mbborak

Just How Terrible Is Housing as an Asset Class? Roubini Weighs In

The only productive effect that housing has on the economy (once it is actually built) is in propping up consumer spending. Those consumers with more space tend to accumulate more stuff and spend more on upkeep and improvements to their houses. Aside from that, it is a drag on federal, state, and local budgets, as households continue to demand public services, and a drag on the actual long-term financial health of the consumer by way of the increased debt burden that they must finance. Now, as the illusory price increases of the past decade reverse themselves, we will unfortunately see even more demands for subsidies resulting in an even higher burden on the taxpayer.

Policymakers have to resist the enormous pressures of the housing/housing finance lobby and the baby-boomer homeowners in the interest of putting this locked-up capital to better use. Good luck - maybe that bit about bankrupting the US economy wasn't so far off.