Every day brings new data on the real estate market, most of it discouraging to the realists in the crowd. The latest evidence suggests that commercial real estate is following residential into the tank. All but the most willfully obtuse Pollyannas now acknowledge that the real estate picture is bad...and likely to get worse before it gets better. Of course the universal caveat applies: Local markets will vary.
As we've written repeatedly in this space (most recently three weeks ago in this item), the mad scramble to prop real estate up may or may not be effective, but regardless of its efficacy, its wisdom is doubtful at best.
So we were pleased to see Yves Smith pass along a summary of Nouriel Roubini's recent roundtable on broad financial and economic circumstances. Here's the relevant passage from Smith's post (emphasis added in bold):
One speaker (I cannot recall which one) argued that the push for more affordable housing was to mask the political impact of stagnant wages. "We needed to show some form of economic progress to meet social goals." Yet channeling so much investment capital into housing has certainly not helped, and probably weakened US competitiveness, thus in the end making workers worse off in the long haul.
That last sentence should be distributed immediately to every member of Congress, with helpful bullet-point explanations of the difference between productivity-enhancing and productivity-draining investments.
As always, none of this should obscure the substantial dislocations (i.e., pain) caused by the bursting of the lending and real estate bubbles. But the extent of the pain this time makes an appropriate policy response that much more important--to minimize the pain next time.