News and Commentary
In an article at Vox, Jerusalem Demsas discusses whether the United States is experiencing a housing bubble. She first explores the question of what makes for a housing bubble. Next, she puts forth the evidence for and against the view that today’s housing market is a bubble. Rapidly increasing prices and intense competition between desperate would-be homeowners are two signs that a bubble is forming. Another piece of evidence is that the Fed bought over $1 trillion in mortgage bonds during the pandemic, which has pushed down mortgage rates and thus contributed to the increased demand for homes. The main point she makes against today’s market being a bubble is that prices are rising simply due to supply constraints caused by land-use regulations. Competition over an insufficient supply of homes has caused prices to be bid up.
In a post in Model Citizen, Will Wilkinson argues that although land-use regulations tend to be implemented locally, they have significant impacts on the macroeconomy that must be acknowledged. Local regulations restrict the supply of housing in high-demand areas, creating an inefficient urban sprawl that hurts the environment and diminishes the effectiveness of fiscal and monetary policy. Will argues that authority over land-use regulations must be seized from localities and given to states or even the federal government. So long as land-use is regulated at the local level, homeowners will use that authority in their own self-interest at the expense of the macroeconomy.