People Aren’t Buying Houses Because They Have No Money

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This is from the “Gee, ya think?” file. It’s from a Financial Times story summarizing various theories about why the housing market has turned flat. After acknowledging that none of the usual theories seem “quite sufficient” to explain things, we get this:

[Sam Khater, deputy chief economist at Corelogic] said he believes “it’s structural”, pointing out that as long ago as the 1990s, there was growth in population and employment, “but during that entire time period we have not had median incomes growth”.

Although the US economy has added several million jobs in the last few years, there has been little incomes growth for the average American, and that may have reduced housing demand. New household formation has been exceptionally low, with many adults in their 20s and 30s continuing to live with their parents.

That helps to explain some of the divergent trends in the housing market. For example, builders are putting up much bigger homes, to cater to wealthy Americans who are doing well, which helps to explain why the number of starts is low.

Yeah, that could explain it, all right.

None of this snark is meant for Robin Harding, who wrote this piece. At least he put a spotlight on the obvious problem of stagnant incomes. That’s more than most business writers have managed to do.

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