Pandemic Housing Market Creates Extraordinary Wealth

Nobody had a better pandemic than homeowners. Emily Badger & Quoctrung Bui at The New York Times writes that “Over the past two years, Americans who own their homes have gained more than $6 trillion in housing wealth.” (New York Times)

• Hard to find a comparison. Benjamin Keys, a professor at the Wharton School of Business, told the Times, “I really struggle to come up with a parallel to this.” Keys said this is less like 2008 when home equity exploded and then almost vanished overnight. Keys explained that the 1889 Oklahoma Territory land rush, or the 1920s Los Angeles oil boom, “events that abruptly changed who owned land and how much it was worth.”

• Social impacts of wealth. Unlike 2008, almost all housing markets have seen gains these last two years which can have profound impacts on homeowners. Daber and Bui write that research from Michael Lovenheim found “that households with rising home values were more likely to have children” and “families that experienced higher home price growth while their children were in high school were more likely to send their children to college.” Rising home values also spurred homeowners to start more businesses.

There could be a big downside to this situation. Keys told the Times that this could lead to homeowners trying to protect their home value. “In a sense, millions of people have made trillions of dollars the last two years by doing nothing…But it’s worse than that,” he continued. “It’s not that they’re not doing anything; it’s that they’ve aggressively blocked development in so many places.”

ANALYSIS: Stuart A Thompson was pretty blunt with his reaction to this Times piece in a Twitter thread “I don’t see how this is anything but an economic disaster. We’ve given homeowners billions for doing literally nothing while condemning future generations to astronomical debt or plummeting quality of life, while cementing housing as an investment asset”