The Housing Bubble… outside Indiana
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After reading an article in IBJ (The Indianapolis Business Journal) today, I couldn’t help but reply to a note written by Economic Analyst Patrck Barkey. The title of Barkey’s article, “Hoosiers are wallflowers as housing party rocks on”. Though he does raise some concern to housing prices in other parts of the country, the premise of the article is still the same. I think it’s actually a little irresponsible.
In 1980, my family moved to Vancouver, British Columbia. While renting, my parents watched the housing market with great concern as it continued to balloon. Growth in population and jobs in the region drove prices up and up and up. My father was forced to make a decision, buy now or perhaps never buy because the prices may rise beyond making the purchase of a home affordable.
In 1986, my parents lost their shirts when my father had to relocate the family to Arizona. It was a bubble, and it burst. Since then the market recovered and so did my parents, but the lesson is still as important today as it was back then. When supply exceeds demand, but prices continue to rise, the market has to correct itself - and will correct itself.
In the United States right now, there are approximately 1.2 million homes sold each year. However, there are 1.7 new homes being built each year. That’s quite a disparity. And it’s inexplicable. There is not an increase in wages, the dollar, the stock market, employment, etc. to justify the incredible increases in home prices in some part of the country.
Rather quickly, I dropped a line off to the IBJ and Mr. Barkey. Combined with the enormous, unprecedented and inexplicable growth in housing prices in some areas of the country, I’m not sure I want Indiana to be cleaning up after this party. It’s a bubble that will either bust or deflate. If Indiana can keep a sensible head and maintain our consistency, our patience will pay off. Reasonable housing and a consistent cost of living will assist in attracting industry to the region as well as keeping the folks that we have.
8/6/ 2005: I was really honored to see my letter in print in this weeks IBJ (8/8-8/14, Page 14A).
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