The Sunday Times had doppelganger real estate stories, one asking if it is better to rent or buy, and the other quantifying what we all know intuitively: that the middle class is getting seriously squeezed by housing prices. From the first story:
Add it all up - which The New York Times did, in an analysis of the major costs and benefits of owning and renting, including tax breaks - and owning a home today is more expensive than renting in much of the Northeast,
And from the second story:
Across the country, the median price of a single-family home has climbed 29 percent in two years, rising to $218,600 this year from $170,000 in 2003, according to the National Association of Realtors. At the same time, median family incomes rose 8 percent. The association's Housing Affordability Index dropped over the same time period, falling 15 percent in the last two years.
The second story discusses the myriad ways in which house-poor middle class people are cutting back on other things – from vacations to food – to pay for their expensive shelter, which gets to an interesting point that is made by “creative class” guru Richard Florida in his otherwise poorly executed book The Flight of the Creative Class. In addition to the ill effects of bubbles in general, he says the housing boom has been an unfortunate waste of investment money. What used to fund start-ups, high-tech R&D, and other creative pursuits is now going towards housing, which doesn’t contribute much to the long-term advancement of civilization. A roof doesn’t really have a multiplier effect no matter how expensive it is. It either keeps the elements out or it doesn’t. Only if it gets repeatedly torn off in hurricanes (!) does a roof continue to employ people.