Last week, Harvard University's Joint Center for Housing Studies released a comprehensive report on the U.S. housing market. Although it made some nods to the sorry -- and worsening -- state of affordable housing, overall, the report was bullish. There's been some softness in the market of late, it noted, but fundamentals are strong, and the next decade should see a renewed boom.
The money quote: "The most immediate risks to the housing market now come from the rise in interest rates, the erosion of affordability after years of strong house price appreciation, and the growing inventory of both new and existing homes for sale. But unless the broader economy stumbles and job losses mount, home sales and construction activity will likely dip only modestly."
At the Housing Bubble Blog, run by Ben Jones, readers were quick to point out a possible flaw in the Harvard analysis. What if the housing boom itself has been one of the main forces supporting the broader economy? Many economists have suggested that the American consumption binge of the past half-decade has been fueled by easy money extracted from housing via refinancing or home equity loans. Couldn't a slowdown in housing precipitate a wider economic downturn?
It's a question very much on the minds of economic observers, not least those in government with the power to actually steer the economy. By all accounts, we are poised at a pivot. Inflation is rising, which is stiffening the Federal Reserve Bank's resolve to continue raising interest rates. But the softening of the housing market, along with weak job numbers and the overall drag on the economy of high energy prices, is making many nervous that a few more interest rate hikes could set off an unstoppable slide into recession. Thus, every economic indicator, particularly those that touch on housing, is parsed with greater-than-normal intensity.
Especially at Internet nodes like the Housing Bubble Blog. Ben Jones has created an information jewel, by indefatigably excerpting from and linking to scores of articles and research papers about every aspect of the real estate industry. He's been rewarded for his aggregation of news sources by the formation of an Internet community that hashes out each new data point or media twist in real time. It's a classic example of how the Internet facilitates ongoing adult education. Jones provides the seed, and the community provides context, additional data and a withering critique. After reviewing the latest outburst of commentary on the Harvard study, I decided to call Jones up and get a little insight into how it all comes together.
Jones is a soft-spoken Texan, now living in Arizona, who once worked as a freelance writer but now says he supports himself entirely from advertising revenue generated by the Housing Bubble Blog and two other blogs. He has a degree in accounting and minored in real estate as an undergraduate. He started the the Housing Bubble Blog in late 2004, because, he says, "I didn't think the issue was getting enough attention."
"I was sending stuff out to my family, telling them, 'I think this is an issue,' I'd include a link and a couple of paragraphs, and then in 2004 decided that I could put the stuff in a blog and they could come to it."
And they did. Although in 2004 and 2005 the U.S. housing market was setting new records almost every month in almost every conceivable category -- new home sales, existing home sales, housing starts -- a growing number of economists were beginning to worry that the dot-com stock bubble had been replaced by another financial mania: a real estate bubble. As the Harvard study notes, "According to Factiva, the number of articles mentioning [the term 'housing bubble'] increased to 3,492 in 2005, up from 789 in 2004, 614 in 2003, and 907 in 2002." Jones says that he picked the term as the title of his blog precisely because it was a popular search engine entry.
At the Housing Bubble Blog, reports such as those issued by Harvard, or even worse, the National Association of Realtors, are generally greeted with scorn and derision. Oftentimes, one senses that the discussants are rooting for a crash, and furious at anyone who denies its inevitability. Jones says he isn't one of them.
"I don't relish the idea that anybody might lose money in a housing crunch. I understand that there are some on the blog that lean a little that way, but I don't think it's malicious. Personally, I think it would be great if there would be a soft landing. I think that a hard landing will be a pretty sobering thing. I doubt anybody will be rooting for it once we are in it."
The Housing Bubble Blog, say Jones, offers a counterpoint to mainstream complacency.
"The way I feel about it, is if people want to hear the real estate bull story the NAR [National Association of Realtors] is there every day. Newspapers until recently have been generally pro real estate or at least supporting the idea that these price levels, unaffordable as they are, can be maintained."
"But we're not getting in people's faces physically -- for the most part it's a discussion." Although Jones concedes that the discussion can get a little heated. "The Internet is a rough place. Sometimes you just gotta grit your teeth and get through it."
Note the use of the word "we." Jones runs the blog by himself, but through its creation has become part of a larger entity. "I've learned as much as anybody, believe me," he says, referring to the education provided by ongoing commentary.
But what happens once the crash -- or non-crash -- is over? What does the Housing Bubble Blog do when there's no housing bubble?
"I'm sure that there's going to come a point where the focus will become something else -- whether it's dealing with a poor economy or a rebounding economy. I told a guy on L.A.. radio that there are an awful lot of people interested in this story, because one way or another, whether as renters or owners, we're all in the housing market. But I look forward to the day when unaffordable housing is not an issue. I'll be happy when it's not a topic anymore and we can get on with our lives."