I think this passages sums up the housing market:
The Rentier Squeeze on Budgets: Debt Deflation as a Byproduct of Asset-Price Inflation"Democratization of home ownership meant that housing no longer was owned primarily by absentee owners extracting rent, but by owner-occupants. As home ownership spread, new buyers came to support the rentier drives to block land taxation – not realizing that rent that was not taxed would be paid to the banks as interest to absorb the rent-of-location hitherto paid to absentee landlords.
Real estate has risen in price as a result of debt leveraging. The process makes investors, speculators and their bankers wealthy, but raises the cost of housing (and commercial property) for new buyers, who are obliged to take on more debt in order to obtain secure housing. That cost is also passed on to renters. And employers ultimately are obliged to pay their labor force enough to pay these financialized housing costs.
Debt deflation has become the distinguishing feature of today’s economies from North America to Europe, imposing austerity as debt service absorbs a rising share of personal and corporate income, leaving less to spend on goods and services. The economy’s indebted 90 percent find themselves obliged to pay more and more interest and financial fees. The corporate sector, and now also the state and local government sector, likewise are obliged to pay a rising share of their revenue to creditors.
Investors are willing to pay most of their rental income as interest to the banking sector because they hope to sell their property at some point for a “capital” gain. Modern finance capitalism focuses on “total returns,” defined as current income plus asset-price gains, above all for land and real estate. Inasmuch as a home or other property is worth however much banks will lend against it, wealth is created primarily by financial means, by banks lending a rising proportion of the value of assets pledged as collateral.
The fact that asset-price gains are largely debt-financed explains why economic growth is slowing in the United States and Europe, even as stock market and real estate prices are inflated on credit. The result is a debt-leveraged economy.
Changes in the value of the economy’s land from year to year far exceeds the change in GDP. Wealth is obtained primarily by asset-price (“capital”) gains in the valuation of land and real estate, stocks, bonds and creditor loans (“virtual wealth”), not so much by saving income (wages, profits and rents). The magnitude of these asset-price gains tends to dwarf profits, rental income and wages.
The tendency has been to imagine that rising prices for real estate, stocks and bonds has been making homeowners richer. But this price rise is fueled by bank credit. A home or other property is worth however much a bank will lend against it – and banks have lent a larger and larger proportion of the home’s value since 1945. For U.S. real estate as a whole, debt has come to exceed equity for more than a decade now. Rising real estate prices have made banks and speculators rich, but have left homeowners and commercial real estate debt strapped.
The economy as a whole has suffered. Debt-fueled housing costs in the United States are so high that if all Americans were given their physical consumer goods for free – their food, clothing and so forth – they still could not compete with workers in China or most other countries. That is a major reason why the U.S. economy is de-industrializing. So this policy of “creating wealth” by financialization undercuts the logic of industrial capitalism."
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