They built like crazy and still had massive price inflation followed by a bubble popping, prices dropped almost 50% and vast swathes of empty houses remained for years and prices only recovered to the peak in the last year or two.
Sorry, I missed out some more of this.
Erdmann divides US cities into Closed Access Cities (CACs), contagion cities (CCs) and Open Access Cities (OACs). The CACs were New York, Boston, the Bay Area and Los Angeles where building housing has become very difficult and where the prices are shooting up. The contagian cities were places that people who moved out of the closed access cities went to. These include Phoenix and Florida. The Open Access Cities were places like Houston, Atlanta and Dallas where sufficient housing for population increases was being built. Erdmann describes the CACs as having a chronic undersupply that has caused many people to move into the CCs. The OACs saw some ride and an increase in homebuilding but didn’t see nearly the drop in prices as the other types of cities.
Shut Out suggests that a reaction to the rise in housing prices that was occuring in CACs led to policy that brought up interest rates and caused prices in the CCs to drop which then led to a loss in confidence and a drop in housing prices across the board. Erdmann says that excess credit wasn’t the primary driver and points to the fact that the increase in US house prices was well underway before the bad loans came in.
From a review on Goodreads of Erdmann's book:
And the categorization seems "after the fact". I mean if you look at prices and then lump cities into categories, you're not really predicting anything.
Not to focus on one single point of your post, but Vegas is in fact nearing the point of having developed the easy area in the surrounding flatland of its valley, and is now beginning to abut the surrounding mountains (and federally owned land). Vast tracts of surrounding uninhabited land does not necessarily mean it is easily developed and habitable.
In a normal market the investors would predict the price coming back down when the construction catches up so it would only go up a little bit, since most prospective buyers would e.g. rent until they could pay less for one of the new units. More to the point, the bank would predict that and not give you a loan that size.
Pre-2007, banks weren't doing that. They were giving loans to everybody regardless of creditworthiness or risk because they were buying credit default swaps which create moral hazard. So unsavvy borrowers overbid on existing properties about to revert to their construction cost and you got a bubble in a place you normally wouldn't.
Now that's much more scrutiny than lenders were showing back in 2007. Back then, if you had cash in a bank account, all good.
In terms of laundering, it's basically passing money through enough legitimate transactions as to conceal the source. So let's say you have $1M in money from illegal activities. If you can get it into a foreign bank account, you could transfer it to the US, buy a house, sell 2 years later. If anyone asked where the money came from you've got a few years history of legitimate investments.
https://www.icij.org/investigations/fincen-files/a-kleptocra...
That is an interesting bit from the lined article:
"One of the biggest issues that the report cites is the use of geographic targeting orders as the U.S.’s primary tool to identify potential money laundering events. GTOs impose reporting requirements on real estate purchases, but only in narrowly targeted scenarios — large cash purchases by legal entities in specific geographic areas."
https://newrepublic.com/article/143586/trumps-russian-laundr...
https://www.theguardian.com/money/2013/feb/20/cash-buyer-sol...
Everyone here lives in the capital cities, and last I looked there were almost no tech jobs at all further up the coast between Sydney and Brisbane.
I wonder if pandemic working from home is going to change this, some of our devs have already moved up the coast...
How do they do this and stay connected? I remember seeing a guy that did this in a van while subscribing to multiple wireless providers. But as far as I am aware Australia still doesn't have the best coverage, service and technology. Moreover, if you're going out more remote locations, I'm sure your connection options start to dwindle.
I'm sure Starlink (maybe oneweb too?) and the WFH movement is going to change this equation quite drastically.
That stretch of coast has been seeing massive house price inflation recently as well, IIRC.
And this is the driving force behind those cities going bankrupt, they're easy to build but not sustainable in the long term: https://www.youtube.com/watch?v=7Nw6qyyrTeI
He's more often worth citing than other of the standard talking heads of economics like Greg Mankiw.
Only study that attempted to quantify pundit accuracy (I know about) found out that Krugman was the most accurate public pundit.
source: Hefferman, S., Klondar, E., & Tummarello, K. 2011. Are talking heads blowing hot air? An analysis of the accuracy of forecasts in the political media.
Henry Kissinger won the Nobel peace prize.
Sometimes they get it wrong.
There's a Sveriges Riksbank Prize in Memory of Alfred Nobel.
And if we really want to go full pedant, the award isn't called anything in English at all, the real name is the "Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne"
But pedantry is silly, right?
Anyway, even the Nobel Foundation explicitly says it isn't a Nobel Prize:
> Not a Nobel Prize
> The prize in economic sciences is not a Nobel Prize.
I think that point about the nature of the price doesn't diminish the point that was being made. As much as it is a call to authority, weight of opinion of someone rewarded with that price is bigger than random voice on the internet.
That being said I think this thread starting with unsubstantiated criticism of Paul Krugman ideas/opinions is not constructive and rather useless.
> Not a Nobel Prize
> The prize in economic sciences is not a Nobel Prize.
Yes, you’re technically correct. But also, you missed the point and are being self-defeatingly pedantic. The economics prize is valued for all the reasons the Nobel prizes are; they carry similar prestige and are thus used interchangeably.
How long has it been since a nobel prize been anything more than a prize for being an influential leftist?
Ha! I see your "UK does not have flatlands" and I raise you Norfolk. V flat indeed
Noel Coward and his fucking quips.
However, the fens is a sinking bog, so not great for building on, especially as its in the middle of fucking nowhere and 180 degrees of depressive grey most of the time.
but but but, its a good quote.
The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke (2004) https://en.wikipedia.org/wiki/The_Two-Income_Trap
https://www.nytimes.com/2005/08/08/opinion/that-hissing-soun...
"Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.
In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.
But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions -- hence "zoned" -- makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles."
Just ignore the first sentence in the article and the prognosis on a bubble popping messily....
Erdmann adds to the thesis in a very valuable way by pointing out that people move out Zoned zone to Phoenix and other US metros.
Just pity the countries that effectively don't have a Flatland, like Australia, the UK and NZ.