Two Mondays ago, the Providence Journal reported on the health of the local real estate market:
June was a good month for Rhode Island real estate, with 1,094 house sales, up 16 percent from June 2014, and the busiest month in 16 years, according to the Rhode Island Association of Realtors.
In June 1999, there were 1,099 houses sold in Rhode Island, and even at a high point for the market, in June 2004, there were 1,048 house sales, the association.
Not only that, but median prices are up and the boom covers multi-family dwellings, too. That does look good, but as with rocketing employment numbers, I can’t help but wonder about the cause. Following local news, one hears about Teespring leaving, not waves of new employers. And indeed, despite the high employment numbers, the number of jobs actually present in the state dipped in June and, long term, has been growing at a slower rate than in previous years since the bottom of the crash.
If things were as rosy as (some of the) statistics show, wouldn’t we be feeling and hearing about it more?
My suspicions are along the lines of Kevin Williamson’s:
… when house prices are rising at 6 percent or 7 percent a year (and rents rising even faster) while U.S. incomes are growing at their slowest rate at any time since Beyoncé Knowles has been walking the Earth (NB: Beyoncé’s income is doing just fine, thanks: She just spent $300,000 on a pair of diamond-encrusted stilettos from House of Borgezie) it isn’t supply and demand at work.
Instead, housing prices are going up for the same reason that college tuitions are: because the government facilitates lending people money at concessionary rates to purchase them. The Fed has, despite the occasional sobering gander in the direction of reality, been keeping the cheap-money sluices pretty much wide open. The federal regulators have loosened their grip over Fannie Mae and Freddie Mac’s lending activities, and, according to a Fed report released Monday, banks are once again loosening up their lending standards.
Jobs in the state aren’t growing anywhere near 16% per year, and neither are incomes. Add a housing crash to the reckonings sure to result from the Obama-Chafee-Raimondo Era in Rhode Island.