Reasons Capital Cannot be at the Efficient Frontier
Billmon notes an intriguing point about the recently-deceased housing bubble, one we all knew but never emphasized:
Anecdotally, the New York area data is that the peak was in 1989 and the break-even was around early 2003.
I know several people, most on Long Island, who almost literally could not afford to move during the 1990s. And those were only the ones who might have wanted to do so. People with a two-hour commute each way, every day. (Which also implies that industry didn't follow the housing expansion.)
The bursting of a housing bubble—among other, more significant, things—creates a decent amount of endemic inefficiency in the system, much of which will not be reflected directly in data, since it is primarily opportunity cost. But it will be a loss nonetheless.
(Cross-posted from Marginal Utility)
It's also why it took almost ten years for the last home price boom/bust cycle in California to come around again. According to the Office of Federal Housing Enterprise Oversight, the reg agency that tracks these things, home prices in the greater Los Angeles metro area didn't return to their 1990 peak until the spring of 2000. [emphasis mine]
Anecdotally, the New York area data is that the peak was in 1989 and the break-even was around early 2003.
I know several people, most on Long Island, who almost literally could not afford to move during the 1990s. And those were only the ones who might have wanted to do so. People with a two-hour commute each way, every day. (Which also implies that industry didn't follow the housing expansion.)
The bursting of a housing bubble—among other, more significant, things—creates a decent amount of endemic inefficiency in the system, much of which will not be reflected directly in data, since it is primarily opportunity cost. But it will be a loss nonetheless.
(Cross-posted from Marginal Utility)
posted by Ken Houghton at 12:39
0 Comments:
Post a Comment
<< Home