Heading off the next housing bubble
Like an improbable comeback on Monday Night Football, housing markets in many regions -- including some hit hard in the 2008 financial meltdown -- are rebounding. There is talk of the resurgence of the McMansion, and even hope of building out some so-called "zombie subdivisions" -- ghost towns of approved and platted parcels of exurban land mostly of large-lot single family homes, the subject of a forthcoming Policy Focus Report.
Robust housing markets are good as a driving force for the economy, but concerns remain about letting 2008 happen all over again, with its vast decreases in value and rash of foreclosures. Some places, like Riverside in California, are only slowly recovering from that experience, according to this recent report on NPR.
James R. Follain and Seth Giertz, co-authors of the Policy Focus Report Preventing Housing Price Bubbles: Lessons from the 2006–2012 Bust,recommend an early-warning system and plan for region-by-region intervention on the financing side, to head off housing price bubbles that appear headed to burst. They spell out the need for vigilance in this op-ed essay published in Urban Land, the magazine of the Urban Land Institute.
"The 2008 crash led to the disappearance of trillions of dollars in assets value and dragged the entire economy down close to a depression," they write. "While prices in many markets are recovering, it seems prudent to be prepared—for example, by looking closely at the markets that are already showing warning signs."