Why you shouldn't buy a house in Vegas
Responding to David Leonhardt's argument that now is a pretty good time to buy a home, Ryan Avent offers an interesting counter. He notes that falling home prices are, in many cases, correlated with high unemployment. After all, if the job prospects were good and incomes were growing, home prices would probably be rising. That makes a decline in home prices doubly damaging: People can't find a job where they are, but they can't leave because it's an awful time to sell a home.Take Las Vegas:
As of February, Las Vegas' unemployment rate was 13.9%. Should we be encouraging people to chain themselves to labour markets like this for at least five to seven years? One of the great virtues of the American labour market is its flexibility, and especially its geographic flexibility. In good times, homeownership doesn't reduce this flexibility by all that much, but good times aren't when you need a labour market that can rapidly adjust to uneven economic conditions.
The wisdom of home ownership has a lot to do with forces beyond your mortgage and paycheck. The local economy. Interest rates. The unemployment trend in your area over the next decade. Owning a home shouldn't be sold as the American dream. It should be sold as a business calculation, and one that requires some serious thinking about probabilities.
Photo credit: Jacob Kepler/Bloomberg.
April 21, 2010; 2:34 PM ET
Categories: Housing Crisis
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