A House Is Not a Home

Daniel Gross entitles this article "Homeless." Actually, it's not about homelessness, or even the effects of the housing market crash on homelessness; it's about the economy recovering without the housing market making a big comeback. On the one hand, Gross cites figures to indicate that more houses were sold in November 2009 than in November 2008, so that's a good sign for the market. On the other hand, prices are still dropping, which is good for buyers but not so good for sellers or would-be sellers. From a couple of sources, Gross finds that prices of existing houses were down a little over 7 per cent in October 2009, compared to October 2008.

Key quote: "Mortgage rates are likely to head higher as the Federal Reserve seeks to pull some of its support from the economy. So those hoping that soaring Toll Bros. stock will replenish their 401(k)s are going to be waiting a long time. ... The thing that gets you into a bubble never gets you out."

For many years, we've been putting too much of our investment capital into building houses and apartment buildings. This is, to put it bluntly, as unproductive as military spending. While factories can be used to make furniture, cars, textiles, and so on, and power plants make electricity, houses don't make anything. They just sit there tying up capital and depreciating.

Now that the crash has helped cut the overspending on housing, maybe the government should make a move to encourage that trend. Abolishing the housing interest deduction would be a good start, and restoring the capital gains tax for personal dwellings would also be a big help. Why should we be subsidizing people for putting their money into nonproductive uses?