Dubious Conclusions About Real Estate

Nixguy reads the latest news about low-interest, county-backed loans that are available in Cincinnati, and concludes the following:

Sounds to me like people are using the money to spruce up the house in order to sell it and expedite the move to the suburb. People aren’t dumb. (not all the time, anyway). It would be nice if programs liked this work, but it still comes down to taxes, business environment and crime.

The article is clear - ten percent of those who received the loans turned around and sold their houses. But there's no data to support the idea that these people moved to the suburbs, other than the implicit assumption (in some quarters) that anytime a 'For Sale' sign goes up in Hamilton County people are evacuating.

And regardless of where they moved - down the street, or to Middletown or Chicago - somebody bought the improved house and moved in, right? A busy economy, it seems, involves property gaining in value and exchanging hands with some frequency. I think you'd find that in any growth market. People indeed aren't dumb all the time - and that axiom holds true for the buyer and the seller.

(The other possible conclusion is that those fearsome criminals are buying homes - in which case I applaud them. Most conservatives might agree that one promising way to escape the most destructive social pathologies is to feel a sense of ownership, and a pride of place - to feel, in other words, invested. But that's another post.)

It's very interesting to follow the Enquirer's data center link. Average home prices and number of sales are down, in year-to-year comparisons, all over the region. But they appear to be down much more steeply in some of the outer 'burbs. Prices held steady even in lowly Norwood, for example, while the percentage change in the outer counties has fallen off precipitously in comparison.

Frankly, I'd feel very nervous putting my recent-construction home on the market out there in the periphery, especially if I'd purchased it in the past couple of years. It's almost a commodity market. To use an imperfect comparison - if I'm buying a pair of pants at the GAP, do I buy the $30 new pair, or the $35 pair that some guy has been wearing around? Compare that to the authentic AC/DC concert T-shirt from 1980, which might fetch serious money on eBay or at a vintage shop - showing an increase in worth that reveals a different value.

Because finally a robust economy, and basic trade, is much better served by a population of people who value things differently. Of course moving to the 'burbs makes sense for some people - it's one way of adding up value, risk, and trade-offs. But I've never understood why it's an either/or proposition, and living or investing in "the city" must therefore be an error. A society of people who all make perfectly uniform, commodity-based retail choices, without any variance - that isn't really a thriving market.

Nor is it much of a society.

Tags: Real Estate, Cincinnati, Enquirer, Nixguy