The Condo-Based Economy Makes the News

Submitted by Rich Toscano on November 20, 2005 - 8:35pm
The mainstream media appears to be punching in concerning one of the main themes I've been harping on so relentlessly for the past year-and-a-half: the fact that the economy is so utterly dependent on continued strength in the housing market.

As a matter of fact, two such articles have appeared in as many days:

The NY Times article busts out a statistic that's shocking even to me: "from November 2001 to October 2005, housing and real estate accounted for a whopping 36 percent of private-sector payroll job growth." That's a nationwide number, so it's certainly much worse here in housing-happy San Diego.

Ladies and gents, this is "misallocation of resources" defined. Selling houses back and forth to each other at ever rising prices does nothing at all to increase the actual wealth of the nation. That horde of people entering the real estate field in the past few years does not represent real, sustainable economic growth in any way.

Don't get me wrong: real estate professionals provide a valuable service and are absolutely a necessary part of the economic landscape. But there is no fundamental reason why 1 out of every 3 jobs created since late 2002 should have been in the real estate field. The world isn't that different a place than it was in 2002. There's only one big difference, as a matter of fact: between then and now, we have experienced a real estate bubble of staggering proportions. All bubbles beget a misuse of resources, and, as that 36% figure makes clear, this bubble is no exception.

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