Housing Bulls Have Been Right So Far

It is impossible to argue with the bulls that housing has been a good investment over the past few years, because it’s true. One difference though that I have noticed in the debate between bears and bulls, is the un-willingness of the bulls to examine evidence of a bubble (or lack of a bubble) outside of their own markets. The Jersey Shore Real Estate bulls tend to make the argument that strong demand for housing in Monmouth County is a mostly local phenomenon, and therefore unique and not as susceptible to broader market forces. For example, the relatively new or expanded ferry service from the Bayshore to Manhattan is cited as a reason that people keep moving to Monmouth County and therefore, the reasoning might go, people will always want to move here, no matter what the price.

Although the Jersey Shore does have its attributes that make it a desirable place to live, the bulls do not seem to want to acknowledge that these local attributes are probably at best, secondary considerations for the average home buyer, with the primary consideration being affordability. At the present time, affordability is being determined strongly by events in lower Manhattan, Washington DC, and far away places like China and London. In other words, the bull can argue all day that ferry service to Manhattan makes Middletown a great place to live and will keep demand high, however the bull still doesn’t address why money is so cheap now (the primary reason houses at these levels are affordable), and what more expensive money will do to housing prices eventually, nor do they have a cogent argument as to why they think money will remain cheap indefinitely.