Friends of ResiShares:
Back in January, in our annual “Top Ten Surprises” note, we predicted that “the Fed will engineer a soft, landing, and we’ll hate it.” While the first part is reasonably self-explanatory (guide the economy back to a sustainable rate of inflation without causing a deep recession), the second part requires a bit more explanation now than we initially provided (who is this “we” anyway?).
In our predictions note, the “we” referred to professional investors - all licking our chops to dine on desirable assets at temporarily dislocated prices. Not vacant office buildings and terminally insolvent tech companies, but (especially in our case, given our day jobs) houses, scarce after 10 years of underbuilding into a demand boom from Millennials. There’s another “we,” however. In economics, as in sports, the number of spectators in the stands dwarf the number of players on the field, and their rooting interest is often even stronger than those whose careers are directly impacted by the game’s outcome. Unlike sports, the boos don’t only come from the cheap seats.
There is a vast political and media ecosystem (or several, if one prefers) with a financial or at least psychological interest in seeing institutions fail. Examples of this from today’s political right wing are too unsubtle to warrant a deep dive from a newsletter. For them, we will only point out that the same forces doing their best to manufacture a crisis from the debt ceiling have been advocating abolition of the Federal Reserve and a return to the Gold Standard longer than most of us have been alive. Sustainable growth amidst moderating inflation is a big problem for their dystopian narrative.
It’s the capitalism-skeptical side of the media spectrum, however, that seems especially frustrated right now by the real estate market’s failure to fail. This explosion of a schadenfreude deferred has manifested as multiple think pieces across multiple outlets, each strongly advocating that we completely rethink the way we allow market forces to govern housing.
The centerpiece is this hagiography of the housing policies of Vienna Austria, from the NY Times. According to its author, the US should emulate this “renter’s utopia” to solve its current housing crisis, as evidenced by the fact that the handful of families they interviewed paid a very small percentage of income on housing. Not to let facts get in the way of a good story, but the average American pays a lower percentage of their disposable income on housing than the average Austrian, according to the OECD.