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Real estate: Michael Kinsley vs. Mark Twain

Housing On Tuesday's Op-Ed page, Michael Kinsley argues persuasively that rising home prices are not a good thing.

I probably shouldn't tell you this, but in his next column, Kinsley will argue persuasively that being rich is not a good thing. Nor is being good-looking or having all your hair.

In Tuesday's article, Kinsley brushes aside capitalism and the law of supply and demand to visualize a new era of real estate.

For those with short attention spans, here's his premise:

In very general terms (with plenty of exceptions and variations) the housing market affects three different groups. There are those trying to break in -- generally young people searching for their first home. There are those in the middle, who want to trade up from a smaller house to a bigger one. And there are longtime homeowners, "empty nesters" who are approaching or already enjoying retirement and want to downsize or get out of the market completely.

Of those groups, he says, only the last benefits from rising prices, and even they don't benefit that much.

Or, if I may paraphrase: My hovel is worth less now, and it'll never go back up, and that's a good thing, so don't worry, be happy.

 But Kinsley's not finished. He then introduces the "greater-fool theory."

There is no physical reason why a house should become more valuable at all. It is not growing like a crop.... It becomes more valuable because people believe that it will become more valuable. Worse, since the general assumption that it will become more valuable is already reflected in the price you paid, you need a buyer who believes that it will become more valuable even faster than the general consensus.

I'll bet that house-hunting is fun in the Kinsley family:

"Look, honey, it's our new place!"

"Uh, dear, that's a cornfield."

"I know! Just look at all the room we have. And we'll make a profit every year, because it's more than a place to live, it's a crop. Our room is over there under the tree. We'll put the kids by the pond; it'll make bath time easier."

Personally, I just don't subscribe to the "greater-fool theory."

In fact, I prefer "the Mark Twain theory": "Buy land, they're not making it anymore."


Michael Kinsley: Bursting our bubble

McMansion economics

Tim Rutten: And the rich get richer

Harry Stein: Boxing with my wife

-- Paul Whitefield

Photo: Great Park in Irvine.  Credit: Mark Boster / Los Angeles Times


Comments () | Archives (3)

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Sudhir Kadkade

Mr. Kinsley's point is that government should not pursue policies that skew housing prices to higher levels. It is not pure market economics (of the Adam Smith variety) that caused the housing bubble. The interference of various governmental agencies created an inflationary bubble that after its inevitable deflation has caused much grief in the housing market. Mr. Kinsley is arguing against an automatic return to those policies.

lyle lorenson

Will Rogers made the claim about buying land because no more is being made. Mark Twain/Clemons was a great story teller, but he didn't write the quote in the title.


What a way to mis-read and misinterpret just about every thing Mr. Kinsley wrote, and every point he made.

First, he never implied anyone should be happy about the BUST.

But the bust would never have happened without the bubble, and it's only the bubble he took issue with.

And he didn't take issue with capitalism and supply/demand either. The demand for housing went up x-amount, but prices went up a x-times-ten. That never made sense, and now we see why.

Back when things made sense, you bought a house for x, lived in it for 10-30 years, then sold it for x plus inflation plus a small profit if you lived in it long enough and took good care of it.

Out of the blue, in the decade leading up to about 2006, people sold their property for x plus inflation plus HUGE profit. That was never the deal, it didn't make sense, and now we all know why.

No, Mr Kinsley is not happy for those who got stuck with over-valued property, but he is wondering why folks want the same old cycle to happen again.



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