House Prices Versus Home Values

Steve Jobs liked to refer to personal computers as a “bicycle for the mind.”

Human beings, he’d learned from poring over Scientific Americans and Heath Kits when he was a kid, unleashed tremendous locomotive power–even eclipsing the No. 1 master species of the contest, the condor–when they blended their energies with those of an efficient partner in locomotion, a two-wheeler. Only people can exponentially improve their ability to accomplish feats and solve problems with the use of tools they create, Jobs reasoned.

So, if we can relate to a PC as a bicycle for the mind, it may be helpful to start thinking about a home–or equally, a community–in a similar fashion, as a tool with which humans look to improve their ability to achieve well-being and the capacity to prosper.

As housing’s market for demand begins to betray signs of stress amid rising mortgage interest rates, price increases, and the collateral impacts of tax reform on the deductibility of state and local and property taxes in high-priced housing markets, everyone’s fixating on prices.

For builders, costs go up and squeeze harder on hard-fought margins. For would-be home buyers, costs to buy and borrow go up, putting more and more pressure on household incomes that aren’t keeping pace. Now, and over the next five months, all of builders’ ability to operate and build at a high level of efficiency and excellence will be put to a test as buyers collectively push back on rising prices, or simply capitulate and put their homeownership dreams off until another day.

Economics say builders should be building for a bigger universe to give more people access to decent, fair-priced housing. Instead, the universe shrinks.

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