On and on go the professional alarmists - America’s housing sector is down and will stay down for a long time to come. Fact: The bursting of a severe housing bubble nearly pushed the American economy over the edge last year. But does that alone make a case for long-term distress? Take a look at the housing picture in its entirety, and count us among those who don’t buy the despair.
Let’s see, for example, how population affects the housing situation. In America, alone among today’s wealthy nations, is on a path of solid population growth. This is good, notwithstanding the harum-scarum alarms by those who see disaster impending from a “population explosion.”
The U.S. population was approaching 300 million in 2000. Quite solid projections by the Census Bureau see the number at about 400 million people in 2100.
Why is the U.S. growing, while other modern nations shrivel up? First, our total fertility rate is about 2.1 children per woman - a magic number in the demographer’s kit, because that’s what it takes to “replace” a society. Sooner or later, Mom and Dad pass on (sorry to break the news), and they must be “replaced” by two children. The extra 0.1 accounts for children who do not live to reproductive age.
A strong relationship exists between America’s “replacement fertility” families and what/where they call home. Much more than their counterparts in Europe and Japan, Americans inhabit single-family detached houses. There is room for two, three - or more - children to play in the backyard, and the nice sense of privacy those children have because they live in their own rooms. Residents of other large, modern and wealthy nations tend to live in apartment nations, where space limitations put a damper on the idea of having a big family.
The coming housing boom will not only employ carpenters, electricians and roofers, but real estate lawyers, policemen and firemen, teachers and athletic coaches to begin a very long list. It was once said that the automobile industry was the great American job producer. No more. That honor surely goes to housing.
America’s history of successfully absorbing large waves of immigrants is a lightning rod for controversy, but the historical record is clear. New immigrant groups - be they German, Irish, Chinese, Italian, Jewish, Polish or Greek - are at first greeted with suspicion. Then they work hard, make lasting contributions and end up being central to America’s cultural fabric.
Mexican immigrants are the hated group du jour but move into the mainstream rapidly. Today’s landscapers and housekeepers are raising tomorrow’s engineers, judges and entrepreneurs. Today’s immigrants, like others before them, will leave the slums and barrios to chase the American dream in a leafy suburb.
At present, about 1 million “net immigrants” (i.e., immigrants minus emigrants) arrive in America each year, so 20 years down the road there will be about 20 million additional Americans (plus their natural growth once here). They will either live in the streets, or the housing market will bloom. This is hardly the stuff of a housing crash. American cities may have problems, but they do not approach Calcutta and its twin Howrah, where sleeping on the street is common, notwithstanding India’s remarkable economic boom.
The bright future we envision for housing in America also tells us a lot about the infamous bubble in that sector and the bright side of all economic bubbles.
Remember the dot-com bubble of the 1990s? Despite suffering a truly spectacular burst, it laid the groundwork to go from dial-up Internet to wireless, and now computing in the cloud. It made e-mail and e-commerce part of our daily lives and gave us near-instant access to all manner of human knowledge. Many of the entrepreneurs who made it happen were immigrants. If that’s an impressive upside, imagine how we’ll benefit from a rebound in housing, something even more essential to us than our Facebook pages.
Housing will come back stronger than before because America possesses the essential ingredients - a growing, dynamic population and a resourceful spirit to overcome burst bubbles - that make us citizens of the First Universal Nation. We should revel in that. Far from a housing-led era of gloom, it guarantees that this will be the second American century.
• Ben Wattenberg is a longtime senior fellow at the American Enterprise Institute and more recently the Hudson Institute. He is the author of 14 books. Michael Sriqui is on the research and production staff for the Public Broadcasting Service’s “Think Tank with Ben Wattenberg” and recently graduated from the London School of Economics with a master’s degree in comparative politics.