27 August 2010

"America stops buying homes"; Pareto

Felix Salmon | America stops buying homes

The number is so low that it looks like a statistical aberration: let’s hope it is. Because if it isn’t, the news is gruesome. It means that despite record-low mortgage rates, people aren’t able to buy houses: essentially all the benefit from those low rates is going to people who already own their homes and are taking the opportunity to refinance.
So what? I wish the residential real estate market was nice and fat and liquid, but it isn't.  In the meantime, why should I care who is taking out their first mortgage and who is refinancing?

Seriously, why should I care if the benefit of low mortgage rates accrue to people who already have mortgages and are refinancing them? How does that make me any worse off? Is this some zero-sum thing, where benefits to home owners who refinance must be costing me something?  Why should I prefer a counterfactual with fewer current owners and more first-time owners taking advantage of low mortgage rates?

I know I'm picking on this line from Salmon more than it deserves, but I've been seeing a lot of people lately insisting that any situation or policy must benefit everyone equally.  I'm sorry if blind people don't benefit from the latest reading gadget or blockbuster movie, but those things are still Pareto improvements.

Good news for some people may not be as nice as good news for everyone, but it's still better than no good news for anyone.

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