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When falling housing prices are good news — and when they're not
Home prices are falling in Denver and other areas around the nation.
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Home prices are falling in Denver and other areas around the nation.
Home prices are falling in Denver and other areas around the nation. Scott Olson/Getty Images hide caption toggle caption Scott Olson/Getty Images A few weeks ago, we asked our readers for ideas and questions for future Planet Money newsletters and podcasts. We got a bunch of great submissions, including an intriguing one from Karl Baumgartner. Baumgartner is a 29-year-old internal medicine resident in Denver, where home prices and rents have been falling. Depending on which data you look at, the Denver metro area is experiencing one of the steepest — if not the steepest — housing price declines in the nation. Home prices have fallen more than 2% year over year, according to the S&P Cotality Case-Shiller Home Price Index, and even more if you adjust for inflation. Rents have fallen even more dramatically. "As a renter myself, I am ecstatic about the falling prices," Baumgartner writes. In fact, he just moved "to a bigger apartment with nicer amenities that I previously couldn't afford, but now can because rent has fallen." One of his friends, meanwhile, recently renegotiated her lease for about $500 less per month by showing her landlord that comparable apartments in her area were now going for much less. "With almost all of my friends being in a similar position at the beginning of our careers with plenty of debt, we are all very excited about the decrease," Baumgartner says. So, yeah, falling rents are obviously a win for Denver renters. But Baumgartner is wondering about the broader economic picture. "We know that negative inflation is bad for the economy in general, and we try to shoot for 2% annual inflation in general. What about negative inflation in the housing market specifically? Are there any downsides to falling prices, or is this just a sign of the market working as it should, with supply finally catching up to demand?" It's a great question because economics doesn't seem to provide a simple answer on whether falling housing prices are good or bad for the economy. Obviously, falling home prices and rents have downsides for homeowners and landlords. But what about the broader economy? Sometimes falling housing costs could be a sign that the economy is healthy and the free market is working as economists might hope. Higher prices encourage builders to construct more housing. More supply comes online. Supply comes closer to or may even surpass demand, and housing prices go down. It's the basic logic behind the YIMBY movement — a pro-housing development effort whose name stands for "Yes In My Backyard" — which argues that housing restrictions have prevented this healthy market process from delivering plentiful and more affordable housing. Other times falling prices are a symptom of — and sometimes a big contributor to — a community's economic distress. So how can we tell the difference? When falling home prices are bad Let's start with a clear bad scenario of falling home prices: Detroit. After years of deindustrialization and socioeconomic problems, Detroit saw a massive drop in population. Between 1990 and 2010 alone, Detroit lost nearly a third of its residents. Home prices fell by more than 80% during the housing bust of the 2000s. This wasn't affordability created by abundance. It was affordability created by economic collapse. Detroit neighborhoods emptied out and fell into disrepair. At one point, in 2007, houses in Detroit were cheaper than cars. For over a decade, the city has had an official program to demolish abandoned homes and buildings. For many Detroit families, generational wealth evaporated. TO GO WITH AFP STORY by Joe Szczesny, US-city-Detroit-auto-debt Curtains flap outside the broken window of an abandoned home December 31, 2014 in Detroit, Michigan. After the largest municipal bankruptcy in US history, Detroit hopes outsiders will see the city's potential not the history of racial conflict, financial crises and citizen flight that has cut its population in half since 1960.
On June 23, 2016, exactly 10 years ago, a close referendum saw just over half of Britons vote to leave the European Union (EU) after years of campaigning that Britain would be better off outside the bloc.A decade on, the promises made during the referendum campaign have largely failed to materialise. Research suggests the UK economy is smaller than it would have been, migration is higher, and compared to its peers, the UK is falling behind.Recommended Stories list of 3 itemslist 1 of 3Net migration to the UK falls by nearly 50 percent amid tighter policieslist 2 of 3In Britain, Brexit is debated again as Starmer’s grip on power slipslist 3 of 3Political turmoil: UK will see its seventh prime minister in 10 yearsend of listHere are seven charts to explain Brexit and how it has played out.What was Brexit?To understand Brexit, you have to go back long before the vote and trace how the UK’s relationship with Europe evolved.In 1973, driven by sluggish economic growth, Britain joined the European Economic Community (EEC), a six-member economic trading bloc. According to data from the Centre for Economic Policy Research (CEPR), Britain’s GDP per capita was almost 30 percent higher than that of the EEC nations in 1950, yet by 1973 it was roughly 10 percent lower.In this January 22, 1972, file photo, British Prime Minister Edward Heath, centre, signs the treaty for Britain to join the European Economic Community at the Palais d’Egmont in Brussels, Belgium. Britain’s membership was a drawn-out affair after French President Charles de Gaulle twice vetoed the country’s application [AP]Scepticism about deeper integration with Europe never went away in the decades that followed – and it was never confined to the right. Labour’s 1983 general election manifesto had called for withdrawal from the EEC, reflecting a left-wing view of the bloc as a barrier to socialism, before the party reversed course after its landslide defeat that year.By the early 2010s, pressure from Eurosceptic MPs within Prime Minister David Cameron’s own Conservative Party, amplified by the rising electoral threat of Nigel Farage’s UK Independence Party (UKIP), pushed Cameron into a political gamble: a promise to hold a referendum on EU membership if he were re-elected.On June 23, 2016, the vote was held, but the result did not go as planned.The results were as follows: Overall: 51.9 percent voted to leave, 48.1 percent voted to remain England: 53 percent leave Wales: 53 percent leave Northern Ireland: 44 percent leave Scotland: 38 percent leave Smaller towns and rural areas tended to vote Leave, while major cities tended to vote Remain.Who supported it, and who opposed it?The referendum split British politics down the middle, and visibly within Cameron’s own cabinet. Cameron led the Remain campaign alongside Chancellor George Osborne, backed by most of the Conservative Party, the Labour Party, the Liberal Democrats and the Scottish National Party.On the Leave campaign, senior Conservative members such as Boris Johnson and Michael Gove, both cabinet ministers, backed the Brexit vote. Nigel Farage, whose party had pushed for the referendum in the first place, campaigned heavily for Brexit and later founded the Brexit Party, now Reform UK, in 2018.After the Leave vote, Cameron resigned, and Theresa May took over the task of delivering Brexit, but failed to get her withdrawal deal through parliament in 2019. Boris Johnson succeeded her and oversaw the UK’s departure from the EU on January 31, 2020.What happened to the economy?Over the past decade, real GDP per capita – the total value of all goods and services produced in the UK, adjusted for inflation, per person – has lagged that of the EU’s 27 members.By 2025, the UK was running five index points behind the bloc on the same 2016 baseline. Economists project average annual growth of just 1.3 percent between 2026 and 2030, reflecting the ongoing drag of trade barriers and structural change.Business investment in the UK also
London, United Kingdom – Ten years after Britons voted in the Brexit referendum to leave the European Union, opinion polls show the public is still grappling with the consequences of its decision.As Keir Starmer resigns to make way for the seventh British prime minister in a decade, the current political instability has its roots in the ominous spiral that Brexit unleashed with David Cameron’s resignation following the referendum in 2016.Recommended Stories list of 4 itemslist 1 of 4The Take: Could Alberta trigger Canada’s Brexit moment?list 2 of 4In Britain, Brexit is debated again as Starmer’s grip on power slipslist 3 of 4‘No sense of direction’: The downfall of Keir Starmerlist 4 of 4Political turmoil: UK will see its seventh prime minister in 10 yearsend of listA YouGov survey conducted this month to mark the referendum’s 10th anniversary found that just 30 percent of Britons now believe leaving the EU was the right choice. This figure was 64 percent when the vote was held on June 23, 2016. But now, a clear majority of 57 percent think it was wrong to leave the bloc, and six in 10 judge Brexit as an outright failure.The arguments for a yes vote that consumed the referendum campaign – sovereignty, the British pound, economic independence, austerity and smashing the burden of unnecessary red tape – have settled into something closer to a deadlock than a consensus.Yet with a recent analysis by the Bank of England indicating the UK economy has shrunk by 6 percent due to the effects of the departure, it is no longer disputed among many economists that the honeymoon is over. Brexit has morphed into “Bregret”, as some pollsters and commentators have quipped.However, the lasting legacy of Brexit may prove not economic but societal – a slow reshaping of the country’s political culture, its tolerance for extremity and the discourse about who belongs, who should be an outsider and how to exclude, no matter how toxic the polarisation gets.On such measures, the decade since the referendum has been costly.A toxic culture of antipathyAnxieties and racism in Britain around immigration, especially concerning people of colour, have a long history. The Brexit referendum offered the latest licence for exclusionary attitudes. By turning a complex question of EU membership into a vote on control of the borders, pro-Brexit campaigners infused the politics of migration with a moral charge it has gripped onto firmly.According to Tahir Abbas, the director of the Centre on Radicalisation, Inclusion and Social Equity at Aston University, “Brexit was a long-term process” that emerged from decades of euroscepticism within the Conservative Party. What is increasingly evident, however, is the powerful rallying of opinion and people that Brexit achieved, he said.“Brexit is a much more recent phenomenon that mobilised Islamophobia, particularly through the infamous poster that Nigel Farage stood before, showing pictures of tens of thousands of brown-skinned people seemingly making their way across Europe and into the UK,” Abbas told Al Jazeera.Nigel Farage, then-leader of the UK Independence Party, conducts the launch for a referendum poster in London on June 16, 2016, days before the Brexit vote [Stefan Wermuth/Reuters]Now, the rhetoric that once sat at the fringe – that the country is being “invaded”, that asylum is a racket, that minorities such as Muslims do not share “British values” – has moved steadily towards the centre of acceptable debate. Phrases that would once have ended a minister’s career in government have increasingly been normalised.With the rhetoric has come policy.Successive governments, chasing the electorate that Brexit revealed, have competed to out-toughen one another on immigration: offshore processing, the threat to leave the European Convention on Human Rights and schemes to deport asylum seekers to third countries that courts have found unlawful.Measures once regarded as unacceptable – such as detention of migrants and asylum s
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