August 26, 2005,
By Jerry Bowyer
Itís only a bubble if you donít know why itís a boom. Thatís why so many in the financial pundit aristocracy are worrying out loud, in front of millions of viewers, about whether or not the current housing boom is, deep down, really just a bubble.
BuzzCharts and the rest of the supply-side community know better. Because America is being governed by supply-side economic policy, our housing market is very strong. It started with the Clinton capital-gains tax cut in 1997. It slowed down during the deflationary recession of 2000-01. It restarted when the Fed ended the deflation through a series of rate cuts. It was strengthened when President Bush cut taxes in 2001. And it culminated in the economic boom that started when the president implemented the final phase of his tax cuts in May 2003. Obviously, this kind of growth canít continue forever, otherwise BuzzChartsí grandchildren will be building their homes on the moon. However, if itís not a bubble, it canít burst.
Americaís pro-growth policies have also had an indirect effect on housing prices. BuzzCharts recently interviewed Scott Cannon of the Pennsylvania Home Builders Association (full disclosure, I do some business with the association), and he explained that immigration is one of the factors driving the demand for homes. The other thing Scott mentioned is the entrepreneurial revolution. It seems that business ownership is becoming so common in America that office space in the home is no longer considered an add-on itís standard. This means that even with all other things being equal, new homes are initially being constructed larger to accommodate the small business boom.
In short, the only thing that could turn the boom into a bubble is anti-growth policies such as tax hikes, regulation, and dollar manipulation.