Tuesday, December 21, 2021

The NYT weighs in again on California housing and it goes even worse than expected

[If you're just tuning in, this should get you up to speed.]

The gray lady has doubled down on the liberal hypocrisy housing narrative with a highly promoted video featuring two of the paper's stars and the results are... not good.

Checkout the 3:40 mark.

Obviously, this graph wasn't telling the story they thought it was telling. My first thought was that we were just seeing the impact of the collapse of the housing bubble which didn't particularly support the NYT's argument, but on closer scrutiny (assuming we can trust the x-axis), I realized it was even worse.

If you take a close look, you'll see that the drop started well before the 2008 collapse.

For the record, I don't know if permits issued is the best metric here -- I'd feel much more comfortable if we had an actual researcher to weigh in -- but the decline is a big part of the NYT's argument so we should probably ask ourselves if anything else of note happened in California around this time...

The Schwarzenegger administration went from 2003 to 2011, or roughly...

One of the odd facts about California (and a major source of its dysfunction) is that in order for a party to control the legislature it pretty much has to have a supermajority, so for these eight years, the state had a Republican governor and effectively a divided legislature, clearly making it the period of peak GOP influence over the past two decades. 

Just to be clear, I'm not saying that Republicans are to blame for California's housing crisis. We are talking about an eight-year run that ended a decade ago followed by a Democratic supermajority. The largest driver of the housing crisis appears to be asset inflation and its ripples, but to the extent that one party owns this, it would have to be the Democrats.

So, while you can certainly argue that liberal and/or Democratic policies on the state level caused or at least exacerbated this situation, the NYT somehow managed to pick the one statistic that supports exactly the opposite point.

But what about the other half of the argument? Could these dynamics be responsible, but at a local level? The video spends pretty much all of its remaining housing segment on Palo Alto.  The behavior described does sound rather appalling and pretty damning if you're making the point that there are lots of assholes in Silicon Valley, but with respect to housing, it's not just anecdotal; it's a headless clown argument (ducks are better than clowns because ducks have heads). 

To make this a real argument, the NYT would need to show some correlation within California cities. Compared to the Bay Area, the far more conservative/Republican Central Valley should have higher vacancy rates and stable housing prices, but we're not seeing any indication that the big valley is evading the crisis. By some metrics, it's getting hit worse. 

It has become increasingly obvious that this is a story the NYT really wants to tell, and no matter how logically flawed and factually challenged it may be, they are by God gonna keep telling it. Somewhat more pressing concerns like plague, flood and an ongoing attempt by the GOP to overthrow American democracy get pushed aside so the editors of the paper of record can spend a little more time scolding California liberals. 

The three things which the New York Times loves above all others are putting itself in a position of moral superiority, displaying its "impartiality" by criticizing Democrats, and taking condescending shots at other parts of the country. Add in the paper's well-established preference for talking about rich people and the hypocritical California Democrats narrative is nearly perfect which means we're probably in for still more installments.  


  1. I was skeptical on many points in that NYT vid after watching as well. I can't comment on the data or methodology but PPIC described greater percent changes in house values inland as more folks were priced out of the costal counties.

    I do agree that this really is red meat reporting for the Times.

  2. The reaction to the chart is a little confusing. You write:

    > If you take a close look, you'll see that the drop started well before the 2008 collapse.

    Isn't that exactly what we would expect? 2006 was already when the bubble began to deflate, as new home sales slowed down. Just a random article from August 2006: https://www.marketwatch.com/story/us-existing-home-sales-plunge-to-a-two-year-low-in-july

    It makes sense that developers, who have their fingers on the pulse of the market, respond sharply to declining sales and backlogs of inventory.

    What ultimately caused the bubble to pop and crater was that those declining sales were associated with price drops, defaults, etc. Of course, it took a while for the effects of that to fully manifest, but the chart matches up with the realities of the housing market.

    So, no need to invoke Schwarzenegger in the first half of the chart. What's more striking is the fact that permits never recovered in the latter half, well after 2011 when Schwarzenegger was long gone and prices were booming.

    1. I may have been unclear.

      What we see here is exactly what we'd expect given the fluctuations of the housing market and matches what we saw across the nation, but the point of the NYT video was that the liberals/Democrats were responsible for the low volume of permits. I don't see how their chart supports that.

      My take away from the chart was that larger economic factors are the primary drivers of the swings. NIMBY policies are bad, but I think their impact has been greatly exaggerated.

    2. And your point about the post-2011 market raises one of the most interesting questions of the whole housing crisis. Elasticity of supply. Why haven't high prices caused a building boom, particularly in the Central Valley where there's a lot of un and under-developed land and the prices have exploded?

    3. I agree with the second part of your argument that at the local level, the "liberal hypocrisy" idea runs into trouble, unless there's good evidence that there are variations between conservative and liberal parts of the state.

      However, the first part of the argument in the original post is that state level policies can't explain it either, and your reading of that chart is that "the NYT somehow managed to pick the one statistic that supports exactly the opposite point".

      But the chart is entirely compatible with the argument they're making about state level forces! From 2003 to 2011, the curve mimics the national economic forces that we would expect. Then, after 2011, there is some increasing growth in response to economic trends, but it caps out even as we know those economic forces became stronger and stronger.

      And California is unusual in this regard, compared to nearby conservative states that have had growth in prices and population. Compare these charts of new permits:





      California's just stops growing after 2016, while the others continue ticking upwards. And I think that's largely the point YIMBYs would make: under democratic control, new housing development has become *divorced* from market trends (to the eventual detriment of affordability).

      Now of course, the chart alone is not slam dunk evidence for that. But I think your claim that it *contradicts* the argument they're making is not true.

    4. Good examples. I've been meaning to post something comparing this data from CA and TX, particularly the huge recent divergence in permits. Also wondering why TX's sharp spike in construction hasn't brought prices down.Serious question. I'm open for suggestions.

      As for the chart showing the opposite, you are absolutely right that viewed in appropriate context, CA has recently done much worse than some Western GOP states, but the NYT didn't do that. They popped up a graph where permits went up under Dems and down under Reps without addressing the apparent contradiction.

      The recent poor performance also raises questions about another part of the NYT narrative praising Newsom as the YIMBY gov since the gap really opened up under his watch.

      For the record, I'm certain that in general YIMBYism is better for housing supply than NIMBYism, but I don't believe it's the biggest part of the story.

    5. > Also wondering why TX's sharp spike in construction hasn't brought prices down.Serious question. I'm open for suggestions.

      Yes, I think it's fair to say that new supply is not the sole issue. Indeed, the overall asset bubble problem that has been discussed here may be doing the bulk of the damage in terms of unaffordability. On the other hand, removing barriers to construction is something that local and state governments at least have the ability to do, and it should help, to some extent, even if it doesn't solve the problem entirely. (Whereas I don't think they have a great angle on an international asset bubble problem...)

      But yes, then the rage bait tone of the NYT is rather misplaced.