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Building from the Ground Up: Reclaiming the American Housing Boom
Myths and misunderstandings about what happened in the Great Recession continue to hinder the American economy by making us afraid of the one thing we need more homes.
Remember when mania led to a massive housing bubble? When Americans found themselves saddled with too many houses and were hit with the reality that our economy had been built on unsustainable borrowing? Everyone knows about that, right?
What if that was wrong? What if, when we get down to brass tacks, Americans have been struggling to build enough new housing—especially in places where housing is in high demand—and this was true, even in 2005?
Viewing the economic calamities of the twenty-first century with this central insight turns the conventional wisdom about our economic challenges upside down. The need for more homes has been the core cause of American economic instability and stagnation. Building from the Ground Up will guide you to a sweeping new perspective about the Great Recession and the financial crisis, which points to a brighter path for America’s economic potential.
Remember when mania led to a massive housing bubble? When Americans found themselves saddled with too many houses and were hit with the reality that our economy had been built on unsustainable borrowing? Everyone knows about that, right?
What if that was wrong? What if, when we get down to brass tacks, Americans have been struggling to build enough new housing—especially in places where housing is in high demand—and this was true, even in 2005?
Viewing the economic calamities of the twenty-first century with this central insight turns the conventional wisdom about our economic challenges upside down. The need for more homes has been the core cause of American economic instability and stagnation. Building from the Ground Up will guide you to a sweeping new perspective about the Great Recession and the financial crisis, which points to a brighter path for America’s economic potential.
- GenresEconomicsUrban Planning
272 pages, Paperback
Published January 11, 2022
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Displaying 1 - 5 of 5 reviews
March 5, 2025
The conventional story of the 2008 recession is: there was a pointless housing bubble, and the government saved the day after the banks destroyed the economy. In this book, Kevin Erdmann tells a very different story: he argues that a housing boom was necessary to accommodate Americans priced out of the most expensive cities, and that government squeezed the economy to death by raising interest rates and tightening lending standards. As a result, the market for starter homes (which would have been bought by low-credit-score homeowners who could not get a mortgage under post-2008 standards) collapsed, and the people who would have bought those homes rented apartments instead. In turn, this collapse contributed to higher rents by increasing demand for rental housing.
Some of his most interesting points include the following:
*There was not an explosion of new housing in the years right before the recession began; housing starts peaked in 2006, years before unemployment began to rise. And as a percentage of the housing stock, housing starts were far LOWER in 2006 than in the 1970s (3.3 percent of the housing stock in 1972, 1.7 percent in 2006).
*One common argument is that interest rates were too low, causing more demand for housing and thus higher housing prices. But higher interest rates were nationwide, and housing prices were much more variable, skyrocketing in some places but not in others.
*There is ample evidence that marginal buyers were not able to finance home purchases after 2008. Borrowers with credit scores over 760 borrowed 96 percent more in 2019 than in 2006, while borrowers with lower credit scores borrowed 58 percent less. Also, prices decreased more rapidly in lower-income areas, suggesting a collapse in demand among lower-income households.
*Conventional wisdom is that too many low-income households bought homes. But before the 2008 recession, the income of the median homeowner rose more rapidly than the income of the median renter- from 105 percent of median renter incomes in 1995 to 122 percent in 2007.
The only thing I did not like was that Erdmann could have discussed comparable non-U.S. economies in more detail. He points out that in Australia and Canada, where government did not crack down on lending, the 2008 recession was less severe. However, those countries still have a housing cost crisis comparable to that of the U.S. Perhaps Erdmann's next book will explain why.
Some of his most interesting points include the following:
*There was not an explosion of new housing in the years right before the recession began; housing starts peaked in 2006, years before unemployment began to rise. And as a percentage of the housing stock, housing starts were far LOWER in 2006 than in the 1970s (3.3 percent of the housing stock in 1972, 1.7 percent in 2006).
*One common argument is that interest rates were too low, causing more demand for housing and thus higher housing prices. But higher interest rates were nationwide, and housing prices were much more variable, skyrocketing in some places but not in others.
*There is ample evidence that marginal buyers were not able to finance home purchases after 2008. Borrowers with credit scores over 760 borrowed 96 percent more in 2019 than in 2006, while borrowers with lower credit scores borrowed 58 percent less. Also, prices decreased more rapidly in lower-income areas, suggesting a collapse in demand among lower-income households.
*Conventional wisdom is that too many low-income households bought homes. But before the 2008 recession, the income of the median homeowner rose more rapidly than the income of the median renter- from 105 percent of median renter incomes in 1995 to 122 percent in 2007.
The only thing I did not like was that Erdmann could have discussed comparable non-U.S. economies in more detail. He points out that in Australia and Canada, where government did not crack down on lending, the 2008 recession was less severe. However, those countries still have a housing cost crisis comparable to that of the U.S. Perhaps Erdmann's next book will explain why.
January 9, 2023
Common wisdom is that the Great Recession started because of a housing bubble which led to too many homes being constructed and the bubble popping. However, this author presents a bold claim that the opposite problem was true: that cities weren't building enough homes which led to an economic crisis.
I'm generally sympathetic to the argument, though I'm not sure the author does it justice. They spend relatively little time on the housing regulations topic and mostly recap the years leading up to and following the financial crisis. In this description, they do discuss a number of financial matters that seem to be more of a problem which winds up undermining their argument.
The book comes with a lot of graphs and data, though it winds up reading almost too academically. So this is a book that has a very particular audience, but may not be as accessible as it could be to persuade a larger audience.
I'm generally sympathetic to the argument, though I'm not sure the author does it justice. They spend relatively little time on the housing regulations topic and mostly recap the years leading up to and following the financial crisis. In this description, they do discuss a number of financial matters that seem to be more of a problem which winds up undermining their argument.
The book comes with a lot of graphs and data, though it winds up reading almost too academically. So this is a book that has a very particular audience, but may not be as accessible as it could be to persuade a larger audience.
January 25, 2023
Broadly interesting and caused me to reevaluate a lot of priors about the GFC, the “housing bubble,” and even my own position on demand-driven hypotheses for city pricing. That said, the lack of a satisfying explanation for why migration to Contagion cities halted ~2005/2006 made the latter half of the book feel hollow. If the conditions are as structural as the book argues, why did people stop leaving Closed Access cities? A quibble but an important one.
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January 19, 2025Essential argument on the true cause of the great financial crisis and how to reignite broad housing affordability
December 21, 2024
Crucial debunking of the housing bubble myth that everyone should consider.
Displaying 1 - 5 of 5 reviews