A much needed crash

The Times is reporting on falling condo prices in DC and elsewhere. The root of the problem may be our zany insistence that everything needs to be subject to investment:

Real estate experts say condos are more susceptible to booms and busts than single-family homes are because they attract more investors who do not intend to live in them and are easier to build than a new subdivision in many cities.

The fact that housing is a medium for speculation and the accrual of wealth, rather than construed only as a means of meeting basic human needs, is a problem. It leads to perverse incentives and strange occurrences, like the replacement of a DC hospital by upscale condos, while inadequate healthcare and lack of affordable housing are two of the biggest problems the district faces.



I'm just happy that the investors in said project are getting screwed by the same market forces that lead to the Columbia in the first place:

Take the owner trying to sell a spacious two-bedroom condo for $879,000 in the former Columbia Hospital for Women, which closed in 2002, in the Foggy Bottom neighborhood of Washington. In 2004, the investor was so confident that he would make a handsome resale profit that he told his agent, Thomas P. Murphy, he wanted to buy five condos. Mr. Murphy said he flatly told his client he would only assist him in purchasing one unit in any one building.

“He needs $890,000 to break even, but the offers are at $800,000 to $840,000,” Mr. Murphy said. “He does remember that I told him he was not getting five of them.”

Could he rent the condo? Yes, but that option is not appealing, either. Mr. Murphy estimates that the unit could rent for $4,000 a month, far short of the $6,800 a month the condo costs in mortgage interest, maintenance fees, insurance and taxes.

Why are we building anything that costs almost $7,000, or even $4,000, per month to live in? Whose interests, apart from the builders', does that serve?