I'm sorry, but this is an outrageously poor argument.

It's as if you were to claim that busy emergency rooms are a leading cause of gun violence.

You have established neither cause nor effect, you have only claimed correlation.

Actually, if you read the article referred to in the blog, I show that slow-growing regions with growth-management controls have fast-growing housing prices, while fast-growing regions with no growth controls or other limits on homebuilders' ability to meet demand have housing prices growing no faster than median incomes.

You can also download housing price indices published by the Federal Office of Housing Enterprise Oversight (3.8 MB file). The indices show that prices in many regions accelerate on almost exactly the date that growth controls are implemented. For example, Charleston, SC prices kept pace with inflation through 1996, then started rising much faster than inflation. It turns out that a comprehensive zoning ordinance limiting development at the urban fringe was passed in 1996.

Theory says that if you restrict supply, price will go up. Smart growth and growth management restrict supply. Prices went up in regions that did growth management at much faster rates than in regions that didn't adopt such policies. I think that is enough evidence.

It might be worth taking note of the distinction between a speculator (who purchases something with the intention of profiting entirely from passive appreciation in its market value) and an investor (who purchases something with the intent of profiting by exploiting its utility). People who buy houses and rent them out are investors. People who buy houses and flip them are speculators. Investors are not a significant indicator of a bubble.

I don't think anyone can define a firm line between "speculator" and "investor" -- we just use one term as a pejorative and the other as a compliment. Regardless, the fact that a much higher percentage of homes are being purchased by people who don't intend to occupy them signifies a change in the market.

Homes were once thought to be immune to bubbles because people lived in them and didn't plan to sell right away. If a large percentage are held for investment/speculative purchases, the market will be more volatile as prices can drop further and more rapidly when those large numbers of people decide to sell.

But that's kind of my point. It's not buying a house without the intention of personally occupying it that's the problem, it's buying it with the intention of more or less immediately re-selling it. My landlord, for example, is not a contributor to the market bubble...he's owned this house for 10 years now and fully intends to pass it on to his kids when he dies, even though he's never lived in it.

When anybody besides the brokers is making money by churning the market, it's time to run away.

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