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Conor Sen

The Next Housing Boom Looks More Sustainable

Rising minimum wages will allow many working-class Americans to buy a first home.

Under the new minimum wages, a Target employee plus a Bank of America employee will be able to afford a home around $300,000.

Under the new minimum wages, a Target employee plus a Bank of America employee will be able to afford a home around $300,000.

Photographer: Daniel Acker/Bloomberg

A housing boom doesn’t have to be followed by a painful bust. The boom of the last decade was powered by speculative froth and lax mortgage underwriting – and it ended predictably badly. The present day, with large employers continuing to raise their minimum wages, creates a framework for a new, more sustainable housing expansion.

Much has been written about the reasons the last housing boom collapsed, but a simple way of thinking about it is too many homeowners had mortgages they couldn't repay, either because they had taken on too much debt, the interest rates on the mortgages reset at a bad time, or they suffered job losses when the economy turned down. And then a wave of foreclosures led to forced selling, downward pressures on home prices, and all kinds of negative second-order effects in the economy and financial system.