Flip That House, along with other US reality television programmes about investors who bought properties to revamp and sell for a quick buck, went dark when the housing market crashed. But now bargain hunters looking to make a profit, and the cameras that follow them, are back.

Low interest rates, a slowly improving jobs market and greater consumer confidence have spurred more Americans to buy houses. Rapidly depleting inventories of homes for sale and surging prices have created a sweet spot for house flippers – those who buy and sell the same home within six months.

Sorry, did I say “sustainability?” I meant to say, “reinflate that bubble so we can prove right that old definition of insanity.”

There was a throwaway line in Heinlein’s The Moon is a Harsh Mistress that made me laugh hard enough that it’s been stuck in my head these last 30 years. Something about two Chinese merchants growing rich, selling rocks to one another.

Flipping houses is pretty much just that, only a house of course has more intrinsic value than an ordinary rock. But just because it has value, doesn’t mean it’s necessarily worth the price paid for it. So what is any given house worth? We don’t have any way of knowing, because the Fed is doing all it can to reinflate the bubble (ie, artificially raise prices), while banks continue to mask the real size of our foreclosure problem. But it’s safe to say the fair-market value of any given house is probably closer to the 2008-09 bottom, than it is to today. It might even be quite a bit lower than the bottom, given that the market was never allowed to actually find its bottom.

Because Washington, of course, couldn’t find its bottom with both hands.


But there’s a more serious problem here, too: A house is not a productive asset. That is, it doesn’t generate new wealth, and as any homeowner can tell you, it tends to generate big new expenses. A productive asset is one that does generate new wealth, such as a profitable business or machine tools. What Bernanke has done — and Greenspan before him — is to move capital away from investments in productive assets and into housing.

And we wonder what’s happened to our productivity? Instead of producing new industries, we’re flipping houses. And as a result, a generation is stuck flipping burgers. They’ve been priced out of fulltime work by ObamaCare, and they’ve been priced out of affordable homes by the Fed.

So who, exactly, is going to keep buying to keep this bubble inflated? The next generation can’t afford it, and the Boomers are going to start dying. Reminds me of the story told about Joe Kennedy, right before the stock market crash of 1929. His shoeshine boy asked him if he had any stock tips, and old Joe supposedly called his broker right away and told him to sell everything. The reason? If the shoeshine boy was trading, there was nobody left to sell up to.

That’s where we’re headed again, this time as farce.