A weekend topic starting with The Stranger in Washington. "If one is stuck with the tools of standard economics, he/she will not be able to make sense of the fact that during the course of Seattle's construction boom, developers have mostly produced luxury apartments and almost entirely neglected the huge demand for affordable apartments. This fact does not square with the classical 'law' of supply and demand."

"Orthodox economics also lacks the explanatory power to elucidate the current state of Seattle's rental market. Nothing in its books or models can predict the situation we are now in: The prices for luxury apartments falling because of glut that will only grow because more luxury apartments are still under construction; while the cost of affordable apartments remains high or rising because of demand."

"Seattle has been in a building boom for seven years and all it has produced are luxury apartments. This is not an anomaly. This is capitalism to the core. As a whole, it is very hard for the market to provide people with things they actually need: cheap transportation, housing, healthy food. These reveal themselves to be things that only non-market systems and institutions can adequately supply."

The Tri-City Herald. in Washington. "With a vacancy rate below 2 percent, it’s tough to find an apartment in the Tri-Cities. But the same trends that are frustrating renters are drawing investor interest to the Tri-Cities. That means supply could begin to catch up with demand. 'We can’t build them fast enough,' said Rob Hughes, director of engineering. 'They’re being occupied immediately.'"

"The pending sale of 575 Columbia Point is possibly the strongest signal that investors see the Tri-Cities as a strong market. The buyer is being represented by Tim Ufkes. The 575 Columbia Point buyer needs to reinvest proceeds from the sale of a Yakima property to defer capital gains."

"He called 575 an ideal investment. The project is new, 95 percent leased, has a new and assumable mortgage, boasts strong rents and has enduring amenities, like access to the Columbia River and the nearby city golf course. It is one of four deals he has pending in the Tri-Cities."

"Ufkes expects to see more Park Place-style development at Broadmoor to accommodate demand from downsizing baby boomers who want condo-type lifestyles. It’s going to lead to a big change in thinking. 'You may end up with a Whole Foods. I’m not sure why you wouldn’t. You may end up with a Trader Joe’s. I’m not sure why you wouldn’t,' Ufkes said. 'It will be quite different that what you have now.'"

From Fox 10 in Arizona. "It's one of the most noticeable hi-rise buildings in Phoenix. 44 Monroe is a mixture of apartments and condos in the heart of downtown. Many tenants there, however, are upset about paying for downtown living, in a place they can't make full use of. 'They have a way from keeping the door from opening any further than 5 or 6 inches so you can't physically get on the balcony,' said Amber Felix. 'You can get it open but can't get out there.'"

"The pool is just a hole in the ground on the 8th floor. Residents were told a leak needed to be fixed, but they haven't had access all year. Felix and her significant other sold their house to move Downtown. 'They haven't kept up with their end of the bargain, especially when we were told it should be done very soon, very soon,' said Felix. 'Had we known then what we know now, we would have never moved in.'"

From the Independent Institute. "We Austrian economists frequently cross swords with our Keynesian foes on all manner of economic analysis and government policy recommendations. Yet the standard Austrian analysis of the business cycle is also sharply at odds with that of the 'Market Monetarists,' a new school of thought coming out of the Chicago school tradition and now gaining traction at places like the Mercatus Center."

"In particular, prominent Market Monetarists have challenged the Austrian narrative of the housing bubble, arguing that the claims of 'malinvestment' and the need for reallocation of resources do not fit the data. Yet as we’ll see, it’s the Market Monetarists who are defying common sense with their alternate version of history."

"In the standard Austrian view, when the banking system (nowadays led by a central bank) injects credit and pushes interest rates artificially low, it sets off an unsustainable boom. However, the distortion is not merely monetary: During the boom, malinvestments occur."

"Here's Scott Sumner (one of the leaders of the Market Monetarists): 'I agreed that there had been some excessive housing construction in the inland portion of the sand states. ... But I argued that these cities were fast growing, and this problem was relatively mild. In my view the malinvestment is better termed 'too early investment'—some houses were built a few years before they were needed.'"

"In his grand treatise Human Action, Ludwig von Mises explained the difference between 'malinvestment' and 'overinvestment' using—believe it or not—a metaphor of a house project. Here’s Mises, describing the situation during an unsustainable boom when artificially cheap credit has misled people."

"'The whole entrepreneurial class is, as it were, in the position of a master-builder whose task it is to erect a building out of a limited supply of building materials. If this man overestimates the quantity of the available supply, he drafts a plan for the execution of which the means at his disposal are not sufficient. He oversizes the groundwork and the foundations and only discovers later in the progress of the construction that he lacks the material needed for the completion of the structure. It is obvious that our master-builder’s fault was not overinvestment, but an inappropriate employment of the means at his disposal.' [Mises, Human Action, Scholar’s Edition, p. 594.]"

"So contrary to Sumner’s perspective, when the Austrians speak of 'malinvestments' during the housing boom years in the mid-2000s, they weren’t predicting that Las Vegas would be a ghost town for the next 30 years. Rather, they simply meant that too many houses were being built ahead of schedule, and further that many of these houses were bigger than they should have been."

"The Austrian perspective on the housing boom and bust lines up with common sense: Too many houses were built during the mid-2000s, and many of these houses were bigger than they should have been. The Austrians differ from most other analysts by blaming this outcome (largely) on loose Fed monetary policy."