Hurricane Sandy swept through 12 U.S. states this past week, causing wide-spread flooding and an estimated $10 billion to $20 billion in potential losses, according to research firm Capital Economics. That means a lot of money will be earmarked toward home repairs and new-home construction. Some commentators have viewed this as a silver lining.

To be sure, more money spent on housing will help the housing sector, but there is an unseen and a frequently neglected opportunity cost: Money spent on housing is money that could have been spent elsewhere. A natural disaster means money must be spent to replace what already existed; that's money that could have been spent on other goods or services or investments.

This lost opportunity to spend elsewhere is what the 19 th century French economist Frederic Bastiat referred to as “the unseen.” Yes, we can see more money being spent on housing, but we can't see where it would have been spent had there been no hurricane.

In other words, Hurricane Sandy will provide a boost to housing, which is our gain, but that doesn't translate into a boost to the overall economy because of the lost opportunity to spend elsewhere.

The point we want to emphasis is that it's always worth considering Bastiat's the unseen. The seen in housing is improving sales and pricing, but the unseen is what the housing recovery could be if it were unhampered by the exclusion of unfunded qualified borrowers. This unseen is our loss.

Courtesy of Jessica Regan.

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