How to rescue housing? The Obama administration doesn’t have a plan — or, more accurately, it has only half a plan. It presupposes that preventing or minimizing home foreclosures is a formula for revival. It isn’t.
Almost everyone agrees that a housing recovery is essential for a broader economic upswing, in part because housing’s collapse brought on the recession. Mortgage delinquencies triggered the financial crisis. Tumbling home prices (down 26 percent from their peak) ravaged consumer confidence, borrowing and spending. Since late 2007, housing-related jobs — carpenters, real estate agents, appraisers — have dropped by 1 million, a quarter of all lost jobs.
Housing’s distress is too much supply chasing too little demand. Huge inventories of unsold homes have depressed prices and construction. Given that prices rose too high in the “bubble” — homes were affordable only because credit was dispensed so recklessly — much of this painful adjustment was unavoidable. But that process should be mostly complete….
[i]Housing’s distress is too much supply chasing too little demand.[/i]
And that demand will generally continue to decline through the early ’20s because it’s driven by the unavoidable forces of demographics:
a) House purchases peak at about age 47 (Bur. Lab. Stat. data).
b) Baby Boom births peaked around 1958.
Housing purchases would, therefore, be expected to peak around 1958+47 = 2005. Births began falling off rather rapidly beginning around 1961, which gives us 2008 when brought forward by 47 years.
Births continued to drop drastically through 1973-75, suggesting demand for housing will continue to drop through perhaps 2022 before turning upward slowly towards another peak in the late ’30s.
Bart, what you say is true. However, the need for housing continues to expand due to immigrants, people staying longer in their own homes, some people desiring second homes, and some housing becoming unfit for occupancy. Families need decent housing. Some are living in shacks. If our country could, it should consider helping such people relocate to decent housing. I am not talking only about rural shacks, but also urban blight. We probably have 10 million units that need to be “retired”. I live in a rural area and see them every day. Some do not have indoor plumbing. Our church and County are trying to help with that.
This piece is a good look at the economics of home ownership… the credit for home buyers is interesting… it might even be necessary given the overall drag that Obama’s “stimulus” package will reak on the economy, especially if his tax increases pass.
Of course the best way to clear up this mess would have been to let the market correct itself (the huge banks and even auto industry made wrong-headed and/or greedy decisions, and therefore, should be held accountable for their actions by market correction. The too big to fail attitude is what has lead to the prevailing moral hazard- very risky transactions made because of the belief there would be no consequences if the deals went bad.) We could then have a much smaller “economic recovery package” aimed at helping workers displaced by the bank mergers and closures and some aid at stabilizing the foreclosure market.
This is all just a massive transfer of wealth from those that did the right things to those that did the wrong things.
Moral: Join in the orgy and be totally fiscally irresponsible, enjoying un-earned “prosperity” or be prepaired to pay for the fiscal foolishness of others under the coercive power of government!
Why should I now pay my mortgage? Why should I not run up my credit cards to $50K and declare bankruptcy? Why should I pay my car loan? Why should I go to work, only to have my money taken by the government and given to the McMansion crowd?
Bumper sticker I saw the other day
HONK
if you are paying my mortgage.
(the “O” in Honk was the Obama “O”)
Cana: Second homes are treated as a separate category within BLS because they are not generally the same sort of housing stock as primaries. In short, it’s a different market, which, BTW, peaks at age 57 IIRC.
Immigration-adjusted demos have pretty much the same curve as raw birth rate, so it’s not going to make that much of a difference. What’s more, if you look at current total fertility numbers coming out of Mexico births are falling below population replacement rates. Absent massive social disruption in Mexico* population-driven immigration from that country will decline to near zero within the next 15 to 25 years.
*40% of Mexico’s federal budget (much of which is used to purchase social peace) is derived from their government oil company, Pemex. Apart from present low crude oil prices, production from their huge Cantarell field has fallen off the table as a result of depletion. Pemex is already in big trouble, as is the federal government there.
More than 20 years ago, my family was faced with having to sell our home in a market where we couldn’t hope to get the same amount that we’d paid for it, even though prices weren’t horribly overinflated (paid $114,000; sold for $87,000). An agent for a home builder that we spoke to had some words of amazing wisdom, which we’ve since lived by:
“You’ve had the use of your house for years, enjoyed it, and watched it age. There’s no reason why you should view it as a money-maker; it’s no different than an automobile. You enjoy it while you’ve got it, but there’s a depreciation cost associated with use. The notion that your house *has* to appreciate – or even let you just break even – is false. You gladly pay for the use of telephone, electricity, water – so consider that your house is the same. After all, renters have to pay for use of their apartments – why shouldn’t you pay for the use of your house, instead of automatically expecting a profit?”
Very true words, and they make a lot of sense. A house is not an investment, or a money-maker. It’s a place to live, and like anything else that costs money. Those who whine and cry about not receiving huge profits when they sell (or, indeed, any profit) are failing to face reality. We took a loss of more than $50,000 on real estate in the 80’s (which we could afford, because we had savings and equity – but didn’t have the latest TV set, hadn’t taken vacations, and were driving 8 year old cars) and I have no sympathy for anyone who now expects to be bailed out of their bad decisions. If they can’t handle it – well, I’ll be d***ned if I’ll see my hard-earned dollars go to compensate for their wasteful spending and errors. Obama’s idea of turning home ownership into an entitlement is dead wrong. People are only entitled to *what they can afford* – not *what they want*.
Never mind housing – Obama has appointed Kansas Governor Kathleen Sebelius to become Secretary of Health and Human Services and she, like Obama, supports late term abortionists like George Tiller.
Everyone who voted for this president should have to watch one of these abortions.
If you did, go to Priests for Life and watch their latest video and then to click on some of the links to see your votes at work.
Since it’s Lent, if you are indeed penitent, you can do penance at a local 40 DFL peaceful Lenten prayer campaign against abortion where in the 5th day, in this nation-wide campaign, 33 babies have been saved from this relentless slaughter. Every 26 seconds a life is snuffed out by abortion. It takes 5 years waiting to adopt a US infant. 250,000 parents in the US are waiting to adopt.
As one German at a 40 Days For Life said, abortion is America’s Holocaust.
GA/FL – and also support Anglicans for Life!
Thanks, Branford, I do. Our Anglican (Uganda) church just started a chapter.
Here’s the link to a new Episcopal ‘ministry’ in Wichita, Kansas for post-aborted babies:
http://www.virtueonline.org/portal/modules/news/article.php?storyid=10026