Is it a catch 22, do We spend or do We save?

[drjones96]

Originally Posted by taurus430

It seems like a catch 22. If we spend, it's good for the economy but could be bad for us.
If we save, it's bad for the economy, and might be good for us.

I think you should spend all your money and I'll save all my money.

[taurus430]

Originally Posted by drjones96

I think you should spend all your money and I'll save all my money.

LOL.....You don't have to worry about that, as I mentioned I'm a better saver than spender. In these bad times I am w/o a job and not in debt, how's that?

It's just with the holidays, they base everything (including the market) on what we consumers spend at the stores which makes you think that holiday spending is good, the reason for my "catch 22" post. I know saving is a good thing.

[Humanoid]

Originally Posted by chuck22b

I'm not totally sure that we totally misallocated resources. I don't think housing per say is bad... and the building of mass amounts of housing for the people isn't totally bad.

Regardless of what you want to think, the markets are crying out "misallocation". The issue isn't the houses, its all the capital (human and otherwise) that went into the housing bubble in terms of construction, banking, finance etc etc.

But if f there are 1 million families in your society how exactly is having 1.1 million homes a benefit? Because we can now focus on other things? That is just another way of saying you misallocated resources.

[chuck22b]

Originally Posted by Humanoid

Regardless of what you want to think, the markets are crying out "misallocation". The issue isn't the houses, its all the capital (human and otherwise) that went into the housing bubble in terms of construction, banking, finance etc etc.

But if f there are 1 million families in your society how exactly is having 1.1 million homes a benefit? Because we can now focus on other things? That is just another way of saying you misallocated resources.

Hi Humanoid,
I already said that I agreed with Bale002 that it was a misallocation. I was just looking at the plus side of the situation... and that housing and developments by nature require a large up-front cost, planning, zoning, and incentives that may not be as easily accessible or available in a "normal" market.

Eventually the .1 million extra houses will be filled.... it just depends if the price is right as the population grows

Maybe the RE market requires bubbles? After war mass constructions (WW1, WW2, Vietnam, Korea War, etc.) and credit expansion mass constructions (late 80s, 2000s) create the new neighborhoods, infrastructure, and communties which require large amounts of capital and initial investments (foresight that normally wouldn't exist without bubble greed). Then the resulting busts provides affordable housing for the masses.

Catch 22.... you need money, capital, resources, and incentives to invest and build... but those incentives may not exist regularly in a normal market (ie, a single developer may not be able to build a large tract and the support of the city with infrastructure and all the other things that come with it because there isn't enough buyers or the costs don't justify the initial outlay - investment).

The bubble inflaters pay for the required mass investments and initial outlays... while the rest later benefit with more affordable houses. Rinse and repeat.

-chuck22b

P.S. I like this thread because... chuck22 = catch22 or chuck is a paradox

[Humanoid]

Originally Posted by chuck22b

Catch 22.... you need money, capital, resources, and incentives to invest and build... but those incentives may not exist regularly in a normal market (ie, a single developer may not be able to build a large tract and the support of the city with infrastructure and all the other things that come with it because there isn't enough buyers or the costs don't justify the initial outlay - investment).

You're going to have trouble explaining why many tracks were built in normal real estate markets.

I don't see what the point of trying to put a positive spin on something that is so destructive.

Originally Posted by chuck22b

The bubble inflaters pay for the required mass investments and initial outlays... while the rest later benefit with more affordable houses. Rinse and repeat.

Actually, we are all paying for it. And if there was never a bubble to became with housing would be affordable in the first place. A bubble is good because it creates affordable housing afterwards huh? Housing was affordable before the bubble.... the bubble created unaffordable housing not the opposite.

[chuck22b]

Originally Posted by Humanoid

You're going to have trouble explaining why many tracks were built in normal real estate markets.

According to housing starts since 1959... a pattern seems to emerge. Housing starts rise, and then it falls into a recession... then it rises again and falls again with a recession.

http://goldseek.com/news/MillenniumW...07/8-4mw/4.gif

I'm not condoning bubbles nor am I in favor of them... all I was remarking on is "perhaps" that is how the RE market works. And that bubbles are a natural phenomena of the housing market in a capitalistic environment. Of course there are housing tracts that were built during "normal" markets... but the majority were built during bubbles.... and busts results in pricing lower than norm (ie, prices usually over correct) making them more than affordable.

-chuck22b

[Humanoid]

Originally Posted by chuck22b

According to housing starts since 1959... a pattern seems to emerge. Housing starts rise, and then it falls into a recession... then it rises again and falls again with a recession.

The fact that housing starts fall in a recession is not surprising...but that isn't the issue. You are essentially suggesting that nothing would get done if there weren't bubbles, yet historically this isn't accurate. There aren't just two states to the economy, either bubble or recession, there is a normal functioning market (Notice I said "normal real estate market", not "real estate market during a recession"). And plenty of houses, offices, shopping centers etc have been built during normal market conditions.

Originally Posted by chuck22b

And that bubbles are a natural phenomena of the housing market in a capitalistic environment. Of course there are housing tracts that were built during "normal" markets... but the majority were built during bubbles....

There is nothing natural about this housing bubble, it didn't just occur out of no where. It was caused by an expansion in the money supply. No such bubble has ever occurred in US history before. Housing does ebb and flow, but usually with the business cycle (which isn't exactly natural either...).

[chuck22b]

Originally Posted by Humanoid

The fact that housing starts fall in a recession is not surprising...but that isn't the issue. You are essentially suggesting that nothing would get done if there weren't bubbles, yet historically this isn't accurate. There aren't just two states to the economy, either bubble or recession, there is a normal functioning market (Notice I said "normal real estate market", not "real estate market during a recession"). And plenty of houses, offices, shopping centers etc have been built during normal market conditions.

It's not necessarily the drop in housing starts that is suspect (as is expected in recessions)... it's the acceleration and then peaking, and then recession that I'm trying to flush out with the diagram. If housing markets are somewhat normalized and don't involve bubbles then the housing starts should be fairly level instead of looking like little mountains with peaks and troughs. I'm just trying to make-out patterns and the behavior of the housing market. I personally don't like housing bubbles. It'd be great if things were normalized and stable instead of peaking and crashing.

There is nothing natural about this housing bubble, it didn't just occur out of no where. It was caused by an expansion in the money supply. No such bubble has ever occurred in US history before. Housing does ebb and flow, but usually with the business cycle (which isn't exactly natural either...).

If all we know are business cycles and ebb and flows.... then what is natural? and what is not? The current housing bubble looks to be an extension of 15+ years of constant housing start increases without the drop that should of happened in the early 2000s. That's probably the most unnatural part of this bubble.

-chuck22b

[Humanoid]

Originally Posted by chuck22b

If housing markets are somewhat normalized and don't involve bubbles then the housing starts should be fairly level instead of looking like little mountains with peaks and troughs.

Real estate will ebb and flow with the business cycle, during a recession they slow building when things improve they often have to play catch-up. A bubble in real estate is something else entirely.

Originally Posted by chuck22b

The current housing bubble looks to be an extension of 15+ years of constant housing start increases without the drop that should of happened in the early 2000s. That's probably the most unnatural part of this bubble.

A lack of contracting housing starts isn't what caused the bubble....that after all would make no sense. There has been a massive credit expansion over the last 20 years or so...this is the issue.