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Location: Jonquil City (aka Smyrna) Georgia- by Atlanta
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I have heard some TV pundits on the business channels saying effectively that we cannot and will not have economic recovery unless housing recovers. The argument seems to go something like this: rampant housing inflation is good for the economy because rapidly escalating values make home owners "feel rich" and more likely to go out and consume. The other argument is that homeowners are able to tap into their rising equity to borrow money to spend in other sectors of the economy. They said that "no other investment" can do this and that, unless housing recovers to what it was in the 90s, we will be in a slow to no growth economy.
I only ask- isn't rampant housing speculation what got us into this mess to begin with? So to get out we want even more of what got us here? Does this make sense to anybody?
They should just put all the stock out there so all the prices plummet like crazy, and zero in on their natural price. If people are counting on their home equity as some kind of BS savings vehicle, well then, they only have themselves to blame. A house has never been a liquid asset and those that felt that way deserve to get burned. Houses depreciate in value every time you flush the toilet and they always will.
Nothing has changed since "An Inquiry Into the Wealth Of Nations" was published in the 1700's.
They should just put all the stock out there so all the prices plummet like crazy, and zero in on their natural price. If people are counting on their home equity as some kind of BS savings vehicle, well then, they only have themselves to blame. A house has never been a liquid asset and those that felt that way deserve to get burned. Houses depreciate in value every time you flush the toilet and they always will.
Nothing has changed since "An Inquiry Into the Wealth Of Nations" was published in the 1700's.
The key to recovery is internationally competitive production and productivity (production - consumption = saving + investment), even on a comparative advantage basis, and a money supply that reflects the real state of relative productivity and competitiveness.
I do not notice that US housing stock as money supply has been a sound indicator of international competitiveness and I do not expect that it would be going forward.
But apparently the objective is not international economic competitiveness on US soil, so then it must be something else.
I have heard some TV pundits on the business channels saying effectively that we cannot and will not have economic recovery unless housing recovers. The argument seems to go something like this: rampant housing inflation is good for the economy because rapidly escalating values make home owners "feel rich" and more likely to go out and consume. The other argument is that homeowners are able to tap into their rising equity to borrow money to spend in other sectors of the economy. They said that "no other investment" can do this and that, unless housing recovers to what it was in the 90s, we will be in a slow to no growth economy.
I only ask- isn't rampant housing speculation what got us into this mess to begin with? So to get out we want even more of what got us here? Does this make sense to anybody?
No, that's just more FIRE Economy stupidity.
Housing can neither drive an economy nor sustain it. It's a simple matter of numbers.
Yes, there are 300 Million people in the US, but if you go to the US Census web-site you'll find there are only 82 Million households.
So the number of new homes is limited to 82 Million? No, the Census Bureau defines "household" as any family unit, which means you can have four households living within one single dwelling place. A good example would be a woman who "owns" a home and is caring for her aging mother, while adult daughter and adult daughter's boyfriend live there as well. The Census Bureau counts that as four separate households.
There are people, ie "households" who will never own a home. That would include households like me, who simply have no desire to own a home (at least not in this country), people who are disabled because of physical or mental conditions who would be unable to maintain or live independently, and people who could never financially own or maintain a home (including paying insurance and property taxes or keeping the gas and electric on).
From that, we can conclude there is a "glass-ceiling" on home-building. There is a maximum number of new homes that can be built nation-wide, a maximum number that can be built per year (per market), and a maximum number of home owners.
Once you reach that point, there's nothing to be done. You couldn't even give away homes for free, because they would be liabilities to the owners who couldn't pay the insurance, property taxes or maintenance.
I believe we reached that "glass-ceiling" which is what caused the housing crisis in the first place. When the "glass-ceiling" was reached, people tried to break through it by lowering the standards using various means, such as requiring no money down, giving mortgages to people who were not credit worthy, making incredibly risky loans and even falsifying loan document data.
The argument that equity rises is also false. Home values are inflated because interest rates are artificially depressed. Home values are also tied to Supply & Demand, and when you have new home-building in a particular market, you end up with a glut of housing that drives down the value of homes in a given neighborhood, so those people actually lose equity in their homes.
I suppose they could start buying up pre-existing homes and demolishing them in order to create a housing shortage to drive prices back up, but it wouldn't change the fact that there will always be a "glass-ceiling."
If the BLS is correct in its 2008-2018 Employment Report, and if the BLS is correct that 67% of all job openings over that 10 year period will be created by retiring Baby Boomers, then unemployment will remain at 9%-10% (or 16%-18% using the pre-1994 method) through 2016 before decreasing to 8% and that will not result in a recovered housing market.
Of course, people could voluntarily reject Tier 2, 3, 4 & 5 unemployment benefits and permanently quit looking for work and that would drop unemployment back down to 5%, but it wouldn't change the fact that fewer people are employed and households have decidedly lower annual incomes because of it, which ends up with the same result, and that is no recovery in the housing market.
The key to recovery is internationally competitive production and productivity (production - consumption = saving + investment), even on a comparative advantage basis, and a money supply that reflects the real state of relative productivity and competitiveness.
I do not notice that US housing stock as money supply has been a sound indicator of international competitiveness and I do not expect that it would be going forward.
But apparently the objective is not international economic competitiveness on US soil, so then it must be something else.
I agree. The real problem is short-term memory or a lack of understanding in regard to what economies historically do. I should think things will remain the way they are, whatever that means to anybody, for the foreseeable future. That is until, like I think you mentioned, we find a way to become a progressive economy again. C'mon scientists, find that cheap energy so we can put a whole class of people to work!
What people don't get is that a house is not a producer of wealth, it is a consumer of it. It's a depreciating consumable item. The Ponzi scheme of 30+ years of taxpayer-subsidized land and highway development, the latest real estate bubble, and persistent propaganda from those who have profited from both have brainwashed millions upon millions of Americans that a house is an "investment," rather than just one more expense of living. The re-inflation of a housing "boom" is not the savior of the economy, it is the destroyer of it--if for no other reason because it diverts what little excess capital our economy is now generating away from investment in productive economic activity into non-productive McMansion bull****. I equate the purveyors of housing that people can't really afford about at the same level as I do meth dealers. Their product may make their customers feel good, but it is absolutely toxic to their customers long term health and survival. But, like the meth dealers, they don't care about that--just making that buck now is all they care about.
The "American Dream" of a house is B.S used by the wealthy banks to make more money. They have made home value skyrocket and when they plummet they simply buy more homes. They own you in forclosure or the own you for 30 years.
It always made me scratch my head that people are "proud to own a home" when their house cost $300k, it may go up to 400k in value but you will pay the bank 750k to pay for it. What a scam.
Greenspan created the housing bubble by encouraging people to go into interest only loans then he raised the rate 17 straight times. What a crook! The banks profited greatly!
The key to recovery is getting America to build and buy American.
Houses don't depreciate because they represent more than just the physical house itself. If housing goes up it means the income outlook has improved and the prospects of housing need have increased or are expected to increase, almost all driven by income growth. If all houses were put in a vacuum where everyone had equal income prospects and reasonable commutes to them then yes houses would function as just a big depreciating asset. But they do not because you buy a house more for the ability to live near employment and income. After all there is probably a perfect house for most of us available in Detroit or western New York, but there is an even better reason why none of us have taken advantage of the opportunity.
I also partially agree with the idea that housing is a lagging indicator and cannot be used to spot economic growth. This comes because loan growth and loan standards are the last thing to improve out of a slowdown or recession and always peak too late where they become a cause of a recession.
So I guess the answer is housing is not really related to the recovery. It will show indicators that prove the recovery is sustained, but it is more just a scoreboard and not a root cause of recovery.
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