THE HOUSE SECTOR IS THE FOCUS OF EVERYONES ATTENTION... THE OVERHANG OF UNSOLD INVENTORY IS HUGE... AND THE BAD DEBT IS NEARLY OVERWHELMING...
MOST THINK THAT A "BAILOUT" WILL SOLVE THE PROBLEM.
LOWER RATES...LIBERALIZE TERMS AND VIOLA! PROBLEM SOLVED.
BUT CONSIDER:
THIS RECENT HOUSE MANIA HAD SOME DIFFERENT THINGS GOING ON...
THERE WAS MUCH SPECULATION...A HOUSE WAS AN EVER "APPRECIATING ASSET"....SAY 10% TO 20% PER YEAR...
AND...BETTER YET...YOU COULD ALWAYS "REFI" EVERY YEAR.
TAKE YOUR "PROFITS" OUT FOR "MAD MONEY"... AND OTHER PERSONAL SPENDING...! IT WAS LIKE HAVING ANOTHER PART TIME JOB FOR LUXURIES!
AND A LOT OF PEOPLE PLAYED THAT GAME...!
THEN, PRICES GOT SO HIGH THAT ONLY THOSE ALREADY "IN THE GAME" COULD AFFORD TO PLAY... AND LIKE ALL GOOD PONZI SCHEMES...HOUSING COLLAPSED FROM LACK OF NEW SUCKERS ENTERING THE SCHEME...
BUT THERE IS ANOTHER ASPECT... THE US IS AN AGING POPULATION...WITH MOST OF THE X-GENERATION WORKING AT STARBUCKS AND LIVING AT HOME...OR "WITH FRIENDS." AND FEW OF THEM WILL EVER BE ABEL TO AFFORD A HOUSE...AT CURRENT WAGE AND PRICE LEVELS...
YES, HOUSE PRICES ARE FALLING...BUT NOT FAST ENOUGH TO BRING THESE GEN-Xs INTO THE GAME... EVEN THE FEW "DINKS" AMONG THEM DO NOT HAVE STABLE ENOUGH INCOMES TO BUY A HOME...
YOU COULD CALL THIS OUR NEW P/E PROBLEM...!! THE PRICE OF THE HOUSE IS NOT IN LINE WITH NEW BUYERS EARNINGS!!
THERE ARE FOREIGNERS BUYING HOUSES WE ARE TOLD...AND THAT IS TRUE. BUT MOST OF THESE ARE PROFESSIONALS...AND THEY WILL NOT BE TAKEN IN BY THE "GREAT GAME" AGAIN...IF THEY ARE BURNED BADLY THIS TIME...AS MANY HAVE BEEN.
IN SHORT, THE DEMISE OF THE "SPECULATIVE BUYER" AND THE ABSENCES OF ANY QUALIFIED "REAL BUYERS" COULD DEPRESS HOUSING TO DEPRESSION LEVES...
