Homestead mailing list

[Clansgian AT wmconnect.com]

Don,

That's a good blog linked to some very good articles.

But by all means don't stop reading at the 'loans'  post.  Just below that 
are several over very interesting observations such as the fact that insiders 
in 
the housing construction and financing industry are selling off their own 
stock at ten times the rate as other industries, the blogger implies it's 
because 
they know something,

I've been doing some reading about what people, especially writers for the 
Wall Street Journal, were saying at the beginning of September of 1929.  The 
parallels are stark.  The most common remark pointed to now as being the 
epitome 
of foolishness was the remark in the the late 20's that it just make good 
sense to borrow someone else's money when you were making more with it than 
you 
were paying in interest.  Things don't change much, do they?

One interesting analysis said that an overlooked factor of 1929 was that in 
the years after the war there was an unprecidented surge in the production of 
consumer goods:  radios, refrigerators, cars, etc.  and the use of consumer 
credit to buy them.  The rise in sales was so sudden and strong, the economy 
geared up as if the rise would continue forever.  Then, opines this 
particular 
analyst, people simply felt they had enough 'stuff' and didn't want to buy 
any 
more.  Because the scheme of borrowing money you intended to pay back out of 
your ever expanding equity was based on a continually rising equity, the 
scheme 
collapsed.   The housing market parallels this more closely than many admit 
(dare admit to themselves).  As the blogger Don pointed out shows, housing 
construction has increased at a far, far greater pace than the formation of 
new 
households.

As the a-bublists are quick to point out, housing is different, isn't it.  
People have to have a place to live.  Yes.  But the opposite is also ture, a 
house has to have a person to live in it for it to have any value.  If you 
are 
building houses faster than new families are being created, the market will 
soon 
or late have to say, "Hold, enough!"

And when that happens, the equity in the house ceases to rise.  But the 
interest on the loan continues unabated.