Homestead mailing list

[Clansgian AT wmconnect.com]

> This is a blip on the chart. Any open look at real estate history  
> reveals ever-rising prices over the long term.

I guess this is where we most disagree.  The magnitude of the current debacle 
makes it not just another blip on the chart.  Nothing any where near like 
this has ever happened before.

Houses are bigger on the average than any time in history, more energy 
dependent than at any time, and are farther away from people's daily 
activities of 
work, school, shopping etc.

Never have such a large number of people had mortgages and never, never 
before have there been so many mortgages, such a percent of mortgages, and 
such an 
amount of money lent on a 100% rate of financing with no collateral.

Today's  news says that in 2007 drop in housing sales was the largest drop in 
25 years.  Also that as of December the average value of houses in the US 
dropped for the first time in 40 years.  

Never before has a world wide recession been provoked based almost entirely 
on housing alone.

"The investment bank (Merill-Lynch) forecasted a 15 percent drop in housing 
prices in 2008 and a further 10 percent drop in 2009, with even more 
depreciation likely in 2010."  (It's a CNN story, url is too long to post but 
I will if 
anyone is interested).

It is often pointed out that builders are still building houses so there's 
still demand, right?

"One reason: Too much of builders' money is tied up in development --   the 
cost of buying finished lots, impact fees and permits, building roads,   
installing water and sewer linesand so on. To keep cash flowing and minimize 
losses, 
they keep buildinghomes and hoping to sell them. Mario Ricchio, housing 
industry analystwith Zach's Investment Research, says, "If builders could 
shut down 
fortwo years, they would eliminate all the overhang. Of course, that's 
notgoing to happen. They have to generate cash flow."   (From Yahoo Finance, 
url too 
long)

-----------------

(Gene)"People must have shelter. New boys and girls are making new  
babies each day. They start out in parents' homes or humble  
apartments. When the family grows, they seek more room."

So the story goes, along with the 'ain't makin' any more land' bit.  But 
other things change too.  My sister is a mail carrier in Virginia Beach.  She 
says 
that the require an individual's name to be listed on the mailbox before mail 
can be delivered, one listing for each person in the house.  As she delivers 
to the urban and suburban houses, the mailbox will say "J. Smith, R. Smith" 
and the next one with three names and the next one with one name.  Then she 
comes to the Hispanic and Russian immigrants and there are twenty or more 
names 
listed for the same house.

Yes, people have to have a place to live, but shoving the kiddos out of the 
nest on their 18th birthday to their own housing and the parents living just 
the two of them in the house for the rest of their days is changing.  As 
costs 
go up, financing is unavailable, utilities taxes and insurance cost more, 
people are beginning to do as the immigrants have always been used to doing, 
they 
double up, triple up, and ten-fold up.  This requires a lot LESS housing than 
exists now. Coming to a neighborhood near you.

All these things taken together mean that this is NOT just another cycle that 
we've seen before.  If it is, can you point out to a time when trillions of 
dollars were lent for mortgages at 100%, as ARMs, when the sq ft of housing 
per 
person has been this high, when the distances from the houses to peoples 
destinations have been this far, when banks world wide have had to have 
massive 
infusions of cash to not default on Mortgage Based Investments, when the fed 
panics to cut the intrest rate 3/4% outside a regular meeting, etc, etc.  
.... 
all these things taken together.  When did that happen before?

Or, Gene, I might ask the question another way.  If this is not the mother 
and father of housing crashes, then what would a real housing crash look 
like.  
How much value would houses have to drop, how slow would sales have to be, 
how 
many surplus houses would have to be on the market for it to quailfy being a 
'real' housing crash?

Inquiring minds want to know.   </HTML>