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  • From: Clansgian AT wmconnect.com
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] Rural Land Prices and Conditions
  • Date: Thu, 24 Jan 2008 13:26:15 EST



> 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>




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