Unemployment is at 9% and has been high for years. The housing market is being made on oversupply of existing homes and decreasing prices. The relationship is clear. The situation, as a monolithic market, will remain in this dynamic until unemployment drops into the 5% range.
Anything over 6% unemployment constitutes a rolling recession. The term has been used before. A rolling recession is no more than creative destruction at work. So the net effect of the last 4 years is a severe general recession followed by a rolling recession. This, given the technology being implemented, could last the next ten years.
While the pattern is a natural innovation cycle, I cannot help but think that it is being made worse by the pyramidal effect of the machinations of Fannie Mae and Freddy Mac in the housing market. I cannot prove that but I have a sneaking hunch that it's true.
Be well and do good.
Showing posts with label Real Estate. Show all posts
Showing posts with label Real Estate. Show all posts
Wednesday, May 4, 2011
Sunday, May 1, 2011
Real Estate Deconstructed
In an earlier blog I said that the real estate market was like an art auction. What did I mean by this? The driving force behind real estate is that everybody's got to live somewhere, but we often forget that there are three socioeconomic systems at work in this society, the value added socioeconomy, the found money economy, and pure transfer of wealth.
We have to account for where the money is coming from that buys the property. Like bonds, that money can be rated. The value added socioeconomy, business as we normally think of it, is AAA. That socioeconomy is growing steadily but wages are stagnant and productivity increases promise fewer people with more money. Disposable income is static. The found money socioeconomy, what I call Macau culture, is BBB. That socioeconomy is not doing well as participants in the value added socioeconomy are being more careful with their disposable income. Pure transfer of wealth is BBB-, junk. The limits of how much wealth can be transferred have been reached and the mood of the country is hovering near 'Devil take the hindmost'.
Art is dear and is promoted, not sold, to bidders. As the real estate market resolves the excesses of Fannie Mae and Freddy Mac, this will be exactly the same scenario in that market, custom homes of some aesthetic value in value added, tract homes of some personality in found money, and various forms of homeless shelters in transfer of wealth.
Be well and do good.
We have to account for where the money is coming from that buys the property. Like bonds, that money can be rated. The value added socioeconomy, business as we normally think of it, is AAA. That socioeconomy is growing steadily but wages are stagnant and productivity increases promise fewer people with more money. Disposable income is static. The found money socioeconomy, what I call Macau culture, is BBB. That socioeconomy is not doing well as participants in the value added socioeconomy are being more careful with their disposable income. Pure transfer of wealth is BBB-, junk. The limits of how much wealth can be transferred have been reached and the mood of the country is hovering near 'Devil take the hindmost'.
Art is dear and is promoted, not sold, to bidders. As the real estate market resolves the excesses of Fannie Mae and Freddy Mac, this will be exactly the same scenario in that market, custom homes of some aesthetic value in value added, tract homes of some personality in found money, and various forms of homeless shelters in transfer of wealth.
Be well and do good.
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