Housing
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Housing

WOW- what a tough last 4 years in housing, the last three in a recession-like economy (if not a Great Recession like it felt). Foreclosures, people in homes “underwater”(owing more than the home is worth), ghost inventories, people in default, government programs which didn’t work, robo-signing by banks which are impersonal enough, government officials pointing fingers at everyone except themselves, etc.
That we HAVE a housing market is saying something. That it is in disarray still says even more. That we haven’t found a true balance or a way out of these inventories/foreclosures speaks to a lack of ideas and leadership. That we are all over the map speaks to the fact there are too many hands in the pie for the markets to behave like the self-cleansing mechanisms that they are- part for good reasons, part for bad.
The good news about people getting in the way of true market mechanics is that home prices are higher now than they should be- period.
The bad news about people getting in the way of true market mechanics is that uncertainty is much higher that it should be- period.
The unfortunate thing is they both go hand-in-hand. Let the markets fall and it would be short term painful, but long term certain. Prop the markets up buys time, but at the unrelenting price called uncertainty. I have a different direction for us to take.
                       
Idea-   The government (yes, I said it) could actually do some good- either directly or indirectly. They need to mandate the demolition of some of the housing glut. That is right- tear them down literally. By removing excess inventory (say 1 in 20 on banks books) the housing prices would stabilize at current or higher levels. The inventories would need to be accounted for, so as not to impact banks capitalization overall. The demolition could be considered an anti-infrastructure play. It would create demolition jobs, help home prices(start to relieve some pressure on underwater homes sooner), eventually create new jobs in construction at a much sooner point in time, remove some blights in neighborhoods(condemned buildings, vandalized homes, eyesores which are unkempt, etc.), and create tremendous certainty earlier in time moving forward.
Remember- we are in a time of a ‘new normal’, where the economy will not grow as quick as it has historically, where homes will be unloaded by boomers more so going forward- not less, where there are less home buyers coming into the market than are leaving, where most former home owners will not qualify for a mortgage for some time to come.
 
 
Idea-   What about a one year moratorium on NEW home construction? You could buy a home and remodel, or you could wait (maybe pay a one-time surcharge)? The point would be this. With enough homes on the market and then some, why would we allow more homes to be built at a time when we cannot support the current home price as is? Why not make them pay-up for it OR not do it? If the argument is we would lose construction jobs, then who would do the remodeling? The sooner we settle out home prices, the sooner we can return to “normal” and the sooner REAL construction pricing and jobs return. My cousin (who has done construction on the West coast for 20 plus years says he doesn’t see construction coming back for a long time- 10 years was his number). 
                       
Side note-     We will come to a point where we will need to forgive the current credit issues at a pace unheard of in history. Just planting that seed now, but it will be part of the ultimate solution. And yes, it means the very people who overstretched before and helped create this mess will benefit earlier than they should. Get over it; I have- since we will need them involved productively in our society as consumers and home owners to make it all work. 
 

1 Comment to Housing:

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Dennis on Monday, December 23, 2013 3:17 AM
That was good post.
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