Good Morning America, your King of Simple News is on the air.
U.S. NEWS: Economists believe that we may be in recession. I believe that the sun may have come up in the East this morning. Economists also believe that unemployment may lead to a downturn in consumer spending. I believe that it is cold in Fairbanks, Alaska in January.
Most economists, along with "Bronco" Ben Bernanke, Alan "Cash" Greenspan, and George "Badlands" Bush also believed that "housing was not a large enough sector to affect our entire economy." I believed that is was.
Now these same economists believe that our economy won't recover until housing recovers. I believe these people are morons.
But, this news does lead me to a dire prediction; housing as we know it will never recover. I know, never is a long time. But hear me out and feel free to debate my points.
"Housing as we know it," should be considered to mean, large, expensive, non-functional, inefficient, overpriced and having nothing whatsoever to do with basic shelter. The former description is what housing has become, has it not?
Totally non-functional roof lines, non-functional grand entries, 1000 square foot per occupant, energy eating black holes of granite countertops, imported tile floors and debt up to our eyeballs pretty much sums up "housing as we know it." Sounds like utopia to me.
The fact that most home loans are based on two incomes doubles the jeopardy of making the dreaded house payment. If one of the happily and hopelessly indebted couple loses his or her job, well, there goes the happy home. Throw in an SUV payment or two and we have the former marital bliss hovering on the brink of even remaining civil.
As the recession deepens and job losses continue to occur, foreclosures will also continue to rise, not in sub-prime loans, but in the main sector of our recently unemployed citizenry who have become victims of both poor debt practices and our ill thought and badly broken economy.
This will further weaken the housing market as inventories of unsold homes rise rather than return to normal levels. In the mean time, lenders will continue to tighten qualifying standards, requiring down payments and proof of income, which they should, but this will also further exacerbate the problem.
As time goes by, our ever present enemy of purposely induced monetary inflation along with rising energy costs will drive the cost of essential goods and services skyward, leaving fewer and fewer discretionary dollars in the hands of the average consumer.
At the same time, the increasing competition of low cost foreign labor combined with a glut of domestic labor created by increasing unemployment and never ending immigration will cause real income to fall drastically in comparison to housing costs.
Yet another negative factor that is often overlooked will be that of rising taxes. As our economic nose dive causes tax collection to wane, government will unwisely attempt to increase taxes, further reducing consumer purchasing power, while at the same time subsidizing housing!
By the point that the existing unsold housing in the U.S. is absorbed (some years), the spread between declining average income and the rising costs of new development and construction will have become sufficient to halt the entry of the average person into home ownership; forever. Much as this condition already exists in the remainder of the world.
Globalization will have at this point accomplished what it was intended to do; share poverty equally.
Interestingly enough, at the lowest point in the housing debacle there will be bargains to be had that will be based on negative market forces, rather than replacement costs.