Now The Real Housing Crash Begins!!!!!
November 01, 2009
– Comments (8)
Remember the Tsunami in Indonesia....the first wave came in, did a bunch of damage, and washed back out. Many were killed and injured, but most were spared. As the waters pulled back, scores wandered back on the beach to view the spectacle.....only to be washed away when the BIG one came ashore.
We may be about to experience the BIG ONE regarding residential real estate....where housing prices really start to decline to values not seen in over 50 years. We are already there in many areas of the Midwest including Detroit, Ohio, and many parts of rust belt.
You see, without jobs, people can't afford housing without government assistance....and if they can only afford housing with the help of government, they can't afford much of a house....especially if government is forced to cut back due to declining revenues.
Despite the government reported 10% unemployment figure....it has been Alstrynomics assessment that the real functional unemployment in America is closer to 25-30% not including welfare and other government programs which did not exist during The Great Depression which would bring numbers closer to 40-50%.
Confirming the Alstrynomic perspective is a decline in INCOME TAXES of OVER 20% in the past year. A year ago, unemployment was over 6%. Now with income taxes down over 20% from that point......it confirms that a lot of people are no longer making anywhere close to the income they were making a year ago......a lot more than 3-4% of the workforce.
A 20% reduction in income taxes... if we were to translate it into only 20% of the workforce......it would mean about 30 million people lost their incomes over the past year factoring a workforce of about 160,000,000 people. That would be about 550,000 people losing their jobs every week......WHAT A COINCIDENCE.....THAT IS ABOUT HOW MANY PEOPLE ON AVERAGE HAVE BEEN FILING FOR FIRST TIME UNEMPLOYMENT CLAIMS.....WHO WOULDA THUNK???????
Now many of these people are drawing down on their savings.......with 8 million homes already in some stage of foreclosure....we could have tens of millions waiting in the wings getting ready to be listed or foreclosed. The flood of potential inventory would be very similar to the flood resulting from the rising waters of a tsunami.
This time though....prices will plunge to levels not seen in decades with many times more inventory hitting the market than buyers.
As new home builders finish up liquidating their finished lots....and absorbing the last remaining viable aready built out lots......tough decisions will have to be made going forward. Building out new communities from raw land is very expensive, sucks lots of cash, and takes years to recover costs...especially in a slow selling low margin environment like we have now......even if the builders get the land for free!!!!!
My guess is with the flood of inventory likely to hit the market over the next six to nine months......and many of the first time subsidized buyers out of the market....we could see a crash in residential housing prices that made the recent crash seem like high tide to a tsunami.
Pay attention to jobs....there is no such thing as a jobless or job loss economy in an environment were services is the driver of the economy. If we continue to lose jobs at anything close to the rate we have experienced over the past year.........we will begin to see distress that makes The Great Depression look like a minor recession with tax receipt evaporation already at peak depression levels.
Remember, it is not the end of the world.....it is just the end of the world as you know it. You are about to enter the Alstrynomic Revolution...Where what you know is what you feel and what you feel is reality.
Imagine that....back to reality....unless something distracts us before reality sets in......
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