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Posted by Mark M. on April 19, 2008, 7:59 pm
Rose wrote:
>
>>The REAL housing crisis is that TOO MANY of them are being built every
>>day, bad mortgages or not. Mindless overpopulation (75 million
>>annually, worldwide) is treated as natural. Nature is treated as
>>expendable.
>>
>>People go about their business, talking about money and investments,
>>as if the land itself is infinite. They always claim there's "plenty
>>of land" but won't say relative to what. Unaffected acreage decreases
>>literally each second.
>>
>>http://images.google.com/images?hl=en&q=human+footprint+map
>>
>>"Economic growth" means more people and less nature each day, with
>>money creating a false measure of value in the process. A true housing
>>"bubble" is an entire round hill covered with them.
>>
>>Real estate developers use money made from cannibalized land to
>>cannibalize even more land. The word FINITE is missing from too many
>>vocabularies.
>>
>>E.A.
>>
>>http://enough_already.tripod.com/
>>
>>Housing starts are a leading indicator of mindless growth.
>
>
> i agree, greed drove the industry and now many houses are sitting
> empty, no one to buy and too many people losing homes they had, almost
> seems pre-determined to cause this current problem, all seems to be
> blamed on the housing market, but there are many other factors
> involved, every market has been inflated, oil companies claiming they
> are losing money, grocery stores, etc. and yes, too many homes were
> built but that is not the economies problem really, the cost of
> everything has soared, where will this end? and to what end? and why?
The key to understanding the housing bubble is understanding what drives up
land prices. The OP is correct in saying that new construction was over
done. The reason is rising land value, but why did land values double and
redouble since the 1980's?
In our system, the financial sector has no problem creating funds for
inflating land value. In fact, in a rising land market, mortgage lenders
KNOW they can write home purchase checks without ANY real money on hand.
They KNOW that real estate sellers will put ALL the money right back into
buying other land.
Land prices rise because they are rising. All it takes is a small push
like a drop in property taxes, capital gains taxes, or a drop in interest
rates and it's off to the races. The upturn in land prices means this
capital gains opportunity will be reflected in even higher land prices.
And so it goes until everybody is mortgage debted up to their eyeballs. At
this point all it takes is one little bitty ol economic nastiness that
reduces the ability to make those big mortgage payments. A war or a sudden
jump in oil prices works nicely. Then the whole thing comes down with a crash.
Land prices cannot level off smoothly. As soon as they stop rising, they
have to fall and fall hard. This is because a big part of land price is
about the future investment payoff that buyers expect in a rising land
market. No more expected price appreciation, no more price premium.
Mark M.
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