Category: Blog

Alternate Economic Universe

upsidedownhouseI’m living in an alternate economic universe.

The new housing starts number just came in. Below consensus. Supposedly a bad thing.

It’s ultimately a good thing.

Housing prices went down because there was and is a glut of new, unoccupied houses. If new housing starts do anything but shrink during the next year or two, the glut will remain or increase, and housing prices will continue to sink. Americans will feel even more insecure, and continue to hoard their acorns. Unemployment will continue to rise. The vicious cycle will spin on.

Until the new houses already on the market are sold off, housing prices can’t stabilize and new homes can’t be built without contributing further to the debilitating glut.

I’m aware that home-builders, tradesmen and craftsmen will continue to hurt for a while longer under this scenario. But long term health in the housing market, and steady work for these hardworking folks who were done in by everyone from local mortgage brokers to international banking giants, cannot be restored unless the glut is gone.

A brilliant friend who’s managed mutual and hedge fund money just told me that he agreed, but since the market doesn’t see it that way, being right is not it’s own reward.

What’s happening to the carpenters, electricians, plumbers, roofers, and their collegues isn’t fair, but only a fool with blinders on would dwell on that at this point. Hopefully the meek eventually inherit the earth, but for the time being the pain of withdrawal is the only thing that will allow the credit junkie called America to resume a productive life.