Is too much being made about the housing market being in decline?

Question

In many metro areas, the housing market has increased 200% in 15 years overall...

Answer 1

Yes it is. I work construction and I can tell you plainly that housing like any other commodity can be over produced and drive the market down. Now that is bad for builders and flippers but it is great for the buyer.

What hurts us is that so much had been built that in order to move the product lenders approved people for loans they could not pay because they had already lent to builders. Both the lenders and the borrowers made poor decisions that really do not effect the larger population. The only real effect it has on most of us is that when any sector of the market is in trouble the speculators panic and it hurts our portfolios or 401s. It is really a self correcting system except that no one wants to pay for their mistakes so We will pay and They will do it again.

Answer 2

No. The point you make--that there has been a long period of growth, is valid. However, there's more to it. First, the use o fsubprime mortgages and other predatory lending practices caused the growth to get way ahead of the demand that would have existed in a normal market situation. consequently, we have an oversupply of homes.

However, the problem isn't the housing itself--its te collateral effects of the abusive lending practices. We now have a situation in which these have resulted in a national shortfall in funds available for lending--and it has spread well eyond jsut the housing market and is affecting other areas of the economy as well. In addition, you have hundreds of thousands of families losing their homes and millions more in danger of doing so.

That, in turn, means the housing construction market is way down--and consumer spending is being affected as well. The result o fboth is sharply reduced growth in jobs.

Bottom line: all of these effects are slowing economic growth. Just by themselves, this is serious--but only to a limited extent. However, one reason why this is a real problem is that the scale of the housing slump is much worse than a normal slowdown, because it is coming n the heels of that over-inflated housing market. Also, its happening at the same time as a sharp rise in energy prices--which not only soaks up much of the money people have (again, slowng economic growth) but also creates inflationary pressures. Further, we have an economy that is also beginnning to suffer the effects of a long period (6 years) of deficit spending (which also tends to slow economic growth and create inflation).

Bottom line--we are headed for a recession.

Answer 3

The housing market isn't the concern. Mortgage securities are.
Mortgage securities are closely tied into the value of the USD. Federal Reserve notes are backed up by the assets of the private banking system. Most bank assets are mortgage securities.
It is estimated that real estate property value in the USA is about $90 trillion. 20% of that figure may face foreclosure in 2008. Those foreclosure plus the glut in new home supplies can drive property values down 20% to 30% in the next few years.
Add that to the federal budget deficit and the value of the USD could plunge at a much greater rate than it has been falling.
It is a serious situation.

Answer 4

It is very difficult to get a loan now. That means housing starts are way down. This will go through the entire economy because much of our economy is based on construction and needs for the home. If it isn't straightened out in a matter of months, many small businesses will go under, larger ones will suffer big time as well as many factories. The last time I remember this happening was during the Reagan administration. That was a depression for people in the construction business.

Answer 5

Odd thing about the "decline". They make loans to a zillion people that could not afford the loans now they act as thought the housing numbers should remain at the same numbers when they only build for people that can afford the loan.

Of course for those few places with a bunch of empty homes maybe they aren't.

Answer 6

If you live in Ohio or Michigan, you wouldn't think so. The crash of the housing market is just adding more misery to an already ailing job market here. Economically, things look pretty bleak in the mid-west.

Answer 7

I am not entirely sure what you mean by "decline".

The demand for housing never declines, people have to live somewhere, and as long as the population is growing, there will never be a "decline".

Now, if you are talking about defaults on mortgages, I *think* you should say so. If you are asking about lenders withholding funds, then again, you should say so.

But, as far as I'm concerned, there is no "housing market decline".

Answer 8

Nope, right now the US economy is in a downward spiral. I hope it picks up. In 2008 though, the industry is supposed to bottom out. I am really scared for a lot of people that will lose their homes that they couldn't afford in the first place. They were given loans by financial whores when they knew they could not afford them. Most of these people are immigrants that work so hard. A sad situation all around.

Answer 9

nope, there are tons of things that are affected directly and indirectly,... homeless people, bigger burden on welfare, less spending by people, fewer jobs, fewer taxes being paid, increased crime, increased drug use and gambling. it goes on and on... just where i live there has been such a dramatic drop in new homes constructed that the regional authority that regulates a 30000 person community had to borrow money for the first time in history and lay off 30% of workforce just to keep services going for community... that is one example of just a 6 month housing decline that is sudden and dramatic

Answer 10

Check out the great state of Michigan! Our Governor claims its all bush,es fault