Housing

I keep watching construction.  There is a guy out at Buffalo Waller Ranch who is building a huge outdoor fireplace and we need to turn him into the EPA.  He needs an industrial stack permit because that chimney is so high. Today he was up on the roof of his pavilion, having outdone his scaffolding, with two young men bringing him mortar and huge limestones. So this is what State Representatives do for play.

 

Actually, US housing is recovering somewhat.  In 2006 just before the crash 2.3M homes a year were being built.  In 2008 there were just 500,000 and since then the numbers have been about 800,000. (still the lowest since the 1950’s) This year it looks like the numbers will perhaps top a million.  All this is happening despite economic growth of only 1.8%.  (Which proves that recessions really are caused by overspeculation and that in about 2 years of selloff, a recession is always over.  And it also proves Rogoff and Rheinhold that a government that holds debt greater than 90% of GDP is destined to moribund growth, even in heart of a recovery.)

 

It causes some ripple effects.  If this were an 80’s style recovery, we’d have a robust rebound in housing and the Fed would be trying to rein in inflation with high interest rates.  That hasn’t occurred and probably won’t.  Banks have also been very burned, and aren’t lending easily.  So mortgage interest rates are low and houses affordable (avg. 17% of household income—way less than the historic 24%) if you can get a loan.  Hereabouts, all the unbelievable bargains in repo properties have seemed to dry up.  So, it is now a crunch on landlords.  Buying a new property is not so cheap, many with good credit have a home already and the renters left are dregs of society.  Hence you hear landlords complain about how bad renters have become.  Many still renting are house trashers and druggies and deadbeats.  Oh for the days of a nice family who has just come to town temporarily with their work or who want to test the waters of the housing market for a year or two before they buy!  At least Oklahoma’s business is booming with unemployment 5.0% and houses rent briskly.  Not so elsewhere and new mortgage originations have fallen off a cliff with investors no longer buying much.

 

Turn that around and look at it from the low-end renter’s perspective.  Incomes of American middle class haven’t grown since the boom of the 80’s.  When there is a squeeze on rent prices and less state government largess in welfare and other programs, you get a squeeze on the renters with spotty employment.  Thus we see renters increasingly doubling up or even putting 8 people in a house.  Add to this the increasing gambling addiction from our numerous casinos, crackdown on crime by local police, etc.  Well, you can see how the poor are living poorer.  Then comes Obamacare mandates to buy health insurance and Amnesty—glut of newly-legals who suppress the market for unskilled workers.  It’s going to get worse before it gets better.

 

The drop of housing prices is causing a lot of folks to question the County Assessor.  Property taxes are local government’s best friend, a constant tax during recession or recovery, and the property can’t be moved.  Trouble is, people see their bills and get angry.  What do they call this—“salient”?  Schools depend on property taxes, and when there is downward pressure not only from lower prices, but also an aging population who are house-rich and fixed-income that will be ugly news for schools.  The saavy educators will be trying to decouple the issue of funding from performance.  More parental involvement, new tools and methods, etc.)

 

So my best guess is that housing will remain moribund in prices for years to come.  I don’t think there is likely to be another boom like we saw nationwide from 1970-2006.