The Housing Market Corrects
A painful for some but necessary for all adjustment
In DC, at least, the overpricing of the housing market has started to level off. No more 10 bids in three days at way above asking price for an apartment or house in one of the neighborhoods. This is a good thing. Like Karl Marx predicted it was looking like there was too much rope and we were getting hanged by our excess housing costs. Everyone's money was going towards the housing bubble. The stock market with its nice solid 10% annual growth over the past century has been flat for the past 5 years as people put their wealth into their homes. This has starved our firms and people's long term cash flow, and made homes too expensive for the young and first-time buyers.
With our almost negative savings rate this boded ill for our economic outlook. We had Ponzi scheme debt instruments ("0% Down!!", "Interest Only Loans!") that our service sector, in all spontaneous order rationality, created for the market. Marx and others (for no ideas are created in a vacuum) said that the capitalist system would hang itself as we moved away from agriculture and production to financial services, where nothing of value is actually produced. Inflated housing prices and debt without underlying value meant these predicted misplaced priorities. Bad investment, as has often been mentioned here in Workers of the World Relax, means that wages and standards of living are apt to grow less quickly than they would with better use of society's limited resources.
Now maybe our money will be put towards better choices with more fundamental value like firms generating profits, growing businesses with - or the potential for - revenue streams, inventions, and efficiency breakthroughs. Or on another plane investments might include education for oneself and one's family, the support of "starving artists" and philanthropic activities such as helping those unable to help themselves.
Sure alot of people will lose-out as the fancy loans start to become due and the ever increasing equity lines of credit can no longer be tapped. But this will be better for all of us in the long run as the economy becomes more diversified into other things besides real estate.
The housing bubble over the past few years has given people irrational expectations that they can borrow and borrow and consume and consume. Now we will be better able to choose things of lasting value to do with our time and money. Maybe a move from conspicuous consumption and towards the more real and lasting - such as living within our means and the finer things in life not just a focus on our material surroundings - is afoot.
In DC, at least, the overpricing of the housing market has started to level off. No more 10 bids in three days at way above asking price for an apartment or house in one of the neighborhoods. This is a good thing. Like Karl Marx predicted it was looking like there was too much rope and we were getting hanged by our excess housing costs. Everyone's money was going towards the housing bubble. The stock market with its nice solid 10% annual growth over the past century has been flat for the past 5 years as people put their wealth into their homes. This has starved our firms and people's long term cash flow, and made homes too expensive for the young and first-time buyers.
With our almost negative savings rate this boded ill for our economic outlook. We had Ponzi scheme debt instruments ("0% Down!!", "Interest Only Loans!") that our service sector, in all spontaneous order rationality, created for the market. Marx and others (for no ideas are created in a vacuum) said that the capitalist system would hang itself as we moved away from agriculture and production to financial services, where nothing of value is actually produced. Inflated housing prices and debt without underlying value meant these predicted misplaced priorities. Bad investment, as has often been mentioned here in Workers of the World Relax, means that wages and standards of living are apt to grow less quickly than they would with better use of society's limited resources.
Now maybe our money will be put towards better choices with more fundamental value like firms generating profits, growing businesses with - or the potential for - revenue streams, inventions, and efficiency breakthroughs. Or on another plane investments might include education for oneself and one's family, the support of "starving artists" and philanthropic activities such as helping those unable to help themselves.
Sure alot of people will lose-out as the fancy loans start to become due and the ever increasing equity lines of credit can no longer be tapped. But this will be better for all of us in the long run as the economy becomes more diversified into other things besides real estate.
The housing bubble over the past few years has given people irrational expectations that they can borrow and borrow and consume and consume. Now we will be better able to choose things of lasting value to do with our time and money. Maybe a move from conspicuous consumption and towards the more real and lasting - such as living within our means and the finer things in life not just a focus on our material surroundings - is afoot.
posted by Cameron Weber at 6:44 PM
