When housing collapses, it doesn’t really matter whether Democrats or Republicans are in charge, the economy is going to be awful until that powerful sector recovers. I believe Keynesian measures hasten that day, but hard times are inevitable.
Housing is finally coming back — rather than being a drag on the economy, a drain on GDP, it’s now beginning to perform its engine function. It thinks it can, it thinks it can…
That’s why we see Home Depot announce that they are adding 10,000 jobs for the spring season.
As housing goes, so goes the nation.
Besides literal green shoots this spring, I expect many more figurative ones.
Unfortunately the housing market is being manipulated by the government and it looks like we are only seeing the beginning of another Keynesian bubble. There are reports that Fannie Mae and Freddie Mac are holding back tens of thousands of foreclosed homes to artificially inflate the value of homes.
If 2008 taught us anything is that when the government artificially manipulates the housing/mortgage industry disaster follows. Of course since it takes 10 -15 years for the bubble to pop Keynesians are fine with that. Who cares about building a solid economic future when we can just enjoy the bubbles and cry for the government to bail us out during the busts.
Those foreclosed homes are irrelevant, whether they are on the market or not. Most of them are in neighborhoods where middle or upper middle class people don’t want to live. In upscale neighborhoods, we are seeing multiple offers again because people have confidence that prices won’t go lower and because inventory is low. People who had held back and rented are coming into the market. Inventory is low because while sellers are willing to take a hit from the high point, there is a number below which they won’t go, they’ll just keep that house a while longer.
As housing began to recover, sales in good neighborhoods were mostly motivated by stuff like death and divorce, there weren’t many of what I would call discretionary sales. This lack of inventory has stabilized/boosted prices, not some evil government scheme.
Now we are finally seeing discretionary sales of people buying a larger house because they’ve had a child or two since the downturn or people buying a smaller home because they’ve been waiting to downsize till they could get a decent price or because they just want a different neighborhood, maybe one with better schools or more charm.
As for the foreclosures, consider Piedmont, a very upscale area in the East Bay of San Francisco with great schools and gorgeous houses from the 1920’s and 30’s. It is not far from some pretty bad neighborhoods in Oakland, with high crime and lousy schools. The people now competing for houses in Piedmont don’t care how many foreclosed properties are available in Oakland or at what price. They won’t live there if you give them a house. It’s a few miles away, but it’s a different universe.