Housing.com News, Analysis & Opinion: Housing Bubble: A Fragile Balance

But when it becomes readily apparent that the housing market is the chief--and maybe only--driver of the economy as it stands, housing becomes VERY political, VERY fast.

"Bonddad," a regular blogger at the Daily KOS, frequently posts treatises on economics--housing, consumer debt, energy prices, etc. Not sexy stuff, but important beyond words. In today's journal, he mentions how much housing is playing a role in keeping our faltering consumer-based economy moving:

In addition, the Bush economy is heavily skewed towards housing. Over the same time, the net gain in construction employment was 418,000, or 27% of total employment growth. In addition, financial services jobs increased by 487,000 over the same period. All of the financial jobs are not related to real estate. I have not seen any statistics that break this number down into a real estate and non-real estate portion. So let's make a simple conservative assumption and say that 20% of the financial services jobs are related to real estate activities. That would mean 6.2% of the jobs created in the financial services area are related to real estate, bringing the total number of housing related jobs to 33.2% of total ob creation during the recovery. Finally, business and professional services increased employment by a little over 100,000. Assuming 10% of these are real estate related, an additional .5% of job growth is real estate related, bringing the grand total of housing based employment to 33.7% of all jobs created in the last 5 years. So, when housing slows so will the job market.

Bubble Meter has been on this topic for a while now, and he makes the point again here. We can't treat homes like banks to draw money out of at will. We can't let our economy be solely balanced on an artificially-generated desire for real estate and the greed of speculators. We can't lock potential homebuyers out of a market due to insane prices, or expose many inexperienced and unready buyers to predatory lenders.

Meanwhile, developers are looking at New Orleans the way Hannibal Lecter eyed his evil former shrink at the end of "Silence of the Lambs." I suspect this isn't just because of the opportunity for profit, but because the real estate market is looking for some kind of new avenue to expand, as inventories increase, prices fall, and consumers stop buying.

The disasters of Katrina and Rita aren't just immediate and physical. Their effects will be felt in extending an already-dying bubble to Terri Schiavo-esque levels of life support. Only this time, I don't see nearly as much fiery rhetoric, but a lot more pain.

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I may be grossly generalizing, but I don't think people view the real estate market as politically driven. Buying a home or a condo isn't a "right" or "left" decision, unless your sole criteria for livability is whether or not your home state is red or blue. You have fun with that if that's the case. :) But when it becomes readily apparent that the housing market is the chief--and maybe only--driver of the economy as it stands, housing becomes VERY political, VERY fast. "Bonddad," a regular blogger at the Daily KOS, frequently posts treatises on economics--housing, consumer debt, energy prices, etc. Not sexy stuff, but important beyond words. In today's journal, he mentions how much housing is playing a role in keeping our faltering consumer-based economy moving: In addition, the Bush economy is heavily skewed towards housing. Over the same time, the net gain in construction employment was 418,000, or 27% of total employment growth. In addition, financial services jobs increased by 487,000 over the same period. All of the financial jobs are not related to real estate. I have not seen any statistics that break this number down into a real estate and non-real estate portion. So let's make a simple conservative assumption and say that 20% of the financial services jobs are related to real estate activities. That would mean 6.2% of the jobs created in the financial services area are related to real estate, bringing the total number of housing related jobs to 33.2% of total ob creation during the recovery. Finally, business and professional services increased employment by a little over 100,000. Assuming 10% of these are real estate related, an additional .5% of job growth is real estate related, bringing the grand total of housing based employment to 33.7% of all jobs created in the last 5 years. So, when housing slows so will the job market. Bubble Meter has been on this topic for a while now, and he makes the point again here. We can't treat homes like banks to draw money out of at will. We can't let our economy be solely balanced on an artificially-generated desire for real estate and the greed of speculators. We can't lock potential homebuyers out of a market due to insane prices, or expose many inexperienced and unready buyers to predatory lenders. And yet, this is exactly what is happening. Ben Jones at The Housing Bubble spoke upon the overextended homeowners using equity to avoid bankruptcy, and how time for them is running low. Meanwhile, developers are looking at New Orleans the way Hannibal Lecter eyed his evil former shrink at the end of "Silence of the Lambs." I suspect this isn't just because of the opportunity for profit, but because the real estate market is looking for some kind of new avenue to expand, as inventories increase, prices fall, and consumers stop buying. The disasters of Katrina and Rita aren't just immediate and physical. Their effects will be felt in extending an already-dying bubble to Terri Schiavo-esque levels of life support. Only this time, I don't see nearly as much fiery rhetoric, but a lot more pain.