Buying & Selling: Housing Slowdown Ripple Effects

The common wisdom among bubble bloggers, bubble-centric economists, and the like seems to be in two camps. Either the slump is precipitating a disastrous recession that will crush economic growth for years, or it will be a hard, painful, but managable deceleration that will ultimately trigger more investment and home ownership as prices fall.

I tend to favor the latter option, because I'm not a doomsayer and the cycles of economic boom and bust are too pronounced to ignore. With that in mind, it's fascinating to watch the effects of the slump on other business sectors that are bad in the short term, but are ultimately beneficial in the long term.

For example, take this story about declines in lumber production:

The housing slowdown is expected to reduce lumber demand this year by 3.2 percent after reaching record highs in 2005, according to the association.Residential construction is the lumber industry's largest market, accounting for more than 40 percent of the lumber used each year, the association said. After a nearly 9 percent downturn in 2006, it forecast new housing starts to fall by another 10 percent to 1.69 million in 2007.

While this will spell serious trouble for the lumber industry, it can only be beneficial to our environment, which is an often-neglected concern in the mad rush to develop property on every last square foot of earth on the planet.

Or take this story about the dwindling employment for immigrants due to the housing lull. Undocumented cheap labor has been a huge boon to the housing industry these last five years, even as it's contributed to a roiling mass of negative sentiment about immigration, job loss, and even identity theft. But now it seems that the spigot is running dry, leaving a lot of people with no jobs and bad prospects:

"That's one of the dangers of importing lots of workers," said Ira Mehlmen, spokesman for the Federation for American Immigration Reform, which seeks to curb illegal immigration. "After their services are no longer required, you end up with them and with their families. "There isn't much reason for them to return home when services and other benefits are available."

Short-term thinking is the bane of modern society in many ways, and the housing market is just another example. The push to build and sell far too much product to people living far beyond their means has wrought all manner of unforeseen consequences, and the ripples will be felt for many years to come.

Posted at December 29, 2006 05:03 PM

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The common wisdom among bubble bloggers, bubble-centric economists, and the like seems to be in two camps. Either the slump is precipitating a disastrous recession that will crush economic growth for years, or it will be a hard, painful, but managable deceleration that will ultimately trigger more investment and home ownership as prices fall. I tend to favor the latter option, because I'm not a doomsayer and the cycles of economic boom and bust are too pronounced to ignore. With that in mind, it's fascinating to watch the effects of the slump on other business sectors that are bad in the short term, but are ultimately beneficial in the long term. For example, take this story about declines in lumber production: The housing slowdown is expected to reduce lumber demand this year by 3.2 percent after reaching record highs in 2005, according to the association.Residential construction is the lumber industry's largest market, accounting for more than 40 percent of the lumber used each year, the association said. After a nearly 9 percent downturn in 2006, it forecast new housing starts to fall by another 10 percent to 1.69 million in 2007. While this will spell serious trouble for the lumber industry, it can only be beneficial to our environment, which is an often-neglected concern in the mad rush to develop property on every last square foot of earth on the planet. Or take this story about the dwindling employment for immigrants due to the housing lull. Undocumented cheap labor has been a huge boon to the housing industry these last five years, even as it's contributed to a roiling mass of negative sentiment about immigration, job loss, and even identity theft. But now it seems that the spigot is running dry, leaving a lot of people with no jobs and bad prospects: "That's one of the dangers of importing lots of workers," said Ira Mehlmen, spokesman for the Federation for American Immigration Reform, which seeks to curb illegal immigration. "After their services are no longer required, you end up with them and with their families. "There isn't much reason for them to return home when services and other benefits are available." Short-term thinking is the bane of modern society in many ways, and the housing market is just another example. The push to build and sell far too much product to people living far beyond their means has wrought all manner of unforeseen consequences, and the ripples will be felt for many years to come.