Housing and Wealth - Part II (Demand and Liquidity)
Monday, September 28, 2009
- In the prior report, we covered housing supply and prices; in this one, we cover demand and liquidity.
- Housing demand is easy to measure, but hard to predict. The prime determinant of housing demand is jobs.
- We are not likely to recover from our current unemployment slump for 5-10 years.
- The "housing ATM" is not only broken, but operating in reverse, putting additional pressure on potential housing consumers.
- Artificially low interest rates give us some temporary stability in the housing market - in exchange for an increased risk of future losses.
- The Federal Reserve and federal government are the housing market.
- Our nation is suffering from "stimulus addiction," and the path of least resistance is to continue feeding the habit.
- For the housing market to recover, the job market has to recover first.
- These are all indications that our debt-based money system is seriously flawed.
We are covering housing at this time because it is one of the key determinants of whether or not our economy will enjoy a decent bounce or merely a false statistical recovery here. As goes housing, so goes the economy.
Here we will focus on the US (primarily because I have good data for it), but the lessons and implications are virtually identical for other areas of the world. Ireland, Spain, the UK and a number of other spots are in far worse shape by this measure than the US.
In the prior report, we covered housing supply and prices. Here we are going to cover demand and liquidity