Letters to the Editor
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Housing as metaphor for the class struggle
By most accounts the Commercial Real Estate Market has farther to fall than Residential property. However by all current (pollyannish) reports, places like Manhattan are still booming. The downside of a Starbucks on every street corner is an empty store front on every street corner.
To grasp what is happening we should break the real estate market down into its various categories, and components which drive valuations. (Downtown property in Manhattan may be desirable, but....)
Land should not lose value (real assets) while stocks and bonds go up (paper assets). The property component should sustain the housing market somewhat. And while the Fed has lowered short term rates mortgage rates have actually risen, (the inflation component), and conversely raising short term rates should ease the burden on mortgage holders. By nudging inflation a bit with higher rates, labor and material costs should also come down. This would allow the value of homes to increase, and get borrowers who are underwater off the snide.
Of course credit will get tight, especially refi's and line of credit loans, however, home equity does not count as savings, and that doesn't disturb the economists too much.
Inflation should make the property more valuable, while labor and material costs come down, and available credit gets tighter, although rates may actually decline, as lenders give points and incentives.
The housing market is like the stock market, or any other market, where supply and demand are the basis of operation. Although the US population is slowing, especially since fewer Mexicans are allowed in, and are not finding jobs, we could have a negative population number, which would bring out the real Chicken Littles. The ongoing migration to cities will allow a shrinking group of home buyers to pile into high rise condos, like sardines. Property will become the bragging right of the wealthy, so values won't fall out of bed.
Let's also imagine those people who live South of the border, whose housing standards need an upgrade. The US housing industry will fill that need, and many newly impoverished Americans will find the digs attractive and affordable, as Americans have already discovered in Costa Rica, and other Central American destinations.
People aren't going to stop living in houses anymore than they will stop eating. America will end up being for the rich primarily, and the poor will go South, or occupy the ghost towns of the last boom.