Monday, March 2, 2009

Housing and Recessions

I ran across a article at Calculated Risk that has 20 good charts; so many that I had trouble picking just one. This chart shows the relationship between housing construction and recessions, and brings up 2 important points.

The first point is that housing spikes and recessions are not necessarily related. There are several smaller spikes in home construction outside the recession areas.

The second point is when recessions contain housing spikes, one sure fire way to end a recession is to stop building so many unsellable houses.

I recently started following Guy Johnson on Twitter. He blogs at Reno Realty. The last post there discusses a house in the "bungalow district" on the "wrong side" of Wells Avenue. It's selling for $89,000. Out of curiosity, I drove over. It's definitely a fixer-upper. It has aluminum siding on the street side and, well, something else on the other 3/4's. Several large tree stumps decorate what used to be a backyard lawn. Still, I came away with a vague feeling of optimism. It was a real house, on a real foundation, and I could afford it if I wanted it. That's assuming I could find a banker foolish enough to loan me tens of thousands of dollars.

With our government insisting on creating jobs and stemming unemployment, it means we will still be building more unsellable houses and prices will continue to fall. And, thanks to our government, there are plenty of foolish bankers still in business. Who knows, in another 6 months, I might be able to afford a decent house in a decent neighborhood.

So keep the bailouts coming Mr. President; keep that monopoly money flowing and the bubble expanding. I'm almost there. Too bad for everyone else though.

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