Ok,
I already asked what you guys want to make. Now, here’s the next one as I’ve not yet mad a desicion. If I choose to go my own way I’ve got about four months worth of work right out of the gate. Most of it will lead to follow on jobs.
Now, here’s the tough one. My research shows some pretty wild variation on what the Housing industry will do in the next four years.
I’ve seen predictions of much higher interest rates and slowing price growth that cause both new and remodel work to dry up.
I’ve seen predictions of new construction remaining hot for ten more years due to a housing shortage.
I’ve seen predictions of new work drying up and remodeling becoming the home of every guy with a stationwagon and a hammer causing prices to hit new lows.
So now, what do you guys think and why?
Replies
Neutral to slight uptick.
Chinese and Japanese conmtrol out long term rates. Greenspan has the short term and he will soon be gone anyway. Those orientals want to keep us stable and the dollar sound so that their crap is priced to sell here.
buying foreign crap is not good for the economy but you asked about housing in particular.
Low intrest rates will keep housing alive along with the fact that we still have increasiong demand.
The glitch is that we do not have the skilled labor to keep up with demand. That creates the vacumn trhat sucks foreign workers in. While displacing a percentage of US workers, it also creates a further demand on housing stock.
Because of volatile changing economy in other sectors ( imporoving at present) there will be pockets where housing stock is empty and idle, but overall, the outlook is good.
But that's just one man's opinion
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Taunton University of Knowledge FHB Campus at Breaktime.
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grow till 2010 ..
then tank.
why? 'cause that's what the forecaster my wife's boss subscribes to says is gonna happen.
Jeff
Buck Construction
Artistry In Carpentry
Pittsburgh Pa
I kinda agree with the doomsayers that forecast trouble brewing.
2010 sounds about right. But it's all relative. In the end, I'll still have to get up and got to work tomorrow.
blue
what goes up must come down.
The trick is figuring out the best position to be in when it all comes tumbeling down.
we're thinking rental properties. Lotsa high mortgages that can't be paid ... lotsa foreclosures ... and people still gotta live somewhere.
First step ... is to be 100% debt free.
Jeff Buck Construction
Artistry In Carpentry
Pittsburgh Pa
First step ... is to be 100% debt free.
I don't agree. I'd be way behind if I tried to get ahead without borrowing. Just don't borrow to buy consumer goods.
When it all comes tumbling, it will take specialized knowledge to capitalize on the situation. Rentals will be just as they are today, a good long term program but loaded with hidden pitfalls and lots of work.
I like the idea of buying foreclosures, but I'd be more inclined to flip them.
Commercial rentals? Okay. NNN appeals to me.
blue
Jeff, I have been keeping up on the market diligently and agree with you. Not as many people will want to buy with high interest rates, but will all need a place to live.
Debt free is always the best place to be, but as long as you have enough money/equity/credit to move on the properties you need to move on, you will be fine. Flipping is good...once the market goes back up.
I believe the housing market is in a good postion right now despite the looming raise in interest. Many contractors/builders are booked up for three years. That is almost enough time to ride out a short recession. Think about it.
I think the future housing market is in unwanted motor homes.
Gas WILL get too expensive, people won't be able to afford to travel in their RVs, and they'll want to dump them. At the same time, fuel costs will make construction materials unaffordable and building and remodeling will stop. However, demand for housing will not slow because of population growth. It's an obvious match... you can't afford to buy a house, but the guy down the block is selling his motor home cheap.... how're ya' gonna refuse?
All you guys oughta be taking solid positions in motor home futures, and getting ready for the end of construction as we know it.
My thought exactly.
Neighbor up the road has a 35' ...same engine as my 1 ton ( 460,4 bbll) figgure 07 mpg...
been for sale 2 yrs. Nice house, just wont go far for cheap fuel cost. Spheramid Enterprises Architectural Woodworks
What are dreadlocks made from?
Seriously... I think the end of oil will mean renewed interest in NUCULAR power. Once fast food, televisions, reclining chairs, and 12-paks of Bud get too expensive, the average joe will vote for anyone who promises relief, even if it means throwing up a reactor where the ballfields and the swimming hole used to be. Or, instead of having a propane tank in the yard you'll have yer own mini-reactor, complete with a baby cooling tower.
Seriously as well.
The broad aspect of NE is cost of maintaining them..and the lack of current units on line..
They take a long time to get up and running, and the NIMBY attitude..must be dropped.
I might sound loopy when I say this..there is ANOTHER alternative..it begins inside, and crosses the many unseen dimensions..but hey, we all gotta belive in something..I belive I'll wait it out an have beer..watch the insanity from a safe distance. Spheramid Enterprises Architectural Woodworks
What are dreadlocks made from?
Nuclear power still needs fuel- uranium. The mines are located in politically unstable regions, just like oil. There is also a finite amount of this fuel, just like oil. Breeder reactors make more fuel, but at the risk of producing weapons grade fuel in the process.
The energy and resources that it takes to construct a nuclear power plant is not insignificant. This energy and refined building materials will only become more expensive as oil prices climb. Considering that it takes many years to construct and commission a plant, now is a good time to start building, if you believe it is the answer.
Then there is the waste issue.
How is it that you consider Wyoming and Montana politically unstable?
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And Canada and Australia...who produce over half of the worlds Uranium.Edit to Add: We have become so antinuke in the USA, that China is taking over as the world leader in Nuke power design and build for the world. We use to be the leader in building these wonders of engineering. We have given this market away and China is happy to take it.
Edited 7/10/2005 8:26 am ET by basswood
I was referring to the deposits located in Africa and the former Soviet Union.
I was thinking of the ecomony in this country and we have enopugh rad materials here already so no need to import. The idea of going nuclear is to get away from importing energy
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We get most of ours domestically or from Saskatchewan (the worlds largest producer). I used to do nuclear analysis work (Radchem Final Review Analyst) for ATI (Analytical Technologies Inc.).
Do you have any data showing how much nuclear fuel is available here in the USA compared to how much is needed to fuel enough reactors to be self sufficient in energy production?
I don't, and I suspect, at one time, it was believed there was enough oil in the USA to supply our needs....
Hopefully, the folks mining the uranium haven't "overstated" reserves... :)
Our current production is about 20% of our current demand. Our top 3 sources are:1. Canada
2. Domestic (USA)
3. AustraliaAs for long term reserves here is one opinion:http://www.americanenergyindependence.com/uranium.htmlEdit to add: You live near the birthplace of the peaceful use of nuclear power.
The worlds first nuclear reactor was created at the University of Chicago, under an athletic field.
Edited 7/10/2005 10:28 am ET by basswood
Interesting links.
Just curious, though... all this mining is done with machines that operate on what kind of fuel? Little "Mr. Fusion's"? :)
How accurate are reserves extrapolations if the energy needed to mine, process and use the uranium must all be provided by a nuclear power source instead of "cheating" and using "just a little bit" of diesel? :)
Heck if I know, maybe the mining equipment is all electric now. I am picturing big machines with big diesel engines.
Mining equipment is mostly hydraulic, powered by diesel. The danger of exposive gasses being released from th erock and set off by sparks precludes use of electric or gaspowered.
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Kind of hard to tell officially. I had friend when I lived west that worked the hard rock mines. Ilearned how to drill and run a jackhammer from them. the unions were demanding so much to let men go near the radon that the mines were closing down as fast as they openned. Of course, part of that was form dwindling demand at that time.Since the other wild card in this is where to store depleted fuel, why not stick it back where it came from? as the mines play out, put rad materials back in the same holes.
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I know all that... I think nuclear is stupid because we have not solved the waste problem, and I'm not sure it can be solved. I'm just saying that the end of oil will bring energy problems so massive that the average folks will want a nuke plant. You might too when they start having problems keeping the lights on in your mom's house, or keeping the plants lit where they're making her medicine.
As far as China goes, they're freaking scary on the environmental level. We could easily have a worldwide catastrophe if they mishandle their stuff. It won't matter if the economy collapses if there's a big radioactive cloud floating over our way. They are in a mad rush to grow their economy and provide enough resources to do it. It's not hard to imagine that some corners are being cut as far as safe handling of rads go.
Is the waste problem solvable? I suspect at some point the potential consequences will be outweighed by the desire for energy.
I find it difficult to imagine engineering solutions that must be sound for a period of time exceeding recorded history when we can't even build a road that does not need to be rebuilt in 20 years... No one dies when the road fails, no groundwater is contaminated for eternity.
Nuclear power itself may be cheap, but how much energy is needed to get the fuel to the reactor, and how much energy is needed to get rid of the spent fuel? No different than how many barrels of oil does it take to get that barrel of oil out of the ground and then refined and transported to the gas station?
I bet the USA has made some serious environmental transgressions during the (or should I say our) Industrial Revolution. China just has about 100 years of technological improvements and American cash from all that imported junk to go on.
As long as the USA gives a resounding FU to the rest of the world on limiting our environmental impact, kinda hard to imagine anyone else doing differently.
"No one dies when the road fails,"LOL, you must have been HUA when you typed that one in!
Talk to survivors of the road failures in California when the quakes hit. Talk to witnesses of disasters when mountain roads fail. Did you forget that flood plains regularly see drowings when those roads get washed out? A couple years ago, Reader's digest did an article on death by bridge failure, pointing out how the infrastructure of our highways needed help. yeah, no body ever dies, except from the things that you build your fears on. Try another fantasy
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If the street in front of my house fails, odds are I will not die. Probably will be inconvenienced, though.
If people choose to build things in harms way, like on top of known fault zones, in the path of hurricanes or tonadoes, in flood plains, on a mountainside or right on the waters edge, then that is a different scenario. Ship happens, if it was so bad, then why build there in the first place? Why should taxpayers pay to put people back where mother nature keeps kicking them off?
When a bridge fails, it is probably due to crappy enginnering, crappy construction or a severe lack of maintenance... maybe all of the above. I wholeheartedly agree that the nation's infrastructure is in need of serious repair, yet where is the money? A topic for another discussion, I suppose. Chunks of concrete falling from an overpass is not a design feature. Yup, if you are on that bridge when it goes down, not a good thing.
Hmmm... stainless steel rebar... there's a thought. I remember reading somewhere that Germany uses it, cheaper in the long run.
Anyway, if a nuclear waste facility is near me, and it fails, I will die or become really sick. <sarcasm on> I hope a bridge engineer didn't design it </sarcasm off>, or that it is not built by the lowest bidder.
I do understand that a whole lot of money has already been invested in the Yucca Mountain site, it is designed to the best of our ability, and we should go ahead and use it. I do not live nearby, but I am in the Midwest, and the trucks and trains carting the stuff will go through here. Which is worse?
My fantasies are much more entertaining than reality :)
Edited 7/11/2005 6:07 am ET by danski0224
My economics professor pounded a favorite phrase into my head in graduate school:
"Current trends never continue."
We're rarely able to see what technological innovations will come down the chute to reset the board.
With that said, we've had our head up our asses a long time on the energy thing and now on global warming as well. One answer lies in learning relatively quickly to harness much more of the "natural" energy around us, such as lies within the oceans, atmospheric dynamics, more hydro, better solar, etc. I suspect as the global warming thing heats up, if you will, we will have one hell of a lot more energy in the atmosphere in the form of hurricanes, storms, wind, etc. Also, it looks like housing demand could stay strong as Mother Natures cleans our plate every few years.
There's coming a reckoning, and it ain't got squat to do with money, power, religion, looks, talent, or any damn thing else. But, I don't think there's a person alive that can really be pre-prepared, though some will get lucky. That's the way nature works. Another grad school professor had a saying that, 'studies have shown that some sort of 100-yr event occurs on average every 2 years.
Meanwhile, has anyone seen that new Tom Cruise movie!!!!
However, when you look at history you generally find that those with lots of money come out best, regardless of the sort of disaster that occurs. (In fact, some actually profit from disasters.) This is probably one reason why they're the least worried.
If you can afford mercenaries you don't need to worry about much, except maybe keeping them in line.
The "Nuclear Waste Problem" is more political than scientific. We stopped reprocessing waste during the Carter administration. Reprocessing is really recycling and every other nation producing nuclear energy uses reprocessing of waste to recover about 97% of the HLW (high level waste) generated by power plants. The solidified and vitrified waste not recovered can be safely disposed of. In Gabon, West Africa, fissionable U-235 is naturally present in such high concentration that at a sustained fission reaction (natural and spontaneous), has been estimated to have lasted about one million years. For a long time we thought sustained criticality of a fission reaction was only possible if humans created it in controlled conditions. The "nuclear waste" created by this enormous natural reactor, has been subjected to weathering for millions of years, but the plutonium and other fission products have only migrated a few meters (without engineered disposal).Our own bodies contain enough naturally occuring, radioactive, Potassium and Carbon that we could be classified as LLW (low level waste) and be "restricted from burial, creamation, or disposal in garbage"...but the rules applied to nuclear waste are fortunately not applied to humans--or what would we do with ourselves? BTW humans have always been this radioactive.
7 mpg... so if I took a 3000-mile winter jaunt down to Arizona and back it would cost more than $1000 in gas. Ouch-o-saurus Rex.
Jeff,
Thats kind what my personal feeling is but I left it out at first because I wanted to see if anyone else felt that way.
In my area it's starting to remind me of the feeding frenzy between 1985 and 1987. After that things took a nosedive and didn't really recover until about1992 or 1993.
I think things are actually a little more stable than the were then. NO junk bonds or S&L bailouts to worry about. But I still a lot of the signs i saw before that drop off. Things like a rising number of houses finished and still for sale, and the same builder digging foundations as fast as he can.
NO junk bonds or S&L bailouts to worry about
I wouldn't be so sure about that Robert!
Start doing some digging about the FDIC. You'll learn that congress recently changed some laws giving them a sweetheart deal, alllowing them to reduce their securities and insure a lot more than they ever could possibly make good on in the case of a major housing correction.
Now, remember the old adage: "What goes up, must come down". Even the chairman recently voiced concern about the speculation in new housing.
If the #### hits the fan like we all know it will, the FDIC will need a governmental bailout.
blue
http://today.reuters.com/news/newsArticleSearch.aspx?storyID=250731+01-Jul-2005+RTRS&srch=immigration+home+building
//
8quarter,
that link raises the question of will it become a self perpetuating situation. Lots of new imigrants are heavily nvolved in new construction.
Will the influx keep new construction and remodeling going for years to come?
or
Will a slowdown cause a dip in imigration in turn causing an even bigger slowdown?
The economy in general will remain stagnant at best, probably climbing slowly, but far below traditional growth rates. So long as no major world event or some such upsets the applecart, any major bust is at least 3-5 years off. The housing market should be at least decent until interest rates begin to climb.
That's really the wild card -- interest rates. Once they start up they'll skyrocket, due to the overall level of debt in the US, and especially the government's insatiable appetite for debt. The lousy economy, though, is holding this time or reckoning off, oddly in part because it's keeping folks from retiring and drawing down their retirement savings. But with boomers reaching 60 something's gotta give.
I'd say I give it 5 years. The thing is, though I'm pretty good at predicting what's going to happen in the economy, I'm usually short by a factor of two on my estimates of when, so my track record would say ten years before the big bust.
There are other chickens that'll come home to roost eventually (such as global warming), but we won't feel most of them for 20-30 years.
That is a good point about more folks entering the remodeling business. Lots of boomers who can't afford to retire but can't afford not to will likely start doing "handyman" work to pull in a little extra cash (and also get out from under the wife's feet). They'll likely undercut a lot of younger guys, since they won't have to make a living wage.
Cater to the very rich. Their economy will not tank. Folks with less money do not have the basis to easily support your business no matter what happens!
reactive is NOT the answer.
PRO active is MAYBE a temp fix..
art we not the ones ?
WE have a consortium, as an experianced force..why has the "WE" gone outta the verbiage?
Spheramid Enterprises Architectural Woodworks
The OLYMPICS ARE HERE, THE OLYMPICS ARE HERE!!
( oh, not London KY..Shucks, I really thought PAris Ky had a chance too)
Are you talking "We" as Americans, or "We" as builders/professionals?
Either way, I don't know that there's enough unity to really get anywhere. Sad to say.
That has been my business for the last ten years. I will start as an employee in two weeks time (master-carpenter crew leader).
In germany the very rich are the ones who pay their bills belatetly and sometimes let you hang with the last payment. Very rich are fussy, frustrated and do not trust anybody. Not all, but most.
My business has been in a slump for two years now, the very rich keep their money in the pockets. I am tired of an uphill struggle against taxes, the bank... So I´ll pack it in for a while. Keep the mobile off...just work - less money, but maybe more contentment. I wish we had your economy.
Mathias
http://www.raulfcarpenters.com
Sounds like you've got the right attitude, Mathias. If there's more money/less hassle in working for someone else than there is in running your own business then that's the right thing to do. You can always start up again when the circumstances are right.
I know what you mean about working for the very rich, having been directly employed by several and having seen the way they treat contractors, I wouldn't dream of bidding on a job for anyone like that.
John
Thank you for your kind words. It is a tough but sensible decision. To protect the very rich: Some of them have been immensely relaxed and appreciative of the "manna" that an individual craftsman puts into a job. Wish I could have been able to afford some of my work...
Mathias
Re: "Cater to the very rich. Their economy will not tank."A lot of ugly truth to that. An interesting study was done a long time ago which pointed out that after WW2, a very extreme economic downturn so the example is telling, the very same industrialist that backed those in power in the axis powers were the same folks who came out of the war in decent shape and rode the recovery after the war.AEG and other large industrial corporations in Germany survived and are still with us today. Often with other names. Similarly Mitsubishi, Yamaha and and other industrialist in the Japanese versions has much the same prosperity. Consequently, in light of the failing luck of the labor movements which were at their height prior to WW2, some historians have characterized WW2 less as a victory for freedom over fascism than a defeat of the working man when faced with industrial power. Fascism, as defined by Mussolini as the unification of industry with government, in terms of the overt form, lost the battles in the field because the government was leading, but won the war in the long run by allowing the government to be cooped by business. Accomplished by modification of the terms of argument by letting industry lead and control under the covering fire of the business/government propaganda machine, a technique developed by the Germans, and inclusion of business under the happy rubric of 'free markets'. A term that had the exact opposite meaning for most of American history when business, remember that robber barons, Standard Oil, coal, steel and RR monopolies were just the more recent expression of business larceny and market abuse. The consensus of most American prior to WW2 was that business and industry had to be tightly regulated to protect the common man and for the good of the nation. They had seen market manipulation, poisonous food and water, environmental ruin, business resort to violence to control labor and markets and industries use of money and power to change the rules. They rightly feared unrestrained markets as they had brought ruin and suffering to so many so often. A lesson we are going to have to relearn, again. Just a matter of time. Of course we, and much of the world will move into a comparative dark age if the Roman model is recreated by the unifying business, media, government and religion.
Wow.
What was your thesis in grad school about? Spheramid Enterprises Architectural Woodworks
What are dreadlocks made from?
I think we entered a recession a couple of months ago when oil went over $50/bbl. It won't be acknowledged by government officials for another six months, but we'll see lots of jobs disappearing in the last half of the year. High energy prices are the economic equivaleent of bricks tied to a swimmer's ankles. They might struggle to stay afloat for awhile, but eventually they will tire.
Another reason for my pessimism is the federal Budget deficit. Officially it's somewhere around $400 billion, but here is an interesting look at what the deficit would be if the government kept real books:
http://www.gillespieresearch.com/cgi-bin/bgn/article/id=596
This is banana republic territory folks, and we're nearing the stage where El Jefe and his goons loot the bank vault, and angry mobs chase his limo to the airport. Yes, China and Japan would like to keep selling us their stuff, but as a nation, we are now borrowing 80% of the savings from the rest of the world (we don't have any of our own). How long can that go on?
The construction trades will get hit hard while the residential and commercial markets try to work through the glut of overpriced inventory that's been built over the past five years. People have to live somewhere though, and I suspect that low-cost housing might be one bright spot with prices for modular homes and fixer-uppers actually increasing as millions of people try to downsize.
Edited 7/8/2005 12:44 pm ET by TJK
I think your right. Average guy usually knows 6 months ahead of the goverment. Around here the leading economic indicators are the flea markets,craft shows. they ain't doin crap cause nobody has got any extra money.
Just started an interesting thing. A 14 x36 house for 50.000.00. Gonna market to the "retired" and guess who else when they find out. Just finished a bunch of Condos on a lake that is billed as the Ultimate in quality. We trimmed it. Spent hours redoing RO and putting 6" jambed exterior doors into 4" walls. Added 1-1/2 behind the casing. its a real treasure. Lawsuits and all. But as long as as the law of greed is running they'll keep selling the crap and building will limp along with wages in the 10-15.00 range. Best if you can work without any principles or standards.
Lotta guys won't say anything cause there ego's wont' let them
For those who fought. Freedom has a special meaning the protected never know.
I think that in my lifetime, we'll see another major depression -- probably a lot worse than the one my parents grew up in.
Why?
Well, we seem to have created a business environment in which people get to be millionaires by buying a company, offshoring the labor, and reaping the profits. Pretty soon, there won't be ANY really good jobs left here "onshore".
I'm guessing that there are already high-paid folks in Detroit whose job it is to decide, each year, how many more jobs to off-shore, while still maintaining enough workers in the US so that the products will actually have a market.
Add to that the reality which is the emerging China workforce, and you'll see that there will probably be one job for every two dozen workers.
Not a pretty sight. I just hope that there will be enough work repairing McMansions, that I can stay busy.
Unless you're the lead dog, the view just never changes.
Gloating here. I just built my home for about 200K (I work for free.) including land that I bought in the early 90s and it is worth at least a million. Now I am back to work subbing for a general doing framing and whatever. It took two years to build my house and I guess I made about 400K a year. Now to buy a lot would cost me about 300K in the same neighborhood. I went to look for work after my house was built and it took about a half hour to get on a high end crew with good money, building a five million dollar home. Finding work is easy if you have the skill and the tools. If you are good at what you do then you can live on gods little acre and find the finest work. I say the economy is good if you are skilled and have a nest egg to tide you over when it gets slow or you want a vacation. Us old guys that have 'know how' are getting scarce. Latino labor is making inroads but few have the tools and skill to make it in my world. That could change because I am very impressed with the smarts and skills of some of my latino co-workers. Oh....I just bought a nice compressor from Costco that was made in China under the Michelin brand for only 150 bucks. It is a very well designed unit and has a lot of guts. Before I was going to buy the DeWalt/Emglo but I couldn't pass up the price of the michelin. I am sorry for the Chinese that only make 25 cents an hour but that cheap price can't be that bad for our economy if it keeps all those nailers going all day long.
People like you are selling out this country for pennies on the dollar. Apparently you have the means to buy American, yet choose not to.
A most fitting and ironic situation would be if your $5 million dollar home customer lost his/her job to outsourcing....
Edited 7/9/2005 7:04 am ET by danski0224
Your post is fresh air amoung the pessimists here.
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Almost everyone I talk to wants to make money fixing up homes.
There is a perfect storm brewing:
Rising interest rates.
Record consumer debt.
Jobs continue to leave this country.
Skyrocketing energy costs.
Skyrocketing commodities costs.
(has your income kept up with rising gas, commodities and health care?)
Whenever all that comes together, the bottom will fall out.
IMHO, anybody that tries to predict the economy is wasting their time. Look at it this way. Gas will be $3.00 a gallon by Labor Day. $5-7.00 in 3-5 years. Any type of construction is tied to fuel costs. Costs are going to rise dramatically for any type of production using gas or oil. That includes lumber, Portland, steel, etc. Things are gonna change....
Got that right.
The whole US economy is tied to fuel costs, which are going up. How long those costs can be absorbed is another matter.
Of course, once this happens: http://www.lifeaftertheoilcrash.net , all bets are off.
"anybody that tries to predict the economy is wasting their time"Tell that to the politicians around here. They're getting ready to spend about $10 billion to widen I-70 so that all of those cars can drive across the mountains without undue delays. The alternative, a monorail train that would handle 70% of the local tourist traffic and clear the highway for trucks is the butt of jokes. If gas is $5 a gallon, the joke will be on us. Privately and publicly, we are borrowing like crazy and spending money on the wrong things. I'd compare it to the activities of drunken sailors, but drunken sailors have to stop when they run out of cash. Our governments just raise taxes, float bonds, or transfer money from other areas to pay for their idiocy. Consumers sign up for credit cards or refi their mortgages to enable purchases of Chinese crap and Japanese TVs. On average, Americans spend $108 for every $100 they earn - how long can THAT continue? Here's a humorous take on our bad habits:http://www.theonion.com/news/index.php?issue=4124&n=1
The mortgage bankers I work with on new construction (3 different banks) have consistently (and over-optimistically, IMO) stated that new home construction in my area is forcasted to stay strong for another 5-6 years.
Meanwhile, I'm contemplating learning Chinese as they continue to buy up our debt.
And, to be on the safe side, DW and I are well-stocked with Ramen noodles and chop sticks.
If gas is $5 a gallon, the joke will be on us.
Not if, when.
Well, I think the degree to which the housing market is in a bubble or not varies quite a bit across the county. For example, I recently visited Hudson, NY, where less than $100k will buy a respectable single-family home. Maybe not in great shape, but there you go.
Meanwhile, two friends of mine are moving out of the greater Boston area because they realized that they couldn't enjoy the life they want together (and as a family) in Boston at the wages, housing costs, etc. they're facing. They're moving west, where a 3-bedroom house costs the same as their one-bedroom condo!
In other words, there is a lot of air in some housing markets. Boston seems particularly vulnerable, seeing that the average income levels being diverted to paying mortatges is 47.5% vs. the national average max. of 30%. If those mortatges are variable (as most today are), then the homeowners are in for a world of pain as the interest rates rise. The joke of "they're 2 percenters" from the 1970's (to show people must be very old to receive such low interest rates) will become "they're 4.5 percenters".
It is my firm belief that the pressures of continued budget deficits, trade imbalance, etc. will cause a run on the dollar at some point in our lifetimes. That will cause a crisis that makes the interest rates of the late 1970's look like childs play (remember the 17% interest rates?). In other words, our financial house has to be put to order. Unfortunately, I don't see either of the two dominating parties stepping up to the plate to make it happen.
But allowing for inflation, fuel is no more expensive than it was 20-30 years ago.
I am far from being an economist. My comments on this are speculation (of course not even economists really know what the future holds). That said, the recent numbers are good:
CPI and PPI down, unemployment down to 5%
Inflation relatively flat (even with high energy costs),
Payrolls, earnings, and productivity UP.
Efficiency and productivity gains seem to be able to compensate for higher energy costs (at least to a point), and a lot of goods are getting cheaper or are flat and wages have been able to creap up without being passed on as higher prices. Interest rates will probably continue to slowly move up in very small 1/4 pt. increments. This may keep things from getting too hot.
Demand for housing is certainly good and is supposed to stay that way through 2012. Add to that the growing high end market and I say life looks good.
The housing bubble is about to pop. Matter of fact prices will roll back 15 to 20%. thats gonna put us in the same boat as the failed S&Ls of the early 90s. Loans are now written at full market value with little or nothing down. when prices roll back many people will have mortgages many thousand over liquidity. it'll leave us all holding the bag. Another big government bailout is on the horizon.
What did we learn from the S&L bailout? No one is accountable.
Your personal quote is so optomistic..."no problems, only solutions."I think our "new economy" may continue to befuddle the doomsayers. I could be wrong, but at least I'm happy and won't loose sleep between now and the "bubble burst". "90% of what people worry about never happens."
If the fallout from the housing bubble collapse were confined to only the housing sector, I might share your sentiments and not worry too much. The problem is that mortgages are now routinely bundled and sold as securities to investors and hedge funds all over the world. They are used as collateral for literally tens of thousands of deals and contracts and any problems with their value or credit worthiness will have serious impacts around the world. Everything from Grandpa's retirement account to the solvency of companies like Chase and Citigroup depends on these contracts not unwinding too quickly, and 95%+ of mortgage holders paying on time.Look at what happened last month when the credit rating on GM bonds was dropped a notch. There was panic among bankers and lots of back room deals as derivatives contracts were called and the money wasn't there to pay them. This was just one corporation, and their debt is only about 1/6 the debt held by Fannie Mae and Freddie Mac. If the same thing were to happen in mortgage backed securities, the fallout could be much, much worse, and the Federal Reserve would probably have to step in and bail out some folks to the tune of hundreds of billions of dollars. The Fed is rumored to have a slush fund of about $20 billion for these types of emergencies, so where would the rest of the "liquidity" come from? Tilt!IMO, the whole damn system is like Alfred E. Neuman skating on a pond with ice 1/2 inch thick. So far so good, and "What, me worry?"