Tuesday, April 24, 2012

American Housing

As I posted before: Housing will not "recover" in my lifetime (I am in my early 50's). Irrespective of how low interest rates are, buyer tax credits, jaw boning.... the problem with housing is that prices are TOO HIGH and property taxes are TOO HIGH and the maintenance costs for these behemoths that the builders built because they paid too much for the lots is simply not affordable on the incomes of the people that are to be doing the buying.

(Just as an anecdote... I strike up a conversation with the man that cuts the grass of one of my neighbors (yea... the same neighbors on food and medical assistance, both of whom can also afford cigarettes and beer as well as a landscaper... but need government assistance for food despite having enough land to provide for themselves as their ancestors did on that property for the past 100+ years) whenever I see him working over there... as he tells it, fuel prices are killing him. Not so much for the machinery that actually does the work (although that's bad enough), but the trucks to move the equipment around and the fuel costs of his employees getting back and forth to the job sites. America went from 6 person families living in 1,000 square foot homes to 4 person families living in 2,800 square foot homes... partly to live in monuments to themselves and partly because the builders convinced people that they needed these monstrosities.  Maybe they do and maybe they don't... my personal experience in moving from a McMansion after my divorce into a small house 12 years ago was one of the most liberating things I have ever experienced. I suspect that this epiphany is happening elsewhere in the market place.)

OK... Case-Schiller measures sale prices. What about property taxes? Municipalities have killed the goose that laid the golden egg just as much as the evil-doers in Banking and on Wall Street. It used to be that there was a tax advantage to buying a home - your interest and property tax deductions where a big offset to the expense of that home... then the municipalities decided to "get paid". Home prices will NEVER recover in the high property tax states/locals of the likes of New Jersey/New York/Southeaster New England... but what is up with California? Yes, they had a check on property taxes... but homes became priced on the mortgage/taxes/insurance gross payment. Lower property taxes there resulted in higher sale prices on the property to bring the gross payment into equilibrium (my opinion). The problem with this is that it makes the price correction more intense.

It matters little if prices are the lowest in a decade, or even 2, if prices 2 decades ago were out of bounds; or, if over investment results in write downs. It is clearly in the best interests of "The People" to have housing costs come down... so why the government push to make housing costs expensive? Because the government is not concerned with The People. The government is concerned with the establishment and their political contributions, free tickets to sports events/games, free dinners, flights to Davos and other meetings of the high and mighty... whether the people are struggling or not to make ends meet is given lip service... what the Establishment really wants is to keep those mortgage payments and property tax payments coming in.

It will be interesting, if I may make use of understatement, to see how this plays out. Do The People come to their senses on student loans, housing and auto debt, credit cards, etc... the way they have come to their senses on the marriage/divorce industrial complex? My bet is that they do... but I have been wrong before... once or twice...


Anonymous said...

I saw somewhere maybe s Dakota is outlawing property tax. They are on to the scam, we can't really own our land, just rent it from the government. On the other hand, in china everyone has a long term lease from the government, but there are no property taxes.

tweell said...

The way that our government is printing money, our homes will be correctly valued again very shortly.

Anonymous said...

when they builtout the suburbs most of the urban slums were torn down. I reckon over time a lot of the outer suburbs and more recent developments will be abandoned too. the construction is too shoddy and maintenance costs will be sky high.


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