The Most ‘Affordable Cities’ Missing Something: Jobs*

The above article on the housing market appeared in the Wall Street Journal, May 21, 2009. In response, I posted the following comments in the Journal, which I have copied here.

Wall Street Journal 10:43 am May 21, 2009
Mike Castleman wrote:
I think the NAHB would tell the truth if they were better at analyzing the problem. The article has the cart before the horse. The markets described in the article are not affordable markets with no jobs. They are jobless markets. In jobless markets, most people cannot afford to buy homes, at any price, so the supply of available homes far exceeds the demand. This causes prices to decline; thus, affordable homes.
If you want to know what is going to happen to the national housing market, all you need to do id look at the Ohio and Michigan markets. As the national economy continues to lose a million jobs per month, the number of people who can buy a home, in any city, at any price, will decline. As the number of buyers declines (DEMAND) the prices of the homes on the market (SUPPLY) will fall. What does mean for the economy? Is it a good thing, because some folks will get a really good deal on a home? Most likely not.
As home prices fall, the home building industry will continue to contract, see my blog: http://housingmarketinsights.blogspot.com/As the production of homes falls, more jobs are lost. As the values of homes fall, tax revenues are lost to the cities, counties, schools, etc., and the liquidity of banks continues to contract. As the number of homes sold drops, jobs are lost in the mortgage industry, the construction lending industry, furniture manufacturing, building product manufacturing… you get the idea.
The most serious issue facing the US economy today is that congress doesn’t get it. No one, and I mean no one is doing anything about restoring housing demand. I believe these people are not stupid (with a few exceptions). If they are not stupid, then there is some other reason why nothing is being done. While both sides of the isle are at fault, at present, the denocrats won, and they are firmly in control. therefore, if the democrats want something to happen, they can make something happen; and if they don’t, it won’t. So the problem becomes a political one, and that is very dangerous for the economy.
As I point out in my blog, the housing industry is the largest domestic industry in our economy, and for decades it has been used by the FED as the throttle for speeding up and slowing down the economy. The problem today is that most of the people involved in the production of housing are self employed, independent, entrepreneurial business people. This is code for CONSERVATIVE. The administration and the Democratic Party have made it very clear that they have no interest in doing anything for their political opponents, the conservatives. If this political stand-off does not change, this economy will reach DEPRESSION levels, with 15%+ unemployment, minus-10% GDP growth, social and civil unrest and all of the other socio/political/economic ills that go with it