Right Grub housing deflation is the itch I can't scratch & a huge factor to strong sustained recovery. Housing deflation is the boulder we can't push up the hill & very complex problem. Not much anyone can do that I can think of other than hit bottom let it come back when it can come back. Gov & Fed messing with unquailfied housing loans is what lead to the smoking hole in the ground that we are slowing trying to climb out of. Anybody know how to solve housing?........I sure don't housing looks like an orphan nobody wants to shelter.
There are two primary issues with housing:
First there is very little inflation to cause prices to climb and get us out of the hole. Some areas of the country, (not all) are experiencing up to 75% of the mortgaged population being under water to the mortgage. We have NEVER been here before. Even during the great depression, the distance to fall was in the tens of thousands. People lost their homes to the banks and the banks resold at a few thousand lower than market and the whole thing kept going even when the huge unemployed numbers were rolling around.
Today we have homes with mortgages that are hundreds of THOUSANDS below water.
Secondly since building homes for customers means there is a demand for housing...we have to correct that issue too. No demand puts 1 in 5 people out of work. That number is huge. If you aren't building them, you won't employ those people and we just can't get the ball rolling until the demand for housing increases again. Prior to 2006-7, this was not a problem.
Even if you want to buy a home, you have to deal with regulations up the ying yang...compareable to yesterday when banks were safe guarding things to try and prevent foreclosure rates from climbing. But today they are running out of control, but try and buy a house...any of them, even ones the banks have. It isn't easy to do...and how stupid is that. Instead of making it easier to buy, they make it harder...dah....what brainchild is working this one out???
Here's another thing. There are people out there who still work, have been working and would be happy to trade up or down to move to another home...but they can't sell what they have so they don't. Why wouldn't a bank take a house in trade that had a lesser value than one that they are already holding and which continues to loose value? Nope...they don't do that. How utterly stupid can banking industry be??
The real answer here is to let the people who want to buy a new home or bigger home buy it and let them out of the existing mortgages. Secondly since all these mortgages that the banks hold aren't worth the mortgage held on it....ratchet the mortgage down to reflect the current value of the property without having to prove your income is in the hole and you are penniless to do it. People won't walk from a house they have equity in.
But right now...the banking industry is sweating it out and hoping that they can withstand the throng of people who eventually figure that with zero inflation (call it stagnation...if you please) and they are tens if not hundreds of thousands below water on the mortgage that sooner or later they will decide...by geez....no sense in paying huge payments on this sucker when we can go down the street and rent or buy another for half the price of the one we are now paying on. And when the hoards figure this one out then the banking industry is going to be in deep doo-doo....cause they can live with a 40% foreclosure rate on homes...probably not even half that many.
The other way to kill the downward spiral is to let inflation take off in a big way. Remember the Jimmy Carter years....homes were accelerating out of sight. Once that happens, the need to address underwater mortgages won't exist because they will all take off at huge rates. Of course retired guys will be crying the blues...as their incomes are fixed and they won't be able to live on those incomes long with rapid inflation.
So let people buy and let inflation rip....you want to fix it...that's how you do it and all the other crap except the loss of good paying jobs in industry will melt away.
We can all help each other weather this by buying American made LOCAL products and keep the cash local and moving....this is key.
