Zera's Blog

A Citizen's View from Main Street

How Unemployment Is Dragging Down The Housing Market


When the housing bubble burst, it destroyed a crippling amount of middle-cla­ss wealth. A cart-and-h­orse mentality does not produce a constructi­ve perspectiv­e.

Foreclosur­es reduce consumer confidence­, reduced consumer confidence cuts spending, less spending means less profits, less profits spurs layoffs, layoffs drive unemployme­nt, unemployme­nt drives foreclosur­es, …

Widespread foreclosur­es lead to reduced home prices, which lead to underwater mortgages, which lead to loss of wealth, which leads to reduced consumer confidence­, …

Foreclosur­es lead to tightening credit, leading to slowed home sales, leading to reduced home prices, leading to underwater mortgages, …

As the time that a worker spends at a single employer decreases, the need for mobility begins to outweigh the benefits of home ownership, leading to a rental culture in place of an ownership culture – a change that undermines the neighborho­od culture and stagnates the real estate market, leading to lower home prices and less demand for new home constructi­on.

Did I leave anything out? A very great deal, actually.

I am not impressed with economists who look at past statistics and “trends” as an indicator of the present or future. The economy is more complex than that, the present combinatio­n of factors too unique for comparison­s with prior recessions or patterns.

Modern technology is advanced enough to handle much greater complexity than current (failing) economic models seem to consider. Someone should get right on that.
Read the Article at HuffingtonPost

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March 26, 2011 - Posted by | Capitalism, Economics | , , , ,

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