Housing Boom
Jan 28th, 2008 at 11:25 am by Susie
That’s the sound the housing market makes when it implodes:
WASHINGTON (AP) — Sales of new homes plunged by a record amount in 2007 while prices posted the weakest showing in 16 years, demonstrating the troubles builders are facing with a huge backlog of unsold homes.
The Commerce Department reported Monday that sales of new homes dropped by 26.4 percent last year to 774,000. That marked the worst sales year on record, surpassing the old mark of a 23.1 percent plunge in 1980.
You have to ask the question why anyone would spend a HALF A MILLION DOLLARS for a roof over their head (a nice home to be sure), especially since their income is only $40-60K a year. Greed is obviously part of the equation - but who’s greed; the contractors, the construction crew, the home buyers, the financier of the home loan, or a little of each of them. It’s probably the latter, as we all want to live better than our forefathers. But until all are willing to sacrifice, we will be stay in this mess. For me, that is homes selling for $500K now being reduced to $250K - something most people can afford with their current income - but I’m not holding my breath.
My organization contracts with hundreds of construction companies. Not housing but road, waste water treatment systems, water distribution and flood control and the like. Over the past 6 months, housing development construction companies have begun to flood the market trying to get any contract they can. They’re rather desperately low-balling there proposals, hoping that we’ll ignore their lack of experience. The construction industry is growing chaotic and looks like it will worsen for some time to come. Remeber, these companies employ hundreds of thousands, each of whom will be paying less taxes, buying less gas, food, appliances and myriad stuff. Hundreds of merchants who sell the food, gas and stuff will be coping with the reduced sales, laying off staff at best or closing up shop at worst. The housing bust is rippling through all sectors of the economy not just finance. But BushCo says, “Don’t worry, it’s just the free market correcting itself.”