Second Leg of the Housing Decline Set To Begin (or Why Economists Are Dangerous To Your Wealth)
Monday, June 28, 2010
Executive Summary
- Housing data is weak and just took a turn for the worse
- Stimulus efforts were essential to keep housing propped up
- The stimulus has ended
- QE and stock market prices are correlated
- What’s coming next
- What you should do
We bought our house in November of 2009. This will turn out to have been a very bad financial decision. We’ll be underwater on that purchase for a very long time; maybe forever (or until Bernanke’s great experiment takes the final turn towards massive currency destruction and inflation; whichever comes first).
Of course, we bought it knowing that. Our decision to buy centered on our valuing time more than money. What I mean by this is that all of the changes that we are now fully engaged in around our house, ranging from insulating to installing solar panels to putting in a fruit orchard, all take time. Time became more important to us than money, and so we bought.
But for every nation dealing with the after-effects of a housing bubble, what matters is that house prices start to climb again. Of course, the housing bubble was just a symptom of the larger and far more damaging credit bubble, but housing is a useful indicator for where we are in the larger credit-bubble story.
Because of its importance to both the bubble’s bursting and its eventual repair, I track housing for signs of true recovery.
I also read the ramblings of classical Chicago-style economists in an effort to understand the mindset of those who only see the world through a very peculiar lens with a distorted and narrow field of view. While reading such works, it’s important to recall the difference between facts, opinions, and beliefs, and also to note what’s being left out.
Here is a classic example from April 2010, penned by University of Chicago economics professor Casey Mulligan and served up by the NY Times, the publication with arguably the most belief-oriented economic reporting team:
Good News From the Housing Sector
Recent reports on housing starts, new home sales and housing prices show that the housing recovery continues.
by cmartenson 
