Economic Dart Theory 101

As presented by Nigel Swaby, soon to be ex-broker.

At the heart of the housing crash debate is whether jobs will remain readily available. Housing bears argue much of America relies on construction and housing related jobs that when that industry goes crashing down, the rest of the economy will follow.

Ummm, I stumbled into the world of Serin starting at the sites that really matter to me in the housing bubble scenario, sites like The Housing Bubble Blog, patrick.net, Immobilienblasen and others.

Now, on those sites there are some extreme bears, predicting another depression, etc. But there are also some very smart, insightful folks who clearly know a lot more about Economics than I do. Unless the drugs of my youth did a lot more damage than I thought, I don't recall the arguments of jobs as the linchpin for Real Estate. I think they are more often referred to as an indicator (lagging?) of the overall health of the economy. I believe some have referred to jobs in construction as an indicator of what's to come in housing.

Nigel seems to be once again inventing his own theories of economics? Maybe i'm wrong, but most of the posts/comments I see on the bearish sites revolve around the lack of affordability in housing in relation to average wages. Most people tend to cite things like historical norms of prices to income rations and all that stuff that requires charts with points and stuff.

In the face of a cooling housing market, the fact wages are rising and jobs are plentiful doesn't make me worry about a housing crash. In fact, temporarily lower housing prices will create a positive mindset for families who want to own a home more than ever.

Hate to tell you Swabby, you should be worried, unless you're really already out of the Broker business. The past few years consisted of fliptards like Casey artificially running up home prices to unsustainable prices. Something like 25-40% of sales were to investors/speculators in that time period... that is unless tons of people all of the sudden bought vacation homes. The buyers weren't even real, now many people who got caught in the hysteria are facing steep ARM resets over the next couple years.

Before that, the Fed stopped house prices from starting to correct with all the interest rate drops.

I know you really don't believe that "temporary drop" mess, it was a bubble and maybe in a year or two it will be time to start looking, but can the glut of mortgage brokers and realtors survive that long? I doubt it.