Prediction: Housing Prices Are About to Plunge
Longtime readers know that I place bets for the hell of it. Easy to do, when you aren’t putting money on it.
My bet is, housing prices are about to drop. Here’s my reasoning.
First, of course, housing prices have recently been recovering. This could be discounted – in my hypothesis, it *should* be discounted – as a common market phenomenon in which people jump in and bid prices up, in anticipation of a larger rise later. Sometimes, sad to say, the bet is premature, and after a while the larger downward slide resumes.
The whole housing price world is still built on an assumption of things being like they used to be. That’s a faulty assumption. Things may never again be like they used to be.
As I pointed out years ago, a globalizing economy inevitably means that wages in the U.S. are going to adjust downwards until they meet competitive wages coming up in places like China and India. We may not generally be heading for the abysmal poverty and hunger found in some such places – I think there’s a good likelihood that we *are* heading that way, when you factor in climate changes and threats to agriculture – but let’s not go there in this post. For now, the point is just that our theoretical intersection of wages and living standards lies well below what we’ve known, and well above what India et al. have known.
How quickly will we reach that theoretical intersection? Those who recall the Rust Belt dismantling of American industry may consider that it became foreseeable pretty quickly, but the actual unfolding has taken decades. If that’s a good guide to the future, then I expect that the dust will be mostly settled on this equilibrium point in twenty or thirty years.
People can’t buy houses if they can’t afford them. As more and more workers find themselves in jobs that pay half what they used to earn, or jobs that are only part-time or unpredictable (or no jobs at all), the whole concept of families typically buying houses and raising kids in the suburbs is rapidly becoming history. I don’t think there’s a solid floor under the market for such units.
If we want to get where we’re going as quickly as possible, one approach would be to adopt universal conscription. Upon turning 18, everyone has to move to a dorm-type living arrangement. It can be in the military; it can be in something like Outward Bound; it can be on a college campus. Doesn’t matter. The point is, the next generation has to be trained to consider a minimal living space to be normal, so as to be grateful for anything above that, and also to be more critical toward indulgence in vast excess above that. It’s simply time to adjust our goals and expectations to our means.
Rapid steps in that direction will train members of the next generation to interact well with one another and to be comfortable in closer quarters. This will facilitate a shift, within just a few years, to smaller, more ecofriendly, and more closely located dwellings that people will actually be able to afford without 30-year mortgages. That’s where we need to go.
That is, in fact, where we *are* going. It’s just a question of whether we march there promptly or are dragged there, kicking and screaming. How long do we want this Bust Belt restructuring to take?
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Tags: bust belt, dormitory, dorms, ends, expectations, housing prices, living quarters, means, restructuring, rust belt, universal conscription