LilBob

Slide of Doom: U.S. Housing Markets Have Peaked

Supply and demand. With a vast pool of unemployed and underemployed workers out there employers aren't required to pay the same wage rates that they would have to in a competitive employment environment. If working people are making less money they aren't as likely to purchase homes. With a general stagnation and decline in wage rates the average of purchase offers will also decline.

Real Estate will continue to decline steadily until the unemployment rate is brought back down to less than about 6 to 7%-what some have projected as the "new normal". Until we reach that threshold, we will continue to see a steady decline in the majority of real estate markets.

Falling Up: The New Business Model

I agree with Reggie for shouting kudos to this article. I personally believe there's still a great deal of opportunity right now. I have family in Sarasota and I watch that real estate market pretty closely. My brother and I have even been kicking around the idea of getting into homebuilding down there-focusing on tiny little single story retirement cottages-which we know we'd be able to sell. It's really a shame that too many of the wrong kind of homes were built. Anyone who can manage to keep their construction costs down, create very simple yet attractive cottage style floorplans and focus on the entry level-sub $125,000-market can still make money in real estate.

Housing Prices: How Much More Downside?

I would expect housing prices to eventually fall below the rate of inflation. The real problem with the real estate boom was that people came to believe that a finished home was worth far more than the cost of construction. There was a seperation from reality where homebuyers forgot a basic rule of economics: when the attributed value of an asset exceeds the production cost of said asset, people will rush to produce more of that salable good. We are oversupplied with homes and given that many younger Americans no longer have access to the same kind of career opportunities that the Baby Boomers had we can expect that when the Baby Boomers do start retiring and moving to warmer climes or downsizing to smaller properties we will see another crash in suburban real estate that will take the index to (potentially) well below the rate of inflation.

You can still make money in real estate but only if you take a dollar/sf approach and specialize in very small modestly priced properties.

California - And by Extension the U.S. - Headed for Permanently Smaller Economy

I agree that this article touches on some strong points. I'm still quite bullish though on alternative energy as a source of economic growth. I'm honestly not a fan of the regular axion of "technology," as a source of economic growth-given that so much in the field has provided us with technologies for infinite and endless distraction. I-pods and cellphones are not the way to prosperity. The area that I see as having the greatest potential is point-source production of energy: roof top solar panels and residential small-wind units. The only way that America can possibly foster economic growth at this point is to find ways to continuously reduce dependence upon foreign oil and domestic utilities.

I also agree with this author's statements regarding zero net growth in homebuilding, although I would not take that to mean zero homebuilding. I've been considering a business plan for a real-estate interest but it won't be for larger homes-we're going to build Chicago style bungalows-between 700 and 800 square feet, everything on a single floor, and with 36" doorways to facilitate wheelchair access-good for aging empty-nesters who want to simplify their lives.