I know a little something about this. Being in Construction for the last 30 years, primarily in semi-custom new home construction, this is absolutely the worst I’ve ever seen. Even at the end of the Reagan recession, Folks who could still afford it built their second homes. They weren’t as scared as people are in this recession. My phone used to ring off the hook. Lately, not so much. In fact, I haven’t fielded a call from a perspective client in three months, albeit there’s multiple reasons for that. Several times, clients have asked for bids, then you never hear from them again. I’ve gone by a couple of the home sites afterward and found out that they hired an outfit that uses immigrant labor and pays half the wages We do. Just can’t compete with that.
I’ve been all over the country the last couple of years and I can tell you that there are a lot of houses and land up for sale and auction.
Consider, for example, the attempts to cushion the collapse of the housing bubble by trying to halt foreclosures or offer “assistance” to deadbeats who can’t make the payments on houses worth less than the mortgage value. What’s the net economic effect?
At Calculated Risk, Tom Lawler, a real estate economist and former risk policy veep at Fannie Mae, tries to figure out how many people have actually lost their homes to foreclosure, short sales or deed-in-lieu desertions. The answer: Not enough. Lawler . . . says the number of foreclosures that have been completed so far is a drop in the bucket compared to the number of loans that have gone bad. . . .
[T]here could be roughly three times as many homes on the market as there are now. Lawler points to 1,445,000 completed foreclosures and short sales at the end of 2010, compared with 4,296,01 mortgages that are past due by 90 days or more.
To adapt an old Marxian expression, we have a “reserve army” of unforeclosed deadbeats, who are on one hand a steady drain on the vitality of the financial sector but, on the other hand, a looming threat to the real-estate sector. Either the deadbeats are permitted to fall further and further behind on their mortgages (not good for the banks) or else the banks foreclose and all those homes are dumped onto an already glutted real-estate market.
It’s a lose-lose situation for the overall economy.
For even more analysis, check out PJM