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Housing Bubble
By Ender | November 23, 2008
Many of us believe our economic woes began with the housing market. I was watching some talking heads on TV this afternoon and one of them suggested that the prices of homes would likely fall another 50 percent before it’s all over.
Maybe I’m simple minded, but to me, at some point the prices of homes have to attach themselves to the actual cost of building a home. If the price of a new home is less than it costs to build, then quite simply, no new homes will be built.
To some extent, that’s what’s happening now and why new home starts have come to a screeching halt. But when the inventories eventually become depleted, and they will some day, then new homes will be needed. And you can bet nobody will build one to sell it for less than it cost to build.
I seriously doubt the inventory of available homes now will go so low that they’ll cost 50 percent of what they cost to build them. This is a patience game. Time will heal this problem, but it can’t change any of the fundamental laws of economics.
I’m sorry socialists. I know you would like it work that way, but it won’t.
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