Posted by
Playful Walrus on Monday, August 06, 2007 12:05:32 PM
It is high time the housing bubble burst.
I wish no ill on those who are in the housing development and real estate business, or for people who may have to move, but things have gotten out of hand, especially in places like Los Angeles and Orange County. My wife and I have been biding our time and are looking for the right moment to upgrade our housing.
While the MSM forecasts doom and gloom because some people might have to move to more modest housing, I think it is a good thing.
The economy is supposed to go in cycles, with a long-term trend towards growth. As housing prices increase and people can make more money developing, selling, and renovating housing, you see more of that activity. Then, at some point, the prices get too high and there’s a weeding process that takes place, including a reduction in pricing or at least a slowdown of price increases. That's natural market activity.
Prices in the Los Angeles/Orange County area (the area I’m familiar with) have gotten out of hand. Why? Some of it is supply and demand. There are over ten million people living in Los Angeles County, and the influx of illegal aliens only adds to the crowd. There are fewer and fewer places to build housing, as “open space” is “preserved” from development. Getting new housing developments in the area approved is a very complicated process.
Regulations also increase housing prices by requiring the housing developers to pass along the costs of “affordable” housing subsidies to the other buyers (and rent control for renters), and the costs of other capital investments they were required to fund as a condition of getting their development approved.
Prices have been further inflated because the people selling the housing to the end consumer know that the consumers can do things like get government assistance or loans. Never mind that the loans are ones that are becoming unaffordable to these people later on. Dozens of illegal aliens can pool their meager resources to get home loans. Finally, so many couples are willing to increase their income to cover the high housing prices by working extra jobs, having both spouses work at least one job, sometimes more. Unfortunately, that doesn’t leave a lot of time for parenting.
The price of any particular housing is usually going to be the result of several factors:
--The size of the home. The bigger the home, the more expensive.
--The features of the home. Things like pools costs more.
--The materials used in the construction of the home.
--The condition of the home.
--The demand for that location. Is the location desired for its proximities, views, low crime, etc.?
--Any other costs (like overhead) the previous owner must diffuse.
--What other buyers are willing to pay. If everything else means a house can be sold at $400,000 and make the seller a profit, but there are people willing to pay $600,000 for that home, guess what the price is going to be?
When I see someone demanding “affordable”, high-quality, spacious housing close to where they work, they are usually demanding other people to subsidize them or take losses or sell something to them at less than market value – whether they know it or not.
I own a home, but since I would like to buy a home that is better for my family (better location, larger, etc.) I won’t be shedding tears over anyone who has bought housing they can’t afford and will be forced to move into a rental, or anyone who fails to get more “affordable” housing imposed on a community by legislative force. The more houses that are vacated, the better for me and my family as we look for a better home. The fewer taxpayer-subsidized housing projects, the less tax money that will be taken from my family for such projects, and the more money I should have to buy a better home.