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“The United States Urban Planners Recession”

Housing - “The United States Urban Planners Recession” – Hugh Pavletich


Robert Krulich interviews Professor Robert Schiller (of Case Schiller Index fame) in this light-hearted “history” with superb graphics - on the issue of United Stateshousing.

It illustrates how people historically bought houses to actually live in……before the recent unprecedented inflation (in reality a “bubble” wrongly referred to by Schiller as a “boom”) encouraged people to speculate (again wrongly referred to by Schiller as “investing”) in specific urban markets – both within the United Statesand elsewhere.

One looks forward to ABC in the near future interviewing Professor Schiller on the current comparative performance of Texasand California.

Comparing - for example - the February Monthly Reports from the California Association of Realtors -where the median house prices have “tanked” year on year from $US554,280 to $US409,240 (26.2%) and the Houston Association of Realtors, where median house prices have “risen” from $US149,940 to $US151,430 (3.1%).

This is creating “widespread problems” in California– as this article The Housing Abyss in Deep by Dr Housing Bubble illustrates.

California(bubble urban markets) - with around 13.5 million residential units – has “tanked” by around $US2 trillion year on year as at February 2008.

Texasforeclosure costs in $ terms appear to be just 5% of those of California.

Of the 1.2 million USforeclosures through 2007 – Californiaand Florida– with 18% of the USpopulation accounted for 32% of the total foreclosures (RealtyTrac data) – suggesting that in $ quantum terms – Californiaand Floridamay account for in excess of 70% of US foreclosure costs.

The latest Metro Employment Report from the US Department of Labor Bureau of Labour Statistics – illustrates how US overall employment growth February year on year was on average 0.6% - with Houston – Sugarland - Baytown leading (3.4%); Dallas Fort Worth (2.5%) – with the “losers” being Detroit – Warren – Livonia at minus 2.2% (understandable with the auto industry); Los Angeles – Long Beach Santa Ana at – minus 0.7% and Miami – Fort Lauderdale – Miami Beach at minus 0.4%.

The current – sadly unnecessary - “US Recession” should therefore in reality be referred to as the “US Urban Planners Recession”

This triggered the “global credit crunch” which more accurately should be referred to as the “deflating global urban bubbles” – built on disastrous policies of “artificial urban land scarcities”.

“Bubbles” with speculative behaviour - cannot occur without scarcities – whether real, perceived or artificial. There is no “speculation” occurring with cars, computers or the vast majority of products we purchase (leaving aside the other massive “political failure” - food – caused by the ethanol debacle).

This in turn will encourage the finance sector globally to differentiate between “real value” (housing priced at or below 3 times incomes) and “fake value” (above 3 times incomes) – and price the risks accordingly.

It would appear Wachovia Bank (the 4th largest in the US) is leading in now differentiating between “stable” “watch” and “stressed” urban markets – and beginning on the path of appropriating assets, amending conditions and pricing risks accordingly.

Wachovia’s “surprise” announcement Monday - stated that last years Ist Qtr profit of $2.30 billion has slumped to a net loss of $350 billion in Ist Quarter 2008, requiring capital raising of $7 billion ( Wachovia Google News)

When Professor Schiller compares the current comparative performance of California and Texas and “discovers” the significance of “land supply” – he won’t have to conclude the interview by stating that he doesn’t know what’s going on.


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