He was right about the recession; can he hit it again?
Watch Out for The Depression
| OpEd News posted this January 22, 2008. The author is a former newspaper and television reporter who spent years in the real estate industry before founding Housing Predictor.com which he edits. The independent web site forecasts more than 250 local housing markets in all 50 U.S. states. Housing Predictor has a staff of researchers, economists, and computer experts who regularly update real estate news, including its opinion polls known as "Predictor Polls" on the real estate industry. |
by Mike Colpitts
Foreclosures reached all-time record levels in 2007 and will surpass that in 2008, according to the Housing Predictor forecast. Fortunately or unfortunately Housing Predictor’s forecasts have been right on the mark. An estimated 1.8-million homes have already been foreclosed as a result of the U.S. real estate crisis.The crisis has spread into conventional mortgages at an increasingly rapid pace. More than 50% of all residential properties in default nationwide are owned by investors, the majority of whom will allow their property to be foreclosed more easily filing bankruptcies in many cases to protect their primary residence. Those are comparatively minor consequences in this day and age. Many multi-millionaires have poor credit histories learning how to obtain financing later with little penalty. After all banks are in the business of lending money.
From an historical prospective, the real estate market has always been a gauge of the greater U.S. economy from nine months to 18 months earlier than the overall economy. The national real estate recession was forecast by Housing Predictor in early 2007.
Investors on Wall Street and in other financial markets have watched their hard-earned savings go up in smoke as trillions of dollars are wiped out from the economic turmoil. Stock values around the world are falling.
The rescue plan offered by President George W. Bush announcing a $150-billion U.S. stimulus package will do little to help the ailing U.S. real estate market and millions of American homeowners at the brink of foreclosure.
An old cliche in real estate is “Lenders are liars.” The loose lending guidelines, lack of government regulation, over-whelming fraud, consumer loan fraud, misrepresentations and historically low interest rates set by the Fed led to the economic crisis. Many Americans think investors should just suffer the consequences in financial losses and credit report destruction. But the credit crisis is much larger than just investors’ financial losses and credit being damaged.
The entire U.S. economy is at the brink of not only a recession, but much worse teetering on the brink of a depression. Historically, it is just a balance of the economic markets. There have been six depressions since 1837 in the U.S. There is much more damage that can result to the real estate markets and the overall American economy as a result.
The cause of every major depression has been land speculation. Economist Henry George discovered this fact 120 years ago. However, never before in U.S. economic history has been there as much land speculation than in the past decade. Land from Florida up the eastern seaboard in New York across the nation to California has been purchased by speculators at the highest rate in the nation’s history, much of it with little money down to protect investors interests.
The great American green back is not a political issue, and the American economy is no longer just at risk of a recession no matter what the political pundits might have you believe. It is already in a full-blown recession. Government reports are always slow. Democrats, Republicans, Independents, and even highly touted special interests need to forget their differences. America is at War in Iraq and in political chaos at home.
Political differences need to be bridged to save the national economy with emergency legislation before the epidemic of foreclosures reaches 1 in 10 American homeowners, which is more than probable. One in 28 homeowners have already been affected in foreclosure in Stockton, California, one in 63 across the nation in Cleveland, Ohio and an estimated one in 24 in Detroit, Michigan. Local economies are feeling the pain in major ways.
If emergency legislation is not passed to halt the foreclosure crisis the nation is certain to see another depression not only caused by the subprime meltdown, and its resulting housing crisis, but by a nation that has lost confidence in itself as a powerhouse.
Editor: Cited reformer above Henry George not only spelled out the link between speculation and depression but also how to undo it: recover land rent for everyone while de-taxing real production of goods and services.
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Jeffery J. Smith runs the Forum on Geonomics.
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Also see: The Panic of 1907
The Top Ten Reasons Why Land is Important More Than Ever
Real Estate and Homeownership |
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