Saturday, October 17, 2009

The Coming Housing Bust - Business Week

I guess it's time that I out myself. I have been writing this blog for four years and in that time I spoke about the housing bubble well before it was a national concern, I wrote about GM's failing management strategy, oil prices, and banking failures. There will be much more to discuss as the US recovers from the "Great Recession".

Two weeks ago my phone rang. It was a Business Week reporter who wanted to discuss a thought I had posted on the Hot Property blog. All the research I am doing shows that we will have a large housing problem as soon as the boomers begin to retire in mass. In short, there are too many large suburban and exurban homes that will not be desirable to younger generations. This thought was first established in a 1989 paper by N. Gregory Mankiw and associates titled "The Baby Boom, Baby Bust, and the Housing Market". This paper surmised that as baby boomers aged and moved into smaller houses population growth and demographics would not be strong enough to backfill into these homes. We know now that this paper was premature yet I believe it's still relevant.

I spoke for a few minutes with the reporter about my thoughts on the matter. We had a great discussion and I'm pleased that the article was more or less on par with what we discussed.

It's even more relevant today than it was then - we are in a long term energy price spike. Higher energy prices have always resulted in a conservation movement in this country and I don't expect this time to be any different. This could be the start of a long downhill trend for the housing market, regardless of any short term upticks or stabilization of the market.


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