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The ABC’s Of The Great American Housing Crisis

It doesn’t take a genius to realize that a horrific housing crisis in unfolding right in front of our eyes.  Yesterday it was announced that existing home sales plummeted 27 percent in the month of July.  Today it was announced that new homes sales dropped to the lowest level ever recorded in July.  But why is this happening?  Why is the American Dream still dying for millions of American families?  Wasn’t the recession supposed to be over by now?  Weren’t home prices supposed to be moving back up by this time?  Well, in this article we will attempt to succinctly break down the ABC’s of the Great American Housing Crisis.  Hopefully this will help people understand why all of this is happening.

A – The Gigantic Mountain Of Unsold Homes Combined With Very Few Buyers Is Going To Force Home Prices Down

For decades, Americans could purchase a home and know that it was inevitable that the value of that home would eventually just keep going up and up and up.  But those days are over. 

Over the past two decades, we experienced a huge bubble in the housing market.  As prices skyrocketed, home builders built homes like crazy and it seemed like virtually everyone in the world was getting a home loan.

But then a funny thing happened. 

The bubble popped.

It turns out that millions and millions and millions of Americans could not afford all of those crazy mortgages that were being passed out, and foreclosures have set record after record after record over the last couple of years.

This has resulted in a gigantic mountain of foreclosed homes being forced back on to the market.  As of this March, U.S. banks had an inventory of 1.1 million foreclosed homes, which was a new all-time record and which was up 20 percent from one year ago.

Meanwhile, banks and lending institutions have learned their lessons and now it is much, much tougher to get a home loan.  Therefore, there are a whole lot less qualified buyers in the marketplace.

So with a ton of homes on the market and very few buyers, it is going to take a long, long time to get all of those homes sold.  In fact, there is now over a year’s worth of unsold homes sitting on the market in the United States.

And do you realize what happens when supply is very high and demand is very low? 

Prices go down.

Right now home owners are very hesitant to lower the prices of their homes much further, but if they want to sell their homes, that is what has got to happen.

B – Without Good Jobs The American People Cannot Buy Homes

Homes sales are never going to get back to “normal” levels until the employment situation in the United States improves.

Today there are over 14 million Americans “officially” unemployed in the United States.  But that does not tell the real story. 

The real story is that we are rapidly developing a very large segment of the population that is chronically unemployed and completely dependent on the government just to survive.

Today in America is takes the average unemployed worker over 35 weeks to find a job.  The number of Americans receiving long-term unemployment benefits has risen a staggering 60 percent in the past year alone.

Not only that, but according to one recent survey 28% of all U.S. households have at least one person that is searching for a full-time job.

So is there any hope that things will start to get better on the employment front?

Well, there might be a month or two where things get marginally better, but over the long-term things are going to keep getting worse.

Every single month, thousands upon thousands of jobs continue to leave the United States and get shipped to China, India and many other nations around the globe where workers are more than happy to work for little more than slave labor wages.

Both the Republicans and the Democrats are doing absolutely nothing to stop this.

So as long as the United States keeps bleeding jobs every single month, there simply is not a lot of room for optimism.

C – The United States Is Getting Poorer Every Single Month And The U.S. Government Is Going Into More Debt Every Single Month

The truth health of an economy should not be measured by how much “consumption” is going on.  Rather, the truth health of an economy should be measured by how much richer or poorer it is getting.

Unfortunately, the United States is doing very poorly in that regard right now.

Whenever the trade deficit comes up, most Americans go to sleep, but they shouldn’t.

What the trade deficit really means is that every single month the United States is getting poorer.

That is why it is so vitally important.

Every single month, tens of billions of dollars more flows out of the United States than flows into it.

It is an ongoing transfer of wealth that is almost unimaginable.

Take a moment to imagine what would happen if every single month five thousand more dollars flowed out of your bank account than flowed into it. 

After some time, you would be quite poor.

Well, that is what is happening to the United States of America.

We are bleeding massive amounts of wealth every single month.

Not only that, but the U.S. government continues to go into more debt every single month.

That means that every single month the interest we are paying on U.S. government debt goes up.

That is another tremendous drain on our national wealth.

In addition, state and local governments across the United States continue to pile up staggering amounts of debt that also must be serviced.

So what does this all mean?

It means that every single month the United States continues to get poorer and poorer and poorer.

That is a recipe for long-term economic problems, and that means that the long-term outlook for the U.S. housing market (and for the economy as whole) is very, very, very bad.

Any questions?

The Beginning Of The End - The New Novel About The Future Of America By Michael T. Snyder
  • Greg

    Yes, I do have questions:

    Does anyone think that this housing crisis and other crises in this nation were not planned?

    If they were planned, do you think that the planners are going to change their plans just because we don’t like it?

    If you don’t think it was planned, do you really think you are that much smarter than the people who have amassed billions and the people who were able to get elected to public offices, therefore those “dummies” just couldn’t see what you could have figured out would happen by the time you were 10?

    Are you going to spout “common sense” solutions to these problems knowing that either 1) the people who caused this problem were too stupid to see it coming and therefore will surely be stupefied by your brilliant logic or 2) your common sense solutions will be as productive as telling Hitler that innocent people might get hurt by driving those tanks so fast?

    Do you ever ponder why they are doing this and what the next steps of their plans are?

    Do you ever wonder if the beliefs that have been pumped into your head regarding global warming, overpopulation, environmentalism, homosexuality and other agenda items are not also created for a purpose?

    Are you going to continue supporting their agenda by promoting immorality, population reduction and other wicked agendas?

  • Gary

    we need to allow bankruptcy judges to do principal cram downs like they do in commercial. We want our bailout like the rich and the banks and wall street got. We need to heavily tax the rich to get it.

  • Justa Guy

    The only way I believe Americans can have an impact against those in power who are perpetrating these acts against our country is to become unpredictable and do what appears illogical to them. Here are some ideas that will at least induce some form of REAL change, for better or for worse, if the majority enacts them:

    Vote independent for every office

    Stop buying garbage, pre-made foods – get your own (preferably organic) ingedients to make your own mac n cheese, meatballs, mashed potatoes, etc. Start home cooking again.

    Start buying American, even if you have to search the internet

    Stop blindly believing everything the politicians and mainstream media tell us (especially when they tell you to go spend your money, the economy is getting better)

    Cut back dramatically on spending for unnecessary items, at least until there are some big job gains (why reward companies that are trying everything in their power NOT to give us jobs with more profits, so they can then give the rich executives huge bonuses for being so savvy?)

    Get everything out of the stock market (it is probably only going down for awhile anyway)

    Get your money out of the banks (maybe use a credit union instead)

    Pay off your debts, stop using credit, and don’t even consider any new credit cards.

    There are probably a lot more things we could come up with. If the majority of average working Americans did these things, the establishment would be dumbfounded. Imagine the impact we could have. They loved that “great sucking sound” of jobs going overseas. I wonder how they would like to hear the “great sucking sound” of Americans pulling all their money back and not giving it up.

    LIKE MANY PEOPLE HAVE SAID BEFORE…MONEY TALKS. NOW IF IT WOULD JUST SAY “SO LONG, I’M OUTTA HERE”, THAT WOULD SPEAK VOLUMES.

  • Mr Carpenter

    More reality checks for the powers that be:

    These would really dumbfound them if say 50% of the population were to do them (which of course, won’t happen, but let’s discuss this just for discussion sake).

    What would happen to the governments if people simply stopped paying all taxes, fees, and said “ok so throw me in jail”. In no way could 1/2 the population be housed in jails. The system would collapse. By the time 1/4 of the country was in jail and a further 1/4 no longer obtaining any unemployment and not working / paying into taxes, the remaining 1/2 of the population couldn’t cope. Certainly it would collapse the whole system before 1/2 the population were incarcerated (besides which, there most certainly isn’t enough room in jails/prisons/FEMA kamps for that many people).

    Yes, JustaGuy, you have some very valid points.

    Look at southern European socialist nations for a clue. Literally 1/2 of their “economy” is “underground”. Virtually everybody has 2nd jobs collecting cash under the table and not paying taxes on it. It’s the only way that socialist nations can function. Yet the powers that be in Europe and elsewhere have decreed that they’re going to try to stop the underground economies, so have allowed Greece to implode in a “controlled collapse” which they believe will minimize the violence. They may have miscalculated…

    Ultimately, it seems that the same thing happened in the post-WWII German economy and during the Soviet years in Russia – the black marketeers / mafia types were the only wealthy people other than the few highly placed politicians (look surprised, wouldja?)

    Let’s take another hint from history which may be useful to us in future. What happened in Germany in about 1951 was that the government levelled the playing field by outlawing the old WWII money, the Reichmark, and put into place a new Deutchmark. Out of the blue, one day, “everyone” got the exact amount of the new money to start life over with. The old money was worthless and the riches obtained by the black marketeers evaporated instantly.

    This may be a means of hitting the reset button for any nations coming out of the soon to be crumbled American no-longer united states.

    If any such new nations wish to have anything resembling a chance of success, they’ll actually follow the Constitution as written and intended by the founders – and for one thing, place silver and gold as the ONLY legal currencies.

    Assuming of course, that there is in fact any gold left in Ft Knox at all…. which is unknown since it has not been publicly audited since the EISENHOWER ADMINISTRATION.

  • bro43

    Mr North firmly dispels the myth that the crash was engineered http://www.garynorth.com/.
    And here is the most comprehensive article on the Ft Knox stash I’ve read in quite some time http://www.lewrockwell.com/orig11/weber-c1.1.1.html.

  • Greg

    bro43 – there are two reasons that people deny this demise is all planned:
    1. People don’t want to believe that there are people committed to bringing this economy down and to creating misery, much less that they are succeeding, because it makes it difficult to remain optimistic about things getting better;
    2. Those who are destroying our future and enriching themselves in the process want the American people to have hope, even though it is false hope, because it is easier to control people when they are deceived with a false hope.

    I see nothing from the site you recommended that changes my firm belief that this demise is all planned. It also continues to amaze me that “economic experts” can say with a straight face that we just stumbled into all of these problems. A third grade class with a basic review of economics would have been less prone to drive our economy off the cliff, yet we are supposed to believe that people from the most prestigious universities and with impressive financial backgrounds just got blindsided! If that is true, we better be checking Fort Knox to make sure the pyrite is still there.

  • Not so Mad Max

    One of the disturbing by products of this crisis is the rampant theories that some elite with a god like omnipotence is running things. Why is so hard to believe people got into homes they had no business being in, builders built like crazy, crooked mortgage lenders put a mirror to homebodies face said body fogged said mirror and the lender declared the body qualified.

    Housing is never going to get to those levels it was fueled with cheep money, greed, and a breath taking level of stupidity. Entire subdivisions will have to torn down or occupied by squatters.

    Oh yeah, and about the elites with the god like omnipotence to many people talk about on this site with awe. Yeah they exist, but they’re not god like, they’re arrogant, insolated, and not terribly bright out side their field.

  • Greg

    NSMM – it is not the elites that have the god-like character, it is the god they serve. Satan “tempted” Jesus Christ with an offer to give him all the kingdoms of the world. Note that Jesus did not respond with an answer that Satan can’t give him the kingdoms so obviously Satan had the power to hand over the kingdoms and if he could give them to Jesus he can also give them to whom he chooses today. That is what he is doing. For a short time, Satan is the god of this world.

    If you don’t believe the Bible, read the writings of the illuminati, Manly Hall, Albert Pike, etc. and see what has been planned for hundreds of years and how those plans are being fulfilled. When I see plans, then see actions to fulfill the plans, then see the plans being fulfilled, I find it to be breath taking stupidity to deny the reality that there are devious actions and people driving those plans to fulfillment.

  • http://pathtoasia.com Rhea

    Politics, recession, lay-offs, corruption, job creation, etc, these are some of the factors why housing crisis is just getting worse. The American government does not have the political will to be honest with the American people about our financial condition. The politicians will most likely take the easy way out by printing us into hyper-inflation rather than admit their folly and take the responsible action of implementing Greek-style austerity. Either way, it’s not going to be pretty. Expect major social upheaval and unrest throughout the country, if not outright anarchy. At the very least, I expect we’ll start seeing some European traditions such as general strikes that will be very disruptive to daily life. It doesn’t take Adam Smith to see the invisible hand reallocating profits from west to east. The robust growth economy in Asia just can’t be ignored. Diversification is a well known and proven strategy for wealth preservation as it mitigates risk exposure to risk while increasing chances of riding the wave on the next bull market. For more visit Path to Asia – http://pathtoasia.com

  • Kimberly

    Hi there,
    I recently watched the movie “The Inside Job” which explains how the financial crisis of 2008 happened in great detail. Prior to viewing the film I thought I had a good grasp as to how this mess came into being but I was horribly naive and misinformed.
    1)Not only was I unaware that at one point the mortgage products being sold were being pushed upon buyers who were not fiscally sound enough to own a home, but that those selling them were pushing to sell mass quantities of these “loan products” due to the fact that they received their commissions right away. Not only did commissions come right away but any profit made by the companies were passed off as bonuses as soon as the ink was dry on the signatures. No sense keeping any of that cash around in case of a default or anything, right?
    2) Then these “sub-prime loans” were bundled up with other loan products (cars, stereos anything that could be purchased on credit was being sold in the same manner) were sold to hedge fund managers, School Districts for their retirement funds, whomever they could unload them on because they were carrying AAA ratings. That is an entire different scam for another day.
    3) So, at this point the banks or securities folks or whatever institution that loaned the “money” has now sold off the paper and made their “money” back, right?
    4) Now they came up with the bright idea that they could insure themselves against the probability that these “loans” could and probably would fail. AIG insured the loans against failure to “anybody” who paid the premiums for the policy. So, when the loans did fail, the institutions that made the original “loans” were then paid off through the insurance they carried on the loans. In fact, once it became common knowledge that these so-called loans could be covered in case of failure, they were purposely set up TO fail in order for the person/institution involved to collect.
    5) Now, the institutions that made the original home loan has been paid again, for the loan. That’s twice by my count.
    6) When everything finally came to a head and failed, as they had been warned by many right thinking and not so greedy economists, one of the companies to hit the dirt hard was AIG due to the fact that they were paying everybody and their bookie off for those insurance policies.
    7) When the bailouts came, and the banks got whatever each one received, AIG was the only institution that was made to pay back 100% AS DEMANDED BY THE NEW FOLKS IN CHARGE WHO WERE THE OLD GUYS WHO CREATED THE MESS. What this means is that for sure they got their entire payment on the #2 payout on the original mortgages.
    8) Ah yes, then the bailouts. Whatever the amount was and the percentage of what damage they actually did, the point is that ONCE AGAIN they were paid for those mortgages and a few other items.
    9) By my count that means that those Institutions of High Finance who don’t know the meaning of “Fiduciary” received payment on the original Home Mortgages at least TWICE if not THREE times.
    This leads me to ask, WHY ARE THEY FORECLOSING ON ANY HOMES AT ALL? Could someone please explain this to me? I would truly appreciate it .
    I do not mean a snide explanation as to how the system is corrupt and so forth, I know this. I would like to know if there is a legal basis as to why they keep collecting money for the same thing, over and over? And, if there is anything, given the amount of money they have already received, that could stop them?
    Thank you to anyone who is willing to try to explain this to my rather naive if not slow self.

  • http://agenda21fordummies.multiply.com Yushud Givaschitt

    Agenda 21, Chapter 7
    Objective
    8. The objective is to achieve adequate shelter for rapidly growing populations and for the currently deprived urban and rural poor through an enabling approach to shelter development and improvement that is environmentally sound.
    Activities
    9. The following activities should be undertaken:
    c. All countries should, as appropriate, support the shelter efforts of the urban and rural poor, the unemployed and the no-income group by adopting and/or adapting existing codes and regulations, to facilitate their access to land, finance and low-cost building materials and by actively promoting the regularization and upgrading of informal settlements and urban slums as an expedient measure and pragmatic solution to the urban shelter deficit;
    d. All countries should, as appropriate, facilitate access of urban and rural poor to shelter by adopting and utilizing housing and finance schemes and new innovative mechanisms adapted to their circumstances;

    Stop thinking micro and think macro….

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