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.