(apologies to those who have never watched the Simpson’s, as this reference may very well be lost on you…)
And for those of you who may wonder why I bring up the housing market on a site dedicated to the promotion of the Space Cynic (tm*) way of life, consider this: externalities are those pesky things that can change your entire industry, economy, or even civilization while you aren’t paying attention. It happened to the buggy whip manufacturers (when the internal combustion engine brought about the auto industry), it happened to the steamship industry (international air travel) and it happened to the big iron computer manufacturers (the personal computer revolution). It also happened to the Aztecs (the Spaniards showing up) and the Dodo (tasted like chicken, apparently).
The housing market has the potential to dramatically worsen our economy – through the ripple effects already being felt in decreased private sector consumption of goods & services, decreasing taxes for cities and counties from properties going into foreclosure, losses in the banking sector from the CDO’s and other exotic “but it seemed like a good idea at the time” instruments, and the moral hazard of creating a safety net that encouraged such nonsense, and the destruction being wreaked on towns across America as foreclosed-upon houses become targets for thieves, squatters, and drug dealers, further worsening the spiral of problems…
And when the economy goes south, as it is already doing so (don’t kid yourself about the Dow reaching new highs – adjusted for inflation, the Dow is not even close to it’s all time high), government spending priorities will get shifted. Pet projects will get axed, Congress will scramble to fund the “necessities” – with sacred cows being ungoreable (Social Security, Medicare, and of course Defense – especially as our wars continue for years to come), the discretionary will suffer the greatest cuts. Think about what this means for visions of Mars or a lunar colony.
When the dot com bubble popped at the beginning of the decade, the Nasdaq began a rather long and devastating (for some) slide from highs of 5000 to a low of almost 1000… along the way, I kept hearing my friends (who were heavily invested in the tech sector, and loathe to give up paper profits that had already vanished) say “4000… that’s as low as it’ll go, now it’ll recover…. 3000, ok NOW it’s hit bottom, I’ll buy up some extra and dollar cost average to get my gains back when the price rises….
…. 2000…. ok THERE IS NO WAY FOR IT TO GO ANY LOWER…. ”
Well, we all know how that turned out, don’t we?
It appears that people in the real estate sector, for a variety of individual reasons, are chanting the same mantra – that we’ve had about as much deflating as was necessary and that the market should stabilize about now. Those of us Cassandras out there of course would beg to differ… and I’m pretty certain that a number of you would agree with me that the market still has another 30-40% to devalue before housing prices are back into intelligible realms…
So where’s the Homer moment?
For those of you who *are* aficionados of the Simpson’s, recall the episode where Lisa interrupts Homer’s big backyard BBQ:
(Homer and Bart chase after the roasted pig Lisa pushes with the lawnmower, and it goes through a bush.)
Homer: It’s just a little dirty. It’s still good, it’s still good…
(The pig goes across a road, hits a wall, and flies off the rotisserie grill and into the river.)
Homer: It’s just a little slimy. It’s still good, it’s still good…
(The pig goes down river into a dam where it gets stuck. Water builds up and sends it propelling into the air.)
Homer: It’s just a little airborne. It’s still good, it’s still good…
Methinks the people who have their fingers in their ears and their eyes closed as the housing market falls apart are saying the same thing… and those who think that the government is going to spend more (or even the same amount) on space are IMHO kidding themselves as well.
(*note – it’s not actually trademarked)