Housing Slowdown Mechanics

US growth could be hit even if the housing market slows in an orderly fashion. The following is an excerpt from a larger, well fleshed out piece which critiques US growth prospects. We've pulled from it a great explanation of housing slow-down mechanics:

Housing can become a drag on growth even if house prices are not falling. The reason lies with the dynamics of a housing bubble. When prices are rising rapidly, the desired stock of housing increases as households and contractors view housing as a better and better investment. As a result, the demand to buy housing rises and efforts by builders to develop more housing increase. After prices have risen sharply, perhaps at an increasing rate for a time, stresses begin to emerge. The central bank wishes the process to slow, so it signals that it will raise its policy-setting interest rate, and that news erodes affordability as home prices continue to rise. Meanwhile, rental returns fall as the stock of available rental housing that was purchased for investment purposes rises, and the rising supply of rental property on the market depresses rents.

Once the momentum from ever-rising prices is lost and house prices actually begin to level off, the desired stock of housing falls. It is easy for the desired stock, which takes some time to build and cannot be rapidly destroyed, to fall below the existing stock that was built conditional on the expectation of ever-rising prices. Once the desired stock of housing falls below the existing stock, construction activity ceases and the rush of speculators to purchase more real estate switches to a desire to sell. If the process is orderly, housing price inflation just falls toward zero. If it is disorderly, house prices collapse as panicky speculators, unable to service their mortgages because of falling rents and less ability to obtain loans, start dumping properties.

... a mere leveling of housing prices would be sufficient to remove the boost from housing that is worth about 1 percentage point of growth.

Less home appreciation = the less incremental equity loans we can make. Thus if home price inflation slows, then suddenly the equity credit card is maxed out, and GDP loses this source of consumption- which the referenced article claims to be 1% of GDP currently. Perhaps this number could be better verified, but also note that this scenario refers to an orderly slowdown.

Comments

[JEROGatch]

MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE MEGSPASE

[ティンバーランド]

京都府の担当者も「処理の実働部隊となる市町村に受け入れを要請する際の国の基準が不明確で、検討する予定はない」としており、まずは国基準をさらに明確化する必要があると主張。滋賀県も、県内の全１９市町が「受け入れ困難」としているため、県としても検討していないという。

　ティンバーランドまた、近畿で唯一、広域連合に加盟していない奈良県の担当者も「県民の理解や感情論を考えると現状では難しい」と話している。