House Prices are in a Bubble... No, House Prices Are On a Financial Cliff

I was doing some thinking about the housing bubble.

We all know about it, and we all think it is going to pop soon..ish

But, after much thought, I feel we not going to have bubble pop with a pull back in housing prices, instead we are at the top of a housing price decline into oblivion.

I see many things happening which will leave the housing market with a surplus that will never clear.

• Banks have been keeping repo houses off the market
• Baby boomers are retiring
• Demographic winter
• Millennial wages are no where near baby-boomer wages, so that they could take over mortgages.
• People are getting into micro homes
• Homestead movement is continuing to grow.
• Robotization, meaning factory work, and all of their support are no longer a draw to the cities. (the jobs aren't there, so why pay for a high priced suburban home)
• The FED can't keep interest rates at zero forever (house prices are directly tied to interest rates)

All of these add up to a destruction of home prices. Especially suburban homes. The suburban sprawl, with its associated strip malls are going out of fashion. Even worse, they are not aesthetically pleasing. They are a blight on the landscape. They only existed because of cars and cheap gasoline. Baby-boomers think they have equity in their homes and one day soon, they will wake up and find that their houses are worthless.

We have created thousands and thousands of places in America that aren't worth caring about, and when we have enough of them, we're going to have a country that's not worth defending. - James Howard Kunstler

And one that will stab the old housing industry in the heart is things like Earthships. Extreme energy efficient, comfortable all year round homes. Add to this the tiny community sized power generation plants that are coming, and you will have people leaving their (poorly insulated, poorly built, ugly, cancerous) stick built houses; first in trickles, then in droves.

It simply makes no sense to stay in a home, even for free, when the cost to heat it is more than the price of a new home, where the cost to heat is near zero. Today's housing market is doomed.

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All images in this post are my own original creations.