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Warning: really, really, crazy, insane long!
"But Maria," you say, "I don't own a house and I have no plans to buy one" or "I own a house and I have no plans to sell... why should I care about the real estate market? Isn't talking about the how the real estate market bubble is about to burst or insisting that the real estate market always goes up just trendy cocktail party chit-chat for yuppies?"
Well, yes, there's that, but, if you can read this blog then real estate matters to you. Let me tell you why... because you are alive and living on this planet (though, there are some intrepid souls living in outer space, but they come back down eventually.) Hmmm, wild, hysterical, gross over generalization you say? Allow me to plead my case.
One reason is that because the ups and downs of the housing markets in countries that are global economic heavyweights affect the, well, global economy. And, since we've already established that you live on the globe, you therefore participate in the global economy - neat, huh?
As Katy Delay, the economist with a sense of humor points out in her "summary of the G7 statement with [her] sarcasms"
if governments hadn't created the real estate bubble in the first place, there wouldn't be all of this flipping of houses, underhanded writing of mortgages and admittedly wasteful speculation.
Australia and Japan, (where Shannon is making a documentary about the homeless shanty towns that have sprung up around Tokyo in the wake of their burst bubble ) may have been the canaries in the coal mine for the U.S., but the rest of the world is not immune as discussed (395 comments) in a post titled "The Global Property Boom: Danger and Delusion" over at one of my favorite voyeuristic blog reads: SF Bay Area Housing Crash Continues.
Hey, even Iceland is not exempt. Although, at least one person thinks that Canada might be.
Once again you protest: "But Maria - I'm just an ordinary squirrel looking for a nut - what's the price of tea in China got to do with me?" Maybe nothing, but allow me take you on a trip from the macro to the micro...
When the Chinese are in a building and growth frenzy then the cost of building materials (in addition to oil) get driven up because they want 'em, need 'em, gotta have 'em in China. When building and construction materials are in high demand both in China and the U.S. (from the house-as-ATM financed remodeling craze) everything costs more here in the U.S., including toilets. Then things happen like your toilet explodes and sends a geyser towards your ceiling like in my house and not only do you have then have to shell out some coin, it's supersized coin because the rapidly expanding economies in China and India demand concrete, steel and toilets. Feel free to apply this example to your rental whereupon your landlord raises your rent or to your local bistro where the price of tea gets raised to cover increased overhead due the cost of new thrones.
Now that I've used the story of my exploding toilet to lead you from the globe to the hood, please continue to let me point out why you, dear reader, should at least pay cursory attention to pornography of real estate bubble talk.
Because the real estate market giveth jobs and taketh away jobs - in your country, your state, your city and your hood.
Over the past four years, the housing market has been a big driver of job growth as almost four out of every 10 jobs created in the United States were housing related...
Because the real estate market might make your neighbors move - South.
Because your neighbors might not be able to continue to pay their now upside-down, interest only, negative amortization, subprime loan and rampant foreclosures might cause property values in your hood to plunge. Plunging property values lead to declining tax bases and decreased funding to schools. Foreclosed properties fortunately don't sit empty with un-mowed lawns at first because newly minted real estate investors still chasing the boom dragon snap them up and then try to play landlord with no real knowledge of how to manage property or properly screen for tenants (meth labs anyone?) and the places get thrashed or fall into disrepair eventually.
And, remember those Tokyo shanty
