While the postrecession (2008-2010) circumstances of high unemployment, the need for job mobility and, in some cases, wholly owned-homes becoming liabilities rather than assets, brought on a surge of metropolitan apartments and suburban and rural leases, it seems the blistering pace of universal homeowning had seen its best days.
The building of close to two million residential houses annually, which reached its peak in this century’s first decade, has dropped to hardly half that amount at best. It was hoped that all-time-low mortgage interest rates, as well as Fannie Mae and Freddie Mac’s anticipated 3% downpayments, would revive homeowning. This “love affair” dated back to the post-World War II timeframe, ending badly in 2007 as bankruptcies became commonplace while repossessed homesteads sold for a fraction of their original price.
At this juncture, all signs point to a lack of the 20th century owning-and-flipping phenomenon. While the economy in general seems to be on a reasonable recovery track this year, both housing starts and resale of existing homes posted negative results in November.
The reaction of the administration by again opening the door to those likely incapable of carrying even the combination of ridiculously low downpayments and minimal mortgage payments was to reignite an artificial “homeowners’ boomlet” that might invite a repeat performance of what brought on the Great Recession.
Thankfully, this is unlikely to happen because of income stagnation and the miserably low level of labor force participation. With flipping homes at higher price levels seemingly unavailable to those taking on mortgage possession, no matter how low, this will likely keep a repeat strategy from happening this time around. That’s why both housing starts and existing home sales are displaying such weak results. Even the overall household asset value per family has ebbed in the last 10 years, which makes the burden of mass homeowning even more unlikely.
As we end the first quarter of 2015, residential construction may present a great buying opportunity for the huge amount of overseas money looking for tangible U.S. assets. But the reawakening of the home as a major asset for the long-term pull does not seem to be coming back. Look for a continuation and increase of metropolitan high-rises and suburban/rural rental and leasers. Even with a more realistic combination that may generate close to a million housing starts and enough buy/sell action to accommodate a rational level of real estate activity, a return to the halcyon homeownership days of 1950 to 2007 seems to be relegated to America’s past.
America’s population expansion
When discussing the question of America’s rapid population growth (expected to reach 375 million by mid-century) with population experts, there seems to be an even split between the positives and negatives.
Since I come out strongly on the positive side, it behooves me to stress the major points that have caused me to reach this conclusion:
• It’s probably not well-known that America’s population has practically doubled since 1950, when it had reached the 160 million mark. Although such current doubling is not expected at any time in the foreseeable future, the current 320 million population will likely have exceeded the 400 million mark before the 21st century is history.
• It’s a proven fact that population reduction in such developed nations as Germany, Russia, France and the other Western nations has had a deleterious effect on their economic viability. This has been compounded by aging populations, many of which are increasingly dependent on the shrinking segment still actively working.
• Although over-population is usually associated with poverty-stricken undeveloped nations — primarily in Africa, Asia and parts of South America — the United States is in a class all by itself. Even though America trails China and India in population size, its overall acreage is comparable to that of China, whose 1.4 billion population is more than four times that of the United States. Even so, most of China’s teeming millions are concentrated along the Pacific Coast line, with most of its interior regions thinly settled, if not downright devoid of population.
• While sociological advancement in the United States and other progressive nation/states have opted for smaller families, America is actually underdeveloped when considering its size, its incomparable natural resources, the wide open spaces west of the Mississippi and the abundance of independent businesses of all sizes, unmatched by any other of the world’s nations.
The major problem facing America’s future is the rapidity of change from a hands-on, massive production manufacturing society to a high-technology evolution that is racing ahead at lightning speed.
While America’s legal immigration averages 1.7 million a year, comprised primarily of a younger-than-average population group, is helpful in moderating the aging median of other industrialized countries, job creation is lagging behind badly. The nation’s active labor force participation rate is bumping along near the all-time bottom. Even in the best of economic times, it would require new job creation to catch up with the person-power willing and able to work.
Whether the answer is found in focusing on construction and maintenance; a re-invigoration of such crafts as mechanisms, plumbing, painting and plastering; and reintroducing technical schools focusing on these talents remains to be seen. Even at best, an increasingly substantial population will maintain the percentage of those requiring government subsidies in the low double-digits.
While much of the driving force behind such renewable energy sources as ethanol, wind, geothermal and solar was motivated by “climatological purists,” the huge gap between the price of oil and the abundance of extremely cheap natural gas became an even greater incentive.
While the conversion of overabundant natural gas released by fracking is now in the process of massive conversion to liquid natural gas, this fossil fuel will be in a massive conversion process in 2015. It has been strongly motivated by the fact that America’s dominance in the unleashed-LNG-available generated energy cost is equivalent to oil at $24 per barrel. It also is in greater supply in the United States than anywhere else in the world.
With the most hopeful increase in current oil prices by the end of the first half of 2015 to reach $75 to $80 a barrell by mid-year, the current energy “sweepstakes” will slow down its aggressive broadening of fracking. Even so, the ongoing surge in LNG will likely lead to a cutback in the big push toward renewables, despite pressure from special interest climatological groups, whose agenda doesn’t include economics.
While major European nations such as Germany, France, the Scandinavian block and even Japan were encouraged to intensify renewable development, going forward, the lowering of fossil fuel costs may cause a major reevaluation as the year 2015 wears on. Germany, Europe’s most efficient economy, has already determined the heavy cost of switching to solar, while putting a halt to nuclear in the 2020 decade.
Other economically hard-pressed nations have found there is a heavy price to be paid by accepting the long-term benefits of renewable energy promised by the climatological purists, who have done their share of squeezing the marginal economic deficits with which the European community as a whole is faced.
Looking forward to the latter half of 2015, it’s safe to say that economic reality will play a much more important role in energy development decision-making as all nations, large and small, examine the relative benefits of cheap natural gas, lower-priced oil and even the continued use of cheap coal as a power-generating element, both for utilities and conversion of iron ore to steel.