BTW, I agree with the points about less-than-critical-mass subdivisions, declining home quality (or durability, at least), etc. I just don’t see the evidence that new homes have stopped selling, as opposed to stopped being built.

I did like Calculated Risk’s original point that as far as jobs, GDP growth, etc. a new home sold is worth more than one existing home sale.

http://www.chinesedrywall.com/

http://www.thechinesedrywalllawyer.com/ as always, we should wonder when the TLA comes under attack –Trial Lawyers Association

http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Chinese+Drywall
–looks like this, too, will turn into, yet, another “Taxpayer”-funded Bailout..

1. Land appreciates, the structure depreciates unless it is maintained. A large % of houses built in in the last couple of decades are too large for proper maintenance. If we believe emerging markets will be growing and stimulating the world economy, resources will be in huge demand. I doubt homeowners will be able to maintain their houses affordably, unless the number of inhabitants per home increases. Many homes, large and small, will be left vacant as the dust settles.

2. Someone mentioned the lack of community. If it is not working now, imagine with increasing competition for resources.

3. People who should have been saving 10K per year, were buying houses over 500K when they should have been maxing at 300K. This has impacted the entire supply chain.

4. How are the young people starting out supposed to afford 300K houses when they start life with 50-100K in education debt? Many bachelors programs are not profitable anymore. The long term income and the potential for saving is not worth the cost. If the students take on debt, they will never save fore retirement, unless the house prices drop. If the parents pay for it, chances are they are tappingit onto the mortgage or reducing their reitrement savings.

And that is why I called it a bubble, yes it’s a subset of the credit bubble, but it is a bubble none so less because over a couple of decades, a major part of this sector was developed to unsustainable levels, financially and socially. And this problen has made its way through the entire system.

Here we have it, a population that never sat down and did the math. Why? Because the majority would not even know where to start.

http://www.globeinvestor.com/servlet/story/GI.20091030.escenic_1346308/GIStory/

“Middle-age mortgagors

Canadian consumer debt loads were already heading in a worrisome direction before the crisis. The trend is now accelerating, driven by a large increase in mortgage balances among middle-aged people.

U.S. consumers, chastened by the destruction wrought by their profligacy, have lifted their savings rates to levels above 3 per cent, up from zero ahead of the crisis.

Canadians are going in the other direction. Household debt rose 3.4 per cent in the first half of the year, as personal disposable income fell 0.2 per cent, according to Mr. Tal. The debt-to-income ratio has risen to 140 per cent from 131 per cent in the past year.”

Chinese drywall anyone?

A lot of people, especially boomers are probably starting to realize that the house will not replace the 10-20K they were suppused to be saving for retirement.

Suddenly there is going to be huge demand for 150-350K homes. And if house prices do not go down enough, we’re going to see a lot of construction of cheaper houses.

But I’m not really worried about that. I think that the credit crisis part 2 will soon be hitting the banking system and forcing them to offload the non-performing loans.

I really like your holistic take on the home buying issues. But I take issue with this part of your reasoning:

The person who buys a half-million dollar house for $100,000 is, by definition, the kind of person who cannot afford to maintain a half-million dollar house.

Because a half-million dollar house that sells for $100k is, by definition, not a half million dollar house. :-)

Indeed, with bubble-based pricing, it never was a $500k price in terms of any sustainable intrinsic value. And the $100k buyer takes sales data on comps around his/her “bargain” purchase to get a property tax abatement from the municipality in the community.

But that leaves us coming to the same conclusion, but for different reasons. A big reason why these suburban communities are unsustainable is because the bottom is falling out of their tax revenue stream as the bubble deflates. That means a combination of cuts/fee increases for basic services like schools, fire, police, roads and water/sewer.