The Clusterfuck Nation Chronicle

Commentary on the Flux of Events

The report on an "astonishing" level of housing starts in the third quarter ought to be shocking for reasons beyond the ken of the conventional media. For one thing, these "housing starts" represent almost exclusively suburban tract housing. That is to say, we are destroying ever more rural land at a rapid pace, much of it prime agricultural land that we would have needed for the future. Also, since the greenfield perimeter now extends to the outer astroid belts of our towns and cities, these new houses will be the first to lose their value when there are any disturbances in the oil markets that make long-distance commuting a problem.

The housing bubble can be attributed to extremely low interest rates plus the belief that the "hard asset" of a house is the best investment somebody can make when stock markets are grinding downward and bank interest is less than the real rate of inflation. The housing bubble is therefore also keyed to the idea that these "assets" will continue to steadily increase in value.

I believe that these suburban houses are going to tank into an extremely hard vacuum. Their value will not increase, but rather plummet as the commuters and soccer moms who live in them find themselves cut off from their jobs and play dates. In the orgy of default and insolvency to come, these will be the hardest houses to resell. What's more, almost all of them are what's known as "production houses," meaning crappy boxes made of particle board and vinyl, with a relatively short "design life."

To make matters worse, the methods being promoted to sell them -- interest-only mortgages, 125 percent mortgages, etc -- are reckless lending instruments that will bring both borrowers and lenders to grief.

The "housing start" news should be read for what it really is: the recipe for an economic clusterfuck.