I knew the housing situation was bad, but I had no idea how bad until I spent some time on this site.  More than any other resource I’ve found this site useful for getting unbiased info on the local market.

It’s scary reading.  Check it out: sdlookup.com

03-29-2009 update. Another good site: Piggingtons.

When the market was near it’s top I reasoned that the best reason to sell was the “Law of Rents”. I created this Law, so allow me to explain.  The Law of Rents states that there can only be a delta of ~15% between mortgage payments and rents in any area (ignoring downpayments).  Any imbalance will result in shifting rental/housing markets to readjust.

At the market top a mortgage on a 2bdrm/2bath townhouse in my neighborhood with a $30k downpayment would have conservatively been ~$2700 at a selling price of ~$480k. The same townhouse could be rented for ~$1900.

No matter what expected appreciation or tax benefits are taken into consideration, it’s impossible to justify paying $2700/month (plus $30k down) for a home that you could rent for $1900.

Given the Law of Rents, the expected point of equalization for the home previously valued at $480k is ~$310k. $310k is the fair market selling price, the price at which rents and homeownership intersect.

Looking at the local market today, I expect a further decline of 15% from our current home value levels given that the comparables for the same unit mentioned above is currently $360k.

If you think the decline in home values is over, I would argue that the Law of Rents disagrees.

India will soon produce a $3,000 car. With 1.2 billion people the availability of a $3,000 car will intensify worldwide gas consumption and demand for oil. Add in China with it’s parabolic increased consumption of all natural resources and the problem is mushrooming.

The United States still consumes more resources than any other Country. We send $700 Billion overseas every year for oil. This transfer of wealth has resulted in American institutions like Anheuser-Busch struggling to fight off foreign takeover and the Chrysler building being eyed for purchase by Abu Dhabi.

The perfect storm is here in the form of the housing crisis. Our financial institutions are in trouble. The dollar is devalued due to liquidity injections from the Fed. Meanwhile our addiction to oil is a one-way pipeline of American money to the Mideast. These two dark clouds are raining misery on us all.

While we are all suffering due to the higher price of oil, the pain is offset because the effect of these prices is that our habits are changing. Less driving, more conservation and intense pressure to lessen our dependence on oil.  Americans are finally thinking globally and acting locally.

Conservation is good for the planet and the United States. We’ll feel the pain at the pump for years but this pain is going to motivate action.

Better now than never.

In the book Is the American Dream Killing You? How the Markets Rule our Lives Paul Stiles explores how Capitalism and unabated Free Markets have destroyed the American Dream. The market is unrelenting, driving Americans into further spirals of debt, work and detachment.

The book lays bare the issues created in a culture where celebrities rule, financial concerns outweigh morals and the media has more influence than our nation’s greatest minds. The current housing crisis makes this book a very timely read, but don’t expect a feel good ending.