The continuing housing bust...

I'm demo-ing a mini-excavator.  Besides being cuter than a speckled pup, I've semi-convinced myself it will be in many ways more useful that a backhoe. Anyhoo, there are some great deals now on equipment like this because the housing market, and hence construction - and housing prices -  can't seem to get restarted.

But comparing housing to stocks only adds to the confusing picture.

The point here is that houses are largely insulated from the kind of capital flows which drive everything from the stock market to the price of gold. There was a brief speculative bubble in housing from about 2000 to 2006, but even then the capital being deployed was largely borrowed rather than invested. Real estate is and always will be a game of debt: it’s almost unheard-of for people to buy up investment properties for cash.The other weird thing about the housing-stocks disconnect is that it seems to be peculiarly American. There have been gruesome property-market crashes in other countries too, of course — look at commercial property in Ireland, or speculative beach resorts in Spain. But in general, countries with much larger property bubbles than we saw in the U.S. have seen property prices fall much less during the bust. And indeed there are brand-new property bubbles popping up all over the Pacific Rim: what is it that’s causing huge demand in Sydney and Hong Kong and Shanghai and Vancouver which doesn’t seem to have any effect on San Francisco?I don’t have any good answers here, except to say that if housing is getting cheaper, in many ways that’s a good thing. Sure, it’s bad for banks, and it’s unpleasant for anybody who bought a house as an investment. But in general, the less money we Americans spend on housing every month, the more money we have to spend on more productive sectors of the economy, and the higher our disposable incomes. Falling house prices don’t make people richer. But they can make you feel richer than if you were spending hundreds of dollars more per month on a mortgage. [More]

The continuing loss of home equity may seem like good news for potential buyers, but it exacerbates an already tense investment/retirement picture for tens of millions of Americans. Small wonder that floating cutback schemes of any kind for SS and Medicare are not well received.