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aceventura3 · 06-22-2006, 11:47 AM

Quote:

Originally Posted by host

Home ownership reached 68 percent of all households recently, and is now declining....so you should deduct your demand "forecast", by one third, and if you concede that purchases by speculators and second home buyers will drop by at least 50 percent in a market of declining demand and price, drop another 380,000 units from your upper end estimate of 2 mllion. These adjustments bring your population driven demand forecast down to one million new units "needed".

In aggregate it doesn't matter who has title to the home. Renting or owning, people have to live somewhere, that is what will drive demand.

I agree you can have households "doubling up", in my state (California) that is already happening. On the other hand the population growth projection doesn't include the impact of illegals in this country, so it is possible demand is materially understated.

You use the term "speculator", I use the term "investor" to charactorize people who buy, collect rent, and sell. True market "flippers" are speculators - people who buy today and immediately try to sell the next. I think "flippers" make up an extreme small amount of the demand in real estate.

Here is an interesting article in today's WSJ. I looks like housing and autos take up 52% of houshold expenditures compared to 41% in 1950. At some point this trend up has to stop, supporting the "bubble bursting" theory. However, people can easily purchase less house and demand for housing can still be high. The average family can do without 3000+ square feet, 4 bathrooms, 3 car garage, media room, and granite countertops, etc.

Quote:

Don't Blame the Latte: The Real Reason
You're Not Saving More Is Closer to Home
June 21, 2006; Page D1

It's time to put our house in order -- and maybe the garage, too.

The U.S. savings rate has fallen sharply since the mid-1980s. In fact, last year, it was negative for the first time since 1933.

At first blush, this collapse in the savings rate seems puzzling. Our incomes have climbed at a healthy clip over the years, easily outstripping growth in spending on key items like food and clothing.

So why do we find it so tough to save? We can't, it seems, blame it all on morning lattes and evenings out. Instead, the big culprits are our two largest expenses: The roof over our head and the cars in our driveway.
• Signs of struggle. Some pundits have argued that the savings rate isn't as low as the official statistics suggest, or that Americans don't need to save so much because they are wealthier than ever. But when I look around, I see plenty of signs of financial distress.

A study sponsored by Putnam Investments estimates that seven million retirees have chosen or felt compelled to return to work. A Pew Research Center survey discovered that 20% of baby boomers had provided financial help to a parent within the past year. Families are also finding it tougher to pay for college, with College Board data showing a 194% increase in annual borrowing through college loans over the past decade.
[Expenses Graphic]

All this suggests folks are struggling to make ends meet. But why? Consider a new study from the U.S. Department of Labor titled "100 Years of U.S. Consumer Spending." The study draws on the Bureau of Labor Statistics' consumer expenditure survey.

It might seem like Americans spend too much on clothes, eating out and entertainment. In reality, however, the portion of our spending that's devoted to food and apparel has fallen sharply over the past century.

Tobacco and booze also account for a shrinking share of spending. Meanwhile, the slice of our budget that goes to entertainment and health care isn't much changed from 40 or 50 years ago. Indeed, if you look at all these categories, you might imagine families have ample financial room for maneuver.
• Road to ruin. Yet we struggle to save -- and the blame seems to lie with two other expenses, transportation and housing.

Our transportation spending jumped sharply in the 1960s and has remained high ever since, accounting for more than 19% of spending in 2002-03. It's easy to see why: The number of passenger vehicles has leapt 270% since 1960, far ahead of the 86% increase in the adult population. We now have one car, van, pickup truck or sport-utility vehicle for every adult.

"The automobile is no longer a luxury item," says Michael Dolfman, the Bureau of Labor Statistics' regional commissioner in New York and co-author of the new BLS study. "Cars became a necessity to get to work," with working couples often needing two cars.

Meanwhile, housing expenditures have climbed fairly steadily over the past century, and our homes now claim a third of our spending.

More families are buying houses, more folks are purchasing second homes, and houses are getting bigger. According to the Census Bureau, over the past 25 years, the number of second homes has jumped 95% and the size of the typical newly constructed single-family home has ballooned 40%.
• Saving ourselves. Put it together, and houses and transportation accounted for 52% of all expenditures in 2002-03, up from less than 41% in 1950.

You probably need to have a car, and you've clearly got to live somewhere. Still, it strikes me that housing and transport expenses are ripe for cutting, if only because they are such plump targets.

But how are you going to cut back? Consider this: We may be spending more on cars and homes, but we are also purchasing cars and homes that are far more luxurious.

"The trend has been to buy the most house you can afford, rather than the amount you need," notes Sophie Beckmann, a financial-planning specialist at A.G. Edwards in St. Louis. "It's the same thing with cars. You see a lot more luxury cars on the road. While you can get by with a $20,000 car, people buy the $40,000 SUV with the leather seats and the TV. There's a lot there that's discretionary."

Indeed, if you're willing to skip the heated car seats and the third bathroom, you would probably still be living better than your parents did -- and you will free up money that can be saved.

This suggestion may puzzle some readers. Sure, cars might be money losers. But houses appreciate over time, so shouldn't you buy the largest home possible?

That might have been true during the recent housing boom -- but it isn't likely to be true over the long run. Since 1975, home-price appreciation has been modest, averaging just two percentage points a year above inflation.

Admittedly, you could goose your home's return with the leverage from a mortgage. You also, however, have to factor in the mortgage's cost, plus all the other expenses of homeownership, including maintenance, property taxes and insurance. The bottom line: Once you deduct those costs, you could probably amass far more wealth by purchasing a smaller home and then sinking the extra money into your 401(k) plan.

http://online.wsj.com/article/SB1150...ml?mod=mostpop