Enlightening data on housing prices.

Long time readers know that I define liberalism as a bent toward debt based consumption (spending tomorrow's money today) while conservatives have a bent toward production and savings.  Now to be fair, I think we need a balance between these.  100% conservatives and no liberals would be a boring, plodding world indeed.  But problems do happen when one side grows too powerful for the good of society as a whole and right now there is a veritable plague of global liberalism infesting our economy and our society thanks to the scourge of fiat currency and fractional reserve banking (without which no such imbalances could exist).

Now, these statements are easy to just make off the cuff even though I personally don't make them lightly.  The reason I don't make them lightly is that it is not my goal to criticize (not that I don't also criticize) but instead to have a real understanding of the dynamics in play.  Bottom line is that my views are simply the boil-down of many years of real life observation.  But the observations are at times subtle and regionally focused and so it is difficult to justify more than a gut feeling opinion from them using this type of data.  I am well aware that while everyone has an opinion few are data based and thus not worth listening to.  Ask my opinion about fine wine, for example, and you will be wasting your time.

So it's nice to get hard data to support my views even though such data is not always easy to come by.  Today Mish has a post that completely backs my long standing views on the matter in question.  In fact, he even hints at my point with the title of his post which is, "Most Expensive Housing Markets in US are Liberal: Correlation or Cause?".  While the article is full of detailed supporting data, Mish's bottom line falls short of  exposing the truth on the matter.  He concludes (rather weakly IMO): "Correlation or cause? Union work rules,  land availability, and building restrictions (or lack thereof) are all likely in play".

While some of those things might be factors, they are not root cause.  Think about it.  Just because there are union work rules or a shortage of land or building restrictions that might tend to want to drive up prices, does that mean prices must go up?  The answer is not no but Hell no.  The reason for this is simple: very, very few (so few that "virtually nobody" is properly descriptive) pay cash for a $600k - $1M house.  The only reason prices are up this high is because the people doing the buying are willing to go into massive debt.  THAT'S A LIBERAL TRAIT.  Without the ability to go into massive debt, the prices on those houses could not be bid up like that regardless of unions or restrictions or rules or any other reason under the sun.  It is the availability of ridiculous amounts of un-payable debt that is taken on by people who think they should live a better living than their work-a-day job affords which drives these prices up.

As long as the credit is cheap and easy, expect a liberal to take on debt.  I do not fault the liberal for this.  It is not really a conscious choice from my observations.  It is more of a way of thinking, a way that their brains are wired.  And that makes it a physical attribute controlled by DNA.  Nobody choose to be liberal or conservative.  They either are or they aren't.  To a liberal, the actual cost of something does not matter very much.  They are not as concerned with whether the item being purchased represents good value as whether it is affordable; to the liberal, the primary consideration is the ability to make the monthly payment.  It is as simple as that.  Conservatives will avoid taking on debt to buy overpriced assets because they know that they can never pay it off.  They care about the monthly payment but the real driver for the purchase decision is whether the asset is worth the asking price.  

Likewise, when the credit crash comes (and it must come at some point in a debt Ponzi therefore it will come), expect the liberals to be the first to walk away.  Conservatives feel that a debt is a debt and debts must be paid.  Liberals will simply point to how they are underwater now and so how can they possibly stay in the place?  Having made a stupid-assed purchase in the first place does not seem to factor into their logic.  They say things like "the economy stole my retirement", etc.  It's always someone else's fault that they find themselves in a bad way.  And when they do, they howl the loudest that "it's not fair" and "government should do something about this".  In effect, they are asking government to force conservatives to pay for the stupidity of the debt based consumption crowd.  While the pendulum is pegged over to the liberal side, they get their way.  But now that the pendulum is swinging back toward conservatism, their cries will fall upon increasingly deaf ears.

I say again: shoebox houses in CA and NY and down town big cities that are going for $400k-$20m are going to get crushed in the coming deflationary crash.  It won't be because there are less liberals.  It won't be because the liberals suddenly became value conscious.   It will be because the corrupt credit system will implode leaving people to have to come up with most of the cash before they can purchase a home.  What historical amounts of available credit and assumed debt have pumped up, the collapse of these enablers of liberalism will crash right back down.  Welcome to the global pump and dump.  Welcome to the global debt Ponzi.