Temporary the high oil price will be, but how long will "temporary" be? It will surely go up higher before it will come down. In three to four years, it can go back up to the early 1980s level.
On the front page of the New York Times today, however, "Rents Head Up as Home Prices Put Off Buyers";
<blockquote>A government report yesterday also offered new evidence that the housing boom could be reaching a peak. The median price of a newly built home fell to $203,800 in July from $219,500 in June, after having risen in the winter and spring, the Commerce Department said. Still, the number of new homes that were sold continued to grow, and economists cautioned that the recent housing slowdown could turn out to be a pause.
But rents have clearly changed direction, even if the increases have been relatively small. With the economy growing and mortgage rates inching up, more people are looking to rent apartments and homes rather than buy them. At the same time, many buildings are being turned into condominiums, reducing the supply of rental property.
(David Leonhardt, 25 Aug. 2005, <http://www.nytimes.com/2005/08/25/ realestate/25rent.html> -- cf. "Rent Rise," <http:// graphics8.nytimes.com/images/2005/08/24/business/rent.gif>; and "More Rent Is Due," <http://graphics8.nytimes.com/images/2005/08/24/ business/rent2.gif>)</blockquote>
The real estate market must be near its peak, if it hasn't peaked already. As the housing bubble (cf. Robert J. Schiller's US Housing Price Index, <http://graphics8.nytimes.com/images/2005/08/21/business/ 21real.graphic.gif>) deflates, jobs in the "real estate industrial complex" will eventually evaporate:
<blockquote>Encompassing everything from land surveyors to general contractors to loan officers, the sprawling [real estate] sector has added 700,000 jobs to the nation's payrolls over the last four years, according to an analysis by Economy.com, a research firm. Combined, the rest of the economy has lost nearly 400,000 jobs over the same span, which stretches back to the start of the most recent recession, in 2001.
For all its benefits, the newfound power of real estate has also left the country vulnerable to a housing slowdown, which many economists expect over the next few years. Residential housing now makes up 16 percent, or $1.9 trillion, of the gross domestic product and is the economy's largest single sector, slightly bigger than the industries and services that supply health care, according to Economy.com.
(David Leonhardt, "Boom in Jobs, Not Just Houses, as Real Estate Drives Economy," <http://www.nytimes.com/2005/07/09/realestate/ 09complex.html>, 9 Jul. 2005 -- cf. "Real estate employment growth has consistently outpaced that of the rest of the economy, at least since 1996 based on the NYT's graph: <http://graphics8.nytimes.com/ images/2005/07/08/business/complex.gif>)</blockquote>
By the time the wealth effect of the property bubble and jobs that it has created will have gone up in smoke, the bankruptcy reform will have also taken effect.
As the Indian man in Michael Perelman's anecdote (at <http:// mailman.lbo-talk.org/pipermail/lbo-talk/Week-of- Mon-20050822/017765.html>) might ask, "Will Americans raise tumult and insurrection"?
Yoshie Furuhashi <http://montages.blogspot.com> <http://monthlyreview.org> <http://mrzine.org> * Mahmoud Ahmadinejad: <http://montages.blogspot.com/2005/07/mahmoud- ahmadinejads-face.html>; <http://montages.blogspot.com/2005/07/chvez- congratulates-ahmadinejad.html>; <http://montages.blogspot.com/ 2005/06/iranian-working-class-rejects.html>