Published by Mark

Turnaround Times Affect Real Estate, Cars, And Bankruptcies

March 31, 2009 at 6:48 am

“When the recovery in home building comes, it could be massive,” according to Senior Economist Robert Stein of First Trust Advisors.

In order to keep my blog readers and Indiana bankruptcy clients up to date, I’m always reading news and commentary about the economy, and about housing and jobs, anything that has to do with issues of financial survival. After all, financial survival is what my work as an Indiana bankruptcy attorney is all about. This Robert Stein has a very, very interesting theory about the recession and about the recovery.

To illustrate his point, Stein first calls our attention to some statistics about cars. He explains that in the U.S., the average car replacement rate is 13 1/2 years. With times having been so tough lately, that replacement rate has gone to 25 years! That means people have been holding on to their existing cars for much longer, repairing them, putting on new tires and new parts, but not buying new cars. In other words, the “hang on to what you’ve got” time has just about doubled! But, sooner or later, some of these cars will need to be replaced, and that will be the beginning of the turnaround.

Keeping that observation in mind, listen to what Stein says about housing. At the current slow pace of housing starts, it would take 279 years to replace the country’s 130 million houses. The normal replacement rate for a house is about 70 years. That means we’ve been hanging onto existing residential structures just about four times as long as normal! Not only is the U.S. population growing, so that we’ll need more houses, the old houses will sooner or later need to be replaced. That means the rate of housing starts will simply have to increase! Stein’s conclusion as an economic analyst: “The production level for houses…has gone to unsustainably low levels…Once the excess inventory is worked off, we are poised for a major increase in residential building.”

As I’ve stated in several earlier blog posts, I’m certainly no economist. What I do know is that many, many individuals and businesses have been suffering enormous financial strain. Not only do I read and listen to all the economic and financial news I can, I’m grateful for all the attention being drawn to the economy, to debts, and to bankruptcy. If all the discussion and all the press coverage leads to legislation (such as the new bankruptcy law allowing bankruptcy judges to modify mortgages) help for ordinary people trying to survive financially, I say, let’s keep those presses rolling and those newscasts coming!

Back
FREE CONSULTATION

Get a FREE Consultation!

  • This field is for validation purposes and should be left unchanged.

mark achieved our affiliation