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To: koan who wrote (77776)	4/16/2008 12:31:19 PM
From: Elroy Jetson	Read Replies (1) \| Respond to of 116555

Of course housing prices will rise when effective demand returns, that's obvious. Especially when demand is irrational as in the recent credit-bubble. This is quite different from saying . . . "home prices will rise when building costs increase". . . . This statement is simply false. Costs have a very casual relationship with the price of anything. This is precisely why real estate appraisers rely on the Cost Approach only as a last resort when all other methods have failed. Even then people have a misconception of what "building costs" are. In a down-turn as we are experiencing, land is currently selling for as much as 80% less than it was a couple of years ago. This discount will increase and affect infill lots more significantly as the downturn progresses. In California land is typically more than 2/3 of the "home building cost" - even more than 90% in coastal areas. Having worked for a number of major home builders, as well as holding a Brokers License for 20 years, I can assure you that building costs in volume are a small fraction of what people imagine them to be or as they are published by Marshall & Swift for replacing one home burnt down in a fire. Does construction cost affect home prices? Yes, in the very long run. In the short run, which can be a very long time indeed, construction costs are not relevant to home prices.

To: koan who wrote (77776)	4/16/2008 8:57:02 PM
From: CF Rebel	Respond to of 116555

koan, "Another thing we forget sometimes is the massive inmigration coming from the south. These people, in my opinion, will shorten the housing downturn as they will need a place to live." This may not be true. Don't underestimate future changes if we find ourselves in the teeth of a deep recession or depression. The federal government may be forced to begin living up to it's obligation to defend the border and start prosecuting state and local officials providing succor to illegals. As jobs get scarce with Americans needing them (even as a step "down"), the feds would have to put Americans ahead of illegals by prosecuting any employers using illegals (starting to happen now). There are two things prodding the feds: the necessity to maintain revenues and the need to cut social costs that previously went to illegals. (It's perverse that upholding the law in the first place wasn't enough to cause this.) In this situation it won't be necessary for the government to spend much money deporting. The illegals would likely migrate out on their own the same way they came here. Given such a situation, there would not be a shortened housing downturn. It could even exacerbate it. Remember, with the banana republic federal spending we have crippled ourselves with, Mexico could easily compete against us for labor and a better standard of living. Why would they want to come here any more? CF Rebel