<Peak Oil, Peak Food, Peak Risk The Oil DrumDrumBeat: January 10, 2008>

298 comments on Peak Oil and the Financial Markets: A Forecast for 2008

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dude59 on January 9, 2008 - 3:56pm Permalink | Subthread | Parent | Comments top

The assumption is probably that the US government will continue BAU, and therefore even if the price of oil stays where it is (as unlikely as we can see that assumption may be), the local economy will continue running.

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wkwillis on January 9, 2008 - 7:11pm Permalink | Subthread | Parent | Comments top

Conventional wisdom.
House prices are twice what they should be, given rents.
Therefor house prices will fall by half.
Unconventional wisdom.
What if rents fall? We could be forced by a falling dollar to go into import substitution mode and essentially require people to move to primary and secondary production areas like Michigan and Wyoming to have well paying jobs, the way we required them to leave Michigan and Wyoming and move to the metrocoastal areas during the service economy.
So rents could fall in the metrocoastal areas, leading house prices to adjuct not just down to the current rent, but to the future, lower rent.
House prices after inflation could go all the way back to the early sixties, when short order cooks in diners could afford to buy a starter house for a small family with a ten percent down payment and a twenty year term.
Happy Days Are Here Again, at least for short order cook type people. If you've got money that is invested in housing, or offices, or retail, or whatever in a metrocoastal environment, you could be in for a world of hurt. Some short order cook's family could be living in your house while you are living in his family's apartment.

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memmel on January 10, 2008 - 1:22am Permalink | Subthread | Parent | Comments top

Ahh but your assuming wages will remain high. They probably will fall as well. Given this you probably will see more housing broken up into apartments as happened to the large homes built in the 1800-1920 boom period. And yes we had a 70 year boom once before. During the first boom expansion into the west and land wealth where the primary driving force. The fairly low density of the suburban housing could probably be rectified with additional infill housing and extensions. Many homes could be converted to small businesses. I don't think you will see happy days but a demographic reversal the wealthy will move closer to work/downtown instead of paying high gas prices. The poor will be relegated to slums outside the cities. This is the demographics of basically all major metropolitan areas in the third world.

The problem is the McMansions are simply not worth maintaining and rents will be following real wages down.

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