The U.S. Prison-Cell Economy: Opinion
NEW YORK ( Bullion Bulls Canada ) -- Every month, the U.S. propaganda machine plays the same game in the housing sector. It announces new home starts. Then a few days later it announces new home sales . But it never talks about the two numbers in the same news item.
There is a very good reason for this: the two numbers have absolutely no connection in the real world. Month after month, the U.S. government announces new home sales bouncing around a little above 300,000 units.
However, month after month, year after year, the same propaganda machine announces new home starts at 500,000 or 600,000, and now 700,000 units per month.
In other words, every month, year after year, the U.S. government announces that its homebuilders have commenced construction on roughly twice as many units as they sell. This alone is proof of some deceit taking place. Obviously, no business which builds double what it sells can remain in business. However this is only the beginning of the fraud with these statistics. It gets really interesting when we look at what the U.S. government is also saying about the inventories of new homes.
So here is the question the propaganda machine will never answer: how can U.S. homebuilders be constructing twice as many homes as they sell every month, while (supposedly) inventories have plummeted lower? The answer is that there is no answer. Obviously, if U.S. homebuilders are building more homes than they sell every month, then inventories can only go higher and higher.
Before the collapse of the U.S. real estate market (after the made-in-Wall Street "bubble" burst), the U.S. propaganda machine could have argued that a significant portion of this massive statistical discrepancy might have been explained by self-owned units, i.e. (small) homebuilders building units for themselves (and thus they didn't need to sell those units to anyone). However, at that time, U.S. house prices were sky-high, but building material costs were relatively low. It made sense for people to build their own homes.
Today, that explanation cannot possibly account for more than a trivial portion of these phantom housing starts. Building material costs are relatively high, while house prices have collapsed. Even with the temporary lull in foreclosures, still a full third of all U.S. home sales are distressed sales -- where buyers can purchase units at substantial discounts. It makes no sense at all to build your own home, when buyers can purchase a house for less than the cost of the land and building materials (and avoid the free labor).