Housing was not the only thing that took down the markets, butit is one of the main things inhibiting a good recovery. It will beyears until the housing market sorts out. That is continued goodnews for multifamily. For openers, all of the politicians got onthe ridiculous band wagon that everyone should own their own homeand fulfill the “American dream”. First of all, not everyone hasthat dream. Second the equilibrium ownership in the US is probablysomewhere around 63%-65% in the current economic environment.Third, there is a whole segment of the population who will not carefor a home any better if they own or rent. They are justirresponsible slobs, or they will never have the income to properlymaintain it. The whole concept that everyone should own a home ispolitical rhetoric and not reality.

The result is we have millions too many houses right now whichneed to wait until the population growth to population movementcatches up. Take Arizona, or Las Vegas or the Inland Empire.Because there is endless land builders foolishly figured there wasendless demand and endless mortgages. Nothing is endless other thanrisk. Land in lousy locations got bought and developed. Commutesgot longer for many. Prices went well beyond any intrinsic value.Home builders made excessive profits well beyond anything they evermade before or ever will again. Lending went out of control. BarneyFrank covered up for the illegal acts of Franklin Raines at Fanny.Barney also rejected John Snow’s warning in 2002 that Fanny was outof control. Bottom line is we are not going back there.

Now we have investors buying up foreclosed houses and makingbasic repairs and flipping them or renting them. That is nice whereit can be down, but it is not going to solve the lack of demand fornew construction. It actually means new building of houses in manyareas is a ways off until demand catches up by population growth,which is slow. We are not having a post war baby boom ever again.Yes more people are again moving to Phoenix, but that is a longerterm trend. If you buy good land now you still have a long hold inmany areas. Las Vegas has other issues related to the casino andhotel industry which Obama killed. While occupancies are up, rateis not and those casino hotels will suffer for years to come. Theevent planners are just not going to risk the reputation issue fora long time. CA has huge issues and business is not going to beexpanding there, so housing demand will be slower to recover thanin the past.