Friday, July 27, 2007
Another Journey Into The Law Of Unintended Consequences!
For years, a few bloggers have reported on the influx of illegal immigrants into the housing market from a number of angles. Their stories seem unconnected but the housing slump may finally connect the dots and the follow-up trauma will not be pleasant.
Story thread number one was about lending institutions giving loans to illegals without requiring the usual financial documentation the average American citizen must present. In other words, the lenders were approving risky loans in order to take advantage of the housing boom which, in the opinion of this blogger, was fueled in part by the ill-advised loans given to illegal immigrants.
The second story line was that of illegals taking over construction jobs. Apparently, many of the jobs Americans no longer want to do are in construction. Seems those once well paying jobs for people with construction skills failed to attract sufficient applicants so, the contractors were “forced” to give them to illegals at sub-market wages. This should have made houses less expensive but it did not. I fight the urge to digress into a discussion on contractors. Anyway, what the influx of unskilled illegals did accomplish was to produce a glut of homes on the market with sub-standard craftsmanship. In the years to come homeowners will discover how badly their dwellings were constructed and the upkeep expenses for the average home will increase dramatically. Again, I fight the desire to digress.
Now the housing market is in trouble. Too much unsustainable growth and too many risky loans have propelled the housing sector into a downward spiral which will end badly for a lot of people. Good! This is nothing but shades of the old junk bond scandals, the dot com boom, the energy market implosion and the comic book collectors’ frenzy. One thing can be said about people out to make a buck and damn the consequences, they are consistent regardless of the sector they enter. These people go in, inflate prices, reduce quality and leave the sector a mess. However, some fail to leave in time and they are burned. Unfortunately, others who could be classified as innocent participants are injured as well.
What we now have is a glut of homes, illegals owning homes but with no history of understanding what that means in America and an employment market about to be saturated with former construction workers looking for other work. On the horizon are the unintended consequences. Americans in job sectors yet to be effected by illegal immigrants will be as these people look for employment. The result will be increased unemployment of legal residents. Also, the massive increase in loan defaults will continue as the illegals migrate to other parts of the country to find work and leave the financial institutions stuck with their poorly kept properties. And, finally, the housing market will take years to absorb the excess poorly built homes driving down prices. Real estate speculators will find themselves holding property with a lower value shrinking their personal wealth portfolio.
Story thread number one was about lending institutions giving loans to illegals without requiring the usual financial documentation the average American citizen must present. In other words, the lenders were approving risky loans in order to take advantage of the housing boom which, in the opinion of this blogger, was fueled in part by the ill-advised loans given to illegal immigrants.
The second story line was that of illegals taking over construction jobs. Apparently, many of the jobs Americans no longer want to do are in construction. Seems those once well paying jobs for people with construction skills failed to attract sufficient applicants so, the contractors were “forced” to give them to illegals at sub-market wages. This should have made houses less expensive but it did not. I fight the urge to digress into a discussion on contractors. Anyway, what the influx of unskilled illegals did accomplish was to produce a glut of homes on the market with sub-standard craftsmanship. In the years to come homeowners will discover how badly their dwellings were constructed and the upkeep expenses for the average home will increase dramatically. Again, I fight the desire to digress.
Now the housing market is in trouble. Too much unsustainable growth and too many risky loans have propelled the housing sector into a downward spiral which will end badly for a lot of people. Good! This is nothing but shades of the old junk bond scandals, the dot com boom, the energy market implosion and the comic book collectors’ frenzy. One thing can be said about people out to make a buck and damn the consequences, they are consistent regardless of the sector they enter. These people go in, inflate prices, reduce quality and leave the sector a mess. However, some fail to leave in time and they are burned. Unfortunately, others who could be classified as innocent participants are injured as well.
What we now have is a glut of homes, illegals owning homes but with no history of understanding what that means in America and an employment market about to be saturated with former construction workers looking for other work. On the horizon are the unintended consequences. Americans in job sectors yet to be effected by illegal immigrants will be as these people look for employment. The result will be increased unemployment of legal residents. Also, the massive increase in loan defaults will continue as the illegals migrate to other parts of the country to find work and leave the financial institutions stuck with their poorly kept properties. And, finally, the housing market will take years to absorb the excess poorly built homes driving down prices. Real estate speculators will find themselves holding property with a lower value shrinking their personal wealth portfolio.
