August 19, 2004


Japan, Russia to Lose Population (GENARO C. ARMAS, 8/18/04, Associated Press)

Japan, Germany and many other large industrialized countries face long-term population slowdowns or declines as more young adults have fewer children or delay child-rearing, demographers say.

While the world's population is expected to increase by almost 50 percent by 2050, Japan could lose 20 percent of its population over the next half-century, according to data released Tuesday by the private Population Reference Bureau.

Russia's population is expected to decline by 17 percent, and Germany's by 9 percent.

The United States is the biggest exception among industrialized countries, with its population expected to rise by 43 percent from 293 million now to 420 million at mid-century.

So much for there being a housing bubble in the U.S.

Posted by Orrin Judd at August 19, 2004 7:18 PM

I'll bet Russia's non-Islamic population is falling faster than that.

Posted by: Robert Schwartz at August 19, 2004 9:37 PM

Considering that the average male life span in Russia is now less than 58 years, things may happen faster.

Posted by: jim hamlen at August 19, 2004 9:51 PM

When you create a large number of programs that benefit pensioners and force the support onto those who would otherwise be having children, thus punishing them, it should be no surprise that you get more pensioners and fewer children.

Posted by: Mikey at August 20, 2004 10:30 AM

OJ, population growth over the long term will ensure that there is a constant demand for housing, but it will not support skyrocketing housing prices driven by historically low interest rates and speculation. As much of the new growth will be through immigration, the low end of the market, prices cannot remain at elevated levels and serve this customer base. Income growth has stalled and is going down relative to inflation. The market will have to find a sustainable price range relative to higher interest rates going forward.

Posted by: Robert Duquette at August 20, 2004 11:35 AM


Except that there's no inflation.

Posted by: oj at August 20, 2004 11:41 AM


Some would argue (though probably not here) that Americans make too much already. Is this another aspect of globalization?

Posted by: jim hamlen at August 20, 2004 11:48 AM

>Except that there's no inflation.

You're nowhere near Southern California, right?

House prices here have TRIPLED in the past seven years. For a decent single-family house (outside of a slum) on some land (i.e. back yard more than ten feet deep), you have two choices:
1) Be making well into the six-figure range so you can pay the $2-3000/month mortgage plus $4-800/month property taxes.
2) "Clown-house" the place with 10-20 paying renters.

With the big continuing influx of cheap labor from Mexican immigration, minimum wage is the best you can hope for starting out (why pay minimum wage or better when we can hire a Mex for under a dollar an hour?) Add housing prices and rents rising at 15-20% a year and something's gotta give eventually.

Once interest rates rise from their current lows, we're going to see a lot of those "low-start, adjustable-rate mortgage" payments rising to the point a lot of former "real estate tycoons" are going to be house-poor or unable to make the new, higher payments. Last time this happened in the mid-Nineties, a lot of people threw their keys at the bank and walked away en masse. Lotsa repos came on the market, prices started to drop, and more homeowners found themselves upside down...

Real estate prices out here follow a boom-and-crash cycle about ten years long; I bought my current place (a repo townhouse) seven years ago, at the last bottoming-out; since then its value has TRIPLED (equivalent to 20% inflation/year) -- similar to the pattern I saw before the last real-estate crash.

Posted by: Ken at August 20, 2004 12:39 PM


Inflation isn'rt when specific things cost more for sensible reasons. How much less would the PC in your house cost than it did 7 years ago for how much better performance?

Posted by: oj at August 20, 2004 1:08 PM

>With the big continuing influx of cheap labor
>from Mexican immigration, minimum wage is
>the best you can hope for starting out

Huh? Only in John Edwards' mythical other America. How about get a science/engineering degree so you can start out making nearly six figures? Unless there's a flood of Mexican engineers willing to work for $1/hour that no one is telling us about...

Posted by: brian at August 20, 2004 1:14 PM


If you just learn to repair watches you start at $40k

Posted by: oj at August 20, 2004 1:17 PM

FYI, I work for a major company in the secondary mortgage market, and at a recent company meeting to discuss our financial status, I asked the president if he thought the housing market was in a bubble. His response was as follows:

- short answer: I don't know. Generally you only know this after the fact.
- certainly some local markets are overvalued and could see corrections in the near future.
- there is some research showing that the overall market could be overvalued. The company will watch this closely and put contingency plans in place.
- if there is a bubble, it won't last long. After a correction, the long term trend will continue, due to population growth trends in US.

Also, he mentioned that we are staying out of some of the riskier products that are coming out to get marginal borrowers into a house. One study they did showed that one such product would incur a 20% defalult rate.

OJ, inflation is a rise in price for a given product, service or commodity, period. California housing isn't going up 20% a year because houses are 20% higher quality from year to year.

Posted by: Robert Duquette at August 20, 2004 1:45 PM


Well, let's see:

In agree that housing prices are going up some places and down some places but thanks to our massive population growth and the fact that homebuilding is one of the few things we can't outsource there probably is no housing bubble.

You're quite wrong about inflation, which is defined as "An increase in the general price level of goods and services; alternatively, a decrease in purchasing power of the dollar." If oil goes up and down rather volatilely and housing increases steadily but everything else goes down there's no general inflation.

The average square footage of homes in CA is enormous by historical standards and by comparison to other nations. They should cost more.

Posted by: oj at August 20, 2004 2:05 PM

If anybody cares, I have a column up this week ( comparing housing opportunities in 1962 and today.

In some respects it tends to support Orrin.

We could use a watchmaker here; our last one retired in January. But if he made only $40,000, he'd have to sleep in his car.

Posted by: Harry Eagar at August 20, 2004 3:07 PM

>How much less would the PC in your house cost
>than it did 7 years ago for how much better

My PC is secondary. Unlike a lot of Netizens, I don't live in Cyberspace. My body is meat, not bandwidth, and needs a physical place to live.

And the California housing market is getting badly overvalued, as it did ten years ago. My only hope for moving up or sideways is to wait for a "correction" (as in the Correction of Flight 800) and see how much prices drop this cycle. I've lived all my life in SoCal, and I doubt I could find a job with the pay, benefits, and regular hours (rare in my profession) if I moved out-of-state.

Posted by: Ken at August 20, 2004 7:55 PM