Housing is tied to the trade deficit.

I have never heard someone say this.  I came up with this by myself.  

Concept:  Sending money away - Iraq, Trade Deficit - it is no longer in our country

Concept:  Housing is a market driven by what the market will bare.

Postulation:  If we send our money over sees then there will not be money available to sustain the same housing market.

Theory:  Saving is down in the US.  So, if we are wealthy, where is our wealth?  In our house.

If we are sending our wealth overseas, where will we lose our wealth?

Where our money is, in our house.

Mechanism:  Wages down, wealth in the country down, cash on hand for buying homes down, credit down, housing market down.

Basically, we sent all the money out of the country, the money is not here to sustain price levels in the housing market, so housing prices are dropping.

New concept:  What we are spending overseas is essentially coming out of our home value, not cash.

Home value dropping is the impact of the trade deficit.

Correction:  Fix the trade deficit, we bounce more money around in this country, and bring more money into this country, employ more people, then housing values go up.  

Compounding problem:  When people expected growth in their income and it did not arrive, interest only and adjustable rate mortgages killed people adn put them into foreclosure.

I want to repeat this:

We are sustaining a massive trade deficit by pouring money out of the wealth source, our home, not the wealth source our bank accounts.

How housing prices are set:  

When single worker families in the past, only men working - homes were priced to what that market would bare.  Homes were built to what that market would bear.

Challenges, and women began to work.  Suddenly, there was enough extra money that the market would bare bigger houses.  They were built, prices were raised on existing homes.

Women work full time to afford even larger houses.  Keeping up with the Joneses takes off and we buy astronomical houses.

We buy in risky ways, interest only loans, and by spending more money on credit cards for other goods when we spent too much on homes and perhaps cars.

The money we were spending, we were sending overseas.  So, it was giving us products to put in our homes to feel wealthier and feel like we have a higher standard of living.  Then, we sent too much money away.  We borrowed too much on homes.  We borrowed too much on credit cards.

The standard of living bubble is upon us.  

I conclude:  Our home prices are dropping because we send so much money overseas, there is not enough money here to sustain the prices that were set on homes.

I predict:  a major expansion of the depth and breadth of the problem before it gets better.

Recovery = when trade deficit turns around enough that money is pouring into our economy and we are flush again.  

Flush people can afford bigger better homes, and will.  Then prices will begin their climb again.

Trending - trade deficit seems to be slowly moving in the right direction.  If this accelerates - we will correct in this country.