Insider
by
Brian Pretti
Executive Summary
- The new drivers of the current housing price cycle
- Why investment capital, not normal household formation, has become primary for pricing
- What the implications of an investment-driven housing market are
- Why prices will fall & what homeowners (residents & investors) can do now
If you have not yet read The US Housing Market's Darkening Data, available free to all readers, please click here to read it first.
The The New Drivers of The Current Housing Cycle
1. Cash
First, we are currently seeing something in residential real estate markets that has not occurred in our lifetimes – the magnitude of all-cash offers. 40-50% of residential real estate purchases have been for cash in recent years. This phenomenon has no precedent in recent economic history. Why is this happening? We need to remember that a primary goal of the Federal Reserve in setting short term interest rates near 0% was to induce investors to buy “risk assets” – think real estate and common stocks. By eliminating rate of return in safe securities such as Treasury bonds, CD’s, etc., the Fed essentially forced formerly conservative investors to purchase higher risk assets in order to get any acceptable rate of return.
In good part, the all-cash offers are coming from investor’s intent on buying to rent. Intent on obtaining an acceptable cash on cash rate of return as yield can no longer be found in safer investments. This crosses the boundaries between investors in the asset accumulation phase of life and retirees starved for yield, draining formerly CD-centric bank accounts in order to purchase income-producing rental properties…
Get Ready For Falling Home Prices
PREVIEW by Brian PrettiExecutive Summary
- The new drivers of the current housing price cycle
- Why investment capital, not normal household formation, has become primary for pricing
- What the implications of an investment-driven housing market are
- Why prices will fall & what homeowners (residents & investors) can do now
If you have not yet read The US Housing Market's Darkening Data, available free to all readers, please click here to read it first.
The The New Drivers of The Current Housing Cycle
1. Cash
First, we are currently seeing something in residential real estate markets that has not occurred in our lifetimes – the magnitude of all-cash offers. 40-50% of residential real estate purchases have been for cash in recent years. This phenomenon has no precedent in recent economic history. Why is this happening? We need to remember that a primary goal of the Federal Reserve in setting short term interest rates near 0% was to induce investors to buy “risk assets” – think real estate and common stocks. By eliminating rate of return in safe securities such as Treasury bonds, CD’s, etc., the Fed essentially forced formerly conservative investors to purchase higher risk assets in order to get any acceptable rate of return.
In good part, the all-cash offers are coming from investor’s intent on buying to rent. Intent on obtaining an acceptable cash on cash rate of return as yield can no longer be found in safer investments. This crosses the boundaries between investors in the asset accumulation phase of life and retirees starved for yield, draining formerly CD-centric bank accounts in order to purchase income-producing rental properties…
by
Chris Martenson
Executive Summary
- The math explaining why Ukraine was a predictable flashpoint
- Why the IMF's "help" is about to make the Ukranian situation a lot worse
- Implications for those considering relocating inside or outside of the US
- Chris' "must have" ingredients that make a potential relocation destination worth considering
If you have not yet read Rising Resource Costs Escalate Odds of Global Unrest, available free to all readers, please click here to read it first.
Ukraine
Now back to Dave’s original series of questions. I think that Ukraine was primed and ready for a shove into instability.
There’s a well known psychology experiment where two male rats can be placed in a cage where they will live somewhat happily as long as they have sufficient food. However, if painful electric shocks are applied to the floor of the cage in such a way that the rats cannot escape, the two males will begin fighting.
Keep up the shocks long enough and the fighting will be severe, even to the death.
What’s happening? The rats lack the context to know that the shocks are coming from outside somewhere. The only thing they can project their discomfort onto is the only other living thing in their sight – the other rat.
So they fight.
Similarly, the people of Ukraine lack the context to know just who is to blame for the unpleasant conditions in which they live and seemingly cannot escape. So they blame each other and fight each other. They blame the President and so he’s gone. But the next one, and the ones following, will be just as bad; and eventually they will each be in turn ousted, too.
The problem is the shocks are not being caused by players they can see and blame. We’ll get to more on that in a minute.
By the numbers, the …:
What To Avoid When Relocating
PREVIEW by Chris MartensonExecutive Summary
- The math explaining why Ukraine was a predictable flashpoint
- Why the IMF's "help" is about to make the Ukranian situation a lot worse
- Implications for those considering relocating inside or outside of the US
- Chris' "must have" ingredients that make a potential relocation destination worth considering
If you have not yet read Rising Resource Costs Escalate Odds of Global Unrest, available free to all readers, please click here to read it first.
Ukraine
Now back to Dave’s original series of questions. I think that Ukraine was primed and ready for a shove into instability.
There’s a well known psychology experiment where two male rats can be placed in a cage where they will live somewhat happily as long as they have sufficient food. However, if painful electric shocks are applied to the floor of the cage in such a way that the rats cannot escape, the two males will begin fighting.
Keep up the shocks long enough and the fighting will be severe, even to the death.
What’s happening? The rats lack the context to know that the shocks are coming from outside somewhere. The only thing they can project their discomfort onto is the only other living thing in their sight – the other rat.
So they fight.
Similarly, the people of Ukraine lack the context to know just who is to blame for the unpleasant conditions in which they live and seemingly cannot escape. So they blame each other and fight each other. They blame the President and so he’s gone. But the next one, and the ones following, will be just as bad; and eventually they will each be in turn ousted, too.
The problem is the shocks are not being caused by players they can see and blame. We’ll get to more on that in a minute.
By the numbers, the …:
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