real estate
by
charleshughsmith
Executive Summary
- Why the momentum for household formation is still downwards, despite the gains in recent years
- Why "rental price fatigue" is putting today's increasingly rosy housing valuations at jeopardy
- Why the fiscal and monetary stimulus that has boosted the housing market in recent years cannot continue further
- How housing may turn from the “can’t lose” investment into an anchor of debt and a “now I can’t move to a better job” debacle
If you have not yet read Real Estate: Is the Bottom In, or Is This a Head-Fake?, available free to all readers, please click here to read it first.
In Part I, we reviewed the fundamentals that have been pushing housing prices higher in 2012. Many of these forces are the result of explicit real estate-supportive Federal and Federal Reserve policies, while others, such as restricting the number of defaulted properties on the market, are implicit policies of the financial cartel that has much to gain from a recovery in housing.
What, if anything, could derail this manufactured housing recovery?
Before we get to specifics, we should start by discussing unintended consequences. What happens when politically expedient policies are imposed with a simplistic goal?
Exhibit #1 is the Federal Reserve policy of lowering interest rates and increasing liquidity to boost “risk assets” such as stocks. This had the unintended consequence of inflating a stock bubble that burst with painful consequences in 2000-02.
Like all central-planning agencies, the Fed followed this policy error by doing more of what had failed: It lowered rates even more, enabling an unprecedented bubble in housing, which subsequently burst in 2007-08 with even more devastating consequences, as that implosion nearly took down the global financial system.
With FHA having replaced the bankrupt Fannie Mae and Freddie Mac agencies as the mortgage-guarantor of last resort, the Federal government has also doubled down on the failed subsidies that enabled the housing bubble.
What are the unintended consequences of pushing investors into the “crowded trade” of rental housing? If we answer this, we will be closer to understanding whether housing has bottomed or not.
Let’s start by reviewing the fundamentals of supply and demand that influence housing and rentals.
Forecasting the Future of Rental Housing and Home Valuations
PREVIEW by charleshughsmithExecutive Summary
- Why the momentum for household formation is still downwards, despite the gains in recent years
- Why "rental price fatigue" is putting today's increasingly rosy housing valuations at jeopardy
- Why the fiscal and monetary stimulus that has boosted the housing market in recent years cannot continue further
- How housing may turn from the “can’t lose” investment into an anchor of debt and a “now I can’t move to a better job” debacle
If you have not yet read Real Estate: Is the Bottom In, or Is This a Head-Fake?, available free to all readers, please click here to read it first.
In Part I, we reviewed the fundamentals that have been pushing housing prices higher in 2012. Many of these forces are the result of explicit real estate-supportive Federal and Federal Reserve policies, while others, such as restricting the number of defaulted properties on the market, are implicit policies of the financial cartel that has much to gain from a recovery in housing.
What, if anything, could derail this manufactured housing recovery?
Before we get to specifics, we should start by discussing unintended consequences. What happens when politically expedient policies are imposed with a simplistic goal?
Exhibit #1 is the Federal Reserve policy of lowering interest rates and increasing liquidity to boost “risk assets” such as stocks. This had the unintended consequence of inflating a stock bubble that burst with painful consequences in 2000-02.
Like all central-planning agencies, the Fed followed this policy error by doing more of what had failed: It lowered rates even more, enabling an unprecedented bubble in housing, which subsequently burst in 2007-08 with even more devastating consequences, as that implosion nearly took down the global financial system.
With FHA having replaced the bankrupt Fannie Mae and Freddie Mac agencies as the mortgage-guarantor of last resort, the Federal government has also doubled down on the failed subsidies that enabled the housing bubble.
What are the unintended consequences of pushing investors into the “crowded trade” of rental housing? If we answer this, we will be closer to understanding whether housing has bottomed or not.
Let’s start by reviewing the fundamentals of supply and demand that influence housing and rentals.
by
Chris Martenson
Bob Wiedemer, author of the best-seller The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy, regards the 2007 puncturing of housing market prices and the 2008 financial market swoon as the precedents to two much larger and much more dangerous bubbles.
These more pernicious threats are the dollar bubble ("printing money") and the government debt bubble ("borrowing money"). While both are expanding at a sickening pace, in the near term they deceptively make things seem much better than they are.
But, like all bubbles, they are unsustainable. And when these collapse, they are going to take the entire financial system, and very possibly the currency, with them (a.k.a. the "aftershock")
Bob predicts that the rupture of both these bubbles will most likely happen in the next 2-4 years and accelerate astonishingly rapidly once it begins.
Robert Wiedemer: Awaiting the Aftershock
by Chris MartensonBob Wiedemer, author of the best-seller The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy, regards the 2007 puncturing of housing market prices and the 2008 financial market swoon as the precedents to two much larger and much more dangerous bubbles.
These more pernicious threats are the dollar bubble ("printing money") and the government debt bubble ("borrowing money"). While both are expanding at a sickening pace, in the near term they deceptively make things seem much better than they are.
But, like all bubbles, they are unsustainable. And when these collapse, they are going to take the entire financial system, and very possibly the currency, with them (a.k.a. the "aftershock")
Bob predicts that the rupture of both these bubbles will most likely happen in the next 2-4 years and accelerate astonishingly rapidly once it begins.
by
Chris Martenson
For many, the collapse of the housing bubble was the trigger that began the era of economic slowdown Americans find themselves mired in.
But recently there have been growing reports in the media of a housing "recovery." So we've invited Patrick Killelea, founder of the popular housing site Patrick.net and author of The Housing Trap: How Buyers Are Captured and Abused and How to Defend Yourself, to clarify the situation.
The short answer is this: While there are some markets where home prices are back in line with both fundamental and historic norms, buyers still need to exert caution when making a purchase.
Patrick Killelea: What Every Homebuyer (and Homeowner) Should Know Now
by Chris MartensonFor many, the collapse of the housing bubble was the trigger that began the era of economic slowdown Americans find themselves mired in.
But recently there have been growing reports in the media of a housing "recovery." So we've invited Patrick Killelea, founder of the popular housing site Patrick.net and author of The Housing Trap: How Buyers Are Captured and Abused and How to Defend Yourself, to clarify the situation.
The short answer is this: While there are some markets where home prices are back in line with both fundamental and historic norms, buyers still need to exert caution when making a purchase.
by
Chris Martenson
Executive Summary
- We've now entered a new era of economic and fiscal descent; expect the next stage to be prolonged and bumpy
- Why only two possible economic outcomes remain at this point (and one of them has a 90%+ chance of occurring)
- How the recent liquidity measures announced by the world's largest central banks will impact:
- stocks
- bonds
- gold & silver
- other commodities
- real estate
- Why adopting a wealth preservation strategy is critical right now (and why so many will fail to do so)
- Why this is not (yet) the moment to go "all in" in exchanging paper assets for hard ones (but do get started if you haven't already!)
If you have not yet read Part I: The Trouble with Printing Money, available free to all readers, please click here to read it first.
A Process, Not an Event
Okay, the ECB and the Fed are now in the game with unlimited, open-ended commitments to print as much money as necessary to get back to the same rates of GDP growth we had in prior decades. I should note that the ECB actions, at least, will be fully sterilized, meaning that they won't boost the money supply – at least that's the plan right now. Soon enough, Japan is going to have to join the fray simply because it cannot afford a stronger yen here; it will have to print because it is first, second, and last an export economy…
After that, it is anybody's guess as to how long China will put up with its massive $3.2 trillion in foreign exchange reserves being debased willy-nilly, but my vote is 'not long.'
These latest rounds of QE are certainly unnerving and may prompt many of you to want to accelerate your own private efforts at financial, emotional, and physical resilience. By all means, use these moments to focus your attention and efforts. But also be aware that we are experiencing what is certain to be a very long process rather than some dramatic event.
Understanding the Implications of QE3
PREVIEW by Chris MartensonExecutive Summary
- We've now entered a new era of economic and fiscal descent; expect the next stage to be prolonged and bumpy
- Why only two possible economic outcomes remain at this point (and one of them has a 90%+ chance of occurring)
- How the recent liquidity measures announced by the world's largest central banks will impact:
- stocks
- bonds
- gold & silver
- other commodities
- real estate
- Why adopting a wealth preservation strategy is critical right now (and why so many will fail to do so)
- Why this is not (yet) the moment to go "all in" in exchanging paper assets for hard ones (but do get started if you haven't already!)
If you have not yet read Part I: The Trouble with Printing Money, available free to all readers, please click here to read it first.
A Process, Not an Event
Okay, the ECB and the Fed are now in the game with unlimited, open-ended commitments to print as much money as necessary to get back to the same rates of GDP growth we had in prior decades. I should note that the ECB actions, at least, will be fully sterilized, meaning that they won't boost the money supply – at least that's the plan right now. Soon enough, Japan is going to have to join the fray simply because it cannot afford a stronger yen here; it will have to print because it is first, second, and last an export economy…
After that, it is anybody's guess as to how long China will put up with its massive $3.2 trillion in foreign exchange reserves being debased willy-nilly, but my vote is 'not long.'
These latest rounds of QE are certainly unnerving and may prompt many of you to want to accelerate your own private efforts at financial, emotional, and physical resilience. By all means, use these moments to focus your attention and efforts. But also be aware that we are experiencing what is certain to be a very long process rather than some dramatic event.
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