Posted on 10/14/2006 9:48:44 AM PDT by GodGunsGuts
'The US housing bubble will disappear'
By Laurie Osborne, Editor
Published 11th Sep 2006
That the US housing bubble will disappear someday is a certainty. That it will blow up catastrophically is a fair bet, warns The Daily Reckoning's Bill Bonner.
Observing recent statistics, Bonner calls the evidence "formidable".
The total value of residential property in developed countries rose by more than $30 trillion, to $70 trillion, over the past five years – eclipsing the combined GDPs of those nations.
Consumer spending and residential construction have accounted for 90 percent of the total growth in the American GDP over the last four years, and more than 40 percent of all private-sector jobs created since 2001 have been in housing-related sectors, including construction and mortgage brokering.
America made some of its biggest gains this past year, with average prices of homes rising 12.5% in the year and prices in Florida, California, Nevada, Hawaii, Maryland and Washington, DC, rising more than 20 percent, while in Palm Beach County, Florida, it rose over 35%. Sales of existing homes in the US set a new high at 7.18 million in April.
Some foreign countries showed bigger gains than the US in the last year, with prices up by 23.6 percent in South Africa, 19 percent in Hong Kong and over 15 percent in Spain and France. But average house prices have actually fallen by 7% in Australia since 2003; Sydney's bubblicious prices have plunged by 16%. In Britain, sales have contracted by a third from last year and have also slowed down in Ireland, the Netherlands and New Zealand. In Britain and Australia, these declines followed what were only very modest interest rate increases.
23 percent of all American houses bought last year were for investment and in Miami, one speculation hot spot, 70% of condo buyers are investors/speculators.
Last year, 42 percent of America's first-time buyers – and 25 percent of all buyers – put no money down.
In California, 60 percent of all new mortgages this year are interest-only or negative-amortization.
House prices in relation to rent have hit all-time highs in the US, Britain, Australia, New Zealand, France, Spain, the Netherlands, Ireland and Belgium. In the US, the ratio is 35 percent above its 1975-2000 average. The price to rent ratio is a cardinal indicator of over valuation.
You said:
"As ex-Texan demonstrates in post #181, median home prices in San Diego country are dropping sharply."
But that "demonstration" is demonstrably FALSE:
"August Real Estate Appears to ``Bottom Out'' in Fallbrook/Bonsall, Says Kalman
BONSALL, Calif.--(BUSINESS WIRE)--Sept. 6, 2006--Two prime real estate markets in North San Diego County appeared to bottom out during August, reflecting a hoped-for normalization of home buying activity, Jerry Kalman, RE/MAX United, reported today.
"Average selling prices for 37 homes that closed escrow in Fallbrook and Bonsall rose ten percent over July 2006 and five percent higher than August 2005 to $705,541, or $291 per square foot..."
May we expect your apology anytime soon?
Being a goldbug means never having to say you're sorry. Or wrong. Even when gold has dropped $140.
I told you. It's a study in psychology.
If the only thing they will take is cash, that means checks and bonds and credit cards puts someone at the back of the line.
Of the folks remaining towards the front, money and commodities now rule. If the store owner is a heroin addict, anybody with heroin goes to the front of the line.
You know what I'm saying and you know that it's true. So are you arguing?
How many dollars worth of Groceries would the cashier let you have for your Liberty Silver dollar?
Or, phone lines are down and they can't run credit cards...
Good question. Hard to say. Depends on if they're Indian or whatever.
Best bet... I would say around ten.
(even though both you and I know now that would be a bit overvalued)
Yeah, I get it. So why is a silver dollar better than a paper dollar?
I told you it's a study in human psychology. If there's a hundred people in line and 90 of them are waving dollars at you, but 5 are waving gold or silver, maybe three have some gasoline they want to barter, a couple have some really nice frozen prime ribs they are willing to trade...
Do you take the paper dollars?
I'm not trying to be critical of anyone, just talking about what was reported.
The story you repeated didn't mention silver dollars. Are you adding to the story based on your belief or did the story say silver dollars (gold, gasoline, prime rib) moved to the front of the line?
First, the clerk making minimum wage has no idea what the spot price of silver is.
Second, without phones, the store owner has no idea was an ounce of silver is worth. He does know what a dollar is worth. (A localized incident in Hawaii will not affect the value of the dollar).
The clerk might not know.
The owner would.
I've walked into pawn shops and bought things just as I'm speaking about. And in fact, they gave me a premium.
Right. Because pawn shops don't want to maximize profits. They'll give you $12 worth of stuff for $10 worth of silver. Because.......why exactly?
If you pay more than .25 on the dollar in a pawn shop, then you really don't know how to shop pawn shops.
They will ALWAYS take an offer.
LOL!
Great. So $10 in fiat money will get you $40 worth of stuff and a silver dollar worth $10 will get you more than $40 worth, why?
I'll give your criticism all the credit it deserves.
What is the pawn shop owner going to do with the silver dollar? Since "cash" is more liquid than silver, and more stable, what is the incentive to offer a premium?
LOL! You're probably right. I'm recovering from spinal surgery, so I don't have anything better to do except argue with you guys. Don't worry, once I'm back at work, my posts to this and all other threads will drop off precipitously.
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