Seven in 10 Consumers Expect Housing Bubble to Burst

Gallop Poll ^ | 4/19/2006 | Dennis Jacobe

[ex-Texan]

The Commerce Department reported Tuesday that single-family housing starts fell 12% last month. Privately owned housing starts fell 7.8% to the lowest level since March 2005, while new building permits fell 5.5%. * * * Labor Department reported that wholesale prices rose 0.5% last month as oil and gasoline prices are approaching new record highs. * * *

New findings from the April Experian/Gallup Personal Credit Index survey suggest that many Americans believe [the housing bubble may burst] * * *

National Housing Bubble

Seventy-one percent of consumers believe it is very likely (24%) or somewhat likely (47%) that housing prices will collapse in housing markets across the nation as a whole within the next year, according to the April Experian/Gallup Personal Credit Index survey. * * *

Housing has been one of the key drivers of economic activity in the United States over the past several years. Building new homes not only creates jobs but also stimulates the purchase of a variety of consumer durables including appliances and home furnishings. More importantly, the growth of housing equity has had a pronounced wealth effect not only on consumer spending, but also on consumer borrowing.

Currently, the housing sector is under assault from the double-whammy of increasing interest rates and surging energy prices. * * *

The most significant impact, however, may involve the effect of a housing slowdown on the overall U.S. economy. A significant economic slowdown during the second half of this year could lay bare many of the housing finance excesses of the past several years. In turn, this could make the pessimism 7 in 10 consumers have about the potential for a bursting of the housing bubble seem prescient later this year.

View Gallop Poll Data and Graphs:

[lewislynn]

The higher cost of transportation is accelerating the price of consumer goods, air travel, cab rides, everything. It's called inflation, the same as that over inflated housing market.

Interesting, and yet we're told inflation is only 3%.

Gasoline is $3.00 a gallon, but the housing market is the only one you claim to be "over inflated" as if there are no "consumer goods" connected with it...I guess some people have a problem with understanding supply and demand.

[RegulatorCountry]

"Pretty soon the only ones left living in the cities will be rich liberals and poor minorities."

That just about describes Philadelphia.

[M. Espinola]

"Gasoline is $3.00 a gallon, but the housing market is the only one you claim to be "over inflated" as if there are no "consumer goods" connected with it...I guess some people have a problem with understanding supply and demand."

Reprint where I stated inflation has no connection with consumer goods(?) It's obvious it does.

When unleaded hits $4.00 and $5.00 a gallon (for starters) it's also obvious consumer goods will rise substantially since transportation coast shall be passed on to the public.

In terms of supply and demand, when homicidal jihad-O-maniacs threaten a large chunk of global oil supplies, the energy market perfectly understands substantial risks of diminished international supplies, therefore prices shall soar to levels most can not even fathom - at this point.

Imported oil/natural gas based demands will continue accelerating with the expanding overseas economies of India, Red China, until prices for that energy become so high individual nations begin cuts back of major orders, as happened during the 1998-99 Asian Economic Flu, which plummeted crude oil spot prices to 1975 price levels resulting in pump prices of being under $1 a gallon.

Cycles repeat themselves, but with the such unstable threatening OPEC wild cards as Iran, Nigeria, Venezuela and the acute venerabitlies of the Wahhabist (Saudi) petroleum infrastructure, new highs have yet to be tested not only in the energies, but the metals complex and even orange juice prices with the prospect of this coming hurricane season.

When the ongoing, sever bullish market components subside, so shall the spot price, only the drop will be twice as rapid on the bearish side. First the world will have to get through the remainder of spring and summer. A long hot summer in many respects.

[M. Espinola]

Since you are one those who believes the housing boom is rock solid and the bubble is at no risk of bursting (no matter what happens to energy prices), the question needs to be asked, are you in any aspect of the real-estate trade - any portion what-so-ever?

[dalereed]

"Many of these people will not be able to afford the homes they're in if interest rates go up. I expect there to be a lot of foreclosures,"

A friend of mine has a daughter that works with 20 people and because of adjustable mortgages have lost their homes to forclosure in the last month and his daughter wouldn't take his advise and lock in a fixed mortgage will lose their home within 3 months.

He just told her that being stupid and not heeding his advise, she's on her own and he won't help her.

It's not the money, it's the principal, he has over a million dollars of toys (restored antique cars) and is building a new 2000 sq.ft. garage to keep them in.

[marajade]

Based on what? Lowest unemployment rate nearly ever and the DOW at its highest point ever?

[M. Espinola]

UK housing has been in trouble for over one year. Ditto Australia...BTW neither countries are in a recession.

That's true. Would you say in terms of the UK housing market prices peeked in greater London the first few months of 2005? The Aussie market along with the Aussie Dollar was on fire from 2003 onward.

Australia's housing bubble could be the first to burst. It won't be the last (The Economist, June 3rd 2004)

[ex-Texan]

People must take responsibity for blighted cities and towns all across America. People rush ahead without looking . . . "Nothing to see here. Lock your doors and windows. Time to move on."

These bargain houses are for sale in Chicago for only $ 175,000 each. The only problem is the neighborhood: Crimes like battery, burgery, telephone threats, assault and criminal damage abound . But perhaps bidders will show up to play bidding games. "Hurry, Hurry! Flip this house!"

Nothing drives up prices like lots of bidders and people get caught up in the bidding frenzy. Realtors in Australia Caught Using Dummy Bidder Tactics to artifically drive up prices. In the U.S., we have called such fraudulent tactics 'using shills.' Are the police and undercover investigators monitoring realtors for using these type of tactics in your state? Are you sure? BBC repoters caught realtors engaging in fraud on tape recently. ABC, NBC and CBS cannot be far behind.

[M. Espinola]

Great cartoon! lol

The deceptive collection of housing boom promoters will vehemently deny that story "Realtors in Australia Caught Using Dummy Bidder Tactics to artificially drive up prices" ever happens in the U.S.

Wholesale prices jump; housing starts slump INFLATION: BIGGEST LEAP IN COSTS SINCE END OF 2005:

[capitalist229]

There appears to be a massive amount of Fed-created excessive liquidity looking for the next bubble.

Today is different from the 70s stagflation, because we do not have wage inflation.

OTOH we are over-dependent on imports and consumer spending.

The fear is this - if the dollar collapses, import prices go up and the consumer-led economy dies a quick death.

BUMP

[veryconernedamerican]

That would only erase one years increase in alot of areas, that is very likely. But what does it really mean to you and I? Little unless you are highly invested in a loan servicer, or own alot of mortgage backed securities. Ex-Texan if you are so certain, you should go out and find a vehicle to short mortgage backed bonds. All real estate increases have corrections. Fannie Mae just added a 40 amortization option to take some pressure off.