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.
ping
Great ... always in the market for prime real estate.
My local paper - the St. Pete Times ran an article saying "Home sales" Relax, the sky may not be falling after all" It looks like the gloom and domm folks are wrong once again...
Then what are you doing here, Toddler?...I didn't say calling all lemmings.
"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.
So the total value of housing is greater than total annual income? There may or may not be a bubble, but even in normal circumstances I would expect that to be the case.
Newsletters quoting each other doesn't mean the MSM is any better or worse. What's the worst than can happen in an economic system with nothing but positive feedback. Make an essay out of it, or find a negative feedback loop someplace and moderate the worst case scenario in a slightly less dark essay. The career writing possibilities are unlimited.
I hear that!
This is NOT good news:
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.
Gloomwhoring is a 24-hour-a-day job, donchaknow.
I'm down to the last chapter of Steyn's new book. I usually get my books from the great public libraries in the Phoenix area, but I more than owed it to Steyn to buy this one. And it's well worth it. It should be a solstice gift to all my liberal friends.
Steyn's catalog of population deflation among Western countries is stunning. The fertile Red States in the U.S. -- together with immigration -- are keeping us afloat, but if we depended on the Blue States, we'd be going down the toilet with Germany and others -- with Islam pulling the handle. It will be cheap to buy some retirement property in Europe, but you may lose your head to your neighbors.
First, the statistic is probably wrong and certainly misleading. Prices around DC in the past year have varied from about steady to as much as 30% off. Second, buyers are coming back as interest rates dropped since the summer. Offers are coming in at or close to asking prices where the asking prices are realistic (reflecting the declines I mentioned). Third, anybody who is waiting around thinking they will get some bargain real estate at giveaway prices should move to rural North Dakota because that's where the bargains are right now.
Even in this area (No. VA), desirable properties are not coming on the market at any price. I was lucky to pick up a riverfront property at about 20% off the peak price because the owners are doom and gloomers or need the money. I don't expect it go up, I'm ready for it to drop some more, but the important thing is that I got it.
Wow, now that you guys are all here, you can tell everybody how now is a great time to buy real estate. LOL!
Me too. I've just been waiting...
That brings up a theoretical question that has NEVER been sufficiently explained. Where does wealth come from and how can an entire country possibly get wealthier all at once. Adam Smith didn't get it.
Why do you have to be so negative? Don't you know that the time to take out an ARM and buy real estate is now!
Oh man, and I'm just sinking a bunch of money in a spec house.
I'm DOOMED!, DOOMED I tell ya.
Your statistics are wrong again. The ARM's made sense about a year or two ago when short term rates were low. Now people are getting fixed and converting their ARMs to fixed.
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