'The US housing bubble will disappear'

in2perspective ^ | September 11, 2006 | Laurie Osborne

[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.

[Toddsterpatriot]

Yeah, I get it. Housing rises 50% in 5 years so that means it's gotta crash. Gold doubling in 5 years means it's going to triple in the next 5 years. It's all so clear now that you've explained it.

[driftdiver]

Comparing the real estate market to the stock market is nonsense. A home is real property. Yes there are ups and downs in the real estate market but they are driven by demand. People can sell their stock and still live. People cannot sell their home without having something to replace it.

[Petronski]

How about you take your lies and strawman arguments, roll them sufficiently tightly, and shove them up your ass?

[GodGunsGuts]

Touchy, touchy! You shouldn't get so upset Pedro...some people might take your loss of control as encouragement. LOL!

[caresistance]

I've often wondered why gold is considered a safe have if currency fails. In an apocalyptic situation I would rather have a basement of canned goods, guns, ammo, camping gear, water purifiers, etc... Much better to barter with then gold. Why does gold hold so much value? What are the uses besides jewelry? I ask for my own personal knowledge, no agenda.

[Moonman62]

I could be wrong, but I think it's a mental illness.

[Toddsterpatriot]

Goldbuggery nonsensia?

[GodGunsGuts]

I went and typed in "Why Gold" into a search engine and this is the first article that cought my eye. Hope it helps--GGG

http://www.mises.org/story/1175

[MelonFarmerJ]

In an apocalyptic situation I would rather have a basement of canned goods, guns, ammo....

Exellent observation. Gold needs to be defended. Given an arsenal, ammo and plenty of canned goods, the gold will come of its own accord...

[Enterprise]

True. When things settle down, gold will do its own talking.

[underbyte]

In Real Estate time cures all mistakes - you just have to be able to hold on long enough

[Petronski]

More projection, GrimyGoldenGriefmonger?



Figures.

[GodGunsGuts]

You really sound like your losing it, Pedro. Shall I call the paddywagon for you? LOL!

[Petronski]

You are the king of projection, troll.

[GodGunsGuts]

Awww...poor Pedro. He can dish it out but he can't take it. Poor, poor Pedro.

[Arizona Carolyn]

Guess the "doomers" would rather wait for the dems to get back into the office. After they reverse all tax cuts Rangel has promised, then perhaps the return of Carter-era rates of 21%... THEN they will know what a housing bubble really is.

[GodGunsGuts]

What we need is real conservatives in office. We need a president who is willing to cut taxes **and** spending (for a tax cut without a cut in spending is really a tax deferment). Moreover, we need Republicans that will stand up to the demorats, and slash spending bills before they even reach the president's desk. And we need a federal government committed to paying down the national debt and solving the triple deficits (budget, current account and trade). If all these things happen it will be disastrous to my gold investments. But I would much rather see my gold plummet than watch our country descend into a Third World debtor status.

[Petronski]

Troll on, creepy troll.

[Petronski]

Guess the "doomers" would rather wait for the dems to get back into the office.

If that sold more gold, yes. But not if it did not.

[GodGunsGuts]

Talk about projection! You keep dogging people on their own threads and posting inflammatory remarks, and then you have the nerve to call them trolls. Physician, heal thyself!