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.
And there is certainly a land office business in refinancing, now from ARMs to fixed where before it was the reverse - and including reverse mortgages not for first time buyers, but for refinancers cashing out some of the big equity boost the last 5 years have given them. For retirees especially, but also for speculators in CA who want to take cash flow from a winner 2-4 years ago and use it to carry another bet last year etc.
Some of those speculators will get killed, and some of those reverse financiers would have been better off selling and moving to a more affordable region (e.g. the CA to AZ trade). But none involve most of the country being paid on the equity side to support the interest side, out of non-existent equity, out of mere hope of price appreciation. Which is what the bears are alleging, and it is ridiculous.
I stand corrected. I've got nothing but time on my hands right now so I'm an easy mark. As far as keeping up the good work...right back at ya!
I bet they'd make an exception if someone decided to pay with gold :o)
Never said that Toddler. I said I'm against fiat money. There's a difference.
I've read good essays on what money is exactly. Few understand it. Based on its rarity. Its divisibility. Its inability to be counterfeited. Its fungibility. Its ease of identification.
And no one has even tried to answer my question that if you have 90 people waving dollars at you, but three waving roast beast, is it all that brainy to take the dollars?
Yet more dissasociation with reality.
Why did you choose that specific 3 year period?
Would you care to spread that graph out some more? Maybe from 1996 to 2006?
The answer: TO SELL MORE GOLD, of course.
I'm with you. I've been taking advantage of it for the last five years. Unfortunately, there are some on this thread that are doing their level best to encourage others to put their collective heads under a rock.
Be my guest. It will just prove how unstable the dollar is.
You again demonstrate your love for cherry-picking data.
I said, be my guest. Go ahead post it. Let's see how stable the dollar has been since 1996. LOL!
Didn't even mention the fact that they compare the price of Gold in Dollars to a Dollars index. Anybody who has taken statistics 101 can see the problem with that.
But the ad . . . err, chart . . . is aimed at the rubes who have NOT studied statistics.
The essence of stability.
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