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.
Looking for a waterfront property for later years. The prices became so outrageous we decided to wait. Maryland is bad but NJ is worse. $15,000 taxes per year on a retirement home is nuts. That figure will probably go up.
LOL! Be careful. The Toddler and Petro twins consider this dupe to be a true American hero.
You're a gold bug of the highest caliber. Waiting for someone else to mention it so you don't appear anxious, well, that's good old-fashioned salesmanship.
But your Eddie Haskell routine ("A goldbug? Little-old me?) is fooling no one.
Liar.
My first mortgage was 12.5% thanks to Carter and the selling agency was pounding his head against the wall because I refused to take a variable rate.
4 years later I reaped after selling.
Yes, the rent to ownership is WAY out of whack. From what I'm hearing, rent in many areas is starting to drop (pushing things even more out of whack) because a lot of the flipper homes are now being rented intead of sold, thus increasing the rental supply. If true, this will put even more of a downward pressure on real estate. Do you have any info. on this, ex-Texan?
New Jersey has pricing as crazy as CA.. It's not as bad as CA but we're working on it. In NJ things are sliding DOWN. NEW homes are sitting - prices are being slashed and incentives thrown in. Over all the market here is DEAD. The five year UP cycle is done.
What I don't understand is why there are so many ad's of late by those trying to sell gold.
They must be the misinformed. /s
Yep, that's why they run all those radio, television and magazine ads...cause their losing money. LOL!
I can handle people talking about it just fine.
Whoring it the way gold bugs do is completely different.
And that could change tomorrow or in 10 years for New Jersey.
Unless of course the dice being rolled are loaded....
However all the speculators and house flippers who mortgaged way beyond their means hoping to make a quick buck, and bought while the market was at its peak, are going to be disappointed. If they can afford to hold on to the properties for a few years they will still make a buck.
And I'm sure the gold bugs appreciate you bringing it up at every opportunity. If I had a gold coin for every time you bring up gold...LOL!
The realtors (and sellers) around here would love to see some buyers.
I agree with everything you said, except I think those who bought at the top and can afford to hold on will be holding a lot longer than a few years.
Send them to the Toddler and Petro twins...they'll buy.
It's a valid conservative position to be positive about gold (and God and guns). But it's also conservative to be bullish about American entrepreneurship, about the value of certain locations, and the increase of economic activity from trade. But that doesn't mean we can't also be prudent about the dollar. There is no way the Fed is going to risk Japan style deflation, they will pump the money supply. But you seem to not realize that pumping the money supply doesn't preclude economic growth, we will get over the long run even if there is a recession or two in the short run.
The ones running the ads are those who broker gold futures contracts. They are gold futures brokers.
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