HOUSING WAS THE LAST BIG BUBBLE...AND IT WAS HUGE..!
THOSE WHO THINK THAT HOUSE PRICES WILL "COME BACK" ANYTIME SOON ARE DELUDING THEMSELVES...
THE MAGNITUDE OF THE BUBBLE ...AT THE END...WAS SO HUGE THAT FEW 'NEW PLAYERS' COULD ENTER THE MARKET...
THIS MADE HOUSING SORT OF LIKE DOTCOM STOCKS AT THE HEIGHT OF THE INTERNET BUBBLE...
I'LL TRADE YOU TWO OF MY $500 CATS FOR YOUR $1000 DOG...!
OF COURSE THE "NEW MONEY" THAT ENTERED THIS PONZI SCHEME WAS WIPED OUT FAST...
SO TOO WITH HOUSING...LIKE ALL PONZI SCHEMES... NEW SUCKERS ARE CONSTANTLY REQUIRED...
AND WITH THE LOW WAGE "NEW GENERATION" OF AMERICAN WAGE EARNERS...THE 20 TO 35 YEARS OLDS... EITHER STILL LIVING WITH RELATIVES OR FRIENDS...OR ON RENT PERMANENTLY...THERE IS LITTLE CHANCE THAT THEY WILL BE ABLE TO AFFORD OWNING A HOME IN THE FUTURE.
HOUSE PRICES SIMPLY MUST FALL TO THE LEVEL OF AFFORDABILITY THAT WE ARE NOT SEEING FOR THE NEW GENERATION OF AMERICAN "GLOBAL" LOW WAGE WORKERS...
IN SHORT, YOU AREN'T GOING TO BUY A HOUSE WITH A $12-$15 PER HOUR JOB...OR EVEN TWO OF THEM!!
FINALLY, HOUSE PRICES ARE GOING TO HAVE TO REFLECT "REASONABLE RENTAL VALUE"....WHICH WAS THE OLD STANDARD OF VALUE...
A HOUSE IS ONLY 'WORTH'...REASONABLE AND COLLECTIBLE RENT TIMES TWELVE MONTHS...!!
NOW THAT THE SPECULATION IS OUT OF THE MARKET...A REVERSION TO THIS OLD STANDARD OF VALUATION WILL HAVE TO RETURN BEFORE ANY RECOVERY IS POSSIBLE...
BUT HERE'S THE PROBLEM...THE HOUSE MARKET AND THE WAGES MARKET ARE SO OUT OF WHACK WITH EACH OTHER THAT ONE OR THE OTHER IS GOING TO HAVE TO CHANGE....
EITHER WAGES GO UP...OR HOUSE PRICES GO DOWN TO MEET THE NEW "HONG KONG" WAGES OF AMERICAN YOUTH...!!
YES, HOUSE PRICES ARE "STICKY"...BUT WHEN THE DAMN BREAKS...AS IT IS NOW...THEY WILL GET UNSTUCK FAST...!!
BOTTOM LINE:
ON ALMOST EVERY LEVEL OF ECONOMICS...AMERICANS ARE REVERTING TO THE NORMS AND "OLD LAWS" OF VALUATION...FROM THE DOLLAR TO WAGES TO HOUSE PRICES...WE HAVE A LONG, LONG WAY TO GO...
HOW THIS IS HANDLED IN THE LARGER BANKING SYSTEM IS PROBLEMATIC...SO FAR THE "SOLUTION" HAS BEEN TO PRINT MORE MONEY...! AND THAT IS AN OMINOUS SIGN FOR THE FUTURE...
