DO BUBBLES DEFLATE OR BURST? ... THEY BURST ...: According to the S&P/Case-Shiller 20-City Home Price Index, prices fell 9.3% from May 2013 to May 2014. For the top 1%, sales of homes $1 million plus have been up 8.5% since a year ago and prices are up 5.2%. Homes under $100,000 are down 12%. The rest in the middle are down 2% on average. One percent are still booming while the 99% are sucking wind. Home ownership in August sank to the lowest level since mid-1995, down to 64.7% from an all-time high of 69.2% in June of 2004. That means 4.5% of households have lost or given up their homes. Mortgage applications are also at the lowest levels in decades as first-time buyers are too scared or credit-poor to buy. Demographic trends say they should be buying more aggressively by now, but they aren’t, even with extremely low mortgage rates. Some of the very rich are borrowing more strategically now. They can get very low mortgage rates and not have to dip into their very lucrative stock portfolios and miss the high gains of the past five years. This is exactly what artificially low interest rates from central bank policies create: greater speculation and bubbles that ultimately have to burst simply of their own extremes. There isn’t an economic crisis or major slowdown in the U.K. or the U.S… yet. Home prices are slowing or falling because they’re getting too expensive, even with the constant decline in mortgage rates this year. In China, the greatest global real estate bubble in modern history is showing signs of cracking. Home prices have been down for three straight months and 64 out of 70 cities have reported average losses of 0.9% this past July. Beijing was down 1.0%, Shanghai dropped 1.2% and Guangzhou 1.3%, with the worst two cities down 2.4%. Bubbles always burst; there are no exceptions. The greater the bubble, the greater the burst. Bursted bubbles tend to go back to where they started or a bit lower. Financial bubbles tend to get more extreme over time as credit availability to fuel them expands. (This is particularly true to the top 1% who are already rich and can access very cheap money with which to speculate.) -------------------------- ULTIMATELY, IF THE TREND GOES UNCHECKED, THE END RESULT OF AN EXTREME SEPARATION OF WEALTH (AND THE POWER IT BRINGS) LEADS TO REVOLUTION. WE ARE PRESENTLY SUFFERING FROM A SCARCITY MENTALITY WHERE THERE IS VERY LITTLE SHARING OF THE WEALTH.
Posted on: Fri, 22 Aug 2014 20:52:22 +0000
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