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EmailSecond Leg of the Housing Decline Set To Begin (or Why Economists Are Dangerous To Your Wealth)
Monday, June 28, 2010
Executive Summary
- Housing data is weak and just took a turn for the worse
- Stimulus efforts were essential to keep housing propped up
- The stimulus has ended
- QE and stock market prices are correlated
- What’s coming next
- What you should do
We bought our house in November of 2009. This will turn out to have been a very bad financial decision. We’ll be underwater on that purchase for a very long time; maybe forever (or until Bernanke’s great experiment takes the final turn towards massive currency destruction and inflation; whichever comes first).
Of course, we bought it knowing that. Our decision to buy centered on our valuing time more than money. What I mean by this is that all of the changes that we are now fully engaged in around our house, ranging from insulating to installing solar panels to putting in a fruit orchard, all take time. Time became more important to us than money, and so we bought.
But for every nation dealing with the after-effects of a housing bubble, what matters is that house prices start to climb again. Of course, the housing bubble was just a symptom of the larger and far more damaging credit bubble, but housing is a useful indicator for where we are in the larger credit-bubble story.
Because of its importance to both the bubble’s bursting and its eventual repair, I track housing for signs of true recovery.
Your faithful information scout,
Chris Martenson
Copyright 2010, Chris Martenson. All rights reserved.
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Comments
Good article Chris. A question for you. As housing assets are marked down and the debt that supports them is also marked down, then the amount of available credit in the financial system must also decrease i.e. the amount of money (which is debt) decreases...
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As someone who is in the process of purchasing a home, I cringed when I first saw the title this morning. However, I read the report and I feel better now.
I knew going in, that home prices would continue to decline from here. That was my biggest stumbling block, a mental block...
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Has anything other than "lip service" been payed to the idea of "austerity"?
robie
Abandon Ship wrote:
Good article Chris. A question for you. As housing assets are marked down and the debt that supports them is also marked down, then the amount of available credit in the financial system must also decrease i.e. the amount of money (which is debt) decreases...
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Thank you for those last few paragraphs, Dr. M. I really needed that this morning. I'm going outside now to start my chicken and duck housing.
Don't we also have a massive resetting of ARM loans this year? That surely won't help matters. These ARM holders are finding it very difficult to refinance.
Thanks for the link on inflation/deflation. I had the same thought as 'Abandon Ship' about deflation as I read your article...
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Anyone who feels like getting a healthy dose of infuriating commentary from a "traditional" Fed economist should read this - *Enroll to see Link* - where he trashes economic bloggers who have not "taken a year of PhD coursework in a decent economics department"...
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ashvinp wrote:I feel slightly ashamed that this guy is from my hometown of Richmond, VA.
I think the closer you get to DC the more arrogant and stupid one becomes. *Enroll to see Image*Oh, wait, that can't be true, after all we have California...
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Speaking of S&P correlations, Bloomberg points out two others in this article:
June 28 (Bloomberg) -- U.S. stock prices are *Enroll to see Link* government bond yields more than ever, a signal to bulls that shares may be poised to rally...
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Thank you Chris!
I like the Rickards' analogy in terms of inflation and deflation. There seems to be a perpetual debate on the issue and I think his view is more realistic than most. My understanding of Weimar Germany was that the printing would not have been politically possibly unless there was a pre-existing and deeply ingrained deflationary mindset...
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