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The end of the housing bubble
K Davies wrote:
[Comments? - KD] big snip Al Martin Raw.com is predicting that the end of the housing bubble is certainly in sight. In other words, construction starts (commercial, residential and industrial) have been falling six months in a row, which classically signaled a downturn in the housing market. The last time this happened was in 1932, which obviously didn't bode well for the coming years. Do I mind talking to myself? No, I don't mind talking to myself. Here's the latest from Al Martin on this subject. It's about a third of the way down at http://www.almartinraw.com/column76.html . ....Also, don't be fooled by the record increase in housing starts as reported this month. These are becoming very volatile (three increases and three declines in the last six months). They are swinging wildly month after month. Since we are in a housing bubble this indicates that a top in the housing market is being formed. As in the automobile industry, the reason that housing starts are remaining brisk is because there is discounting across the board by developers. The luxury market is already soft. The housing bubble still exists in median priced homes. It should be noted that commercial and industrial property prices have been dropping for six months. Builders are doing what car manufacturers are doing - reducing prices and giving buyers easier terms. They are borrowing sales from the future in order to keep the bubble alive. It should be remembered that a home is the average American family's largest asset. Increased real estate prices create a much larger wealth increase than increases in stock prices. When the housing bubble bursts and a negative wealth effect is generated concurrently with a negative wealth effect from stocks, this will wreak havoc on consumer confidence. We recommend that people not refinance their homes and take a lot of cash out of their property. If people want to refinance at lower rates, they should do so classically - refinance existing mortgages to reduce to the monthly mortgage payments and not take a lot of cash out. Otherwise you could very easily find yourself in an upside -down position with no cash, being overextended credit-wise when the housing market breaks. It is a time when people should be hunkering down.... |
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