Great expose yesterday in the FT on the global housing bubble - how it's unjustified, built on a house of cards, a ponzi scheme and look out below...
This is the mainstreamest of the mainstream press, so a two page A section expose like this really is a jump the shark announcement for the bubble. For the full expose, you'll have to buy the pink paper - but they do have a bit online.
The only question is - what took so long FT?
Do higher house prices make a country richer? The answer is simply “no”. If the market value of the stock is raised, those who own it are made better off by as much as those who will buy their houses from them are made worse off. Higher prices merely redistribute income among residents, principally from the young to the old.
Where prices have risen far faster than underlying incomes, only two possibilities exist. Either prices have moved to a higher equilibrium level, in which case future purchasers will have to save more and consume less. That would itself have significant economic implications. Or they have reached an unsustainable level, in which case they will fall in real terms. That would have more significant economic implications. [Note that both possibilities have very significant economic implications]
The future will tell us which and where — possibly quite soon.
April 18, 2006
The Financial Times hits the global housing bubble hard
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"The only question is - what took so long FT?"
Don't sell 'em so short, the FT has been barking up this tree for at least as long as I've been a regular reader (which is going on two years now). Although, arguably, they have been playing it more from the general credit bubble angle, rather than just real estate.
In other words, if they haven't been yelling themselves blue about our horrifically distorted real estate markets, it's only because they've run out of breath from wailing over everything else that's gone wonky with the current US/global credit scene (you know the score: near-miss hedge fund implosions, the teetering private pension systems, Chinese bond-bingeing, etc. ...).
Nevertheless, they've been skeptical of the housing scene for a long, long time.
I have a better one --- Check out the may issue of Harper's -- They actually have a graphic guide of the Real Estate Bubble/Collapse.
who is worse, a car salesman or a real estate agent?
I read the article, and it wasn't remotely as dramatic as you portray it. In fact, it was annoyingly noncommittal. I don't think the money world is going to freely admit a buble exists till the whole thing has collapsed. Even Suze Orman still claims real estate is a good "investment" if one picks the right location (she's usually ahead of the game), and Donald Trump is still on television pretending to be successful, and millions of people are still watching, and listening, and believing. He's actually admired by many, though he is one of the most notoriously unscrupulous developers in history, throwing many people out of their homes for his "redevelopment" projects. Talk about eminent domain issues.
I still see Carlton Sheets on television pushing his get-rich-quick real estate program, and apparently unconcerned that real estate "investors" have destroyed the entire planet, and created terrible hardships for millions and millions and millions of families.
Frankly, I think the Federal Government should bulldoze all those trashy condos and houses in Phoenix, Tucson. Sante Fe, Las Vegas, and elsewhere that were thrown up by developers in the past two or three years, destroying the spectacular scenery, and they should make the developers (and local legislators who gave them permission to build) pay the costs. But, it won't happen. Developers can do anything they want, anywhere they want (with the possible exception of two or three tiny towns), and almost nobody in the business world will stand stand up to them or openly acknowledge the damage they are doing.
Typo. I meant "Santa Fe."
The Pet dot Com Puppet, Dutch Tulips and the Confederate Dollar... WILL rise AGAIN !
Do you believe the Fed claims that inflation is at .1%? When they stop raising rates, inflation will spiral out of control. It looks like they have decided to inflate their way out of this mess. It's time to load up on precious metals and oil. The smartmoney knows what is going on and that is why natural resources keep going up. They're not going to sell us their valuables for our worthless dollars. I see oil hitting $100 this year and gold will be over $1000 with silver hitting $25. Maybe the IMF can bail us out this time.
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