Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

It’s Not Supply & Demand Inflating This US Housing Market Bubble

Housing-Market / US Housing May 09, 2018 - 03:28 PM GMT

By: Harry_Dent

Housing-Market I recently told our readers about how this latest real estate bubble looks just like the last one. It’s surged about the same, this time peaking a little higher, and has run for about as long.

But what’s driving this bubble is totally different than what drove the last one.

The first bubble was thanks to Baby Boomers flooding the market as they surged through their peak home-buying years in unprecedented numbers. They were helped along with the most liberal lending standards in history. Remember the days of subprime, variable rates, and NINJA loans?


It was quite simply a case of excess demand outstripping even strong, rising supply. Both drove prices to extremes that few can afford.

Eventually, defaults on those insane loans overwhelmed the market, sending the whole house of cards tumbling.

This time around, the situation is the opposite…

Supply (rather than demand) is driving this bubble. Baby Boomers have long since passed their peak home-buying cycle and Millennials don’t have the job and income growth the Boomers had. Besides, they’re more gun-shy after witnessing the largest real estate losses in more than a century, when housing collapsed between 2006 and 2012. Oh, and they’re facing tighter lending standards and the burden of student loans.

You would never suspect we are in a bubble looking at this chart.

https://economyandmarkets.com/wp-content/uploads/2018/05/BubbleAboutLowSupply-300x225.jpg

Back in 2008, both new-home completions and months-supply-in-inventory were at all-time highs, and demand still outstripped supply.

Builders were solidly behind that bubble, but on a lag, even after sales peaked in late 2005 and prices started to fall after early 2006.

New homes completed peaked at 199,000 a month in June 2008. Inventory peaked at just over 14-month’s supply just before that.

When the bubble finally burst, new homes fell to 35,000 in 2013 and inventory fell to just under four months’ worth. That was an 82.4% fall in home completions and a 73% fall in months’ supply – the highest on record.

Home prices dropped on average 34% while houses in the bubbliest areas lost more than 50% of their value. The Great Depression only saw 26% declines on average.

But, like I said: this time it’s not demand driving the bubble, but supply.

Homeowners aren’t selling. Baby Boomers are holding onto the homes they bought into the last cycle as people do until they retire or die.

And buyers are cash-strapped.

Even near the top of this bubble, inventory is around five months and new homes completed are only 65,000 a month – not that far from the record lows.

That is what’s driving higher prices!

And it’s the worst on the low-end of the market. The supply of homes under $100,000 is 21% lower than a year ago. For homes under $250,000, it’s 8% lower.

The median new-home price now averages $326,888 compared to the overall median home-price of $250,400 for existing houses. That means more people are having to pay more than they can afford, especially those who can least afford to do so!

The trends are clearly showing, this time, that high-end real estate is starting to collapse first: from Manhattan to Toronto to London to Singapore. That may be the catalyst for the property burst I’m forecasting.

The rich will be hit the worst in the end, the poor will be the first to default!

This is the second and final real estate bubble we’ll see for some time. And it’s very likely to end up with losses closer to 50% on average. This is definitely NOT the time to buy. Rather, it’s an excellent time to sell and then rent until the worst of this collapse is over! Especially on the high-end.

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2018 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules