Spiga

There is No Housing Bubble!!??????

IN RESPONSE TO KARL PARIZE:
Jude Wanniski writes (in excerpt):

MY ANSWERS IN BOLD

The U.S. housing market also continues to benefit from the 1997 Tax Act, which exempts the first $500,000 of a primary home's increase in value from capital gains tax, a measure that instantly added $4- to $5 trillion to the value of the nation's housing stock. That gigantic number was then available as equity, against which families could borrow to move to bigger and better housing at those low interest rates. (well this assumes the american is a smart investor, but a large portion of that equity is going outside the US, buying products who's value added benefit was creating out of the country..I disagree there)

*Between 1952 and 1971, household net worth rose 3.2 times, while gold held steady. Meaning, real household net worth (based on gold, i.e., using gold as the inflation measure) grew 6.3% annually over this period.

*Between 1971 and 2004, household net worth rose 12.9 times, while gold rose roughly 12.1 times. Meaning, real household net worth grew about 0.18% annually over this period.

*This should be expected. Under Bretton Woods, real GDP (again, based on gold) grew 4-5% annually. During the post-BW era, real GDP grew roughly 0.25-0.50% annually.

(ive seen these figures before, NOW you have to ask yourself, where did the gain go, since its not tied to GOLD?? It was consifiscated....Its a stealth tax....so unless you have built a company and equitized yourself, your probably not keeping up with the REAL INFLATION that is occuring.

THE DOLLAR IS WEAK IN ALL TERMS.... IT HAS TO BE. ITS ONLY WORTH IS DEBT, WHICH WILL NOT BE PAID OFF. EVERYTHING AROUND THE DOLLAR HAS TO GO UP... OIL SHOULD BE 80 DOLLARS OR MORE IN DOLLAR TERMS, THE STUFF ISN'T GOING UP (REAL ESTATE, COMMODITIES) - THE DOLLAR HAS FALLEN, DUALLY FROM TOO MUCH (EASY DEBT, WHICH CREATES FIAT MONEY) AND LOW RATES (WHICH SUSTAIN RISKIER INVESTMENTS) AS LONG AS THIS EXISTS, UNREPORTED INFLATION SKYROCKETS...AND SO DO THE ASSETS THAT ARE MAKING FOLKS FEEL RICH.

here is some more food for thought...


Further, oil prices are rising and it is finally starting to have a small effect on the economy. We are watching a significant rise in the inventory of homes for sale in some of the nation's hottest markets. The Wall Street Journal, in a cover story today, says in the headline that this suggests the housing market could be cooling. In San Diego they have more than doubled. And in many other areas are up 25-40% or more.

The problem is serious, though. Rising home prices have resulted in a great deal more borrowing. We have seen home values rise by $6.5 trillion and debt rise by $4 trillion since the beginning of the decade. On average, consumers have significantly less equity in their homes than they did 5 or 10 years ago, even with the run-up in home prices.

The guide is the central bank of Australia, where they did in fact have a housing bubble. They raised rates until the housing boom stopped, and somehow kept housing prices from falling. The Australian housing market has been flat for 18 months. I think the Fed would like to see the same thing happen here.

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