Housing Market Correction: More Like A Bust in 2008

Housing Market Correction: More Like A Bust in 2008

Housing Market Correction

The truth may not set you free, but it certainly won’t imprison you like stupidity. Sol Palha 

Housing Market Correction

Updated Dec 2020

The chart above clearly illustrates how household debt has soared to a point where it accounts for a massive portion of the GDP; this monstrous debt is now equivalent to 90% of the United States GDP. This also clearly illustrates how a mountain of debt has financed this economy; in the end, nothing new has been created other than a massive pile of debt. This sort of scenario cannot last indefinitely. Eventually, the overinflated assets must deflate, which is currently what’s happening in the housing sector.

bust 1

bust 2

Housing Market Correction 2008

This is an eye-opening chart; for once, we can see how massive this real estate bubble is. This chart represents prices of homes in the United States going back to the 1880s.   When one looks at the big picture, one can quite clearly see that the current trend is unsustainable.  Another important fact is that we have over three trend lines on this very long-term chart (only three have been drawn in), and thus, a correction is imminent, and in this case, it has already begun, but one must remember it has only just started.

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Housing Market Correction: More Like A Bust in 2008

This chart provides a closer look at the housing market for the last 21 years, and even when prices are adjusted for inflation, the gain in prices over the past four years has been enormous.  Note, too, that in this case, we have over five uptrend lines in place; the trend line rule dictates that the more trend lines you have in place, the more violent the eventual correction will be.

Conclusion

The Housing Market Correction has only just begun and when it ends, it will look more like a bust than a correction. There are still a vast number of mortgages that are going to be reset in the upcoming months.  Right now, only the subprime sector has been affected, but in the months to come, individuals with perfect credit scores will take the beating of their lives; they will let stupidity and greed dictate their actions. These individuals made the fatal mistake of taking on debt they cannot service with their present income. They are only surviving now because their mortgages have not reset; once these mortgages reset, watch the next phase of the bloodletting process begin.

When the real bloodletting process begins, fear will be rampant as the market will likely start to pull back/crash in conjunction with the housing sector. Investors will start looking for Safe-haven and precious metals, and the energy sector will provide this.

The bottom line stays far, far away from the real estate market; the housing bust is still not over. 

 

It is the dull man who is always sure, and the sure man who is always dull.

L. Mencken 1880-1956, American Editor, Author, Critic, Humorist

Updated Commentary July 2019

The housing markets are slowly moving towards another bubble; all left is for some sort of liar loan scheme to come back. Once easy financing is provided to the masses, it will cause another feeding frenzy and end as badly as it did in 2008.

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