Housing Market Correction: More Like A Bust in 2008
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

The chart above quite 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 this economy has been financed by a mountain of debt; at the end of the day, nothing new has been created other than a massive pile of debt. This sort of scenario cannot last indefinitely. Eventually, the assets that were overinflated must deflate, and this 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 honestly 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 takes a look at the big picture, one can quite clearly see that the current trend is simply 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.

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 is going to be.

Conclusion

The Housing Market Correction has only just begun and when it ends, it will look more like a bust then 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 are going to take the beating of their lives; they let stupidity and greed dictate their actions. These individuals made the fatal mistake of taking on debt that 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 most likely start to pull back/crash in conjunction with the housing sector. Investors will start looking for a  Safe-haven and precious metals and 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 that is left is for some sort of liar loan scheme to make a comeback. 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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