Tuesday, June 20, 2006

The Forever Impending Housing Collapse

A lot of the Bubble blogs are repeating the fact that we are about to have a housing collapse. I kind of think that this is rather like a Tsunami about to come in and the waters recede. At this point someone points out that there is going to be a seawater shortage.

The problem that is perceived is an over abundance of housing for SALE, NOT an over abundance of housing. There is a fine line here, but it is worthy to notice it. Somebody owns every one of these units. What we are looking at is an asset that has become less fungible (convertible to cash). It's less convertible because its price suddenly has no reliable point of reference. Ergo housing collapse.

I suggest a different venue. Its going to be the banks and loan companies that finance these loans that will hit the dust first. This will be reflected by a massive shrinkage of the money supply. All of this debt has to disappear, through BK or whatever. Once this happens, reality will hit the Real Estate Market.

The irritating thing about all of this, is that the Real Estate Bubble People think that this will be a single item event. There are going to be some bankruptcy's and most probably a trashing of the bond market. After that, when you find your IRA has been marked to market at an 80% loss, real estate, just might drop in price. Your dreams are dashed and you cannot afford to retire at age 65.

Sound ridiculous,doesn't it? It happened in 1929, history doesn't repeat itself, believe that and I have another for you.

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