Housing Collapsing Again.  And Then Again In 2029 (May 23, 2022)

.  .  .

K          “Not again.”

J          “Again.  And then again in 2029.”

.  .  .

K          “Today the interest rate drives about 86 percent of the decision to purchase a house; the Fed dictates interest rates.  The ‘Wealth Effect’ that arises when one’s paper worth rises substantially drives about 13 percent of the decision; the Fed has distorted and inflated the paper worth of assets to stratospheric and unsustainable levels.  The desire by a few astute characters to rebalance their net worth into real estate drives about 1 percent of the decision; the Fed has distorted the relative value of assets and confounded the balancing act.  Those three drivers are decelerating and will soon crash stupendously.”

J          “Carve out about 17 to 23 percent for those folks who were cooped up and want a bigger coop.  Buckets of ‘helicopter money’ were fluttering and floating around without a home in the hands of folks who want a bigger one.  At the Fed’s direction, interest rates are going up, one’s paper worth is going down, and housing may be too large a percentage of one’s net worth.  However, the value of one’s real estate holdings may remain proportionate because the value of one’s paper worth is also declining.  Someone who had a million dollars in assets and a million dollar home may end up with six hundred thousand dollars in assets and a six hundred thousand dollar home.  And be cured of the deceptive and deleterious ‘Wealth Effect’ that often drives one to be less wealthy in the intermediate run.”

.  .  .

K          “Again.”

J          “And again.”

.  .  .

[See the e-commentary at Housing:  Another Bubble Blown By Criminally Low Interest Rates (August 24, 2020) providing a treatise on housing, Housing Again (October 8, 2007) discussing the anatomy of a house, America the Bankrupt: Economics 210 in the Land of the Freeway and the Home of the Wave (January 17, 2005) discussing the “Hyperdive” decline in the economy that is percolating, When the Bubbles Burst (December 4, 2006) discussing the macroeconomic and microeconomic consequences of the housing market collapse when all tools and manipulations finally fail and The Dow Jones (the Murdoch ?) Hits 14 K In A Hollow Economy (July 23, 2007) discussing the decline in the stock market that has been successfully delayed for fifteen years but cannot be avoided forever.]

Bumper sticker of the week:

Again

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