My recent trip through Nevada & California left a somber impression on the future of real estate. Sprinkled among manicured lawns was yards of tall weeds and broken dreams. Banks and politicians continue the charade of better news but waves of distressed properties tell another story. The truth always shows its hand and unfortunately despite what we’re told the future of real estate is more devastation at least in many regions. We could spend hours talking why but the fact is despite billions in mortgage-backed securities and artificially low interest rates decline is still the trend. All while gold and silver sprint from the pack.
Dr. Housing Bubble posted more concern just in time to ruin my morning coffee. California sold 38,000 homes in June but added 43,000 foreclosure filings. Even though housing costs have dropped over 50% from the peak. Not even cheap homes can bring back buyers willing to stand in line for days not so long ago. To say correction is taking place is understated. The real estate pendulum has swung far beyond a normal correction and evidence of decade long decline stares homeowners right in the face. If you are new to The Prospector Site you might be asking what this has to do with gold or silver. Maybe more than you can imagine.
The fix for real estate appears complex but is simple. Until jobs return, higher wages, and your dollar’s value stabilize more decline should be expected. But like gold and silver witness today real estate had a heck of a run. The next couple of years will be interesting for gold and silver holders. Just like real estate new gold holders will see nothing but stars as gold continues to spike breaking new highs with the latest bad economic news. Sure we will see dip days or weeks but overall the trend for gold is straight up.
The real estate bust caught many off guard but all runs end and R.E. is not above typical asset cycles. Gold and silver will be no different and the same ones caught by surprise will curse gold as it declines from over speculation and greed. Like real estate, finding new buyers to unload pricey metal will be difficult but unlike real estate government help is unlikely. Don’t get me wrong I’m not saying don’t buy gold or silver what I’m saying is realize all bull runs come to an end and locating an exit is wise. I also feel a time to exit from gold is far down the road. Until then I’m buying just like I have over the last ten years.
BLOOMBERG: U.S. Homeownership Falls to Lowest Since 1998 on Tight Lending
“Tight underwriting standards and the lack of a down payment are keeping a big chunk of buyers out of the market and other people are being displaced by foreclosures,” Yamano said in an interview before the report. The ownership rate may tumble to about 62 percent by 2015, he said. Read it here.
MARKET WATCH: The U.S. Treasury will not default
Debt is a symptom; overspending is the disease
Though the debt ceiling is getting all the attention, the real issue is the rapid growth of government debt. I believe the increase in the debt ceiling should be passed, but I also believe we have to address the more important issue, growth in government indebtedness. The Federal government is borrowing roughly 44% of what it spends. That is why we keep running into the debt ceiling. The debt ceiling is really just a technicality. The long-term issue is the size and scope of government and growing debt is just a symptom of that.
Take a look at how much Federal spending has increased in just the past few years. If you think there is any form of math in which this kind of increase is sustainable, think again. Read it here.