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2017 Economic Headwinds: Housing Bubbles Popping up and Just Plain Popping Everywhere

A global 2017 housing bubble may be ready to collapse.

As we enter 2017, housing bubbles are showing signs of bursting all over the world. I know I’ve been promising I would lay out the economic headwinds for 2017, but 2017’s headwinds are building so fast and furious that I’m having to break that promised article out into several articles, as I’m accumulating material faster than I have time to cover.

I’m going to start with the housing bubbles that are now extremely evident in the US, Canada and Australia, noting that housing is also insane in its own weird way in China again and in many other parts of the world. The point I want to make is that, with housing bubbles now at the peak of popping in several parts of the world, this coming housing market collapse could make the US housing market crash of 2007-2009 look like the warm-up act, and housing is just one area of the global economy that is showing signs of high peril.

 

A 2017 housing bubble collapse in the US may be in the cards

 

As I wrote in “The Inevitability of Economic Collapse,” the whole US economy is a house of cards, but particularly the US housing economy where we have done everything we possibly can to pile up a potential housing collapse as precariously as we did last time around just so we can watch it all fall down again.

The hard push to get back to where we were in 2006 has been on for about seven years. In the past few months, housing has been on its fastest tear in the US with the number of new permits being issued for construction in 2017 particularly leaping up like a spring lamb, and that’s with prices that are now generally higher than they were at their peak in 2006. We are showing all the same evidence of an irrational market that we showed going into the Great Recession:

That peak was only attained because of lax credit, which made an expanding number of purchases possible after prices went beyond what people could afford. Since wages in real terms (having only recently started to rise in a few industries) are not any better than they were back in the housing crash of ’07-’09 , today’s higher prices are actually less sustainable without dangerously lax loan terms than they were back then.

That’s why we have again begun to relax loan terms for individuals buying a house. For the last eleven quarters, more lenders have relaxed mortgage standards than have tightened them. (“Minimum credit scores have dropped. Self-employment documentation has reduced. Maximum loan-to-values have been increased.”) On top of what banks are doing to relax their own self-imposed standards, Trump has ordered a review of Dodd-Frank with the hope of stripping it back in order to get banks to issue more loans in order to juice the economy (and to make things better for his real estate industry). We learn nothing.

 

Cohn said Friday on Fox Business that the executive orders are intended to relieve restrictions and scrutiny that post-crisis regulations have put on banks…. Trump promised to do “a big number” on the Dodd-Frank Act.  (Bloomberg)

 

What could be better than a return to the exuberant days of banking deregulation? A Republican article of faith says that banks and the economy can always benefit from further deregulation. Dodd-Frank will be stripped down before it fully goes into practice. The unstated goal here is to fatten up some more bankers and further inflate the housing bubble because we are so incapable of thinking outside of a housing-based economic model.

The fact is that bank loans to businesses have never been higher (in total value of loans issued), so there is no problem, as Trump claims there is, of banks not issuing enough loans to businesses. The value of bank loans issued was not even this high just before the Great Recession. Likewise, the total value of bank loans for commercial real estate has never been anywhere near as high as it is right now. So, most likely those who are not being given loans (like perhaps the King of Bankruptcy) probably don’t deserve them.

For now, the race to the top in housing is still on, but there are signs that a peak is being reached. I’ referring to signs other than just the fact that we’ve passed the previous peak’s prices. January purchases of existing homes picked up to a pace not seen since 2007. The number of new-home sales jumped 3.7% in one month (in terms of number of units sold). That is in spite of the fact that the median price of a US home has risen 7.1% since the same time last year.

One caveat about this rise (until we see where it goes in the next couple of months) is that some of this activity since December’s rate hike may be due to people rushing to buy before interest rates rise even more, now that rate increases by the Federal Reserve are looking certain.

With houses in the US now remaining on the market for only fifty days, averaged across the nation (less than a month on the west coast), the market is feeling as searingly hot as it did in 2006 just before prices started to fall. So, that’s one indicator a top may be near.

Because of a shortage of inventory (the lowest number of houses on the market since 1999), bidding wars are starting again in cities like Seattle and San Francisco where houses again regularly sell for more than their list price.  That kind of bubbling-over race to higher prices ran for a few years in the highest-priced markets before the last housing crash, but it is the kind of frenzy that defines “irrational exuberance” in a housing market. When people scurry to say, “I want to pay you more than you’re asking for” in a market already priced higher than ever before, you’re witnessing the kind of mania that precedes a crash. So, that’s another indicator that a top may be near.

One more kind of action that has risen back to pre-Great-Recession levels is house flipping. Foreclosures are being snapped up by mom-and-pop fixer-uppers at a level matching the superheated speculation of the last housing bubble.

Some US housing bubbles appear to be popping already. Prices on expensive homes in some places, such as Miami, are now falling quickly. Since early 2016, condo speculators in Miami (who buy condos pre-construction, hoping to sell them for a better price as soon as they are completed) have been pummeled into accepting losses. Inventory is growing in Miami; sales volume is shrinking; and total volume of sales in dollars is declining.

Same kind thing is happening in Manhattan where luxury co-op apartment contracts have collapsed 25%. Closings on high-end sales in Manhattan (number of units sold) had fallen 18.6% year on year back in October. Inventory of units in new developments was backed up at that point an additional 27.2% YoY.

Barry Sternlich, CEO of the Starwood Property Trust, which finances real estate development, calls Manhattan’s luxury condo situation “a catastrophe” that “will get worse.” Since homes in this segment of the market are typically bought by those people who make a lot of money by working on Wall Street, one has to wonder what this says about the real situation in the world of stocks and finance.

From 2017 on, the US housing market will face different kind of bubble bust than it has ever faced before. The baby-boom bubble is now moving out of the housing market. For the next two decades, the fastest rising segment of the population will be those who are seventy or more years old, while those who range from twenty to sixty nine (where homes are still being bought) will shrink in total numbers.

Seventy-plussers, whose total population is projected to quadruple during that time, buy the lowest number of homes of any age group (only about seven percent of the market). Not only do they have less need of a new home, there aren’t many banks that want to issue a thirty-year mortgage to someone who will be a hundred years old by the house it gets paid off. So, ask yourself who is going to buy up all the houses that the baby boomers evacuate when they move into retirement facilities? (The growth in nursing facilities, may keep construction going, but it isn’t going to help banks with huge numbers of home loans on their books, and boomers trying to sell in that market will be hurt badly by falling values, making it also hard to buy into retirement facilities.)

 

Why the real-estate mogul president of the US may cause the housing bubble to collapse in 2017

 

It seems counter-intuitive that a real-estate development tycoon would cause a housing bubble collapse, as there is nothing he would hate more, but consider the following:

While high-priced homes (prices and numbers of sales) are already starting to slide in some major metropolitan areas, Trump’s immigration restrictions are likely to impact the lower and mid segments of the housing market, pushing them over the cliff, too — particularly the multiple-family housing market and to some extent single-family housing. (I’m for many of his immigration reforms, but the math doesn’t care how you feel about immigration. Math is math.)

The secondary reason — second only to having a cheap-labor pool — that businesses and government want as much immigration as possible is that high immigration forces expansion of our housing-based economy. And housing expansion seems to be the only sure way of growing an economy we know about — sure, that is, until it isn’t.

Housing markets with the highest risk of an immigration-based collapse in 2017 include Los Angeles, San Francisco, Miami, Silicon Valley and New York, which have the largest populations of foreign renters and buyers. Since some of those areas are already hurting on the top end of the market, they are going to really feel the squeeze.

Consider a simple reality of the deportation threat: even those who are not deported are likely to back off from their purchasing plans. More will stay for now with renting in fear that they may be deported. Overnight, millions of people are becoming reluctant to enter long-term residential plans.

Not only do millions of families deported mean a loss in demand; they also mean millions of homes and apartments going on the market. It’s a price hit from both demand and supply sides of the market at the same time. In the old days, that was a recipe for a ghost town where people simply walked away.

The possibility of deportation also makes lenders nervous and less willing to make loans to undocumented immigrants. (Some lenders actually specialize in making mortgages to “undocumented immigrants.”)  For the bank’s view, people leaving the market and selling their homes in large numbers means oversupply, which predicts falling prices, which predicts mortgages going underwater. If those underwater mortgages are adjustable-rate mortgages they cannot be refinanced when the interest increase comes. So, defaults will rise for immigration reasons just as housing prices are exceeding the peek they hit before the last major housing crisis. Smart bankers are getting nervous, but that means loan tightening will exacerbate the problem.

Then you have to factor in the millions of immigrants who won’t be coming even if deportation doesn’t happen quickly. That influx is already down because people know the risk of deportation is far more likely under Trump than it was under Obama. (Obama practically advertised for illegal immigration by letting the world know that children would not be deported, which translated to “send them quickly while you can get them in and can know they will be allowed to stay.”)

The factor here is that a third of the real-estate industry’s estimated new growth is based on new immigrants adding to demand. Whether they live in apartments, houses or condos doesn’t matter. All of that is new construction for a planned influx of new people who are no longer coming. That is going to start taking some plans off the table. Many of those permits that have been applied for may never be exercised.

While Trump’s massive immigration changes (and the fears caused by the knowledge that change is coming) are likely to effect the lower end of the market the most, they will effect mid levels as well. Immigrants with specialized skills, who are here with green cards to do specialized jobs, are becoming more skittish, too, being uncertain of how Trump’s immigration plans will effect them. Even some green-card holders who are already far along in the process of getting citizenship legally are becoming apprehensive about purchasing a home because they are concerned that the immigration issue could become more aggressive.

So, we have a rather large trigger that is already moving, which could cause a 2017 housing bubble c0llapse.

 

Canada’s housing bubble is more precarious and is already falling in 2017

 

From Miami, Florida, to Vancouver, B.C., housing is tumbling at the top. Vancouver’s housing market decapitation is partially intentional, created in part by a 15% foreign-investment tax that the city started at the end of summer in 2016. They implemented the tax because prices at the top were going insane due to Chinese investors, and that was pricing Canadians out of their own market; but that pushes somewhat wealthy Canadians down to high mid-level homes, raising prices there, which pushes mid-level buyers down and so forth.

The 15% tax hits mansions the most because that is where foreign money was percolating prices into the stratosphere (due to Chinese investors looking for ways to store their wealth outside of badly failing China). However, the price drop in top-tier housing is not entirely due to the foreign-investor tax because sales started to fall sharply (by about half the number of units sold in a month, year on year) for two months before the new tax was voted into place. (Maybe just in anticipation?) In fact, the average home price in Vancouver has fallen almost every month since March, 2016, though most of the deflation has been at the top. (So, maybe a top is in anyway.)

At the same time, the number of empty houses (including derelict mansions) in the greater Vancouver area had more than doubled from what it was back in 2001 even though prices since 2001 had risen 450%. So many empty houses means there is a lot of reason to believe prices will keep falling, especially now that the foreign investors are being driven away. Have incomes risen 450% to keep up with that? Don’t think so.

Because mansions in the best neighborhoods (where the median home price is about $5 million Canadian) were oddly being left unoccupied and deteriorating, Vancouver also imposed a one-percent surcharge on property taxes for houses that are not primary residences or are not rented out for half of the year in hopes of getting people to do something with those home in order to thin out the decay.

(The result of all this has been to push Chinese investment down to Seattle, Washington, causing the high-end home market along the US west coast to improve.)

Toronto, Canada, is as much a bubble as Vancouver. Doug Porter, the chief economist for the Bank of Montreal, told investors this past week, “Let’s drop the pretense. The Toronto housing market and the many cities surrounding it are in a housing bubble.”

Prices in that region have risen an average of 22% in just the last year. This is the fastest increase since the late eighties, which almost everyone in Canada will agree was another bubble, and it comes on top of pervious years of double-digit gains.

This is insanely bubblicious activity. Did incomes rise 22% last year? Do the math: When the cost of housing rises 22% in one year, and wages rise 2% and when the 22% is on a starting number that is maybe four times higher than the average annual wage that only rose 2%, clearly there is no more room for housing prices to rise … other than by foreign investment (now being curtailed) or further relaxation of credit terms. (Lest you think the latter is a realistic possibility, think how much you’d have to slacken credit terms in just one year to make the next year’s mortgages affordable.)

 

The housing bubble down under is probably going under in 2017, too

 

Australia appears to be trying to push its bubble higher in all the same ways the US tried leading into the Great Recession. Why? Because the Australian housing bubble is coming to an end, and what one does when that happens is loosen the strings on the net to cast a wider net. Thus, one member of parliament is now asking for banks to start giving zer0-downpayment loans. Been there, done that in the US; and the housing market collapse came shortly after.

When you have nothing down and little to lose, you walk away from your loan quite easily if housing prices fall. So, the end of the bubble comes surprisingly fast at the point.

The Australian housing bubble percolated along nicely all the way through 2016 with housing prices in Sydney and Melbourne rising fifteen and thirteen percent respectively in one year. Canberra and Hobart saw about 10% growth in prices. In Brisbane, however, where construction was soaring, growth has almost stalled. Vacancy rates have now doubled. Project approvals are dropping, so construction will begin to go down. Perth was the first major city to shift into reverse as it saw property prices slide downhill four percent last year. Smaller cities where the big money was coming from mining of resources sold to China are seeing even faster declines. They are not ghost towns, but it is the same dynamic.

One of the things the US experienced in its infamous housing bubble collapse was a lot of dishonesty in the loan approval process and the loan repackaging process that became necessary to expand the net after all possibilities of legally relaxing standards were exhausted. Now Australia is in the same place:

 

UBS Securities Australia reported today that about 28% of Australian mortgages issued in 2015 and 2016 are what we in the US have come to call “liar loans,” which played a big role in the housing boom and the collapse and subsequent bailout of the global financial system.

The last phase of a housing bubble needs liar loans to keep going because buyers have to reach beyond their limits, and the only way to do this is lie now, or miss out forever on buying a house to live in or get rich with quick as investor…. US-style mortgage fraud would be a “Nuclear Bomb” to Australia’s banks. (Wolf Street)

 

Much of this fraud has come from Chinese investors who falsely stated their income. With the Chinese running double books in China as well-known standard operating procedure, who would have thought they might have provided false data to Ausie banks? Increasingly, Australian banks are afraid to lend to them, so Chinese investment is falling off sharply.

 

Shanghai-based financiers claim their Chinese clients’ funding from Australian banks has been frozen and they face foreclosure – or usurious interest rates – from private financiers…. “All the deals have been frozen,” said Mark Yin, an agent with Shanghai-based Home Tree Group, about his Shanghai clients’ funding with Australian banks. “We are now looking for finance all over the world….” Billions of dollars has been invested in tens-of-thousands of high-rise apartments that are reshaping the skylines of the nation’s major capitals, particularly Melbourne, Sydney and Brisbane. Most have been sold off-the-plan, which means purchasers buy off the blueprint with a deposit and complete when it is built, which requires a second valuation and financing commitment by the lender…. Lenders, which initially fell over themselves to finance overseas’ buyers, slammed on the breaks when spot checks on the loan applications detected widespread fraud. The main problem is mainland Chinese buyers, which account for about half of the deals. That means many local lenders that agreed to provide funding when buyers made deposits, will not recommit upon completion. Nervous local lenders fear that a sharp downturn, or change of sentiment, could result in foreclosures with overseas borrowers they have little chance of locating. (Financial Review)

 

According to UBS, misrepresentation is systemic, and according to The Guardian, the housing bubble in some parts of Australia is “ready to hit the skids.” With things falling apart, the Reserve Bank of Australia started trying to make Donald Trump the scapegoat for the failure of its own cheap-money policies … before he was even inaugurated. (Don’t they have their own notoriously irascible PM they could blame?)

Trump’s policies may be inflationary, they whine. Wasn’t Australia’s central bank, like the rest of the civilized world, trying for the past several years to create a little inflation? Now their failures are because Trump is creating inflation?

The problem is that Trump’s talk of infrasture spending raised bond rates in Australia, too, which bleeds into mortgage rates. Interest rates are now rising outside the central bank’s control, just as they are here in the US, sending housing expansion into reverse. Market forces are wresting control over interest from central banks, so CB decisions to raise target rates at this point don’t amount to much more than catching up in order to maintain the illusion that they are still in control.

UBS also ranks Sydney as the fourth-most likely city in the world to experience the implosion of a housing bubble. (Vancouver tops the list.) Property prices there have grown almost fifty percent since 2012, while wages have stagnated. That assures it is a credit-fueled housing bubble, not a rise born of spreading prosperity.

How bad is it?

 

Example of the Australian housing bubble. This shack sold for a million dollars.

This Sydney house with its tiny sliver of land in a residential neighborhood sold for nearly $1 million in 2014.

 

That bad.

Jonathan Tepper — a US hedge-fund consultant who predicted the mortgage crises in the US, Spain and Ireland — claimed Sydney’s housing bubble was ready to burst in 2016 with a correction that could be as much as a fifty percent plunge. Stated Tepper, “Australia now has one of the biggest housing bubbles in history.” Was he wrong entirely about an Australian housing bubble crash or just a little premature on the timing?

Some developers (with their own interests to promote) say Sydney cannot crash because Australia’s population is still growing rapidly and will for another twenty year, but Sydney could still crash if the rise in values has more to do with years of speculation than with population growth, as rental rates would indicate. Prices will revert to what people can actually afford when speculation can’t go higher.

We know what happens as soon as speculative housing bubbles stop rising because they can’t find enough qualified fools (or enough cheap credit). Like all Ponzi schemes, the game is over immediately upon reaching the last tier of willing or able players. Where wages have stagnated for years, that happens as soon a speculators can no longer count on a profiting from reselling to other anxious speculators.

Higher interest disqualifies more participants. As in the US, Australian households are again already struggling under a huge debt load of $2 trillion Ausie bucks. That means a little rise in interest should shut the game down pretty quickly. That crane count over the skyline of Australian cities, which has outnumbered major cities in the US and UK, may start to look a little derelict in the years ahead, as rusting cables sway in the wind over half-finished, vacant monuments.

Stop! Don’t worry about that scenario right now. Individual banks in Australia have found a way to keep the investor pool growing even as central-bank cheap money has topped out — mortgage fraud. According to a report last spring, which was tabled by the Australian senate, many banks are falsifying applicant information in order to make applicants look more capable of paying than they really are. So, Australia is not just experience mortgage fraud from applicants, but also mortgage fraud from the banks making the loans.

You have to appreciate how much the Ausies learned from the United States’ play book where many banks in Florida ran the same game in the run-up to the Great Recession. Australia should be safe, though, because, according to the report, this is happening “with the full knowledge of Australian Securities and Investments Commission, the Australian Prudential Regulation Authority and the Reserve Bank of Australia.” (One has to wonder why they became so concerned about Chinese falsification, when others are going out of their way to create false applications; but such is the bizarre world of housing bubbles, especially when they reach their popping point and things get desperate.)

Philip Lowe, the Reserve Bank of Australia’s governor, tried last fall to blame skyrocketing home prices on a shortage of houses, rather than on the loosey-goosey interest rates of the national bank. Sorry, Pip, but if that were the case, rents would have risen parallel with housing prices; but rents have barely nudged upward for years. If there is a shortage of inventory, it’s only because you’re in a feeding frenzy of flippers, not because people can’t find enough shelter. It’s a speculative bubble, with everyone snapping up anything that flashes in the pond. Bite first, decide if its food-worthy later.

The last person we would expect to understand housing bubbles is a banker. Stay with the bubbles in your champagne flute, Phil. They’re the only ones you’re familiar with. The real problem is that years of cheap loans have enticed your people to amass the highest levels of household debt in the world! Do I hear a flush coming? But, hey, at least the RBA has set aside $300 billion dollars for its next bailout. So, you’re good, Australia … until round two. All bets are on the house in this casino.

Even ol’ Pip recognizes that one of the major reasons governments want immigrants is to keep pumping up the housing bubble. Lowe stooped to his name’s own level when he lamented last week that “the insidious” resentment that Ausies have toward immigrants, such resentment being caused by the overcrowding of Australia’s major cities. This could doom the land down under’s housing-based economy if people there start rejecting a major source of demand as is happening in the US. You see, the eternal expansion of overpopulation is essential when the only way to grow a housing economy is to grow population.

The solution, according to Lowe, is for the government to build more transportation infrastructure so the influx of people can spread out more. (Hmm, you mean take out more bonds, which will cause interest rates to rise just as happened because of Trump’s infrastructure plans? I guess Lowe likes the idea if it happens in Australia, just not when it happens to Australia.)

Hopefully, someday Australia will be one big city from coast to coast. Then they can start building islands (think how much infrastructure spending that will cause) to house more people in order to keep that real-estate-driven economy ever on the rise. (I ask the question, “Why do economies need to grow? What’s wrong with just sustaining nicely? Well, of course, they need to grow so that people can get filthy rich.)

How long can the game go on? According to The Sydney Morning Herald,

 

The forecasters are now saying 2017 will be the year that the housing headwinds could get stronger.

 

But The Herald also states that none of this points to Australia’s housing bubble bursting, but just to a little letting of the air out of the market. Ah, the perfect world where the air hisses out like a lazy snake. The problem with Ponzi schemes, though, is that as soon as the air starts coming out, the snake bites, and the whole scheme collapses. In housing that plays out as flippers stopping their investment because they get scary-close to not making money anymore. Some even start to lose money. Demand plunges as soon as the flippers stop flipping, so housing prices fall. That means mortgages go underwater.

All of that becomes a catastrophe when a nation has issued a huge number of variable-interest loans — as Australia has. When interest rise just as housing prices go down, owners cannot sell their way out of trouble as an escape hatch if they got in over their heads. The only way out is default.

Even worse are interest-only loans where speculators qualify for much more than they can actually pay for with loans that require interest payments only until a set date when a balloon payment is due. The flipper plans to sell the house into a rising market and see a big profit before that impossible event hits. The home owner who plans to stay counts on being able to refi at a more attractive interest rate once he or she has built up equity due to rising values. If they can’t? Australia has half a trillion dollars worth of these loans outstanding, comprising more than fifty percent of residential term loans.

Prices could just settle out if this wasn’t a speculative bubble of people buying and selling homes to make a quick buck in a rising market. But when prices have reached lofty heights largely because of rampant speculation, housing is likely to slide off a cliff when speculation stops and prices revert to what people can actually afford without all the baloney that pumped up the market.

 

Housing bubbles ready to burst all over the world in 2017

 

The countries I’ve covered here are no different than many others. I could as easily write about the UK housing bubble, which began to unwind last year. Barclay’s is now offering 100% loan-to-value mortgages — an obvious latch-ditch kind of effort to prop things along to anyone who has seen these things fall apart in the past. As with Vancouver, Manhattan, and Miami, London’s pricier neighborhoods have seen a decline of ten percent in value in the past year.

The Organization for Economic Co-operation and Development said at the start of this year that it now sees dangerous property bubbles in several of the world’s largest economies that risk a “massive” price collapse. It notes that New Zealand and Sweden are perched at even more precarious heights than the UK, Australia, Canada and the US.

All of this accelerating insanity has to be a top coming in. One can hope all these bubbles deflate slowly, but our experience with major bubbles says they don’t just fade. As soon as there is no greater fool qualified to enter the market, housing balloons in the US, Canada and Australia will likely implode. Likewise, elsewhere.

We have rebuilt almost exactly the same potential panic-inducing crisis that was just starting to show in 2006; only this collapse is likely to be global … all at the same time — probably starting this year and really falling apart next as contagion moves from nation to nation.

To keep qualified investors coming into this Ponzi scheme for now, nations have reverted to relaxing credit standards and the US back to deregulating banks because that’s the only way to expand to the next larger tier of fools. Same old story as last time. We’re doing this because we are so addicted to the idea of a housing-based economy as the only way to go that we bullheadedly keep thinking it has no top limit to its expansion.

We do this even though we have already experienced how quickly things go bad — very bad — when you reduce mortgage standards so much in order to rope the final round of people in. People go mad in herds, but only recover their senses one at a time, while voices of sanity pretty much talk to themselves.

For right now, the stampede in stocks and housing is still on; so don’t worry: a collapse is nowhere in site. We are no closer to a meltdown in either market than Fukushima was after a thousand earthquakes and a tsunami. If you don’t believe me, ask a banker.

 

Did anyone say housing bubble collapse?

 

Oops.

 

 

  • Becky Fay

    Globalization. First we offshore our good paying manufacturing jobs. Then we buy second rate goods made from cheap labour. They make money and come back to buy up our real estate. It truly is a conspiracy implemented by the 1%. Democracy and Decency is what is missing. Filthy lucre is going to be our undoing. I truly despair for north America.. I do not shop at Walmart or buy anything from China because it is your job I am protecting.

    • Well, I haven’t gone as far (yet) as not buying China, I have avoided Walmart all my life for exactly the reason that it puts mom and pops out of business and replaces them with lower-paying, lower-benefit jobs just so I can buy cheaper underwear. Forget it. The cost of seeing beautiful small towns replaced with strip malls isn’t worth the savings. I’d gladly pay more.

  • Chad Jones

    also small buisiness has been decimated as rents are so high its become difficult to even launch infto business and the govts solution is to lower wages and remove overtime rates … it has also launched into a welfare carve up reducing benefits for the poor.. meanwhile ceos are taking massive salaries . australia has copied americas greed driven capitalist globalist model and really ruined the lives and futures of all the working class yet has handed wealthy property investors free money by continually nurturing the property market… the result is brothels everywhere now and gang and drug explosions unseen in australia … now we have multiple shootings weekly previously unheard of and youth rioting at festivals robbing families … australia is hard to police as is is so vast so now it is becoming dangerous to travel as once before and its only the start as things are only now bedding down … greed has ruined the peace and u cant even study now as a degree can cost upto 100k and a basic certificate 10k …

    • “Australia has copied americas greed driven capitalist globalist model and really ruined the lives and futures of all the working class”

      That seems to be the path Europe is on as well where the bankers keep flourishing while the Greeks move into ever greater indentured servanthood. Of course, they brought that on themselves with their socialist welfare-state economy and their own lies about their financial condition when they entered the EU. However, the rest of Europe is constantly tightening the neck around their neck, rather than allowing bankruptcy to resolve an impossible debt problem.

      The protection of global capitalists and bankers is not so much something that comes from the US as it is the way of the entire world at this point, and the divide between rich and poor, which is yawning greater and greater is creating more social unrest, which is only going to grow. But globalism is also creating social unrest between those who think globally and those who think more nationalistically or simply locally.

      So, as it is going in the US and Australia, so it is going in Europe.

  • Chad Jones

    another major issue in australia is that they allowed millions of new units and subdivisions but didnt buld any new schools hospitals roads or power plants so now we have the worst traffic ever and constant power outages and a stupid govt blaming lefty environmentalists when it is basic maths … if u harbor 5 million new citizens u will need more schools roads and power plants … instead they just built move apartments here with no regard and now services cost triple and are lousy … and there is little support for renewable energy as it gets all the blame for rising bills. its just an utter joke of greed driven mismanagement and plunder in australia… sometimes i am ashamed to call myself an aussie..

    • Yeah, I live way up in the mountains in the US where they built a wonderful community for Russian immigrants that is the highest-crime ghetto in our county and that added all kinds of traffic to a highway that can’t be widened. All to keep the real-estate tycoons happy.

  • Chad Jones

    australian property wont collapse in major cities like sydney because the govt uses the “immigration tap” to simply bring in more buyers at will.. as soon as prices dip we see more migrants especially from china who are so savvy they are now buying into the best suburbs. originally chinese investors only bought in cheaper suburbs at ultra high prices now they are buying in blue ribbon areas so the govt wont allow these to collapse as it faces loosing its voter base so it simply relaxes rules and keeps letting chinese buy more to bolster prices. it is a tragedy of utter treachory that citys like sydney have sold their souls to foreign investors who just abuse the system. i dont expect a price collapse but i do expect a high crime spike and more small independant partys forming govt and possible social unrest and revolt because it is just crazy what theyve done to average aussie workers who now live in great poverty and hoplessness while chinese youth drive around them in new bentlys and maseratis… it is perhaps the greatest betrayal by a govt of its own voters in human history… an utter disgrace all to benefit developers and investors only

    • You’re right. Sooner or later, it will collapse in spite of those things, but who knows how long they can keep floating it with wide-open-door, super-loose immigration policies. Same thing has been happening for a long time in the US. (Of course, it was happening before the last housing collapse, so things can still go bad dad.)

      Without a doubt, that’s the number-two reason politicians of all stripes love immigrants. #1 cheap labor for their major donors in industry; #2 keep increasing GDP through housing and everything else where buying goes up with more population; #3 (depending on the party) increase voters for that party.

      It will lead to increasing social unrest and violence because they are importing people faster than people can get used to each other.

      • Chad Jones

        i hope it does collapse … im an academic who was studying as prices rose sharply… now i cant get in and the job market is so thin i cant save fast enuff… so a huge collapse makes me a winner.. if not im forced to leave sydney and probably immmigrate to eu as i have dual residency and just forget australia… im priced out of a life here now .. its a terrible sad shame for me but i rather leave than live as i do paying 1200 a month in rent for a small unit …

        • I felt the same way before the collapse in 2008. I had waited too long in a highly appreciating market to buy my first house, and so I was priced out of the market for the rest of my life if it didn’t collapse. As with you, downpayment were rising faster than I could save for. (If I’d bought at a younger age, I would have had something that appreciated at the same high rate as everyone else, making it possible to have a higher downpayment for the next home.) My only hope was if the market collapsed, which it did, and I’ve been fine ever since. It’s a great leveler.

  • steve jones

    I’m sorry you are getting more ignorant trolls these days commenting on your fine work, this time from one of my countrymen. He does seem very worldly though, for such an ignorant ass. The Aussie property bubble is particularly pumped up by the unique Australian “negative gearing” rort and capital gains tax discount. Nearly all investors down under are deliberately buying a “losing proposition” where rental income is far less than the interest costs on the loan. This loss they can deduct against ANY other income. They cling to the expectation of selling for a profit to the next greedy fool, while enjoying the tax deductions along the way, and then a discounted capital gains tax regime when they sell. Perversely, it’s actually a “rational” bubble for the reasons of these insane tax distortions…until the music stops, then it will be a bloodbath. Any talk of limiting rental loss deductions to the final selling price, or allowing it to continue for new houses only, is quickly howled down by almost everyone. You see the majority are either in on the scam, or just too stupid to realise their inflated house price does not make them richer. Rather it makes their kids poorer.

    • I’m glad that, in the process, I’ve learned that a lot of the people who post here are your countrymen. I knew some were but was surprised to find how many were. Nice to know there is a strong Australian connection (along with a rather staticky one that connects via Jakarta).

      It’s interesting how the decade of “recovery” is full of people voluntarily taking losing positions, such as giving banks their money and paying them to hold it by buying negative-interest bonds. It’s my money, but I pay you for taking it off my hands for awhile.

      Didn’t know Australia had figured out a way to do that with property, too!

    • steve jones

      I forgot to say, virtually all Aussie politicians have multiple negatively geared properties. Half of them also use these properties to rort the parliamentary allowance system. I’m not kidding, recently one was sleeping in his colleague’s garage and claiming the enormous nightly allowance. Down here we have our own style of corruption, luckily it’s chump change compared to the US entrenched corruption.

  • steve jones

    I’m sorry you are getting more ignorant trolls these days commenting on your fine work, this time from one of my countrymen. He does seem very worldly though, for an ignorant ass. The Aussie property bubble is particularly pumped up by the unique Australian “negative gearing” rort and capital gains tax discount. Nearly all investors down under are deliberately buying a losing proposition where rental income is far less than the interest costs on the loan. This loss they can deduct against ANY other income. They cling to the hope of selling for a profit to the next greedy fool, while enjoying the tax deductions and discounted capital gains tax regime when they sell. It’s actually a “rational” bubble for the reasons of these insane tax distortions.

  • Peter Harris

    I see, more bigoted, racist and sociopathic dribble, from the Alt-right.
    And isn’t always the case, that the members of the alt-right, are not the sharpest tools in the shed when they make their arguments.

    lets go through a few points here.

    For a start, we are Aussies, and not Ausie. It’s Aus-sie, you got now?
    And this gave you away, as a bigoted fool, and who is totally uneducated.

    “…want immigrants is to keep pumping up the housing bubble. Lowe stooped to his name’s own level when he lamented last week that “the insidious” resentment that Ausies have toward immigrants…”

    If he stooped to be “low,” then it is not spelt with an “e’ at the end.

    Do you know the difference between, “there” and “their?”

    “…resentment that Ausies have toward immigrants, such resentment being caused by the overcrowding of Australia’s major cities.”

    What proof have you got of the so-called resentment?
    And, do you really believe that immigration is to blame for the overcrowding of our cities??
    You know nothing about Australian geography and demographics.

    It has always amazed me that, America, being the richest and most well resourced country in the history of the human race, could churn out such feckless and gormless ignoramuses.

    But as the rest of the world knows, you cannot stay on top of the heap for ever, when you are that stupid.

    “Make America great again.”
    Yeah, that’s like saying bring back the Dodo bird.

    Here, we have a saying you that you might want to look up.
    The phrase is; “dropkick.”
    Check it out.

    • “Resentment” wasn’t my word. That was your low banker friend Lowe’s word. So, it is your own central bankster who according to you knows nothing about Asstralian (Did I spell it right in your case?) demographics because the argument that Aussie resentment of immigrants in overcrowded cities could hurt Australia’s housing market was his. (By the way, learn how puns work. They usually work as homonyms spelled differently. Do you know what a homonym is? Or is your head too far up your Aussie to hear how the words sound the same?)

      And to my Australian friends, you know I think Australians are great. It’s just the Asstralians that I’d like to dropkick. By the way, Petter, did you know that the word “dodo” in “dodo bird” is not capitalized because it is not a proper noun? But then what would a dodo know about grammar?

      • Peter Harris

        Thats hilarious.

        You do shake your head when you debate these morons on the far right.
        And you do feel sorry for them, like you Dave.
        Because you make a point about their feckless dribbling, and how do they reply?
        Well, with more feckless dribbling.

        If you, and your fellow Alt-righters, put just a modicum of effort into debating the points I’ve raised, then you may (yes, may) start getting taken seriously.

        However, you only have enough intelligence to dog whistle and a repeat Alt-right Chinese whispers, and your own style of fake news.

        Now, the phrase “Alt-right,” is that a “proper” noun?

        And if so, do you put a capital “R” in the word right too?

        Please advise, as it appears you you don’t have the brains, or the balls discuss anything else.

        • I’m glad to see you picked yourself up, Peter. Once you finish dusting yourself off — because you look a little foolish — perhaps your grammar and demographic lessons would be better taught to your central banking chief, who is apparently completely ignorant about Australian demographics and, thus, should have done a little more research before he spoke about the growing resentment he believes Australians are feeling toward immigrants and about how it is going to crater the Aussie housing market. If you school him, as you are fond of doing, perhaps he will stop publicly misrepresenting you.

          Technically “Alt-right,” as you’ve put it, is not a phrase but a hyphenated word, and when you WRITE “the word ‘right,'” the word “right” is supposed to be enclosed in quotation marks or italicized, as you are speaking of the actual word. Thus, I used the word “dropkick” in quotation marks when referring to the actual word, but left the quotation marks off when talking ABOUT a dropkick. Sort of like this: “‘Fat’ refers to Peter’s head” versus “Fat is the substance of your thoughts.”

    • Recyvuym

      Dear Christ man, leave that poor strawman alone. Dave doesn’t support Trump, and this isn’t ZeroHedge. And I don’t know what country you’re from, but here in Australia where I live, anti-immigration sentiment is pretty god damn strong. Have you seen the support Pauline f’ing Hanson is getting these days? Do you look outside right now and notice a whole lot of people protesting in the streets about how the guards in Nauru are getting a government mandate to rape women and children? Please pull your head out of your ass, and then take your high horse and your partisan dribble, and ride off into the sunset never to be heard of again.

      • Peter Harris

        Ha ha ha ha.

        Hey Dave, you need an alias to attack me??

        As I’ve said before, you Americans are all piss and wind, and no courage

        On the “nutter” scale, this website gets weirder and weirder.

        • Recyvuym

          … an alias who has consistently commented on these articles for months, including having disagreements with himself over whether the US is going to war with China?

          https://disqus.com/by/recyvuym/

          Are you a brain-damaged chimpanzee, or is this just your first time using the internet? Because you’re doing a terrible job of it either way. I’m not saying you should stop or anything. By all means, continue talking to me. It’s been very entertaining so far.

          • Peter Harris

            Give it up Dave.
            Don’t you look Gila enough already?

            • Recyvuym

              I can’t believe your response, when presented with evidence you were wrong (seriously, click the link) was to hunker down and insist. Was there anything else you wanted to add to this embarrassingly public tantrum, or did you want to tell us all about how 9/11 was the Jews next?

            • Peter Harris

              “…when presented with evidence…”

              A relatively new Disqus account is not “evidence,” in fact it proves my point, and your desperation Dave.

            • Recyvuym

              … all right… you got me, Detective Harris. I don’t know how you did it. But darn it, you figured me out.

              Yes, I’m really Dave. Months ago, I got so bored and lonely that I created an account just to talk to myself with, and convince other people that others read my blog. And it would have worked, if not for you kids, and your damn dog too. How could I have predicted I would meet my downfall in the exceptionally intelligent social justice warrior Peter Harris, come to right all the perceived wrongs of the blogsphere!

              You’re pretty crafty, but that’s all right, because you’ll never guess who was REALLY on the grassy knoll the day JFK died… keep digging, my friend, you alone can solve the conspiracy…

            • Peter Harris

              As a practising Psychologist, reverse psychology is wasted on me.

              Again, nice try… No, not really.

            • Recyvuym

              Oh my god, tell me you’re not really this stupid.

              I mean it might be reverse psychology or… maybe I was being sarcastic.

              And I might be Dave, writing this at 1am US time, or I might just be some other guy who visits his blog and happens to agree with him about the impending economic collapse.

              But please, your thoughts have been so… um, compelling. Do elucidate. Just how did you figure out I was Dave?

            • Peter Harris

              …writing this at 1am US time…

              You forgot to add, the bottle of Jack Daniels, and the instant grits, straight out of the packet.

            • Recyvuym

              Right whatever, but we’ve already established you know I’m Dave, what I’d like to know is HOW you figured it out.

              Because at the moment it almost looks as though you just… pulled it out of your ass, or something.

              I mean, not that you would ever do that or anything.

              I’m happy to keep this going as long as you would like by the way. If anyone finds this half as entertaining as I have, it was worth it. For my part it never ceases to amaze how the internet manages to produce such fine specimens of human intelligence, and so routinely these days, too.

            • I know I enjoyed it, but then I’m one of us.

            • Recyvuym

              My only disappointment was that he stopped so soon. It’s a rare and beautiful thing to find a troll who’s so willing to humiliate himself out of the argument. I didn’t even really have to do anything.

            • I know! It was like autopilot. Put a nickel in him and watch him go. Ah well.

            • He looked in the mirror, saw you looked just like him and that he also looks just like Dave. In his own mind, he thinks the vodka was Jack Daniels. (I guess how it is perceived depends entirely on who is out when the bottle is out.) It suddenly dawned on him while my personality was out and writing above that he is just arguing with himself in the night. We can all sleep now.

            • “As a practising Psychologist, reverse psychology is wasted on me.”

              That explains a lot. I would advise, “Physician, heal thyself. Reverse thine psychology and apply it on thine self.” In the very least, keep practicing. Practice makes perfect. Or did you mean “As a practicing psychotic?”

              (By the way, “psychologist” is not capitalized either, no matter how important you feel you are.)

            • Peter Harris

              You really are a sad and pathetic soul aren’t you.

              You have a shallow and inane way to debate your talking points, which is peppered with gross hypocrisy.

              So typical, of those of your ilk.

              Also, typical of your type, you display synthetic bravado, to disguise your cowardice.

              You allow your attack dogs to take me on, in the form of trollets, because you don’t have the brains, or the balls to take me on directly.

              And the alias to attack me?

              So childish, and pathetic.

              Are you going to answer my previous questions I put to you?

              And like your laughable attempt, to defend Donald Trump’s “record” crowd turnout at his inauguration, you are also wrong about your basic punctuation and grammar.

              The word psychologist can have a capital letter, as if it’s used as a title, like the word Doctor.

            • Hi, Troll. Glad you chose to hang around.

              You weren’t using “psychology” as a title. Perhaps you didn’t notice that. You said, “I am a practicing Psychologist,” not “I am Psychologist Harris,” just in case the self-appointed Grammarian-in-Chief (That would be you, in case you are confused.) was confused about how to use it as a title.

              Unless you’re a lab psychologist, I say, “Keep practicing” because I don’t believe you are a psychologist. You don’t have the necessary people skills. You, after all, are the one who began your rants in a vitriolic manner. I just decided to have fun and join in the sparring, figuring if that’s the way you like it, let’s go for it.

              So, hang around. Me and my various alter personalities enjoy it. Naturally, though, there are few things a troll hates more than being enjoyed. The education in how trolls operate will be good for all of us — me, myself and I.

            • Peter Harris

              Huh?
              JFK is dead?
              Someone told me he was living out his retirement, on a farm in south west Tasmania.

            • Dang! Now even I’m confused. I always thought I was Dave. Still, you’ve been doing great as a stand-in, Rec, while I got back to writing my next article (where time can be more productively spent). To my other alter-egos here, likewise, because you are probably all figments of my imagination.

              This just in: we are all figment’s of Peter’s imagination, and he’s actually the only one sitting somewhere and writing on a computer, arguing with himself. Alas, he sits in his underwear swilling vodka all night and looks for anything he can find to bark at between looking at his lady-boys on the internet (if Steve is on to anything) and having deliriums.

            • Peter Harris

              “…you want to tell us all about how 9/11 was the Jews next?

              No, it was Bart Simpson, yes?

            • Peter Harris

              Or, maybe Khloe Kardashian?

    • steve jones

      Do you live in Melbourne? I worked for a very nasty piece of work with the exact same name as yours.

      • Peter Harris

        A troll, who cannot read.

        • steve jones

          I didn’t read all your drivel, but yes I saw you like your lady boys in Jakarta.

          • Peter Harris

            If you are trying to get a rise out of me, you are wasting your time.
            You have just confirmed my first comment.

            • QEternity

              You’re a eunuch?

  • Recyvuym

    Well David, now they’re shouting 15th of March, because that’s the date Trump has to raise the debt ceiling and supposedly, the Democrats have an opportunity here to force a governnment shutdown. I’m not sure whether that’s quite how this ship is going down. But at this point I would welcome it, because come on. Enough. Just crash already.

    I was thinking we would see these bubbles begin to rupture back around December. There were so many signs indicating they would. Yet we all watched in astonishment as housing prices here held, and US stocks continued to soar, and suddenly, overnight, virtually every important businessman in the country woke up with amnesia and dementia, and decided the economy is in top shape. And it seems this sheer faith alone is all that’s kept things going, in sheer defiance of reason, common sense and reality itself.

    It is surreal to me now to visit my father, who’s a financial advisor. I overhear him talking to clients on the phone, telling them it’s only a matter of time before the next big stock market crash. That the construction market here in Australia is rapidly becoming unprofitable. That most of his associates within the industry are also hitting the panic buttons. Most of my friends have also accepted that we’re entering rough waters. We are now only sitting back and watching just how high the roller coaster will climb before it goes over the edge. Yet somehow, over in the US, there has developed this narrative that the roller coaster is going to just keep going up and up and up forever, and wipe out all the debt and lift all the sorry peoples of the world to riches along with it. So. The Ides of March? If I only have to put up with this delusional garbage that much longer, I promise not to breathe a word of complaint at all the miseries of the new Great Depression.

    • While Stockman thinks the fifteenth will be the trigger, I don’t think there will be any intentional government shutdown as a negotiating tool (like we have seen in the past) because Democrats have always been very disinclined to do that, and Republicans got burned when they did it in the past. They found out it didn’t go over so well, even with many of their own constituents.

      They may, however, wind up in such a stalemate that they just can’t find their way to any decision. So, I think some form of breakdown could happen then (probably solved by some stop-gap that keeps the government running via IOUs to social security, etc.).

      I feel like the sooner it crashes the better because its inevitable, so stop propping it up at the cost of future generations and stop pushing off the pain only to create a harder crash the longer we wait. (Not sure it can get any harder than its going to be now, though. We’ve been pushing the snow straight ahead for almost a decade, we’ve got an immovable pile in front of us It’s amazing the plows are still inching it along.)

      Interesting to hear that your father is now joining in telling of a big Australian stock market crash. Given your “surreal” note, it sound like he, like most financial advisors, is usually prone to tell investors that the bull is going to keep raging. Even more interesting to learn that he sees most of his associates as hitting the panic buttons.

      Must feel a little like watching the tsunami starting to rise into the streets of the village and wondering how far the water is going to keep flooding in. Where is the high the ground that’s high enough to help?

      Definitely different than over here where you have a few like myself who are ringing the alarm, but where almost all of the big gurus are still saying there could be YEARS of good times left ahead in this market. (So they said last time, too.)

      Maybe the Ides of March for you. I’m don’t know enough of the Australian picture to know if the wheels will fly off the roller coaster that soon or not. Over here, I think we’ll feel the wheels start to vibrate, but they’ll just vibrate worse and worse but not come off for a few more months. Still, there are so many things in severely bad shape this time with the whole structure of the roller coaster that the structure may come down before the wheels fall off, or the lap belts may all tear out and jettison everyone.

      Can’t even tell this time which sector is likely to go first. Last time, it was obvious to me that housing was going to take everything down in short order and that the banking crisis that would develop from that and the stock market crash that would develop from that would take the rest of the world down. Now all the parts looked cracked, so it’s anyone’s guess as to what goes first.

      –David

      • Recyvuym

        I’m not sold on the Ides of March either, though it would be fitting for the second wave to hit exactly 9 years and 6 months after the first one did. But every time we’ve been primed for the big collapse moment, including Brexit, the Trump election and then inauguration, and even the Italian Referendum… nothing has happened. So I’m not betting on the 15th. More just hoping, so we can get this over and done with, and so the crash isn’t as bad as it will be if this pattern keeps up.

        My dad is saying he doesn’t know when it will happen, but it obviously will. It’s surreal not only because, as you say, he’s usually bullish, but also because he spent much of last year assuring me it wouldn’t happen. He is prone to changing his mind. It was he who first clued me in to the fact the GFC isn’t finished, not long after it supposedly wrapped up. At that time, being Australian (we technically avoided a recession), and not long out of school, it was only in the periphery of my awareness. We also both came to the same conclusion separately that the Italian Referendum would spell doom for the entire European banking system by the end of 2017, and are now watching it unfold more or less as expected.

        But I can’t tell which foundation is going to fall first either. Technically I suppose there’s nothing to stop the US from crawling on for the rest of the year, perhaps even longer. But my gut is telling me we’re either in the shallow end of it already, or we’re very close now. Compared to six months ago, this notion has become virtually mainstream, and a lot of prominent collapse figures are now sounding the alarm. As James Kunstler said in his most recent article, where he also predicts 15th of March as a crunch point: “Enjoy the remaining weeks of normality.”

  • QEternity

    There is a significant divergence between the direction of stocks, and the direction of interest rates. I believe rates in Germany are now a Negative 1%! Here in the US rates have been backing down. And one of the best and longest “calls” on interest rates, that of Lacy Hunt @ Hoisington, has not changed his tune that the direction of rates is still down. No one has been more correct for longer on rates than he has so far.

    The process of the Fed is to raise rates until the “break something” like the economy. It may only take another 1/2% to break it all as things show signs of slowing around the world, while hopium still runs rampant around the Trump reflation.

    Time is still ticking. we don’t know which event lights the fuse, however we know the fuse is just waiting to be lit.

    • Yes, I’ve seen the German rates, too, as well as the reveals of US bond rates. I haven’t seen it start to bring back down mortgage rates yet, but it probably will shortly IF the Donald’s plans of massive tax cuts and infrastructure spending get put off as he said in the past couple of day they would … in order to focus on Obamacare, which turns out to be much harder to change than the thought it would be (by his own admission). However, even if they are turning around on their own because they only started rising due to Trump’s plans (now delayed), the Fed will likely continue along its path of trying to raise them. I wouldn’t be surprised (though I’m not predicting it) if they raise them in March and in June, which will give you that extra half of a percent you’re talking about in late June.

      Aye, we don’t know which event lights the fuse for sure, but we do know there are a lot of fuses with matches sitting right next to them (as I’ll be laying out in the days ahead).

  • Chris P

    Dave
    Thank you very much for showing the common sense articles that we can never find anywhere else. You make a great case for another reason why the govt. wants more and more immigrants to come and keep our crappy housing market alive. I don’t want you to get to big of a head but I really look forward to your articles. Keep up the good work. Thanks Chris

    • Oh, you don’t have to worry about my head getting too big, Chris. There are plenty of people on the other side of any issue I take who are more than ready to help deflate it. No shortage of willing volunteers.

      • Let me add, just look at the conversation that quickly came my way above (and below) to see what I mean.

  • John

    Restriction and deportation of excess “migrants” would reduce housing costs for young Americans priced out of the market, increase their job opportunities, cut expenses for welfare and crime control, and help reverse the demographic destruction of American society. Most countries, including Mexico, don’t welcome foreign workers who compete with local labor. Why should the US be any different?

    • I agree completely, and I’m for such changes; but none of that changes the math as to what effect it will have on the housing bubble. One of the things about my writing is that I choose to do my best to see reality and not see what I want to see. A gradual change toward the end-point you’re looking for there, John, could be adjusted to; but it appears we will be looking at a fairly rapid change, and that will hit housing in negative ways (that are good for young first-time home buyers) in a big way IF Trump carries out his plans with the alacrity he has promised.

      It will also be devastating to many industries if it happens quickly because wages have been suppressed by the enormous pool of cheap migrant labor that both parties keep available for their cronies for so may DECADES that the shift in costs would be quite upsetting and extremely hard to adjust for.

      If you undo decades of economic suffocation in a single year, industries will reel, and markets (commodities and stocks) crash because industry cannot shift gears that fast. For example, farmers won’t be able to find replacement pickers fast enough because kids today and their families have moved away from working the fields in summer, so their crops will rot on the vine. Even if they can, their products may not sell because of sticker shock due to what it would take in an increase to picker to entice enough new ones in fast enough.

      So, while I’d love to just jump into the world you talks about, a leap would be devastating to many industries, but particularly to housing, given that a third of demand for new housing comes from immigrants.

      It is one of those things that “is what it is.” It’s just math. Change demand that extremely in a very short time, and markets crash, rather than adjust.

      –David

      • John

        A collapse of the housing bubble is short term pain for long term gain. Likewise with out-of-control migration, tuition costs, healthcare costs, offshoring, etc. The US is facing a “lost generation” of people in their 20s and 30s with bleak prospects for career, home and family formation. We simply can’t afford to wait for a “gradual” correction to these structural problems any longer.

        • Indeed. Liberal Democrats have completely sold their children’s and grandchildren’s future life to pay for their own generosity to the poor, disabled, etc. Republicans have completely sold their children’s and grandchildren’s future life to pay for their strength in building largest military on earth and endless nuclear bombs. It is high time we deprive ourselves of EVERYTHING (including the opportunity to feel like we’re generous to the poor and disabled) unless WE ALONE pay for it.

  • jakartaman

    So what are you trying to say Dave – ha
    If I want to be a contrarian I would say – ya housing prices go up and they go down.
    They are up now and will go down maybe soon – so
    When we start talking about the 500 trillion dollar derivative crash – then we all can panic!!

    • What I am saying is that we have MANY reason to expect a crash this time around, not just one. There are a lot of headwinds building against an economy that is already designed with flaws in it. So, if it is not a bond crash, it will be a derivatives crash. if it is not a derivatives crash, it will be a way over-priced stock-market crash. If it is not a stock market crash, it will be housing crash. If it is not a housing crash, it will be bank failure due to break-up of the Eurozone. Etc. As you start looking at all the kinds of major crashes that waiting in the wings it becomes “inevitable” that a grand collapse is coming soon.

      No matter which thing actually crashes first, it’s going to be huge because a major failure of any one of those will most likely cause some of the others to crash since they are teetering already. This housing crash, alone, has the potential to be far worse than the last one by being global. That gives you a sense of the scale of what will happen no matter which piece falls first when any one piece is enough to do great economic damage.

      (The disadvantage of dividing up my headwinds article is that you get less of a sense of how many things are ready to go wrong all all once.)

      • Frank Muller

        I live in perth/western australia ,renting at the moment ,watching the bubble burst live.
        Prices coming down for sale and rents too,but the gurus telling us its only a small cycle.
        I don’t think so,the thing here is, government still gives handout (free money) to home buyers trying keep the bubble going.
        If doing so even more properties flooding the markets ,

        frank

        • Peter Rayner

          I also notice that the WA govt is trying to prop up the housing marketing over there with a $5k boost to the first home owners grant. I live in Sydney and trying to find a new rental for my family and can’t believe the rent prices in the regions I wish to live.
          I’m really hoping for interest rates to rise so that investors dump there stock and run for the hills. This may reduce prices so I can buy a house for my family to live in. The Liberal government should remove all property incentives so that the house of cards come crashing down!

          • That’s the same position I was in, and I was glad for the real estate price because prices had been climbing into the stratosphere for so long there was no way I was ever going to find a way into the market, having not gotten in sooner so that I could have had something appreciating right along with the rest of the market.

            The housing crisis in the US brought things back down into reality where a person could afford to buy a home without absurd terms of credit. So, we were able to buy a beautiful 40-acre farm in the mountains. Originally priced at US$825,000, it had come down to a more respectable $525,000, and we managed to talk the fatigued seller down another $100,000 from there so that we could get the place.

            So, what is terrible to some who bought into the market late, is a huge relief to others who were priced out by the frenzied speculation. Your time will come. When the crash happened here, it took about two years for houses to find their bottom. So, you may have a bit of a wait.

            Use the time to position yourself so that you have the downpayment, credit rating, income, etc that you need in order to buy (if you haven’t already), and you’ll be ready when you see prices have started very slowly rising for several months to jump in, knowing the bottom is likely in.

            –David

        • Thanks, Frank, for the on-location view. When I was living in Hawaii just before the Great Recession hit, I had a conversation with a resort real-estate agent who also said the downturn that was happening in Hawaii in 2007 was just s short cycle. He argued like I was an idiot because what I was saying didn’t fit his agenda. Real-estate, you know, never falls. It just has slack times.

          Oops.

          • QEternity

            I do have to add I have a friend who owns/rents some very high end condos in Hawaii. when it all cratered, the “value” of his condos dropped by almost 1/3. Yet his rentals only fell off for a little while. Over the last few years the “value” of his condos are pretty much what they were when he bought them, and rentals are up. Will it stay that way? who knows..

            • I wonder if I know him from my property management days. Shoot me an email if you like. Probably not. There are a lot of people there, but you never know.

      • jakartaman

        Thanks
        I also have known (in the gut) that the big one was close.
        You, By putting the intelligence and data together have shown that it might be the housing market that will be the straw –

        • Well, you know, Jakarta, in the present situation there are so many straws, I think any one of them you pull out might break the camel’s back.

          • Peter Harris

            “Well, you know, Jakarta, in the present situation there are so many straws…”

            Oh, i see, you are a “property manger” in JKT too??
            Do tell.

            • No, but I do have a farm, so I know straw.

              I know nothing about Jakarta at all; but this article also said nothing about Jakarta at all. For all I know, Jakarta is the one place on earth that will escape every turmoil known to human beings. But do I have to know something about Jakarta to write to someone who has “Jakarta” in his name and who, if I recall, does live in Jakarta?

              I’ll let him represent what is now happening in Jakarta.

            • Peter Harris

              “Well, you know, Jakarta, in the present situation there are so many straws…”

              It would appear from that response you do know something… Or claim to know something.

              “For all I know, it is the one place on earth that will escape every turmoil known to human beings.”

              Again, not true.

              Look at the history of Jakarta, and the conflicts between the socio economically disadvantaged Javanese, with the more affluent Indochinese.

              I’m just curious, seeing as though i live in Jakarta.

            • You are not a careful reader, but that is typical of trolls. Read to attack, not to to try to understand. If you were more careful, you would have seen my reply was addressed to someone who calls himself “Jakartaman.” I regularly uses shorter nicknames for people here. I have never written about Jakarta and have never been there. You are welcome to tell us anything you want to inform us of about Jakarta.

            • Peter Harris

              Oh, it’s so easy to call me a troll… sooky sooky la la

              Like pointing out, that there is rice in a Warung Nasi?

              It seems that its you, that has not read carefully, otherwise, you would not of made those remarks about Jakarta.

              This was an indirect consequence of the Asian financial crisis.

              https://en.wikipedia.org/wiki/May_1998_riots_of_Indonesia

              And today;

              https://www.theguardian.com/cities/2016/nov/25/jakarta-chinese-indonesians-governor-ahok

            • Indeed, it is exactly that way.You look at a rice paddy, you see rice, you say, “Look, there is rice.” You look a troll, you see a troll, you say, “Look, there is a troll.”

              I now think I am arguing with a blind troll, as I have never made any remarks about Jakarta in my life, other than to state above that I know nothing about it. Apparently, even with my guidance, you were unable to discern that I was never writing about Jakarta; I was writing about this article, which never references Jakarta, and addressing my comments to someone named “Jakartaman,” who was also not specifically writing about Jakarta but about the global economy overall.

              If you’re referring to my reply to you where I said, “For all I know, Jakarta is….” surely you know that when someone leads off with “for all I know …” they are not intending to list facts. I was really saying, “For all I know, Jakarta is the most solid place on earth economically.” I could have just as easily said, “For all I know, Jakarta is an economic hell hole.” Because the point of the expression is to say it could be one extreme or the other, and I wouldn’t know. I chose to go for the positive possibility. My mistake apparently.

              Such inane attacks over nothing are a troll’s second nature. So, yes, I see a troll rooting around in the rice paddy.

            • Peter Harris

              Ha ha, so a rice paddy, is the same as a Warung Nasi?

              Oh, and rice paddy is an American term.

              Sticks and stones.

              You Americans are all piss and wind.

              But enough about Jakarta, get back to answering my previous question, regarding the intelligence of yourself, and other Americans.

            • QEternity

              I get the impression your synapses are just not firing in the right order.

              You claim to travel, so get out of your troll bunker and get a little sunshine in your eyes. You might actually feel better.

              Seriously, trolling is so… so… juvenile. If you have something to actually debate, please do so. Dave is a pretty good debater, and i’m sure he’d love to do it with you. Trolling is just petty, childishness.

            • If I only had the time for trolling. I get so little fishing in these days, but it looks like the best I could hope to catch is something toothy and slippery. You spend a lot of time hauling it in and then have to throw it back anyway. I am afraid that, for those who are hammerheads, everything looks like a nail, so it wouldn’t matter what I said anyway; he’d hit it and go the next one..

              Alas, I have to get back to writing for those who can read. Not a lot of value entering a debate when the firing order is messed up.

            • Peter Harris

              “Trolling is just petty, childishness.”

              Yes, which you have clearly demonstrated.

              The hypocrisy award of the week goes to QEternity.

              Speaking of brain physiography, try using your Prefrontal cortex, rather than your Limbic system

            • There you go with the unnecessary caps again. For a grammarian who believes it is his job to school others, you sure miss a lot of beats.

            • There you go with the unnecessary caps again. For a volunteer grammarian who believes it is his job to school others, you sure miss a lot of beats.

            • Peter Harris

              More deflections dave?

              “you sure miss a lot of beats.”

              Speaking of which, are you going to saddle-up, and answer questions?

            • You said something somewhere along the line about having presented an argument. If you did, I didn’t see it. All I saw was your immediate declaration about how stupid Americans are. You have your opinion, and you’re welcome to it, as it doesn’t make any difference to me what you think of Americans.

              I can’t answer for the other 360,000,000-plus Americans, anyway, only for myself. Judging from the stock market, I’d say there is a fair number of stupid ones.

              Got your phone call from Mexico. Wrong number.

            • Peter Harris

              “I can’t answer for the other 360,000,000-plus Americans…”

              I’m starting to feel sorry for you.

              Its not 2025, just yet.

              http://www.worldometers.info/world-population/us-population/

              I would of used the official US Census Bureau’s website, but it appears to be down.

            • QEternity

              I stand by what I said. Your synapses are not firing in the right order. Sane people don’t spend their lives trolling others.

            • Peter Harris

              “Your synapses are not firing in the right order.”

              And i see you are still using your limbic system.

              “Sane people don’t spend their lives trolling others.”

              Are you being ironic?

            • Recyvuym

              Whoa, this guy’s still here? Hey! Hey buddy! Peter! Mate! We never finished our conversation, from before! Remember? Remember that conversation, Petey boy? Why did you just leave? You were going to tell me how you knew I was Dave, remember? You left me hanging, bud! How’d you do it? I mean anybody else would assume you just pulled it out of your ass, but I know you must have had some clever trick. Tell us mate! And while we’re at it, how did you guess your mailman was really Elvis Presley? Oh and have you figured out this isn’t a pro-Trump or alt-right blog yet?

            • Peter Harris

              “Whoa, this guy’s still here?”

              More irony? “-/

            • Recyvuym

              Um, no, Petey. This is my blog, remember? Because remember how you figured out I’m Dave? So it’s not ironic for me to be here at all, is it?

              In fact, even if I wasn’t Dave, it still wouldn’t be ironic, because I’m a regular here.

              But all this is besides the point – you were going to tell me how you knew! Go on. We’re all waiting. 🙂

            • Peter Harris

              For you, i suggest a course of Quillivant.

            • Recyvuym

              Peter… mate, if I didn’t know any better, I could almost swear you were doggedly avoiding my question.

              But you’re not doing that, are you? I mean why would you. Unless…

              Unless you really DID just guess that I’m the author of this blog. And unless you were also… wrong…?!

              I’m sure that’s not the case, but my point is, it’s starting to look that way. And it’s just, if everyone assumes you’re making shit up, well I don’t mind to pressure you or anything, but we would all definitely laugh at you really, really hard for being a total tool, if that were to happen. And you would, in fact, be a total and utter tool, caught with his pants down.

              But don’t worry, my friend. I’m sure you would still be welcome to hang around if that were the case. We could all use the comic relief.

            • Peter Harris

              Knave_Dave Mod Recyvuym • 4 months ago

              “This is a good morning in the reply section. Good thoughts and good questions. (It probably helps that I’m also eating left-over pizza for breakfast ;)”

            • Recyvuym

              Uh… was that supposed to be your proof or something? Wow, you’re really digging for scraps there, aren’t you mate?

            • Peter Harris

              “Uh… was that supposed to be your proof or something?”

              In addition to what i have already stated.

            • Recyvuym

              What you already stated was that I’m Dave. That’s it. You just… said it.

              I’m not even sure anymore whether this is funny, or just sad.

            • Peter Harris

              “What you already stated was that I’m Dave. That’s it. You just… said it.”

              What, can’t you remember, or can’t you read?
              Maybe both.
              And how come you predominantly only comment on this Blog?

            • Recyvuym

              Hm? Sorry Peter, did you just Google my username in some (predictably) shitty attempt at doxxing?

              Well, the answer to your question is I generally don’t use the internet very much, and I make an exception for this blog, Wolf Street, and FutureTimeline, where you will find I have been consistently claiming I am Australian for more than a year.

              But if you still want to push this angle of trying to prove I’m David Haggith, please continue, because I simply cannot believe how dumb you are and I am laughing my ass off right now. Anyone want to take bets on how long this tool will keep it up? I’m fielding three more days before he finally realises his life has no meaning and sinks into a long and well-earned coma.

            • Now I’m laughing out loud. Good thing I wasn’t drinking coffee, or I’d have to clean my screen.

              “Sorry Peter, did you just Google my username in some (predictably) shitty attempt at doxxing?”

              Why not? Peter o’Tool here called me from Jakarta (so he says) using a Mexican phone number. Simply said, “Wrong number” in his Aussie accent, then hung up. Poor guy doesn’t know where he’s coming from.

            • Recyvuym

              Man, this would have to be the funniest conversation, on or off the internet, that I’ve had in at least a year. I have saved it to my laptop (names and such removed) and intend to show all my friends. I’m half tempted to post it to r/cringeanarchy, which ordinarily is too mean-spirited for my tastes, but in this case…

              Peter should be proud, he’s bringing mirth to people’s lives. In fact, if he’s happy with the way he’s conducted himself here, maybe he should show his friends too. Every time I thought he was done, he kept coming back for more punishment. Like an 8-year-old deliberately shitting his pants in class, he doesn’t seem to mind whether the attention he gets is positive or negative, as long as somebody’s looking at him.

              He has now claimed to be from Jakarta, Mexico, Australia and Indonesia (kampung?!) I can only assume he’s realised how thoroughly he defeated himself here, and now he’s playing it off like it was all self-deprecating humour from the first, and we’re all idiots for taking him seriously. But we never took you seriously, Petey boy. Trust me.

            • Peter Harris

              And how come you stop communicating around 11p.m. US time?

            • Peter Harris

              Ok then, goodnight Dave.

              I’m off to the kampung for the weekend.
              I trust the tone of this “blog” will reduce somewhat in my absence.

            • Recyvuym

              Haha! Peter, tell me you did NOT just try to dodge what I told you by replying to a different comment I made. I will give you the benefit of the doubt, and post it again so you may refute it.

              “Hm? Sorry Peter, did you just Google my username in some (predictably) shitty attempt at doxxing?

              Well, the answer to your question is I generally don’t use the internet very much, and I make an exception for this blog, Wolf Street, and FutureTimeline, where you will find I have been consistently claiming I am Australian for more than a year.

              But if you still want to push this angle of trying to prove I’m David Haggith, please continue, because I simply cannot believe how dumb you are and I am laughing my ass off right now. Anyone want to take bets on how long this tool will keep it up? I’m fielding three more days before he finally realises his life has no meaning and sinks into a long and well-earned coma.”

              So you can’t possibly miss it, like you so foolishly did when I posted the above, HERE IS A POST I MADE ON A DIFFERENT FORUM, UNDER THIS USERNAME, IN MARCH 2016, IN WHICH I CLAIM TO BE AUSTRALIAN AND SEEM TO KNOW AN AWFUL LOT ABOUT AUSTRALIA. http://www.futuretimeline.net/forum/topic/15591-malcolm-turnbull-australian-pm-pledges-1-bil-to-clean-energy/

              Peter, do you STILL think I’m David Haggith? Please say yes, you would make my day if you said yes.

            • Rec, as my alter ego that I didn’t know I have, you have to remember that Peter considers declarations the same thing as proof. So long as he can say it, he knows its true because he heard himself say it. That is evidentiary, and it is your burden to proven his “argument” wrong.

              Not sure where the leftover pizza statement came from, as I don’t recall writing it; but I know I love leftover pizza for breakfast, so maybe, Rec, it is something you wrote when you were me.

              Oh, by the way, we are also both Peter. Sad as that is for us, we’re stuck with it. We are all figments in his head, as he sits at his computer eating pizza, swilling vodka and writing in a comment section to himself on a blog that he created. And that’s why he became a professional psychologist … to figure himself out.

            • QEternity

              Honesty is lost on you. Perhaps you are better served in the echo chamber of DailyKos.