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

e-commentary.org

May 23

. . .

K "Not again."

J "Again. And then again in 2029."

. . .

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

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

. . .

K "Again."

J "And again."

. . .