The answer is simply;
They won't.
Understand the economic problems the US is having today are IDENTICAL to those of Japan back in the 1989. Stock market bubble AND a housing bubble, followed by a crash and then MASSIVE government "stimulus" spending that only managed to get the economy to limp along at 0% growth rates.
ERgo you can expect US property prices to go where Japan property prices have gone.
Now I know how to fix this. I know how to get not only property prices back up, but stock prices back up as well as GDP. Alas, "capitalism" is out of favor and the idiotic masses who don't know a damn thing about economics ( but know the top three contestants on Teen Idol) have opted to go the socialist route. Thus, all Americans can enjoy their own "lost decade" just like the Japanese did.
Yay. I always wanted to belong to one of those.
ReplyDeleteToo bad we can't form some sort of sub-set of the USA that's reserved ONLY for those that can prove they "get it" and let the rest parish for being such moronic Sheeple.
ReplyDeleteStagnating house prices are yet anothe reason why a house is NOT an investment.
ReplyDeletePeople say you "throw money away on rent." Guess what: you also throw money away on property taxes, mortgage interest, maintenance costs and time, and the opportunity cost of you down payment.
You need to average 4-5% house price appreciation per year for 30 years just to break even. It must appreciate higher than that in order to qualify as "an investment".
People think that because they have a mortgage interest deduction and get a big check when they sell their house that they made money. But your interest deduction is only a fraction of what you pay. The money you get from the sale of your house is mostly a rebate of YOUR money.
There are few periods in time when buying makes sense. With more than 8 years or mortgages under water and foreclosures at a record high in Minnesota, many people are figuring this out the hard way.
It's time to get the federal government out of the "affordable housing" business. It's not only how they control you, it's the largest cause of most recessions.
@Anonymous
Should we call this haven Galt's Gulch?
I'm reminded of a comment.
ReplyDelete"Geez, you religious extremists, with guns and so-called economic freedom, why don't you get your won country..."
"We did, who let you in?"
Your comment on how the American public has opted for socialism reminded me of this blog:
ReplyDeletehttp://fabiusmaximus.wordpress.com/2006/07/04/death-constitution/
Some other good reads:
http://fabiusmaximus.wordpress.com/2008/02/15/context-richards/
http://fabiusmaximus.wordpress.com/2009/02/11/geopolitics-2/
http://fabiusmaximus.wordpress.com/2008/04/14/wheeler/
http://fabiusmaximus.wordpress.com/2008/03/11/sitrep-economy/
Just read it. It's a very interesting blog, analyzing the woes of US society.
Captain,
ReplyDeleteIt wasn't that long ago you were showing graphs of money supply growth and predicting a future of inflation.
Have you changed your mind? Or do you think that housing will continue to stagnate while the price of everything else (including the stuff to build a house) inflates? That would be a remarkable prediction.
Since the current generation does not seem too interested in having kids, we are probably approaching the same demographics of Japan. If that's the case we will probably get the same deflationary period.
David Goldman explains it all pretty well here:
http://www.atimes.com/atimes/Global_Economy/KG14Dj05.html
James
Hi James,
ReplyDeleteI was more focusing on real prices, but even if inflation did occur, I doubt it would affect the price of housing. Consider it a balloon where you press in one area, the air just goes elsewhere and inflates the other part of the balloon.
Given what a horrible taste housing has left in people's mouths, not to mention the Gen X'ers who bought more than they could afford are now taken out of the permanent demand for housing, I think even in an inflationary environment, it will be things other than housing going up (CPI type items) and not housing.
I've been reading your blog from Tokyo for some time. I enjoy it!
ReplyDeleteI purchased property here in Tokyo in 2004. I guess I lucked out. Value went up 20% and it has not gone down! Not to mention 10% annual return on money invested.
As in any real estate investment, its timing and location. I lucked out. But there are always good investments if you look carefully.