July 4, 2013

Mid-Year Housing Bubble Predictions

Please post your predictions here. Some from six months ago, “The US will run out of land.”

One said, “The misinformative media messaging and reality will continue moving in opposite directions and a growing number of people will begin to see that. It’s already happening. Ask around….. J6P will tell you ‘housing isn’t getting better around here.’ Of course we have to define ‘getting better’ but you get the drift. Contractors will continue to eviscerate comps and anyone who bought a house 1998-2012. You debt-junkies are going to get some schooling this year.”

A reply, “Really? with interest rates at all time lows?”

Another said, “Price of oil will go down below $80/brl due to dropping demand of US consumers and European consumers + new sources being brought online. US officially enters recession. Gold goes down below $1,500/oz. Canadian real estate begins to crater and Canada bails out its banks. China experiences another Tianamen Square incident as their economy cools.”

And this, “I predict a significant rise in municipal and pension defaults with subsequent fallout to domestic bondholders. Ironically, these bondholders will be the very pensioners and municipal unions holding the funds, so expect a lot of strikes and walkouts and sit ins. These will be noisy but mostly ineffectual, because Federal reserve funds will not adequately cover the shortfall and the US credit rating will drop again as a result.”

“As austerity kicks in for real and entitlement spending is reduced across the board, the public taste for military endeavors will wane as the State Department becomes ascendent. We may have to do some fancy horse trading (in the form of permanent residence visas and loosening of trade restrictions) to assuage some foreign creditors, but at the same time, a new biotechnology (most likely genetic modification of some cancerous disease) will develop commercially in the US that will suck some of those foreign funds back into US for development and possibly even first phase treatment protocols.”

“Major corporations, sensing blood in the pension waters, will follow governmental lead by declaring bankruptcy in order to discharge pension obligations, then reform and be bought up under the aegis of foreign conglomerates with US Boards of Directors using foreign labor. Small-time private investment in the stock market will come to a virtual standstill. The possibility of Citizens United going on the national chopping block will hit the media as states begin to line up to repeal it in advance of the next Presidential election. Gay rights will become federal law.”

“I also expect to see a significant (and organized) rise in college loan defaults which will be addressed politically with some sort of bailout (most likely in-kind public service.) And Wall Street will have a very bad year. Dow at 8500 again would not surprise me.”

Some specifics, “AZ will see their price increases flatten out as supply created through development restarting eases price pressures. CA will see their price increases continue (and accelerate to faster than 4% annually on the whole) as non-current loans shrink toward normal levels by the end of 2013. At least 2 companies will be taken public who own rental homes. New housing development will be at approximately 1.1MM to 1.2MM annualized by the end of 2013, helping with growth in blue collar and generally lower skilled jobs. The unemployment rate will fall faster than tepid job creation would otherwise indicate.”

And finally, “Credit continues to be king. House prices are bid up by credit junkies sporting 3.5% (borrowed, of course) down payments, and borrowing high multiples of yearly income. To make matters worse, inventory has been artificially limited by Megabank, Inc. holding properties off the market subsequently pushing up prices which diminishes cash purchasing power. It makes no sense to use hard-earned cash to compete with credit (and its junkies). Cash is not king. One day, cash will be king, but not until the easy credit is gone.”

Bits Bucket for July 4, 2013

Post off-topic ideas, links, and Craigslist finds here.