QUESTION: Mr. Armstrong, My question on real estate is that we are in a period where demand has outpaced supply. Has the migrant crisis and climate change collided to create a perfect storm in real estate?
Thank you
FH
REPLY: The only good news for real estate is that smart money is starting to look at mortgages as an alternative to unsecured government debt. If you were thinking of buying a new house right now, lock in the interest rate, for with war on the horizon, long-term rates will rise. That does not mean we have a Real Estate Crash like the 1930s. This one is different from anything in the past, and it is certainly not the contrived version of the Mortgage Back Securities of the 2007-2009 Great Recession.
Housing starts and new building permits crashed with the Economic Confidence Model as if they fell off the cliff in May, where new starts dropped 5.5%, and new permits fell 3.8%. Both seem to have responded to the Economic Confidence Model right on time. This means that over the course of the next quarter, this combination of trends in both areas suggests that the new supply for housing will shrink. This is perhaps the FIRST time we have witnessed these trends turn with the ECM. Typically, they lag, creating the oversupply that accelerates the decline in prices thereafter. Here, the supply side will tighten, which will help to insulate the decline in prices, at least in the Red states.
John Law (1671-1729) observed supply and demand by trading on the Amsterdam exchange during the 16th century. He is the author of that theory. Typically, we have an oversupply at these turns, which leads to the prices crashing. In this case, the supply side is NOT in an oversupply situation on a broad level. The big institutions have been buying residential properties in the national market in a way we have never before seen engaging in renting and even house-flipping.
Of course, the Democrats reject everything related to economics and see the economy as their plaything. The socialists follow Marx, who effectively rejected the supply-and-demand theory, preferring to assume that they can manipulate society to achieve their personal political goals. The Democrats/Socialists have never accepted supply and demand, which has led to major economic upheavals since the 19th century, and the Silver Democrats rejected the Gold Standard. That was made famous by William Jennings Bryan’s (1860-1925) speech that the government would not crucify making on a cross of gold.
The Migrant Crisis has also contributed to preventing the collapse in demand, as we saw during the 29007-2009 Mortgage-Backed Crisis. Insurance companies are exploiting the situation by using climate change to attribute greater risks, and people are seeing prices double and, in some places, triple. This is also making it unaffordable for those who need a mortgage. The high-end properties that do not require mortgages are free to self-insure rather than contribute to the insurance scam that always takes place.
Prices will decline in the Blue States because we also face complete fiscal mismanagement from the Democrats at every possible level. The Biden Administration is planning a Tax Armageddon after the election, which will impact real estate on a major level. The Biden Administration is lying again about what they will do with this coming tax on UNREALIZED gains. They can argue that they are only going after the rich, but that is discrimination and violates the Equal Protection Clause. Once they get that through, it will come down to everyone, and they will be taking estates of $5 million or more. The Supreme Court will bless Janet Yellen and take the position that the government can do whatever it wants with regard to taxation. This recent ruling on overseas profits confirms that taxation has NOTHING to do with paying your fair share for serviced tendered. You are an economic slave, and whatever you earn anywhere in the world belongs to the government even when you receive ZERO services in return. You are an American, and thus, you are a slave that they can do with as they please.
When they passed the Income Tax, they swore the average person would never pay if they failed to file an income tax form; that is the crime – not failure to pay. Once they tax UNREALIZED gains so they can fund their endless wars to spread American Imperialism to the world by the Neocons, there will be nothing left. They can say your home that you paid $100,000 is now $1 million, and you will owe 25% of the 900K profit, so you will be billed for $225,000 plus interest and penalties for every day you do not pay. Your house will then crash to $300,000; you will NOT get a refund; you will just not be charged again until it exceeds $1 million – NO REFUNDS!
