We have been warning for many months now of the 'Second Great Property Bubble' of this century in the USA.
New Home Sales, after having never fully recovered from the GFC, are again collapsing at a frenetic pace.
No one wants to talk about it on Wall Street? Similarly in the broader economic community. Yet, it is very clear in the data, and has been for some time.
We are all aware of sky-rocketing home prices and the joy that brings in wealth creation for families.
Though, just the family home, is merely a peg in a moving wall. In other words, simply maintaining the ability to move sideways at the same relative value.
It is investors who have clearly benefited. In particular, the property fanatics of the various industry motivation groups. However rising mortgage rates are a real problem for this often severely over-stretched group.
Highly leveraged investing in any asset group, stocks or property, inevitably leads to exactly the same outcome. Higher volatility and significant correction. Corrections are OK, but wash-out the extreme speculators corrections can be particularly savage.
The collapse in New Home Sales from a point of extreme upward price extension, artificially created by a behind the curve Fed that fed the speculation, can to be honest only end one way. That is a property price collapse. This is likely to be underway within a few months, if not weeks.
The US property market is in an extreme bubble state and it is already beginning to burst.
Add a property price correction to extreme food and energy inflation and rising interest rates, and the answer to this riddle is without equivocation, a fully-fledged Recession.
The USA experience is exactly identical to the current formation of forces in the Australian economy.
Like the USA, Australian policy makers appear completely unprepared for what is coming.
This article was written by Clifford Bennett, ACY Securities Chief Economist.
The view expressed within this document are solely that of Clifford Bennett’s and do not represent the views of ACY Securities.
All commentary is on the record and may be quoted without further permission required from ACY Securities or Clifford Bennett.
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