Is there another real estate collapse on the way?

Rons-Blog

As a real estate broker and auctioneer professional that specializes in real estate, I try to keep up with what is happening across the country in different markets. What happens in one market seems to affect other markets. Question: Is there another real estate collapse on the way?

There are many gurus out there that want to give you the inside scoop about what the real estate market is doing. They either want a fee, or  for you to buy their recent book. I try and keep away from these guys as most of what they write is hype with a hidden motive or agenda.

As an indicator to real estate market movements, some economist tell us to keep an eye on the oil market and China. According to Harry Dent, author/economist,  “Oil prices will be the first trigger in the next crisis. Although it helps consumers a bit, low prices kill the $1 trillion QE-driven fracking industry that’s been such a stalwart of this bubble economy. And it’s already causing junk bonds to fall further in value, as energy-related bonds have been as high as 20% of that market recently.”

I recently read where oil related layoffs were affecting real estate valves in Texas. Other oil employment dependent states could be affected too. And now the eye is on China’s real estate market.  Dent has been warning about  China’s unprecedented real estate bubble collapsing…

He says, “Recall the Japanese at the top of their stock and real estate bubble in 1989. They were buying real estate hand-over-fist, from Pebble Beach to Rockefeller Center to London. Then, after bidding them up, they ended up selling those holdings at big losses. The Chinese make the Japanese look prudent!  Chinese buyers are bidding up the high end of the top coastal cities in English-speaking countries like they’ll never go down and like they can’t get enough. We’re talking Sydney, Melbourne, Brisbane, Auckland, Singapore, San Francisco, L.A., Vancouver, Toronto, New York, London…”

Dent asks, “Guess what happens when the bubble wealth in real estate that has built up in China finally collapses? So does the capacity of the more affluent Chinese to buy real estate around the world. And these are the guys who have by-and-large been driving this global real estate bubble at the margin on the high end! Bear in mind that Chinese real estate has been slowing and prices falling for over a year. ”

CNBC reported in October, “While home prices nationally have not yet returned to their peak of the last housing boom, some local markets have surpassed it. Now, some claim the housing market is in a bubble far worse than the devastating one in 2008. The argument: Housing is far less affordable today than it was back then, and the home price gains are driven not by healthy, end-user demand but by a lack of construction, artificially low interest rates, and institutional and foreign all-cash buyers.”

One economist wants us to think about this : (1) the U.S. real estate market used to be a sound investment … until its collapse in 2008. (2) although the market has slowly recovered, the underlying issues that  caused the original collapse haven’t been addressed.  (3) As a result, another housing bubble is developing … and it may pop sooner than anyone expects.

Keep this formula in mind; Markets discover price via supply and demand: big demand + limited supply = rising prices. Abundant supply + sagging demand = declining prices.

Is the bubble about to pop in your area? I am no economist but I would keep an eye on oil and China.

If you are planning to sell, you may want to do it now! Give us a call at 252-257-4822 and let’s talk.

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