House prices have broken free from reality and defied gravity for far too long, but they are an asset like anything else, and there clear reasons a nasty correction looms in the coming year .
Like 2008 and 2009
Asset prices around the world soared as central bankers embarked on the greatest money printing experiment in history. While much of that money flowed into the stock market, a great deal also found its way into Greensboro house prices. What we are now witnessing on trading screens around the world is the unwinding of the era of monetary excess, and house prices will not escape the fallout.
Last time started with real estate,
this time starts with commodities and stocks
Without an ever-increasing supply of money Greensboro's economy is now slowing sharply.
The success of some local businesses since 2008
have been consequences of central government planning
supported by purchased elected representatives at the national level
via the Federal Reserve's QE
The first assets to be impacted by the downturn were commodities. The price of things such as oil are set daily in one of the largest and most highly traded markets across the world and as a result it is highly sensitive to any changes in demand and supply. Admittedly there are also supply-side factors impacting the oil price, but the weak demand from a slump is still a major factor.
The next asset to fall was share prices. There was a delay of about 12 months because even though shares are also traded daily, their value depends on the profits of the company, and the impact of the commodity collapse took about a year to feed through.
There is a delayed effect on Greensboro's property prices because the market is so inefficient.
...like all asset prices they are on borrowed time.
The fundamentals of demand and supply in Greensboro housing will undergo a huge shift in the year ahead.
This could prove a double whammy on the housing market, turning potential buyers into sellers, and flooding the market with additional supply. A survey of landlords suggested 200 plan to exit the sector. The rapid growth of buy-to-rent looks set to be slammed into reverse.
Greensboro's property market has been a highly attractive place for wealthy individuals to protect their savings.
...The stock market collapse will also destroy wealth.
...The Russians have also had their wings clipped as the country’s economy goes into freefall. The Russian ruble has collapsed in value by 50pc against during the 18 months.
The oligarchs have also seen their wealth evaporate as their holdings slump in value.
...The shares will go first followed by the homes.
...An entire generation of homebuyers don’t know what an interest rate is.
In the US following the December rate rise the cost of mortgages has soared by 50pc.
...Greensboro households are simply drowning in about £40bn of debt according to the latest figures from the Office of Budget Responsibiliity.
When budgeting is this finely balanced, it doesn’t take much to tip it over the edge.
...Greensboro's housing market has defied gravity and logic for far too long. Government intervention by way of cheap loans allowed it one last hurrah, but the limits of state intervention are being brutally exposed in China
Greensboro is no different."