This is the summer to make your move or purchase your first home – so they say. The Fed continues to add money to the system at 85 billion per month, holding interest rates at under 3 percent on a 30-year mortgage.
Maybe this is the time to move back into real estate investing, buying up property at bottom prices when the market it just starting to turn the corner.
The foreclosure market is also interesting. The number of foreclosures on the market is lower than it has been for 3-4 years in most areas, which means the supply of homes is quickly decreasing and home builders are going to be busy this summer as the demand for homes is already picking up. This means the foreclosure market is no longer going to be suppressing the prices of non-foreclosure homes.
So much so that there is probably going to be a shortage of experienced home builders because of the increase in demand and the number of home builders that have gone out of business in the last few years. This is going to contribute to a steady increase in the prices of new homes throughout the summer and into fall.
But I think it’s a trap
The other side of the coin is the pending collapse of the US Bond market. The world is quickly accelerating into a currency war that the Fed started and all other majors nations are now aggressively following.
The rating of US Bonds should have already been lowered many times over, but the rating agencies are politically unable to lower them. The US is in a world of trouble. Asset prices are out of control and way higher than the value of the collateral they are priced at – translation, the stock market is approaching a bubble in prices.
Soon something is going to have to give in. Either the stock market may begin to crash or the bond market.
The stock market may begin to collapse because the value of the collateral they represent is not worth the high bubble prices – just like when the housing market began to collapse in 2007. This would keep the US Bond market afloat for a little while during the crash, but eventually it would trigger a Bond market collapse as the collateral of sovereign debt could come into question.
After the smoke clears, debts will remain.
National debts, which are much higher than they were in 2008, will continue to push up interest rates in Europe and Asia and the US. The Fed will probably try to print money by the trillions this time, but this time the nations of the world may turn to something other than the dollar as stop the nations of the world from printing money in their own currency.
Rampant inflation around the world will cause the world to stop buying US Bonds. Instead the central banks will start selling US Bonds. This would put an end of the Fed’s ability to print money and virtually export inflation to the world. The flood of dollars coming back to the US would cause major inflation, forcing the Fed to reverse course and rather than adding money into the market they would have to take it out.
The Fed will be forces to sell US Bonds, but no one will be buying them, so they will become the only buyer. US Bond prices will sink, interest rates will climb and everyone that purchased property in the summer of 2013 will be sorry they did. They will be stuck with debts they cannot afford to repay and assets that they cannot sell nor affort to keep.
The housing market will collapse again, leaving new buyers underwater.
It may not happen this way, but the risk that it could are increasing and for this reason I’m not moving back into the housing market any time soon.