The Housing Cartel |
History has taught us that cartels do not work when they try to manipulate a commodity to extreme values. There has been many examples of syndicated maneuvering and one that springs to mind out of many is the silver debacle in the sixties (I think it was in the sixties) The influential Bunker-Hunt family tried to corner the market for silver with disastrous results.
In today's world there has grown a very large and very unsuspecting cartel. Who is it you may ask? Well, it may be you,...... yes, you, the person that is reading this article.
Do you own your own home? You do! Why then, you are part of a world cartel that has unwittingly manipulated the price of private property beyond the extreme. The evidence is all to clear and unfortunately the results are going to be disastrous for many families.
If property owners could just keep swapping houses amongst themselves and pocket the profits all would be well. But....... there is a very big BUT....... there is a significant proportion of the population that does not own property and they are on the outside looking in....the trouble is, they cannot afford to get into the housing markets.....the is no value at the inn. Therefore they have to rent.
The first sign of trouble begins when rental values start to fall because renters just cannot afford large increases in rent. This has begun in many coastal towns and it will not be long before the decline in rents are transported to big cities.
Because the stock market has not produced good returns since March 2000 until the end of October 2002, many people invested in buy to rent. The barber and the taxi driver stopped tipping shares and started to invest in rental properties. This has fueled an increase in prices that cannot be maintained and will collapse just like dot coms.
The second sign of pending disaster is first time buyers who did mange to get a mortgage have stretched themselves to breaking point. Many have 125% mortgages and extended credit card debt. Local taxes are on the increase due to higher property values.
And thirdly, to cap it all, interest rates are on the way up. Rates have already risen in the UK and Australia. Economies around the world are rising and the economy in America is about to Boom...Yes Boom! It may be short lived, but it will show amazing growth over the next six months. The stock market will boil upwards in double quick time in the first three months 2004 (barring terrorist attacks) too way over Dow 12,000 and at the same time, house prices will begin to falter.
By summer 2004 interest rates will be up by over half a point in the USA and then the cartel will begin to fear a collapse. The rush to the exit may be bad news for any banks whose customers are mortgaged to the hilt.
Cartels have never worked and the housing cartels fate is blowing on the winds of an economic boom that has been orchestrated to give artificial signals of prosperity fueled (or should it be fooled) by more debt....so we have a cartel brought down by bigger manipulations of economic statistics.......good game...good game. If you can catch a falling star, before it falls and put it in your pocket, you may be one of the few homeowners that will be ahead in this housing cartels game.
Of course, I could be wrong and the housing market may continue to go up for many more years. This article is just written to point out the possible dangers that may lie ahead and as the saying goes ... Forewarned is forearmed.