On Stormfront Acushnet was talking about a coming crash after the wildly spiraling rise in real estate prices.
I normally don’t discuss economics, but the first sentence of his piece made answering it irresistable to me.
He started off, “Is there an economist in the house?”
So I replied:
Yes, I am a professional economist and a former economics professor.
The first thing I would remind you of is the fact that you should not take that seriously. Any economist who really understood economics would be richer than Bill Gates.
But unlike other economists, I can do simple arithmetic and not get lost in some theory. In short, I have outgrown my college education.
As a simple matter of geometric progression, the boom in real estate will have to end.
It may end with a bust, or it could do what the stock market has done the last few years, just sit there. The stock market had a huge boom in the 1960’s and just touched 1000, then it stagnated and never got back to 1000 again until 1982 or thereabouts.
The present Dow-Jones average of about 10,000 is likely to last a LONG time.
When that happens, money pours into real estate, as it did in the 1970s.
You know that the great stock market crash of 1929 was so sudden because invesments were heavily leveraged. You could buy a stock with only ten percent cash and ninty percent borrowed on the stock itself, called “buying on margin.”
I never buy on margin, but after the Crash of 1929 the new rules only allowed a person a margin of thirty percent, so you had to have seventy percent of the price in cash. It was moved up to 50% in the 1960s and I don’t know if it has been moved back to 70% since.
Whe money moves into real estate, it moves into a highly leveraged market. You can easily buy a house or an apartment with 30% cash and if you watch TV at all you know lenders are desperately trying to give out second and third mortgages that go as high as 100% of a house’s value.
This is a formula for a crash.
The cushion real estate has that the stock market does not is that you can live in a house and you can’t live in a stock. If a stock drops and you are margined out, you sell it. Not everybody who lives in a house on which he owes more than it’s worth will sell it.
So one major determinant of whether the present real estate boom will end iwth a crash or a leveling out will be how many people are buying places to live in and which are speculators.
It is the speculators who can’t make money in the stock market who are now moving into real estate.
And that is arithmetic talking, not an economist.
#1 by Mark on 12/14/2005 - 1:37 pm
There’s one more cushion to the housing market. If prices fall you can still rent it or lease it out. You have to keep insurnace on it so if a tenant burns it down or runs his car thru the building or floods it on you, you can can reclaim your loss there too.
#2 by lemon on 12/14/2005 - 2:45 pm
I sure hope the housing market goes down. Money is pouring in from out of state buying up everything at ridiculous prices, sometimes just to turn it into a rental. Young adults without that kide of money behind them can’t think of much of anything. If they have a job that lets them pay rent,college loans and support themselves, they are lucky, let alone think about having white babies. My dad could have gone to college on the GI bill. He refused because he wanted to farm and be his own boss. Little did he know what refusing to take the bribe would do for the future. I know, we haven’t starved, been taken out and shot, or sent to siberia, but I have to hope for better. And I WANT grandchildren. Shari.
#3 by Peter on 12/14/2005 - 7:56 pm
Don’t forget that the housing “market” is tied to the replacement of Whites in the population. California went from 98% White to less than 50% White in a very short period of time. This accelerated most rapidly at the time that Reagan was president. The Whites were crowded out. The mechanism was the housing market.
A ten-fold rise in housing prices means it is very economical for Whites to sell and leave. Some houses have gone from $25,000 to more than $2 million in forty years. This is an incentive for Mexicans to move in several families into one dwelling. Older housing has been subdivided and replaced by denser housing. Skyrocketing housing prices mean younger people cannot afford to buy a home. The cost of rent also skyrockets. Add to all this that wages have not risen proportionately to cost of living. Two wage earners doubling their work hours a week eventually will fall short. Whites who can profit have a carrot to sell and leave. Whites who can no longer afford to live have a stick to leave.
The housing market can tell what is happening with White genocide.