The Next Down-Leg for Housing Is Upon Us

By Jeff Nielson of Bullion Bulls Canada

In the case of the U.S. housing market, we have this week's disastrous news on U.S. new home sales (the lowest reading in the near-fifty years of recording such data), followed by the sudden realization by the deluded majority that the U.S. housing bottom was in fact a just a trap-door. The reason why this next, more serious collapse is a surprise to so many is because when it comes to the U.S. housing market, there are two entirely different worlds. In one world, the U.S. housing market had already absorbed its pain. All that remained was to restore confidence to U.S. homebuyers (and maybe create a few jobs), and the U.S. housing market would once again start chugging higher. In the meantime, the plucky Obama government was doing its utmost to save U.S. homeowners, along with the assistance of the banker oligarchs -- and everyone was in agreement never to repeat the mistakes of the past. Then there is the real world. In the real world, the U.S. housing market has fallen less than half the distance it needed to fall to bring U.S. housing prices back to sane levels. While defining "sanity" is an ever more difficult task in this age of disinformation, let's start by going back to the mid-1990s. It was in the second half of that decade U.S. housing prices began a much steeper incline than previous years, and (depending on whose numbers you look at) U.S. home prices roughly tripled over that span. Since that point in time, the wages of the vast majority of U.S. workers have been steady declining (in fact this decline goes back more than 30 years). The question becomes: how do people making less money support any increase in U.S. home prices (over the long term)? The answer is that such prices can only be propped-up (temporarily) by depleting the savings of those with savings, increasing the debt of those with no savings, and generally lowering lending standards. The longer that such short-sighted recklessness is allowed to continue, the nastier the meltdown when sanity returns to the market.   Loading Comments...   1 2 3 4 5 Last » Next › adsonar_placementId=1341527;adsonar_pid=879768;adsonar_ps=-1;adsonar_zw=600;adsonar_zh=280;adsonar_jv='ads.adsonar.com';   Loading Comments...   Recent Comments Featured Photo Galleries var galljs = document.createElement('script'); galljs.src = 'http://js.thestreet-static.com/files/tsc/v2008/js/_1277416320100/min/pages/gallery.js'; var head = document.getElementsByTagName('head')[0]; head.appendChild(galljs); Go to Slideshow Archive TheStreet Premium Services Compare All Services Jim Cramer's Action Alerts PLUS: Now any level of investor can trade right alongside a Wall Street pro — and enjoy 24/7 access to his portfolio! Learn More Login NEW! Don Dion's ETF Action: A concise two-step strategy for learning and trading in this increasingly lucrative area of investing. For all levels of investors! 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