The Second Wave Down Is Global

Source: What Is That Whistling Sound

A thorough article on the global housing market is attached.  To summarize:

The United States: Record Foreclosures, Growing Supply

To kick things off, consider these words from Rick Sharga, Vice President with RealtyTrac:

We’re on track for a record year for homes in foreclosure and repossessions. There is no improvement in the underlying economic conditions. Whether things fall precipitously depends on government and lenders controlling the inflow of new foreclosure actions. If the market is left to fend for itself, you may see more serious price depreciation.

Spain: No Longer Rich

The late great housing bubble was not just a U.S. phenomenon, of course. It went global.

Across the pond in Europe, Spain has a phrase that refers to the glory of the housing bubble period: “cuando pensábamos que éramos ricos.” Translation: “When we thought we were rich.”

Rich no more, Spain now has “1.5 million unfinished, unsold or unwanted units… scattered across the country,” according to the WSJ.

Spain has not even begun to face its severe real estate problems. The Spanish banks are walking zombies, propped up by largesse from the ECB (European Central Bank). As the WSJ reports,

Investors believe banks need to be more transparent about the number of bad loans and other assets they have on their books. Instead of disclosing troubled credit, many Spanish lenders have chosen to refinance loans that could still prove faulty and to report foreclosed or unsold homes as assets, often without posting their drop in market value. Even after many banks passed this summer’s government-imposed “stress tests,” economists believe such assets still pose a danger.

One risk, says Luis Garicano, an economist at the London School of Economics, is that Spanish lenders could follow in the footsteps of Japan’s so-called zombie banks, “holding on to capital in order to cover their losses.”

          Canada

Looking to the north, Canadian investors have largely been exempt from the real estate carnage of America and Europe. But for how long?

As The Canadian Press reported last month,

…prices in six of Canada’s largest housing markets are in bubble territory for the first time in 30 years — and a U.S.-style correction is still not out of the question, according to a report from an Ottawa-based think tank.

The report… says home prices now sit at 4.7 to 11.3 times Canadians’ annual income — much higher than historical comfort levels of between three and four times income.

“To see all of the (major) markets outside of that comfort zone is very unique and concerning,” said David Macdonald, a research associate who authored the report entitled “Canada’s Housing Bubble: An Accident Waiting To Happen.“

          China

The source of frenzied buying in Hong Kong, London and other places? Wealthy Chinese looking to diversify out of home markets in the face of rapidly rising inflation.

And speaking of the Chinese housing market: Veteran China watcher Andy Xie, observing from his local perch, has written extensively about the risk of a potential 64.5 million vacant Chinese properties on the market.

That number, 64.5 million, is more than the population of Great Britain. If one were to bunk up in family groups of five, China’s property market vacancies could comfortably house the entire population of the United States.

Comments:

We are rapidly travelling down Exter’s pyramid.
The availability of credit is diminishing as overleveraged banks attempt to keep operating assisted by government bailouts.

We observe small businesses becoming more difficult to sell.
We see housing and other real estate prices dropping as supply balloons.
We see stock values rise in value temporarily.
We see corporate bonds rally as money flows in from stocks, only to slump later as risk adversion returns.
We see stock values go sideways and eventually downward.
We see government bonds rally as money flows from higher up the pyramid looking for “safety”.
These values too will drop as we continue down toward  T Bills and cash (Federal Reserve Notes & Euros).
Eventually, with the madness of central banking, we will see more Quantitative Easing in the US, Japan, and Europe.  Then the money will be driven into gold like a flood.

Gold, the final safe haven, when central planning fails, Keynesian thought fails, Nietzschean philosophy fails.

The rush to gold has only begun.

Read the original story at What Is That Whistling Sound?