Worldwide: There's trouble ahead in the global housing market.
The easy environment financial and housing markets have had for nearly a decade are ending. Prices will waiver as investors remain in denial and refuse to sell at lower prices. But soon that denial will turn to panic, and prices will plummet.
Our good friend John Rubino over at DollarCollapse.com just released an analysis titled US Housing Bubble Enters Stage Two: Suddenly Motivated Sellers.
He reminds us that housing bubbles follow a predictable progression:
- Stage One: Mania -- Prices rise at an accelerating rate as factors like excess central bank liquidity/loose credit/hot foreign money drive a virtuous bidding cycle well above sustainably affordable levels.
- Stage Two: Peak -- Increasingly jittery owners attempt to sell out before the party ends. Supply jumps as prices stagnate.
- Stage Three: Bust -- As inventory builds, sellers start having to lower prices. This begins a vicious cycle: buyers go on strike not wanting to catch a falling knife, causing sellers to drop prices further.
Rubino cites recent statistics that may indicate the US national housing market is finally entering Stage Two after a rip-roaring decade of recovery since the bursting of the 2007 housing bubble:
- the supply of homes for sale during the "all important" spring market rose at 3x last year's rate
- 30 of America's 100 largest cities now have more inventory than they did a year ago, and
- mortgage applications for new homes dropped 9% YoY
Taken together, these suggest that residential housing supply is increasing as sales slow, exactly what you'd expect to see in the transition from Stage One to Stage Two.