Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole. ATTENTION: Backup Blog at:
posted by Ben Jones @ 9:14 AM
The excuse given for higher home prices being due to high building costs and demand, have been misleading statements. A large part of the demand in the housing market is due to speculators and low interest rates, but this demand is going to go away. Likewise demand in the housing market has created a demand for home building materials, thus driving up prices. This demand too will go away, allowing prices to come back to normal. Of course I say this based on the past. If China keeps ramping up it's economy, lumber, concrete, etc. will be shipped overseas, thus keeping prices high for us. I have a feeling though once our economy slows down, so will China's.
China has slowed dramatically -- just look at every chineese stock index. If the US collapses here so does China -- no one will buy their crap, nevertheless use that as an entry point in secular bull mkt.Bottom line: buy china on the dips sell US on the rallies.
Bring on the lower lumber costs!I'm planning to cash out my equity in a high cost city and build (on land purchased before the bubble) in little town USA.
Nayrab, I think you're right. China's demand for building materials was ignited when Chinese won the bid to be the host of 2008 olympics. Other than that, their private sectors depend on the trade with the US and the rest of the world. In about 2 years, the projects to build the infrastructures for the olympics will all be finished, so if a recession happens in the US in the next 2 years, it will kill China's private sector's bidding for building materials.
Interesting - for the US you are likely thinking of lumber prices as an indicator of supply conditions for housing. That is, perhaps there is less demand for lumber by builders.However, for British Columbia, lumber production is a key part of our local economy, so lower lumber prices is not good for income in BC. This is an interesting channel through which a house price crash in the US would have impact on Vancouver's market.
I think lumbers prices definately could fall, but not for long. if you read jim rogers book, you see that the commodities boom started in the early 1930s!so a bad economy doesn't necessarily mean all bad things for the lumber industry. of course each company is different.
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