Housing Crash Coming

If you live in the US or UK, you’ll notice that prices for homes have gone up and up. In the UK, the average home has gone up 45% with a high of 90%. Many have attributed this to huge pension funds such as Blackrock and Vanguard. While they have purchased a huge amount of properties, it’s not as large as I was led to believe.

As a side note, you can go to Zoopla.com to find like property that was sold the previous year to see how much they have gone up.

According to one financial analyst, by looking at Blackrock’s financial records, which is a matter of public record, they own about $25 billion. The value of all homes in United States, is about $35 trillion. That means Blackrock owns less than one tenth of one percent. So, who is fuelling this rise? It is those who who are small property buyers (2 – 10 homes) and the others that are single home buyers.

As a side note, movers say they have never seen it that busy, so that tells me that there are people moving into these homes.

Again, in the US and UK, more and more property is offered for lease and not for sale. In the UK, it’s called “lease hold”. How this works is, that you can only buy part of the property and you still have to pay rent. In some cases you have to pay land fees, too. If you are a pensioner, you can only buy anywhere from 40% to 70% of the property – even if you are a cash buyer.

What I think is, that huge pension funds started this, and it encouraged individuals to do the same. So, both groups are selling property but retain part of it and are making a better return than what a bank gives you. Plus, there is no stopping them from raising the rent and land fees to get even higher return.

We are in the process buying property, so much of this is written from personal experience. What we found out is:

• the property is 45% or more in value compared to last year
• much of the property is sold within days
• estate agents who mail us what they have, by the time we get back to them the next day, the property is sold
• people are offering above market value for their property – and getting it
• many properties are being listed as an auction
• more and more property sold as lease hold

How Lease Hold Works

If you can only buy 50% of the home (at inflated price, no less), your rent is less but you also have to pay rent and land fees. Of course, the rent can go up and the land fees, too.

Not A Housing Shortage
There is not a housing shortage as the government would have you believe. It’s simply people bidding more and more for homes.

I’d like to make an analogy with coin collectors. A $100 coin is entered in an auction, the price goes up and up until it sells for $130. Now, there aren’t fewer coins of this date, type and grade on the market; the price of the metal content did not go up. So why the increase? It could be one of two reason:

It could be that there is a trend, for some reason, that more and more collectors what this coin.

It could be that numismatists think that the coin will go even higher, so are willing to pay more for it now. This is what I believe is happening to the housing market.

Making It Illegal To Own Land Without Making a Law Saying You Can’t Own Land

Again, this is what I think is happening. It’s a way of making people landless and homeless by pricing them out of the market. This has been done by the banks many times before.

Lindsey Williams made a video of this back in the 1980’s where farmers were losing their land. How it work was like this. Farm land went up and up; banks encouraged farmers to “grow big or get out of the market.” Mortgages were easy to get – as their collateral was worth more. So, family farmers borrowed more money. Then agriculture land dropped in value. Because farmers collateral became worth less, the bankers called in the loans. The farmers could not pay, so they went bankrupt. As a result, they either worked the land as employees or they moved to the cities and rented property.

This was done to whole countries, too. If you read the book, “I Was An Economic Hitman,” by John Perkins, he told about when he worked for the World Bank (I think) where he got heads of states to sign for loans in the billions of dollar. The banks knew that it would be more than what they could afford to pay back. When they couldn’t, the loan stipulated that they would take x percentage of their natural resources. The country had to increase taxes to try to pay back the loan, so it made the average working in that country poorer.

Now, this is being done again with the current housing bubble. I don’t know what other countries this is happening to but I would not be surprised if it’s many more.

So, you have individuals that are selling their home in order to get as much money off of the buyer as they can. For those who are not capitalizing on this, they think it’s a good thing, but when they turn around to buy another home, they find out they can’t afford a bigger one. Then they look for a home that is the same size as the one they sold and that has gone up, too. Finally, they have to settle for a smaller home at a higher price.

The Solution

If you are looking to move because you really need to move and not wanting to take advantage of your fellow man, here is a suggestion. Again, it’s only a suggestion as I’m no financial advisor. That is, when you sell you home, rent a place to live. I think that the market would fall as soon as one year, maybe two. Then, when the market falls, you should be able to buy at a realistic price.

Back in 2008, homes fell in price between 20 – 50%, with places like Florida and the Southwest being hit the hardest. When it falls this time, you’ll be able to own your home again and at less than what its going for now. The rent you pay in the meantime would be a lot less than the 50% extra you’d spend if you bought now.

What others have done is, they have moved to a 2nd world country where property prices are lower, as well as everything else. With the high prices of homes in the US and Europe, they are able to buy a home just as nice for half the price and have a lot more left over. Also, their pension goes further, enabling them to have a better quality of life.

In Summery

This housing bubble, like those in the past, including agriculture bubble, is a way to take the right of ownership away from the people without making it a blatant law.