My Prediction of a Market Crash is Right-On! Why?

As of the past year, mortgage applications are DOWN 28% and refinancing's are DOWN 30%. This means that the real estate markets are tanking BIG TIME and this trend will bring our economy DOWN within 45 days (give or take 15 days). That is my sense as of today. I see no path for an opposite viewpoint given the interest rate situation and our consumer situation. A CRASH is built into the mix given our situation! Listen to both videos (especially the one at the end of this missive)!

 I have been a student of our real estate industry for over 50 years. When interest rates reach threshold levels that produce less affordability I witness a downtrend in values. This has been the mantra for decades. As real estate goes so goes the general economy. Consumers will slow down their purchases and in today's market institutional buyers will stop their buying. Some 30% of homes have been purchased by institutional buyers. This is now changing. See graph below.

The situation in the refinance market is also tanking big time. This means that home owners do not want to pay current interest rates on a refinance situation. Current mortgage rates are now at 7.31 % (average). My rate on my house is at 2.25%. Would I want to refinance in today's market? I don't think so!. My mortgage payment would increase by some 45%. The issue today is affordability for the many. We still have lots of cash buyers who can ignore these interest rates but this market is also drying up. 

Commercial real estate (especially office space) is also tanking in most of our big cities. Vacancy rates are at record levels (over 17% vacancies). This will continue until a new market emerges (after the CRASH). My sense is that Cap Rates have lowered commercial real estate values by some 45% to date. Cap Rates determine the VALUE of any income producing property. As these rates increase, VALUES decrease. I have watched this situation for over 50 years. We are now heading for a HUGE CRASH in our economy!

My sense is that the coming CRASH could start within 45 days (give or take 15 days). The hand writing is on the walls. Liquidity is drying up and borrowing is DOWN big time. It's mostly due to these higher interest rates. Our Fed is the culprit and their motive is to STOP inflation. This will happen by early 2024 (most likely). Inflation will turn into deflation for most hard assets. Our stock markets are now sensing our DIRE situation. These markets will CRASH when sentiment crashes. It's all a 'confidence game'!

My suggestion is to prepare now for a coming market CRASH that could last for many years. Our central planners will not be able to PREVENT this outcome IMO. Yes, the FED could start a new QE (quantitative easing program) to change some factors within our markets. But this will NOT prevent the coming recession/depression. Our bubble economy will DEFLATE and this could start within 45 days (give or take 15 days). That is my viewpoint. Think for yourself. Have a good day!

This pundit has a good understanding of the real estate industry IMO. His perceptions are similar to mine! Prepare for the biggest housing crash in all history. October could be death signal!

I am: Donald B. Swenson, Economist/Philosopher, donaldswenson.blogspot.com.

http://kingdomecon.wordpress.com