{"id":10366,"date":"2010-06-18T13:18:05","date_gmt":"2010-06-18T17:18:05","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=10366"},"modified":"2010-06-18T13:18:05","modified_gmt":"2010-06-18T17:18:05","slug":"here-comes-the-housing-market-double-dip","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/06\/18\/here-comes-the-housing-market-double-dip\/","title":{"rendered":"Here Comes the Housing Market Double Dip"},"content":{"rendered":"<p><a href=\"http:\/\/www.taipanpublishinggroup.com\/taipan-daily-061810.html\" target=\"_blank\"><span style=\"text-decoration: underline;\"><strong>Here Comes the Housing Market Double Dip <\/strong><\/span><\/a><\/p>\n<p><span style=\"color: #888888;\">By Justice Litle, Editorial Director, Taipan Publishing Group<\/span><\/p>\n<p><strong><em>The housing market double dip is coming&#8230; along with an  unpopped Australian bubble just waiting to burst.<\/em><\/strong><\/p>\n<p>Remember when &#8220;safe as houses&#8221; was a legitimate expression? Now it&#8217;s a  bit of an ironic joke. What counts as no joke at all, however, is the  chaos investors will face when the second wave of housing market turmoil  hits.<\/p>\n<p>There has been such a grand buffet of top-down troubles to choose  from \u2013 collapsing eurozone, overheating China, the BP oil spill \u2013 that  global real estate markets have been back-burnered. Based on the way  things are unfolding, though, they will soon come back to the fore.<\/p>\n<h3><strong>Aussie Aussie!<\/strong><\/h3>\n<p>Before we talk about &#8220;second waves,&#8221; let&#8217;s talk about first waves.  There are yet a few housing bubbles in the world ready to pop in grand  style \u2013 with vicious outcomes to count on when they do.<\/p>\n<p>Take the land down under, for example. Australia has long been known  as &#8220;the lucky country&#8221; for its beautiful climate and abundant natural  resources. But the Aussies won&#8217;t be feeling so lucky when their bubble  goes kablooey&#8230;<\/p>\n<div>\n<div>\n<blockquote><p><span style=\"color: #000000;\"><em><strong>Hot New \u201cSecret Backdoor\u201d Niche Market Could Turn $5,000 Into  $1.5 Million by December 2010!<\/strong><\/em><\/span><\/p>\n<p><span style=\"color: #000000;\"><em>A hot niche market is cranking out stunning returns of 7,100%&#8230;  12,300%&#8230; even 13,900% in a single day. Find out how to cash in on this  market with these exclusive <strong><a href=\"https:\/\/orders.taipanpublishinggroup.com\/DCT\/WDCTL605\/\" target=\"_blank\">&#8220;secret  backdoor&#8221; trading strategies<\/a><\/strong>.<\/em><\/span><\/p><\/blockquote>\n<\/div>\n<\/div>\n<p>The Australian housing market is a &#8220;time bomb,&#8221; says legendary  investor and renowned bubble-spotter Jeremy Grantham. &#8220;You cannot  possibly miss it,&#8221; he adds, further noting that &#8220;sooner or later, the  rates will go up and the game is over.&#8221;<\/p>\n<p>Grantham&#8217;s logic is irresistibly simple:<\/p>\n<ul>\n<li>The price of housing is typically in the range of 3.5 times family  income.<\/li>\n<li>Australia&#8217;s home prices are now trading at an average of 7.5 times,  i.e. superbubble territory.<\/li>\n<li>Real estate bubbles are the same because they are all &#8220;unique and  different.&#8221;<\/li>\n<li>That is to say, the bulls always advance &#8220;special&#8221; reasons why such  and such bubble won&#8217;t pop.<\/li>\n<li>Without fail, the &#8220;special case&#8221; bubble <strong>always pops anyway<\/strong>.  By the keen-eyed measure of Grantham&#8217;s quantitative asset management  firm \u2013 which runs $106 billion at last count \u2013 <em>every major asset  bubble in all of recorded history has burst<\/em>.<\/li>\n<\/ul>\n<p>And thus, if Grantham&#8217;s expectations play out in accordance with the  unblemished track record of historical norms, Aussie home prices would  have to fall more than <em>forty percent<\/em> (!) to revert back to  long-term trend.<\/p>\n<p>By various measures, China, Canada, and the U.K. are also home to  unpopped housing bubbles of disconcerting size. They, too, will burst.  And unlike the U.S. housing bubble and bust, these latter burstings will  appear against a backdrop of spent stimulus and gargantuan government  debt burdens, making it that much harder for Keynesian-minded  politicians to ride to the rescue with checks they can&#8217;t cash.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" title=\"Chart: Gold Index\" src=\"http:\/\/www.taipanpublishinggroup.com\/images\/web\/taipandaily\/charts\/td-061810-chart-goldindex.jpg\" alt=\"Chart: Gold Index\" width=\"450\" height=\"286\" \/><\/p>\n<p>Have we mentioned that now would be a good time to learn how to go  short, if you aren&#8217;t versed in the practice already? Have we further  mentioned, oh, maybe just a few hundred times or so, that now is a good  time to consider gold? (Perhaps it should be mentioned again, just in  case.)<\/p>\n<h3><strong>American Bubble Redux <\/strong><\/h3>\n<p>For the moment at least, the worrisome housing market action is not  in the &#8220;waiting to pop&#8221; countries. It is back in the United States,  where an already busted market is getting ready for another lurch  downward. <em>(My fellow editor Adam Lass recently wrote about the U.S.  housing market. Sign up here to check out his <a title=\"Sign Up for Taipan Daily\" href=\"http:\/\/www.taipanpublishinggroup.com\/profit-taipan-daily-seo3.html\" target=\"_self\">investment commentary<\/a>.)<\/em><\/p>\n<p><a title=\"Go to Video: Meredith Whitney: Housing Will Double Dip\" href=\"http:\/\/seekingalpha.com\/article\/194027-housing-will-double-dip-meredith-whitney\" target=\"_blank\">Meredith  Whitney<\/a>, the Wall Street analyst who made a name for herself  predicting Citigroup would crash, is ready and waiting for more housing  pain. &#8220;The housing market will surely double dip,&#8221; she said in March of  this year. And now it appears she is right.<\/p>\n<p>The troubles circle round in a giant feedback loop. Persistent  weakness in the economy \u2013 high unemployment, high concentrations of  temporary workers, and reduced wages for those who kept their jobs \u2013 are  deterring would-be home buyers from shelling out on new home purchases.<\/p>\n<p>Meanwhile, the much-vaunted homebuyer tax credit is fading away. Like  other forms of stimulus, it was a temporary remedy&#8230; a short-term  goose, not any type of permanent solution.<\/p>\n<p>Thanks to the soon-to-expire credit, U.S. homebuilders are sweating  bullets. They know that once the credit goes away, so will new home  sales.<\/p>\n<p>&#8220;U.S. builders such as LGI Homes are on a tight deadline to finish  houses by the end of June,&#8221; Bloomberg reports, &#8220;so purchasers can get a  federal tax credit of as much as $8,000&#8230; That&#8217;s speeding up a  construction process that for some builders can take five to six  months.&#8221;<\/p>\n<p>In fact some builders, like KB Home, are so desperate to move  inventory they are giving away teeny-bopper concert tickets. Per the <em>WSJ<\/em>:<\/p>\n<p><a title=\"Go to KB  Home's Justin Bieber Concert Contest\" href=\"http:\/\/www.kbhome.com\/Promo%7EPromoID%7E6607.aspx\" target=\"_blank\">KB Home<\/a>, the nation&#8217;s largest  builder, is dangling the chance to see YouTube\/Twitter phenom Justin  Bieber in concert. Visitors to any Las Vegas-area community before July 5  can enter to win four tickets and a soundcheck pass to Mr. Bieber&#8217;s  sold-out July 24th concert at the Las Vegas Planet Hollywood Resort  &amp; Casino.<\/p>\n<p>If you&#8217;re over the age of 14, you may not  be familiar with Mr. Bieber&#8230;<\/p>\n<p>Mr. Market doesn&#8217;t seem all that thrilled by this pre-teen enticement  strategy, seeing as how <strong>KB Home&#8217;s (<a title=\"Google Finance:  KB Home\" href=\"http:\/\/www.google.com\/finance?q=KBH%3ANYSE\" target=\"_blank\">KBH:NYSE<\/a>) <\/strong>stock price is down circa 35% in the  past two months or so.<\/p>\n<h3><strong>Squeezing Blood From a Stone <\/strong><\/h3>\n<p>Nor is it just the builders feeling heat. &#8220;Over the past year,&#8221; <em>The<\/em> <em>Washington<\/em> <em>Post<\/em> reports, &#8220;lenders have become much  more aggressive in trying to recoup money lost in foreclosures and other  distressed sales, creating more grief for people who thought their real  estate headaches were far behind.&#8221;<\/p>\n<p>Imagine the indignity faced by men like Fernando Palacio, who lost  his home to the bank&#8230; saw the property sold off in foreclosure  auction&#8230; and then received a bill for a whopping $148,062, the bank&#8217;s  calculated shortfall on the sale.<\/p>\n<p>To go through the hell of losing a home, only to be hit by a  six-figure bill afterwards \u2013 to be emotionally and fiscally broken, and  then left less than broke \u2013 is almost too much financial torture for the  average Joe to take. Yet this is exactly what is happening in states  where lenders are allowed such maneuvers.<\/p>\n<div>\n<div>\n<blockquote><p><em><strong>How YOU can \u201ctax\u201d THEM<\/strong><\/em><\/p>\n<p><em>Our Pulitzer Prize-nominated journalist-turned-analyst shows you the  100% legal way to \u201ctax\u201d the U.S. government for $1,150,000 or MORE&#8230;<\/em><\/p>\n<p><em><strong>He reveals everything in a FREE <a href=\"https:\/\/orders.taipanpublishinggroup.com\/CUT\/WCUTL605\/\" target=\"_blank\">underground  wealth expos\u00e9<\/a>.<\/strong><\/em><\/p><\/blockquote>\n<\/div>\n<\/div>\n<h3><strong>A Self-Feeding Spiral<\/strong><\/h3>\n<p>Adding to this litany of woes: &#8220;Numerous municipalities are  struggling financially,&#8221; the <em>WSJ<\/em> reports. &#8220;A Rhode Island city  recently said it faces insolvency. Harrisburg, the capital of  Pennsylvania, is considering a municipal bankruptcy filing&#8230;.&#8221;<\/p>\n<p>When banks start dumping foreclosed homes at fire-sale prices, real  estate values drop. And as municipalities struggle to pay bills,  property taxes rise and local services \u2013 water, trash, policing, schools  etc. \u2013 are cut back.<\/p>\n<p>Of course, the more that real estate values drop, the lower the  income from property taxes the municipality receives. And so property  taxes have to rise further in percentage terms to make up for the  shortfall&#8230; or local services have to experience even deeper cuts,  which in turn reduces local employment and depresses property values  further. And so it goes in a self-feeding spiral.<\/p>\n<p>Thank you so much, oh wise government leaders, for turning the  &#8220;American dream&#8221; of home ownership into a full-fledged nightmare by  distorting the <a title=\"Go to article: Don't Trust the Weatherman - Those ARE Storm  Clouds on the Horizon \" href=\"http:\/\/www.taipanpublishinggroup.com\/taipan-daily-052510.html\" target=\"_self\">U.S. housing market<\/a> with a slew of  harebrained gimmicks and incentives that never made sense in the first  place. You sold us warm apple pie with pure B.S. filling, and we ate the  whole thing.<\/p>\n<h3><strong>A Target-Rich Environment<\/strong><\/h3>\n<p>So how to respond to all this, other than shaking one&#8217;s head or  gnashing one&#8217;s teeth?<\/p>\n<p>By figuring out what to buy&#8230; what to sell&#8230; and what to sell  short. As bond giant PIMCO observes, Real Estate Investment Trusts, or  REITs, could be badly hit by the fallout from a slowing economy and a  housing market double dip. Other consumer retail names are heavily  exposed to a pattern of declining consumer spending among the middle and  lower tiers.<\/p>\n<p>For most investors, the housing market double-dip fallout will not be  pleasant. But for those willing to do a little trading, it will be what  one might call a &#8220;<em>target-rich environment.<\/em>&#8221;<\/p>\n<p>Don&#8217;t forget to follow us on <a title=\"Become a fan of Taipan Publishing Group on Facebook\" href=\"http:\/\/www.facebook.com\/pages\/Baltimore-MD\/Taipan-Publishing-Group\/220337511074\" target=\"_blank\">Facebook<\/a> and <a title=\"Follow Taipan_Trader on Twitter\" href=\"http:\/\/twitter.com\/taipan_trader\" target=\"_blank\">Twitter<\/a> for the latest in  financial market news, investment commentary and exclusive special  promotions.<\/p>\n<p><em><strong>About the Author:<\/strong><\/em><\/p>\n<p>Justice Litle is the Editorial Director of Taipan Publishing Group,     Editor of <a title=\"Learn  more  about Justice Litle's Macro Trader\" href=\"https:\/\/orders.taipanpublishinggroup.com\/JMT\/WJMTKC19\/\" target=\"_blank\"><em>Justice  Litle\u2019s Macro Trader<\/em><\/a> and   Managing  Editor to the free investing  and trading e-letter <a title=\"Sign up  for Taipan Daily\" href=\"http:\/\/www.taipanpublishinggroup.com\/profit-taipan-daily-seo.html\" target=\"_blank\"> <em>Taipan Daily<\/em><\/a>. Justice  began his   career  by pursuing a Ph.D. in literature and philosophy at  Oxford   University  in England, and continued his education at Pulacki    University in  Olomouc, Czech Republic, and Macquarie University in    Sydney,  Australia.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>There has been such a grand buffet of top-down troubles to choose from \u2013 collapsing eurozone, overheating China, the BP oil spill \u2013 that global real estate markets have been back-burnered&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-10366","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/10366","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=10366"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/10366\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=10366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=10366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=10366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}