الحوار والراي الحر => الاقتصادية => الموضوع حرر بواسطة: Sleiman Yohanna في 14:21 09/08/2005

العنوان: Warnings Of Worldwide Housing Crash
أرسل بواسطة: Sleiman Yohanna في 14:21 09/08/2005
Warnings Of Worldwide Housing Crash

For several months, Lyndon LaRouche and EIR have warned that unsustainable housing bubbles, built up by the central banks’ massive money pumping, have become one potential detonator for triggering a global crash on financial markets. The central banks’ liquidity pumping has led to an explosive growth in mortgage credits, in the United States, Britain and elsewhere. Now, a series of highly alarmist articles on the housing bubble have appeared in German newspapers—for example, in the Financial Times Deutschland, Berliner Zeitung and Die Welt.
   Most of the data in these articles have been taken from a recent survey by the London Economist on the housing market in the leading economies worldwide. In its June 16 edition, the Economist put out its findings, concluding:
   “The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops.... Never before have real house prices risen so fast, for so long, in so many countries.... Rising property prices helped to prop up the world economy after the stock market bubble burst in 2000. What if the housing boom now turns to bust?”     According to the Economist survey, “the total value of residential property in developed economies rose by more than $30 trillion over the past five years, to over $70 trillion, an increase equivalent to 100% of those countries’ combined GDPs. Not only does this dwarf any previous house-price boom, it is larger than the global stock market bubble in the late 1990s (an increase over five years of 80% of GDP) or America’s stock market bubble in the late 1920s (55% of GDP). In other words, it looks like the biggest bubble in history.”
Over the 1997-2005 period, house prices have risen most in South Africa (244%), Ireland (192%), Britain (154%), Spain (145%), and Australia (114%). In the US, prices rose by “only” 73%. But, here the house price inflation has further accelerated in recent quarters to above an annual rate of 20%. Until the year 1996, US private households were adding every year about $200 billion in new mortgage debt. This figure then increased dramatically, reaching $900 billion in 2004. The total volume of outstanding mortgage debt in the US has crossed the $8 trillion mark.
Furthermore, the Economist noted: In all the housing bubble markets, “house prices have hit record levels in relation to rents,” and are “at record levels in relation to incomes.” A big danger is the high rate of house owners buying for “investment.” Investors, rather than residents, are more likely to sell out in case of price falls, prompting further acceleration of price falls. In order to prop up the housing bubbles, private households are being lured into taking on more mortgage credits by temporary low interest rates and by “innovative” financing schemes. A rising number of mortgage credits are being offered in the US without demanding any down-payment, and even without paying any interest or principal until the credit matures. According to the National Association of Realtors (NAR), 42% of all first-time American real estate buyers made no down-payment on their home in 2004. Furthermore, 50% of new mortgage credits no longer carry the usual fixed interest rate, but are “adjustable-rate mortgages” (ARM). All of this provides the perfect ground for people buying homes no longer to live in them, but to re-sell them within a few months at a significantly higher price. Already a stagnation of house prices would crush such financing schemes.
A bursting of the global housing bubble, which is just a matter of time, will have devastating consequences for the financial system and economies, going far beyond the repercussions of the “new economy” stock market crash, which wiped out $15 trillion in asset value within three years