Renters are far less likely to upgrade their homes and participate in neighborhood improvement programs. Consequently, values fall. As values fall more mortgages become underwater and more people effectively become renters (either through foreclosure or because they owe more to the bank than what their house is worth).

Homeownership is an important part of a well-developed middle class. Homeownership enables individuals to save and accumulate assets that can benefit generations of their family. Even if the short-term financial cost of rent beats that of homeownership, the long-term benefit of an eventually mortgage-free house is huge.

For those saying that homeownership is what got us into this mess in the first place…I argue that it wasn’t homeownership, it was loose lending standards and rampant speculation that led to the housing bubble and massive excess capacity. If everyone who bought houses over the past few years were properly qualified and had some skin in the game (i.e. a decent down payment) the bubble would be far-less onerous.

On the other hand, those that are buying houses today (in an environment with tighter lending standards, cheaper housing and low mortgage rates) may be the ultimate benefactors of homeownership. Today’s low mortgage rates and cheap housing is setting up families to be debt-free much faster than in the past (and therefore have more money available for savings and discretionary spending). I have suggested several times that if a large portion of the young population exploits today’s ownership opportunity, America could have a far more stable economy in the coming decades.

NYT article

Canadian house prices have increased significantly between 2003 and early 2008, with a marked downward trend since mid-2008, especially in the resource-rich western provinces. This paper estimates the evolution of equilibrium real home prices during this period in key provinces and finds that, following recent declines, home prices are now generally close to equilibrium throughout Canada. However, house prices in Alberta and British Columbia remain around 8 percent overvalued at the end of the sample (second quarter of 2009). Despite the limitations of econometric estimates of house-price dynamics, the measured small degree of overvaluation suggests that the Canadian housing market is essentially at equilibrium.

Get the scoop on Canadian housing from the IMF

The Residential Housing Market is Still Burning Down.

Today, the Commerce Department reported that June new home sales, at 330,000, were up a blistering 24%. So is the crash in residential real estate over? It’s off to the races, right?

Wrong! Much of the gains were cancelled out by whopping great downward revisions which caused April to shrink from 504,000 to 422,000, and May to shrivel from 300,000 to an unbelievable 267,000, a 60 year low.

Every time I update my prediction that home prices are either going south or nowhere for a decade, my inbox gets flooded with angry emails from real estate agents around the country and other industry apologists screaming that I am missing record home affordability and historic low 30 year mortgage interest rates.

Over the weekend I received an assist from Barrons (click here for the link), which highlighted an unexplored angle in the real estate crisis. The coming demographic curve predicts that there will be a shortage of those aged 35-49, prime first time home buyers. At the same time, there will be an oversupply of those over 50, like me, who are looking to downsize their housing requirements.

The net effect is for national home ownership that peaked in 2004 at 69% to fall as low to as 64% by 2015, its 1993-94 bottom. The flip side is that renters will soar from 32.8% to 36% during the same time period.

Needless to say, this is terrible news for house prices. It also explains why low end multifamily housing, where newly formed young families and immigrants reside, is one of the few sectors of the housing markets showing a pulse.

If you want more depth on this politically sensitive issue, please read my notorious piece on “The Hard Truth About Residential Real Estate” by clicking here.

The housing crash has left at least 11 million people in the unenviable position of owing more on their homes than they are worth—and many more millions with properties worth far less than they paid for them.

But some might not be as trapped as they think.

This article is a reflection of the new mindset of the American consumer. Frugality. Savings. Debt reduction. Those are things that we just didn’t do during the 1980s and 1990s and 2000s. Paying down debt was trumped by the returns one could get in the stock market.

Not any more.

Full article

Taleb: Deficits Could be the Next Black Swan

US May Look Like Japan

The Death of Paper Money

The Mean of the New Normal

Europe presents main threat to global recovery, IMF says

5 Unemployment Myths

Who’s Afraid of Steve Jobs

How Bad is China’s Property Bubble?

Reaction to War Logs Disclosure

Tesla Electric Cars – Still Far to Go

The Web Means the End of Forgetting

US Senate Candidate, Founder of Euro Pacific Capital & Successful Author (NEW BOOK “How an Economy Grows and Why It Crashes”). Schiff tears apart the ‘recovery’ and points to a precipitous decline in the US dollar. Don’t listen at your own risk.
AUDIO

Bill Fleckenstein

President of Fleckenstein Capital, a money management firm based in Seattle. The outspoken critic of Alan Greenspan rails on the mess that the money printers have left us.
AUDIO

John Williams

Founder of Shadow Government Statistics Newsletter and Specialized Economic Consulting Services: Analysis Behind and Beyond Government Economic Reporting. A resolute independent, Williams cracks open our suspicions that the mainstream media is rigged.
AUDIO

Matt Simmons

Founder and Chairman of the Board of the Ocean Energy Institute & Former Chairman Emeritus of Simmons & Company International. Simmons presents some scary thoughts on the BP disaster…putting his own reputation on the line. Let’s pray that Simmons isn’t right.
AUDIO

Absolute Must Listen: Ben Davies

CEO of Hinde Capital – Ben ran trading for RBS Greenwich Capital in London where he managed a macro portfolio. Davies presents the stunningly convincing case for gold.
AUDIO

Jeffery Saut

Managing Director & Chief Investment Strategist for Raymond James – Jeffrey known for his insightful market commentary is a regular on Wall Street Week, CNBC, Bloomberg TV and more. A fantastic interview for a surprisingly opinionated CIS of a mainstream broker – Saut has been a leading thinker in the investments industry for a long, long time.
AUDIO

James Turk

Chairman and Founder of Goldmoney.com – James has written “The Freemarket Gold & Money Report,” an investment newsletter since 1987. Turk makes the ultimate case for the barbaric relic, highlighting its true value vs. its price.
AUDIO

Source: KingWorldNews

Watch the full episode. See more Need To Know.

The nation’s 13.6 trillion yuan of new loans in the past 17 months, bigger than the economies of South Korea, Taiwan and Hong Kong combined, is “unprecedented in 400 years of economic history,” said London-based hedge fund manager Hugh Hendry, co-founder of Eclectica Asset Management.

Read the full article

Does anyone else have bubble fatigue? The western world doesn’t like pain. That’s understandable. And we lack foresight. That’s unfortunate. But will this lead to our downfall? After all, our adversaries and global competitors have proven repeatedly that they are willing to sacrifice for the future.