With a massive real estate crash underway, China is not the world leader in growth.
China Financial Markets’ Michael Pettis explains that bailouts are useless.
Shifting the debt doesn’t solve the problem
- Houze Song’s excellent article on why proposed property rescue plans in Zhengzhou and elsewhere are likely to fail. The authorities are only shifting the debt rather than settling it.
- I would add that the existence of large amounts of bad debt and overvalued assets, by definition, means that the system’s recorded collective “wealth” exceeds its actual wealth. can be thought of as a “basil”
- In other words, “solving” the debt problem is not about shifting problems or increasing liquidity. Ultimately, you will need to write off the debt and allocate the associated losses. This reduces the economy-wide recorded wealth by the full amount of the basil.
- In the process, and for that reason, someone’s wealth must diminish, whether they are workers, household savers, businesses, local governments, central governments, importers, or whoever else. That is why debt settlement is so politically difficult. someone has to take the loss.
- Trying to settle losses and debt in the real estate sector by moving debt from one entity to another without anyone suffering a loss is never a solution. It just gives you more time to fix the problem.
US collection
The payoff in the US for extreme real estate valuations will come in the form of significantly lower growth going forward.
Existing home sales fall 5.9%, falling for 6th straight month
Yesterday I noticed Existing home sales fall 5.9%, falling for 6th straight month
The main selling point of pre-owned homes
- Existing home sales fell for the sixth straight month, at a seasonally adjusted annualized rate of 4.81 million.
- Down 5.9% from June, down 20.2% from a year ago.
- The median existing home sales price rose 10.8% from a year ago to $403,800.
- However, the median is down $10,000 from last month’s all-time high of $413,800.
- The inventory of unsold second-hand homes increased to 1.31 million units by the end of July. This equates to 3.3 months at the current monthly sales pace.
- The median resale home price across all home types was $403,800 in July, up 10.8% from July 2021 ($364,600). This is because prices have increased in all regions. This is the 125th consecutive month of year-over-year growth and the longest streak on record.
- Properties were typically on the market for 14 days in July, the same as in June, down from 17 days in July 2021. His 14 days on the market is the shortest since the NAR began tracking him in May 2011. 82% of the houses were sold. He was less than a month on the market in July 2022.
- First-time buyers accounted for 29% of July sales, up from 30% in June and July 2021.
- 24% of July transactions were all cash, down from 25% in June but up from 23% in July 2021.
- Private investors or existing homebuyers, who make up most of the cash sales, purchased 14% of homes in July, up from 16% in June and 15% in July 2021.
Details are helpful.
It was the longest record on record, surpassing the same month of the previous year for 125 consecutive months.
scroll to continue
Case-Shiller house prices
Housing began to decline 9.6%, now below pre-pandemic levels, led by single households
Also note Housing began to decline 9.6%, now below pre-pandemic levels, led by single households
House prices either crash or slowly fall for an extended period of time. I’d rather crash.
The longer prices stay high, the weaker the housing market.
This is a problem created by the Federal Reserve.
Free funding from Congress exacerbated the problem, but more than a decade of ridiculously low interest rates by the Fed created a housing bubble.
Origin of this post MishTalk.Com.
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