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Technical Traders/Chris Vermeulen/7-8-2021
“The data and activity are supporting a hypothesis that speculators, flippers, and homebuyers have chased the rising price levels well past a key equilibrium level suggesting that a reversion process is very likely in the near future. This reversion event may be similar to the 2008-09 housing crisis as banks suddenly realize they’ve issued loans to borrowers at extremely high price levels with very little collateral to support these transactions. Or borrowers suddenly realize they are trapped in an overpriced home while the economy reverts to lower output levels. Either way, this seems like a receipt for some type of crisis in the making.”
USAGOLD note: Real estate values in many rural areas have certainly risen to extremes. Whether or not they have achieved bubble status remains to be seen. We might add, too, that it is not just the pandemic that has driven people from the major cities. Most in this group are moving for very fundamental reasons, and because it is possible given current innovations in technology – not as a speculation in the real estate market. We will add that for a good many in this group the reasons for the mood extend beyond just the pandemic. It is doubtful, in our view, that this group will react to a reduction value, or even a crash, as a terminal event. For the speculators and the financial system, though, it might be a whole different story, as Vermeulen points out.
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