Quote:
Originally Posted by JohnR
I just got my house tax assessment evaluation today. It went up 25 % from 18 months ago though my house is probably worth slightly less than at that peak. The re-evaluation 18 months ago was double that from 3 years before. Yep - taxes are cheaper and out pacing inflation, as just about every other bill from utilities to medical... Now I need another job just to afford this, not because I'm getting laid off  |
John, I hear ya. I can't tell you how many people I've encountered who felt like they had to sell their homes because they couldn't afford to pay the constantly rising property tax and maintenance AND healthcare AND energy. Yeesh, almost left out uniformly rising homeowners insurance premiums post-Katrina. A lot of these folks are retire-ees on fixed incomes. It's especially loopy here in the Northeast, with the influence of Wall Street largely driving up real estate and housing prices.
Much of this can be attributed to a buttload of liquidity (money supply) floating around. If you increase the global money supply for whatever reason (like Alan Greenspan did after he overtightened leading up to the dot-com bust and after 9/11), that money is going to be creating speculative asset bubbles like we've seen in the real estate market, energy (to some extent, enabling technologies like online trading and China/India supply/demand are major factors too), and gold prices.
Most people don't realize this, but we also increase the money supply every time we import more than we export by buying some fancy cheap gizmo from China, as this leads to a trade deficit that has to be financed (by an IOU) by somebody.
This fiat money that gets created by our trade deficit gets circulated back into the U.S. economy - foreign governments like China and Japan and OPEC nations buy things like U.S. Treasury bonds and U.S. government agency bonds that finance mortgage bankers here in the U.S.
The result is that the price of money goes down further, and there's plenty of easy money to get a home loan, which, coupled with lax lending standards (hey this money has to go to work for us), causes people to stampede into real estate and thus causes prices to go UP.
Of course, the party is over when people realize they can't pay their mortgages after they reset ... and they default, and then the government steps in to stanch sub-prime mortages. One spigot of liquidity is thus shut off.
This theoretically cascades into consumer spending , which props up 75% of the economy. When consumer spending slows, then factories and service businesses shut down and we get a recession. That is one of the fears in the stock market.
HOWEVER ... in this case, so far all the leading economic indicators point to slowing growth, not a recession. Housing woes won't likely spill over into consumer spending. So the experts say.
Next year is another story.
So, at some point, when the stock market corrects further (say, 10% off of this year's high), and it will be a bumpy ride, it might be not a bad time to scoop up some shares opportunistically.
Hybrid Mode
