I just spent the last 3 hours reading about the real estate market and the global economy. Exciting stuff for sure. So what did I learn? Just that the housing bubble is about to burst. I know a few home owners so I'm hoping they sell now, invest in gold and ride out the coming recession. According to the head economists like Stephen Roach, Americans owe a lot of money. We continue to spend because of low interest rates and the temporary tax cuts. Interest rates have to go up because there are signs of inflation, the tax cuts can't last unless we want to get rid of public schools. When rates go up and spending on Iraq goes down, the housing market will implode. There are a lot of people, my dad included that aren't worrying about retirement because the value of thier homes have doubled in the last 6 years. What happens to spending when that equity evaporates like it did in Japan?
"The Japanese real estate boom collapsed in 1991; in 2003 a house in Tokyo cost less than half of what it did in 1991. A tanking real estate sector and a slowing economy saddled Japanese banks with bad loans. Excess capacity, especially high for Japanese automakers, discouraged new investment and ensured that the slowdown would persist."