The National Association of Realtors in the United States says problems in the residential property market are worse than it thought. Instead of the average, existing house declining 0.7% this year as it predicted, the drop is likely to be closer to 1%, says the NAR. Not since the ’30s has this happened, it noted.
And ‘if it weren’t for a favorable economic backdrop,’ the situation would be much worse.
A one-percent fall doesn’t sound to us like something anyone would worry about.
Meanwhile, foreclosures in April were twice their level in 2006. Warren Buffett says these problems are big problems for the people who are in the middle of them, but they’re not likely to affect the rest of the nation.
We suppose it’s a bit like being in a big battle. It’s probably exhilarating and interesting – as long as you’re not one of the people who gets killed.
Should the people pay any attention to official warnings?
Didn’t Alan Greenspan famously warn of ‘irrational exuberance’ in 1996? And didn’t it turn out that the exuberance wasn’t so irrational after all? The Dow went up for four more years… corrected in 2000-2002… and has been going back up ever since.
And remember when Carlos Menem, president of Argentina, told the world that it had nothing to worry about with the peso. “One peso, one dollar. Full stop.” We were just there; we got three pesos to the dollar.
“When the authorities tell you to do something, you should probably do the opposite,” says our neighbour, Pierre. But what if… occasionally… the authorities didn’t lie?
Yes, it would be a dirty trick… but we wouldn’t put it past them.
The Daily Reckoning Australia