You see it after every big stock market crash, money goes toward housing/property, a supposedly 'safer' asset. Prices go up 'in steps'....but then they plateau. For years. Incomes will catch up like they do and then housing is more affordable (on the outer fringes, where most 1st home buyers buy). Just not yet. It will be years.
If all speculationbased price levels sit on extremes, which is rather the case now (stock market multiyear recordhighs, precious metal multiyear recordlows) then that means that a stable price / sideways is rather not to expect. All a reversal needs is a trigger. And the more extreme the price levels, the smaller the trigger that is needed. See, the whole of the market picture is an amount 'volatile' money, being money that moves forth and back and causes the price instability/cycles. The current situation is that this volatile money is now concentrated in the stock market, as the multiyear record high levels there indicate. There, the what goes up has to go down - rule applies. It needs some trigger(s) and they will head the exit doors back to other markets (alike gold/silver). Of course, again temporary. Still, this is a sell-higher-than-now opportunity for those that in a previous cycle were tricked into paying higher prices, as to 'restart' their silver 'adventure' on a better basis. Aside of this volatile money, there are bank savings. The crisis made alot people cautious, save instead of spend, and bank savings also sit on record highs. And it's exactly this that prevented serious inflation. And this is also the single capital problem that the central planners face, that already reached the near to zero intrest rates level, as illustrated by the new super excess reserves based QE method they started in 2008, a construction wherein they can throw more dollars to their parasitic buddies without having to give bank depositors also more. People with bank savings could be seen as people with promises that, unless some technological super revolutions occur or aliens flow in resources, can never be held at todays price levels. In order to escape this loss, they have to speculate on other things than fiatmoney. Sooner or later. The longer they wait, the more loss accumulates. But, those other things to speculate on, can also mean loss, due to others having driven the price up before them. So, it's a matter of pickpecking the moments wherein the least bought themselves in. Those 'plateaus'. Those that have the courage to not sell and instead keep on buying there, in the middle of the pessimism of no future here / sideways, will later be lifted to the positive side in a 'going up step'. Those that lack this courage, will just cascade loser decisions, and stay milking cow forever. That's how I see it. That 'volatile money' is the money that is after your money. On price plateaus it's not present.
That 12% interest rate and $150,000 house reminds me of the days back in 1990. The flaw in the argument above was if you look up the chart above for the weekly wage back in 1990 it was $529 The $2000 a month repayment was impossible (almost 100% of monthly income!). You could TRY and pay it of at $1540 a month....but that takes 30 years. I'd rather be paying $2000 a month in 2010 on a $300,000 house with a weekly wage of $1270 (from the chart above) Id still have $800 left over each month. People of today think that buying a 1st home was much easier back then than now. The truth is that it has never been easy to buy a 1st home - and the numbers are ALWAYS scary.
That's precisely the point, Banks take higher risks and lenders take higher risks now than 20-30 years ago. Also low interest rates can, and invariably do, go higher at some stage, something many young buyers fail to factor in on a huge 30 year commitment. Easier? Perhaps easier to take on debt but the in longer term it is rather frightening. I'm glad that I was a FHB back in the bad old days, at least there was some consideration given by the lender and the borrower to the long term commitment. I also had the misfortune in those days to experience Paul Cheatings' "recession we had to have" when mortgage interest rates soared to nearly 20% so I am well aware of the risks involved in acquiring large debt. It is easier in some ways now but when the wheels fall off the prang is a lot harder.
