OK, it’s been a long time since I posted anything about the macro economy, and it’s impact on local Real Estate. The trouble in the stock market because of the idea Greece may default on it’s debt obligation this Sunday May 16th have a lot of people wondering. There are a lot of things to wonder about, but let’s just say that it has stalled the pricing of Real Estate in the United States.
The reason is that we have had this global economy illusion for the past decade, or going back to 1998 to be more exact. When you look at charts and graphs for Real Estate like this one: http://upload.wikimedia.org/wikipedia/commons/6/6c/Shiller_IE2_Fig_2-1.png there are a lot of these, but you may get an idea from just this one, you get the idea that something went wrong with the price of Real Property. This chart is of the United States, because it’s easier to track, but the world, the global Real Estate market, is even more over priced.
So when we heard banks were being bailed out we never thought about what that meant. It means they have loans that are defaulting. People aren’t paying on mortgages. They can’t afford it. In turn what that means is that all the Mortgage Backed Securities that are the basis of Pension Funds, Entitlement Programs, Institutional Investments, are worth less than what the economies of the world thought.
Dubai started it, Greece is next, then Portugal, Spain, Italy, and England isn’t doing to well. It’s an economic domino effect. Our Real Estate pricing has been holding a collective breath, and now we will see, in two days, we’ll see.
