Is Real Estate The Next Shoe To Drop - Part 3

Our continued research into the state and status of the Real Estate market continues to point to a process that is starting to unfold in the US which may put price and activity levels at risk. Within the past two segments of this research article, we’ve highlighted how market cycles and recent market data point to a Real Estate market that may be in the early stages of a downward price cycle.

Additionally, within Part II of this article, we highlighted the human psychological process of dealing with a crisis event which also suggests a deepening price contraction event may take place within the next 12 to 24+ months.

US New Home Sales Data Was Just Released

We believe the psychological process is just starting to become evident in the current data. For example, the US New Home Sales data was just released and it shows the sharpest decline in activity since June 2010 (nearly 14 months after the actual bottom in the US stock market in March 2009).

Real Estate

Our researcher team believes investors/traders and many consumers have become complacent with the current data and are simply in denial in attempting to relate future economic outcomes to the current set of circumstances. There has never been anything like this to disrupt global economic activity and consumer engagement over the past 100+ years. Not even the Great Depression or WWII was on this scale. Continue reading "Is Real Estate The Next Shoe To Drop - Part 3"

Is Real Estate The Next Shoe To Drop - Part 2

As we continue to delve into the looming Real Estate crisis that will likely hit the US and globe over the next 12 to 24+ months, we want to focus on the human psychological process of dealing with a crisis event and how that relates to economic engagement. In the first part of this research article, we discussed how the time-line and events that have unfolded over the past 120+ days have setup a continuing global crisis event. The best of our knowledge, there has been nothing like this, other than massive wars like WWII, that have taken place on the planet over the past 75+ years.

This presents a very real possibility that human psychological processes have engaged throughout the planet that may disrupt how effective the recovery efforts are in the near future. If humans engage in a traditional psychological crisis-cycle process, then there is little chance that the economic recovery will reach 2018-2019 levels very quickly. Let’s review the psychological process of a crisis event.

The Normal Psychological Reactions To A Crisis Event Are

Vicarious Rehearsal: People that are distanced from the crisis event (location or expectations) tend to react in a way that reflects their belief that “it won’t result in any dramatic changes to their lives”. Thus, they continue behaving and acting as they would without the crisis.

Denial: The process of denial takes on many forms. Some people simply ignore the warnings or information related to the crisis. Others become agitated or confused. Some simply chose to believe the threat is not real and others may believe the threat does not relate to themselves.

Stigmatization: Sometimes, segments of society may become stigmatized by their community as anger or blame drives people to believe infected people or segments of society that may promote the crisis event are identified. We’ve already seen some of this type of activity throughout the globe take place. Continue reading "Is Real Estate The Next Shoe To Drop - Part 2"

Is Real Estate The Next Shoe To Drop?

The past few weeks and months have been very interesting to see how the global central banks and governments have attempted to position themselves ahead of this COVID-19 virus event. We continue to suggest that we are just starting the process of navigating through this potentially destructive virus event. We believe the sudden onset of the virus pandemic has sent a shock-wave throughout the globe in terms of expectations and valuations that are, just now, starting to become “real”. Let us try to explain our thinking and how this relates to Real Estate.

The COVID-19 virus event is a global crisis event that is currently in the very early stages of consumer psychological processing. All types of crisis events prompt some forms of typical human reaction. We believe the Real Estate market may be the next big asset revaluation event as consumers continue to process the COVID-19 virus crisis and the consequences of this event.

Real Estate Cycles

Real Estate cycles typically transition through the following phases as supply and demand functions work through the markets. Pay attention to the middle of this cycle chart. In the Expansion and HyperSupply stages, once supply peaks and prices somewhat peak/stabilize, a transition takes place in the market where buyers chase premium properties and push price levels moderately higher. The Recession Cycle is typically a disruptive cycle that is the result of an economic/income disruption. When people can’t earn enough to satisfy their debt obligations and or provide for their families, then the Real Estate cycle begins to contract.

Real Estate

An event like this, the COVID-19 virus event, would typically start out as a regional/local event. This did happen as it roiled certain areas of China in late 2019. Watching how China attempted to manage and hide the extent of the virus explosion within their country was painful to watch. Continue reading "Is Real Estate The Next Shoe To Drop?"

Concerned About The Real Estate Market?

Our continuing research into the state of the real estate market suggests the Covid-19 virus event will likely put extreme pressure on many sectors within the US and global markets. This, Part III of a multi-part research article, will highlight many of the key economic data points that will soon be released and how these numbers may shock the markets. Additionally, as consumers and businesses prepare for an extended shutdown, it is important to understand the psychological process that takes place in the minds of people. PART I, PART II

Initially, people naturally hope for a quick and reasonable solution. As the process continues where an extended shutdown of the US economy persists, consumers and business managers change their expectations from optimism for a quick resumption of economic activity to “how do we survive this extended closure event”. This is when traders and investors really need to pay attention to what is happening in their local and national economies. One of the most important things to consider throughout an event like this is to watch how your local economy is operating and what is happening with local consumers. This will help you understand what is happening elsewhere.

Demand for certain items will continue almost as normal. We call this the Personal Consumer Essentials. These items are typically things like toilet paper, toothpaste, over the counter medications, underwear, food, and water. These are the types of purchases that must continue for average people to survive this type of event. Luxury items, vacations, extras, and other purchases may suffer throughout this process.

The first 30 days will likely be a transition period for many consumers. Remember, this is still the “hope” phase where Continue reading "Concerned About The Real Estate Market?"

Is A Real Estate Crash Coming?

Does history repeat itself? Are price patterns and chart patterns reliable enough to suggest that a global Real Estate market collapse may be set up? What would it take for another Real Estate collapse to take place in today’s global market?

First, let’s start with this simple chart highlighting the “Bear Flag” setup from 2007 and the current 2019 Bear Flag setup. This price pattern was enough of an early warning sign for our research team to run into our offices and tell us of the exciting pattern they just identified regarding Real Estate and what they thought could happen. We listened to them share their ideas and concepts of how we have 11 months to go before the 2020 US Presidential election takes place and how higher risk delinquencies and foreclosures are starting to spike. They suggested the political theater of the global markets and US election cycle will likely distract from the weakening economic cycle which could present enough “smoke and mirrors” to keep investors’ attention away from this potential collapse in the housing market.

Much like a magician attempts to distract you just long enough to pull of their new trick, could the political theater, global economic news cycles and the never-ending battle in Washington DC be just enough of a distraction that skilled traders miss this critical setup? We hope not.

The peak that occurred in 2007 setup about 19 months before the 2008 Presidential election took place. The 2019 peak occurs about 13 months before the 2020 Presidential election. In both instances, a highly contentious political battle is taking place which may distract traders and investors from really paying attention to the underlying factors of the global markets. Continue reading "Is A Real Estate Crash Coming?"