TownSpeaks Real Estate US Housing Supply and Demand

US Follows Greece in Default

Is the USA next in line for debt default?

In an interview hosted by Matt Welch, radio host and economic / investment expert Peter Schiff warns of the indicators found in the US economy and how they are going to take us down the same road as Greece who has recently teetered on the brink of being ejected from the European Union and facing financial collapse, "What's happening in Greece and what's happening in Puerto Rico is going to happen in the United States," 

Peter Schiff, CEO of Euro Pacific Capital notes, "Once the Greek creditors began to question the solvency of Greece they demanded higher interest rates. The minute our creditors figure out we are in the same position as Greece or Puerto Rico, they're going to demand higher interest rate from us and we can't pay either."

When people discuss default, this is what it means - that we are not able to service the interest rate on the debt that we have outstanding and that we are not able to pay creditors who have 'loaned' us the money that we borrow. It is interesting to note that Quantitative Easing was the process of printing money for the purpose of buying our own Treasury Notes. In other words, it is like spending money on your Visa, then going home and printing money so that you can borrow more. The problem with the analogy is that in our economy, we do not pay the debt down, we only accumulate more.

Further, we have enjoyed world currency status meaning that our cash is good everywhere and is used as the primary currency in the world. This is true because it is the primary currency used to purchase oil. We have abused that power though and it is not a matter of if, but a matter of when the world will no longer tolerate our abuses. With a debt ratio of more than 100% compared to the GDP, if any other nation were were in this situation, there would not be any question that we would be forced into default.

Add to that artificially low interest rates and you have a recipe for disaster. Many do not correlate the interest rate of 0 and our ability to service our national debt. Right now we can make payments but what happens when interest rates go to even 3%, which is still extremely low? Then we have to pay much more to service the nearly $20 trillion we have in liquid debt (not even overall debt). That number becomes astronomical.

The Feds have been able to keep these rates down by printing more money and they are under the misguided belief that they can control the interest rates we pay, but there is a stark reality awaiting the policy makers. There is a point where pressure for interest rates to rise exceeds the ability for Feds to contain it and, just like the housing collapse, the more you keep the lid on pressure, the more that pressure builds and the bigger the explosion.

This is a great video interview lasting about 3 1/2 minutes.

Real Estate Supply and Demand Curve

Residential, Commercial & Real Estate Supply and Demand

Real Estate Supply and Demand. There are several indicators that can portend the health of the housing market. From this we can derive a sense of the health of the markets in general since housing is a large portion of our economy.

Residential Real Estate Supply and Demand

In the residential world, we are most concerned with the investor category for several reasons. The reason the investor category is so critical is that this segment of the real estate market is the gauge for residential real estate trends. Investors are very sensitive to end user demand and they buy and price homes accordingly. So real estate investors are a primary focus of this article.

Commercial Real Estate Supply and Demand

The second division is commercial. From a real estate supply and demand perspective, this segment is a two-year lagging indicator behind residential real estate as a rule of thumb. So goes the residential market, so goes business which is why commercial real estate has a lag. Well if we know the main indicator of commercial real estate is the residential market, then logic questions why we even follow the commercial market.

There are several key factors in this market that can help us understand more clearly, how deep a trend is but more importantly, the velocity of the trend. How is this possible? In the real estate supply and demand equation, residential real estate is a mass of money based strictly on demand. Commercial real estate is a mass of money based not only on demand, but on demand projected in the future.

Comprised of purchases and leases, commercial real estate is executed by a more 'intelligent' market member. Not that they are smarter, just that they do much more research into projected demand curves prior to executing a purchase or a lease. They are more careful not to extend into a cycle without reasonable assurance that they will be able to sustain both top and bottom of a cycle.

This brings us to our final point, the cycle. Historically ten years top to top (or bottom to bottom), a real estate cycle has a tendency to consistently repeat which helps us trend where we are headed both economically and historically. The challenge lately is that the swings have become more violent and pronounced with a greater dependency on external events on our economy.

TownSpeaks Real Estate US Housing Supply and Demand

This is one factor in globalization, but that is for a different discussion. Additionally, in this discussion we are not factoring employment or economic dynamics as drivers of demand. We are simply delineating residential real estate and commercial real estate to fundamentally understand the correlation between the two.

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Stockholm Terror Attack

TFlash – Stockholm Terror Attack

Subject – Stockholm Terror Attack

A man suspected of driving a carjacked truck into a crowd of shoppers at a local department store has been arrested and has confessed to local authorities. Police have confirmed that at least 4 people have been killed and 15 people injured (9 seriously) in the Stockholm Terror Attack. Images of the man were distributed by police as the short manhunt came to conclusion.

Swedish Prime Minister Stefan Lofven stated that the attack appeared to be terror related and this was later confirmed by police. Sweden and neighboring countries are attributing the spike in crime to the influx of refugees from states known to have radical terrorist ties. The Stockholm Terror Attack is another in the wave of so called Lone-Wolf attacks in the region.

Stockholm Terror Attack occurred at approximately 3:16PM local time.

Stockholm Terror Attack

Swedish Police release images of the suspect later arrested in the horrific attack at a local department store

Stockholm Terror Attack

Police release images of man suspected and later apprehended in Stockholm Terror Attack

Stockholm Terror Attack

Scene outside the local department store where a carjacker used a truck to run over shoppers. Courtesy AFP