Sunday, December 30, 2007

Spain: "the secondary housing market has practically stopped."

Why am I posting this? Why, because all real estate is local. ;)

This article really caught my attention as I googled "real estate sales".

Good thing it won't spread. Oh... from the article: The issue is all the more important as the housing market makes up 7.5 percent of gross domestic product, according to figures from the BBVA bank. The construction industry as a whole employs 13 percent of workers. So what fraction of Spain's employment is in the REIC? We have 13% in construction. But what about Realtors (tm), mortgage brokers, and all the secondary services?

I also loved this little quote by the author:

And when sales slump, prices follow. A recent study by Deutsche Bank forecast that the average rise in house prices in 2007 would be identical to inflation, which was around 4.0 per cent in the 12 months to November.

Now what happens when everyone bets on home price inflation and instead Spain gets deflation?

This isn't local. Its not different here (where ever 'here' might be). 2008 will be the awakening that there is a global problem. (Sorry, but 2007 was but a nudge.)

Why is Spain important? Its going to scare all of those German saviors of Florida in hiding. So what? Simple, once Spain starts to dive there will be no 'foreign investors' to save the US market. Its the lynch pin connecting investor psychology to an understanding of the size of this event.

But there will be growth. Ethanol has soaked up US surplus grain production. This is helping the USA gain tremendous bargaining leverage in international food sales. I'm seeing a slow bleed of aerospace manufacturing back to the US (thanks to a weak dollar). And video games... (Get a Wii, they're fun!) Not to mention it looks like I'll be attending a friend's wedding in the middle of India. ;)

So if they can keep the banking system functioning... we'll avoid the worst. (I think it can be done.)

But first the python has to pass this (real estate) pig.


Hat tip Guess who's:
Its on the impacts of speculation in Spain.

Got popcorn?

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