Predicted housing crash a big snooze

 

Mortgage rates have tripled or whatever, and nothing is happening.  Even before the pandemic, remote housing had halved in value.  Then came the Great Exodus from Toronto, and still nothing.

In the good old days, banks were quick to foreclose and kick the people out.  Then they would put out the houses at distressed prices.  People would sell at low prices to avoid the banks.  The house prices were set by the lowest prices that sold.

But not now.  There is a buyer and seller strike.  Nothing is moving and it defies all the physics of money flow.  Nobody is  buying, but they want to rent, and the rents are zooming.  So, here comes the physics hypothesis, easily proven right or wrong in the next few months.

Hypothesis - Banks are mucking with the system.  Physics is the study of fundamental forces, and money wants to flow when it is free.  If it's not flowing, then it is tied up, and we have 'limbo', which is the same condition Japan faced after the big property crash, because the banks couldn't let go.

We are in limbo because the banks can't foreclose and kick everybody out.  Ever since the pandemic, nobody has been paying the mortgage.  The banks just merrily pile on the debt and say it will be fine once housing starts doubling again every year.

I'm saying any of this is happening, it's just a hypothesis, but banks can also engineer a phoney foreclosure, which is to take the house at peak prices, and allow the former owners to live there, low rent or rent-free.  The banks know that the first real foreclosure will cause a panic, tons of empty houses, and prices dropping to nothing.  

The hypothesis is only proven by history.  Sooner or later, as with Japan, this 'charity' becomes unsustainable.  We get a crash much bigger than we would have got, had we just let things go free.  Prices go down by half or more.  This is only a year or two of recent gains.  I generally expect things to be worse.  However, nothing will happen as long as we have our fine limbo, probably until the Spring.

ps. Symbolic Picture

House under construction, not touched for years.  Lost in the Fog of Limbo.