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The rate at which real estate prices will likely decline

Something to think about…and worth a read

The way we at The Automatic Earth see it play out is that the entire house of cards will fall within 2-5 years, and, within that timeframe, sooner rather than later. While there can be any number of inside and outside factors that can speed it up, we see practically none left that could slow it down.

No-one who hasn‘t thoroughly thought this through could possibly see an 80-90% drop in home prices, and most who have can’t either. However, that’s where the Big Picture enters…

Our economies run on credit, it’s their lifeblood. Take it away, and they will stop running. Not altogether, but to a very large extent. Imagine that coming to a grinding halt.

Real estate purchases practically all involve the use of credit. For anyone to be able to afford a home with the cash they have, home prices will have to come down a lot, which is precisely what they will do. However, by that time, those among us who do have the cash will think twice before using it to buy a home. Home purchases will never go down to zero, but they can come down a lot. Like prices, purchases can also fall by 90%. There’s a solid link between the two.

In the end, what we’ll be left with is a small group of rich people buying up real estate for pennies on the dollar, which is of course no different from what happened in the 1930’s.

What we fear will be new and special (about this depression) is the degree to which we will see our economies and societies crumble; there are precious few signs that it will be better, let alone different, this time.

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