After the United States launched a massive stimulus policy, everyone knows that the Great Inflation will definitely come and asset bubbles will definitely come!
China has taken strict precautions. Although housing prices have risen, the rate is limited. In contrast, the real estate industry in the United States is crazy.
01
- The US housing market is frantic.
Buying a house depends on looting. One step later, either the house will be gone, or the landlord will sit down and start the price.
The feverish emotional response is statistically that US home sales have soared, hitting a record high.
- The nationwide housing prices are soaring, setting a historical record!
According to NAR data at the end of June, the median price of existing homes in the United States in May was US$350,300 (approximately RMB 2.207 million), a record high. The price rose by 23.6% year-on-year, the largest increase since 1999 on record. Since March 2012, it has increased year-on-year for 111 consecutive months.
According to its monitoring of 183 metropolises in the United States, 99% of the regional housing prices rose in the first quarter of this year, and 89% of the regional housing prices rose by double digits! This data is very!
From 2012 to 2019, the index’s compound annual growth rate (CAGR) was 5.9%, and in 2020, the index’s compound annual growth rate was 10.3%. The price increase has almost doubled!
If an increase of 15% in one year, it means that house prices have doubled in four years. If the down payment ratio is 10%, and the residents add 10 times leverage, then the house price will double in 4 years, and the investment income of the house will be 10 times!
This is a very scary thing!
Let’s look at other home price indicators, single-family home prices are also at an all-time high; the home price index, constructed by Nobel laureate Shiller, is also at an all-time high.
The real estate market in the United States is frenzied. The direct factors are the imbalance of supply and demand, environmental support, too many buyers and too few sellers.
- Policies are favorable to the US housing market.
As the housing mortgage interest rate is directly linked to the MBS yield, the Fed has purchased a large number of MBS after the outbreak (the scale has increased by 55.5% since April 2020, and the cumulative increase has been US$0.75 trillion).
Therefore, the 30-year and 15-year mortgage interest rates were once suppressed to historical lows of 2.7% and 2.2%.
- There is a shortage of houses in the United States.
After the subprime mortgage crisis, the U.S. real estate market has ceased to be so frenetic, so the supply has been low.
After the outbreak of pandemic, the situation became worse, because construction workers stopped working, no one was going to build houses, and there was a labor shortage.
As a result, the US inventory is in a hurry!
The current decline in new home inventories has narrowed, but existing home inventories have continued to decline year-on-year, down 6.1% and 28.2% respectively from the same period last year.
The number of months available for sale for new homes and existing homes also fell from 6.6 and 5.3 months at the end of 2019 to 3.2 and 3.6 months, respectively.
- The outbreak of the pandemic has caused soaring demand for housing.
The outbreak of the COVID-19 pandemic is highly contagious. The first choice for the wealthy with the conditions is to leave the high-density main urban area and buy a house in the low-density suburbs.
The rich have all gone to buy houses, and the poor have also wanted to buy houses, leading to an overall surge in house prices across the United States.
- An unprecedented stimulus plan and soaring investment demand.
In April and December 2020, the US Congress passed 3 trillion and 900 billion US dollars of fiscal stimulus respectively. In March 2021, another 1.9 trillion US dollar stimulus was launched.
Everyone knows that such crazy money printing must be spent quickly, otherwise the money will depreciate!
02
The key question is, is there any risk in this round of house price increases, and what is the transmission logic of the risk?
The U.S. housing prices are soaring and people are rushing for houses. What is weird? Residents’ leverage ratio has not reached the required level.
We can draw a conclusion from the residents’ leverage ratio alone: There is no bubble in the US housing market, and is there no risk in the housing market?
Of course not.
A hidden lever for the American people to buy a house is government subsidies!
Although there are many reasons for the soaring housing prices in the United States, from the perspective of funding sources, the main driving force is the US government subsidies.
In the 2 trillion stimulus bill (CAREs Act) of March 2020, subsidies and unemployment benefits for individuals totaled US$550 billion, accounting for 27.5% of the total plan.
In the 900 billion stimulus package launched in December, subsidies for low-income earners were $286 billion.
On March 11, Joe Biden’s fiscal stimulus package provided direct subsidies and unemployment benefits to low-income groups totaling 1 trillion yuan, accounting for 53% of the total plan.
After several rounds of the US government’s direct subsidies to the people, that is, direct money into the people’s bank cards, are as high as $1.8 trillion.
1.8 trillion US dollars, equivalent to 12 trillion yuan!
The result of such a large-scale subsidy is that the American people no longer go to work.
Looking at the employment rate in the United States, it was as high as 65% in 2000, but now it is only 58%.
All of a sudden, it has dropped by 7% over the years.
Look at the labor force participation rate data again.
In 2000, the labor participation rate in the United States was as high as 67%, but after large-scale subsidies in the United States, the labor participation rate was less than 62%.
Americans do not go to work, definitely not because of lack of job opportunities, look at the vacancies in the United States, it also hit a record high!
What does mean? The United States now provides a large number of jobs. Every boss is short of staff, but no one applies for it.
So, looking at these data together, you can draw a conclusion: The American people are too dependent on government subsidies to go to work!
The government subsidizes too much money and it can’t be spent. What should I do? Save it!
Therefore, the savings rate of the American people has soared, and the fluctuation of savings is closely related to the time of the US government subsidy.
Of course, the people also know that money depreciates in their hands, and it depreciates even more in their bank cards, so they are all rushing to buy houses.
So, the first part of the phenomenon of the American housing market mania occurred.
Everyone has the impression that Americans don’t like to buy houses. Those who buy houses are rich. In fact, this is a prejudice. The poor in the United States also buy houses.
Let’s look at the data:
According to NAR data, existing home sales priced between US$250,000 and US$500,000 (approximately 1.3 million yuan-2.6 million yuan) accounted for the largest proportion, followed by US$100,000 to US$250,000 (approximately 650,000 yuan- 1.3 million yuan).
It obviously means that the best-selling houses in the United States are those of low- and mid-end products. That is, a house of 100,000-50 US dollars is about 650,000-2.6 million yuan.
650,000-2.5 million houses in China, think about it, which group of people will buy it again.
Finally, let’s look at the US housing market from a house price/rent ratio.
According to the calculations of Ping An Securities, the current ratio of house prices to rents in the United States is still at a historically high level, far exceeding the average level of 62% since 2000.
So, the conclusion is now clear: American real estate is not as healthy as it seems!
The US housing market is frenzied, and the main funding driver is government subsidies.
Compared with the past, regardless of the good financial data, once the United States stops subsidies, the vulnerability of American household wealth will soar.
In other words, once the US government stops subsidizing, US real estate will be very dangerous!
03
Let’s stretch it further down.
With the public savings rate so high and the population clearly underleveraged, who is carrying all the weight? Dollar credibility!
Where does the money come from for subsidizing people on such a large scale in the United States? Issuing bonds.
The debt scale of the United States soared in March 2020, and in March of this year it exceeded 28 trillion US dollars for the first time, and it was 28.2 trillion US dollars at the end of April.
Anyone who has studied monetary theory knows that as long as the government issues bonds, as long as they can be issued, as long as the commercial banks accept the accounts and the foreign governments accept the accounts, then you can count your own skills as you issue them.
Obviously, this is not something the US government does.
The U.S. government issued so many debts at once, far exceeding its economic strength, so what should we do? The Fed takes over.
In the first quarter, the Fed increased its holdings of U.S. Treasury bonds by a net amount of US$243 billion. Since March 2020, it has increased its holdings by a total of US$2.44 trillion.
Since March 31, 2020, the Fed’s holdings of U.S. Treasury bonds have doubled to $4.94 trillion, accounting for a record 17.6% of U.S. Treasury bonds.
Have you seen how the United States plays?
The economic situation is not good-the US government’s massive stimulus-what if there is no money? Fed buys.
In this case:
The Fed can print U.S. dollars without restrictions – the Fed can buy U.S. debt without restrictions – the U.S. government can stimulate the economy and subsidize the people without restrictions-Americans can buy houses and Chinese goods.
Friends, where is the problem? There is no problem logically, this is the privilege of dollar hegemony.
However, the United States has done this, and what it loses is the reputation of the U.S. dollar. For every extra dollar printed, the credibility of the dollar loses a little.
Therefore, the logic is clear: the current prosperity of the United States, whether it is a soaring import or a soaring house price, is actually overdrawing the reputation of the dollar until the end of the US dollar hegemony!
This is the most secret price for economic growth in the United States! This is also the logic behind the long-term depreciation of the US dollar.
Source: Waihuitoutiao