Thursday, February 01, 2007

We're Swimming In Liquidity, Aren't We? / contrary investor

another fantastic piece from make sure you read the full piece with lots of great charts and commets. click on the headline!

genial. unbedingt den kompletten bericht lesen. auf die ├╝berschrift klicken!

Owners equity as a percentage of the market value of residential real estate directly from the Fed Flow of Fund data. Thank you Fed. Very simple question that really reflects on household net worth and prompts a few questions about household leverage. In one of the greatest residential real estate price acceleration periods of a life time, how come there has been absolutely no increase in relative owners equity as a percentage of market values since the real estate mania's inception early this decade, let alone since the baby boomers came of age in the early 1980's?
With the type of price increases we have seen just this decade, we would have expected this to perhaps have turned up a bit vertical. As you know, there's only one explanation. Household residential real estate leverage in aggregate accelerated at a greater rate than did prices during the current cycle. And here we thought nothing could have moved faster than real estate prices in recent years. Wrong. This shows us just how meaningful "liquidity extraction" has been in the land of residential real estate for households this decade.
Again, what's next in terms of a meaningful household asset that can be inflated and borrowed against? At least for real estate, it's now a "been there, done that" asset class, isn't it?

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