Real Estate – Collapse or Liquidity Crisis 2015.75-2020.05

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QUESTION: Mr. Armstrong,

Thank you for all the information you provide on your blog.

Looking at a chart you posted on the real estate cycle shows the peak in 2007 then a drop and a bit of a rebound into 2015, followed by a huge drop afterwards.  Am I correct in believing we will see real estate prices collapse after 2015 and continue to fall for years afterwards?  Thanks for any advice you can offer a prospective first time home buyer.

Thank you,

ANSWER: The real estate market has been rebounding and should continue to do so into 2015. After that, there will be a liquidity crisis so prices may not crash as much as things become stagnant. Right now, property in high wealth areas such as New York and Florida have been rebounding because of a lot of foreign capital influx due to instability in Europe etc.

We will not see the crisis as we had coming down from 2007 in real estate. With each turn in the business cycle there is typically a different sector. We are likely to see a crisis in pensions and more cities go into bankruptcy to escape their pension liabilities. This is part of the DEFLATIONARY aspects in this STAGFLATION admixture of rising cost inflation thanks to taxation rather than demand inflation from wholesale spending.