Synapse Crackle Pop

Synapse! Crackle! Pop!   Rice Krispies!!   Or Rice “Bubbles” as they are known in Australia.  The cereal, serial and surreal breakfast of champions.  There’s been no lack of neurons firing this week here at real estate of mind central – with the election and all.  Tough to decide what to pick out of my own brain.  I’ll just give you a few quick cliffs notes rather than the full fiscal cliff version.

Does this sound familiar? From CNN Money: “Buyers were snapping up homes faster than developers could build them. Investors grabbing two, three, four each, hoping to cash in on skyrocketing prices.”

“But then the music ended. Prices started to slide. Developers were stuck with empty buildings. Homeowners saw their wealth begin to slip away.“

Buying frenzy?  A dangerous game of musical chairs?  United States – 2007?

Dystopian ghost-tracts littering the landscapes of Florida,  Las Vegas and the Central Valley?

Nope. Been there. Done that.

Now, I’m not going to beat the drum too loudly here folks, being the cautious real estate soul that I am,  but it finally does seems like housing markets around the U.S. are rounding the corner.  Passed the bottom. Beginning to head slowly-but-not-so-surely back up that I recommend wishful Sellers start looking for 2006 Median Price Points anytime soon. (Think 5 years down the line – maybe – the pendulum has a long way to swing. )

But how about China – circa 2012?  What goes around comes around? Karma?  Deja Vu all over again as Yogi Berra would say?

Perhaps this could qualify as a weird remake of The China Syndrome.  Jack Lemmon, Jane Fonda and Michael Douglas hook-up with Tim Geithner, Hank Paulsen, the gang at Lehman Brothers and the 25 member ruling politburo of the Chinese Central Committee?

Goes something like this:  The world’s run-away economy overheats. The global financial meltdown reaches critical mass.  It all begins to burn a hole through the middle class  – inexorably heading down, deeper and deeper towards China – where all those cheap exports to the US are starting to dry up.

Faced with a rapidly cooling economy the Chinese government does what so many others have done before – they drink the Kool-aid.

Lending restrictions are loosened.  Billions are encouraged to borrow trillions. Real estate and housing are pushed to the forefront.  Creating jobs. Increasing demand for steel, coal and construction equipment.  Keeping the economy moving ahead at an overheated, unsustainable pace.

A massive house of cards built on ballooning debt, financial speculation, officially sanctioned greed and the prevailing belief that “real estate never goes down.”   Sow the wind and reap the whirlwind.    It always comes full circle.

The solution?  Tighten credit. Crack down on speculators. Enact more regulation to limit the opportunities for the middle class to jump on the gravy train.  Cut off the flow of free money, in the form of debt, that’s being handed out like Halloween Candy. Then charge the Catch 22 off – back to the people.

Now that things are getting better here – perhaps the U.S. can start exporting boatloads of short sale negotiators, foreclosure experts, customer service reps, collection agencies and loan modification processors to China.  We won’t be needing them much longer.  We can do our part to help China bailout out of its own underwater real estate market while we help equalize the trade balance at the same time.


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