Three wave theory of housing breakdown

The bottom of housing market is eagerly anticipated. Wall Street, WXC real estate investor and financial market are torting the bottom of real estae in 2009.

They are right but they are extremely wrong. The dollar based bottom may very well come in the end of 2009 to middle of 2010. But is that a bottom? The answer is: absolutely not. Absolutely not because purchasing power adjusted, the housing will continue to crash silently for a foreseeable future.

So waht is the 3 wave theory of housing crash?

The first wave is the housing bubble bust that bring down the housing price, this wave is still on going without stopping. People think that bottom of this crash is it, no more. But wait, what is causing the bottom? The answer is clear, it is the liquidity injection of federal reserve that artificially float the price. Without it, we will then see just one crash, which bottom will bring the housing price back to early 1990's. at least.

The second wave of housing crash is the silent crash. While housing price stablized with hyper-inflation, its value continues to crash as dollar devalues.

As the hyper-inflation gets out of hands, we face two possible scenarios. The first, dollar completely crashes and new currency arises; and the second, federal reserve bank forced to hike up the bond interest rate to double digits, possiblly in middle to upper 20%. In either scenario, we will see depression that form the 3dr wave of housing crash. That will wipe out most real estae investors, except a limited few who clearly sees this crashing train. Oh, forgot yet, in later scenario, commodities, stocks, bonds, and real estates of all kind, will crash real hard. My personal view is the first scenario is more likely. But never say never. Both can happen. I do not have a crystal eye ball for that.

Stay tuned, stay safe, stay away from real estate as far as one's eye can see.