Below you will see a chart I saw over on Zerohedge today in an article titled “Visualizing The Monthly Cost Of Buying Vs Renting A House In America” which is linked below. This chart, produced by Visual Capitalist caught my eye. Its really a whopper. Don’t try analyzing it too much by numbers or dates. Instead, just try to take it in as a graphic pattern and get a feel for what is taking place in our economy with all the drama the chart clearly indicates.

I stare at charts all day long. But even I was not aware of how sharply the cost of housing has risen these past few years. The time periods we look at certainly make a difference to our perspective. In this case the chart runs from 1970 through to 2022 which makes it 52 years long. So I located the rough center and put a green line through it then also marked out the peak and low point with another set of green lines.

What you should notice is that it took almost 5 decades for price to reach the midpoint line but a mere 4 years longer to double the “cost to buy” of a family home. It staggers the mind. And the look is without any doubt parabolic and still rising. This is how real estate has eaten our economy since Covid struck. Between the cost of servicing debt and the costs of renting all that the other members of the economy hear is the sucking sounds of money rushing to fill a massive hole in a single obese asset class that now threatens to consume everything in its wake like a lingering black hole.

This is the picture of what we call an economy these days. Not manufacturing or high tech industrialization nor services and transport. No, its all about houses and the cost to live in one. That is what consumes our minds and drains our wallets as the majority of investment spirals in the darkness of the hole. It is withering as it eats away at the retail sector. It sucks the very life out of most small business too. And it leaves plenty little in leftovers for retirement savings and much needed future investment.

Can you see it now? That chart is the picture of economic damnation itself. It is shaping up to become a South Seas Bubble chart in the process.  To appreciate what I mean by that, just look at the vertical line that formed during the last 4 years. Time has stood still….only price is moving higher.

We all know where this is going eventually. So you had best prepare and be ready. No asset has EVER seen this kind of a chart form without resulting in an inevitable crash. Let me repeat that for clarity. We have NEVER seen a pattern like the one you are looking at result in a soft landing or a keep rising into a permanently high plateau. Every single such chart ends in tears and gnashing of teeth. In the case of real estate such crashes typically end with deep depressions. I did some analysis on this chart incidentally, using a method I developed myself. We have not reached the top yet. Indeed we have just broken out to a higher level and there is plenty more room for prices to keep running higher.

The speculators will be thrilled.

But homeowners who have all their net worth tied to a single asset are going to get hurt very badly when it falls.

https://www.zerohedge.com/personal-finance/visualizing-monthly-cost-buying-vs-renting-house-america