Housing Conditions As It Relates To Real Estate

Since the economic upheaval of the pandemic, central banking systems have been seeking a soft landing, raising interest rates as the primary tool. However the FED and US Treasury use lagging indicators like unemployment rates, and a constant rotation of cherry-picked commodities to inform the reported consumer price index (CPI), to appear less negative than reality.

The cost of living is at an all-time high. Everyday people struggle to make rent, put food on the table while attempting to not live off credit cards. The issue is the worth-less money.

The construction industry is highly correlated with economic cycles. The last “great recession” was a housing and derivatives bubble. Nobody saw it coming. Unfortunately, the same market indicators that appeared prior to the great recession are occurring again, some theories even discuss how the fed creates fake companies, injecting them with printed liquidity to buy bad debt from big banks. Another way to prop up the economy, further inflates the bubble. This also creates more inflation.

The fed also controls interest rates. They have been raising rates in attempts to bring down inflation. They say it has worked (questionable), and now are posturing to bring rates back down. Given higher interest rates, the reality of inflation and strange economic times have all contributed to a slowdown in construction, and new housing development.

Here is a screenshot from a well-respected chart analyst showing us the comparison of the Dow Jones industrial average bubble as it was right before the great depression in the 1920’s in comparison to today:

Wolfstreet.com published a study comparing the 20 largest housing markets, showing the current housing bubble in comparison to the last great recession in 2008.

2023 saw a record number of banks going insolvent, in part caused by 15 years of 0 interest rates. Banks buying bad debt at zero rates and now much of that bad debt needs to be refinanced at current rates. This pushes banks into insolvency.

1%ers are getting out. Jeff Bezos (Amazon), Mark Zuckerberg (Meta), Jamie Diamon (JP Morgan Chase), The Waltons (Wal-Mart) have all recently sold huge amounts of their companies’ stocks. This trend last happened in 2007 before the great recession.

The world is de-dollarizing. Historically what makes the dollar strong is that every country has been forced to use dollars for trade because of the Breton Woods agreement. The Brenton Woods agreement dictated that paper money was back by tangible gold reserves. Other countries then backed their currencies off the dollar. Nixon took the dollar off the gold standard and the fed has been printing money ever since. Today, because of our abuse of that agreement, countries are looking for alternatives. Trade in local currencies.

A reset of the financial system is needed. The system is over leveraged. Central banks need to find a way to re-collateralize the debt.

Weve all heard about the great reset. How that will play out is up for debate, but what is not up for debate is that we are transitioning into a new system. A digital money system, with central banks pushing to their own regulated currencies.  

Another factor is that we are also dealing with a large influx of immigrants.

We already have a housing shortage. Now it is being exaggerated. Those in the lower rung of housing affordability will now be forced to move up a ladder or end up homeless, as new immigrants will be competing for affordable housing.

These are all variables that are outside of our control and all we can do is try our best to navigate the currents. Ride the waves. Armed with this knowledge, we can position ourselves to benefit from the impending change.

The problem is difficult economic currents and lack of affordable/abundant housing. Our aim is to bring a solution to the market to help to solve this problem. At BONSAI, a large part of our marketing efforts this year are being focused on research and development! We believe that these investments into a revolutionary housing type that can be prefabricated, is cost effective to construct and once habituated, can sustain and regenerate life for a fraction of the cost compared to conventional housing stock. Read more about these efforts here.

One of the possible solutions is the burgeoning use of artificial intelligence in architecture and development 

Amy Webb of Future Today Institute recently wrote a piece about the coming tech Supercycle.

She theorizes that the advent of AI and other technologies will catapult economies towards an age of massive development and prosperity. We intend to ride this wave as well, and leverage technologies like decentralized ledger technology (which central banks and smart financial institutions are currently onboarding, , as vehicles to springboard these innovative and revolutionary housing concepts into reality! Stay tuned.

At BONSAI we are continually updating ourselves with economic trends, so that you can feel confident in your investments, both built, and otherwise.