Has A Dangerous Deflationary Cycle Begun?

Could the U.S. economy soon be hit with an economic earthquake? In the last 30 days in some housing markets, despite a claimed shortage of homes for sale, the average prices of homes have devalued by thousands of dollars on the average. Many modest homes might well have lost $4,000 to $8,000 in value without most homeowners aware of this dangerous deflationary trend where the net worth of the average American family could take a major hit. Some other sources already claim that since the end of the Bush administration until now,  home prices had declined enough along with other investments becoming devalued, that many Americans may have lost up to 40% of their net worth since 2008.  Further evidence  of a declining standard of living for Americans can be found in simple things such as looking at collector’s markets for items on Ebay for example, where prices have sharply tumbled for many collector’s items since even 2010 for example.

Other major indicators such as manufacturing index numbers have declined along with new lower consumer confidence numbers as well as disappointing news with unemployment and payrolls. But, the big decline in home prices in the last 30 days should be the most frightening canary in the coalmine here. These declines in home prices could mean that it might be wise to get out of that big home into something smaller and bank a lot of your money before that money evaporates as home prices may be starting a steep deflationary slide where the average American may be witnessing their personal wealth decline by thousands of month in the coming months.

Perhaps the most frightening example of home price deflation has been in Detroit, Michigan, where a number of negative factors have pushed some home prices down to $6,000 to $10,000 for homes that could easily sell for $250,000 to $450,000 in other markets in the U.S.  Those who invested in real estate in this city,  have been completely destroyed financially due to this terrible deflation of their most important asset, their home. 

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