Sunday 17 June 2012

I've Got A Gal In Kalamazoo

Tottering through town, stepping gently around the holes dug by essential services through all the expensive newly laid granite blocks in the costly revamp of the roads and pedestrian areas, it was impossible to avoid the windows of the estate agents.

The prices of properties are now one hundred times, roughly, what they were when I first looked in agents windows seeking a first home on what at the time was around average salary.  Do not mention the word “inflation” if you want a polite conversation.

As well as the amazement at the fortunes asked for some decidedly iffy homes there were investment opportunities.  Some were in the USA quoting a guaranteed rate of return of around 14% for the lucky buyer. 

Guaranteed, that is, depending on the rental being paid, relative pricing being secure, what might happen with local property taxes and above all, the comparative rates of inflation in the USA and the UK as well as the exchange value of the pound against the dollar.

The properties are located in the State of Michigan in the USA.  This is in the North and has the advantages of easy escape to Canada if necessary and should Prohibition be reintroduced unlimited scope for profitable enterprise.  In a decade you could become a second Joe Kennedy.

They were substantially built colonial styles houses, detached, with three bedrooms and a garage and decent sized gardens.  They looked to be the kind of very decent ordinary family homes that much of Middle America might aspire to.

Yet they were priced at £30,000 each.  Looking at comparative UK properties on sale through the same agent, depending on location and condition, you would expect to be paying £240,000 to £300,000.  That is eight to ten times more.  Also, mortgages were available.

Avoiding a long analysis of incomes, conditions, the problems in the mortgage sector of the USA and a lot of other complex economic issues, all well discussed around the web, clearly there is something very badly wrong going on here.

How come the houses in Michigan cost so little that in the UK they are on sale at give away prices?  How come the cash prices in the UK are now so much that a middle income family may need six or seven times income to buy the British equivalent?  Fifty years ago they were more or less on a par at two to three times incomes.

So if you do not believe that economies and finances are now out of joint around the world this is a practical demonstration that they are and the implication is that one way or another there has to be another major reordering of the world economy soon.

So while the USA goes through a messy election campaign as the roof falls in, in the UK market the financial authorities are pushing as much money into the property market as possible with the added inputs of hot money from Europe and elsewhere.  Something has to break.

The picture above is of President Obama giving a speech at Kalamazoo Central High School, I could not resist the yawn. 

If you want entertainment go to the Youtube 7.43 clip of the Glenn Miller band doing the “I’ve Got A Gal In Kalamazoo” routine from the 1942 film “Orchestra Wives” which features an astonishing dance routine by the Nicholas Brothers.

Back then, most of us in the USA and the UK were renting with ownership just a dream.  Now most of us are dreaming again.

1 comment:

  1. My brother lives near Seattle and house prices there have fallen about 25%, but the market is still dead so maybe they have further to fall.

    Yet you'd think Seattle would be prosperous with Boeing and Microsoft as local businesses.