The Meltdown Cometh

So China modestly revalued its currency today and lifted the dollar peg in favor of a peg to a more varied basket of currencies. The change was slight (2.1%) and portends future revaluations so it is only likely to fuel currency speculation in Asian markets. It brings only modest relief but it does suggest longer term rates will now rise sooner rather than later. One puzzle for economists today is why long term rates have stayed so low while short term rates have been increased 9 times by the Fed. As for Greenspan's froth, all signs suggest that Denver is one of those tiny bubbles of foam.

DenverPost.com - LOCAL NEWS: "New homes outpacing population
A census report points to an overbuilt market as just six Colorado counties have kept up with housing.
By Jeremy Meyer
Denver Post Staff Writer
Housing growth outpaced population growth in all but six Colorado counties in the first part of the decade, leading analysts to speculate the housing market is overbuilt.
The U.S. Census Bureau's annual report on housing units released today shows the state continued to add homes since 2000 at an 11.2 percent clip. Over the same period, the state's population grew by 7 percent.
'Many, many housing units have been built, and the population growth isn't going with it,' said Y. Richard Lin of the Colorado Department of Local Affairs. 'That's good for the people, because there is more housing available. But housing prices keep going up, so people can't afford' them.
A disconnect exists between the increasing number of housing units and the lower population rate, said Tucker Hart Adams, chief economist for the Rocky Mountain region of U.S. Bank.
'The numbers don't add up,' she said. 'If you are building (two) times as many houses as the number of people moving to the state, my question is - if we're not overbuilt - who is buying them and living in them?'
The Denver metro area has three times as many homes on the market this year as it did five years ago - 21,300 homes for sale in the first quarter of 2005 compared with 6,800 in the same period of 2000.
The vacancy rate in apartments was 10.2 percent in the first quarter of 2004 compared with 5.1 percent in 2000.
At the same time, home sales are breaking records. The real estate market in metro Denver set a high last year with 54,012 home resales - a 12.6 percent increase over 2003.
'The chickens are going to come home to roost," Adams said. "I don't know when. People who really stretch to move out of apartments into houses, and did it with no money down - interest-only loans or floating mortgages - are not going to be able to stay in those houses." "