Western property prices over the last 7 years blew out to bubble proportions. Now financial markets and economies around the world are set to pay the price for easy credit and real estate hype.

The U.S. housing bubble is one which is now well precedented. Even the worlds second richest man and investment legend Warren Buffet agrees. After the dot com bubble interest rates lowered by Alan Greenspan. This allowed the internet bubble to be transfer to the property markets as lowered interest rates and slack lending requirements allowed people to pump up property prices to unprecedented levels.

Now housing sales have plummeted through out the states.

Housing prices in some states rose as high as six times median income where as historically prices have been more around the two time median income mark.

This phenomenom was not limited to the U.S. but occured in most western countries due to similar reasons.

Things are set to get worse as the U.S. dollar declines. On top of this oil has probably bottomed out in price and over the long term will get more and more expensive due to long term dwindling supplies and increasing demand (China and India).

Then we have a worldwide drought - plus high oil prices equals increasing food prices.

So overall things are going to get more and more expensive which will make it even harder for people to pay the mortgage.

Nationwide in the U.S. foreclosures are already up 17%.

So who’s going to buy these houses when Generation X sells properties they discover they actually can’t afford… and the Baby Boomers sell out for retirement (or just to ease debt burden)?

Well not Generation Y.

Generation Y have unreliable work habits and generally low paid.

Whats worse is a lot of Generation Y are in major debt.

In the U.S. two-thirds of college students now take out student loans and graduate with an average of $20,000 in debt.

On top of that, up to 76 percent of undergraduates carry credit cards with an average balance of more than $2,000.

Heather Schopp is a 29 year old chiropractor in California with $170,000 of debt.

If you want to find out more check out Tamara Draut’s “Strapped: Why America’s 20- and 30-Somethings Can’t Get Ahead”

Anyway my point is when the Baby Boomers come to cash out and Generation X sell because they can’t afford the mortgage repayments as interest rates rise theres no one who can afford to buy these properties off them.

That mean’s prices of real estate can only decline in real terms, (because inflation is going to continue to rise).