The five-year housing boom is indeed over, says the Associated Press.

To wit: In the last week, the Commerce Department reported that January sales of new single-family homes fell five percent - the fourth decline in seven months - and the backlog of unsold new homes hit a record. And the National Association of Realtors said used home sales slipped 2.8 percent in January, the fourth straight drop and five percent below January 2005.

Builders also emitted a few hiccups. Luxury homebuilders, Toll Brothers Inc., reported that signed contracts in the November-January period fell 21 percent from a year ago, and KB Home said more buyers were backing out of contracts.

And the slowdown is already rippling through the economy.

Nationwide, the median house price last year was $219,700. In January, it fell to $210,000. For many people, this means that there is no more equity to "take out." The ATM machine in the bedroom is broken down. They can't even refinance without putting back some of the money they took out.

When trouble comes, it generally knocks first on the flimsiest doors - doors belonging to people living on the fringes of town...at the margins of the good life. And so, from North Carolina, we get word that loan defaults are growing in poor areas, while even in New York City foreclosures are soaring - up 65% in January over the same month a year ago.

Buying a house has never been easier, said a source quoted in the Charlotte paper. And it's never been easier to lose one.

Easy come. Easy go.

But here in London, even though the housing boom is supposed to have ended, it seems to have got a second wind. How can it be? Londoners face the same sort of financial pressures as Americans. They have borrowed freely - and spent even more freely - without any real increase in their incomes. How can they afford to buy London homes - already among the priciest in the world?

The answer came to us last week: Londoners are not buying property at all. People who do not live in the city - people who are mostly not even English - are doing the buying. In 2004, 25% of purchases in central London were made by foreigners. In 2005, that percentage rose to 40%.

Where are all these people coming from? Where do they get so much money?

Bill Bonner, back in London...

*** Why do the rich get richer? Why do the poor get poorer?

We posed the question yesterday to colleague, Lila Rajiva. Since she comes from India, we figured she might have thought about it.

"The rich are better educated; they tend to save money, they invest, and they own capital assets. Oh - but do you mean why are the rich getting richer now?"

"Sorry, yes." We meant, how come the rich are getting richer, now, at top speed, while the poor still stay poor. But the question requires more even clarification. Because not all the 'rich' are getting richer and not all the poor are staying poor. For instance, the average American working stiff - who must look like Croesus himself to a Mumbai street sweeper - is having trouble keeping up. His real, hourly wages have gone nowhere for 30 years. His family's disposable income has actually gone down for the last three.

A conundrum...but, a dear reader provides a picture of why home ownership rates are declining:

"Florida is a great example of why the rate is declining," he writes. "First of all, the Republicans like to point to their tax cuts as some great accomplishment. But at our middle-class level, few of us see any cuts at all. Maybe we save a little on income taxes, but it's not much. On the other hand, our real estate taxes have been increasing every year. Where I used to pay about $800 per year, I now pay over $1,300 per year.

"Then there is the cost of insuring your house, if you can find someone willing to do it in this state. If you do find someone, you find that you will probably have to pay much more than you had paid in years past. Sometimes about two to three times as much as what you paid just two years ago.

"Then there are our wages. Over the last five years, our wages have pretty much just kept pace with inflation. When you figure the outrageous home prices, the rising taxes, the rising cost of home insurance, and the stagnant wages it makes a lot more sense to rent than to own these days."

*** We get no letters like this from readers in India. We only know, statistically, what has happened to them. The Chinese or Indian laborer who was able to get a job in a decent sweatshop has seen his earnings soar - on average; they've doubled in the last 10 years. He still earns only about 5% of what the GM factory hand gets, but he's gaining ground rapidly. Relatively, the American workingman is getting poorer while the Asian workingman is getting richer.

We see nothing wrong with this. Here at The Daily Reckoning, we put our hand over our wallet, take a drink, and line up beside George W. Bush and Thomas L. Friedman in favor of free trade. Not that we are philosophically or ideologically in agreement with them; it's just that we just don't like anyone telling us what to do. But we're also not fool enough to think that everyone benefits from globalization all the time, or liar enough to tell Americans that they will all come out ahead. They won't.

Some will, of course, because that's what globalization does. Here's how it works. Take bananas. You can probably grow them in Iceland, but it would be rather expensive to do so. Better to let the Nicaraguans grow the bananas, while you Icelanders concentrate on pickled herring. That is what the great economist David Ricardo termed the "theory of competitive advantage." It says that you should do what you do best and let others do what they do best. That is the principle behind globalization. It is what draws capital to Chinese factories and business to Indian call centers. Labor costs are much lower, so they can produce more, less expensively. Thus, they have a competitive advantage over similar enterprises in the West.

The theory of comparative advantage is almost certainly correct; in that, the more people do what they do best, the better off everyone is. And it is probably true that the world's output goes up as more and more people in Asia are drawn into the modern economy.

But, of course, three billion people jumping into the planet's labor pool is bound to make a splash. And when they do, someone's bound to get soaked...

*** Which brings us back to our original question. Why do the rich get richer and the poor get poorer?

Because rich people have capital and capital is mobile, says Lila. Labor can't move...at least not easily.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.