Posted on 04/02/2022 6:39:40 AM PDT by Browns Ultra Fan
This clip from the Bruce Willis and Meryl Streep film “Death Becomes Her” perfectly represents the predicament surrounding The Federal Reserve’s loose monetary policies and housing prices: “Now a warning” after Meryl Streep ingests The Fed’s magic monetary elixir.
The Dallas Federal Reserve issued a warning recently that a housing bubble is brewing … after the economy drank its magic monetary elixir. We can see the housing bubble clearly (defined as the spread between REAL home price growth and REAL average hourly earnings). Notice that the current housing bubble looks similar to the infamous 2005 housing bubble. And the US is seeing several months of the spread between REAL home price growth and REAL hourly earnings be even higher than the peak of the 2005 bubble.
The Federal Reserve is starting to slow down its asset purchases, so we should see a cooling of the housing bubble. Unless, of course, The Fed changes its tune from quantitative tightening (QT) back to quantitative easing (QE) … again.
The Dallas Fed has a measure of housing “exuberance” which shows a bubble forming, but not there yet. I like the spread between real house price growth and real hourly earnings better.
The Dallas Fed also has a price-to-rent chart also showing growing exuberance.
But if we look at the Case-Shiller National HPI YoY to US CPI Urban Consumers Owners Equivalent Rent of Residences YoY we see that the US is currently experiencing a price-to-rent ratio higher than the peak of the 2005 house price bubble. What is the culprit? The vast expansion of monetary Stimuylpto surrounding the Covid outbreak in early 2020.
(Excerpt) Read more at confoundedinterest.net ...
You should do a ping list, Browns Ultra Fan.
Is it still a housing bubble if the price of everything skyrockets as the Fed and Treasury destroy the dollar?
“There is no inflation, dammit, and if there is, it is only transitory. How many times do I have to tell you dog-faced pony soldiers?”
signed, President JoJo
This one will be different — and likely less impactful — than ‘08. Then the bubble was caused by an overheated housing market and artificially inflated home values. This time it’s tied to the devaluation of the dollar through Dipwad’s policies. Not as many folks have put their mortgages underwater this time because the houses, while highly valued, are not selling.
It seems to be a case of high prices curing inflation.
Instead, housing is up sharply because they are deliberately inflating away the value of the dollar. Media is flailing about for any scapegoat they can find to keep public attention off of what their benefactors are doing. "Greedy corporations!" "Greedy oil companies!" "Greedy lenders!" "Greedy homeowners!" Nice, Bernie Sanders-approved phrases that have nothing to do with the real problem.
With the dollar losing its purchasing power the way it is, I wonder if I could approach the bank later this year and offer to repay the entire amount due — at 50 or 60 cents on the dollar.
I don’t see the same kind of multi-flipping that happened in previous bubbles, just one and done cashouts.
As of last year, I have no mortgage. Bought this house outright after selling the previous one for way more than it was worth, IMHO.
As much as I see housing prices are inflated, the real issue is supply and demand. There is a population boom going on right now and a lot of that is due to illegal migration plus the regular increase. Unless builders build homes way faster than population increases I think prices will only go up. Just my opinion. I’m not an economist.
That’s not the case at all. Population growth in the U.S. right now is minuscule. Any “boom” you see is in residential real estate is the result of internal migration from one place to another — plus the shrinking size of households as more and more families break up and live separately.
I guess. All I know is that immigrants have very large families and the homes that are being built are much larger than before. Like I said. I’m not an economist. Just shootin my mouth off.
Paid for by the Fed's easy credit.
The banks aren't going to hold still for that.
But you might get the same effect by just keeping up your payments. In five years, you might be able to pay off the balance of a 30-year mortgage with a week's pay. Of course, the minimum wage by then could be 200,000 per year and all other prices will have gone up 20X as well.
Property taxes are your biggest risk. They can increase at a rate that matches or exceeds inflation. And they will.
The other risk is that banks will rent enough politicians to change the laws and make all fixed-rate mortgages "renegotiable".
Or the Government may decide to tax you on the imputed income of "Owner's Equivalent Rent", or "Unrealized Captial Gains on Property".
Politicians, Rope, Lamppost. Some assembly required,
Yeah, the messycan cartels, raghead terrorists, and jamaican mafia all need a place to sleep. Hopefully they'll all be confined to south central LA and metro Denver.
Very high chance the bank took the mortgage dollars, tossed them into equivalent length treasuries, and will just sit back and capture the 1% spread, so it matters not to them about getting paid in inflated dollars.
In my view, in many parts of the country, the Fed is three or more years late in seeing the latest housing price bubble. Many buyers have known for some years that higher interest rates were only a matter of when, not if, and had been selling older/lesser houses buying “up” (and bidding up) to get mortgages set in the available lower rates. Now others want in before inflation worsens even more.
I like that one... :)
A lot of the heat right now is corporate buys. Nobody is really sure what they’re trying to accomplish. I’ve got friends in real estate. They put a house on the market and by the end of the day they’ve got 3 offers for at least 25% over list all cash without even showing the house to anybody. Somebody is gonna go broke on this crap. Just not sure who.
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