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Monday, August 20, 2012

The Truth About How The Fed Has Destroyed The Housing Market

When observing the trends in the housing market, one has two choices: i) listen to the bulls who keep repeating that "housing has bottomed", a false mantra which has been repeated every single year for the past four, or ii) look at the facts. We touched briefly on the facts earlier today when we presented [9]the latest housing starts data:construction of single family residences remains 46 percent below the long-term trend; the more volatile multifamily houses is 15 percent below trend and demand for new homes 47 percent below. This is indicative of reluctance by households to make long-term investments due to fear of another downturn in housing prices. Bloomberg summarizes this succinctly: "This historically weak demand for new homes is inhibiting the recovery of demand for construction workers as well, about 2.3 million of whom remain without work." But the best visual representation of the housing "non-bottom" comes courtesy of the following chart of homes in negative or near-negative equity, which via Bloomberg Brief, is soared in Q4, and is now back to Q1 2010 level at over 13.5 million. What this means is that the foreclosure backlog and the shadow inventory of houses on the market could be as large as 13.5 million in the future, which translates into one simple word: supply.

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4 comments:


  1. "GREED" is what destroyed the housing market

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  2. 1020-Exactly. Greed coupled with legislators that pushed for mortgages for those that didn't qualify. Hell of a concoction.

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  3. "The Perfect Storm" Greed and legislators that believed they knew better than the banks. Wallstreet took the ball and ran wild with $$$ in their eyes. It will take at least another 5-7 years to dig out from this hole. In the meantime, the economy will not recover without a stable housing market. Write this down....then get back to me in 7 years!

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  4. Wake up folks. The housing boom was a manufactured event.

    The housing bust was also a manufactured event.

    WE are not the problem. WE are the victims.

    ReplyDelete

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