The Echo Bubble In Housing Is About To Pop

And here's the knife in the heart of the Echo Housing bubble: declining household income.

The Federal Reserve-induced Echo Housing Bubble is finally starting to roll over, and the bubble's pop won't be pretty. Why is the bubble finally popping now?

All the factors that inflated the Echo Housing bubble are running dry. These include:

-- unprecedented low mortgage rates

-- FHA mortgage approvals for anyone who fogs a mirror

-- frantic cash buying by Chinese millionaires desperate to get their money out of China

-- the Federal Reserve buying up trillions of dollars in mortgages

-- lemming-like buying of housing for rentals by everyone from Mom and Pop to huge hedge funds.

The well's gone dry, folks. There isn't going to be another push higher or a third housing bubble after this one pops.

Let's start with the basics: demographic demand for housing and the price of housing. There are plenty of young people who'd like to buy a house and start a family (a.k.a. new household formation), but few have the job or income to buy a house at today's nosebleed level--a level just slightly less insane than the prices at the top of Bubble #1.

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