Death of the Great Recovery Part 3: Housing Collapse 2.0 Has Begun

Death of the Great Recovery Part 3: Housing Collapse 2.0 Has Begun by David Haggith – The Great Recession

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It’s simple math — an equal and opposite reaction. After a long spell of QE took mortgage interest down to the lowest it has ever been, a long spell of QT (quantitative tightening) is going to take it back up again. That’s why I forecasted another housing collapse with confidence last year:

Rising mortgage rates will certainly cause housing sales to fall. Prices will follow for those houses that have to sell because, as mortgage interest rises, people won’t qualify for as large a mortgage as they do now. It’s all part of the developing Epocalypse in which multiple industries collapse into the final depths of the Great Recession as the fake recovery fades out of existence like a mirage.

The big difference between 2010 and now, and between 2008 and now, is that home prices have skyrocketed since then in many markets – by over 50% in some markets…. In other markets, increases have been in the 25% to 40% range. This worked because mortgage rates zigzagged lower over those years, thus keeping mortgage payments on these higher priced homes within reach for enough people. But that ride is ending. (Zero Hedge)

I gave this part of my 2018 economic predictions more time to play out than I did for Carmageddon or the Retail Apocalypse or a 2018 stock market crash because mortgage rates are not as volatile as things like credit-card rates, nor do housing prices quickly reverse. People can hold out for a year or more or choose not to sell at all before they are inclined to drop the price of their most treasured asset.

Nevertheless, mortgage interest is rising at the fastest rate seen in nearly half a century in what has been the most prolonged increase in 46 years. Rates are already at 4.66% on a 30-year mortgage and briefly touched a seven-year high, even though the Fed’s unwind is only at half speed and has only been happening (at an even lower speed) for a little over half a year.

Mortgage rates spiked in a big way today, bringing some lenders to the highest levels in nearly 7 years (you’d need to go back to July 2011 to see worse)…. Today did cover quite a bit more distance than other recent “bad days.” (Zero Hedge)

As interest rises, sales and prices will go into decline; but right now we still have a lot of rebuilding to do from the hurricanes and wildfires; rates are just beginning their rise; and we are entering the peak building and buying season. That means I expect a summer housing boom this year — a last hurrah —  as buyers try to pour into the market before rates rise any more … as soon as school is out … and as rebuilding from last year’s hurricanes and fire storms gets under full swing.

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David Haggith

Knave Dave — vigilante against the false profits of The Great Recession Too many criminal CEOs still fill their porky bellies with the biggest taxpayer bailouts in the history of the world. These bailouts protect their reputations, saving them from the fall they should have taken. They continue to receive bonuses for having done an unparalleled job of destroying their companies! Many of their companies wouldn’t be making any profit at all if not for the interest they’re making off of nearly free government bailouts. Just this week Hewlett-Packard fired its CEO, but is still paying him a bonus of millions of dollars in exchange for a year of corporate wandering in the wilderness. Netflix’s CEO cost his company hundreds of thousands of subscribers and had to reverse his decision. Bank of America’s CEO launched a debit-card fee plan that was immediately stupid in the eyes of many, but greed an arrogance led him to think he could pass it by his customers, and he lost customers in droves and had to reverse his decision, as did the many major banks that followed him. Since these corporate leaders do things most of us can immediately see as being dumb, why are they rewarded with salaries a thousand times greater than many of us make?