FOMC Day: There Has Been No Recovery – The Housing Bubble Is Re-Popping

The whole thing was in fact a giant lie used to cover up the fact that none of the money was spent to try and generate economic growth.  – Phoenix Capital Research LINK

The Fed’s FOMC is concluding another two-day meeting today and will issue its latest policy statement around 2 p.m. EST, as the idiots on financial tv sit on the edge of their seat trying to figure out which word or syllable has changed from the last policy decision statement.  The entire process is nothing more than well-staged theatre of the absurd.

How do we know the US is not in recovery? It’s really quite simple. If it were, the Fed wouldn’t have any issue with raising rates.  – Phoenix Cap Research

Now that we’re seeing retail sales decline month to month almost every month, manufacturing indices plunging to levels not seen since 2008-2009 and the GDP registering a decline, before inflation is stripped out – of almost 1% in Q1, it is highly improbable that the Fed will dare raise rates.  Not even a gratuitous quarter point bump.

Why this country’s debt-bloated, overleveraged financial system now has unmanageable levels of debt bulging for every nook and cranny in the system.  Even worse, there’s $100’s of billions of leveraged exposure lurking behind of the insidious facade of off-balance-sheet accounting at the big banks.

Then there’s housing bubble 2.0.  Only this time around its only a “price” bubble – as opposed to a price and volume bubble like housing bubble 1.0.   This price bubble has been fueled by the $2.0 trillion – and still counting as the Fed is still buying $10’s of billions of mortgages every month – of money printing.  – Investment Research Dynamics

Why do I say it’s only a price bubble?   Because, other than the loud noise of water cooler and cocktail party chatter about hot housing markets, transaction volume is at best tepid:

existing home salesBased on the level of existing home sales for the last 7 years, it’s hard to characterize this as a “hot” market. Too be sure, there are some poor souls who are getting suckered into buying a home by their aggressive realtor, but they are competing with a large cohort of investor/flippers who YTD have represented roughly 40% of transaction volume (more on this later). Institutional investment buyers who drove volume in 2011-2013 are leaving the scene, with some of them unloading homes onto the gaggle of mom and pop flipper operations.

price bubble

Here’s your housing bubble:   the median price of existing homes has soared 41% since 2012.  BUT as you can see from the graph just above, the price-action is not supported by volume.  As the volume dries up, there will be an an air-pocket collapse of the price.  Anyone who has traded relatively illiquid securities – homes are extremely illiquid most of the time – knows exactly what I’m talking about.  Once volume dries up and the market heads south, if you’re long, you’re wrong.

Speaking of a system bulging with debt protruding from every crevice, Jim Quinn’s Burning Platform featured a must-read article yesterday in which the author has discovered that the Loan-To-Value Ratio on Fannie Mae-issued mortgages is now at its highest level in history – nearly 10% higher than at the peak of housing bubble 1.0:

fannie mae loan to debt ratioThis is a debt and price bubble that has been fueled by the Fed and by the significant easing of credit terms for Government-sponsored and Government-backed mortgages. You can buy a home with effectively with a negative down payment. The Government requires a 3% down payment, the seller can subsidize up to 6% of your closing costs AND you can borrow the down payment.  That math adds up to a negative down payment.  Note:  Government = you, the taxpayer.

If the Fed raises interest rates, we will witness perhaps the the fastest systemic collapse in history.  We are going to witness a stunning collapse in housing anyway.  It’s just a matter of time before we see a reversion to the mean in which housing prices revert back to the true fundamental condition of the middle class in this country.  A fundamental condition which is has significantly and substantially degraded over the last seven years since the first housing bubble exploded.

6 thoughts on “FOMC Day: There Has Been No Recovery – The Housing Bubble Is Re-Popping

  1. The Fed may well raise rates;

    Reprise;

    It was not accidental (1929 crash). It was a carefully contrived occurrence…The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all. Congressman Louis T McFadden

    “Some [Most] people think the Federal Reserve Banks are the United States government’s institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign swindlers.” — Congressional Record 12595-12603 — Louis T. McFadden, Chairman of the Committee on Banking and Currency (12 years) June 10, 1932

    Tragedy and Hope
    A History of the World in Our Time
    by Carroll Quigley, 1966

    Pg. 326-327: It must not be felt that these heads of the world’s chief central banks were themselves substantive powers in world finance. They were not. Rather, they were the technicians and agents of the dominant investment bankers of their own countries, who had raised them up and were perfectly capable of throwing them down. The substantive financial powers of the world were in the hands of these investment bankers (also called “international” or “merchant” bankers) who remained largely behind the scenes in their own unincorporated private banks. These formed a system of international cooperation and national dominance which was more private, more powerful, and more secret than that of their agents in the central banks. This dominance of investment bankers was based on their control over the flows of credit and investment funds in their own countries and throughout the world. They could dominate the financial and industrial systems of their own countries by their influence over the flow of current funds through bank loans, the discount rate, and the re-discounting of commercial debts; they could dominate governments by their control over current government loans and the play of the international exchanges. Almost all of this power was exercised by the personal influence and prestige of men who had demonstrated their ability in the past to bring off successful financial coupe, to keep their word, to remain cool in a crisis, and to share their winning opportunities with their associates. In this system the Rothschilds had been preeminent during much of the nineteenth century, but, at the end of that century, they were being replaced by J. P. Morgan whose central office was in New York, although it was always operated as if it were in London (where it had, indeed, originated as George Peabody and Company in 1838).

    1. For additional reading on Central Banks and their unmitigated quest of total power read “Lords of Finance”. It was written a couple years back and well worth a read.

  2. “a reversion to the mean in which housing prices revert back to the true fundamental condition of the middle class in this country”.

    After a price correction that ends up below mean, there is always a “dead cat bounce” back to the mean. Only this time after the housing price reversion, there will be no bounce. Considering that the middle class has been decimated and that the new generation cannot afford the “American Dream”, the price reversion will be at a much lower semi-permanent level than most think possible. The only way that housing cost would stay elevated, will be because of a hyper-inflationary event.

    1. Forgot to say that the new lower price reversion reflects what you say Dave, about the present “true fundamental condition” of the (now defunct) middle class.

  3. I remember Bob Chapman speaking about the Illuminati Central bankers before his death. Then I come across this.

    http://redefininggod.com/nwo-schedule-of-implementation/

    There plan really does seem to be coming together. I remember having to renew my mortgage years ago before I started to wake up. I told myself I need to lock in a “fixed rate ” as there was NO WAY they wouldn’t raise interest rates. It was Economics 101 as I had been taught. And of course I was wrong. They lowered and have continued to lower rates to keep the Gran Ponzi going. Pumping bubbles and manipulating markets all along the way. They’ve destroyed the USA and are now just picking at the bones as the marrow is almost completely gone. Buy Gold & Silver and get right with your maker. Whatever you conceive him to be. You’re going to need it….

  4. And we are expected to believe the following;

    *FED SAYS ECONOMY EXPANDING `MODERATELY,’ JOB GROWTH PICKED UP

    They know perfectly well the true situation. The deeper the tyranny of a nation, the bigger the lies. Even as under the Romanian dictator Nicolae Ceausescu, they lied about the weather, to make people feel better.

    That is the state of the US today (and the West).

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