Home » Posts tagged 'Housing Bubble'

Tag Archives: Housing Bubble

In Part 1 of this article I laid out how the global elite have used this covid flu to manipulate the weak minded into a fear induced mass psychosis as a key element in their Great Reset plan to control the world and keep you technologically enslaved under lock and key. Now I will try to decipher how this mass hysteria might play out over the course of 2022 and beyond.

“Americans today fear that linearism (alias the American Dream) has run its course. Many would welcome some enlightenment about history’s patterns and rhythms, but today’s intellectual elites offer little that’s useful. Caught between the entropy of the chaoticists and the hubris of the linearists, the American people have lost their moorings.” – Strauss & Howe – The Fourth Turning

Federal Reserve Just Declared the American Dream is Dead for Most Americans

“The most effective way to destroy people is to deny and obliterate their own understanding of their history.” ― George Orwell

The American Dream, where all Americans, no matter the circumstances of their birth, had a legitimate opportunity to live a better life than their parents, based upon their own intelligence, work ethic, and good fortune, is an illusion in today’s world. The ruling elite have stolen the wealth of the nation and its citizens. This was not an accident, but a plan implemented over many decades, accelerating after Nixon closed the gold window and opened the door to unlimited amounts of debt being created out of thin air and backed by nothing.

One of the Fed’s only mandates was to maintain a stable currency. Since its inception in 1913 to 2020, the USD had lost 96% of its purchasing power. The USD has lost 7.5% of its purchasing power since 2020, as Powell and his cronies have lost control of inflation.

Visualizing the Purchasing Power of the U.S. Dollar Over Time

…click on the above link to read the rest of the article…

The Most Splendid Housing Bubbles in Canada “Pause” after Bank of Canada Ends QE, Starts Unwinding its Balance Sheet

November 20, 2021

The Most Splendid Housing Bubbles in Canada “Pause” after Bank of Canada Ends QE, Starts Unwinding its Balance Sheet

Home prices fell in Vancouver, Ottawa, and Montreal; were flat in Toronto, other cities for the first time since 2019.

So this is something that hasn’t happened in the Canadian housing market since 2019: The Teranet-National Bank House Price Index for October, released today, failed to rise from the prior month.

The index for Vancouver, a red-hot housing market, fell for the second month in a row, something the market hasn’t seen since September 2019. The indices for Ottawa and Montreal also fell. The index for Toronto was flat for the month, as were the indices for some of the other cities.

What has changed that caused this “pause,” as it is now being called, in one of the biggest housing bubbles in the world?

The Bank of Canada got hawkish.

For a year now, the BoC has repeatedly cited the craziness in the Canadian housing market – a historic spike in home prices – the result of the BoC’s crazy asset purchases and interest rate repression.

The BoC started tapering its purchases of securities a year ago by ending its MBS purchases and tapering its purchases of Government of Canada bonds. It then shed nearly all its repos and short-term Canada Treasury bills, ended other smaller programs, and tapered its GoC bond purchases multiple times. Then in October, a suddenly hawkish Bank of Canada ended QE entirely and surprised markets by moving the next rate hikes forward. Meanwhile, inflation in Canada hit an 18-year high.

Total assets on the BoC’s balance sheet, as of last week, fell to C$496 billion, down 14% from the peak in March.

…click on the above link to read the rest of the article…

The Most Splendid Housing Bubbles in Canada: Even the Bank of Canada Gets Nervous and Tapers

May 20, 2021

The Most Splendid Housing Bubbles in Canada: Even the Bank of Canada Gets Nervous and Tapers

House prices in the largest markets have gone nuts amid “extrapolative expectations and speculative behavior,” as the Bank of Canada put it.

The first thing to know about the housing bubble in Canada is what the Bank of Canada has been doing, after its furious bout of QE: In October last year, it tapered purchases of Government of Canada bonds by one notch and also ended buying mortgage-backed securities. In March, it started unwinding its liquidity facilities, citing “moral hazard” as reason. In April, it tapered by another notch its purchases of Government of Canada bonds, citing “signs of extrapolative expectations and speculative behavior” in the housing market.

The assets on its balance sheet have now dropped from C$575 billion in March, to C$478 billion as of May 12:

House prices have truly gone nuts.

In the Greater Toronto Area (GTA), house prices spiked by 3.0% in April from March, and by 12.3% year-over-year, and have nearly tripled over the past 15 years, according to the Teranet-National Bank House Price Index today.

The index tracks prices of single-family houses through “sales pairs,” similar to the Case-Shiller Home Price Index in the US, comparing the price of a house that sold in the current month to the price of the same house when it sold previously, often years earlier. By tracking how many more Canadian dollars it takes to buy the same house over time, the index is a measure of house price inflation.

In Greater Vancouver, house prices jumped by 2.0% in April from March and are up 9.4% year-over-year. The Bank of Canada’s pandemic magic has completely turned around the housing bust that had started in mid-2018. The index has more than tripled in 15 years:

…click on the above link to read the rest of the article…

Bank of Canada Announces Balance Sheet Reduction, Suddenly Worried about “Moral Hazard”

March 24, 2021

Bank of Canada Announces Balance Sheet Reduction, Suddenly Worried about “Moral Hazard”

“Once crisis tools have served their purpose, central banks should scale them back.”

The Bank of Canada will unwind its crisis liquidity facilities, will further reduce its purchases of Government of Canada bonds, which it already started tapering in October, will let short-term assets “roll off” the balance sheet when they mature, and will as a result reduce its total assets from C$575 billion now to $C475 billion by the end of April, announced Bank of Canada Deputy Governor Toni Gravelle in a speech today.

Most of the speech was focused on the reasons for the QE and liquidity programs that the Bank of Canada unleashed starting in mid-March last year, in a two-fold role: In its role as “lender of last resort,” to deal with the “extreme stress” in the markets, as liquidity dried up and markets weren’t functioning or had “seized completely” as everyone was trying to sell everything in a mad “dash for cash.” And in its role as provider of stimulus as the economy that was spiraling down.

But these actions ballooned the balance sheet fourfold, to C$575 billion, and it created the possibility of “moral hazard.”

“Moral hazard emerges whenever market participants or other economic actors feel that they can engage in risky behavior without bearing consequences if things go wrong,” Gravelle said, a year after moral hazard became forever the guiding principle of the markets.

But moral hazard can be limited “by ensuring that such actions have a predetermined expiry date or are unwound when they’re no longer needed,” he said.

“Once crisis tools have served their purpose, central banks should scale them back to show that they are emergency measures and don’t reflect business as usual,” he said.

…click on the above link to read the rest of the article…

wolf richter, central banks, bank of canada, wolfstreet, canada, housing bubble, mortgage bubble, interest rates, qe, quantitative easing

The Importance Of A Resilient Life

September 22, 2019

The Importance Of A Resilient Life

In the end, it will mean all the difference

My business partner Adam and I recently met with a successful business owner whose career began on Wall Street. The kind of guy who should be rooting for the system, because it has treated him well.

Instead, he was quite nervous about the sustainability of the status quo. “Starting in August,” he said, “Maybe it was the Amazon catching fire, maybe it was the negative interest rates – I don’t know for certain what the trigger was – but something has snapped.”

I agree. Because I feel it, too.

As do so many others. And not just those who regularly read PeakProsperity.com. Increasingly, even ‘mainstream’ voices are stating to report a profound sense that something really isn’t right. That — from the economy to geopolitics to the natural world — things are swiftly worsening.

Public perception is beginning to shift from complacency to fear. Countries are fast rejecting globalization in favor of nationalization. The holes in our ecosystem — vanishing birds, insects, amphibians and fish stocks — are becoming frighteningly obvious. The threats to life as we’re accustomed to it are becoming more visible while accelerating in both magnitude and frequency.

I expounded on the danger of this in my recent report It’s the Pace of Change That Kills You. Negative developments can spark their own vicious cycle. The more components of a system that fail, the more at risk the remaining components become.

That report was published just two weeks ago. Since then the world’s largest oil refinery was attacked by hostile forces and knocked out of commission, throwing the future integrity of the global oil market into question. Scientists just announced that North America has lost 29% of its total bird population (a drop of -3 billion) in the past half century.

…click on the above link to read the rest of the article…

Now Even Paul Krugman Of The New York Times Is Admitting That The Next Crisis Will Likely Be Worse Than 2008

November 28, 2018

Now Even Paul Krugman Of The New York Times Is Admitting That The Next Crisis Will Likely Be Worse Than 2008

There is a growing consensus that once the next economic crash finally arrives that it will be significantly worse than what we experienced in 2008. This is something that I have been saying for a very long time, but now even mainstream economists such as Paul Krugman of the New York Times are admitting the reality of what we are facing. And without a doubt, the stage is set for a historic collapse. We are living at a time when everything is in a bubble – the current housing bubble is much larger than the one that collapsed in 2008, student loan debt has now surpassed the 1.5 trillion dollar mark, corporate debt has doubled since the last financial crisis, U.S. consumers are 13 trillion dollars in debt and the federal government is nearly 22 trillion dollars in debt. And even though stock prices have fallen dramatically in recent weeks, the truth is that stocks are still wildly overpriced. What goes up must eventually come down, and Paul Krugman insists that we “are poorly prepared to deal with the next shock” and that “there’s good reason to think it will be worse”…

“We are poorly prepared to deal with the next shock,” Krugman said. “Interest rates are still close to zero in the US and in most of the rest of the advanced world. The fiscal policy we did was badly handled in the aftermath of the 2008 crisis, and there’s no particular reason to think it will be better. In fact, there’s good reason to think it will be worse.”

Hmmm.

Where have I heard talk like that before?

You know that it is very late in the game when even Paul Krugman can see what is coming.

…click on the above link to read the rest of the article…

Mortgage Rates May Hit 6% Sooner, as Fed Sheds Mortgage-Backed Securities, But What Will that Do to Housing Bubble 2?

November 16, 2018

Mortgage Rates May Hit 6% Sooner, as Fed Sheds Mortgage-Backed Securities, But What Will that Do to Housing Bubble 2?

Mortgage rates are climbing faster than the 10-year Treasury yield.

The average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment rose to 5.17% for the latest reporting week, according to the Mortgage Bankers Association(MBA) today. This is the highest average rate since September 2009 (chart via Investing.com):

Many people with smaller down payments and/or lower credit ratings are already paying quite a bit more. Top-tier borrowers pay less.

Thus, mortgage rates have moved a little closer to the next line in the sand, 6%, which is still historically low. At that point, the interest rate would be back where it had been in December 2008, when the Fed was unleashing its program of interest rate repression even for long-dated maturities via QE that later included the purchase of mortgaged-backed securities (MBS), which helped push down mortgage rates further.

Now the Fed is shedding Treasury securities and mortgage-backed securities, and we’re starting to see the impact on mortgage rates: The difference (spread) between the 10-year yield and the interest rate of the average 30-year fixed-rate mortgage has widened sharply.

Since the beginning of the year:

The 30-year mortgage interest rate has risen 95 basis points, or nearly 1 percentage point (from 4.22% to 5.17%).
The 10-year Treasury yield has risen 71 basis points (from 2.46% to 3.17%)
The spread between the two has widened from 176 basis points on at the beginning of January to 200 basis points now.

In other words, mortgage rates are climbing faster than the 10-year Treasury yield, now that the Fed has begun the shed mortgage-backed securities. This is expected. It’s part of the QE unwind – it’s part of the Fed exiting the mortgage market and pulling its support out from under it.

But 6% is still low:

…click on the above link to read the rest of the article…

Home Affordability: Canada vs. US

November 14, 2018

Home Affordability: Canada vs. US

Homes are unaffordable in the US, but the situation is far worse in Canada.

Point2homes has an interesting set of charts on Home Affordability In Canada vs the US.

Key Findings

The average Canadian has to dish out a whopping 56% more to buy a home, or 25% more to rent one compared to ten years ago, but the median wage in Canada only went up 15%.
The average home price in the U.S. increased at a much slower rate (24%), while the median income went up by 18%.
Since 2008, the Canadian dollar lost approximately 25% of its power compared to the American dollar, going from almost perfect parity to a much lower exchange rate.
The affordability crisis worsened in Canada, where the housing market went from “seriously unaffordable” to “severely unaffordable”, but the American housing market remained in the “seriously unaffordable” category.

Real Housing Prices

Eight years into the new millennium, the U.S. marched head first into one of the worst economic crises in its history following the bursting of the housing bubble. Canada’s real estate bubble hasn’t yet popped and the country has not yet seen a major decline in home prices, but the Canadian economy experienced its own share of turbulence following the oil price crash from 2014 and the burst of China’s speculative bubble.
And now, 10 years after the housing crisis that destabilized the U.S., some analysts claim that Canada faces a similar scenario if it stays the course: household debt currently exceeds 100% of GDP, according to data released by the Bank for International Settlements, the average home price went up 56% in ten years, while the median wage per household only increased 15% during the same period, and loose lending is on the rise.

…click on the above link to read the rest of the article…

Foundation and Empire

November 12, 2018

Foundation and Empire

**Thomas Cole, “The Consummation of Empire” (1836)**

Every vice of the Empire has been repeated in the Foundation. Inertia! Our ruling class knows one law; no change. Despotism! They know one rule; force. Maldistribution! They know one desire; to hold what is theirs.

That quote is the narrative crux of Isaac Asimov’s second book of the Foundation trilogy, Foundation and Empire (1952). It’s the fatal flaw of the Foundation, formed originally as a noble form of galactic government, but now no better than (and easy pickings for) the Empire.

Hold that thought.

The narrative crux of the second note of the Things Fall Apart trilogy, Things Fall Apart (Part 2), can be found in the following chart. It’s the relationship between U.S. household net worth (how rich we are) versus U.S. GDP (how much our economy has grown) from 1951 through today.

Both data sets are in nominal dollars (meaning neither is adjusted for inflation), both are compiled by the same people (the Fed) using the same methodology, and both are normalized at 100 to show growth rates. It’s an apples-to-apples comparison, so don’t @ me about semi-log charting – it adds nothing here.

For 46 years, from 1951 to 1997, we were no more and no less rich than our economy grew. Which makes sense. That’s the neutral vision of monetary policy, where you’re not trying to pull forward future growth through leverage and easy money in order to create more wealth today.

For the past 20 years, however, we have had a series of wealth bubbles – first the Dot-Com bubble, then the Housing Bubble, and today the Financial Asset Bubble – that have made us richer than our economy grows. Each of these bubbles was intentionally “blown” by the Fed through monetary policy.

The “Nightmare Scenario” For Beijing: 50 Million Chinese Apartments Are Empty

November 11, 2018

The “Nightmare Scenario” For Beijing: 50 Million Chinese Apartments Are Empty

Back in 2017, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth would keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing as three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US, with the remainder invested financial assets.

Beijing knows this, of course, which is why China periodically and consistently reflates its housing bubble, hoping that the popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process. For now, Beijing has been successful in maintaining price stability at least according to official data, allowing the air out of the “Tier 1” home price bubble which peaked in early 2016, while preserving modest home price appreciation in secondary markets.

How long China will be able to avoid a sharp price decline remains to be seen, but in the meantime another problem faces China’s housing market: in addition to being the primary source of household net worth – and therefore stable and growing consumption – it has also been a key driver behind China’s economic growth, with infrastructure spending and capital investment long among the biggest components of the country’s goalseeked GDP. One result has been China’s infamous ghost cities, built only for the sake of Keynesian spending to hit a predetermined GDP number that would make Beijing happy.

…click on the above link to read the rest of the article…

Here Comes The Housing Bust “Reverse Wealth Effect,” Australia Edition

October 27, 2018

Here Comes The Housing Bust “Reverse Wealth Effect,” Australia Edition

For the past few years, homeowners just about everywhere have been able to finesse life’s problems by thinking “at least my house is going up.” This home equity accretion allowed them to buy stuff on credit, safe in the knowledge that even as they maxed out yet another credit card their net worth continued to rise. They felt smart and confident, in other words, and so continued to behave in ways that the modern world defines as normal and natural.

But now that’s ending. Home prices have stopped rising in many places and in a few canaries in the financial coal mine have begun to plunge. Here’s what “plunge” means for Australians:

House prices ‘falling by over $1,000 a week’ in Sydney and Melbourne, Deloitte says

The boom time is over and we’re now officially experiencing the “house price fall we had to have”, according to Deloitte Access Economics’s latest business outlook.

It has found what many had been predicting: prices are dipping as interest rates are rising, with our biggest cities feeling the winds of change most keenly.

“Our house prices here in Australia had streaked past anything sensible by way of valuation,” said Deloitte partner Chris Richardson.
“Now, finally gravity has caught up with that stupidity and prices are falling.

“In Sydney and Melbourne, housing prices are falling by over $1,000 a week.”

Prices had surged across the country over the past five years as historically low interest rates have driven Australians to load up on debt, while investors had also cashed in.

Not if, but by how much
Housing forecasts have gone from disagreement over whether home prices will fall to debates about how much they’ll decline.

…click on the above link to read the rest of the article…

Did The Nasdaq Bubble Just Burst?

October 26, 2018

Did The Nasdaq Bubble Just Burst?

Regular readers will recall when back in March, Bank of America cautioned that after the tech bubble in 2000, the housing bubble in 2006, we were witnessing the third biggest bubble of all time: the e-Commerce bubble.

Well, after several weeks of sharp volatility which has hammered tech stocks, slammed momentum trades and hurt growth factors, the tech sector is once again sharply lower after hours largely on the back of disappointments from Google and Amazon, with the ETF which tracks the Nasdaq 100 dropping about 2%, and threatening to slide back into a bear market.

The reason for this latest weakness in the QQQs may be that investors are finally realizing that the latest Nasdaq bubble may have popped, if for no other reason than what is shown in the Bloomberg chart below: namely revenue growth at the two e-commerce titans, Google and Amazon, appears to have finally peaked.

Granted, the decline is not in revenue but in revenue growth, however when investors are already beyond skittish about peak earnings, a slowdown in the second derivative may be all they need to sell now and ask questions later. Which may explains why FANG stocks are all sharply lower after hours as the market begins to reasses just how much longer the “e-commerce bubble” as defined by Bank of America has left before it pops…

Ten Years After the Last Meltdown: Is Another One Around the Corner?

October 16, 2018

Ten Years After the Last Meltdown: Is Another One Around the Corner?

September marked a decade since the bursting of the housing bubble, which was followed by the stock market meltdown and the government bailout of the big banks and Wall Street. Last week’s frantic stock market sell-off indicates the failure to learn the lesson of 2008 makes another meltdown inevitable.In 2001-2002 the Federal Reserve responded to the economic downturn caused by the bursting of the technology bubble by pumping money into the economy. This new money ended up in the housing market. This was because the so-called conservative Bush administration, like the “liberal” Clinton administration before it, was using the Community Reinvestment Act and government-sponsored enterprises Fannie Mae and Freddie Mac to make mortgages available to anyone who wanted one — regardless of income or credit history.

Banks and other lenders eagerly embraced this “ownership society”’ agenda with a “lend first, ask questions when foreclosing” policy. The result was the growth of subprime mortgages, the rush to invest in housing, and millions of Americans finding themselves in homes they could not afford.

When the housing bubble burst, the government should have let the downturn run its course in order to correct the malinvestments made during the phony, Fed-created boom. This may have caused some short-term pain, but it would have ensured the recovery would be based on a solid foundation rather than a bubble of fiat currency.

Of course Congress did exactly the opposite, bailing out Wall Street and the big banks. The Federal Reserve cut interest rates to historic lows and embarked on a desperate attempt to inflate the economy via QE 1, 2, and 3.

…click on the above link to read the rest of the article…

Violence, Public Anger Erupts In China As Home Prices Slide

October 15, 2018

Violence, Public Anger Erupts In China As Home Prices Slide

Last March, we discussed why few things are as important for China’s wealth effect and economy, as its housing ~~bubble~~ market. Specifically, as Deutsche Bank calculated at the time, “in 2016 the rise of property prices boosted household wealth in 37 tier 1 and tier 2 cities by RMB24 trillion, almost twice their total disposable income of RMB12.9 trillion.” The German lender added that this (rather fleeting) wealth effect “may be helping to sustain consumption in China despite slowing income growth” warning that “a decline of property price would obviously have a large negative impact.”

Naturally, as long as the housing bubble keeps inflating and prices keep rising, there is nothing to worry about as the population will keep spending money buoyed by illusory wealth appreciation. It is when housing starts to drop that Beijing begins to panic.

Fast forward to today, when Beijing may be starting to sweat because whereas Chinese property developers usually count on September and October to be their “gold and silver” months for sales, this year has turned out to be different. As the SCMP reports, not only were sales figures grim for September, but the seven-day national holiday last week also brought at least two “fangnao” incidents – when angry, and often violent, homeowners protest against price cuts offered by developers to new buyers.

These protests are often directed at sales offices, with varying levels of intensity – from throwing rocks to holding banners and putting up funeral wreaths. The risk, of course, is that as what has gone up (wealth effect) will come down, and as home ownership has remained the most important channel of investment for urban households in China in the past decade, price cuts have become increasingly unacceptable and a cause for social unrest.

…click on the above link to read the rest of the article…

The Great Financial Crisis: Bernanke and the Bubble

September 25, 2018

The Great Financial Crisis: Bernanke and the Bubble

Ben Bernanke responded to Paul Krugman’s post last week, which agreed with my argument that the main cause of the Great Recession was the collapse of the housing bubble rather than the financial crisis. Essentially, Bernanke repeats his argument in the earlier paper that the collapse of Lehman and the resulting financial crisis led to a sharp downturn in non-residential investment, residential investment, and consumption. I’ll let Krugman speak for himself, but I see this as not really answering the key questions.

I certainly would not dispute that the financial crisis hastened the decline in house prices, which was already well underway by September of 2008. It also hastened the end of the housing bubble led consumption boom, which again was in the process of ending already as the housing wealth that drove it was disappearing.

I’ll come back to these points in a moment, but I want to focus on an issue that Bernanke highlights, the drop in non-residential investment following the collapse of Lehman. What Bernanke seemed to have both missed at the time, and continues to miss now, is that there was a bubble in non-residential construction. This bubble essentially grew in the wake of the collapsing housing bubble.

Prices of non-residential structures increased by roughly 50 percent between 2004 and 2008 (see Figure 5 here). This run-up in prices was associated with an increase in investment in non-residential structures from 2.5 percent of GDP in 2004 to 4.0 percent of GDP in 2008 (see Figure 4).

This bubble burst following the collapse of Lehman, with prices falling back to their pre-bubble level. Investment in non-residential structures fell back to 2.5 percent in GDP. This drop explains the overwhelming majority of the fall in non-residential investment in 2009. There was only a modest decline in the other categories of non-residential investment.

…click on the above link to read the rest of the article…

Tag Archives: Housing Bubble

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

House prices have truly gone nuts.

Post navigation

Latest Posts