The current Housing Market reflects 2005- Prepare for Adjustments


By the Lending Lies Team

The major news sources refuse to address the possibility of a housing bubble, however analysts who don’t drink the mainstream Kool-aid say the markets look eerily like those of 2005.

Back in 2005 the mainstream media dismissed the warning signs and encouraged people to keep buying houses due to record-low interest rates and to invest in the stock market. Businessweek magazine interviewed several prominent economists in their June 22, 2005 issue about the possibility of a housing bubble and all dismissed the fact that prices were soaring unsustainably and a bubble pop was on the horizon.

The top broker’s on Wall Street are quietly advising clients that the optimism surrounding the housing markets has grown delusional and the market is timed for a reversal. However, the media refuses to acknowledge that when a market is artificially stimulated prices top and then come tumbling down in free-fall.

The reality is that the U.S. housing market looks shockingly comparable to the mid-2005 housing market numbers. Now that government-sponsored lenders are once again offering 0% down mortgage loans to people with subpar credit scores- what could go wrong?

There is a pattern showing that housing prices and demand are on the verge of a crisis not seen since the beginning of the Great Recession. In fact, despite high unemployment, low wages, and escalating food and fuel prices- Americans enthusiastically buy into inflated housing bubbles. It defies all logic.

June 2016 was the 50th straight month showing national home price appreciation. In fact, according to a CNBC August 29th report, home prices have rebounded to just shy of their 2006 peak prices.

However, the sales stats are starting to show a sales slowdown. In Miami-Dade County sales declined in July on high-end properties falling 20.8%. The National Association of Realtors reports that existing homes sales dropped 3.2% from June to July and the trend does not look to have abated.

In Southern California during the same time period, sales dropped 10.7%. The prediction is that housing prices will start to fall and they should fall to more realistic levels. Some areas in the country saw 60% price increases over the past 8 years. In Naples, Florida for example, homes in the Naples city-limits rebounded 60%. A home that was listed for $540,000 in 2010 recently sold for 1.2 million within days. Price increases like this are not practical, sustainable or rational.



Also remember, that loan originators and servicers have not changed their securitization methodologies.  At some point the market will have to contend with the fact that millions of Americans have corrupted titles due to the shoddy securitization and sales of mortgage loans.




6 Responses

  1. Ian, what Neil does not say is… there is a collection account inside these CDO trusts that finance auto loans, school loans, machinery, and if someone wants to buy enough of them… bearded spotted owls.

    He is right… the auto loan market is a shit show, and they can’t write enough new auto loans to swap out the defaulting loans inside the pools. CIT is a perfect example

  2. Npv- interesting take on things- in rhat regard, now what do we do?

  3. Neil, you technician you…

  4. 2016 marked the peak in the downstate New York region. There has also been slowdown of foreign capital feeding the fire in NYC. We are expecting a 16% correction during 2017 and an additional 8% contraction during 2018.

    Thereafter, we believe we will form a slight downward trough, with Median value trending toward the PTI.

    I also noticed that the living lies chart is extremely bearish with the first signs of the death cross showing. We will wait, and when we see the upside down bearded spotted owl show on the 200 day metro chart… we are pulling out entirely.

  5. lets keep it simple, once again, the home prices have risen while people’s incomes have not so at some point the have nots are greater in #s than the haves and how much do the haves have to have!

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