It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.

Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.

This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing. We now know who was responsible. Greenspan and Bernanke were at least 75% responsible for the housing bubble and its eventual implosion, which essentially destroyed our economic system. They purposely kept interest rates at obscenely low levels, encouraging every Tom, Dick and Julio to buy a home with a negative amortization, no doc, nothing down, adjustable rate mortgage, so they could live the American dream of being in debt up to their eyeballs.

Greenspan and Bernanke were also responsible for regulating the Wall Street banks. They allowed them to leverage themselves 30 to 1. They allowed them to create fraudulent high risk mortgage products. They looked the other way as Wall Street sliced and diced these guaranteed to default mortgages into AAA rated derivatives that were then spread throughout the global financial system like ticking time bombs. As home prices rose three standard deviations above the long term average, these Ivy League educated geniuses cheered it all on. Bernanke saw no bubble, just as it was bursting. He saw no mal-investment or systematic risk from this orgy of greed and fraud. And then it all blew up in our faces, while the perpetrators walked away unscathed to pillage and rape once more.

Chart of the Day

And now we come to present day and something really smells fishy again. Home prices crashed by 40% between 2005 and 2012, putting prices back to 1978 on an inflation adjusted basis. All of the bubble gains were wiped out in the blink of an eye. Bernanke and his Wall Street owners had a real problem with this development. Wall Street banks had/have billions in toxic mortgages on their books and only accounting fraud by not having to mark them to market has kept these banks from having to declare bankruptcy. Bernanke, Geithner, and the Wall Street banks hatched their master plan to save themselves at the expense of young people in 2011/2012.

We know for a fact that real median household income is still 7% below 2007 levels and sits at the same level as 1989. We know for a fact that wages have been stagnant since 2007. We know for a fact GDP has barely broken 2% since 2009. We know for a fact the price of healthcare, food, energy, tuition, rent, and a myriad of other daily living expenses are dramatically higher since 2009. We know mortgage originations are at 1997 levels. We know housing starts are 60% below the 2005 highs and at levels seen during the 1991 and 1981 recessions. Existing home sales are 30% below the 2005 high, only up 10% from 2012 levels, and sitting at levels reached in 1999 before the boom.

A critical thinking person might wonder how median single family home prices could possibly skyrocket by 37% in the last three years when household incomes are falling, living expenses rising, and the number of houses being sold are at recessionary levels. The stinking rotting fish again sits in the hallways of the Eccles Building in Washington D.C. Janet “Yellowfish” Yellen has inherited the bubble blowing machine from Ben “Blowfish” Bernanke and has continued to inflate a new housing bubble, because one housing bubble just isn’t enough.

There is nothing free market about the 37% increase in home prices. It has absolutely nothing to do with supply and demand. It has nothing to do with normal families looking for a home. It has everything to do with the Federal Reserve’s 0% interest rates, the $3.5 trillion of QE injected into the economic gambling system, Wall Street banks withholding foreclosures from the market, hedge funds buying up tens of thousands of foreclosed homes and renting them out to the former middle class, Fannie and Freddie guaranteeing 70% of all sales, the government encouraging 3.5% subprime loans again, Chinese and Russian billionaires parking their ill gotten wealth in US real estate, and flippers reappearing in the same old places (Las Vegas, Phoenix, Florida, California).

The Federal Reserve created the last housing bubble and they’ve created the new housing bubble, along with stock and bond bubbles, with their easy money policies designed to enrich their Wall Street owners and the parasites who feed off the financial industry. Their entire plan smells to high heaven. They have thrown young people and most of the middle class overboard, while the bankers, billionaires, politicians, and connected cronies party like it was 2005 on their $250 million yachts.

Now what? The Fed says they are going to raise rates. The QE spigot has been turned off. The hedge funds are selling their buy and rent hovel investments, cash buyers are dwindling, the flippers who appeared in 2005 are back, Boomers are looking to sell and downsize, young people are already in debt up to their eyeballs thanks to the government doling out student loans like candy, the number of full-time good paying jobs continue to dwindle, and the rigged 37% price increase has priced millions of people out of the market.

The good news is the Wall Street banks have inflated their balance sheets and celebrated by giving themselves $20 billion in bonuses for a job well done. If mortgage rates rise to 4% or God forbid 5%, the entire housing complex would implode faster than a blowfish out of water. If you’ve bought in the last two years you will be underwater sleeping with the fishes like Luca Brasi in the not too distant future.


  1. Ms Freud really really wants to sell this year. We are Praying, Fasting, and Anointing our heads with coconut oil … that homes prices in our area increase by 150% over the next few months. Is that wrong? Does Jeebus answer these kind of prayers with a “Sure, why the fuck not!”.

    Did you know the War Of 1812 was really pretty fucking FASCINATING?

  2. Yes Stuck I am fascinated by W1812, and I am on my way through LA and MS tomorrow, lets have it!!!

    Admin- All that toxic paper from the last sits on the Feds balance sheet, along with all the new from this round. My bet, they have some plan to ‘remove’ the productive assets and stick us with the toxic liabilities in the next dust up.

  3. We bought our first place in 1991, a little 3/1 bungalow with 900 sq. ft. It was an owner finance. That was back when people still owned stuff instead of hocking themselves to high heaven. The owner was an old country fellow who had raised his family in the same house, I remember making the deal with him sitting at the picnic table in the back yard. We went to the attorney’s office, signed the sale papers, I paid the $200 for legal services. Done deal.

    Every month for the next 12 years I deposited $558 in the old man’s bank account, the bank was just a couple of streets over. I just walked in and gave them the money and they gave me a deposit slip.

    No mortgage company, no title search, no home inspector, no real estate agents, no loan officer. None of those people mad a dime off the deal.

    Now that government and the banks have financialized every aspect of our lives, I doubt such a thing would be possible in America anymore.

    Most people in this country probably don’t even remember how easy it used to be to do stuff before banks and insurance companies wormed their way into every corner of our existence.

  4. The War of 1812 may well be fascinating but I eagerly await learning just exactly how it relates to how it has come to pass that American citizens continue to present posteriorly to the banking cartel that has been sodomizing them since 1913 at the earliest.

    Mr. Quinn’s facts are impeccable as always, but I believe he errs in assuming that the “Ivy League educated geniuses” didn’t know exactly what they were doing and doing at the behest of their masters behind the curtain; banking cartel says “frog”, functionaries jump, because their real financial rewards are waiting down the road once they leave their “public service” positions. They’re “serving” the public alright, but not in the sense of doing a service to the great unwashed, BOHICA, no?

    Gov. lackies big and small make it well-nigh impossible for the plebs to purchase property outright and build homes that are perfectly habitable but don’t conform to ridiculous regulations. Think that’s an accident? Think again.

    The “free market” is keeping Luca company down at deep fathom five. It was the bankers all along.

  5. Ottomatik

    It’s 95% done, and will be finished by tomorrow.

    However, Admin just released an original work on Monday, so I will probably wait until after the weekend.

    1. Stuck

      I’m a big fan of the War of 1812 and want to read it. It will be the top post as soon as you submit it. You should do it Friday. I can take the weekend off.

  6. I’m also noticing more Hedge owned properties coming up for sale in Florida. Seems the rental market isnt what its cracked up to be and they see the line forming to exit positions.

    I know one house has been in foreclosure zombie state now since 2009 – no payments made and they lived there till 2015 free. That house is still not seen as forclosure and i bet theres many more.

    1. Sly

      I also know someone who is still living in their house not having made a mortgage payment for years. The bank never takes possession because they would have to book a loss.

  7. Housing bubble. Fraudulent title transfers (or no transfer at all) when Washington Mutual was taken over by Chase. MERS scandal. Pittance of fines for shady foreclosures, with hardly any monies going back to the screwed (former) homeowners. Should have been RICO charges against those vermin.

    Oh yeah, I’ll be selling a condo I paid $200k for in 2005 this summer for $122k. Fuck.

  8. Admin

    OK. The writing is done. Just need to find some pics, a vid, and format it. Will shoot for noon tomorrow.

  9. Oh … forgot … if you’re a big fan of W1812 ….ughhhh …. this has been a new venture for me based on a brief article I read a month or so ago ……… soooo, I probably won’t have much new info for ya … just to set expectations.

  10. In Australia, the price of housing is going through the roof. It is unbelievable. Some say totally unsustainable. I am not so sure, tho, for the following reasons.

    – 90 percent of Aussies live in or around 5 big cities, and land is at a premium
    – the cost to build a house, not counting outrageous govt charges, is nothing short of extraordinary. Australia has the first or second highest minimum wage in the world – there is no cheap labor. It costs around $350k to build even a modest home, not counting land. Unbelievable.
    – the population is growing steadily, and over time I expect it to accelerate even more. The demand for housing will remain high for decades

    But the question will become – who will be able to afford houses at he ever increasing prices?

    How will young people accumulate $100+k down payments, especially as during the years they are accumulating, prices soar even further?

    Seems to me houses will accumulate in the hands of investors. Not billionaire types, but millionaire types, and the young will perpetually be rent slaves.

    Banks no longer are willing to lend with tiny deposits. Never should have done it to begin with.

    The cost of building homes is going to keep climbing, govt grabs and regs will keep climbing, land is not being created, and the young are going to get royally screwed.

    So much for high minimum wages being a panacea.

  11. Actually, Dutch, if it smells fishy, that’s a good sign you shouldn’t eat it. The Sexy Mongolian (I-S called her ‘Mongoloid’ but truth be told, I did not marry his sister, I only dated her one crazy drunken evening) wonders why I sniff at food, it’s a guy thing, it has to pass the smell test. She got sick from the salad bar at Sizzler’s, I am sure of that because something smelled strange. I avoided the salad bar. Now she won’t go to Sizzler at all. We go to the Armenian diner for Mediterranean food.

  12. This story is my life right now. We moved to Dallas about a year ago. Sold our house in El Paso for a loss. Making the same money. Slightly more. We cannot afford to buy a fucking shack in Dallas for the price we sold our home for in El Paso.

    So, for now, we rent. It’s not ideal, but it’s better than being locked into a 30 year bondage where we CAN’T leave here.

    So, on the one hand, I’m hoping for a little reversion to the mean. I know it’ll be a bitch for all of us, but the current pricing scheme here sucks. It’s got to come back to something close to “normal” so that normal folks like us can buy a little property.

  13. Jim, more than just the banks being saved by inflating real estate values. If you can value a house at 350k, instead of 125k, you get to tax and mandate insurance on 350k. Do you really think interest rates are the biggest threat to municipal bonds? Think again. And if you think residential is overvalued, never mind. You are the authur of space available’

  14. I bought my first house in 1988 for $109,000. It is a 2100 sq ft 1920 bungalow on a 5,000 sq ft corner lot with a Model T garage, in an inner city neighborhood in Portland Or. I sold it due to divorce in 1997 for $263,000 (I did some improvements). A few years ago I noticed on the internet that it sold again in 2008 at the height of the housing market for $500,000. I am pretty sure it must be underwater but then I thought the couple that paid a quarter million dollars for it wouldn’t see any gains either.

    FWIW, the couple we bought it from purchased it in 1982 for $66,000.

  15. Zar, your story sounds a little like mine if I change a few details and someone buys the house as a foreclosure.

    I thought of a little story: I went to the gas station and after I got gas, I decided to go inside and buy a lottery ticket. A black kid at the entrance asked me for some spare change. I gave him a fiver. Then I imagined, what if the kid went in and bought the winning ticket after I left? It actually happened that a first guy standing in line at the 7-11 let another cut in line and the second dude bought the winning ticket.

    Anyway, back to your comment: my neighbor bought the house next door at the peak of the market for $400K. The dude who sold him the house bought a nice ranch in Littlerock. My new neighbor lost his home to foreclosure around 2010. Crazy how life works, huh?

  16. ” If you’ve bought in the last two years you will be underwater sleeping with the fishes like Luca Brasi in the not too distant future.”

    You should really qualify that statement….

    In the context of the entire nation I do agree with your sentiments…but there are pockets that have never really “recovered” in price terms from the highs of 06′.

    I was fortunate enough to be able take the close to “free” money at the end of last year that Fannie/Freddie offers and bought a house that was on the market for almost 5 years that was priced well below 06′ level, it’s also sitting on 5 acres.

    The boomers were desperate to sell and over extended….

    My whole point being is that there are still some areas that you can buy at reasonable prices despite this casino atmosphere created by the Feds and the experiment in moral hazard.

    Again, I want to reiterate that I agree as a whole with your sentiment on a nationwide basis…but the blanket statement quoted above should be qualified.

  17. While prices here in my neighborhood have not recovered to their 2006-7 levels, a home recently went on the market and had 7 buyers bidding on it, and the seller got more than his initial asking price. Sold in 3 days.

  18. When this bubble pops there is no turning back. There is also going to be a major problem with these houses that were bought by banks and rented because rental houses always lose their value. My mother has been looking to buy another house for the past 2-3 years and she has seen many listings for houses without occupants for the past several years. A few house she found had termites and others were decaying. Any house that Wall Street bought and kept unoccupied for at least 5 years is unlivable due to decay.

  19. I’ve been saying for some time that we’re heading for the greatest crash in human history. The piece reflects my own conclusions almost exactly. There’s never been a period of grosser market distortions in any period of the modern age. Debt instruments yield nothing, which is why the stock market appears strong. There’s no place else to put one’s money for any yield. People are buying homes they can’t afford and will lose when the crash comes. True unemployment is actually running nearer 15% than the government-announced 5%, since once one’s unemployment benefits run out they simply fall out of the rolls – they disappear from the stats.

    The rest of the world, especially China, is holding most of our debt, and when they come to the realization that they’re not going to be repaid, it may become very ugly. Some of the greatest wars in world history have started over far, far less. Umm, who was that guy Ferdinand, the Archduke of Serbia?

  20. Steph is right. Houses decline rapidly if not given serious TLC.

    I imagine that lots of houses left idle for any period of time will mold. My youngest son house-shopped about two years ago and several of the foreclosures he looked at had experienced basement flooding while unoccupied. It is almost certain that such an event, if not remedied immediately, guarantees black mold and eventually the property will be torn down to the foundation.

    Lots of homes were built improperly during the boom, and are already predisposed to problems with moisture in the basement. I’ve heard horror stories of windows improperly installed such that rain seeped directly into the walls under the windows, soaking the insulation and leaving a time bomb that eventually rendered the property valueless.

    The housing bust of 2007-2009 was just the initial kick-off of a much larger conflagration.

  21. This is my last day as an employee. Not worried, much, however, as my wife and I broke our necks to limit our fixed costs to a fraction of what most people in the middle class spend, and I saved like a monk for over 10 years. If we keep what we have we’ll be a-okay.

    What worries me is my sons. All well employed STEM graduates, all married, one with kid (soon to be kids). The focal point of my worries for them?

    Their houses.

    All have the unavoidable mortgage and if their jobs go toes-up in an economic hard-landing, they’ll be in deep guano pretty quickly. Two of them have what I’d call relatively expensive-to-maintain properties, too, so between mortgage, taxes and maintenance they’re on the hook for a chunk of monthly change.

    Yes, parents always worry. If my kids aren’t making it, NO ONE’S kids are making it, to be honest. But I see the last 15 years as a trap, a Wall Street pitcher plant where people are lured into a one way trip to being digested by the parasites in NYC.

    My wife and I are *relatively* protected from this trap (they could always ramp my property taxes high enough to run me out of my house, or seize my ERISA-plan savings, which would hurt) but younger people or those who unwisely lived right to the limits of their incomes are extremely vulnerable.

  22. Another laid-off coworker is moving (due to husband’s job) and selling in Naperville, a suburb of Chicago.

    She said the house is on the market for $200k less than what they have in it.


  23. The DJIA is now below 18,000 again.

    The weekly trend is STILL clearly UP….so I’m not yet interested much in even remotely trying to play the downside, but I would not be surprised if this time it doesn’t rally back above it. Heck, the daily trend is still not confirmed to down, and the DJIA has to drop another 50-80 points to break a supporting diagonal trend line, but it has waffled around the 18,000 mark for 6 months now.


    I have been wrong before, but this seems very unlikely to be a period of consolidation prior to vaulting higher, especially since the Dow Transports have now fallen a good 10% and look to be solidly indicating a weekly downtrend.

    I think Mt. Vesuvius is beginning to rumble.

  24. dc.sunsets- I saw the rapid decline from foreclosed houses on Google Street view. A lot weren’t in great shape to begin with but they were still standing. It took less than 5 years for most of those houses to decay into piles of rubble.


  25. To say that the “real estate bubble destroyed our economy” really isn’t accurate. Slick Willy singed into law the mechanism which forced banks to give mortgages to those who could not afford them. Financially inept people now vying for homes, drove prices up. Those bogus loans, in addition to those who already owned homes refinancing their over-valued homes to buy non-durable assets, essentially pumped money into an already dying/unsustainable economy- propping it up for a while more. When the welfare recipient could not afford to make the mortgage payments; and the refinancers abandoned their over-leveraged, over-taxed homes, the bubble burst, and the economy merely returned to the point where it would have naturally been, had there been no RE bubble.

    The future of RE will be interesting: The market needs to drop a good 75% to match what people can earn these days- and yet, that would price homes far below the cost of actually building new ones. (Which is probably why we see such a push towards apartments these days- which is the natural course of the communistic economics we’ve been practicing for some time now) 🙁

  26. I bought my home in 2006 at the height of the bubble. Even then the cracks were coming as the house didn’t sell in 2005 and was relisted in 2006 at $30k less. Eventually got it at $40k less than what they originally wanted. Still was too much but the spouse didn’t want to rent anymore.

    Four years later in 2010 going through a divorce I decided to keep the house, which had declined in value by about $80k, per market comps. I took on the debt mostly because the mortgage/insurance/tax was LESS than what rent on a decent 1br apartment was. Also got out of paying out the ex as I took on her share of the debt.

    Today I’ve paid a shit pile of the principle down so I’m not underwater unless we have a major collapse but the rent problem persists. Housing prices are high only compared to the historical mean. Compared to rents (at least in my area) housing is cheap. People are buying, if they can qualify, because rents are fucking insane. Sure, you’re saddled with the debt noose but if you don’t plan to move anytime soon it pencils out.

  27. “Something Smells Fishy”

    Which is precisely why the international community has repeatedly asked Moochelle Obama to either stop exercising OR open up a goddam window.

  28. May I say, returning to this post, that I am utterly flabbergasted to see that my original comment has garnered 52 upvotes.

    It was just a truth as I lived it, and typed it out on my keyboard in just a few minutes.

    I am wondering why so many people found it appealing?

    Not looking for accolades, but truly curious as to what made my experience connect so resoundingly. I never expected my reply to even be noticed.

    What was it about what I said (typos and all) that resonated so deeply? I am honestly asking.

    There is such a deep undercurrent of dissatisfaction with the way things are now being run, – we all love modernism but its drawbacks are becoming more and more evident –

  29. “The Fed Has Been Horribly Wrong” Deutsche Bank Admits, Dares To Ask If Yellen Is Planning A Housing Market Crash

    Submitted by Tyler Durden on 05/31/2015 16:06 -0400

    The reason why Zero Hedge has been steadfast over the past 6 years in its accusation that the Fed is making a mockery of, and destroying not only the very fabric of capital markets (something which Citigroup now openly admits almost every week) but the US economy itself (as Goldman most recently hinted last week when it lowered its long-term “potential GDP” growth of the US by 0.5% to 1.75%), is simple: all along we knew we have been right, and all the career economists, Wall Street weathermen-cum-strategists, and “straight to CNBC” book-talking pundits were wrong. Not to mention the Fed.

    Indeed, the onus was not on us to prove how the Fed is wrong, but on the Fed – those smartest career academics in the room – to show it can grow the economy even as it has pushed global capital markets into a state of epic, bubble frenzy, with new all time highs a daily event across the globe, while the living standard of an ever increasing part of the world’s middle-class deteriorates with every passing year. We merely point out the truth that the propaganda media was too compromised, too ashamed or to clueless to comprehend.

    And now, 7 years after the start of the Fed’s grand – and doomed – experiment, the flood of other “serious people”, not finally admitting the “tinfoil, fringe blogs” were right all along, and the Fed was wrong, has finally been unleashed.

    Here is Deutsche Bank admitting that not only the Fed is lying to the American people:

    Truth be told, we think the Fed is obliged to talk up the economy because if they were brutally honest, the economy what vestiges of optimism remain in the domestic sectors could quickly evaporate.

    But has been “horribly wrong” all along:

    At issue is whether or not the Fed in particular but the market in general has properly understood the nature of the economic problem. The more we dig into this, the more we are afraid that they do not. So aside from a data revision tsunami, we would suggest that the Fed has the outlook not just horribly wrong, but completely misunderstood.

    … the idea that the economy is “ready” for a removal of accommodation and that there is any sense in it from the perspective of rising inflation expectations and a stronger real growth outlook is nonsense

    And the kicker: it is no longer some “tinfoil, fringe blog”, but the bank with over €50 trillion in derivatives on its balance sheet itself which dares to hint that in order to make a housing-led recovery possible, the Fed itself is willing to crash the housing market!

    … if the single objective was to reduce inflation, regardless of where it came from, then crashing the housing market is certainly one way of going about it…. The dilemma for the Fed is of course that it is precisely the decision not to crash the housing market by doing extraordinary stimulus in the first place that has led to the current outcome of weak ex housing demand and strong housing inflation. The decision is akin to embracing financial repression as an alternative to the uncertainty of asset price deflation and a debt default cycle. If we could reset house prices 30 percent lower and fast forward a few years, the economy would probably be meaningfully more dynamic but it is those few years that might be hairy and no one let alone the Fed would likely stomach the risks.

  30. Great article. We were the victims of lender mortgage fraud and asked a lawyer what we could do about it. They all said the same thing: You do a loan modification to something like $700 monthly payment and maybe a principal reduction to about $90,000.
    We replied, “Our mortgage is $80,000 and our payment is $600 and we believe it should be paid off by now. So can you help us sue the lender?
    They all said ‘ no’ without explanation. One finally explained that Freddie Mac and Fannie Mae own 75% of the mortgage and so no one is allowed to sue them even though they bought all the obviously fraudulent mortgages. The only remedy is to keep paying, but maybe slightly less.
    The banking system can commit fraud now, but everyone else will go to jail for it.

  31. Face up to the fact that western economies are in depressions. We would be more aware of the situation if the fed didn’t keep printing currency and giving it to banks. From an individual’s standpoint, this money printing only debases the currency in his and her wallets. Not good!
    The only personal solution to this con-game is to put US currency into some real investments such as precious metals, jewels, rare collectables, etc. The US dollar is on the skids (as is the federal system).
    Consider the possibility of the USA union breaking up in 2017 to 2018.


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