From Peter Reagan
Back in November we covered how inflation, mortgage rates, and prices were making things worse for the housing market – in other words, for everyone who owns a home (or has a mortgage) and everyone who invests in housing (developers, real estate speculators etc.).
Looks like the bill has come due, and the housing bubble is about to return to earth…
Side note: Why are we talking about this? Well, maybe you remember the last time the housing market collapsed? We call it the Great Financial Crisis, the worst period in the global economy since the Great Depression. The S&P 500 lost 50% of its value during the ensuing 18-month bear market. That’s why. The housing market is a leading indicator of incoming financial crisis.
Let’s start by looking at the more optimistic commentary that is still making the rounds. For example, Norada Investments attempts to make the case that the housing market is slowing, but won’t crash:
This time around, there are far more purchasers than available properties, the exact opposite of what occurred in the 2000s. The majority of bad mortgages have been eliminated. Lenders have significantly stricter requirements on borrowers.
So far, so good!
In fact, maybe too good… If there are really more purchasers than properties, why is Lennar (the #2 homebuilder by market cap) shopping an inventory of 5,000 houses to big rental landlords? Why are more than three times as many new home sales being canceled, compared to a year ago?
Does it sound to you like there are more purchasers than available properties? Continue reading “This Housing Bubble Could Be Worse Than 2008”
