Dr. Housing Bubble 02/04/14

The housing market is addicted to the easy financing juice of Wall Street:
What happens if the juice is taken away?

While the stock market can turn on a dime with the agility of a cheetah, the housing market has the nimbleness of the Titanic. That is why the slowdown that started in the summer of 2013 is actually now resulting in on the ground changes for buyers and sellers. The stock market has taken a bit of a reversal early in 2014. This is important for housing since much of the hot money is coming from excess funds from Wall Street and investors chasing yields like hungry hippos. The euphoria of a stock market juiced on Quantitative Easing has leaked into many areas outside of stocks including real estate once again. Yet the resulting re-inflation was largely based on investors cramping out regular home buyers.

Regular buyers unlike the last bubble, are the last folks to the party. That is, the last bubble was because of too many regular buyers over stretching with toxic mortgage junk (and prime mortgages with weak income due diligence) while this cycle is because of Wall Street using easy money from uncle Fed. This is why the rise in adjustable rate mortgages (ARMs) and jumbo mortgages so late in the game tells you that families are simply unable to compete with big money and once again, are stretching out their budgets for as much as they can get. Many even with low rates cannot compete so they have taken the next alternative in the form of renting.

One thesis I think largely being missed is that the real estate market has caught a ride on the coattails of the non-stop stock rise since 2009. Four years of stocks only going up with QE as a backstop have conditioned people to believing that stocks and real estate only go in one direction. What happens when the juice no longer holds the same kick as before?




Prices and sales stalling out

http://www.doctorhousingbubble.com/housing-market-and-stock-market-stocks-impact-real-estate-as-leading-indicator/