The Housing Bubble Mantra: Hurry! Buy Now!

The LivingLies team

The media is reporting that US housing starts, or the construction of a new house, fell more than expected in March. It is reported that buyer traffic is having the best run since 2009, and that consumers are facing stiff competition and a low supply if you’re shopping for a home.

Where have we heard this before?  Prior to every market bubble that implodes, the mainstream media spins the “buy now or lose out” message so that the herd jumps blindly back into the market, while investors and banks start to short the same markets.

Duetsche Bank who is in a death spiral is reporting that the overall recovery of the housing market continues, particularly among single-family units.

Despite the recent housing dip, the media reports that housing starts hit a four-month high this February. The biggest driver for this trend is single-family home purchases, thus, the herd is falling in line by purchasing homes that are artificially inflated because consumers can obtain cheap money and credit requirements have been relaxed.  Fannie Mae and Freddie Mac have recently lowered credit score requirements while allowing homebuyers to borrow down payments.

The number of single-family homes purchased still remains far from pre-recession levels.  In the past three years some markets experienced 20% annual price increases, but home price appreciation has stabilized at a more pragmatic rate of around 5% nationwide.  Most housing markets have not recovered to the 2006-07 peak but are nearing that level.  Meanwhile wages have stayed relatively flat while the cost of living has increased.

The media reports that home purchases have rebounded back to levels seen a decade ago, and that young adults are taking advantage of low mortgage rates.  In direct conflict, the media is reporting that most millennials can’t find a job let alone purchase an overpriced home.

And yet, Bank of America reports that seventy-nine percent of millennial homebuyers believe owning a home has a positive impact on their long-term financial picture.  Of course Millennial’s have never experienced a housing bubble implosion, a job loss or the joys of dealing with a loan servicer.

The media reports that there is an extremely low number of homes for sale — and that it’s truly a seller’s market. That may be true in hot markets, but overall the housing market in most of America is flat.  The media is also using cheap interest rates as a way to scare people so they go out and purchase a new or more expensive home, when in reality,  if the FED continues to raise the interest rate twice more this year- they are going to seriously impair housing sales and prices.  As we reported last week on Livinglies, even a 1% rise in interest rate has a cooling effect on people who can barely afford a mortgage at interest rates around 3.5%.

It is not a lot harder to get a housing loan after the financial crisis as reported.  Although there are no more zero-down, no-qualifying loans there are loans that require less than 1% down with a credit score between 640 and 680.  Before the year 2000 most homeowners put down 10- 20% to purchase a home.

 

The media claims that large homebuilders aren’t able to keep up with the extreme demand to purchase homes and yet contradictory reports state they are sitting on unsold inventory.  The media blames it on builders have become more efficient.  There has been a steady decrease of workers per housing unit under construction since 2012, and yet if the housing market is so robust then why aren’t the workers without jobs being employed?

It is obvious that the media is not being honest and the markets are beginning to look eerily like 2006. When the housing market crashed the media ignored all warning signs while repeating the same mantra we are hearing today.  As I prepare to post this article Reuters is announcing that housing starts last quarter dropped by 6.8%, and blamed it on the weather.

Reuters reports that U.S. homebuilding fell in March after “unseasonably mild weather” buoyed activity in February and manufacturing output dropped for the first time in seven months.

If the Federal Reserve hikes interest rates in June as expected, the first quarter will look strong compared to the second quarter and the markets are already pricing in the interest rate hike.  The Midwest in particular suffered its biggest decline in three years.

Single-family homebuilding, which accounts for the largest share of the residential housing market, fell 6.2 percent to an 821,000 unit pace last month, retreating from a near 9-1/2-year high. Single-family starts in the Midwest, which was lashed by a storm last month, declined 35 percent.

 

 

 

7 Responses

  1. In Sarasota / Manatee County Florida, it has blown up way past the last housing bubble.. New multi family going in everywhere and new single family developments as far as the eye can see.. Unreal!! Thanks, Mike

  2. People may not buy foreclosed houses. People need to help people when politicians and others are favoring banks.

  3. Reblogged this on Mario Kenny.

  4. Reblogged this on California freelance paralegal and commented:
    I would not buy a house at this time. I would rather rent and wait until the bubble bursts and prices drop back down to a realistic level. What goes up will come down at some point.

  5. Yeah, same old song, different day. Sell high and pay higher, whatever. I have been checking some of these markets and due to the low volume, prices are pushing 20-40% over 2 years ago.

    Am I missing this? Prices should not be moving at this rate. So, here we have inflated appraisals, with 1% – 3% down (people who cannot afford a down payment), easy financing, MBS’ pushing through the system again.This sounds very familiar…just saying. People have a short memory.

  6. It has to start somewhere.. at that place is voting for “term limits” period.

    We can only beat them at the polls.. of course that’s without starting a civil war!

  7. I truly hope this prediction is far from the truch. Neil has been through a lot in his years and has been a wonderful and cherished blessing to all of us property owners.
    let’s hope that the Trump Administration will start listening to all of us people who are crying “foul” with the crooked “banksters” and finally take positive action to expose, derrail, and take down nasty big lenders like Bank of America. B of A is trying to encourage investors into a false “narative” in my humble opinion and they should be exposed for who they are and ALL that they have done to destroy our wonderful country. Too bad more people don’t band together to expose and help in the takedown of a true Goliath that beats it chest and acts like they are way too big to fail. Semper Fi

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