Posts By Lee Adler – The Wall Street Examiner http://wallstreetexaminer.com Busting the myths Fri, 29 Jul 2016 18:47:22 +0000 en-US hourly 1 How Much Stimulus Did Fed Housing Subsidy Really Buy? http://wallstreetexaminer.com/2016/07/much-stimulus-fed-housing-subsidy-really-buy/ http://wallstreetexaminer.com/2016/07/much-stimulus-fed-housing-subsidy-really-buy/#respond Thu, 28 Jul 2016 12:58:03 +0000 http://wallstreetexaminer.com/?p=302179 Today I’ll dig a little deeper into the new home sales data and related data. I want to help you see how the media spins the story to suit its narrative in support of the status quo. The status quo includes the ideas that the housing “recovery” is a big deal, that housing inflation is a matter…

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Today I’ll dig a little deeper into the new home sales data and related data. I want to help you see how the media spins the story to suit its narrative in support of the status quo. The status quo includes the ideas that the housing “recovery” is a big deal, that housing inflation is a matter of “appreciation,” and that we should all thank the Holy Fed for stimulating this great recovery. But the data suggests that rather than stimulate recovery, Fed actions seem to have retarded it.

Yesterday we covered the idea that the media ignores historical perspective in touting the strong recovery off the housing crash low. Even with the rebound, the market is still little better than recession levels from 20 years ago. At the same time, by pushing mortgage rates to record lows, the Fed has stimulated enough housing inflation to suppress sales in spite of population growth and growth in the number of full time jobs. It has also cost savers trillions in lost income.

The Fed wanted lower mortgage rates to stimulate the market. But the combination of the increase in jobs being mostly low pay service jobs, and the rapid inflation of house prices has left most households off the Fed’s gravy train. At typical qualifying ratios and down payments, households at the median household income can only qualify to purchase a house priced around $200,000. The problem is that home builders aren’t building houses priced less than $200,000. That leaves almost half of US households unable to buy new homes. In some overheated metro markets, the percentage is even greater.

New Home Sales Under $200,000 - Click to enlarge

In June, nationally, builders sold only 8,000 houses priced at less than…

Read the rest of this post at David Stockman’s Contra Corner.

The post How Much Stimulus Did Fed Housing Subsidy Really Buy? was originally published at The Wall Street Examiner. Follow the money!

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Behind The New Home Sales Data — A Darker Backdrop http://wallstreetexaminer.com/2016/07/behind-new-home-sales-data-darker-backdrop/ http://wallstreetexaminer.com/2016/07/behind-new-home-sales-data-darker-backdrop/#respond Wed, 27 Jul 2016 12:51:07 +0000 http://wallstreetexaminer.com/?p=302168 There’s so much great data in the Commerce Department’s monthly new home sales report. It’s always useful to parse it for all the tasty morsels that the mainstream media ignores. We’ll take a look at some of it here, with more to come in the days ahead. First let’s look at the usual positive spin…

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There’s so much great data in the Commerce Department’s monthly new home sales report. It’s always useful to parse it for all the tasty morsels that the mainstream media ignores. We’ll take a look at some of it here, with more to come in the days ahead.

First let’s look at the usual positive spin given the report in the mainstream media which is usually devoid of historical perspective whatsoever. It’s always about the short run. The Wall Street Journal’s headline said it all.

U.S. New-Home Sales Posted Solid Gain in First Half of 2016

Solid pace offers fresh evidence of healthy momentum in the U.S. housing market as home-buyers enjoy low interest rates

All of that is true, but it doesn’t tell the whole story. To his credit, the Journal’s Ben Leubsdorf noted in the body of the article that “the pace of home construction and purchases of new homes remain depressed compared with levels seen during past economic expansions” but he never addressed just how weak those sales are.

Here’s some perspective.

Sales have nearly doubled from the June 2010 and June 2011 lows of 28,000 to this June’s 54,000. But this is still down sharply from the June 2005 peak of 115,000 units. At the same time, it barely exceeds the low of 47,000 reached in June 1991 and 53,000 in June 1992 during that recession.

New Home Sales Long Term- Click to enlarge

Read the rest of this post at David Stockman’s Contra Corner, where first published.

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How Wall Street’s Party Keeps Going While They Keep The Public In The Dark http://wallstreetexaminer.com/2016/07/wall-streets-party-keeps-going-keep-public-dark/ http://wallstreetexaminer.com/2016/07/wall-streets-party-keeps-going-keep-public-dark/#respond Tue, 26 Jul 2016 12:28:30 +0000 http://wallstreetexaminer.com/?p=302064 House prices comprise the most important measure of inflation that is ignored by the Fed and mainstream economists. It’s not included in the CPI or PCE. Instead, the BLS and BEA use a ginned up measure called Owner’s Equivalent Rent (OER) which has substantially understated actual house price inflation, particularly in the past 4 years. Read the…

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House prices comprise the most important measure of inflation that is ignored by the Fed and mainstream economists. It’s not included in the CPI or PCE. Instead, the BLS and BEA use a ginned up measure called Owner’s Equivalent Rent (OER) which has substantially understated actual house price inflation, particularly in the past 4 years.

Housing Inflation Vs. OER- Click to enlarge
Read the rest of this post at David Stockman’s Contra Corner, where originally published.

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Tweet O’TheDay http://wallstreetexaminer.com/2016/07/tweet-otheday/ http://wallstreetexaminer.com/2016/07/tweet-otheday/#respond Wed, 20 Jul 2016 23:02:01 +0000 http://wallstreetexaminer.com/?p=301654 Americans waiting to cross the border into Canada, pending the Presidential election, no matter who wins.

OK, but really:

The post Tweet O’TheDay was originally published at The Wall Street Examiner. Follow the money!

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Americans waiting to cross the border into Canada, pending the Presidential election, no matter who wins.

Border Crossing

OK, but really:

The post Tweet O’TheDay was originally published at The Wall Street Examiner. Follow the money!

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How The Fed and Most Economists Ignore Inflation, And Why That Means Big Trouble http://wallstreetexaminer.com/2016/07/fed-economists-ignore-inflation/ http://wallstreetexaminer.com/2016/07/fed-economists-ignore-inflation/#comments Wed, 20 Jul 2016 17:17:08 +0000 http://wallstreetexaminer.com/?p=301584 The headline CPI numbers are finally starting to hit or exceed the Fed’s target, coming in at a seasonally finagled rate of +0.2% for both May and June. CPI understates actual inflation, and that plays havoc with other economic data. With the Fed focused on bad data, it has had the excuse to continue ZIRP…

The post How The Fed and Most Economists Ignore Inflation, And Why That Means Big Trouble was originally published at The Wall Street Examiner. Follow the money!

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The headline CPI numbers are finally starting to hit or exceed the Fed’s target, coming in at a seasonally finagled rate of +0.2% for both May and June. CPI understates actual inflation, and that plays havoc with other economic data. With the Fed focused on bad data, it has had the excuse to continue ZIRP in a futile attempt to increase consumer prices.

The BLS suppresses CPI by understating housing expense, using a ginned down measure called Owner’s Equivalent Rent (OER) instead of actual market rent or, heaven forbid, actual house prices. In 2016 they have been inflating by around 5% per year, depending on the measure. The rate was even higher than that in the years between 2012 and 2015, but the affordability issue is beginning to cut into that. The result is that CPI has been understated by about 1% per year in recent years.

They can’t keep suppressing the impact of housing forever. Eventually rising housing costs “leak” into other costs. Given this suppression and lag we might guess that CPI will begin to accelerate and far outstrip the Fed’s 2% target rate “for a considerable period.” The Fed will need to play catch up on raising the Fed Funds rate as the CPI heats up. So let’s dig a little deeper and see just how much inflation the Fed missed by both ignoring housing inflation. This chart illustrates.

CPI, PCE, Housing- How Fed Ignores Inflation

Click here to view chart if reading in email.

The Fed first announced its 2% “inflation” target in early 2012. The chart depicts the level of various housing price measures where the average level in 2012 is indexed at 100.  The Fed wasn’t really measuring inflation. It was watching the PCE. That’s a number that the BEA manufactures to deflate GDP. It’s even more suppressed than BLS’s CPI as you can see on the chart. Both are measures of arbitrary baskets of consumption goods. Asset prices, such as housing, are either excluded or suppressed. The rationale is that your house isn’t a consumption good, it’s an asset. Assets don’t inflate, they “appreciate.”

What the difference is between inflation and “appreciation” only central bankers and economists can appreciate. I like to call a spade a spade. Assets inflate just like consumption goods. The idea that asset prices should be excluded from any measure of inflation is an artifact of the CPI’s original purpose. The purpose was to index government contracts, salaries, and benefits to the “cost of living,” so that payees would receive reasonable adjustments for rising costs. In 1982 the government was forced to eliminate housing costs from that measure because rapidly inflating house prices were causing the Federal Government’s expenditures to increase faster than revenues. So they simply stopped counting housing prices and substituted OER, a phony measure of rent which almost always understates actual housing inflation.

A problem arises with using understated measures of inflation to calculate real GDP growth. For example, if the nominal value of the production of new housing is deflated by the PCE at 1.5%, that will grossly overstate its real value as a contribution to GDP. Housing inflation, even conservatively, has been running at 3.5% since 2012. Multifamily apartment prices have been running away even faster. The result is substantial overstatement of real housing value in GDP every year. The same issue applies to a lesser or greater extent to most components of real GDP. When the BEA tells us that real GDP growth is 2-3%, using a PCE of 1.5%, it probably overstates growth by at least 0.5% and possibly more.

The rationale for ZIRP was at best questionable. By failing to take into account, deliberately or not, the asset inflation that QE and ZIRP caused, the Fed kept the policy in place for far too long. As a result, we once again face the age old problem of the Fed being behind the curve.  As the Fed plays catch up, it will raise interest rates in an economy that it is much weaker than it appears based on government statistics.

As CPI begins to catch up with real inflation, the years ahead shape up as something similar to the late 1960s through 1970s. That was the era where the US had high inflation, rising interest rates, and slow economic growth interspersed with severe recessions, or what came to be known as “stagflation.” It was an era where Americans had lost faith in government, just like today. It was a terrible environment for investors, in both stocks and bonds.

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Mea Culpa- ECB Did No Emergency Funding for Brexit http://wallstreetexaminer.com/2016/07/mea-culpa-ecb-no-emergency-funding-brexit/ http://wallstreetexaminer.com/2016/07/mea-culpa-ecb-no-emergency-funding-brexit/#respond Wed, 06 Jul 2016 16:59:22 +0000 http://wallstreetexaminer.com/?p=300378 I have previously reported this erroneously on Twitter and on the Capitalstool.com message board that the ECB issued €399.3 in emergency loans on the day of Brexit. The €399.3 billion LTRO offering of June 29 had been previously scheduled and was not emergency Brexit funding. Several blogs had reported that the ECB had issued this emergency…

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I have previously reported this erroneously on Twitter and on the Capitalstool.com message board that the ECB issued €399.3 in emergency loans on the day of Brexit. The €399.3 billion LTRO offering of June 29 had been previously scheduled and was not emergency Brexit funding. Several blogs had reported that the ECB had issued this emergency funding and I picked up on it after a cursory review. In fact this operation began in March, based on the TLTRO indicative calendar posted here and a press release here.  The June 29 operation posting was both previously scheduled, and a rollover of outstanding loans under TLTRO-1. It was not reported that TLTRO-I of €367.9 had been repaid prior to this new issuance.

I had searched for any prior similar issues that were maturing but did not find them. As a result I reported this incorrectly. I always strive to report data as accurately as possible. In this case I failed to do so and I apologize for the error. The ECB took no special emergency action as a result of Brexit. However, the new TLTRO program did result in an increase in TLTRO outstanding and a significant increase in the ECB’s balance sheet both for the week and for the month of June. This had a direct impact on US markets.

This post is a paraphrased excerpt from the Wall Street Examiner Pro Macroliquidity Report. Additional details and analysis are available in that report.

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The Market is Rigged, Lee Adler Tells Lindsay Williams http://wallstreetexaminer.com/2016/07/market-rigged-lee-adler-tells-lindsay-williams/ http://wallstreetexaminer.com/2016/07/market-rigged-lee-adler-tells-lindsay-williams/#respond Tue, 05 Jul 2016 22:59:41 +0000 http://wallstreetexaminer.com/?p=300295 On Fine Business Radio, Lee Adler explains to Lindsay Williams why a rigged US market will benefit from ECB and BoJ money printing and negative rates in Europe and Asia. If you are an optimist by nature, do NOT listen to this program. http://wallstreetexaminer.com/lalw070516.mp3 Click here to listen if player not visible.

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On Fine Business Radio, Lee Adler explains to Lindsay Williams why a rigged US market will benefit from ECB and BoJ money printing and negative rates in Europe and Asia. If you are an optimist by nature, do NOT listen to this program.

Click here to listen if player not visible.

The post The Market is Rigged, Lee Adler Tells Lindsay Williams was originally published at The Wall Street Examiner. Follow the money!

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NAR Home Sales Data Shows Bubble II Still Boiling http://wallstreetexaminer.com/2016/06/media-focus-seasonally-adjusted-crap-housing-sales/ http://wallstreetexaminer.com/2016/06/media-focus-seasonally-adjusted-crap-housing-sales/#respond Wed, 29 Jun 2016 17:43:31 +0000 http://wallstreetexaminer.com/?p=299784 The NAR released it May report on sales of existing housing–what it calls “Pending Home Sales.” The report covers actual sales contracts reached during the previous month. The NAR reports the data both on a seasonally manipulated (SA) basis and also on an actual basis, not seasonally manipulated (NSA). The media focuses on the SA numbers. In so doing…

The post NAR Home Sales Data Shows Bubble II Still Boiling was originally published at The Wall Street Examiner. Follow the money!

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The NAR released it May report on sales of existing housing–what it calls “Pending Home Sales.” The report covers actual sales contracts reached during the previous month. The NAR reports the data both on a seasonally manipulated (SA) basis and also on an actual basis, not seasonally manipulated (NSA). The media focuses on the SA numbers. In so doing this month, their instant “analysis” reached the wrong conclusion, and we got headlines like CNBC’s:

Pending home sales down 3.7%, marking first annual drop in two years

or The Wall Street Journal’s:

U.S. Pending Home Sales Fell 3.7% in May

National Association of Realtors index also suffered its first annual decline since May 2015

In reality, the SA factor overstated the April to May decline. Furthermore, sales did not decline year to year. The NAR’s data on the actual number of contracts in May had the Pending Home Sales Index at 133.2 in May of 2015 and 136.4 this May. That’s a gain of +2.4% year over year.

This is not a surprise. Contract data from the national online Realtor firm Redfin had already revealed that May was a record month. Even though Redfin’s data is national in scope and comes from the Realtor’s MLS services, and even though it is released weeks before the NAR report, the mainstream media don’t report it.

Existing Home Sales and Inventory- Click to enlarge Click here to see Chart 1 if viewing in email. 

The media used the statistically inexcusable practice of using seasonally adjusted annualized monthly figures to compare year to year performance of the same month. That’s how they reached the wrong conclusion and misrepresented the market.

The US existing home sales market is in a mania, driven by inventory shortage and abnormally low, central bank subsidized mortgage rates. May sales activity confirms that. The buying frenzy has not cooled. Current sales volume is at the highest level since the top of the bubble in 2005. It is slightly higher than in May of 2006, although still below the buying climax of 2005. There may be room here for additional price inflation before the buying panic exhausts itself. The price correction would normally follow the manic volume peak. Volume typically precedes price.

May is a swing month where sales are sometimes higher than in April and sometimes not. Month to month actual sales were down 1.9%. That was slightly better than in May of 2015 when sales were down by 2.6%. During the 4 prior years when sales were in a recovery from extremely depressed levels, May gains ranged from +5.3% in 2011 to +1.6% in 2014. The volume of annual activity continued to increase but the pace decelerated. Sales can only increase so much in an inflating market because affordability becomes a limiting factor.

There’s a good chance that this month’s NAR sales figure will be revised up. Redfin covers 26 major US metros representing about 40% of the total sales reported by the NAR. Redfin’s data for May showed not a month to month decline like the NAR’s data, but an increase of 11%. Redfin also showed a year to year increase of 8%. Their data showed that far from cooling down, the mania is heating up.

Housing Inventory To Sales Ratios At Record Lows- Click to enlarge

Click here to see Chart 2 if viewing in email. 

With inventories at record lows and artificially stimulated demand reaching panic proportions, this can only lead to housing inflation heating up. As affordability falls, that will ultimately be bad news for the US economy when this echo bubble can no longer sustain itself.

Housing Mania Sales Volume at 2006 Level - Click to enlarge

Click here to see Chart 1 if viewing in email. 

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Here’s How Bad US New Home Sales Are http://wallstreetexaminer.com/2016/06/quick-take-us-new-home-sales/ http://wallstreetexaminer.com/2016/06/quick-take-us-new-home-sales/#respond Fri, 24 Jun 2016 03:49:01 +0000 http://wallstreetexaminer.com/?p=299181 The Census Bureau’s monthly update on new US home sales for May had lots of interesting data buried between the lines. I’ll touch on a few things here, with more to come in a subsequent post. First, while prices rose only 1% year over year, they are now up nearly 31% since the 2011 lows…

The post Here’s How Bad US New Home Sales Are was originally published at The Wall Street Examiner. Follow the money!

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The Census Bureau’s monthly update on new US home sales for May had lots of interesting data buried between the lines. I’ll touch on a few things here, with more to come in a subsequent post.

First, while prices rose only 1% year over year, they are now up nearly 31% since the 2011 lows and by nearly 22% since the 2007 peak. And this isn’t a bubble?

US New Home Sale Prices Bubble Up- Click to enlarge

Click here to view chart if reading in email.

Then there’s the business from economists and the media blaring about the “recovery” in the housing industry. Indeed sales are up a massive 122% since the May 2010 bottom! But the reports lack perspective. The bubble peak was in 2005, already 11 years ago, and sales are down 57.5% since then, and even down 35% since 2007, when the collapse was already under way for 18 months.

The May 2007 benchmark is important because that’s when employers finally stopped hiring full time employees. So don’t get too excited about the ultra low, all time, million-year record first-time jobless claims that the media is all hot and sweaty about. Employers are always the last to get the news. That’s because they take their cues from the stock market. Unfortunately for employers, investors are always the second to last to get the news. The thing about the markets knowing more than everybody else–discounting the future–it’s hogwash. The market doesn’t “know” anything. The market doesn’t have a mind. It can’t possibly discount the future accurately. It’s a liquidity meter. That’s all. And employers know even less about the economy than the market does.

So here we are with stock prices surging, until tonight when BREXIT surprised everybody, the markets, the betting lines, the surveys, hell even its supporters. And even more clueless employers are still adding jobs. Maybe the Brexit will be the catalyst that finally gets them to find their mentality, wake, up, wake up to reality.

New Homes Sales Not Keeping Pace With New Jobs - Click to enlarge

Click here to view chart if reading in email.

But what’s this? New home sales aren’t keeping up. Supposedly jobs growth translates into home purchases. But even though lots of full time jobs have been added since the 2007 jobs peak, they don’t pay enough to allow workers to buy new homes. How do you call your neighbor’s kid who just got his Phd? Just text Uber and he’ll be right over. Or when you see him at the restaurant, yell “Waiter!” These are the jobs this screwed up, QE’d, ZIRPIAN economy is mostly producing.

A good way to visualize just how historically bad the housing industry is doing is to normalize for population growth, dividing sales by population.Per Capita Home Sales No Better Than 1982- Click to enlarge

Click here to view chart if reading in email.

Sales per million people have risen by 87% since the 2010 bottom. Is that a lot? Not when you consider that the current sales rate is only 39% of the 2005 level, and that it is no better than at the 1982 bottom when mortgage rates were at 16%. Think about that. Mortgage rates are at their lowest level since the beginning of the Hebrew calendar 5,776 years ago, and current new home sales are no better than they were at the bottom of the Volcker credit crunch in 1982. Hey, I was working on The Street back then. I remember well what it was like. That was not a good time to be in the housing business.  And today is just as bad.

I hate to think what might happen when rates start to rise. Apparently the Fed feels the same way. People who think the Fed will ever be able to normalize its balance sheet are deluded. The Fed, and the rest of the world’s big central banks, have backed themselves into a corner with monetary policy that has only gotten more and more insane.  As more and more investors and traders come to that realization, the housing market and the stock market face yet another collapse, this time with no discernible way out via magic monetary tricks. The next time, nature must run its course.

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Fed Sponsored Housing Inflation Makes Buying A House A Dangerous Game http://wallstreetexaminer.com/2016/06/record-high-churn-record-low-supply-keeps-house-price-inflation-bubbling/ http://wallstreetexaminer.com/2016/06/record-high-churn-record-low-supply-keeps-house-price-inflation-bubbling/#respond Thu, 23 Jun 2016 01:14:37 +0000 http://wallstreetexaminer.com/?p=299064 Click here for an update of this report. A falling percentage of American households can afford to buy houses as prices rise and incomes fail to keep pace. Yet, the sale prices of existing housing keep inflating. According to the NAR, which publishes the median and average sale prices after sales have settled, the prices of existing houses rose…

The post Fed Sponsored Housing Inflation Makes Buying A House A Dangerous Game was originally published at The Wall Street Examiner. Follow the money!

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Click here for an update of this report.

A falling percentage of American households can afford to buy houses as prices rise and incomes fail to keep pace. Yet, the sale prices of existing housing keep inflating. According to the NAR, which publishes the median and average sale prices after sales have settled, the prices of existing houses rose by 4.7% year to year in May. This represents contract prices mostly as of March and April. The online real estate firm Redfin publishes data on sales contract prices virtually in real time from the MLS data for the largest and most active metropolitan areas in the US. Its data showed a year to year gain of 4.3% for contracts reached in May.

While house price inflation may be slowing, it’s still too fast relative to US household incomes. The average weekly earnings of US workers has been rising at an average monthly rate of just 2% over the past year. With mortgage rates approximately stable year to year, housing is becoming less affordable as it continues to inflate.

House Prices Inflating- Click to enlarge

Click here to view chart if reading in email. 

Both data sets show house prices increasing twice as fast as household incomes. To many owners of houses and to Wall Street economists, that’s “appreciation.” To everybody else, especially the 40% of households that don’t own a house, that’s inflation. The BLS and professional economists don’t recognize it as such, but it is what it is.

Obviously the trend of declining affordability probably can’t end well for the housing industry, for the US economy, for current owners of houses, or for mortgage lenders, and ultimately for you and me. That’s because it is we, US taxpayers, who will end up bailing out Fannie and Freddie and the big banks again when the next price “adjustment” comes.

The Fed’s subsidy of super low interest rates directly promotes housing sales churn. That’s ok if supply rises to meet demand, but that’s not happening. The rate of sales is back to near record highs, above the levels of 2006 when the last bubble peaked, and nearly as much as the peak sales volume reached in 2005. That level was in a mania. I know because I sold my house in Florida in June of that year, just as sales volume was peaking. The market had gone crazy.

It’s approaching a similar frenzy of activity today because one of the prime motivators of the buying is fear. It’s the fear of those who are on the income qualifying razor’s edge that they will be priced out of the market. This dynamic is particularly strong in tech bubble and Sunbelt markets. When have we seen this before? Whether local or national in scope, fear driven manias don’t end in a good place. Some local markets are being left in the dust, but enough markets have seen double digit gains, that it’s troublesome. According to Redfin, 7 large metropolitan markets saw year to year inflation of 9% or more. 11 more metros out of the 31 Redfin covers had increases of 5-9%.

The dynamic that is stoking this mania is not only the Fed’s direct subsidy of buyers via super low mortgage rates. That encourages more buyers to bid, and bid more aggressively. But low interest rates also suppress inventory. As the massive baby boom generation moves into retirement age, interest rates are so low that they have no incentive to cash out of their homes and move to rental properties or less expensive houses. So they stay in the housing market, either staying put in a house that’s too big for them or often holding on to the old house as a rental property.

A second factor holding down supply is the affordability issue. Incomes are not keeping pace with housing costs. Would-be move up buyers stay put because their incomes won’t qualify them for the bigger mortgage they would need to be able to “move up.”

House Sales and Inventory- Click to enlarge

Click here to view chart if reading in email. 

Finally, low interest rates encourage investors to buy houses as rental properties. That takes supply off the for-sale market. Because the opportunities to invest cash in alternative income producing investments are so limited, housing becomes a fat target for investors to use leverage to generate decent returns on their cash. Again, the Fed is directly promoting this by subsidizing low interest rates. Ironically, the idea of raising the rate that the Fed pays to the banks on reserve deposits, which Yellen and Co. have tabled for now, would only make the situation worse by lowering banks’ cost of funds. Raising the short term rate in that way would only force Treasury yields lower. Mortgage rates would go with them.

Central bank sponsored negative interest rates in Europe and Japan are also driving capital out of those markets into the US seeking positive yields. This is suppressing US Treasury yields and the mortgage rates indexed to them, even more. The ECB and BoJ are actually promoting the US housing mania. It’s an unintended consequence of insane central bank policy.

So we have an artificial market, with idiotic central bank policies artificially suppressing mortgage rates. Buying is driven by fear among prospective buyers, and by a lack of decent alternatives for would be sellers and investors. The same suppression of mortgage rates keeps supply off the market. Artificially stimulated demand and suppressed supply cause an unhealthy inflation in house prices that is pricing ever more potential owner-occupant buyers out of the market. A healthy housing market would be driven by a growing population with rising incomes and upward mobility. That’s not happening.

Inventory to Sales Ratios At Record Lows - Click to enlarge

Click here to view chart if reading in email.

The current trend can’t end well. The question is timing. We don’t know how long the clock will tick until the next crisis erupts. Whether you are a would-be owner occupant or a would-be investor in housing,  “investing” in a house is becoming an ever more dangerous proposition.

Click here for an update of this report.

The post Fed Sponsored Housing Inflation Makes Buying A House A Dangerous Game was originally published at The Wall Street Examiner. Follow the money!

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