Housing Bubble 2: ballooning inventories of new single-family homes.
Profit grows on trimmed trees, freshly painted walls, and rehabbed bathrooms, and flipping volume soars, and nothing can go wrong. Then something goes wrong.
You’d think the housing market is in fine shape, based on the sizzling optimism of our home builders.
Homeownership hit the skids when homes became a highly leveraged asset class, flipped and laddered by speculators, rather than lived in by normal folks.
“These are trades that, three years ago, would have far surpassed anyone’s imagination.”
Home prices hit a slick $1,000,000, while soaring office rents blow up enterprises with real business models. It’s crazy. It’s powered by hot money from around the world. Then comes the moment when the hot money evaporates.
‘Hours Worked’ plunged in the second quarter at a rate last seen during the middle of the Great Recession, a terrible harbinger of GDP.
Buyers from China are the most prolific, spending 72% more than a year ago! On expensive homes. They benefit from the devaluation of the dollar – according to the NAR – and are desperate to get their money out of China.
FICO: “That doesn’t feel like a healthy, sustainable growth situation.” Lenders fret “about the risk in mortgages” as consumers return to “reckless borrowing.”
The smart money had a goal, which it now reached via the “multiplier effect” by which a small number of sales can have extreme consequences in price for the rest.