Tuesday, August 21, 2018

Step three of current Housing Bubble burst event taking shape as foreclosures begin to climb

Like in 2007, there are three signals or steps which indicate that the Fed induced Housing Bubble is bursting.  The first of course is that across the board, hosing sales have started to decline in areas that had the largest growth.

Sales of new U.S. single-family homes fell to an eight-month low in June and data for the prior month was revised sharply down, the latest indications that the housing market was slowing down. 
The Commerce Department said on Wednesday new home sales dropped 5.3 percent to a seasonally adjusted annual rate of 631,000 units last month, the lowest level since October 2017. May's sales pace was revised down to 666,000 units from the previously reported 689,000 units. - CNBC
The second step is that home prices begin to fall precipitously from their all-time highs.
Manhattan real estate had its worst second quarter since the financial crisis, with prices and sales dropping and inventory rising, according to a new report.
And the third step or indicator for a Housing Bubble pop is when homeowners start to lose their homes through foreclosure.

One month ago we discussed why according to the recent data, the "Housing Market Headed For "Broadest Slowdown In Years." Fast forward to today, when we received the latest confirmation that the US housing market appears to have recently hit a downward inflection point: according to the just released July 2018 U.S. Foreclosure Market Report released by ATTOM Data Solutions, foreclosure starts in July increased by 1% from a year ago — the first year-over-year increase following 36 consecutive months of decreases. 
Foreclosures rose from a year ago in 96 of the 219 metropolitan statistical areas, or 44% of the markets analyzed in the report; 33 of those areas posted their third straight monthly increase. A total of 30,187 U.S. properties started the foreclosure process for the first time in July, up 1 percent from the previous month and while the increase was less than 1% from a year ago, it marked the first annual increase in exactly 3 years. - Zerohedge
The current housing bubble is different than the one from a decade ago because new home building is way down this time, and escalating prices came from limited inventories in the used home market.  However what isn't different is that both Fannie Mae and the banks changed their lending standards midway through the bubble and have been once again allowing 3% or less down, and in some cases, little validation of income.

ie... return of subprime.

The signals we are seeing here in 2018 are the same ones we saw back in 2006, a full year before the Housing Bubble officially imploded.  And all that remains now is whether the Fed is going to try to keep it going by changing course in their interest rate policies, or instead watch history repeat itself in a public that is now more in debt than they were at the time of the Financial Crash.

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