The extent of the housing price boom can’t be understated.\u00a0 It is an order of magnitude worse than the previous housing price boom at its peak in 2007.\u00a0 The Federal Reserve’s decade-long wild and irresponsible money printing, including hundreds of billions of dollars poured directly into the housing market, has been the fuel that caused this explosion.\u00a0 All of this and more is about to reverse, and a major housing price correction is at our doorstep.<\/p>\n

The problem is simply illustrated.\u00a0 From a base of 100 in January, 2000, the Case-Shiller 20 City Home Price Index reached an all-time high, at the peak of the housing boom, of 206 in April, 2006.\u00a0 After tumbling to a low of 136 in March, 2012, the index assumed a steady ascension.\u00a0 It reached a new peak of 207 in January, 2018, continuing steadily higher from there.\u00a0 By April 2020, the index reached 223.<\/p>\n

Housing Price Price Boom Explosion<\/h3>\n

But then something shocking occurred.\u00a0 From there, the Case-Shiller exploded higher, reaching an all-time high of 299 in February, 2022.\u00a0 Within just this 22 month period, the index skyrocketed by over 34%.\u00a0 This is the most powerful 22 month housing price surge in the history of the Case-Shiller Home Price Index.<\/p>\n

Said another way, from its low in March, 2012, the rate of increase in housing prices is larger than the rise that led to the great financial crisis of 2008.\u00a0 History has never witnessed the explosive parabolic housing price rise over the 22 months ending in February 2022.\u00a0 This can’t, and won’t, end well or pain-free.\u00a0 The Federal Reserve’s coming interest rate increases will not only end this price boom, it will do what it always does – cause a reversal.<\/p>\n

Affordability<\/h3>\n

Let’s not stop there.\u00a0 All-time lows in mortgage rates over the last two years – fueled by the Fed – raised housing affordability and stoked demand for houses, especially among first-time buyers.\u00a0 Mortgage rates have now risen by over 200 basis points since their lows.\u00a0 Rates are headed higher – probably much higher – as the Federal Reserve belatedly addresses red-hot inflation.\u00a0 Mortgage rates at over 5%, which haven’t been this high since 2011, must head higher.<\/p>\n

And housing affordability is now collapsing.\u00a0 As of April 2022, monthly mortgage payments (principal plus interest) are now up almost 40% – that’s right, 40% – year over year.\u00a0 And this is occurring at a time when housing starts as a percentage of orders reached a 12 year high in January 2022.\u00a0 Thus, right as demand is on the cusp of a (major) downturn, supply is coming on line at a decade high rate.\u00a0 The ripple effects of a downturn in housing will be felt throughout the economy.<\/p>\n

A Big Reversal Should Be Coming<\/h3>\n

We are at the top of the housing peak looking down – how far, no one knows – as the fuel of the last decade-plus zero interest rate and quantitative easing policies has burnt out.\u00a0 And there other dangerous things occurring too, which I’ll address in soon-to-come posts.<\/p>\n

<\/i><\/a><\/span>\n<\/i><\/a><\/span>\n<\/i><\/a><\/span>\n<\/i><\/a><\/span>\n<\/i><\/a><\/span><\/div><\/div><\/div>","protected":false},"excerpt":{"rendered":"

The extent of the housing price boom can’t be understated.\u00a0 It is an order of magnitude worse than the previous housing price boom at its peak in 2007.\u00a0 The Federal Reserve’s decade-long wild and irresponsible money printing, including hundreds of billions of dollars poured directly into the housing market, has been the fuel that caused … Continue reading “The Housing Price Boom is Unsupportable – A Major Correction is Coming”<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[6],"tags":[84,85],"class_list":["post-2499","post","type-post","status-publish","format-standard","hentry","category-opinions-thoughts","tag-federal-reserve","tag-housing-prices"],"jetpack_publicize_connections":[],"yoast_head":"\n