Best of the Week
Most Popular
1.US Dollar Crashes, Gold And Bitcoin Skyrocket As Economic Recovery Lie Is Exposed - Jeff_Berwick
2.Now Obama Warns Americans to ‘Be Prepared’ for Disaster… What Does He Know? - Jeff_Berwick
3.EU Referendum - Britain's Immigration / Migrant Crisis Explained - Nadeem_Walayat
4.EU Referendum - British People vs Establishment Elite, Vote LEAVE an Act of Defiance! - Nadeem_Walayat
5.Prominent Billionaire Investors Warn of Financial Crash, Quietly Position Themselves - MoneyMetals
6.Bankers Warn of BrExit Financial Armageddon if British People Vote for Freedom - Nadeem_Walayat
7.Bad U.S. Jobs Report Prompts Stocks Bear Market Rally Towards New All Time Highs! - Nadeem_Walayat
8.Gold And Silver – Friday May Have Marked A Pivotal Turnaround - Michael_Noonan
9.EU Referendum - British People vs Establishment Elite, the Illusion of Democracy and Freedom - Nadeem_Walayat
10.Felix Zulauf: Monetary Stimulation Creates Bubbles, Not Prosperity Nor Growth - GoldandLiberty
Free Silver
Last 7 days
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16
BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - 22nd June 16
Proof that the Gold Bears are Wrong - 22nd June 16
Here’s a Trillion-Dollar Investment Opportunity for Those Few with No Debt - 22nd June 16
BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - 22nd June 16
Increase In U.S. Rig Count Will Not Cap Oil Prices - 22nd June 16
Are Copper and China Stocks Set to Rally? - 22nd June 16
SPX May Break Its Trendline - 22nd June 16
Believe it or Not: More Kids Live At Home Now than Since The Great Depression - 21st June 16
EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - 21st June 16
British Pound Outlook - BREXIT, Europe and You - Does your vote matter? - 21st June 16
Fascist Victory Behind the European Union - 21st June 16
EU Referendum Opinion Polls Analysis Shows Strong Momentum in REMAINs Favour - 21st June 16
Is It Time to Dump Gold and Buy Platinum? - 21st June 16
Could Central Bankers Be Gold and Silver's BIGGEST Allies? - 20th June 16
Words Still Mean Things – Brexit With Graham Mehl - 20th June 16
Baroness Warsi the Manchurian Candidate Quits LEAVE for REMAIN, Boris Johnson Next? - 20th June 16
FTSE Soars, Stock Markets Bounce on LEAVE Polls Surge, Bookmakers Widen BrExit Odds - 20th June 16
Brexit Would Trigger Devolution of Europe - 20th June 16
Stock Market Week Of Uncertainty - 20th June 16
Will Gold’s Bullish Price Chart Outperform Gold’s 5 Bearish Indicators? - 20th June 16
Bonds And Stocks At All-Time Highs: Are Markets Confused Or Broken? - 20th June 16
Silver Sleeping On the Job - 19th June 16
BrExit Odds Sink, REMAIN Polls Boost by Jo Cox Killing by Radical Right Extremist, Conspiracy? - 19th June 16
How Elliott Waves Tell You When to "Jump In" & When to "Jump Out" of Markets - 18th June 16
Stock Market Inflection Point During Bifurcation - 18th June 16
Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - 18th June 16
Gold Stocks - Bull Markets that Follow Epic Bears - 18th June 16
The Fed Giveth and the Gold Bullion Banks Taketh Away… - 17th June 16
Brexit: "The Vote Heard Around the World" - 17th June 16
Gold Stocks Summer Breakout? - 17th June 16
Stock Investors Get Higher Returns and More Dividend Income - In Less Time With Less Risk - 17th June 16
How to Use the Gold-to-Silver Ratio? - 17th June 16
Inflation, Deflation & Associated Trading Prospects - 17th June 16
Overnight Markets Struggling to Stay Flat - 17th June 16
Gold Price Surges to Highest in Nearly Two Years On Central Bank and Brexit Haven Demand - 17th June 16
Stock Market Thinking Upside Down; Dow 18k Still Key - 17th June 16
Jo Cox MP Terror Attack Killing Claimed for "Britain First" - Witness Report - 17th June 16
Stock Market, Iron Ore, Bitcoin – Is Silver Next for Chinese Momentum Investors? - 16th June 16
EU Referendum Campaigning Suspended Following Shooting of MP Jo Cox, Suspect Named as Tommy Mair - 16th June 16
Why People are Migrating to the UK, Illegal Immigration, Housing Crisis Consequences - 16th June 16
Stocks Fluctuate Following Recent Decline - Bottom Or Just Pause Before Another Leg Down? - 16th June 16
The US Consumer-Driven Economy Has Hit a Brick Wall - 16th June 16
Bitcoin Price Going Parabolic Again, Now At $730 and Up 60%+ In Last Three Weeks - 16th June 16
China's Hard Landing Has Already Begun! - 16th June 16
Crude Oil Price - Oil Bears vs. Support Zone - 16th June 16
Central Bankers Are Wrong About Inflation and Deflation - 15th June 16
Alignment Of The Dow, Interest Rates, Debt and Silver Cycles Will Deliver A Fatal Blow - 15th June 16
Stock Market Bounce May be Over - 15th June 16
EU Referendum: Have the Bookmakers Got it Wrong? LEAVE Opinion Polls Lead - 15th June 16
Gold Price Rally - 15th June 16
How to Invest for Brexit Report - 15th June 16
Stock Market Short of the Decade? - 15th June 16
Stock Market Sell Off Coming! - 14th June 16
QE - The Good, Bad & Ugly - 14th June 16
This Demographic Shift Makes Our Social Security Useless - 14th June 16
Gold Stocks Ultimate Objective in a World of Monetary Transition - 14th June 16
Philosophy of the New World Order - 14th June 16
The Brexit Game - Boris Johnson vs David Cameron EU Referendum Zombies - 14th June 16
EU Referendum: LEAVE Opinion Poll Lead of 51% to 49% Whilst Bookmaker Odds Still Strongly Favour REMAIN - 14th June 16
George Soros Making Big Bets on Gold - 14th June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

What Housing Market Recovery? 10.7 Million Homes Still Have Negative Equity

Housing-Market / US Housing Feb 01, 2013 - 06:38 AM GMT

By: Profit_Confidential

Housing-Market

As I have written in these pages recently, the housing market is still missing the most important part: first-time homebuyers. We have large institutions buying up homes in bulk transactions instead of a good old-fashioned housing recovery where actual home occupants fuel the recovery.

Financial institutions like The Blackstone Group L.P. (NYSE/BX) are eating up the supply of foreclosed and empty homes and driving prices higher in the housing market. Why are they doing it? Because these big funds can’t get better returns elsewhere. Stock market? It’s too high. Bond market? It doesn’t pay enough. “Better buy cheap houses and get tenant money,” seems to be the new thinking.


But is the financial institutional buying of homes going to really change things for the U.S. housing market?

According to CoreLogic, 10.7 million homes or 22% of the entire residential households in the U.S. economy with a mortgage had negative equity in them at the end of the third quarter of 2012. And there are 5.29 million homes in the U.S. housing market that are either delinquent by 30 days or more or in foreclosure. (Source: Lender Processing Services, January 23, 2012.)

As I have been stressing in Profit Confidential, the so-called “recovery” in the housing market is artificial and doesn’t really do any good to the U.S. economy.

Robert J. Shiller, one of the founding fathers of S&P/Case Shiller Home Prices Index, agreed with my notion. At the World Economic Forum in Davos, Switzerland, he said “…it’s going up in the short run, what it will do in the longer run is hard to say. Maybe it will go down.” He also added that the housing market is still a “somewhat risky investment.” (Source: Wall Street Journal, “Shiller Says Housing Still Is ‘Somewhat Risky Investment,’ January 25, 2013.)

The truth of the matter is that it will take years if not decades for the housing market to get back to its peak. Maybe it never will. Back in the good old days, the U.S. government helped drive home prices higher through their lack of mortgage qualification oversight.

Today, we have billion-dollar institutions buying houses, pushing prices up.

I am very skeptical about the small rise in house prices and the increased optimism towards the housing market. Dear reader; let’s think about it this way. Today, the U.S. government announced that the U.S. economy contracted 0.1% in the fourth quarter of 2012—the first decline in gross domestic product (GDP) since the second quarter of 2009.

A surprise? Not for my readers. I’ve been writing for months that the U.S. economy is slowing. As crazy as it sounds, if the economy contracts again in the first quarter of 2013, we’ll officially be in a recession. Good luck to the housing market then.

Michael’s Personal Notes:

Quantitative easing hasn’t done much for the “small guy” in the U.S. economy other than create jobs in low-wage-paying sectors, while the “big guys” have enjoyed the propping up of stock prices. Why aren’t we looking at the Japanese economy as a lesson? After all, what happened there could very well become the fate of the U.S. economy.

Our Federal Reserve unleashed multiple rounds of quantitative easing and so did the Japanese central bank when the country’s crisis hit back in the 1990s. But after eight rounds of money printing, the Japanese economy is back in recession.

What happened in the Japanese economy as it printed money? Its currency, instead of going down in value against other world currencies, went up in value. But all that is changing now. Just look at this chart:

Chart courtesy of www.StockCharts.com

The Japanese yen has been rising in value since July of 2007. But starting in 2012, the yen collapsed as the Japanese decided to go “no holds barred” on quantitative easing. The Japanese yen declined in value significantly compared to other major currencies from a high of in October 2011 of 130 to 110 today.

Since the Federal Reserve announced its first round of quantitative easing, the U.S. dollar has only declined about 11% against a basket of other major world currencies. But, as we see from the chart above (the Japanese “lesson” as I call it), it does not take much for the market to lose faith in a country’s currency. The yen has fallen 15% in just over a year.

My skepticism about what the Federal Reserve is doing grows as I see the Japanese economy continue to suffer even after multiple rounds of quantitative easing and almost two decades of artificially low interest rates. Quantitative easing hasn’t worked for the Japanese economy; the chances of it working for the U.S. economy are bleak in my opinion.

Actually, by increasing its balance to almost $3.0 trillion, the Federal Reserve may have caused a bubble in the stock market.

On the other hand, the Federal Reserve may have no other option but to continue creating money, as the U.S. government needs the money to pay its bills—the government issues bonds, and the Federal Reserve buys the bonds and gives money to the government.

If quantitative easing can bring economic growth to the U.S. economy, then where is it? Why is the jobs market still tormented? Why are businesses stockpiling cash instead of reinvesting it? Why are real incomes declining? Why has the housing market become a playground for big financial institutions instead of homeowners? And why did the U.S. economy unexpectedly contract in the fourth quarter of 2012? Sounds more and more like Japan’s “lost decade” to me.

Where the Market Stands; Where it’s Headed:

Was Tuesday the top for the stock market? We’ll soon find out. On Wednesday, the Dow Jones Industrial Average hit a new post-credit crisis high of 13,969. Since then, the market has come down as companies earnings have disappointed and reality has set in: the U.S. economy contracted in the fourth quarter of 2012.

We’ll see where the market goes from here. But, as I have been writing, we are either at the top or close to it.

What He Said:

The year “2000 was a turning point of consumer confidence in high tech stocks. 2006 will be remembered as the turning point of consumer confidence in the housing market. That means more for-sale signs going up, longer time periods to sell homes, bloated for-sale inventory and eventually lower prices for homes. But this time, the turnaround in consumer confidence will have a bigger impact on the economy. Hold onto your seats, this is going to be a nail biter.” Michael Lombardi in Profit Confidential, August 24, 2006. Michael started talking about and predicting the financial catastrophe we began experiencing in 2008 long before anyone else.

Source

Michael Lombardi, MBA for Profit Confidential

http://www.profitconfidential.com

We publish Profit Confidential daily for our Lombardi Financial customers because we believe many of those reporting today’s financial news simply don’t know what they are telling you! Reporters are trained to tell you the news—not what it can mean for you! What you read in the popular news services, be it the daily newspapers, on the internet or TV, is the news from a “reporter’s opinion.” And there’s the big difference.

With Profit Confidential you are receiving the news with the opinions, commentaries and interpretations of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe today’s financial news will mean for you tomorrow!

© 2013 Copyright Profit Confidential - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife