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Urgent Stock Market Message

U.S. House Prices Accelerating, Fed Succeeding in Inflating New Ponzi Housing Market Bubble?

Housing-Market / US Housing Jun 10, 2013 - 02:51 AM GMT

By: Nadeem_Walayat


The Fed's QE-Infinity money printing programme to buy mortgage backed securities and government bonds that is running at a monthly rate of $85 billion is succeeding in inflating another US housing market bubble as house prices surge by an annualised rate of 11% in March (28th May) with some cities such as Phoenix seeing house prices soar by an annualised rate of 20%.

Now whilst the title of this article may contain the word bubble, however understand this that we are in the very early stages of the housing bull market that follows on from the embryonic bull market of 2012 which has many years to run, so do not make the mistake that many market commentators are making in the wake of the latest data, those who never saw this bull market coming are busy already proclaiming it as bubble that is about to burst.

My in-depth analysis and concluding trend forecast of January (12 Jan 2013 - U.S. Housing Real Estate Market House Prices Trend Forecast 2013 to 2016), based on the latest data available at the time concluded in a detailed trend forecast for the US house prices to target a rise of 30% by early 2016 as illustrated by the original graph below, which followed a years warnings to prepare for the birth of new housing bull markets for the UK and US as I repeatedly iterated during 2012 as being the year of the embryonic bull markets that have morphed into bull markets proper for both countries.

US House Prices Forecast 2013 to 2016

US House Prices Forecast Conclusion - As you read this, the embryonic nominal bull market of 2012 is morphing into a real terms bull market of 2013, with each subsequent year expected to result in an accelerating multi-year trend that will likely see average prices rise by over 30% by early 2016, which translates into a precise house prices forecast based on the most recent Case-Shiller House Price Index (CSXR) of 158.8 (Oct 2012 - released 26th Dec 2012) targeting a rise to 207 by early 2016 (+30.4%).

This analysis was also accompanied by a youtube video version.

An updated graph for the case shiller US house prices index shows that the US housing market is trending in line with the forecast trend trajectory.

So yes, whilst it is obvious that the rampant money printing policies of the UK and US ARE creating NEW ponzi housing market bubbles, however these bull markets have only just begun and are nowhere near to getting to the euphoria bubble stage as my most recent analysis for the UK suggests that the UK housing bull market could run for the rest of this decade before next popping, hence why I do not see any reason to rush to publish a detailed trend trajectory for the UK market, but rather continue to publish a series of in-depth analysis on its mega-trend drivers ( 03 Jun 2013 - UK Housing Bull Market Opportunities In Britain's Multiculturalism Immigration Crisis), towards arriving at the most probable trend trajectory.

Similarly, whilst my existing US housing market forecast is for into early 2016, that does not necessarily mean that I expect the market to peak and crash in 2016, for it is highly probable that just like the UK this current US housing bull market could last for the whole of this decade, or quite close to, so I see all of the discussions in the mainstream press and blogosfear concerning whether the US housing market is in a bubble or not as being ludicrous because I doubt it will even be in a bubble 3 years from now, let alone today!

The bottom line is that the global central banks ar engaged in an inflation war as they competitively debase their currencies via unprecedented money printing to INFLATE asset prices which are LEVERAGED to inflation, this was true for the stock market in 2009 (as I wrote at the time) and is true today for housing markets as the fractional reserve banking system ensures that whatever the central banks print will be leveraged up by at least X10 and during the mania phase as much as by X90 which will be driving the next subprime mortgage market that will once more ramp up prices into the final euphoria phase, which means a LOT of inflation is yet to come, far beyond anything that the academic economists that populate the mainstream press can ever conceive of, as from what I see they are still obsessed with non existant deflation whilst the housing bull market juggernaut rumbles on as illustrated by one of the most popular housing market articles of recent days as published by Forbes magazine.

Great Reflation Produces Mirage Of Recovery In Housing

By Peter Schiff - concluding -

Of course the real risks in housing center on the next leg down, in what I believe will be a continuation of the real estate crash. We can’t afford to artificially support the market indefinitely. When significantly higher interest rates eventually arrive, the fragile market will again be impacted. We saw that movie about five years ago. Do we really want to see it again?

Meanwhile the smart money continues to pile into the US housing market as they snap up bargains (they have been doing so since at least mid 2012) whilst academics and mainstream journalists / salesmen, perma bears at blogosfear sites such as Zero Hedge, and off course cry babies who perpetually sit on the side lines always too fearful to commit, will as usual be found out to be wrong! Because they will NEVER understand what drives markets for the fundamental fact that they don't tend to put their own money on the line. Instead, I have put my own money where my mouth is and have committed 60% of my assets to the UK housing market on the basis of detailed analysis, just as I committed 30% to the stock market during 2009 because there is nothing that focuses ones mind to get it right than actually having a large chunk of ones wealth at risk.

Ensure you are subscribed to my always free newsletter to get my ongoing series of analysis on the housing markets.

Your central banks asset price bubbles riding analyst.

Source and Comments:

Nadeem Walayat

Copyright © 2005-2013 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

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 trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


10 Jun 13, 15:32

Schiff is smart money too!!

10 Jun 13, 22:37
Schiff housing

It is highly probable that he will turn out to be wrong in expecting an imminent us housing market crash



10 Jun 13, 22:59
RE: Schiff

Agreed.It can go up for 3 years too. But before the 10yr gets to 4% you need to cut it loose.

Long dollar though anyway. Any REIT's you can recommend?

Was looking online, there's 10% net yields on offer with tenants etc in the US.

24 Jun 13, 20:42
US Residential Real Estate

Nadeem you are by far the most accurate dot connector out there, and I have much respect for your analysis.

Regarding housing I'm intrigued to the extent you've personally allocated capital toward housing in the UK.

I am in the US and based on your predictions we should see several more years of appreciation. I am curious as to your thoughts on the "hot" markets that have already come back 30-40% (AZ, CA). What are your opinions on those areas?

Most importantly what do you predict with respect to the escape from bonds, surging interest rates, and a US dollar that is getting "worked around" (use of Yuan, etc), as to its affects on residential real estate?

We seem to be at a pivotal point at this time.

Thank you in advance for your insight.

24 Jun 13, 21:48
Housing market and interest rates


I am 60% invested in uK housing because that is where I reside, if I resided in the US then I would probably be 60% invested in the US housing market. It is far too much extra risk to invest in foriegn property markets, there are too many factors beyond ones experience.

In my opinion rising interest rates are a red herring, just as before them were falling corporate earnings and debt deflation theory for the stock market.

But it will only become apparent with the benefit of hindsight exactly why. Though my ongoing series of articles accumulatively do illustrate why which nearly always resolve back to the fundemental driver which is the exponential inflation mega-trend, which is why deflation has always only ever been a delusion.



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