Day by Day

Tuesday, May 24, 2022

The coming correction?

 Hey, look, it's a post that's NOT about the un-vax!

For a couple of years now, I've been looking at the housing market and saying "This isn't natural.  Something is skewing the market.  There's no way these prices are organic."  And I've had my theories, and I've looked at a few things, but this article lays it out quite nicely.

The Federal Reserve has created a doom loop between the housing market and inflation. For years it has printed tens of billions of dollars each month to buy sketchy securities meant to subsidize the housing market and favor bond traders. This continues even now, in spite of inflation and a red-hot housing market. But the housing market has become dependent on unearned, newly printed money, and stopping the flow might cause a catastrophic correction. If it doesn’t stop, however, inflation will explode. 

Let me walk you through some of the math.

Where I currently live is a bunch of old military housing that the sold off decades ago.  Small houses, typically three bed one bath, on decent sized lots.  When I got to Utah, they were selling for around $200k, which I thought was high but this is an urban metro area.

Our neighbor put his house up on the market last week and got an offer of $390k.  

Folks, these houses ain't worth that much.  Period.  But people are PAYING that much, mostly folks from out of state (*cough*kalifornia*cough*) who have sold their shitty broom closets in an even more overheated market and come up here to escape.

As a side note, the folks who move to my part of the area tend to be rather conservative.  The folks who leave Kalifornia and stay liberal tend to move into SLC proper or go south of SLC.

Anyways, let's go back to talking about how the government has fucked things up AGAIN.

The sheer scale of the Fed’s involvement in the mortgage market caused an unstable bubble. As the president of the Kansas City Fed recently said, “by owning roughly one-quarter of the MBS market along with a significant portfolio of longer-term Treasuries, our presence in financial markets muddies price signals, encourages excessive risk-taking, and can foster financial instability. Asset prices remain historically high and remain vulnerable to economic and policy uncertainty.” 

In other words, lenders don’t need to worry about lending to risky borrowers because the Fed is buying all the crap nobody else will touch.

Remember how the government used Fannie Mae and Freddie Mac to cause the 2008 housing bubble to pop, and the economic crisis that followed it?

It's gonna be worse.  Far worse.  Inflation is going to get worse, prices are going to skyrocket, because the government is controlled by ideological idiots who either have no clue what the fuck they're doing, or they're doing it on purpose because they want to collapse the system and rebuild it as their socialist utiopia.

UPDATE:  Lookie at what just popped up.

From the placement of keys or strings on musical instruments to the shape, colors, and lettering of road signs, standards surround us, protect us, and ease our lives. They provide practicality, accessibility, and stability.

Yet at a time when our economy is facing countless challenges and continues to send loud signals of instability not seen since the financial crisis of 2008, a federal agency charged with the specific mission of ensuring stability and policing risk in the housing industry is considering a proposal that would abolish the proven standard upon which the mortgage industry relies to determine creditworthiness.

If you are befuddled as to why the Federal Housing Finance Agency (FHFA) is contemplating whether to tinker with lending standards during a time of elevated financial insecurity and housing market volatility, then you are not alone. 


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