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Will The New Housing Bubble That Bernanke Is Creating End As Badly As The Last One Did?

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posted on May, 2 2013 @ 01:17 AM

Federal Reserve Chairman Ben Bernanke has done it. He has succeeded in creating a new housing bubble. By driving mortgage rates down to the lowest level in 100 years and recklessly printing money with wild abandon, Bernanke has been able to get housing prices to rebound a bit. In fact, in some of the more prosperous areas of the country you would be tempted to think that it is 2005 all over again. If you can believe it, in some areas of the country builders are actually holding lotteries to see who will get the chance to buy their homes.

Wow - that sounds great, right? Unfortunately, this "housing recovery" is not based on solid economic fundamentals. As you will see below, this is a recovery that is being led by investors. They are paying cash for cheap properties that they believe will appreciate rapidly in the coming years. Meanwhile, the homeownership rate in the United States continues to decline. It is now the lowest that it has been since 1995. There are a couple of reasons for this.

Number one, there has not been a jobs recovery in the United States. The percentage of working age Americans with a job has not rebounded at all and is still about the exact same place where it was at the end of the last recession. Secondly, crippling levels of student loan debt continue to drive down the percentage of young people that are buying homes. So no, this is not a real housing recovery. It is an investor-led recovery that is mostly limited to the more prosperous areas of the country.

For example, the median sale price of a home in Washington D.C. just hit a new all-time record high. But this bubble will not last, and when this new housing bubble does burst, will it end as badly as the last one did?

Federal Reserve Chairman Ben Bernanke has stated over and over that one of his main goals is to "support the housing market" (i.e. get housing prices to go up). It took a while, but it looks like he is finally getting his wish.

According to USA Today, U.S. home prices have been rising at the fastest rate in nearly seven years... U.S. home prices in the USA's 20 biggest cities rose 9.3% in the 12 months ending in February.

It was the biggest annual growth rates in almost seven years, a closely watched housing index out Tuesday said. In particular, home prices have been rising most rapidly in cities that experienced a boom during the last housing bubble...

So is this false rise in the housing market going to come crashing down around everyone? I hope not as it wouldn't be good for the economy, but following previous trends, it looks like that's how it's heading.


posted on May, 2 2013 @ 02:34 AM
the magic 8 ball says "signs point to yes"

higher cost of homes means more and bigger loans for those homes which can then be had for pennies on the dollar when people inevitably default on their loan
edit on 2-5-2013 by sirhumperdink because: (no reason given)

posted on May, 2 2013 @ 02:50 AM
Wow china is doing it and we are doing it AGAIN, when will people learn
houses are not worth what the market says they are they are worth but
what the buyer can actually pay, of course this attitude is reflected in
the health care system as well, oh well i guess we are going for another
ride! wonder how big these bail outs will be, i still simply cannot
understand that, oh you ran your company into the ground? well
by golly we cant have that, here have some free money since apparently
your customers do not want to give you theirs...... anyone see anything
wrong with that equation? paying a bunch of already super rich people
to fail again and again...... because they are too big to fail.... yeah apparently
no one told them that because they just keep on proving that
wrong by failing again and again and again..... 30,000$ new cars
when the median income of the average family in the US isnt even
that high, oh take a loan out you say? sure in this stable and steady
job market a 72 month car loan could never be a mistake..... oh you
want a house? well then buy one for more than its even worth and
then we will take it when the job market crashes again and resell it
the next schmuck 5 years from now when the "market recovers"........

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