Saturday, October 1, 2016

Sucker Punch On Main Street - Disturbing Facts About The Fed's Phony Housing "Recovery"

Zero Hedge ^ | 28 September 2016 | Tyler Durden /Lee Adler 

Whether you think there has been a housing “recovery” or not is a matter of perspective. Sales are indeed up 117% since the 2010 low, but that low was literally the worst level in the history of this data (since 1963) as a percentage of population growth. It was the Great Depression of Housing, the only possible result of the greatest housing bubble since the 1920s, if not in history. While sales have rebounded since that low, the current sales rate has barely recovered to the levels seen at the recession lows of 1991 and 1982. This rebound is little more than a dead cat bounce after 6 years of recovery, and now it may be faltering.
Mainstream economists give the Fed credit for stimulating this “recovery.” But, in fact the Fed has created a Catch 22 with no way out. The only thing the Fed has stimulated is house price inflation while destroying interest income on savings for millions of ordinary Americans, especially former middle class retirees. With mortgage rates pushed down to all time lows, house prices have consequently inflated at a rate that offsets the buyer’s savings in the interest component of the mortgage. Meanwhile American savers have lost not only massive purchasing power, but also have been forced to consume principal. The Fed has not stimulated sales but it has succeeded in transferring wealth away from those who can least afford it to those who least deserve it.
During and after the 2007-2010 crash, homeownership fell due to the massive increase in foreclosures. The foreclosure crisis began to recede in 2012. Since then the drop in the homeownership rate has not been because of people losing their homes, it has been because fewer people can afford to purchase, even in spite of the world’s central banks subsidizing buyers with absurdly low interest rates. As we’ve shown, the subsidy is self defeating. It does not benefit buyers.
Meanwhile, the only US regions that have seen any rebound at all in new home sales have been the West and Southwest. The Northeast and the Midwest remain absolutely dead in the water. In the Northeast, sales are down 60% relative to the 1991 recession low. Let that sink in for a moment–not versus the bubble peak, but since the low of a recession 25 years ago, when the US population was 25% less than today. Sales in the Midwest are down 12.5% since the 1991 low.

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