Pop! The housing bubble is now bigger than 2006-07

[wvwvw]

Housing's Echo Bubble Now Exceeds the 2006-07 Bubble Peak
By Charles Hugh Smith
OfTwoMinds.com
April 26, 2017

If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble.

A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class.

Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle, and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:

Is an asset bubble merely in the eye of the beholder? This is what the multitudes of monetary authorities (central banks, realty industry analysts, etc.) are claiming: there’s no bubble here, just a “normal market” in action.

This self-serving justification–a bubble isn’t a bubble because we need soaring asset prices–ignores the tell-tale characteristics of bubbles. Even a cursory glance at these charts reveals various characteristics of bubbles: a steep, sustained lift-off, a defined peak, a sharp decline that retraces much or all of the bubble’s rise, and a symmetrical duration of the time needed to inflate and deflate the bubble extremes.

It seems housing bubbles take about 5 to 6 years to reach their bubble peaks, and about half that time to retrace much or all of the gains.

Bubbles have a habit of overshooting on the downside when they finally burst. The Federal Reserve acted quickly in 2009-10 to re-inflate the housing bubble by lowering interest rates to near-zero and buying over $1 trillion of mortgage-backed securities.

When bubbles are followed by echo-bubbles, the bursting of the second bubble tends to signal the end of the speculative cycle in that asset class. There is no fundamental reason why housing could not round-trip to levels below the 2011 post-bubble #1 trough.

Consider the fundamentals of China’s remarkable housing bubble. The consensus view is: sure, China’s housing prices could fall modestly, but since Chinese households buy homes with cash or large down payments, this decline won’t trigger a banking crisis like America’s housing bubble did in 2008.

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[RMuller]

Their is no housing bubble in most American regions. It's supply and demand. Their is low inventory in most markets. Since 2007 builders have built to few homes.
Miami has over built Condos. That's the only market that you willl see housing prices not gaining much.

[JohnSmith]

They are no longer giving loan out so easily anymore, so doubt it will be like before.

[RMuller]

They are no longer giving loan out so easily anymore, so doubt it will be like before.

3.5% down payments are coming back. I think Trump wants to make it easier to get home loans. So we could be 4-5 years from a small bubble.
It won't be as bad as the last housing bubble.

[N1019]

Their is no housing bubble in most American regions. It's supply and demand. Their is low inventory in most markets. Since 2007 builders have built to few homes.
Miami has over built Condos. That's the only market that you willl see housing prices not gaining much.

That's what they say here - lack of supply. However, the other side of that is excessive demand supported by historically low interest rates, i.e. cheap and easy debt. Is there too much demand given the general economic conditions? I think so. Far too many people with average incomes who shouldn't be buying an overpriced house are jumping in to the market head first with no buffer to accommodate interest rate rises, job losses etc. and the banks have been helping them despite claiming that they have tightened up lending conditions. Ultimately, the banks make money by creating new money out of thin air, lending it and charging interest. They always find a way to do it.