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Jim Quinn/Burning Platform: “Something Smells Fishy In The Housing Market”

Friday, May 29, 2015 11:53

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(Before It's News)

TND Guest Contributor: Dave Kranzler |

There has been no improvement in underlying consumer liquidity conditions. Correspondingly, with no fundamental growth in liquidity to fuel increasing consumer activity, there has not been a basis here for a recovery in the housing market, past or present, and there is no basis for expecting a recovery in the housing market or general economy in the near future.

Without real growth in household income and without the ability or willingness to take on meaningful new debt, the consumer simply has not had the wherewithal to fuel sustainable economic growth. Impaired consumer liquidity and its direct restraints on consumption have dominated the housing-market collapse and ongoing stagnation in consumer-related real estate sales and construction activity. – John Williams, Shadowstats.com

I have been writing about the absolute dismal condition of the current post-bubble housing market since last 2012. Once again I have been early at calling the demise of the homebuilder stocks. Just like my original call in early 2004, I underestimated the ability of the Fed and the Government to artificially pump up home values. Of course, it’s extremely difficult to get timing right in the stock. But the homebuilder stocks typically plunge in waterfall fashion, which means you need to be positioned short ahead of time or you will miss the best gains that will be made. We saw how quickly they drop with Beazer and KB Home in late 2014.

Of course, history tells us that market interventions ALWAYS fail. The more energy and force thrown into the intervention, the worse the failure. The housing market will experience an epic collapse. CORRECTION: the housing market is in the middle of an epic collapse that started in 2005. After this dead-cat bounce fueled by Fed money printing – $2 trillion of which went directly into the mortgage market – the next leg down with be brutal.

Jim Quinn of The Burning Platform has written a must-read commentary on the insanity of the current housing market activity:

There is nothing free market about the 37% increase in home prices. It has absolutely nothing to do with supply and demand. It has nothing to do with normal families looking for a home. It has everything to do with the Federal Reserve’s 0% interest rates, the $3.5 trillion of QE injected into the economic gambling system, Wall Street banks withholding foreclosures from the market, hedge funds buying up tens of thousands of foreclosed homes and renting them out to the former middle class, Fannie and Freddie guaranteeing 70% of all sales, the government encouraging 3.5% subprime loans again, Chinese and Russian billionaires parking their ill gotten wealth in US real estate, and flippers reappearing in the same old places (Las Vegas, Phoenix, Florida, California)…If you’ve bought in the last two years you will be underwater sleeping with the fishes like Luca Brasi in the not too distant future.

You can read the rest of this piece here: Home Prices Up 37% Since The Housing Crash–Something Smells Fishy
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About Dave Kranzler:

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics. Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.