To the surprise of no one (who was paying attention), the U.S. housing market is once again flooded with excess supply – and worse still, the situation is guaranteed to get much, much worse in the months (and years) ahead.
The situation is very simple: there are no buyers and more “homeowners” than at any time in history are incapable of servicing their mortgages (in other words, they aren’t really home-owners). This means that inventories will go straight up, and prices should go straight down. Of course, as I pointed out in a previous commentary, massive U.S. mortgage-fraud (which is greater today than at the heart of the first U.S. housing-bubble) means that even price-data from the U.S. housing market is hopelessly flawed.
To be specific, fraudulent transactions reporting supposed “price gains” of 1000% and more have totally poisoned this data. As a result, no one is capable of saying exactly how fast U.S. house prices are really falling. Using fraud to lie to Americans is nothing new for the U.S. government – and undoubtedly it considers itself very clever to use mortgage-fraud to feign price-gains in the U.S. housing market.
However, all that is being accomplished is that instead of an horrific crash – which finally results in an equilibrium price-level, the U.S. government continues to delay the real, necessary correction in prices. Instead of this crash being spread over merely five to ten years, the U.S. government is ensuring a full generation of slow, steady decay.
As I remind readers regularly, the U.S. “pension crisis” and $70 trillion in “unfunded liabilities” mean that the pensions and social programs which are supposed to support retiring baby-boomers are grossly and hopelessly under-funded. Recipients (with rare exceptions) will only be receiving pennies on the dollar with respect to these benefits.
Holding no assets other than real estate, retiring baby boomers have a choice between radically reducing their spending (and standards of living) – which will destroy the U.S. consumer-economy – or, they can dump trillions of dollars of real estate onto the market (i.e. at least 10 million more homes).
Meanwhile, even at propaganda-outlets like Bloomberg, they are predicting anywhere from 8 to 12 million more foreclosures/repossessions which are going to be dumped onto the U.S. market over the next few years. By itself, this is several years of supply. In other words, if U.S. homebuilders didn’t build even one house, and U.S. homeowners didn’t sell one home, it would still take more than two years just to clear away all this additional, bank-owned supply.
In the real world, however, U.S. home-builders continue to flood this over-supplied market with new units. U.S. homeowners continue to sell their homes – with large numbers of them being so desperate that they are forced into “short-sales”. And U.S. baby-boomers are just about to start dumping millions of homes, themselves.
There are several things which make this next collapse of the U.S. housing market so much worse than the first. To begin with, price-disparity between different regions/markets in the U.S. has disappeared. Unlike the first U.S. housing-crash – which only really impacted about 1/3 of U.S. homeowners, this next crash will hurt everyone.
Secondly, the government has already done everything it could (after the first crash). Interest rates are literally as low as they can possibly go. The home-buyers subsidy has already lured any Americans who still have any purchasing-power into this market – meaning that there is no reservoir of buying-capital to pull this market out of the next collapse.
The average wages of Americans have been falling (in real dollars) since 1970, making 1970 house-prices a reasonable point-in-time to look at as a possible, long-term equilibrium point for prices. That implies that U.S. house-prices will fall another 75% from current prices. Indeed, with the average American now earning (in real dollars) what their great-grandparents earned during the Great Depression, 1970-prices suddenly look much less far-fetched.
click to enlarge
Click to enlarge
Having fattened-up on 0% “loans” from the government, and their “trading profits” from rigged, U.S. equity-markets, apparently the banksters are finally able to absorb some of the massive write-downs which they must take (on each and every foreclosure/repossession). “Home seizures” by U.S. banks hit a record in August – for the third time in five months. However, with 8 to 12 million homes (at least) to dump onto the market, we should expect these home seizure rates to at least double over the next year.
Even at double the rate of seizures, it would still take more than 4 years just to get all of this excess supply onto the market. And by that time, the house-dumping by cash-strapped, retiring baby-boomers should be just starting to accelerate.
With permanently depressed wages, massive unemployment, the most over-supplied market in history, no personal savings, and an economy in the early stages of a Greater Depression, there is no “light at the end of the tunnel” here – not in five years; not in ten years.
If this nightmare already sounds as bad as it could possibly get, you’re wrong. I (and other commentators) have said for years that reckless U.S. money-printing by the Federal Reserve, and even more reckless fiscal policy from the U.S. government has made U.S. hyperinflation inevitable.
With the entire U.S. economy drowning in $60 trillion in total public/private debt (plus an additional $70 trillion in “unfunded liabilities”), there is no way to even service this mountain of debt with the U.S.’s (relatively) tiny $13-trillion economy. The U.S. government must drive the U.S. dollar down to near-zero – so that all these U.S. dollar-denominated debts “evaporate” with inflation. However, what also evaporates is the wealth of all Americans (or at least all wealth which has not previously been converted into gold and silver).
For Americans desperate to escape out from under crippling, “under-water” mortgages, there is no hope at all for such people when the only potential buyers for their property have currency which will be (literally) worth no more than “Monopoly” money. This is what makes the current disinformation from the U.S. government so despicable. By convincing Americans to delay bailing-out of this dying market, all that the U.S. government is doing is making the financial destruction of these households 100% wipe-outs.
Americans need to escape from their under-water mortgages now – at any/all costs – and convert their wealth to precious metals (the only, real "money"), so that when U.S. hyperinflation hits, their own wealth is 100% “insured”. For those in these financial death-traps, you only have a matter of months (and possibly even weeks) in which to avoid financial catastrophe.
Eminent U.S. economist (and founder of Shadowstats.com) John Williams, has already accelerated his own forecast for a U.S. “hyperinflationary depression” to as soon as this year. Avoid the hypnotic effect of the U.S. propaganda-machine – and act now, before it is too late.