Housing Market Crisis 2.0: The Jury Is In For 2018-2019

Feb. 12, 2019 1:18 PM ET160 Comments
David Haggith profile picture
David Haggith
2.66K Followers

Summary

  • Here is a play-by-play review of a housing crisis that began exploding one story at a time last summer.
  • What is different this time from last is that the 2007-2009 crisis started in the US and pretty much stayed in the US.
  • This one is developing all over the world simultaneously - in the US, Canada, Australia, the UK, etc.

The 2018-2-19 Housing Market Crash 2.0 is just getting started.

As happened with the first housing market crash that began in 2007 but didn't become widely recognized until mid-2008, the present housing crisis began exploding one story at a time last summer, and this blog was perhaps the first to state that summer's change was the turning point from decades of ascent into a collapse in housing sales and prices. I said the same thing back in 2007, and people didn't believe me then either.

The present housing market crash, like the last, was created by the Federal Reserve artificially pressing mortgage rates down, then down further, and then down as deep they dared push for years and years. Falling interest allowed people with flat incomes to keep purchasing increasingly expensive homes. Since people buy payments more than house prices, housing prices kept rising as payments were kept in line via these artificial interest reductions.

The Fed's ill-conceived plan, however, was never sustainable prior to the last housing market crash and is not now. I've said throughout the Great Recession and ensuing years that, sooner or later, we'd get to the point where the Fed would have to raise rates, and I've said its quantitative tightening will certainly raise rates as much as it increases its stated interbank lending interest targets. I've also said that, by the time the Fed started raising rates, housing prices would be unaffordable without the Fed's artificially lowered interest; therefore, the market would have to crash all over again because, all over again, people would find themselves underwater on their mortgages.

And now, here we are. US banks have not started to go down, but they are feeling serious pressure as this article will point out, while eight months of statistics now prove housing is relentlessly falling with NO hint of letting up. As I wrote in my first Premium

2018-2019 Housing Market Crash 2.0 appears inevitable, given how far off the cliff we've already fallen and how fast we're going down.

Graph by Wolf Street

After 2018, we look about like this. 2018 pushed us just over the edge into a housing market crash that is as likely to continue sliding as the house in this picture at the top of a bluff that is giving way. (And I've seen places in Seattle that look exactly like that.)

Canadas housing market crash looks like a bus that just hit a brick wall.Canadian market looks like a bus crashing into a brick wall.

This article was written by

David Haggith profile picture
2.66K Followers
If you want articles like those you've seen to continue, I hope you will consider some support on my Patreon page: https://www.patreon.com/BeatTheEstablishment My path to writing on economics on The Great Recession Blog began as a personal journey. Back in 2007, my she-who-was-my-wife had a small family estate, which she and her brothers had been holding onto for several years because real-estate was always appreciating. I worked as a property manager at a five-star resort in Hawaii back then, and I was certain from my own observations in the industry and from my readings that the U.S. housing market was on the verge of catastrophic collapse. I recall a real-estate agent who thought I was nuts because "real-estate never falls." We were just "in a slump."I urged my wife to press her brothers to sell the family home before prices collapsed. They eventually complied and sold the home just three months before Bear-Stearns made it obvious some deep financial troubles were brewing, taking the U.S. housing market down for the tumble. Her family sold near the peak of the market. I realized, then, the value of urging people to take actions based on what I believed, even if they might not like to hear it at the time. I watched with dismay as the Fed and government bailed out all the banksters who brought collapse upon the entire world and as George Bush said he had to give up his capitalist principles to save capitalism, when what he really meant was he had to trash the corrective side of capitalism in order to save capitalists. Crony economics.I couldn’t stop myself from writing a critical series I called “Downtime“, which lampooned the U.S. government and chided the Federal Reserve for their cronyism, ignorance and ineptitude. (Heck, Bush put the very people who created the mess in full charge with blank checks to solve the mess!) I syndicated those articles on my own to The Hudson Valley Business Journal, The Valley City Times-Record (North Dakota), The Daily Herald (Tennessee) as well as a news website in Israel and another in Australia. I have minced no words in the many years that I have now been writing on macro economics, criticizing those who kill capitalism by refusing to let it do its work of creative destruction when bad ideas an corrupt greed fail. I am an equal-opportunity critic of central bankers, economists (who missed the whole story in 2008), financial writer who parrot whatever the Fed tells them, and especially politicians as their cerebral stem rot and corruption on both sides of the aisle deserves derision. I have gone on to write many features for RT.com and TalkMarkets and about sixty other economic websites, including Seeking Alpha, which picks up my articles from time to time. Recently I also became managing editor of DollarCollapse.com

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (160)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.