Free Republic

The last credit supercycle, the housing bubble and easing of mortgage credit, almost took the US economy out. But of course, nothing ever changes. That was the theme of the classic Bernard Malamud novel “The Natural” where Roy Hobbs strikes out in the climactic moment (Robert Redford hits a titanic home run in the movie to win the game defeating the entire message of the Malamud novel). Take auto loans and student loans, for example. student-debt-is-the-only-kind-of-household-debt-that-rose-during-the-recession-its-now-the-second-largest-consumer-debt-category-after-mortgages The average loan-to-value ratio, or LTV, on vehicle sales to consumers with spotty credit has risen to 114.5 percent this year from about 112...

Fearing another housing bubble in the UK, the Royal Institution of Chartered Surveyors called on the Bank of England to use its powers to cap house price growth at 5% in certain areas. Where in the UK are house prices growing at breakneck speed? London .. and some place outside of Liverpool. london If we compare London house prices (white line) to New York City house prices (gold line), we can see that London did has rebounded more rapidly after the global recession. The largest increase was in London where prices were up 8.1%. Read more: http://www.dailymail.co.uk/news/article-2419824/Call-expensive-mortgages-areas-house-prices-soaring-5-slammed-experts-insist-boom.html#ixzz2eswQBWhh Follow us: @MailOnline...

The student loan bubble is starting to burst. The largest bank in the United States will stop making student loans in a few weeks. JPMorgan Chase has sent a memorandum to colleges notifying them that the bank will stop making new student loans in October. “We just don’t see this as a market that we can significantly grow,” Thasunda Duckett tells Reuters. Duckett is the chief executive for auto and student loans at Chase, which means she’s basically delivering the news that a large part of her business is getting closed down. And if you read Zero Hedge or AgainstCronyCapitalism,...

Here we go again.  Having just recently endured a one-hour phone conversation with my friend Steve, a mortgage broker, I’m a little bit confused and somewhat worried.  Since most of the houses sold in the past year have been “all-cash” transactions, combined with the fact that mortgage applications have fallen off the cliff, I asked Steve if that means that the average person is no longer a buyer.  Steve replied, “Define the average person.”  I articulated, “It’s not someone who pays “all-cash” because I know that’s the technique on Wall Street, and I also know it’s a select few...

According to Core Logic, house prices in Los Angeles rose 20.7% Year-over-year. Phoenix rose 19.8%. Texas cities (Houston, Dallas) were up 10%. clcities Excluding distressed sales, the recovery is largely west of the Rockies and Georgia/Florida. clmap The large year-over-year gains occurred when the 30 year mortgage rate was 3.80% (but has risen since late May to 4.37%). br30080613 Rising mortgage rates and 70% of jobs being created are part-time. Throw in nationally flat-to-falling mortgage purchase applications, and we have an INVESTOR-FUELED HOUSE PRICE RECOVERY. lambs Hope those investors keep buying!!!! Sadly, it is difficult for part-time workers to purchase...

Americans are still talking about the recently deflated housing bubble, but there’s a new bubble in town. It’s the student loan bubble and when this one pops, it might dwarf the wreckage we’ve witnessed in the real-estate markets. In the latest news, the Federal Reserve’s Board of Governors warned that soaring student-loan debt has “parallels to the housing crisis,” according to a May report in Bloomberg. As with housing, free-flowing cash will lead to widespread default. Of course, it’s easier to repossess a tract house than to take back a potentially worthless degree. Federal Reserve Chairman Ben Bernanke dismissed these...

The Federal Reserve Open Market Committee (FOMC) meets today at 2pm EST. But is there a bubble? One sign of a bubble is the rise in NYSE margin accounts. Another sign of a bubble is the junk bond yield. But I will tell you where there is NOT a bubble – mortgage applications. The Mortgage Bankers Association (MBA) released their weekly mortgage applications this morning revealing that mortgage applications dropped -3.3% from the preceding week. Mortgage purchase applications fell 3.04% from the previous week and remain at 1997 levels. Mortgage refinancing applications fell 3.43% from the preceding week. This is...

You might be under the impression that everything is going pretty well in Canada, which had no banking collapse and only a mild recession in 2008-9. You would be wrong. The country is beset by political corruption scandals of the sort that people focus on when the economy is good. But it also has a massive ongoing housing bubble, and its economy is being propped up by a global commodities boom that now shows signs of slowing. Let's break down the three ominous signs. First, the scandals: Montreal Mayor Michael Applebaum got arrested this morning, charged with 14 counts including...

The student loan debate in Congress is bringing to the forefront the student loan crisis plaguing our nation, as well as the financial instability of academic institutions in the United States. Relative to the student loan crisis, the New York Federal Reserve concluded in its 2012 report that the obligations for student loans total approximately $1 trillion, or approximately $25,000 per graduate. The report notes that there are over 15 million borrowers under the age of 30, while the total number of borrowers is almost 39,000,000. The delinquency rates on the loans range between 10% to 20% for the various...

Uh-oh. Mortgage rates are rising at the same time that leading indicators (lumber futures and architectural billings) are declining. According to Freddie Mac, the government-sponsored enterprise in conservatorship, mortgage rates are trending upwards. The primary-secondary mortgage rate spread has fallen below 100 basis points (but remains elevated since Fannie and Freddie were put into conservatorship). At the same time, lumber futures continue to decline. Architectural billings plunged declined by the most since 2008. And architectural inquiries also declined. House prices remain elevated since a year ago (FNC, Case-Shiller, Loan Performance, FHFA). Let’s see how this impacts prices.

Private colleges are offering record financial assistance to keep classrooms full, according to the Wall Street Journal's Ruth Simon. Some schools are seeing just 20% of the students they accepted enrolling, versus the usual rate of 33%. These schools have raised tuition discount rate — the price after grants and scholarships — to an all-time high of 45%. Meanwhile, the median sticker price increased just 3.9% last fall, the smallest gains in 12 years. And at public schools, the sticker price climbed just 4.8%, also a 12-year low. For the Washington Examiner's Michael Barone, this makes it official: the college...

In the February 5 Morning Briefing, I outlined the Irrational Exuberance scenario as follows: “In a melt-up scenario, the market [S&P 500] would do just that, jumping to my yearend target [1665] or higher before the middle of the year. … The Fed’s critics, including dissenters on the FOMC, will warn that ultra-easy monetary policy is once again pumping air into a stock market bubble. So a melt-up could be followed by a meltdown, or at least a very nasty 15%-20% correction later this year if the Fed is forced to stop its quantitative easing by soaring stock prices…” Alternatively,...

It's easy to spot a Fed-sponsored housing bubble if you look in the right places. The best place to start is an analysis of price inflation as measured by the BLS as compared to a CPI-variant that takes actual housing prices into consideration instead of rent. This is a followup to my post Dissecting the Fed-Sponsored Housing Bubble; HPI-CPI Revisited; Real Housing Prices; Price Inflation Higher than Fed Admits. Data for the following charts is courtesy of Lender Processing Services(LPS), Specifically the LPS Home Price Index (HPI). The charts were produced by Doug Short at Advisor Perspectives. Anecdotes on the...

... The reality of the Fed's actions, when combined with expansionary fiscal policy, is that neither fiscal nor monetary policy is effective any longer in dealing with the systemic structural issues in the Western world's economies. Additionally, the Federal Reserve's policies are borderline negligent and irresponsible. The Fed is creating the next bubble that will make the housing bubble bursting look tame. When interest rates have been maintained at near zero rates for over five years, entire economic structures and systems/businesses become dependent upon such low rates. The Fed's current policies fail to reflect that economic uncertainty is preventing the...

It is time to close both Fannie Mae and Freddie Mac—the government-sponsored mortgage giants. Both entities distort the country’s housing finance market by issuing mortgage-backed securities with subsidized government guarantees that the mortgages will be repaid. If guarantees are necessary, they should be priced and issued by the private sector, not by the state. Financial institutions expert David C. John details specific steps to achieve this shutdown carefully and methodically without further upsetting the delicate housing market—and without making the situation worse.

The price of Bitcoins has plunged more than 70% in the past two days, sparking a rush of activity that overwhelmed trading platforms and suggested the bubble in the virtual currency has burst. Bitcoins were down to $77.56 as of 3 p.m. ET Friday. Prices reached as high as $266 per Bitcoin around 7:30 a.m. ET Wednesday. But the price started to fall through the rest of day and Thursday morning. At about 10 a.m. ET Thursday, trading was halted on Mt.Gox, a Japan-based exchange that claims to handle 80% of Bitcoin trade worldwide. The price at that time...

There is evidently no idea bad enough and no failure severe enough to stop the government from trying it once again. In myopia remarkable even by abysmal government standards, the White House is pushing for policies that fueled the housing bubble, which burst a mere five years ago. Reintroducing those policies at this stage of a nascent recovery in the housing market will set the stage for repeating history, and very likely leave taxpayers on the hook once again for another bailout. Last week, the administration began exerting pressure on banks to lend to people with lower credit scores, arguing...

The most devastating market events are those that no one sees coming. Take what happened to Lehman Brothers in 2008, for example. Up until the last minute, virtually no one could have imagined one of the country's leading investment banks would file for bankruptcy. The housing market crash was the same way. The Street believed housing prices would never go down. With the market totally blind to the growing risk in each investment, anyone who had investments in housing or with Lehman Brothers suffered huge losses. Despite these tough lessons, there is now another epic bubble developing and the market...

Nick Timiraos at the Wall Street Journal wrote in interesting piece yesterday called “Home Prices Seen Making Stronger Gains in 2013.” Numerous analysts have upgraded their forecast for house price growth for 2013, primarily based on limited inventory and growing demand. And then Fed of Minneapolis President Narayan Kocherlakota reinforced the notion that The Fed will keep the pedal to the metal (MORE asset purchases) even if unemployment falls below 6.5%. Bloomberg News reports that Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, in a speech he gave on Wednesday, said the Fed’s Open Market Committee “may choose not to...

Cullen Roche is worried that the trajectory of housing prices might deviate from what practical assumptions would predict. "Real estate returns are not rocket science. Because they’re such a huge portion of the consumer balance sheet they tend to be tied very closely to wage growth. Wage growth, by definition, is very closely tied to the rate of inflation. That explains why the long-term historical return of real estate is roughly in-line with rate of inflation. But this survey from Zillow shows that real estate “investors” are probably still too optimistic." I can see why these assumptions are attractive, but...