2017 Economic Headwinds: Housing Bubbles Popping up and Just Plain Popping Everywhere

Monday, February 27, 2017
By Paul Martin

By David Haggith
TheGreatRecession.info
February 26, 2017

As we enter 2017, housing bubbles are showing signs of bursting all over the world. I know I’ve been promising I would lay out the economic headwinds for 2017, but 2017’s headwinds are building so fast and furious that I’m having to break that promised article out into several articles, as I’m accumulating material faster than I have time to cover.

I’m going to start with the housing bubbles that are now extremely evident in the US, Canada and Australia, noting that housing is also insane in its own weird way in China again and in many other parts of the world. The point I want to make is that, with housing bubbles now at the peak of popping in several parts of the world, this coming housing market collapse could make the US housing market crash of 2007-2009 look like the warm-up act, and housing is just one area of the global economy that is showing signs of high peril.

A 2017 housing bubble collapse in the US may be in the cards

As I wrote in “The Inevitability of Economic Collapse,” the whole US economy is a house of cards, but particularly the US housing economy where we have done everything we possibly can to pile up a potential housing collapse as precariously as we did last time around just so we can watch it all fall down again.

The hard push to get back to where we were in 2006 has been on for about seven years. In the past few months, housing has been on its fastest tear in the US with the number of new permits being issued for construction in 2017 particularly leaping up like a spring lamb, and that’s with prices that are now generally higher than they were at their peak in 2006. We are showing all the same evidence of an irrational market that we showed going into the Great Recession:

That peak was only attained because of lax credit, which made an expanding number of purchases possible after prices went beyond what people could afford. Since wages in real terms (having only recently started to rise in a few industries) are not any better than they were back in the housing crash of ’07-’09 , today’s higher prices are actually less sustainable without dangerously lax loan terms than they were back then.

That’s why we have again begun to relax loan terms for individuals buying a house. For the last eleven quarters, more lenders have relaxed mortgage standards than have tightened them. (“Minimum credit scores have dropped. Self-employment documentation has reduced. Maximum loan-to-values have been increased.”) On top of what banks are doing to relax their own self-imposed standards, Trump has ordered a review of Dodd-Frank with the hope of stripping it back in order to get banks to issue more loans in order to juice the economy (and to make things better for his real estate industry). We learn nothing.

The Rest…HERE

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