Real Estate & Banking Pressures Are Building As The Fed Pushes The Envelope

Monday, March 19, 2018
By Paul Martin

SilverDoctors.com
March 19, 2018

Chris Vermeulen “says the combination of these factors, as well as relatively narrow wage growth, are pushing many borrowers over a financial cliff.”

Chris Vermeulen of The Technical Traders

Early signs that the US Fed may be pushing the envelope of rising rates and creating pressure on banks and borrowers are starting to show up more prominently now. One component of our research at Technical Traders Ltd. is to find data that may be overlooked or ignored by some other researchers. We believe that any pressures or hardships related to general consumers will be seen first in discretionary debt (credit cards, autos, and entertainment/activities). When consumers feel the debt pressure starting to build, they react by cutting back on certain discretionary spending – focusing their purchasing/paying abilities on essential items like food, human necessities (toiletries and other essentials) and maintaining essential components of their lives.

One of the first things to watch is the delinquency rates for credit cards and autos. Additionally, watching for early signs of weakness in the larger metro real estate can assist us in understanding the health and dynamics of regional economies. Months ago, the levels of Foreclosures and Pre-Foreclosures were dramatically lower in major metro locations. Pre-Foreclosures are early stage Foreclosures where borrowers are behind in their mortgage payments and the banks have issued an “intent to foreclose” notice unless the borrower repays delinquent amounts.

The Los Angeles metro is one of the largest and more diverse economies in the world. California is rated the 6th largest economy in the world if it considered a unique country. The ability to earn and spend efficiently within this metro is essential as it is ranked the 8th most expensive city in the world (Source March 2016 SCPR.org). There is a fine line between the balance of being able to afford to live in an area while creating opportunity and success and being priced out of an are because of constricting economic fundamentals. We believe this balance is beginning to skew towards a massive unraveling process.

The BLUE dots on this image below are Pre-Foreclosures. The RED dots are Foreclosures. Our research concludes that this early stage development of increased foreclosure activities and strains on the economic fundamentals related to this large metro are showing that pressure is building for an eventual market top similar to what we saw in 2008. We may still be many months or a year away from an eventual peak in the stock market, but the signs are starting to become more evident that pricing pressures are driving many borrowers into the foreclosure process while the regional real estate markets are about to be flooded with distressed property.

The Rest…HERE

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