Possible New Housing Bubble in Our Future

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Housing bubble

Investors, not home owners, are driving the housing recovery.

Many housing market analysts say that the increase in prices in the housing market is not part of a sustained recovery, but an artificial rise due to a glut of investors in the market taking advantage of low-priced houses and low interest rates. They are convinced the housing market has bottomed-out. The normal buyers are not able to secure mortgages because their credit ratings have been weakened by the recession. It’s not a classic recovery. Washington Times

Some analysts believe the market is here to stay and has been jump started by the investor purchases. Investors have taken many distressed sales off the market and shored up the market.

President Obama is pushing banks to give mortgages to buyers with weaker ratings to bring about a more classic recovery and has promised they won’t suffer loss as a result.

Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default. WaPo

If banks will not suffer financial recriminations over defaults due to poor lending practice that leaves the taxpayer on the hook for another bank bailout. How else will they not suffer financial recriminations?

Mortgages given to unqualified buyers is what caused the financial crisis in the first place.

Many investors make cash purchases and are buying up homes in desirable areas, leaving a shortage in many areas, driving up home prices. When they are up high enough, they will sell and move on.

David Stockman, former Reagan budget directors,

“We don’t have a real, organic, sustainable recovery,” he said. “In a world of medicated money by the central bank, things aren’t what they appear to be,” he said, noting that some of the sharpest, double-digit gains in home prices and sales recently have been in formerly distressed markets such as Phoenix and Las Vegas, which were devastated during the housing market collapse and have had a glut of foreclosed properties.

“It’s happening in the most speculative subprime markets, where massive amounts of ‘fast money’ are rolling in to buy, to rent, on a speculative basis for a quick trade,” he said. Washington Times

 

 

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