Fixed-income investors are shorting the 2Y US Treasury like it was April 2007.
Talk about taking it in the shorts!
In a 60 Minutes interview, President Barack Obama channeled President Ronald Reagan and asked “Are you better off than 6 years ago” referring to when President Obama was elected for the first time.
Here is the answer in two charts, Mr. President!
If you were able to take advantage of The Fed’s massive distortion of asset prices (such as the stock market and both residential and commercial real estate), you are better off!
But if you are one of the middle class, the answer is no.
If you are a minority, the answer is no.
But if you are in the top earner group, you are better off. All others? No.
OK, Rick Sharga noticed that it actually took me 4 charts, not two. So, just focus on the first two!!
And former Attorney General Eric Holder is far better off. He is now making $77 million with JPMorganChase.
Yes, Los Angeles is the winner of the housing bubble derby, followed by Riverside placing and Miami showing.
San Francisco is in fourth place. Las Vegas and Phoenix are a distant fifth and sixth place. Trailing the pack by several lengths is …. Cleveland.
Here is what $665,000 buys you in Pasadena, a suburb of Los Angeles. A two bedroom, 1 bath cottage with only 1,100 square feet. (Courtesy of Dr Housing Bubble).
Notice that all the bubble cities are recovering at roughly the same speed. You can thank investors (foreign and domestic) and all-cash buyers for the “recovery.”
Let’s see if the recovery is sustainable with investors pulling out of markets. Or if The Fed stops printing money.
Here is a photo of dedicated George Mason University student Inderbir Bal studying my on-line real estate finance course notes over a healthy drink of orange and carbohydrates.
Today’s economic news is pretty weak. First, new durable goods orders are way down.
Second, initial jobless claims fell to near 14-year lows. But why is this weak news? Here is why.
M2 Money Velocity is at an all-time low and real median household income is only at 1995 levels. Average hourly wage growth is down about 40% since President Obama took office.
So the claimed “recovery” does not apply to wages and income, only to initial jobless claims and unemployment rates.
And U6 full-time and part-time unemployment is at 12% while it was around 8% in 2007. That translates to U6 unemployment being 50% higher than in 2007.
Once again, this failed economic recovery explains why mortgage purchase applications stink.
We are in an economic Bizarro World!
I have written numerous times about the stalled/low wage growth since 2007, despite the massive intervention by The Federal Reserve.
The USA is now the “Leader of the Pack” in terms of low wage jobs among develop nations.
The GINI coefficient of income inequality keeps rising despite the massive expansion of The Fed’s balance sheet and class warfare rhetoric out of Washington DC.
I hope we try something different. The borrow, tax and spend strategies of The Federal government are NOT working.
We are now The Leader of the Pack.
Existing home sales in the US declined in August by 17.7% YoY. But the PRICE of existing home sales tells a worse tale of woe: the only house price segment to gain YoY were $1+ million homes.
Unfortunately, $1+ million homes are only 2% of US housing.
That leaves the other 98% with declining house prices YoY. In short, the middle class loses … again.
Here is why.
So, the wealthiest Americans with higher incomes can meet the DTI requirements.
Are you talking about me?
America’s middle class is having a difficult time. They are not sharing equally in the Fed-induced stock market surge and real median household income is the lowest since 1995.
Rising home prices (albeit slowing), stagnant wage growth and rising mortgage rates are leading to a decline in home affordability.
Take the National Association of Realtors Homebuyer Affordability Index. You can see that UNaffordability peaked in 2006 when home prices peaked and real median household income was recovering from the 2001 recession.
You can also see that AFFORDABILITY peaked in 2012 after home price declined and mortgage rates hit a low since 2000. Unfortunately, real median household income had also fallen preventing a true housing recovery.
Mortgage purchase applications remain at a 14 year low (like real median household income, mortgage purchase applications are back to 1995 levels). This results in an affordability gap due to rising home prices, rising mortgage rates and declining/stagnant income.
Unless members of the American Middle Class over substantial holdings of the S&P 500 and/or Commercial Real Estate, there massive Federal Reserve asset purchases and interest rate repression scheme has NOT helped the Middle Class.
Is loosening credit standards the answer? Do you think Federal housing policy should heap MORE debt on households that are already suffering from the aftermath of a housing/credit bubble that burst? I would say no.
The solution is not more debt, it is adopting policies that allow that economy and wages to grow. Not stifle recovery.
So, like in the movie “The Incredible Burt Wonderstone,” we have succeeded in making the Middle Class disappear!