Wednesday, May 29, 2013

Parsing the Fed.

Today I've been trying to figure out how the Fed thinks it's going to start "tapering". If the housing market is normalised, of course the Fed will pull back. If inventory is so low and houses are going pending in as little as four days - how could that not be normalised? Have you seen the prices?

This is what Mr S. and I have observed in the housing market. The low end is being pushed up, and the high end is being pushed down. Everything is being compressed into the middle. Pushing the limits of the non jumbo market. Remember, 20 - 45% (roughly) of homeowners are still trapped in their houses. The zones are like a tree rings and San Fransisco is the middle. The further into the interior valley you go, the more trapped people are. Prices have regained to 2007 levels in six months. They still have two full years to regain prices from the top. Perhaps people would like a bigger house, or maybe would like to downsize. All of the inventory that might fit this criteria is now sucked up. I believe it is impossible to know the real amount of inventory that exists. Perhaps all the "viable" inventory is sucked up. Houses sat vacant for a handful of years and who knows what state of disrepair they were in before they were foreclosed upon. Likley a lot of inventory just isn't financially viable to improve at this point. And lets not forget three of the largest banks have halted foreclosures.

That whole scenario sounds like the market is pretty locked up. It's insane to think prices will continue to go up. People like to do the YOY data because it makes the 25% increases seem more sane. But really, it's only been 6 months. That clearly is not a sane rise.

Long story long, do you think the Fed will stop printing? Because I don't.

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