Thursday, September 17, 2015

Swimming in a vat of quicksand.

The Fed is playing with FIRE. This is the historical chart of existing home sales.  That peak right after 2007 is what happened when the government started the The Housing and Economic Recovery Act of 2008 establishing a tax credit for first-time home buyers.

Sales right now are as high as when the government directly goosed the housing market with that program. If you strip out that big bubble in 2006, the sales are right about at trend line.

The rental market. Hold on - let me center myself. I've been hearing and reading the craziest stories about rentals. I know a girl where her complex was raising her rent every nine months.It's like she was having a rent baby.  In SoCal, I've started reading stories about bidding wars on RENTALS.

The market needs to normalize and fast so more units can be built, because this is an inflation fire just smoldering. I get what is happening in the rest of the world, but I believe the US is causing a lot of that damage. The dollar has been moving pretty sideways for about the past six months. The peak was about six months ago. The price of rents are rising way faster than the mortgage resets of the 2000's. That can not continue.

Yet the Fed just told you not to expect your salaries to go up very much. Or even at all. That is the reason deflation is way worse than inflation. Sure, prices go down. But so do your wages.

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