Remember 2008? Another Terrifying Housing Crash Is Now in Progress
The comments below are an edited and abridged synopsis of an article by Michael Snyder
More than a decade ago, the Fed created the most epic housing bubble in US history, and everyone was happy until 2008 came along. The economy slowed, home prices crashed and the ensuing chaos on Wall Street was painful. Now the Fed has created an even larger housing bubble; home sales have fallen for six months in a row and prices are crashing again. Some parts of the US have already seen prices plunge by as much as 20%.
If we continue on the current trajectory, millions of homeowners will be underwater on their mortgages. The last time mortgage rates were this high was during the last housing crash, and they’re only going to go higher because the Fed wants interest rates to rise in order to fight inflation. Many potential home buyers will be forced out of the market, and apartment rents are 15% higher than they were a year ago.
Many of the things that we witnessed in 2008 are happening again: The economy is slowing; big corporations are laying off workers; home prices are starting to collapse. There is tremendous pessimism about what lies ahead.
If we had learned some lessons from the last crisis, all of this could have been avoided, but instead we are moving into a future that is going to be extraordinarily painful. The Fed is stuck between a rock and a hard place: If it doesn’t raise rates, inflation will continue to spiral out of control. If it does raise rates, it will crush the housing market and make the coming recession far worse.
For years the Fed assured the public that it had everything under control, and that it knew what it was doing. Now everyone can see the truth, but unfortunately it is too late to reverse course.