The Next Leg Of The Housing Crisis In Five Simple Charts
February 2nd, 2010Via: ZeroHedge:
Below are 5 simple charts the highlight just how precarious the housing situation in the U.S. is, and how likely the second, and probably much more fierce, leg down in the markets is going to be.
A bearish report by CIBC 1captures precisely the highly unstable system that U.S. housing has become, and deconstructs it along the five key axes of weakness which while individually may be controllable to a degree, combined represent a recipe for disaster. CIBC’s main sources of concern arise from:
1. Short-lived remedies; used by the administration to prevent further price deterioration (tax-credits);
2. Shadow Inventory; in reality when accounting for the surging shadow inventory which very few dare talk about, the total number of available unit sdouble to over 8 million, representing a record high 16 months of supply.
3. Strategic defaults; the amount of households with negative equity is roughly 10 million or about 20%, in 2009 25% of all foreclosures were strategic; as populist anger against banks accelerates look for strategic defaulits to keep rising
4. Quantitative Easing expiring; This needs no introduction: the sole reason why mortgage rates have been as los as they have, has been due to the Fed’s constant manpulation of the MBS market via the $1.4 trillion MBS/Agency QE purchase program. With this program set to expire in 2 months, rates are set to explode.
5. House Prices are already entering a double dip; Previously we discussed the Case Shiller NSA home price index number which indicated that a double dip in prices has already commenced. A positive feedback loop will only lead to further deterioration here
