For those of you who feel these global events are unrelated to your neighbors foreclosed house across the street on Johnson Street in Peoria, listen closely. This “Real Estate Depression” has occurred with the most favorable interest rate environment possible, due largely to significant manipulation via monetary and fiscal policy in order to suppress rates – see Buried Deep Within The Files That The Federal Reserve Released On Thier MBS Purchase Program, We Found TARP 2.0!!! More Taxpayer Money To The Banks! as well as FASB Appears to Have Bent Over For The Final Time & Accuracy In Financial Reporting Dies An Ignominious Death!!!
This fairy tale, Goldilocks rate environment cannot last forever and will spell very bad words if rates shoot up faster than income. Guess what… The Inevitable Has Finally Been Admitted In Europe: The Macro Experiment Has Ignited Inflation Without Commensurate Growth & Rates Will Spike.
There are a plethora of nations ready to default/restructure any minute now, kicking off a rate storm that will cause havoc and spike cap rates. I even detailed Portugal’s scenario and made it available for all to see, haircut analysis and NPV losses to investors and all. Anyone interested in seeing the entire scenario analysis for Portugal should look here, you will find it nowhere else: The Truth Behind Portugal’s Inevitable Default – Arithmetic Evidence Available Only Through BoomBustBlog
For graphical evidence of what will happen to the housing market when the fecal matter flips off the fan blades, let’s revisit a topic that the popular media has forgotten about – Adjustable Rate Mortgages.