Trouble ahead for the housing market

CHRIS J RATCLIFFE/AFP/Getty Images

Our good friend John Rubino over at DollarCollapse.com just released an analysis titled US Housing Bubble Enters Stage Two: Suddenly Motivated Sellers.

He reminds us that housing bubbles follow a predictable progression:

  • Stage One: Mania -- Prices rise at an accelerating rate as factors like excess central bank liquidity/loose credit/hot foreign money drive a virtuous bidding cycle well above sustainably afforable levels.
  • Stage Two: Peak -- Increasingly jittery owners attempt to sell out before the party ends. Supply jumps as prices stagnate.
  • Stage Three: Bust -- As inventory builds, sellers start having to lower prices. This begins a vicious cycle: buyers go on strike not wanting to catch a falling knife, causing sellers to drop prices further.

Rubino cites recent statistics that may indicate the US national housing market is finally entering Stage Two after a rip-roaring decade of recovery since the bursting of the 2007 housing bubble:

  • The supply of homes for sale during the "all important" spring market rose at 3x last year's rate;
  • 30 of America's 100 largest cities now have more inventory than they did a year ago, and
  • Mortgage applications for new homes dropped 9% YoY.

Taken together, these suggest that residential housing supply is increasing as sales slow, exactly what you'd expect to see in the transition from Stage One to Stage Two.

If that's indeed what's happening, Rubino warns the following comes next:

Stage Two's deluge of supply sets the table for US housing bubble Stage Three by soaking up the remaining demand and changing the tenor of the market. Deals get done at the asking price instead of way above, then at a little below, then a lot below. Instead of being snapped up the day they're listed, houses begin to languish on the market for weeks, then months. Would-be sellers, who have already mentally cashed their monster peak-bubble-price checks, start to panic. They cut their asking prices preemptively, trying to get ahead of the decline, which causes “comps" to plunge, forcing subsequent sellers to cut even further.
Sales volumes contract, mortgage bankers and realtors get laid off. Then the last year's (in retrospect) really crappy mortgages start defaulting, the mortgage-backed bonds that contain their paper plunge in price, et voila, we're back in 2008.

Rubino's article is timely, as we've lately been seeing a proliferation of signs that the global boom in housing is suddenly cooling. I've also recently encountered similar evidence that the housing market in my own pocket of Northern California is weakening, and I'm curious to learn if other PeakProsperity.com readers are seeing the same in their hometowns.

The Global Housing Bubble

Housing, as they accurately say, is local. Conditions differ from region to region, making generalizations of the overall market difficult.

That said, the tsunami of $trillions printed by the world's central banking cartel since 2008 clearly found its way into the housing market.

The world real estate market is HUGE, over $200 trillion. That dwarfs the global debt and equity markets. So it's no surprise the central authorities did all they could to reverse the losses the GFC created for property owners.

As a result, many of the most popular locations to live are now clearly in bubble territory when it comes to home prices:

UBS map of global housing bubbles

The chart above displays the most bubblicious major cities around the world in red. But it's important to note that the merely 'overvalued' markets denoted in yellow, and even some of the green 'fair-valued' ones, are still wildly-unaffordable for the average resident.

For example, in "yellow" San Francisco, where the median home now costs $1.6 million, prices are well-above the excesses seen during the previous housing bubble:

And in 'fair-valued' New York City, the median household must spend 65% of its annual income on housing alone.

Is it any wonder that 70% of millennials who don't yet own a home fear they'll never be able to afford one?

Signs Galore Of Topping Markets

At the end of a speculative bubble, it's the assets that are most overvalued that correct first and correct hardest.

So we would expect that as the highest-priced real estate markets fare from here, the general real estate market will follow.

When we take a closer look at what's currently going on with the red-hot real estate markets noted in the chart above, we indeed see evidence supportive of Rubino's claim that the decade-long Stage One mania may now be ending.

Here's a spate of recent headlines about these cities:

Sure looks like Rubino's predicted Stage Two symptoms of rising supply and stagnating prices.

Local Signs, Too

As mentioned, I live in Northern California, quite close to Santa Rosa.

Things here aren't as nuts as they are in San Franscico; but it's still a moderately-affluent region with lots of second homes. It's one of the semi-frothy areas I'd expect to see cooling off in first should there be a downwards turn in macroeconomic conditions.

Located less than an hour north of San Francisco, residential housing prices here have roughly increased 2x over the past six years as the Bay Area has boomed. Supply has been in chronic shortage, exacerbated by the loss of thousands of structures burned during last October's destructive Tubbs fire.

But recently, for the first time in many years, realtors here are beginning to talk of a softening they're seeing in the local housing market.

Median sale prices dropped from May to June, which is counter to previous years. And several towns are seeing year-over-year declines in median price -- something unheard of over the past 7 years.

Meanwhile, the days-on-market ratio for properties is beginning to creep up.

Of the greatest concern to the realtors in my area: bidding wars are no longer happening. Houses are selling either at or below asking prices now. That's a *big* development in a market where houses have routinely sold for $50-100K+ above the listing price.

In a similar vein, I'm hearing evidence of the softening rents down in San Franscico and the East Bay (Oakland/Berkeley). Wolf Richter has done a good job chronicalling the substantial volume of newly-constructed units that have recently hit the market threatening to depress rents, and I've heard from a multi-family unit owner down there how landlords in the area are now finding their rents ~$500 too high for the market to bear.

This is all early and anecdotal data. It's too little at this point to claim definitively that my local housing market has entered Stage Two.

But I'm curious to hear from other PeakProsperity.com readers. What are you observing in your local markets? Are you seeing similar signs of concern?

Please share any insights you have in the Comments section below. Collectively, we may be able to add clarity, in one direction or another, to Rubino's hypothesis.

Prepping For Stage Two

Whatever the timing, Stage Two is an inevitability for today's ridiculously-overpriced real estate markets. It's not a matter of if it (as well as Stage Three) arrives, but when.

Given the data above, I think Rubino is correct in his assessment. Or at least, correct enough that prudent action is warranted today.

This makes even greater sense when considered along with the current trends of rising interest rates and quantitative tightening. Remember, home prices and interest rates have a mathematically inverse relationship: as rates go up, home prices must go down (all else being equal). And as central banks start withdrawing in earnest the excess liquidity that inflated property values to their current nose-bleed heights, expect further downward pressure on prices.

To drive the urgeny home even harder, we haven't even yet talked about the damage an economic recession and/or a painful correction in the financial markets would wreak on the real estate market. With the current expansion cycle the second-longest on record and our all-time-high markets looking increasingly vulnerable, it seems very unlikely we'll avoid at least one of those crises in the near to mid-future.

Here are worthwhile steps we recommend at this point:

  • Consider selling: If you're a homeowner and are not committed to remaining in your property for the next decade+, do some scenario planning. If prices fell 20%, how much of a financial and emotional impact would that have on you? If you have substantial equity gains in your home, Stage Two is the time to protect them. If you have little equity right now, make sure you're fully aware of the repercussions you'll face should you find yourself underwater on your property. What will your options be should you lose your job in the next recession? Whether to hold, or sell now and rent, is a weighty decision; and the rationale differs for each household -- so we strongly recommend making it with the guidance of your professional financial advisor.
  • Raise cash: The vicious cycle that begins as Stage Two transitions into Stage Three is deflationary. Lower prices beget lower prices. During this period, cash is king. By sitting on it, your purchasing power increases the farther home prices drop. And when the dust settles, you'll be positioned to take advantage of the resulting values in the real estate market. We've written at length about the wisdom of this strategy given current market conditions, as well as how, while waiting for lower prices, you can get 30x the return on your cash savings than your bank is willing to pay you, with lower risk. Our recent report on the topic is a must-read.
  • Educate yourself: Yes, real estate is overpriced in a number of markets. But it has been and will remain one of the best ways available to the non-elites to amass income and tangible wealth. And as mentioned, when the next Stage 3 brings prices down, there will be value to be had -- potentially extreme value. If you aren't already an experienced real estate investor, now is the time to educate yourself; so that you'll be positioned to take informed action when the time to buy arises. Our recent podcast interview on Real Estate Investing 101 is a good place to start.

In Part 2: The Case For Starting To Build A (Small) Short Position, we conduct a similar analysis into the overvaluation and growing vulnerability of the financial markets (which are highly likely to correct much faster, sooner and more violently than the housing market), including the details on a recent short position we've started building.

The tranquil "free ride" the financial and housing markets have had for nearly a decade are ending. The string of easy gains with little effort are over now that the central bank money spigots are turning off at the same time the "greater fools" pocketbooks are tapping out.

For a brief time, prices will waiver, as investors remain in denial and refuse to sell at lower prices. But soon that denial will turn to panic, and prices will plummet.

Make sure you're positioned prudently before then.

Click here to read Part 2 of this report (free executive summary, enrollment required for full access)

Can fear win the vote? Democrats have a dangerous strategy to demonize Trump.

Anna Moneymaker / Staff | Getty Images

The Democratic Party’s nominee is deliberately spreading false, fear-driven narratives to turn her base against Donald Trump, regardless of the consequences.

Have you noticed how Kamala Harris and her allies in the corporate left-wing media have become bolder in labeling Trump a “fascist”? A recent New York Times article revealed that Democrats have shed their reluctance to use the term. In fact, it has become their rallying cry as Election Day approaches.

What’s the real goal here? According to John Daniel Davidson at the Federalist, Harris and her supporters are using this rhetoric to energize their base — and more disturbingly, to prepare them for violence if Trump wins. The fearmongering isn’t just about driving people to the polls; it’s about creating an atmosphere of rage and chaos.

Let’s show the Democrats that our republic doesn’t bend to fear and certainly doesn’t bend to those who twist the truth for political gain.

Harris is deliberately spreading false, fear-driven narratives to turn her base against Trump, regardless of the consequences. This is the same Kamala Harris who, during the George Floyd riots in 2020, encouraged bailing out rioters and urged the violence to continue both before and after the election.

For example, Harris has claimed that Trump will use the Department of Justice as a weapon against his political enemies if he returns to office. But let’s pause for a second: Who is using the Justice Department as a political tool right now? Harris’ own administration, led by Joe Biden, has weaponized federal agencies against Trump and conservatives for years.

Harris also recently entertained the idea that Trump would round up people who “don’t look white” and throw them into camps. During an interview with Charlamagne tha God, a caller suggested this scenario. Instead of refuting the caller’s paranoia, Harris nodded and said, “You have hit on a really important point.

This kind of divisive rhetoric fuels fear and division in our country. Let’s not forget: Trump was president for four years, and there were no camps, roundups, or authoritarian crackdowns on dissenters. Leftists claim Trump and his supporters spread conspiracy theories, but they are the ones pushing baseless and dangerous claims.

While Democrats claim to defend democracy, they are increasingly aligning with authoritarianism. For example, the EPA funneled billions of dollars to left-wing organizations, including one tied to Stacey Abrams, for “voter mobilization” efforts. This funding came through the Inflation Reduction Act — a taxpayer-funded omnibus bill. Imagine the outrage if Republicans in Congress gave billions of taxpayer dollars to right-wing groups. The media would be in an uproar, and there would be protests at the White House gates. But because it’s Democrats doing it, the mainstream media turns a blind eye. These are the warning signs of an authoritarian regime.

This is why it’s more critical than ever for Americans to see through the left’s manipulation. Trump’s not the fascist here — he’s a threat to the left's power. The real danger lies in the left’s escalating rhetoric, which is designed to incite chaos if things don’t go its way. And let me be clear: That’s exactly what leftists are preparing for.

Don’t let them succeed.

The best way to counter their lies is by getting out to vote and encouraging others to do the same. If every single one of us does this, we won’t let the fearmongering and lies being peddled by Harris and the Democrats succeed. Let’s show them that our republic doesn’t bend to fear and certainly doesn’t bend to those who twist the truth for political gain.

America is currently standing at a fork in the road. Which path we take will determine our fate as a nation.

One path is “we try something entirely new,” as in “not the Constitution,” and the other path is “we go back towards the Constitution,” says Glenn Beck.

The stakes for this decision are higher than they’ve ever been.

“We're deciding this year whether or not our kids are going to grow up in a country that gives them the opportunity to be themselves and to move forward and chart their own course, or we're going to continue to live in a place where we're not sure if our kids are going to have a better life than we did,” Glenn warns.

Regardless of who you vote for, Glenn says that one thing applies to everyone: “You’ve got to get involved this year,” which includes voting.

Election Day is rapidly approaching, and it will undoubtedly be a night that goes down in history, which is why BlazeTV will be broadcasting it live.

“We’d love to share it with you,” says Glenn.

Go to BlazeElection.com for exclusive access to our election night broadcasting. Your BlazeTV+ subscription also gives you access to all BlazeTV content as well as Blaze News.

“Sign up and be a part of the family as we go through this together,” invites Glenn.

Get $40 off your first year of BlazeTV+ with code ELECTION.

TOP THREE craziest leftist reactions to Trump's McDonald's visit

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Over the weekend, President Trump visited a McDonald's in Bucks County, Pennsylvania to serve up some french fries to hungry supporters.

MAGA fans from across the country came to celebrate and support Trump, quickly swamping the small town with a tide of Trump merch. With a roaring crowd outside, Trump cooked up some crispy fries and served them to a small selection of supporters through the drive-thru window, creating a light-hearted, fun momenta pleasant break from the turbulent election cycle.

Naturally, the Left quickly swooped in to rain on Trump's parade. From unsubstantiated fact-checks to overused insults, here are the craziest reactions to Trump's McDonald's trip:

Fact check on Donald Trump's claims about Kamala Harris

The Washington Post / Contributor | Getty Images

While working his brief 15-minute shift, Donald Trump quipped that he's now worked at McDonald's longer than Kamala Harris, referencing the Vice President's unsubstantiated claim that she worked at McDonald's one summer during college. McDonald's further substantiated Trump's claim by indicating that there are no existing records of Harris's employment, though they admit that records from the pre-digital age may not have survived to the present day.

Despite the lack of evidence, left-wing media outlets, such as the Washington Post, were quick to defend the Vice President. Their argument essentially put Trump's word against Harris's, suggesting that Trump was deliberately lying to defame the Vice President, while simultaneously treating Harris as a more credible source.

Pointing out the obvious fact that this was a political stunt

The Washington Post / Contributor | Getty Images

In what is likely the least informative journalistic piece of the century, MSNBC made the "shocking discovery" that Donald Trump didn't actually work at McDonald's and that the entire event was for his campaign. It's unclear what detail gave this away to the "ever-vigilant" reporters at MSNBC. Maybe it was the fact that McDonald's was closed for the event, or the lack of employees within the restaurant, or possibly it was the crowd of cheering fans outside. Thank you captain obvious, the event was a carefully coordinated and secure political event. The former President who has had several assassination attempts on his life did notwork in an unsecured restaurant, dealing with countless unknown people.

Truly "top-notch" reporting by MSNBC.

Calling Trump supporters "weird"... Again.

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The New York Times had to really scrape the bottom of the barrel to come up with something to paint Trump's fast food fiesta in a negative light. Instead of attacking Trump, they went after his supporters who lined the street to cheer on their favorite presidential nominee. They went so far as to describe the event as a violent riot full of unhinged and uneducated fanatics. The New York Times even quoted a pro-Harris protester who showed up to the event and suggested that "Jan. 6 was maybe a trial run ... and now they’re a lot more organized — and a lot angrier.” The insults didn't stop there. They dredged up the archaic and cringeworthy Tim Walz original calling the Trump supporters "weird." This "zinger" doesn't have the punch the New York Times wanted it to have, and came across as a sad attempt to bring Trump down in one of his high points in his campaign.

RIGGED: Kamala Harris attempts to sway Fox interview in her favor, STILL falls short

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The election is mere weeks away and Kamala Harris just had her first adversarial interview since she began campaigning.

Last week, Harris sat down with Fox News journalist Bret Baier for an interview plagued with difficulties from the beginning. As Glenn recently pointed out, it seemed like Harris had done her best to ensure the interview was intentionally rigged against Baier. Despite being in front of Baier's diverse audience, she did not seem too interested in taking the opportunity to sell herself to a new demographic. Instead, Glenn hypothesized she was just after a quick soundbite to pander to her faltering core supporters.

However, the interview blew up in Kamala's face, and the American people took notice. Here's a rundown of Kamala's first Fox interview:

Rigged Interview

BRENDAN SMIALOWSKI / Contributor | Getty Images

Harris and her team did everything possible to throw Bret Baier off his game and derail the interview in her favor. It started when Harris's team informed Fox that the interview, which was originally supposed to be an hour, would be cut in half. This left Baier scrambling to reformat his interview to better fit the new time requirement. Then Harris arrived at the interview ten minutes late, further shorting the interview.

The purpose behind Harris's tardiness became apparent during the interview. Every time Baier asked a question, Harris would launch into a lengthy word salad. Baier was forced to interject just so he was able to ask more than a couple of questions. Harris even pushed back, calling out Baier's interruptions, which of course, just wasted more time. Clearly, Harris or her staff realized that she could not sustain a hostile interview for any extended period, which is why Harris tried to filibuster away as much of the interview as possible.

When the brief interview was nearing the end of its allotted time, Harris's staff began signaling to Baier to end the interview. Despite the change in plans and late arrival, her staff was determined to end the interview as quickly as possible.

Harris's Agenda

CHRISTIAN MONTERROSA / Contributor | Getty Images

From the beginning of the interview, Harris was hostile. She was immediately adversarial and would spin every question into a criticism of Trump, no matter how pointed Baier's question was. Several times Harris had emotional outbursts, spewing classic anti-Trump rhetoric, regardless of its relevance to the question asked. Glenn pointed out that this was the reason Harris took this interview. Recently, many of her core supporters have been faltering as her sudden burst of televised appearances has revealed her paper-thin platform. She took this interview to get a good clip of her passionately bashing Trump on Fox News. This would bolster her core demographic, which she desperately needs.

Harris's Fumbles

BRENDAN SMIALOWSKI / Contributor | Getty Images

Despite her best efforts to sway the interview in her favor, Baier still managed to pin Harris several times. Harris kept dodging tough questions Baier threw her way with the same tactic: she would promise to "follow the law" then deflect the question back on Trump. One of the more memorable instances of Harris's evasion strategy was when she was questioned if she supported prison inmates having access to taxpayer-funded transgender surgery. Harris insisted she would "follow the law" and then explained that Trump had followed the same law while he was in office. This response was, in essence, a non-answer. Harris was ignoring the obvious fact that as President, she would influence what the law would be and how it is enforced.

Harris's other major blunder occurred after Baier asked her how her presidency would differ from Biden's and how she would "turn the page" on our current situation. In classic Harris fashion, she immediately deflects on Trump, framing our current situation as somehow a byproduct of Trump simply existing within the political sphere. This convoluted web she spun was so twisted that Harris herself lost track of what she was saying gave up, telling Baier, "You know what I'm talking about." Baier admitted he was just as lost as she was, and she simply went back to attacking Trump.