Mike Whitney has penned another excellent article this week about the next leg down in the national housing market we are about to face very shortly:
“Did the Federal Reserve collude with the big banks to hold millions of houses off the market until the Fed finished adding $1.25 trillion to the banks reserves? Did the Fed do this to make it appear that its bond purchasing plan (quantitative easing) was stabilizing prices when, in fact, it was the reduction in supply that stopped prices from plunging?”
Yes, most probably.
“The banks agreed to cut supply (by temporarily stockpiling homes) while the Fed loaded them up with a cold trillion-plus in reserves. Meanwhile, John Q. Public assumed (incorrectly) that Bernanke’s program stabilized prices. It’s a very ingenious deception.”
Yes, they most likely kicked the can down the road… for awhile.
“So what does it all mean? It means the public was snookered yet again. It also means that housing prices will fall further as banks dump more inventory on the market. How far prices drop will depend on how quickly the banks clear their shadow inventory which, in turn, depends on agreements they’ve made with the Fed and the other banks. Housing inventory is being released in drips and drabs according to an unknown plan. Some would call it price-fixing.”
This one is definitely worth a read. The full article–
