California Housing Bubble 2.0 in Pictures - By Mark Hanson

Fantastic, everybody made some good money in the past 18 months thanks to the Fed’s aggressive monetary policy — or, to be specific Twist, QE3, and QE4 — which dropped mortgage rates from 5.5% to sub 3.5% almost overnight in late 2011.  This made it so everybody could instantly “afford” 20% more house.  Over the next year this increase in “purchasing power” pushed house ‘prices” higher.  Throw in top aggressive Wall Street and private all-cash “investors” regularly paying 10% to 20% over appraised value / list price for their buy-to-flip/rent schemes and viola’…everybody who owns a home is a lot more “wealthy” — on paper — than 18 months ago.

This note is to throw out some compelling data on where housing actually sits relative to the bubbly years.  And that although it may look different, conditions may be quite similar.   Greed and fear, as they relate to financial assets and decision making, are powerful emotions.   When you see them driving markets, step back, breathe, have a drink, and a think.