The housing market is bracing for another shock. Thousands of borrowers who took out home equity loans during the bubble years are now getting alarming news - their monthly payment will soon triple. And as more bubble-era home equity loans reach their 10th birthday, more homeowners will be affected.
Between the stock market, bitcoin, and tech IPOs, today everyone seems in a race to spot the next biggest asset bubbles readying to pop.
The term "asset bubble" indicates that there is a marked, noticeable divergence between the market price of an asset and its fundamental value. In other words, something that people store value in - a coin, a house, a share of stock - is valued much, much higher than the thing itself could possibly be worth.
Bubbles usually end with crashes: double- or triple-digit percentage losses in the price of the inflated asset over a very short time.
How much do higher mortgage rates reduce home sales?
That, of course, depends on how much rates rise and whom you ask. But there's no doubt higher mortgage rates hurt sales, experts say.
Interest rates have been climbing since May. Rates on 30-year, fixed-rate mortgages averaged 4.37% for the week ending July 18, Freddie Mac's weekly survey of conforming mortgage rates said. That's up more than a percentage point from early May.
And existing home sales fell 1.2% in June, to a seasonally adjusted annual rate of 5.08 million, from 5.14 million in May (but still 15.2% higher than in June 2012), the National Association of Realtors said Monday.
Lawrence Yun, the NAR's chief economist, told Money Morning he expects interest rates to hit 5% to 5.5% within a year. And while he foresees existing home sales rising as much as 10% for 2013, he predicts only a single-digit percentage increase next year primarily because of higher mortgage rates.
"There's no risk of any reversal of this housing recovery; it's just slowing the pace of this housing recovery," Yun said.
He said robust demand and affordable prices would lessen the impact of the higher mortgage rates in much of the country, but pricier markets in New York, parts of California and Hawaii would be hit harder by the higher mortgage rates.
There's a new idea sweeping through the country. It's called dignity mortgages.
Backers say this new financing idea will help millions of homeowners and get the middle class back to the heart of the American recovery.
Opponents thinks it's a recipe for disaster that will make the first financial crisis look like a cakewalk.
Today the Fight Club is taking on this growing issue, let's get ready to rumble...
Since January 2012, shares of Lennar Corp. (NYSE: LEN) have more than doubled. It could be a sign of another housing bubble. Read more...
Where there’s smoke, there’s fire.
When it comes to swiftly rising home prices, the question is whether the on-fire price increases are a healthy sign of a housing recovery... or a "smoke screen" masking another Wall Street-led real estate bubble.
Here’s the answer and what it means for you.
The housing market has rebounded in a big way, with home prices increasing the most since the housing bubble burst in 2006.
Prices aren't the only indicator pointed toward recovery.
Housing barometers including sales, permits and housing starts have surged well beyond their recession troughs and back into healthy territory - and bullish analysts say there's plenty more room for growth after years of decreased activity.
The housing market activity has been driven by pent-up demand, improved consumer confidence, low interest rates and still affordable prices. And the industry's comeback comes at a time when supply is tight. The inventory of homes available is at near-historic lows, and foreclosures have declined.
Investors have taken comfort from the recent improvement in housing prices seen across the country.
But now the shares are rolling over. Could the relative underperformance of the homebuilders be telling us something?
David Stockman, former director of the Office of Management and Budget under President Ronald Reagan, thinks so.
In an interview with The Daily Ticker, Stockman said, "I would say we have a housing bubble again. I don't think we have a real, organic, sustainable recovery."
Stockman argues that "fast money" is moving into the local real estate markets that suffered the biggest declines in order to "speculate in buy-to-rent for a quick trade."
Stockman thinks that these speculators will be looking to sell out as soon as prices rise sufficiently to give them a specific rate of return and that "they will be gone as quickly as they came."
The S&P/Case-Shiller Home Price Index showed prices hit post-bubble lows in February, and U.S. home sales data show that while not all housing news is dismal, a strong and stable recovery is a long way off.
The U.S. housing sector has been a drag on the economy since a home price bubble burst and helped cause the 2007-2009 recession. While many economists maintain that a budding recovery is blooming in the troubled sector, recent housing market data are simply another wake-up call.
Here's a look at the numbers.
Case-Shiller Home Price Index Falls
The Case-Shiller Home Price Index of 20 cities revealed a price drop from January to February of 0.8% (on a non-seasonally adjusted basis). The 10-city index also fell 0.8%.
The 20-city index declined 3.5% from a year ago, while the 10-city composite slipped 3.6%.
"Nine housing markets and both composites hit post crisis lows," David Blitzer, a spokesman for S&P, told CNN Money. Included in the nine markets are Atlanta, Charlotte, Chicago, Las Vegas and New York.
Blitzer went on to note, "While there might be pieces of good news in this report, such as some improvements in many annual rates of return, February 2012 data confirm that, broadly speaking, home prices continued to decline in the early months of the year."
Foreclosures and other distressed property sales continue to be the main challenge for home prices, Pat Newport, an analyst for IHS Global Insight relayed to CNN.
"We still have 6 million homeowners who are late on their payments," said Newport. "We'll still have lots of foreclosures, which will depress prices."
In fact, with January's mammoth $26 billion mortgage settlement between five major banks and a group of state attorneys general, foreclosures that had been held up for a year or more are now moving forward.
"Enough homes are in the foreclosure pipeline to keep house prices falling through much of this year," Celia Chen, a housing economist at Moody's Analytics, told the Los Angeles Times.
From the Tulip Mania of the 1600s all the way to the recent housing bubble, market manipulators have employed a wide range of tactics to lighten the wallets of unsuspecting investors.
And even though market manipulation is prohibited in the U.S. under a section of the Securities Exchange Act of 1934 - it's as American as apple pie.
Everyone from high-ranking government officials to investment bankers have been caught with their hands in the cookie jar.
The list includes scofflaws like Ivan Boesky, Michael Milken, and Jack Abramoff.
Jim Cramer, the host of CNBC's "Mad Money," said he regularly manipulated the market when he ran his hedge fund, calling it "a fun...and lucrative game."
Not surprisingly, a recent study found that those closest to the information loop -corporate insiders, brokers, underwriters, large shareholders and market makers - are most likely to be the perpetrators.
To give you an idea of how things work, here are three notorious examples of market manipulation.
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