Do you remember what happened in 2008? Many people believe that another historic financial disaster is coming and that it will absolutely devastate the U.S. economy. Earlier this week, I wrote about an investor named Michael Burry that has actually bet 1.6 billion dollars that the stock market is going to crash. He made all the right moves in 2008, and he fully intends to be proven right once again in 2023. Of course current conditions definitely resemble 2008 in so many ways.
The residential housing market is so dead right now, and commercial real estate prices are plummeting at a very frightening pace. Unfortunately, officials at the Federal Reserve are making it quite clear that they are not done strangling the economy.
This week, mortgage rates jumped above the 7 percent mark to the highest level that we have seen in more than 20 years…
Mortgage rates surpassed 7% this week, hitting the highest level in more than two decades.
The average rate on the popular 30-year fixed mortgage increased to 7.09% this week, up from 6.96% the week prior, according to Freddie Mac’s release on Thursday. That’s the highest point since the first week of April 2002 and marks just the third time rates have exceeded 7% since then. The last times were in October and November of last year, when the rate reached 7.08%.
Needless to say, high mortgage rates have been crippling the housing market in recent months.
At the midpoint of this year, existing home sales were down a whopping 18.9 percent from the same time in 2022…
Total existing-home sales1 – completed transactions that include single-family homes, townhomes, condominiums and co-ops – receded 3.3% from May to a seasonally adjusted annual rate of 4.16 million in June. Year-over-year, sales fell 18.9% (down from 5.13 million in June 2022).
There are certainly lots of people out there that would like to buy homes, but thanks to how high mortgage rates have become they simply cannot afford to do so.
Housing has become extremely unaffordable in this country. According to Redfin, the percentage of teachers that can afford to buy a home close to the school where they work has fallen to just 12 percent…
The number of teachers who can afford a reasonably priced home in their school district nationwide has collapsed to just 12%, down from 17% last summer and 30% in 2019, amid the worst housing affordability crisis in a generation, according to data from Redfin.
Redfin’s analysis of median teacher salaries for 2022 across 50 major cities for over 70,000 PreK-12 public and private schools revealed no teacher in San Jose and San Diego could afford homes within “commuting distances” to their respective school, which means home and work are 20 minutes during typical rush hour conditions.
So much damage has already been done.
But apparently officials at the Federal Reserve believe that even more carnage is necessary, because they are indicating that more rate hikes are on the table…
Most Federal Reserve officials signaled during their July policy-setting meeting that high inflation still poses an ongoing threat that could necessitate additional interest rate hikes this year.
Minutes from the U.S. central bank’s July 25-26 meeting released Wednesday showed that central bank officials observed that inflation remains well above the Fed’s 2% target — and that policymakers need to see “further signs that aggregate demand and aggregate supply were moving into better balance to be confident that inflation pressures were abating.”
No. Don’t do it.
Even if rates stay at current levels, we are headed for extreme pain.
Raising rates even higher would just be suicidal.
But it looks like they are going to do it anyway, and that could push mortgage rates up to the 8 percent level…
Economists have predicted mortgage rates could go above 8 percent if the economy continues to show signs of strength and the US Federal Reserve decides to raise interest rates again.
Mortgage Rates have not hit such levels since 2000, according to data compiled by Freddie Mac.
Do officials at the Fed actually believe that our system can handle such high rates?
Unless the Fed changes course, the housing market is going to absolutely implode.
And of course the commercial real estate market is already imploding.
The chaos that is already transpiring is putting an enormous amount of strain on our financial institutions, and Fitch is warning that we could soon see sweeping rating downgrades in the banking industry…
A Fitch Ratings analyst warned that the U.S. banking industry has inched closer to another source of turbulence — the risk of sweeping rating downgrades on dozens of U.S. banks that could even include the likes of JPMorgan Chase
.
The ratings agency cut its assessment of the industry’s health in June, a move that analyst Chris Wolfe said went largely unnoticed because it didn’t trigger downgrades on banks.
In many ways, I feel like I am watching a repeat of 2008.
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Officials at the Fed can clearly see everything that is happening, but they just keep insisting on making things even worse.
So I hope that you have been preparing for turbulent times, because things are going to get crazy.
Sadly, the truth is that most Americans are not prepared for tougher times. In fact, one recent survey discovered that 72 percent of Americans are not financially secure…
For many Americans, payday can’t come soon enough. As of June, 61% of adults are living paycheck to paycheck, according to a LendingClub report. In other words, they rely on those regular paychecks to meet essential living expenses, with little to no money left over.
Almost three-quarters, 72%, of Americans say they aren’t financially secure given their current financial standing, and more than a quarter said they will likely never be financially secure, according to a survey by Bankrate.
Many of those people will lose their jobs during this new economic crisis, and because they don’t have any sort of a financial cushion to fall back on many of them will also end up losing their homes.
Delinquency rates are already starting to move higher, and that should deeply alarm all of us. But what we have experienced so far is just the tip of the iceberg. So brace yourselves for what is ahead, because this ride is only going to get bumpier from here.
Michael’s new book entitled “End Times” is now available in paperback and for the Kindle on Amazon.com, and you can check out his new Substack newsletter right here.
Article cross-posted from The Economic Collapse Blog. Sound off on our Economic Collapse Substack.
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And the walls come tumbling down…
Note how banks on average give you ~0.45% on your savings account while lending your money to borrowers at 7.6%. We’re being raped by the Fed and the banks and no one is doing anything about it. “Build back better”!
Online banks are paying 4-5% on CDs. Pull your money from Chase, Citi, Wells, and other brick-and-mortar banks and move it to an online FDIC-insured bank. Problem solved.
Joe Biden’s America day 1008:
Nothing has been BUILT!!!!!!
Nothing is BACK!!!!!!!!!!!!!!!!
Nothing is BETTER!!!!!!!!!!!!!!!!!!!
FJB!!!!!!!!!!!!!!!!!!!!
TRUMP-LAKE 2024 for THE WIN!!!!!!!!!!!!!!!!!!!!!!!!!MAGA!!!!!!!!!!!!!!!!!!!!!!!
Doom and gloom. I bought my first house (I am a vet) in 1993 at a rate of 9% and refinanced it when rates hit 5%. We will survive. My parents bought rental property at 12% back in the late 70’s. It’s the inflation that’s hitting so hard, not the interest rates. Your money doesn’t go as far.
We are seeing the beginnings of the Domino effect. If you lock doen a society for whatever reason, it kills businesses and the jobs they provide. This is so diabolical it gives the impression that the FED and the Biden Administration are definitely trying to kill America. We cannot assume they are that stupid that they would do the exact things that led up to the 2007/2008 financial crash where our home lost 40% of its equity value.
What the hell do they expect when you kill business, start a “Plandemic”, and then have the temerity to kill America’s energy sector while weather wars are destroying our infrastructure ? THIS IS ALL BY DESIGN MY FRIENDS SO ARM YOURSELVES, BECAUSE YOUR LIVES MAY DEPEND ON IT.
Arms won’t help. We’re past that point. We can’t organize due to censorship, They will bankrupt each of us and take our homes. Fight back and you’ll die.. May as well do it yourself.
Well at least there will be lots of huge commercial buildings empty for housing the entire migrant world. Places where they can organize, breed and form huge gangs to take the rest of everything from us.
Get on board with Christ NOW.
Everything seems aligned to manufacture a currency crisis in the US. The FED’s incessant rate raises, US debt ballooning, Democrat’s endless budget increases, printing of money etc all providing the pretext for the IMF/WEF folks to roll out a global digitized currency once the dollar collapses. It’s already on the brink of losing its petrodollar status- Saudi Arabia is ready. Once that officially ends, it’s game over for us and everyone else will follow like dominoes.
$1.6 b is the notional value of the put options. Not the cost. He only spent a few million. Notional value is number of contracts x stock price x 100. Price per contract is much lower than that. For example a S&P 500 put contract expiring on September 22nd (ticker SPY) for $430 strike price has a notional value of $43k but only costs $570. Farther out expiration dates = higher prices. More out of the money = lower price.
Don’t want you to invalidate your argument by having bad info. He still spent millions on options but like 1,000 times less than you think. Maybe even less depending on the expiration dates and the strike prices.
There’s a REASON why the swamp is importing 3rd worlders right now. They know tht when the shtf Americans are going to want to hang politicians and bankers for what they’ve done to our country and it’s ppl. The scumbag politicians need these illegal rats to keep citizens busy fighting them off so they don’t come straight to politicians homes and offices to drag them out and k!ll them.
When things collapse, illegals will be just as irate because they won’t have their freebies anymore and will start rioting, robbing and r*ping Americans. They’ll be starving and will come after your pets after they’ve sacked the grocery stores.
Arm up and be ready to dump every pos you see when things start popping off.
Sir,
Im a conservative and support your message, however ive been a real estate investor for over 23 years, 18 of it full time.
I need to convey todays RE market is nothing at all like 2008, so when you keep using it as an example of pending calamity, it makes me wonder what else you’re wrong about.
Im happy to share the actual data and analysis to support my assertion.
Yes i think economic policy is bad, and we’re going in the wrong direction, 100%, but those issues are not yet playing out in single family homes. Its a normal prepandemic trend right now, low supply, low production, high equity, steady supply/deman equality.
Let me know if you want to discuss.
Regards,
Corey @ Fidelis
yes, real estate is way more overvalued than it was in 2008 – fueled by years and years of artificially low interest rates
homes are easily 3x overvalued nationally – homes historically have gone up 2% per year yet last year they went up more than 30% after year upon year of double digit price increases
the residential real estate market will have to correct to make homes affordable – but they can’t because the banks will start to fail again – so government will step in to make homes ore even unaffordable to save the banks
When people vote for liberal leftist Progressive communist types, this is what you get. Unfortunately this time conservatives not might not be able to come to the rescue again because Sorros has bought out most DAs so that they can throw anyone in jail who has the ability to try to stop the collapse through sensible governance. Case in point: president Trump and his associates are being unconstitutionally railroaded
Our economy is like one of these huge corporations going out of business. All the peons suffer while the top management get their golden parachutes.
It is simply way too easy to SPEND MONEY THAT IS NOT YOURS.
“They’ have THEIRS already. “They’ are invested with monies they DID NOT EARN. Those at the TOP are stealing everyone blind. At least $190,000,000,000 thrown away TO OUR WORST ENEMIES (after the CCP DELIVERED THE WORLD THE W U H A N). “They” know NO ONE RECONCILES THE BOOKS TODAY. “They” just set up the WASTE and BENEFIT from the FRAUD which, again, is NEVER LOOKED AT even when it becomes known.
Do not let the FOOLS fool YOU. There are at least 500 FOOLS in CON-RE-GRESS.