Housing Bubble 2018? Some thoughts

Housing Bubble 2018? Are we headed for another housing collapse?

First thing: I am not sounding the alarm. The housing market has been growing since 2009. It does not take a mathematician from MIT to realize it will correct at some point.  Sane and rational business people will also plan for the downside as well as the upside. Your success is not determined by the market. Your actions in relation to the market determine your success.

The human mind is a very interesting thing. We have to frame experiences so we can compartmentalize and understand them. For the most part, we tend to react to the current situation with a narrative based on framed past experiences and not the data at hand. Think of a Thanksgiving Turkey. every day the farmer fed them, then on that special day just before Thanksgiving the farmer comes with a different purpose. The turkey associated the farmer with getting fed. Since the Turkey did not have a calendar of the experience of a full year, the last visit from the farmer was a surprise!

Housing Bubble 2018? The cause of the last cycle was a debt-fueled mania.

Over-leveraging tends to create the most downward price pressure. Leverage drives the price of the asset up and then drives it down in the deleveraging phase.

What do debt levels look like currently?

Housing Bubble 2018? Commercial Loan Debt

As you can see,  Commercial Loan Debt has surpassed the levels of the last Cycle

 

Housing Bubble 2018? Motor Vehicle Loans

Again, this debt level has surpassed the last cycle.

 

Housing Bubble 2018? Multifamily Debt Levels

Again, this debt level has surpassed the last cycle.

 

Housing Bubble 2018? Student Loan Debt

Again, this debt level has surpassed the last cycle.

 

Housing Bubble 2018? Total Consumer Debt

Again, this debt level has surpassed the last cycle.

 

Housing Bubble 2018? Mortgage Debt 1 to 4 family residences.

Based upon the current debt levels what segments appear to be ready to correct?
1 to 4 family debt is one of the few debt levels that still has not pierced the last cycle. When I read the tea leaves of this cycle, I see more 1987 than 2005. Time will tell.

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