The
similarities between 2007 and 2014 continue to pile up. As you
are about to see, U.S. home sales fell dramatically throughout 2007
even as the mainstream media, our politicians andFederal
Reserve Chairman Ben Bernankepromised
us that everything was going to be just fine and that we definitely
were not going to experience a recession. Of course we remember
precisely what followed. It was the worst economic crisis since
the days of the Great Depression. And you know what they say –
if we do not learn from history we are doomed to repeat it.
Just like seven years ago, the stock market has soared to all-time
high after all-time high. Just like seven years ago, the
authorities are telling us that there is nothing to worry about.
Unfortunately, just like seven years ago, a housing bubble is
imploding and another great economic crisis is rapidly approaching.
Posted below is a chart of existing home sales
in the United States during 2007. As you can see, existing home
sales declined precipitously throughout the year…
Now look at this chart which shows what has
happened to existing home sales in the United States in recent
months. If you compare the two charts, you will see that the
numbers are eerily similar…
New
home sales are also following a similar pattern. In fact, we
just learned that new home sales have collapsed to an
8 month low…
Sales of new single-family homes dropped
sharply last month as severe winter weather and higher mortgage rates
continued to slow the housing recovery.
New home sales fell 14.5% to a seasonally
adjusted annual rate of 385,000, down from February’s revised pace
of 449,000, the Census Bureau said.
Once again, this is so similar to what we
witnessed back in 2007. The following is a chart that shows how
new home sales declined dramatically throughout that year…
And this chart shows what has happened to new
homes sales during the past several months. Sadly, we have
never even gotten close to returning to the level that we were at
back in 2007. But even the modest “recovery” that we have
experienced is now quickly unraveling…
If
history does repeat, then what we are witnessing right now is a very
troubling sign for the months to come. As you can see from this
chart,
new home sales usually start going down before a
recession begins.
And
don’t expect these housing numbers to rebound any time soon.
The demand for mortgages has dropped through the floor. Just
check out the following excerpt from a recent article by
Michael Lombardi…
One of the key indicators I follow in respect
to the state of the housing market is mortgage originations. This
data gives me an idea about demand for homes, as rising demand for
mortgages means more people are buying homes. And as demand
increases, prices should be increasing.
But the opposite is happening…
In the
first quarter of 2014, mortgage originations at Citigroup Inc.
(NYSE/C) declined
71% from
the same period a year ago. The bank issued $5.2 billion in mortgages
in the first quarter of 2014, compared to $8.3 billion in the
previous quarter and $18.0 billion in the first quarter of 2013.
(Source: Citigroup Inc. web site, last accessed April 14, 2014.)
Total
mortgage origination volume at JPMorgan Chase & Co.
(NYSE/JPM) declined
by 68% in
the first quarter of 2014 from the same period a year ago. At
JPMorgan, in the first quarter of 2014, $17.0 billion worth of
mortgages were issued, compared to $52.7 billion in the same period a
year ago. (Source: JPMorgan Chase & Co. web site, last accessed
April 14, 2014.)
It is almost as if we are watching a replay of
2007 all over again, and yet nobody is talking about this.
Everyone wants to believe that this time will
be different.
The human capacity for self-delusion is
absolutely amazing.
There are a lot of other similarities between
2007 and today as well.
Just
the other day, I noted that retail stores are closing in the United
States at the fastest pace that we have seen since
the collapse of Lehman Brothers.
Back
in 2007, we saw margin debt on Wall Street spike dramatically and
help fuel a remarkable run in the stock market. Just check out
the chart inthis
article.
But that spike in margin debt also made the eventual stock market
collapse much worse than it had to be.
And
just like 2007, consumer credit is totally out of control. As I
noted inone
recent article,
during the fourth quarter of 2013 we witnessed the biggest increase
in consumer debt in the U.S. that we have seen since
2007.
Total consumer credit in the U.S. has risen by 22
percent over
the past three years, and 56
percent of
all Americans have “subprime credit” at this point.
Are
you starting to get the picture? It is only 7 years later, and
the same things that happened just prior to the last great financial
crisis are happening again. Only this time we are in much worse
shape to handle an economic meltdown. The following is a brief
excerpt from my recent article entitled “We
Are In FAR Worse Shape Than We Were Just Prior To The Last Great
Financial Crisis“…
None of the problems that caused the last
financial crisis have been fixed. In fact, they have all gotten
worse. The total amount of debt in the world has grown by more
than 40 percent since 2007, the too big to fail banks have gotten 37
percent larger, and the colossal derivatives bubble has spiraled so
far out of control that the only thing left to do is to watch the
spectacular crash landing that is inevitably coming.
For a long time, I have been convinced that
this two year time period is going to represent a major “turning
point” for America.
Right now, 2014 is turning out to be eerily
similar to 2007.
Will 2015 turn out to be a repeat of 2008?
Please feel free to share what you think by
posting a comment below…
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