The media are cheering the recent rise in home prices, insinuating that it's a sign the economy is improving. Those of us who actually look behind the numbers know better: it's a function of investors throwing cheap, low-risk, Fed-provided dollars at the housing market, just like they did in the mid 2000s. It's part of the "mother of all bubbles" the Fed is inflating--as Nouriel Roubini is calling it--, and it will eventually lead to another economic calamity.But until the new bubble bursts, it's fast times in the housing market. Home prices are once again shooting for the stars, and, not surprisingly, the markets that are rising the quickest are the markets in which investors are throwing the most capital. From Forbes:
Institutional investors have been targeting specific markets and then accelerating purchases of REOs in those markets, driving down distressed inventories and leading to notable increases in REO prices that have in turn led to larger market upticks.
Institutional investors have focused buying efforts strongly on south and southwestern cities that were hit hardest by the foreclosure crisis. The cities where investors activity has been particularly robust in the past year are Atlanta, Ga., Detroit, Mich., Las Vegas, Nev., Phoenix, Ariz., and Calif.’s Los Angeles.Note that 5 of the 6 fastest-rising markets are markets in which investor activity has been "particularly robust", as per Forbes:
It's 2005 all over again. It will be 2008 again in just a few short years.