U.S. Housing Bubble 2.0

Yahoo! Interview of David Stockman Feb 4, 2013

David Stockman the former director of the Office of Management and Budget in the Reagan Administration on the topic of whether the current "U.S. housing recovery" is one. 


According to David Stockman:

• “I would say we have a housing bubble...again.”
• “We don’t have a real organic sustainable recovery because in a world of medicated money by the central bank, things aren't what they appear to be” 
• “It’s happening in the most speculative sub-prime markets, where massive amounts of 'fast money' is rolling in to buy, to rent, on a speculative basis for a quick trade,” 
• “And as soon as they conclude prices have moved enough, they’ll be gone as fast as they came.”

Bloomberg reports that: Blackstone (BX) has spent more that $2.5 billion on 16,000 homes to manage as rentals. It’s now the country’s largest investor in single-family homes to manage as rentals, with properties in nine markets. And Blackstone is joined by others like Colony Capital LLC and Two Harbors Investment Corp. (SBY) in trying to turn this market into a new institutional asset class. 

Stockman argues the problem in housing is the two forces needed for a recovery, first-time buyers and trade-up buyers, are missing. With the combination of 7.9% unemployment and staggering student loan debt, he doesn't see a young generation of new home buyers coming into the market. And with baby boomers heading for retirement with less than adequate savings, he thinks they’ll be trading down with their homes, not up.

As for the "American Dream" of home ownership, Stockman argues the past model where the government was trying to get to 69% home ownership was a huge policy mistake that led to no-down payment loans, liars loans, and a degradation of lending standards. He says the government should have no dog in the hunt when it comes to ownership versus renting. “Let the market decide,” Stockman says.

February 4, 2013 Lauren Lyster of Yahoo! Daily Ticker Interviews David Stockman: Full text and 4.59 minute video interview here.

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