If 2008 was the watershed year of the US subprime mortgage crisis, we could say 2015 marks a rebirth.

That’s after the protracted death throes of the old cycle.

I say that because the strength in the US housing market is obvious now.

You only have to check out the recent news to see why. The Wall Street Journal reported recently that the foreclosure crisis in America is essentially over.

The paper cited Mortgage Bankers Association stats that said foreclosure starts were 0.4% in the second quarter. The delinquency rate—loans past due but not yet in foreclosure—is at its lowest point since 2007.

Sure, there’s a backlog of bad debts and cases to work through in some states. But the market has known and discounted these long ago. What’s left to worry about in US housing?

Well, there’s always something to worry about. But you have to go 180 degrees now. The pressure is on affordability now. Rents in key cities are rising. They’re also consuming a growing chunk of household income.

You don’t have to look far to see why. Bloomberg reported last week that builders replenishing land holdings are finding that prices across the US have jumped 57% since the bottom in 2009.

They even included this handy graph. Check it out…

Make no mistake about this. The investors who had the cash in 2009 to scoop up the distressed sales all over the country are sitting on (or selling out with) enormous profits. To give you some idea, Bloomberg 

profiled hedge fund manager John Paulson.

Heard of him? He rose to fame for big bets against the US subprime market before it collapsed. He cashed in billion dollar profits. After 2009 he made some costly bets on gold going up that didn’t work out.

Until last week, that’s what I knew of his career. What I didn’t know was that alongside his gold position was an aggressive one he took on a rebound in US housing. We’re talking figures to the tune of $770 million. He cashed in on the way down and on the way back up.

Notice how he was quite happy to tell everyone about his gold position, but he seems to have told absolutely no one about all the land he was buying.

The gold was in a fund — other people’s money. The land purchases seems to have been his own cash.

And by the looks of it, the payoff is big in parts of the US. For example,Bloomberg reports that in Nevada land valued at $20,000 an acre is now selling at $400,000 to $450,000 an acre.

That’s some move up.

When the big guys are on a sure thing, they’re not going to tell you about it. And land prices going up after 2009 were a sure thing. Cycles, Trends and Forecasts is the only group telling you why. If you want to know more on the cycle timing, see here.

Let’s reflect here on what’s dominated the headlines for the last five years. And that’s been mostly why the next collapse or depression is just around the corner.

It must have kept millions—both people and money—on the sidelines. It still does.

Meantime the big boys—Paulson, Blackstone Group, hedge funds and private equity groups—bought up all the real estate cheap. They got the kind of deals you’re lucky to get once in a lifetime.

Soon will come a switch…

Once the banks that financed the disaster before 2007 have completely offloaded their bad debts and properties, we can expect the good news to start coming out. This will drive prices even higher, before the amateurs buy at the top again next decade.

Let’s not forget how the US government will slowly facilitate the return of first time and lower-middle income buyers now. The banks, homebuilders and real estate agents need this demographic back in the market. That’s because it’s mostly the top end, luxury money driving the residential market at the moment.

It’s been proved over and over again that voters like rising house prices—as long as they’re in on the action. Long-term consequences be damned.

So what do we see recently? Last year the deposit required for a housing down payment was reduced to 3% for certain borrowers. In January President Obama cut the insurance premiums borrowers have to pay to the Federal Housing Authority. This was to promote ‘home ownership’, according to theWall Street Journal.

Never mind the fact that the FHA required a $1.7 billion bailout in 2013 from the losses it copped in the wake of the subprime crisis. Politics, I tells ya!

Or as the WSJ reported at the time:

Getting a mortgage is too difficult for many Americans, say administration officials. With a housing recovery under way, albeit in fits and starts, the White House has shifted its focus toward improving access to credit for many families that face tighter mortgage standards and sluggish wage growth.

Indeed. Why do you care? Soon the credit expansion will kick into full gear in the US. Once banks are free to lend, you can get rapid expansion in lending—which is at 8 o'clock on our real estate clock.

Once homeowners and companies start finding credit easier to obtain, the next cycle gets fully underway.

Once homeowners and companies start finding credit easier to obtain, the next cycle gets fully underway.

Or, think of it this way: the 'recovery' so far has really only got us back to the starting blocks. The race will start now, and run into the middle of the next decade.

What will the big boys be doing then? Start here.

© Text Copyright Callum Newman rights reserved.
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