The Aftermath (Phoenix AZ Home Price Bubble Case Study) – Investment Watch


by confoundedinterest17

Phil Hall from Benzinga wrote a series of excellent four-part articles for MortgageOrb (although “The Orb” has removed his name). Here are the links to their stories.

mortgageorb.com/the-fall-and-rise-of-the-housing-market-part-one

mortgageorb.com/the-fall-and-rise-of-the-housing-market-part-two

mortgageorb.com/the-fall-and-rise-of-the-housing-market-part-three

mortgageorb.com/the-fall-and-rise-of-the-housing-market-part-four

After rereading these excellent articles on the housing bubble and collapse, I thought I would take the opportunity to present some charts to highlight the housing bubble, before and after the collapse.

Here’s a chart of home prices in Phoenix AZ. Consider the bubble that peaked in mid-2006. The Phoenix bubble correlates with the large volume of sub-620 FICO loans and adjustable rate mortgages (ARMs). Note that many of the pre-2010 ARMs were ARM loans from the NINJA (no income, no job).

What happened? Serious crime nationwide soared as the Great Recession began and unemployment soared.

Since the housing bubble burst and severe mortgage delinquencies rose, the Federal Reserve entered the economy with a vengeance. And they have never gone away, and they have increased their drowning markets with liquidity.

Certainly the radical change in interest rates by the Fed in response to the 2001 recession was a problem. They lowered the Fed funds target rate like a rock, then homebuilding went wild nationwide and home prices soared thanks to Alt-A (NINJA) and ARM loans. But now the Fed is dominating the markets like a gigantic T-Rex.

Interestingly, then-Fed Chairman Ben Bernanke never saw the bubble coming. Or the outbreak.

Speaking of pizza, Donato from Columbus Ohio it is my favorite. Founder’s Favorite is my favorite, but they offer the dreaded Hawaiian pizza (ham, pineapple, almonds and … cinnamon?)

Bleech!






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