Some economic commentators are asking if the recovery touted in the corporate mass media is real or another bubble created by the Federal Reserve Bank at the behest of Wall Street. Consider two pieces of evidence that the American economy is in recovery: consumer confidence and housing prices. Consumer confidence on the Conference Boards index hit 76.2, the highest level since February 2008. You may recall if you are not affected by ADD that 2008 will go down in history as the year the global economy melted down. However, the average consumer confidence level during a recession is about 79. Americans are obviously not economically clairvoyant.
Housing prices seem to be another false signal that our economy is mending. They are rising at the fastest rate in seven years. One would think that the increase in housing demand would be reflected in more loan originations. Look at the chart and think again. Loan originations are well below the bubble years and even below post bust 2009. The number of loan originations are at the same levels of the mid '90s. The reason for this logical incongruity is the demand in the housing market is mostly from financial institutions and speculators, while the supply is being constricted by lenders, thus driving up prices. One investment firm alone, Blackstone Group, has bought 26,000 homes in nine states. JP Morgan-Chase says institutional buyers have amassed $10 billion for buying distressed single family homes to renovate and rent to Americans. In California house flipping has reached 2005 levels. Three major banks halted their foreclosure sales last month to prop-up house prices. US Person's advice: sit tight and conserve cash just like the "big fellas" are doing because the Second Great Depression isn't over:
