Zeev's Turnips Patch-No Politics (ZEEV)

[ogm]

Consumers keep extracting money through home equity loans at a frentic pace. 112 bil extracted last quarter again, thats on track for another 400+ bil year. Just like last year. This is approximately equal to 3.5% GDP. And guess what, this is the estimated economy growth rate.

The real question is how long can this home equity frenzy last ? How long can home prices appreciate at 15% a year if the incomes are barely growing ? How many more loans the banks will give away before they will realize that they won't get the money back ?

Because once this borrowing binge is over there will be a MAJOR recession.

This whole economy is about housing. And price appreciation in housing.

Once housing prices will stop appreciating, the whole ponzy scheme will kick in reverse.