Bank Stocks Rebound as Home Prices Start to Weaken

With all of the different government programs put into place since the 2008 financial crisis to manipulate the credit markets and artificially boost home ownership, the fact of a bubble in home prices is no great surprise. Add to that the limitations on bank lending for new residential home construction and you have the perfect formula for killing the American dream of home ownership of American families.

We believe that the year 2018 may be remembered as marking the peak in both bank equity valuations and residential home prices. Residential loan default rates are unlikely to rise very quickly given the shortage of moderately priced homes, but as we note in The IRA Bank Book, bank net interest margins are likely to be as flat as the yield curve by year-end. And the embedded credit risk in the financial system will continue to build with each passing day and largely due to the conflicting policy decisions emanating from Washington.

Link here.