Believe it or not, your home equity is fake! The majority of folks truly believe their homes are a great investment or could be categorized as an asset, and who would think otherwise with home prices shooting skyward over the last few years! The definition of an asset is straight forward, if you receive funds every month/periodically for something you own or control, then it’s an asset.

The Federal Reserve’s Influence on Housing Markets & Home Equity

The Federal Reserve’s very rich founders met in secret off the coast of Georgia in 1910 to essentially agree to stay out of each others markets, or in other words to protect their own monopolies. Most people believe the FED was created to stabilize the economy by keeping inflation in check. Not so! The FED is a private banking cartel with their primary goal to prop up asset prices for the ultra wealthy.

Following the “Great Recession”, the FED cut interest rates to near 0% from 2009 – 2015. The FED also admitted to creating a “Wealth Effect” to essentially deceive the people. By adding the term “Quantitative Easing” which is just another name for money printing, the FED embarked on one of the greatest economic deceptions since the creation of the Federal Reserve in 1913.

Consider the following about the economy:

• The FED printed over $123T from 2009 to 2021 and purchased US Treasuries to keep interest rates low. This helped to artificially inflate real estate prices all over the country.
• How are folks making ends meet when real income is shrinking and inflation is at a 40 year high?
• How can you grow the economy when interest rates are rising?
  
• The largest home flipper’s stock price closed at $1.63 on 1/12/2023. They are still refusing to lower home prices much in severe downtrending markets. Market forces determine prices and Opendoor going bankrupt would send home prices lower.

Housing Debt and Home Equity

From 2008 to 2019, housing debt rose by just $100B. Over the next two years the housing debt increased by $282B. Home refinancing during 2019 – 2021 was raging and folks were pulling over $320B per quarter out of their “home equity”. In November of 2021, home prices started to drop due to a slowing economy and high inflation. Home equity dropped by $63B in 2021 and by $1.5T in 2022.

Summary

As mentioned above, the FED has duped most homeowners into thinking they are “rich” by artificially inflating home prices. Unfortunately, home prices are setting up for a huge crash that will make 2008 look like a walk in the park.

Here are some more alarming facts, corporations were paying over $650B per year to service their loans prior to the FED’s zero interest rate policy (ZIRP). Non-financial corporate debt now stands at over $12.8T as of Q3 2022 and companies are starting to lay off workers in mass. The tech industry alone has laid off over 150,000 workers.

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P.S. If you’re interested in learning more about the state of the economy, check out – Epic Economist – YouTube

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Sources: Philsgang, FRED