We’re in the late stage of the 18.6-year real estate cycle.
This is not to say that the end of the cycle is here… on the contrary, the coming months and years will see investors’ fear turn to mania.
We’ll see the housing market soar… driving the economy and the stock markets.
But not everybody will be able to take advantage of this opportunity. They’ll buy – and sell – at exactly the wrong time.
Read on to learn about how you can be one of the few who gets it and profits from what’s coming.
Here’s What It’s All About
For the real estate cycle to keep going, banks need to continue lending.
And, ideally, to increase it.
That’s why, it’s all about liquidity.
Ample liquidity makes money available for households and businesses… who take on loans and mortgages. They drive up the price of real estate, fueling the cycle.
You’ve probably never heard about it…
But there is a $1.5 trillion “insurance” against a housing market crash built into the banking system.
And it will keep the cycle going.
It’s called the Federal Home Loan Bank system.
It was created during the Great Depression, nearly one hundred years ago.
Back then, the idea was quite simple: the government would support the banking system if they ran out of funds to lend to their clients.
But as is always the case with a government intervention, the markets take advantage of it for their own profit.
The FHLB system doesn’t insure against a market crash… but it could, in fact, accelerate the race toward the end of the cycle.
From Bloomberg:
Silicon Valley Bank, catering to venture capitalists and tech startups, said it held $15 billion from an FHLB at the end of 2022. Signature Bank, with clients including crypto platforms, had $11 billion. And by April, First Republic Bank, offering mortgages to millionaires on unusually sweet terms, ended up with more than $28 billion. All four banks collapsed.
FHLB is issuing hundreds of billions of dollars to make sure that the mortgage market grows.
Back in March, it issued $304 billion in debt, more than twice as much as the Federal Reserve, which put about $165 billion in the economy during the banking crisis.
And it lent it to everyone, from traditional banks to Silvergate Capital, a company that specialized in cryptocurrency.
Wall Street also tapped into this almost unlimited source of liquidity for short-term purposes.
It looks like it’s there for everybody.
And it will continue driving the cycle toward its logical conclusion.
Much like it didn’t prevent the collapse of some of the banks that used its funds, it won’t save the system from the inevitable turn of the cycle.
Because nothing can. The real estate cycle always finds a way to complete its 14 years up, four years down pattern.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson
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