wall street nuggets

Are we seeing a turning point in the amount of real estate loans outstanding at commercial banks?  As can be seen in the graph below, the amount of real estate loans at commercial banks as tracked by the Federal Reserve has been steadily climbing for the past twenty years.

We only have data though January of 2009, but there have been some signs that we are reaching some sort of pressure point.  The jump of 160 billion dollars in October of 2008 was very strange and recalls a similar odd jump of 150 billion dollars in October of 2006.  Looking at the rather odd drop in real estate loans back in March of 2006, I suspect we will see another drop of about 60 billion dollars in March of 2009.

It might be more appropriate to look at the ratio of real estate loans outstanding to disposable income, if the real issue is the affordability (or lack thereof) of the real estate boom.  This also is a cause for grave concern, given this ratio has increased by about 175% over the past 30 years.

The shaded regions in this plot identify periods of recession in the economy.

By the way, lets have some good news.  It was a great day in the markets after a few weeks of rather pathetic returns.  Today, the overall market was up about 8% pretty much across all sectors.

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