Authored by Charles Hugh Smith via OfTwoMinds blog,

All these curveballs will further fragment the housing market.

Oh for the good old days of a nice, clean housing bubble and bust as in 2004-2011: subprime lending expanded the pool of buyers, liar loans and loose credit created speculative leverage, the Federal Reserve provided excessive liquidity and the watchdogs of the industry were either induced (ahem) to look away or dozed off in a haze of gross incompetence.

The bubble burst was also straightforward: unsustainable debt, leverage, fraud and speculation all unwound in 2009-2011. The cause was obvious and the effect easily predictable.

Alas, today’s housing bubble and bust has these curveballs:

1. A stupid amount of cash sloshing around the world.

2. Who has the cash and an interest in using it to buy houses.

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One reason why people with cash will be interested in using it to buy a house is the urban migration is reversing. The rich people who snapped up tony homes in tony urban neighborhoods are quietly selling to the unwary and moving to rural towns and exclusive enclaves far from decaying urban centers.

The places the wealthy want to live don't want sprawl and new homes sprouting up, so supply will be limited. Locals who preceded the wealthy also have a dim view of sprawl, congestion, overcrowded schools, and all the other blights of building booms.

Strong demand from cash buyers and limited supply equal home prices which don't drop, they only notch higher. Note that 1) mortgage rates don't matter to those with stupid amounts of cash and 2) these are not the average speculative buyer, they're buying for themselves, and are protective of everything that makes the place somewhere they want to live: they are Super-NIMBYs (not in my back yard). "Growth" is fine as long as it's somewhere else.