April 27, 2014

An Attempt To Reestablish An Unsustainable Charade

Readers suggested a topic on the changing housing market. “How long from now will the MSM openly acknowledge U.S. housing price declines?”

A reply, “I do not expect ‘rebubble pricing’ to continue. My expectations of the market are that housing prices will bounce along with the seasons, some increases, some decreases, but generally a moderately upward trend of 0-5% annually. I believe the Fed will continue to taper, the economy will continue to percolate and recover and the two will offset each other.”

“I do know that 85% of the residents in my properties are seriously saving to buy their own home. That seems like a telling statistic. All the young members of my family are in the market to buy homes for themselves in the next few years. Household formation is a powerful factor in the markets.”

One said, “I’m not trying to live a single life and I would give in to actually owning a house but not if I’m going to be ripped off by the hucksters in the REIC colluding to prevent a drop back to where things would be if not for the fraud and crookedness. My stridency this time comes from the blatant shills and pimps who deny recent and obvious history. Prior to the last fall at least there wasn’t this obvious data point staring you in the face.”

And finally, “A moth goes to the light. A mariner keeps it to one side. It is not negative to avoid obvious hazards. I boat through water with rocks and shoals. I am optimistic that I will arrive safely at my destination because I do all possible to identify the rocks and go around them.”

The Wall Street Selector. “The contraction that follows on the heels of a major real estate bubble is often just as sticky as the previous expansion was. The reason (as e.g. Japan demonstrated) is that someone has to bear large losses once the phantom wealth disappears – whether the losses are admitted to or not. The illusory accounting profits of the boom were very large, and the subsequent losses are essentially their mirror image.”

“One therefore ends up with a banking system unwilling and incapable of restarting the inflationary lending cycle (mind, it would be capable in theory, but in practice it would maneuver itself into an even more vulnerable position) and scarred would-be borrowers who are no longer interested in burdening themselves with debt that might come back and haunt them in the future.”

“We subsequently watched with awe as Bernanke’s ‘QE’-driven echo bubble grew ever larger, eventually beginning to take house prices back up as well, in spite of still widespread mortgage delinquencies.”

“However, as our resident real estate expert Ramsey Su (who has been active in the RE business for decades) never tires to point out, there is no reason to believe that the echo bubble is any more stable than its predecessor, as it largely depends on all sorts of government interventions, with the Fed’s money printing and interest rate manipulation the most important. While fewer and fewer people voiced skepticism over time, Ramsey has kept at it, inter alia warning that Wall Street firms buying up homes in REO-to-rental schemes don’t represent organic demand, and in fact only serve to price out potential first time buyers.”

“Moreover, the ever higher pile of new rules and regulations bedeviling the mortgage industry has slowly but surely created housing finance socialism, with government-subsidized entities such as the carcasses of the GSEs completely dominating the market.”

“Who is served by rising house prices? In the end they are the outgrowth of an attempt to resurrect the illusory wealth of the expired bubble. They may help ‘repair’ credit that the bust has revealed to be unsound. However, this ultimately means that unsound investments are not liquidated. Instead there is an attempt to reestablish what is essentially an unsustainable charade.”

Business Insider Australia. “Below is an interview with Jed Kolko, chief economist at Trulia. BI: What is the most under-reported story in housing?”

“JK: There are actually still a lot of vacant homes out there. Even though the inventory of homes actually listed for sale is below long-term norms, the share of vacant homes is still higher than pre-bubble levels, including in many markets that have traditionally been fast-growing. The elevated vacancy rate holds back construction activity because builders don’t want to build where there are already a lot of vacant homes. The main sources of housing data don’t tell us for sure why there are a lot of vacant homes being held off the market (i.e. neither for sale nor for rent).”

The Market Oracle. “The Cameron/Osborne Help-to-Buy bubble is already well past its best-before date. Even if thousands more foreign buyers high on cheap credit and shady deals may flock in before this city-of-cards comes tumbling down. What Downing Street 10 will have done is to dislocate huge numbers of Londoners unable to keep up with rising prices, and fool many many gullible thousands more into signing up for the property ladder only to to be unceremoniously kicked off with huge debts tied around their necks.”

“There are those who would argue that in financial systems and ‘free’ markets, those who don’t pay attention get fleeced, and that this has a function. But for a government and central bank to push and advocate this sort of development, just to look better for a short time, is a whole different story.”

“Not a day goes by that I don’t hear and read yet more about the miraculous recovery Britain has accomplished for itself. Obviously, there are very similar ‘miraculous recovery’ stories doing the rounds about the US. And for very similar reasons. Nevertheless, both existing and new home sales numbers that came out this week spell it out as clear as you can wish it to be: the US housing recovery is dead. Falling sales, construction dead in the water, the works.”

“I read something toady to the extent that ‘100% of experts polled agreed that US interest rates would start rising significantly this year.’ I’ve said it many times before, and I’ll say it again: GET OUT! You’re not all going to be among the 1% of people who beat the markets. Go find something more useful to do with your time and your money and your life than to spend it all in this cheap credit casino that was constructed specifically to take it all away from you.”

Bits Bucket for April 27, 2014

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