July 5, 2015

Mid-Year Housing Bubble Predictions

What do you predict for the future? From six months ago. “Interest rates stay in a holding pattern even as the fed ends QE. Treasury rates also stay in a holding pattern. Junk bonds fall as oil prices tank and a mini stock market turmoil develops as losses in junk bonds make some investors sell off their stocks. Some pension funds that carry these bonds fail. This might extend to those homes for rent funds but that may just be wishful thinking.”

“More small time flippers get tired of the work for less than the fancy returns they expected, sell their housing stock at a loss and get a real job. Rents stabilize and house prices stay in a holding pattern overall. More apartments built with wooden framing catch fire in California resulting in the government restoring the old requirement for steel framing for multistory buildings.”

“Wages finally start going up and business owners in suburbs and rural areas start finding major problems in attracting employees. Getting roommates becomes more normal for more people in the Bay Area supporting high rents but allowing individuals to pay less than they had prior to the boom. Los Angeles ‘ silicon beach siphons tech workers from the Bay Area but sf continues to be the main draw with both businesses and housing concentrated in the city proper. The overvaluation/ bubble existing in pre-IPO stocks like uber and lyft stay high but wait for 2016 when the need to start showing a profit becomes real.”

One said, “Link of oil and other commodities prices collapse to China and Eurozone economic slowdowns becomes increasingly irrefutable. Oil doesn’t drop much further, but also fails to quickly rebound as predicted by many economists. Oil patch state economies feel the pain. Price of oil patch housing takes a hit due to sudden weakness in demand. Fracking junk bond carnage comes to light.”

And this, “China’s contribution to global and Asian debt growth still accounts for 27.8 percent and 50 percent respectively, according to estimates of the International Banking Fund. Fake growth based on borrowing is everywhere, but especially concentrated in China. It will have to end like all epoch credit expansions, hard to say when.”

One year ago. “the clogged pipeline of foreclosures will be cleared away by magic (and somehow consequence-free for banks) debt forgiveness and restructuring, which of course will fly under the radar.”

Another said, “Gasoline goes up. Health care cost go up. Taxes go up. Education cost go down. Housing goes up in price were the 1% live down everywhere else.”

And this, “The Fed has no choice but to monetize this Wurlitzer in order to prevent asset price drops, pumping nominal house prices up to generate increased property tax revenues, thereby bailing out municipalities, and upping prices of things in general, to increase sales tax revenue.”

“In the process, amnesty that the Home Builders and Realtors are lobbying for, will be granted. This adds 15-35 million new household formers to the picture. Once legitimacy is established for these millions, Fanny, Freddy, FHA, etc will solicit these new customers to join the ‘Murikan dream, absorbing 14 million vacancies, plus what ever in addition need to be built to accommodate these new ‘citizens,’ and the millions who flood in behind them in anticipation of the next amnesty. (With risk of losing a home by being deported gone, multiple family living arrangements will give in to single family household formation.)”

“Lagging incomes will begin rising as this tsunami of new money, and velocity of same, exponentially increases. The Fed will see to it the money gates remain wide open until inflation is running double digit, and interest rates are up to around 100 basis points behind it. In other words, it’s QE until the old 20’s tune ‘We’re in the Money’ takes a position on the Top 40 again. As Hendry suggested, one trillion didn’t do it. Four trillion didn’t do it. But some trillion, some day, will.”

And finally, “No question the spring market was a disaster, except for the folks who gave property away and took their losses overall it was a standoff, and sellers took it hard on the chin. Reducing of prices still produce little sales, buyers are now seeing lot of houses pulled from the market as sellers say, we will wait till fall to realist or gauge the temp again.”

“Many grossly underwater got out, the folks who can afford to stay and many can now, well it will be intersting, somebody always needs a house and if interest rates move towards 5% look for a flurry of activity in the near future?”

Bits Bucket for July 5, 2015

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