It Was Gruesome Watching People Not Make Much Money
A report from the Washington Post. “London: They are not hard to spot, if you know where to look, especially at night - the floors of swanky, new apartments, most of the windows dark, almost all the time. The zombie flats. Owned, but empty. There’s enough empty property here to be given a name in the British news media: the ‘ghost mansions’ of ‘lights-out London,’ the streets where it is alleged that 7 in 10 addresses are second - or third or fourth - homes. The blight of conspicuous empty homeownership is a big story in London - and around the globe. The ‘empty home’ phenomenon has gone viral in hot postal codes around the world - and it is especially visible in cities such as Miami, Hong Kong, Vancouver, B.C., Dubai, Singapore, San Francisco and Sydney, where foreign buyers and their shell companies gobble up units as investment properties and piggy banks.”
“In Manhattan, the New Yorker had a look at Census Bureau numbers, which revealed that in midtown - from 49th to 70th streets, between Fifth and Park avenues - nearly 1 in 3 residences are unoccupied at least 10 months a year. Newsweek estimated in Paris ‘one apartment in four sits empty most of the time.’ In Jerusalem, the deputy mayor said the number of ghost flats is triple the official estimate - and bemoaned the impact on young families searching for a bit of living space.”
From Better Dwellings in Canada. “Toronto real estate inventory has been increasing over the past few months, and we wanted to see what kind of sellers we’re looking at. An analysis of properties listed for sale in the City of Toronto show that over 6% were bought less than 18 months ago. While some have ask prices that might prove profitable, we estimate 1 in 3 of these listings are currently looking at a loss.”
From Bloomberg/Dubai. “Dubai residential property prices and rents are set to fall further as losses of high-paying jobs and dwindling household incomes boost vacancies across the city, according to Phidar Advisory. ‘The false start of early 2017 is over and the cracks are starting to show,’ Jesse Downs, managing director at Phidar, an advisory firm specialising in real estate, wrote in a report. ‘Sales volumes of completed properties are at a six-year low and vacancies are rising across the city.’”
The Vanguard in Nigeria. “In spite of the cheering news that the country is getting out of economic recession, the bleak outlook of the housing sector of the nation’s economy will remain a major cause for concern for real estate developers and the survival of their businesses in the country. This is because developers have been churning out housing units in different parts of the country without corresponding demand for them. This has subsequently led to the astronomical increase in the number of unsold housing units across Nigeria.”
From Reuters on Brazil. “A Brazilian land developer controlled by U.S. buyout firm Carlyle Group LP investment vehicles has appointed turnaround specialist Ivix Value Creation to help it reverse mounting client lawsuits and avoid filing for bankruptcy protection. The move is intended to help Urbplan find a way to avoid restructuring a pool of asset-backed securities and credit worth 450 million reais ($144 million) and recover from a period of weak housing activity, they said.”
“Their first task, they told Reuters, will be reviving confidence among creditors that Urbplan will repay them. ‘We are not here to carry out an autopsy of the company, which means we’ll do whatever it takes to avert Urbplan’s bankruptcy protection,’ said partner Nelson Bastos.”
From The Australian. “Mortgage belt suburbs in western Sydney are starting to show signs of stress, topping a list of areas across the state where homeowners are having the most difficulty keeping up with their loan repayments as the housing boom starts to slow. The worst performing postcode in NSW is Ashcroft, 29km southwest of Sydney’s CBD, according to a ranking by ratings agency Moody’s of suburbs where homeowners are more than 30 days behind in their mortgage payments.”
“Carnes Hill in the city’s southwest was ranked third, Fairfield was eighth and Bidwill in Sydney’s northwest was ninth. The ranking follows a five-year bull run in the housing markets of Australia’s east coast capitals, where dwelling prices had soared on average about 80 per cent in Sydney, according to CoreLogic.”
“The western Sydney mortgage belt suburbs were home to a noticeable proportion of first-home buyers who often bought in house and land communities being developed in the city’s growth corridors, said Savills Australia head of residential research Sophie Chick. ‘You’re seeing people moving into new homes so you don’t have that existing equity. So when you have a look at the distribution of people there (in these new communities) they’re all new buyers to the area, so they’re more likely to be taking out mortgages,’ Ms Chick said.”
Fromm Stuff New Zealand. “Former Block Australia contestant Carlene Duffy, who walked away with just $10,000 from her auction, said it will take the losing Block NZ contestants ‘months to get over the shock and devastation’ of falling short at auction. ‘I would just give it time, because it probably took us a few months,’ Duffy said. ‘This whole experience, you sort of feel like you are in a bubble and it’s very insular, but if give yourself time and once the shock wears off, you can re-evaluate where you go from here.’”
“Carlene and her husband Michael Duffy were fan favourites of The Block Australia’s 2014 ‘Glasshouse’ season, which saw an abandoned 1980s office building transformed into multi-million dollar apartments, but were gutted when 14 weeks of renovations yielded them just $10,000 at auction.”
From The Spinoff. “For the last six years The Block NZ has been both New Zealand’s most successful reality franchise, and the most illuminating cultural artefact of this era. The show features four teams racing to complete a renovation or build of adjacent houses, with each retaining the profit from the sale, while those who get the largest profit also get a $100,000 cash prize.”
“For five years the show rode the surging Auckland housing market ever higher. Back in 2012 houses in bourgie Takapuna went for between $789,000 and $961,000 – figures which seem almost quaint today. Gradually the median lifted: it was $983,000 the following year, rocketing to $1,429,000 on moving to Pt Chev in 2014, before posting $1,327,500 and $1,425,000 in Sandringham and Meadowbank respectively.”
“Every year the show’s contestants profits grew a little fatter, rising like the market from a little over $300,000 combined in year one to peak last year with the four teams splitting a Lotto-like $1,081,000. And, for mystifying reasons which can be known only to the contestants, Mediaworks, the IRD and our legislators, all that money was tax-free.”
“Which is to say that The Block NZ functioned as a perfect advertisement for our housing market: vastly expensive but only going up; everyone made tonnes of money; no one paid tax. Truly, this reality TV captured our era better than any big budget drama could ever dream of doing. Until, last night, it all broke down. We’ve been told the market will crash or stall since before 2012, but last night we watched it happen on live TV. It was gruesome viewing. Auctioneers in bright yellow ties, coated in sweat looking out at motionless audiences. We watched three-part tragedies unfolding before our eyes.”
“It was wrenching television, watching ‘people not make much money,’ as host Shelley Ferguson put it, and no one on screen was in any mood to celebrate. Worse than the timing was the constant push to bigger and bigger houses, which mirrors that of the market as a whole. Our house-size has risen over the past few decades from around 100sqm to closer to 200sqm. But the bigger and richer they are, the less liquid, as we saw last night.”
‘last night we watched it happen on live TV. It was gruesome viewing. Auctioneers in bright yellow ties, coated in sweat looking out at motionless audiences. We watched three-part tragedies unfolding before our eyes’
This must signify something.
‘The western Sydney mortgage belt suburbs were home to a noticeable proportion of first-home buyers who often bought in house and land communities being developed in the city’s growth corridors’
Lovely.
“Carlene and her husband Michael Duffy were fan favourites of The Block Australia’s 2014 ‘Glasshouse’ season, which saw an abandoned 1980s office building transformed into multi-million dollar apartments, but were gutted when 14 weeks of renovations yielded them just $10,000 at auction.”
They got off easy. They could have lost their shirts and wound up in BK court.
Imagine the collective horror of watching the big “lotto” pop on nationwide tellie. I think that’s why it’s being reported like a public massacre. The first article mentions they were used to everybody on the show walk off with hundreds of thousands. Just how long did they expect this to keep going?
2 people, 14 weeks of work for $10,000.
8 hours per day for two people for 14 weeks.
16×7x14 = 1568 / 10,000 = 6.37
They made $6.37 cents an hour.
Now add in taxes and expenses…
I wonder what the auction house fees were…
They got off easy. They could have lost their shirts and wound up in BK court.
Yeah.
It was wrenching television, watching ‘people not make much money,’ as host Shelley Ferguson put it, and no one on screen was in any mood to celebrate.
If watching people “not make much money” is bad, just think what it will be like to watch people lose money. But that could never happen.
They’re not making any more Zealand.
da bear
Some of the HGTV shows have this problem, but they slide around it.
Flip or Flop always ends with an open house. Most of the time people make offers, but if no offer come in at the wishing price, the show end with Tarek doing a disgusted voiceover like “If we don’t find a buyer then we’re stuck with this thing, or we have to drop the price …”
More often, the shows end with some realtor saying “I would list this renovated house for X.” Only the list price. The show doesn’t say if the house actually sold for X. Didn’t we see some article where the renovators themselves (”Income Property” for example) aren’t selling the house, they are renting it out and waiting for appreciation?
You do know those shows are totally fake, right?
You do know those shows are totally fake, right?
Hahah…this is my little sister…she got “internet-famous” for a while for actually going public with how fake they are.
http://hookedonhouses.net/2012/06/11/house-hunters-what-it-was-like-to-be-on-the-show/
It ended up making the national news.
Seeing this happen in SoCal too. Lots of flips sitting on the market for weeks and months, with contracts often happening only after one or more price reductions. This press release provides some hard data on what’s been happening.
https://www.attomdata.com/news/home-flipping/q2-2017-u-s-home-flipping-report/
Two of the zip codes in SoCal that they identified as having at least 25% of home sales being flips are in South Central LA… with the known-to-be-dangerous area west of USC having a third of sales be flips in Q2 2017! LA County averages 193 days to flip, which does not surprise me given that many of these properties are dilapidated mid-century or older shacks that previous owners often lived in until death.
See the price history for a place in my brother’s SoCal neighborhood. They listed their “flip” that same week for a 63% markup!!! And the only “renovation” this FB was add a staircase connecting what were previously two separate up-/down-stairs units. The pictures on the listing clearly indicate it is still a POS that need $100k+ in work to even be habitable!
Date Event & Source Price
5-Sep-17 Price Changed $699,900
5-Sep-17 Price Changed $699,900
24-Jul-17 Price Changed $795,000
24-Jul-17 Price Changed $795,000
10-Jul-17 Price Changed $875,000
10-Jul-17 Price Changed $875,000
19-Jun-17 Listed (Active) $975,000
15-Jun-17 Listed (Active) $975,000
12-Jun-17 Sold (MLS) (Closed Sale) $600,000
14-Nov-16 Listed (Active) $660,000
Figure taxes, fees and closing costs on buying and selling the flip = $40,000
Renovation costs? Min of $40,000
Getting awful close to break even.
Now add in the monthly alligator charges.
Not giving it away….
‘The false start of early 2017 is over and the cracks are starting to show’
Yeah, well what did you expect Dubai? But congratulations, you managed to pull off two spectacular booms and crashes in just 15 years. BTW anyone notice that London, Auckland and Lagos were at one point or another the most expensive housing markets in the world? Now it’s sad pandas all around.
But…but…
It’s different here…
California is the most impoverished state in the country:
http://www.sacbee.com/news/politics-government/capitol-alert/article174026561.html
Becoming a sanctuary state and letting in more illegal criminal invaders can fix this!
They like to say that illegals “pay taxes.” Evidently they aren’t paying enough taxes to support the social services they are getting.
FWIW, California isn’t even in the top 10 of percentage of population on food stamps:
http://www.huffingtonpost.com/2011/05/13/10-states-with-the-greatest-food-stamps_n_860233.html
Also, when I lived there, everyone bitched about the cost of living. But when we announced that we were leaving, our social circle was incredulous.
Los Angeles is the only place in the country I have seen barbed wire around highway overpass signs to protect them from gang graffiti.
And with the prison realignments letting out all sorts of bad guys - it’s starting to make a comeback.. along with crime and homelessness. Looks like the 90s in LA all over again.
Fun…
I’ve never understood “taggers”
I remember first seeing Taki 183 on the (NYC) subway. Seemed to be everywhere. Next thing you knew every moron in the city was doing it. It turned the commute from merely uncomfortable to ugly. Naturally, the NYT hailed him as a hero:
Celebrating Forefather of Graffiti
That article is from 2012.
FWIW, California isn’t even in the top 10 of percentage of population on food stamps ??
There are many here that will be so disappointed with those facts to the point they will call it “Fake News”…
Well that’s cute dave. Consider that California is the “poorest” state not because incomes are the lowest but because housing prices and debt burdens are ridiculous.
Also, illegals are not eligible for SNAP. Calsnap?
Well BS it does not change the “facts” about Colorado’s post now does it. So, I suggest you start disparaging all those other states who hand out more welfare than we do. Short of that, your just another California hater troll.
“hater troll…”
Obviously not Davey. In fact some of my beloved kin are there, experiencing the paradox of the poverty of plenty and insane prices and debt in California.
If you can’t have an intelligent conversation just insult somebody!
You did not respond to Colorados post. All you did was offer the same California “poorest state” troll post {along with others} that you do weekly.
“you do weekly…”
I had no intentions of being an imagined echo in your world. Living in debt is like a poison to ones mind.
I dunno. Mortgage debt doesn’t feel like poison to me. Yeah we can argue over “debt vs.” expense all you want, but almost everybody has to pay some form of housing costs each month.
Auto debt and CC debt, on the other hand, *are* mind poison. Not gonna lie.
2011? My has CA really gone down hill since then. Didn’t take long.
“California Is America’s Poverty State”
http://www.laweekly.com/news/california-is-americas-poverty-state-7380756
‘Central banks unwinding quantitative easing, potential crises in China and Italy, elevated global trade imbalances and a backdrop of populism: Just some of the potential sources of the next financial crisis, according to the latest research from Deutsche Bank.’
‘In a report looking for the potential source of the next financial shock, Deutsche Bank strategists Jim Reid, Nick Burns, Sukanto Chanda and Craig Nicol warned that there are “a number of areas of the global financial system that look at extreme levels.”
“This includes valuations in many asset classes, the incredibly unique size of central bank balance sheets, debt levels, multi-century all-time lows in interest rates and even the level of potentially game changing populist political support around the globe. If there is a crisis relatively soon (within the next 2-3 years), it would be hard to look at these variables and say that there was no way of spotting them.”
‘Deutsche Bank noted that “we’re in a period of very elevated global asset prices – possibly the most elevated in aggregate through history.” “While there are no obvious triggers for historically high global asset valuations to correct, while they remain this high there is always a risk of a sudden correction that could be destabilizing to a financial system and global economy that seems to require such elevated asset prices.”
‘While there are no obvious triggers for historically high global asset valuations to correct…’
Note that these countries above: Brazil, Dubai, Nigeria and Australia all got hit by the QE inspired commodity boom/bust.
‘Aspiring first home buyers may by now have seen a new campaign plastered across billboards around the country – “First home feeling impossible? Not if we can help it”, and an image of a grinning banker with folded arms. Your ANZ “first home coach” has your back.’
‘But look in ANZ’s September Australian housing update, which was sent out today from the bank’s economists rather than marketers, and you won’t see any encouraging smiles.’
‘Australia’s capital city housing market has tipped into unchartered territory. The explosive years of 14-20 per cent year-on-year gains in Sydney and Melbourne are over and, while few expect those markets will go backwards, how will Australians readjust to “normal” gains?’
‘Banks are still writing loans like mad. But pretty much all are going to investors and upgraders. First home buyers make up a small portion of the market. In their haste to sell those mortgages, the ability of banks to tell a truthful mortgage application from one with fudged numbers flew out the window.’
‘UBS now estimates that $500 billion worth of “not completely factually accurate” mortgages now sit on major bank balance sheets. Which bank was said to be the worse offender? You guessed it – ANZ.’
Does ANZ have a Suzzane commercial?
Robo-signing
“an image of a grinning banker with folded arms”
Maybe it was our Mr. Banker
Called here many moons ago.
***********
Meanwhile, The “Next Big Short” Is Quietly Blowing Up
Back in March, when we detailed the ongoing catastrophic deterioration in the US retail sector, manifesting itself in empty malls, mass store closures, soaring layoffs and growing bankruptcies - demonstrated most vividly by the overnight bankruptcy of Toys “R” Us, the second largest retail bankruptcy in US history after K-Mart - we said that “just like 10 years ago, when the “big short” was putting on the RMBX trade, and to a smaller extent, its cousin the CMBX, so now too some are starting to short CMBS through the CMBX, a CDS index which tracks the values of bonds backed by various commercial properties. They are betting against securities backed by malls in weaker locations where stores could close in quick succession, triggering debt defaults.”
We dubbed this retail short via CMBX the next “Big Short” trade, and others promptly followed.
http://www.zerohedge.com/news/2017-09-19/meanwhile-next-big-short-quietly-blowing
So in the big scheme of things, how can you have a functional economy when any time an area starts to generate some jobs speculators will jump in and drive the price of housing out of reach for the workers? The companies can move elsewhere to find affordable housing and cheaper workers but as long as there is so much speculator cash floating around it will just happen again in the next place. And in the meantime it’s difficult to actually produce anything for very long.
Mel Watts says you are peddling fiction.
‘Employers jettisoned thousands of Bay Area jobs in August, state labor officials reported Friday, and economists warned that the spike in home prices could crimp employers’ ability to hire workers in the nine-county region.’
‘The Bay Area lost 4,700 jobs last month — the worst month for employment losses in seven years, according to seasonally adjusted figures from the Employment Development Department.’
“The main constraint on economic growth right now is housing,” said Robert Kleinhenz, executive director of economic research with Beacon Economics and UC Riverside’s School of Business.’
‘Employers slashed 3,000 jobs in Santa Clara County and another 2,000 in the San Francisco-San Mateo area. Even if companies have openings, new jobs aren’t reflected in employment statistics until people are actually brought on board — and experts said it’s proving more difficult to recruit for many types of jobs as Bay Area housing costs soar.’
“It’s getting tougher for companies to hire folks who are not in the highest earning levels, people who are not in creative and technical classes,” said Mark Vitner, a senior economist with San Francisco-based Wells Fargo Bank. “For a lot of folks, they can’t afford to live anywhere close to where their job is. Sometimes, they can’t afford the cost of commuting.”
‘The 4,700 jobs lost in the Bay Area was the worst single month for the nine-county region since its employers eliminated 15,000 jobs in July 2010, at a time when the region had just begun to banish the ill effects of the Great Recession. California also stumbled into employment losses in August, losing 8,200 jobs.’
“For a lot of folks, they can’t afford to live anywhere close to where their job is. Sometimes, they can’t afford the cost of commuting.”
So…what you’re saying is that those jobs are becoming unfillable at that salary. Are you going to raise the salary? Or just go without workers in that location? Not a complicated choice.
Bigger and bigger government with more and regulations and higher taxes can SOLVE this.
Quick - more affordable housing programs!
Employers slashed 3,000 jobs in Santa Clara County
Oracle whacked another 1000 in Santa Clara on September 1st, though I don’t believe those layoffs had anything to with housing prices. There should be more before the end of the month.
““We are seeing more monthly ups and downs as the pace of job growth levels out,” said Jeffrey Michael, director of the Stockton-based Center for Business and Policy Research at University of the Pacific.
Case in point: Prior to the August job losses for the Bay Area, the region added 17,700 jobs in July.
The job market’s ups and downs “should continue since housing and transportation place physical limits on labor force growth in the Bay Area,” Michael said.”
This is why I am watching the new Amazon HQ closely and hoping it DOESNT come to my neck of the woods. (Loudoun County, VA). Housing is already high here, put it in a smaller city.
Agree! The thing I don’t know is, what does AWS pay?
They already have a big location over off Worldgate that services the gov aws services.
I’m getting hit by a LOT of recruiters. The problem is the commutes. Could be a 50% increase in income which could mean I might be able to actually go for a house with a walk out basement.
They pay $13/hr so no….. Scamazone won’t save anyone
http://www.loudountimes.com/news/article/loudoun_county_committee_approves_ad-hoc_committee_in_hopes_of_landing_amaz
A link to the local article if you wanted to learn more.
And I love hearing people who talk about living in DC and coming to Loudoun for work because it’s a ‘reverse commute’. This area doesn’t have a ‘reverse commute’, it’s just a bit less painful.
Where in NoVa are you?
My understanding is that Amazon pays SW Engineers about 120K on average and they are VERY picky about who they hire for those jobs. You can make more if you’re a “big data architect” or something along those lines.
it will just happen again in the next place.
And don’t forget that when the company leaves the area in order to “harvest” the cheapness of the next area, that company leaves behind a wake of workers with a nearly underwater house that they now can’t sell. They can’t afford to follow their company even if the company wanted them. It’s just another form of companies harvesting the prosperity of their workers.
It already happened when factories moved first South and then overseas. But add in the new dimension of overpriced housing (45% of income!) and the middle class is even more toasted than it already is.
They can’t afford to follow their company even if the company wanted them.
Interesting point in light of discussions that occur regarding why workers won’t move for a job like they used to/”should”.
‘There’s enough empty property here to be given a name in the British news media: the ‘ghost mansions’ of ‘lights-out London,’ the streets where it is alleged that 7 in 10 addresses are second - or third or fourth - homes. The blight of conspicuous empty homeownership is a big story in London - and around the globe. The ‘empty home’ phenomenon has gone viral in hot postal codes around the world - and it is especially visible in cities such as Miami, Hong Kong, Vancouver, B.C., Dubai, Singapore, San Francisco and Sydney, where foreign buyers and their shell companies gobble up units as investment properties and piggy banks.’
‘In Manhattan, the New Yorker had a look at Census Bureau numbers, which revealed that in midtown - from 49th to 70th streets, between Fifth and Park avenues - nearly 1 in 3 residences are unoccupied at least 10 months a year. Newsweek estimated in Paris ‘one apartment in four sits empty most of the time.’ In Jerusalem, the deputy mayor said the number of ghost flats is triple the official estimate - and bemoaned the impact on young families searching for a bit of living space.’
The writer wonders if it’s “even desirable” to change this situation.
Cheap and easy money will find a place to die.
The writer has swallowed to koolaid that somehow insane housing prices equals a strong economy….
Cheap and easy money will find a place to die.
Now all we need to do is pull the plug and let it die. Supply will meet demand and the housing that already exists will become “affordable housing”.
The writer hasn’t been properly schooled on this universal truth;
Nothing accelerates the economy and creates jobs like falling prices to dramatically lower and more affordable levels. Nothing.
…please take the red pill.
Dont know much about Dubai or Miami, but all the other ghost flat areas were the target of chinese buyers, no? Goes to my thesis that hot chinese money drove this RE bubble more than anything.
And in my neck of the woods pretty much anything near the beach is a vacation rental - very few owner occupiers. Wages cant possibly support the property taxes, forget about the massive mortgage payments necessary to keep that boat afloat. Forget about ghost flats, we have a ghost economy - empty properties everywhere and walking dead businesses.
Goes to my thesis that hot chinese money drove this RE bubble more than anything.
You can’t run a trade deficit forever, can you? Eventually they have to buy something with the money before it becomes worthless.
Japan was the world’s second largest economy for a long time, and they had the rule of law and strong property rights, and world-class companies. They went on an RE binge in the US in the late 1980s, and there were fears the Japanese would soon “own” the US because they were buying so much here.
China does not have the rule of law and their citizens know it and seek to offshore as much cash as possible white the getting’s good. Plus their prosperity is in no small part based on central planning and debt. I suspect both stories will echo each other.
Eventually they have to buy something with the money before it becomes worthless ??
Exactly. Now add to that it could be dirty money, then possibly taking a 50% haircut does not seem so bad now does it.
‘taking a 50% haircut does not seem so bad now does it’
Unless you happen to be the other buyers standing around.
How many 1%ers do any of you know? My former boss’ BIL is one - his main house is in Miami (14 bathrooms and an annual property tax bill over over $120K last time I heard), but he also keeps a luxury condo overlooking Central Park (one of those empty residences mentioned above), not to mention another country lodge in upstate NY.
Many wealthy people in this country have been doing this for, well, since there have been wealthy people here. Now maybe the percentages aren’t that high, but these people are part of the above-mentioned situation.
Even here in the greater Seattle area, I have noticed this when driving through street-of-dreams neighborhoods around me, where I’m pretty sure that more than a few homes are second or third homes for corporate executives that are rarely there.
Every time Larry Ellison buys another house, a puppy dies
Silverdale, WA Housing Prices Crater 8% YOY
http://www.movoto.com/silverdale-wa/market-trends/
After reading this thread I can’t understand how people overseas are going to save the US real estate markets. And since when is it a buyer’s responsability to make sure the seller makes money? Talk about entitlement from homeowners.
About 2003.
US Housing Demand Craters To 20 Year Low
http://bit.ly/2xEUUCD
Questions raised at the Fed about the efficacy of QE.
Countries have, for millenia, sought the Holy Grail of prosperity through currency dilution and redistribution.I guess the Fed thought it found the secret formula.
Fed economist: ‘No evidence that QE works’ as central bank starts unwinding program
Jeff Cox
CNBC
September 19, 2017
• The Federal Reserve is expected this week to announce a roll-off of its $4.5 trillion balance sheet.
• St. Louis Fed economist Stephen Williamson said there’s little to indicate that the quantitative easing program that expanded the balance sheet worked as it was intended.
https://www.cnbc.com/2017/09/19/fed-economist-no-evidence-qe-works-as-balance-sheet-unwind-starts.html
It did of course have tremendous positive impacts on the FIRE sector, which cannot be discounted for future planning.
the big speel today is suppose to be about reducing the balance sheet.
Why exactly do they have to reduce the balance sheet again?
The treasury is making money off their debt.
Why not just keep racking up more debt to buy treasuries?
How about a spinoff from the FED with a fresh balance sheet?
Why exactly do they have to reduce the balance sheet again?
So they can re-expand it in the next crisis to “save” us.
“There’s little question that the program, known as quantitative easing or “money printing,” boosted the stock market. The three iterations of QE between November 2008 and October 2014 each saw big boosts to the market, with a cumulative S&P 500 gain from beginning to end, including the various down periods between each leg, of about 140 percent.”
And this boost of the stock market produced “wealth” in the same way that boosting the real estate market produces wealth; wealth that can be cashed out and spent. Take away this wealth and you take away the spending power.
And it is spending power that powers a consumer-based economy.
One can argue that this type of wealth produced by price increases is not quite the same as the old fashioned wealth created by producing things and I will agree, but I will also state that both types of wealth spend exactly the same.
I have a buddy that retired a few years ago because he was “making” more money in the stock market than by working. Then the stock market went down and he didn’t “feel” so wealthy.
“There’s little question that the program, known as quantitative easing or “money printing,” boosted the stock market. The three iterations of QE between November 2008 and October 2014 each saw big boosts to the market, with a cumulative S&P 500 gain from beginning to end, including the various down periods between each leg, of about 140 percent.”
So once again, it produced inflation in stocks and houses, but we don’t call it inflation because it didn’t affect salaries.
Wage inflation results in the working/producing class treading water (higher salaries but higher costs) while non-producers take the hit in standard of living. This time we allowed the stock and housing mortgage holders to break even or even make money while everyone else got the shaft. Similar to classic inflation but a much different demographic takes the hit.
At least we saved the banks.
Keller, TX Housing Prices Crater 13% YOY
http://www.movoto.com/keller-tx/market-trends/
aapl
will crash
as my wife is not buying the new phone !
insider tip
Ah… waiting on the pixel 2?
“From Better Dwellings in Canada.”
“we estimate 1 in 3 of these listings are currently looking at a loss.”
But in April 2016
Real estate ‘chaos’ sends millennials scrambling before they’re priced out
‘This is my city, I love it,’ says buyer hoping to land a house in Toronto
By Lucas Powers, CBC News Posted: Apr 12, 2016 5:00 AM ET
The modest house in west Toronto wasn’t their ideal starter home, but with a little compromise, it was close enough. Besides, it had a newly renovated kitchen and there was a daycare centre right around the corner.
To add debt or not to add debt?
They’re facing an uncomfortable choice: save “aggressively” for the next year or so and hope to come out with enough to land a house, or try to get a loan to break into the market now and go deeper into debt (they’re still paying off student debt from university). On top of a mortgage, it could be crippling.
House sold for $111K in 1987 might cost 10 times that now
http://www.cbc.ca/news/business/real-estate-house-prices-millennials-1.3514476
‘This is my city, I love it,’ says buyer hoping to land a house in Toronto
I wonder how much they will love it when they are a couple of years worth of salary underwater? I would think that would strain the relationship a bit.