From Political Untouchables To Pariahs
A weekend topic starting with the Richmond Times Dispatch. “Hot, Hot, Hot, accurately describes the current state of the commercial real estate market. The ongoing strength in the sector can be attributed to cheap and available capital. The conduit market, which was written off for dead two years ago, is poised to complete 2017 with the second-highest annual volume since the financial meltdown in 2008 and pricing that is close to post-recession lows. The combination of falling spreads and less volatility has made conduit lending very profitable.”
“The irony is that fewer conduit players are active today than two years ago when the market was petering out. So, while volume and profits are soaring, fewer market players are sitting at the table. Admittedly, those at the table are competing fiercely for deals. In addition to more conduit money fueling deals, more money is going into agency deals than in any prior year.”
“The production for Fannie Mae and Freddie Mac in 2017 is so strong that there is rumblings of huge cutbacks for 2018. The Federal Housing Finance Agency, which is charged with overseeing agency lending, has not made any announcements for 2018, but changes are expected. Jerome Powell, nominated this month by President Donald Trump to be the new chairman of the Federal Reserve, is an outspoken advocate of reforming the two government-sponsored enterprises.”
“Powel said in a speech earlier this year that more private capital needs to be in play and that the next few years may present ‘our last best chance to finish critical reforms’ and address systemic risk presented by the dominance of Fannie Mae and Freddie Mac in housing market finance. Not that the Fed chairman has a great deal of power over the Federal Housing Finance Agency, but the agencies are on pace to provide close to 50 percent of all multifamily mortgages this year, according to industry estimates, which far surpasses their lofty goals of providing 40 percent of the multifamily mortgages.”
From Vanity Fair. “The Republican tax bill that passed the House provides plenty to be worried about. Take, for instance, the proposed elimination of the deductibility of state and local taxes. That is obviously a cynical, politically motivated ploy on Donald Trump’s part to penalize voters who didn’t vote for him (for good reason) in high-tax blue states, such as New York and California, and to give a benefit to the red-state voters who did vote for him. (I get it, elections have consequences.)”
“Worse, a Wall Street executive says, it could lead to another housing crisis, just as the last one is (or should be) still fresh in our collective memories. Here’s his thinking (which is hard to refute): Since, generally speaking, one of the largest state taxes is on property—your home—eliminating the federal tax deduction for state property taxes will inevitably cause the cost of homeownership in states with high property taxes to go up. It follows, logically, that if the annual cost of home ownership goes up, then the value of the home—which is for most people their single most-valuable asset—must go down.”
“The National Association of Realtors commissioned a recent study that predicted that the elimination of the deduction for state and local taxes could result in a decrease in home valuations of between 10 percent and 17 percent. Lower home values could also lead to problems—again—for the government-sponsored entities Fannie Mae and Freddie Mac that have guaranteed some home mortgages, which are secured by homes worth materially less.”
From A Duopsony Built Around Rent-Seeking by Edward J. Pinto and Norbert Michel. “A recent Senate Banking Committee hearing explored ‘The Status of the Housing Finance System After Nine Years of Conservatorship.’ The title pretty much says it all — Congress has done nothing substantive on housing finance reform in almost a full decade.”
“Given the spectacular failure of Fannie Mae and Freddie Mac that led to the 2008 financial crisis, the fact that these Government-Sponsored Enterprises (GSEs) remain in government conservatorship might seem surprising. After all, during the crisis, Fannie Mae and Freddie Mac transformed from political untouchables in housing finance to pariahs.”
“Rather than seize that moment to shut down the GSEs to protect taxpayers and housing finance markets, Congress succumbed to an onslaught of special interests lobbying and fear-mongering aimed at protecting the GSEs’ duopsony — a market condition where there are only two large buyers for a specific product or service.”
“In virtually the blink of an eye, groups such as the Mortgage Bankers Association and the National Association of Home Builders convinced members of Congress that the housing finance market couldn’t function without some form of government backing. The worst propaganda was that only government guarantees could prevent interest rates from skyrocketing, home values from plummeting, and long-term fixed-rate mortgages from disappearing.”
“Now that the Trump administration has indicated it wants to reinvigorate the private housing finance system, it is facing the same resistance Congress did in 2008. The Housing Lobby argues for either a continuation of the status quo with the addition of an explicit government guarantee or some close hybrid. Supporters also incorporate an ‘affordable housing cookie jar’ in an effort to get buy-in from progressive lawmakers and lobby groups.”
“But these groups ignore the three major problems with our nationalized housing finance system. Americans have more debt than ever. After 50+ years of ‘affordability’ policies, homes are more expensive than ever, and notwithstanding trillions of dollars in subsidies, the current 63.9% homeownership rate is statistically no different than the average rate of 64.3% since 1964 (excludes bubble years).”
“Homeowners and taxpayers have little to show for the federal government’s largesse, except for mountains of mortgage debt and GSE bailout IOUs. An even bigger problem with defending the status quo is that the GSEs are not currently helping Americans of modest means buy homes. Data from 2016 clearly show that the bulk of the GSE business focuses elsewhere.”
“The nearby chart shows that while the GSEs accounted for two-thirds of government agency business in 2016, only 7% of total agency activity (comprising 11% of total GSE activity) served buyers of more modest homes with moderate downpayments. The rest went to cash out and no cash out refinancings (56% of total GSE activity), second homes and investor properties (6% of total GSE activity), purchase loans with downpayments of 15% or more (20% of total GSE activity), and higher priced homes with downpayments of less than (7% of total GSE activity).”
“The housing lobby cannot hide from these figures. The bulk of GSE activity simply is not doing anything to help make moderately-priced homes more affordable.”
‘After all, during the crisis, Fannie Mae and Freddie Mac transformed from political untouchables in housing finance to pariahs’
I bet most readers here don’t remember the CEO’s of these two companies used to hold press conferences that the media covered like rock stars. Their influence was considered untouchable. They would openly lobby congress while it was debating their corruption. Oh yeah, remember that? The criminal investigation opened in 2004 on Fannie Mae executives by the justice department that just went away without a word.
It should also be recalled that both of these outfits went bust before shack prices even went down by much.
And what about all of those off-balance sheet entities?
And off-shore, like Enron’s. Fannie had over 900 of them. Remember when Fannie hired 1500 accountants to clean it all up? Never heard about that again.
Here’s a big lie that never gets explained: supposedly these two corporations guaranteed $5 trillions in loans, but got “bailed-out” with around $200 billions. Yet the central bank was stepped in with $4 trillions in QE. And that’s just in the US. $200 billion is couch change in the scheme of things. Non-banks make most GSE backed loans these days. Just how deep is Quicken’s balance sheet? Some printers and desks?
Just how deep is Quicken’s balance sheet? Some printers and desks?
Don’t forget all those cheapo Linux servers
Unless they run everything on the cloud, which means their computing power is rented. Of course, the printers and desks might also be rented. I suspect that the biggest asset on their balance sheet is probably “retained earnings”.
The comments to the last link are interesting. Here’s one:
“Freddy and Fanny may have paid back their debt, but left human devastation in its wake. The $60,000 we lost in rental property I’m not happy about, but, we can easily afford. Most weren’t so lucky, and will never quality for another home of their own. Many of my wife’s co-workers were destroyed financially. Others like several of my neighbors in top 5 % like my wife and I used to be, before retiring, still can’t upgrade to better homes lacking equity.”
“Why aren’t people responsible for all of the carnage to society in jail? Under Obama, those fortunate remaining in the middle class stood still, the top 1% moved forward, the rest went backward. In 2006 a 25 pound bag of CAL-ROSE rice on sale was $3 on sale, today it’s around $12. Same goes for other staples.”
“The reason AIG unlike Lehman Brothers, was too big to fail simple. A hand full Congress and K Street had all their investments in it. AIG had enough assets to pay it’s debts, and not too big to fail. It was GMC’s real estate division that paid for retiree pensions that bankrupted GM. Bail Out of the auto industry I had no trouble with. Freddy and Fanny never compensated private and public pension funds when they crashed and burned.”
“No one mentions the jobs lost, and diminished retirement savings lost in the stock market in 2008. The current level of the stock market reflected in inflated currency. America doubled its debt, everyone’s money has less buying power. Other debt bubbles in our economy readily apparent in student loans, on target to create a bigger crisis extending more trauma to society than 2008.”
“In 2006 a 25 pound bag of CAL-ROSE rice on sale was $3 on sale, today it’s around $12. Same goes for other staples.”
This is something that goes unreported in the media. They’ve also reduced the package size on a lot of products to hide the price increases. What used to be a pound of coffee beans has turned into 12 ounces, and for the first time last week I am seeing 10 ounce packages of beans. Do they really think customers are that stupid? I’ve not once been fooled.
I couldn’t believe how ridiculously small the Breyer’s ice cream package was last time I was in the supermarket. It feels like it is literally 1/2 the size, although this may not be so much a matter of inflation as it may be the company trying to get product size to be about on par as Ben and Jerry’s.
Ice cream has gone from 2 qts to 1.75 and now I’ve seen 1.5, and I don’t think the quality has improved.
I’ve noticed that, too. I hardly ever buy ice cream so it doesn’t bother me.
I’m pretty sure I’ve seen 12 ounce bottles of beer that were actually 11.2 ounces.
I’m pretty sure I’ve seen 12 ounce bottles of beer that were actually 11.2 ounces
I think that those are mostly imports, which are in milliliters. 330 ml is 11.15 ounces.
And not only that, they are now whipping more air into it, so you actually are getting even less than the advertised quantity of product.
Forward!
Housing my friends….
Miami Beach, FL Housing Prices Crater 9% YOY
https://www.movoto.com/miami-beach-fl/market-trends/
HA! Is that you? it looks like you finally found a market that is dropping. Congratulations, your analysis looks to be correct. Listings are increasing and prices are dropping! HA!
DebtDonkey
Washington, DC 20017 Housing Prices Crater 13% YOY
https://www.zillow.com/washington-dc-20017/home-values/
Don’t forget to select price from dropdown menu on first chart
Most weren’t so lucky, and will never quality for another home of their own.
Well at least we solved that problem and declared them qualified again quickly.
Also from the Richmond article:
“So, what does all this loan production mean to commercial mortgage rates? Rates are about where they were last month and are currently in the 3.50 percent to 3.90 percent range for 5- and 10-year loans offered by life insurance companies, according to the John B. Levy National Mortgage Survey.”
“Conduit pricing has come in dramatically and now averages 4.10 percent to 4.35 percent for higher leverage loans. Banks are finding it more difficult to compete on both proceeds and price against non-recourse bridge lenders, particularly on loans larger than $20 million.”
“This can be attributed to the strength of an obscure portion of the lending world known as the collateralized loan obligation market. While that type of loan obligation was a popular pre-crisis source of capital, the market hasn’t been a viable alternative for commercial real estate lending until very recently when pricing and volatility dropped.”
“Groups now with relatively small amounts of capital can produce loans that are sold off to bond buyers at cheap yields. That allows these small and nimble firms to compete favorably against regulation-laden banks.”
“With leverage pushing 75 percent to 80 percent of costs, banks have a tough time competing. Pricing is in the 4.5 percent to 5.5 percent range, which is higher than most larger bank pricing, but attractive enough for many because the other great benefit is there are no personal guarantees.”
“While the overall commercial real estate market is “Hot, Hot, Hot,” there still appears to be runway before things slowdown, particularly in smaller markets like Richmond. With conduit pricing coming in and volume ramping up, it would not be a surprise to see transaction activity pick up in the area.”
“More than $150 million of loans were originated by conduits in Richmond so far in 2017, according to Trepp, LLC, a New York-based provider of analytics and commercial real estate information. The list of originations is chock full of hotels. Next year, it is likely that the list will be larger and include other property types.”
For folks using the JoshuaTree Extension in Firefox, are you seeing issues in the new version (57.0), where ‘read’ comments aren’t getting saved?
Just upgraded and noticed it this morning. I’ll try to find some time today to figure it out…
Ahh, figured it out. If you tell Firefox to “never remember history” in the privacy settings, it puts you in permanent “incognito” mode as far as extensions are concerned. The extension is set to not store any data in incognito mode. May have to re-think that…
drumminj, the time and effort is appreciated.
drumminj, the time and effort is appreciated.
Agreed. Apparently I hadn’t updated because I hadn’t encountered the issue yet.
+57.0. Thanks for everything.
Thanks for the kind words, all. As always, I don’t charge or take donations for the extension, but appreciate being able to read here so direct any goodwill towards Ben in the form of donations.
It is that time of year! I will do.my part once again and click the PayPal button. This blog is one of the most important sources of my housing market knowledge.
“…and click the PayPal button.”
+1 Every payday here.
Monday, February 07, 2005
Fannie/Freddie Regulator Preps For Bankruptcy
‘The Office of Federal Housing Enterprise Oversight is pushing legislation through congress that prepares for the insolvency of the mortgage giants. Patrick Lawler, OFHEO chief economist told a forum “Receivership is a valuable thing”.
‘None of this is reported on the official website of the regulator. Also mentioned in this story was this tidbit;”..a coalition of 37 federal, state, and local groups urged the federal government and Congress to cut ties with Fannie and Freddie Thursday. Warning that Americans are threatened by a potential taxpayer bailout of the two companies”.
http://thehousingbubble.blogspot.com/2005/02/fanniefreddie-regulator-preps-for.html
The good old days when the planet would cool and the seas would recede…
+++++
Lawmakers quickly point fingers after bailout fails
CNN - Sept 29, 2008
WASHINGTON (CNN) — Democrats and Republicans on Capitol Hill immediately blamed each other for the failure of a $700 billion bailout package in the House on Monday.
Before the vote, many House Republicans expressed opposition to the bill, saying it departed from free-market principles. Republican congressional aides also said calls from constituents were running 10 to 1 against the legislation.
Nearly 60 percent of Democrats voted for the bill, and about a third of Republicans supported it.
+++++
But TARP passed just a few days later. Despite a 10:1 disapproval ratio from American citizens.
+++++
Obama Lobbies for TARP Funds, Stimulus Plan
BYRON WOLF - ABC News - Jan. 13, 2009
President-elect Barack Obama told Democratic senators in a closed lunch today that he needs the second $350 billion authorized by Congress as part of the TARP legislation last year and that he’ll veto any move by Congress to cut that funding off.
Larry Summers, the incoming leader of Obama’s National Economic Council, met this morning with Democrats on the Senate Finance Committee to get more of their input on the $700 billion plus the stimulus package, a separate bill to inject capitol in the economy. It was Summers’ third meeting with Democratic senators in five days on the stimulus proposal, which includes tax measures and infrastructure spending that Obama wants to pass early this year.
“Before the vote, many House Republicans expressed opposition to the bill, saying it departed from free-market principles.”
Those free market principles have been virtually abolished by the post-crisis era policies of the Fed and the GSEs.
“But TARP passed just a few days later. Despite a 10:1 disapproval ratio from American citizens.”
Never was there a more clear message of “f**k you” to the American people from politicians elected to serve them than this day in 2008.
The American people were unable to comprehend that people that mattered were going to be hurt. There was not choice but to bypass them on that one.
Only 37 of 2300 gov agencies to manipulate housing
Seems inadequate
More gov plz
Senate Committee Hearings on Fannie Mae & Freddie Mac 2004
https://www.youtube.com/watch?v=UIjoW_IXos4
How is it possible that Maxine Waters continues to show up on my Flat Screen in 2017?
How is it possible that Maxine Waters continues to show up on my Flat Screen in 2017? Genius has its limits. Stupidity has none.
“Powell said in a speech earlier this year that more private capital needs to be in play and that the next few years may present ‘our last best chance to finish critical reforms’ and address systemic risk presented by the dominance of Fannie Mae and Freddie Mac in housing market finance. Not that the Fed chairman has a great deal of power over the Federal Housing Finance Agency, but the agencies are on pace to provide close to 50 percent of all multifamily mortgages this year, according to industry estimates, which far surpasses their lofty goals of providing 40 percent of the multifamily mortgages.”
It will be very hard to replace the GSEs’ dumb public capital with private capital.
It might be hard on specuvestors. How could we live without all these luxury condos and apartments?
‘The combination of falling spreads and less volatility has made conduit lending very profitable…the agencies are on pace to provide close to 50 percent of all multifamily mortgages this year, according to industry estimates, which far surpasses their lofty goals of providing 40 percent of the multifamily mortgages.’
And how can we possibly live without this?
‘the GSEs accounted for two-thirds of government agency business in 2016, only 7% of total agency activity (comprising 11% of total GSE activity) served buyers of more modest homes with moderate downpayments. The rest went to cash out and no cash out refinancings (56% of total GSE activity), second homes and investor properties (6% of total GSE activity)’
‘The combination of falling spreads and less volatility has made conduit lending very profitable…the agencies are on pace to provide close to 50 percent of all multifamily mortgages this year, according to industry estimates, which far surpasses their lofty goals of providing 40 percent of the multifamily mortgages.’
• When the GSEs blow up, the central bank prints up a vast amount of cash, appropriating that purchasing power to itself and distributing it to the financial sector. Even if it never reduces its balance sheet (and it probably won’t) and it stays flat - it has appropriated a vast amount of power. Rinse and repeat.
• The GSEs are the purest form of privatize the profits/socialize the losses. They operate as profit-seeking corporations.
This wealth extraction will continue until pressure release valves blow, in the form of electing non-traditional candidates who actually will put a stop to it. OR… we get faux reform candidates, and it never stops and the US becomes a backwater oligo-kleptocracy, a la Russia or Brazil.
(Side note: I think the incoherent fury against DJT is more the deep state frightened by a challenge to their control rather than actual outrage against, say, his supposed sexism. Look at the media and left’s reactions to Al Franken versus DJT to see that. FYI, that site I linked to leans left).
“the deep state frightened…”
And it is amazing how effective the thought leaders are at inciting illogical rage. If history serves, this will be a much greater danger to the country if/when the fake economy takes a dirt nap.
“And it is amazing how effective the thought leaders are at inciting illogical rage. If history serves, this will be a much greater danger to the country if/when the fake economy takes a dirt nap.”
Spot on. Fence sitters and fair weather patriots will cave when their fake asset equity dissolves overnight. My hope is Trump can shore up the fake economy with real fundamentals to lessen the impact by the time it blows.
“And it is amazing how effective the thought leaders are at inciting illogical rage.”
There you go again.Why is it that every conversation has to end up talking about climate change?
“Since, generally speaking, one of the largest state taxes is on property—your home—eliminating the federal tax deduction for state property taxes will inevitably cause the cost of homeownership in states with high property taxes to go up. It follows, logically, that if the annual cost of home ownership goes up, then the value of the home—which is for most people their single most-valuable asset—must go down.”
The journalist’s attempt at economic analysis misses on a couple of points:
1) The cost of homeownership in high property tax states won’t change, but who pays for it will. Why should red state voters have to share the cost of blue state housing purchases through federal tax subsidies?
2) Blue state housing would become more affordable if it more closely reflected the buyer’s willingness to pay without all the tax gimmicks to subsidize the purchase. But this would be properly termed a price reduction, not a cost reduction.
“In virtually the blink of an eye, groups such as the Mortgage Bankers Association and the National Association of Home Builders convinced members of Congress that the housing finance market couldn’t function without some form of government backing. The worst propaganda was that only government guarantees could prevent interest rates from skyrocketing, home values from plummeting, and long-term fixed-rate mortgages from disappearing.”
Never mind that many other developed countries apparently have functioning housing markets in the absence of GSEs or federally guaranteed mortgages.
Day in the life of a Liberal Democrat:
10am: TAX THE RICH!! KILL THE RICH!!
11am: Whoa, whoa, whoa!! You want to increase taxes on the rich in NY and CA by eliminating SALT and MID? You are LITERALLY worse than Hitler!
12pm: TAX THE RICH!! KILL THE RICH!!
There were 200,000 FBI background checks for gun purchases on Black Friday.
Suck on that, globalists
Speaking of globalists, Ireland is threatening the UK to veto its Brexit trade negotiations with the EU if it doesn’t keep an open border between Ireland and North Ireland.
https://www.cnbc.com/2017/11/26/ireland-will-block-brexit-talks-unless-border-issue-agreed.html
Globalists gonna globe.
Beverly, MA Housing Prices Crater 7% YOY
https://www.movoto.com/beverly-ma/market-trends/
Today’s lesson on the fake legacy media.
40 year old accusations with no evidence or facts. BAN THE REPUBLICAN. HE MUST RESIGN. HE WILL NOT BE SEATED.
Democrat congressman that recent settled sexual harassment and sexual assault complaints with TAXPAYER MONEY? HE IS AN ICON!!!
++++++
Pelosi Defends Conyers, Says He’s ‘An Icon’
Daily Caller | 11/26/17 | Alex Pfeiffer
House Minority Leader Nancy Pelosi defended embattled Democratic Michigan Rep. John Conyers Sunday, calling the 88-year-old congressman “an icon.”
“We are strengthened by due process. Just because someone is accused — and was it one accusation? Is it two?” Pelosi replied. “John Conyers is an icon in our country. He has done a great deal to protect women — Violence Against Women Act, which the left — right-wing — is now quoting me as praising him for his work on that, and he did great work on that.”
“In her complaint, the former employee said Conyers repeatedly asked her for sexual favors and often asked her to join him in a hotel room. On one occasion, she alleges that Conyers asked her to work out of his room for the evening, but when she arrived the congressman started talking about his sexual desires,” BuzzFeed revealed in its report. “She alleged he then told her she needed to ‘touch it,’ in reference to his penis, or find him a woman who would meet his sexual demands.”
The report said that four signed affidavits from former staff members said that Conyers made sexual advances on female staff.
Additionally, Melanie Sloan, a lawyer who worked with Conyers, said that she would encounter the congressman in his office “walking around in his underwear.” And a former staffer, who anonymously filed and then withdrew a lawsuit, said that Conyers touched her “repeatedly and daily” from May to to July 2016.
I’ll bet the Dems never thought that their harassment witch hunt would come back and bite them in their keisters.
Amoral superiority.
Never, ever forget - they elected and protected someone who preyed upon woman in the same way to the presidency of the US, and they nearly elected one of the protectors of these vermin as well. The only explanation for this behavior is that they are criminal scum, consumed with a lust for power that justifies anything they do, no matter how evil.
Damn is Pelosi’s brain fried. She barely knows what planet she’s on at this point. We need term limits, ASAP.
DJT’s support for Moore seems to me the moral equivalent of Pelosi’s support for Conyers. Both are obviously wrong, and non-partisans supporters who defend Moore or Conyers are tribalists simply defending “their guy.”
Viagra: enabling senile satyrs since 1998.
Bob Dole approves of the above statement
Here’s an article that will give you warm fuzzies:
http://www.denverpost.com/2017/11/26/colorado-divide-rising-home-values-cripple-small-fire-departments/
Here’s a link explaining the tax cut:
http://www.denverpost.com/2017/01/13/tax-soaring-home-values-colorado/
Don’t make me come out there
I mentioned this house before, as I know the people selling (they are scheduled to finally close next week):
https://www.zillow.com/homes/for_sale/13889137_zpid/globalrelevanceex_sort/40.391591,-105.114157,40.385503,-105.122569_rect/16_zm/
360K house, $1610 property tax last year.
Nice curb appeal… needs a fluffy dog on the front lawn. The back wall could have a couple more windows. Lots of trees on that street and no graffiti on the stop sign.
Graffiti is pretty rare in my little burg. if you see any, it’s most likely on a box car traveling through town.
The back wall could have a couple more windows.
I never liked the layout of that house. From what I heard it had two offers. The first one got buyers remorse and bailed out on some technicality (or so I was told) so they went with the backup offer, which had its own sale contingency (the first one was an all cash offer). Anywho, from what I heard they got their stairs aligned and closing is scheduled.
I also know that the house is paid for, no mortgage to payoff. From what I have been told, they are going to buy something bigger and fancier in the 500K range, even though they are empty nesters, and will have a mortgage again. To each his own.
It’s probably too rich for a dual income military family. It looks like a nice neighborhood, but $360k is out of my league. Certainly two incomes required.
I thought selling (and taxing) cannibis was going to lower everyone’s tax bill to virtually zero? That’s what my Aunt in Denver said.
selling (and taxing) cannibis was going to lower everyone’s tax bill to virtually zero More likely cannabis will lower everyone’s irritability level to virtually zero & they will no longer care what the bill is.
I thought selling (and taxing) cannibis was going to lower everyone’s tax bill to virtually zero?
I don’t recall that promise. What I recall was that the weed tax would provide extra funding, as it would exempt from TABOR limits. The weed tax collected was about $200 million in 2016. In theory, that tax money is supposed to be earmarked for schools. That said, I’m sure bureaucrats in Denver are finding ways to make sure as little of it as possible makes it to the classroom.
‘Rather than seize that moment to shut down the GSEs to protect taxpayers and housing finance markets, Congress succumbed to an onslaught of special interests lobbying and fear-mongering aimed at protecting the GSEs’ duopsony — a market condition where there are only two large buyers for a specific product or service.’
‘In virtually the blink of an eye, groups such as the Mortgage Bankers Association and the National Association of Home Builders convinced members of Congress that the housing finance market couldn’t function without some form of government backing.’
Isn’t this what government is supposed to prevent? Special interests doing closed-door deals to rip off the public? It’s almost like we’d be better off if the government wasn’t involved at all.
Jim Rogers Speaks the Truth about Fannie Mae and Freddie Mac
https://www.youtube.com/watch?v=rkwtYhiJ930
Is it safe to conclude that the huge bubble in luxury condos and apartments wouldn’t exist without GSE backing?
Isn’t the luxury mania global?
The bubble is global and even frothier than here, with price to income ratios as high as 100x in some countries, and without GSE’s, 30 year fixed rate mortgages, no MID, no SALT and all loans are recourse. Oh, and all those countries have double digit VAT (sales tax) too, often 20% or higher. I wonder how is it that anyone in those countries has any money left to spend. They have bay area (or worse) housing prices, low wages (some approaching third world levels), onerous taxes, etc.
Oh, and all those countries have double digit VAT (sales tax)
vat taxes the lines of production as well as the point of sale. that makes production inefficient, which make the vat a very bad tax.
a straight sales tax is much better. it only taxes consumption.
I believe that in Europe VAT is charged at the production level only when products are exported from the trading bloc.
that would make them less bad but still worse than a straight sales tax.
vat taxes the lines of production as well as the point of sale. that makes production inefficient, which make the vat a very bad tax.
In theory, with VAT each stage is taxed only once, hence the term “Value Added”. What this does do is create a lot of accounting work to determine how much “value” is added at each step of the process, so it can be taxed and added on to the price
In the end, it’s still taxed at dizzying rates, 20% or even higher. I’ve seen VATs in the high 20’s.
Since GSE support ends before you get to the “luxury level” for condos, I would not draw that conclusion.
And GSE’s involvement in the apartment world drives cap rates lower and should allow more development to occur (all else equal), and SHOULD result in more building than in a world without the GSEs, which SHOULD result in lower rents…and it’s starting to happen in places that had a lot of luxury condos/apartments built.
Lawlessness is the name of the game. They will print more, they will suspend laws as it suits them, they will downright steal and cheat you……..until they can’t. It might be too late by then.
August 21, 2006
‘The Industry Is Trading Risk For Convenience’
Some reports from Wall Street and Washington. “Toll Brothers Inc., which earlier this month said its quarterly new-home orders slipped nearly 50% on a slumping housing market, may again reduce its 2006 profit forecast when it reports earnings Tuesday. Analysts will also be looking for details on write-downs Toll said it plans to take for land options it is walking away from.”
“The National Association of Realtors is expected to report existing-home sales Wednesday morning, and economists will be watching median prices to see if they fall from the previous year. That would be the first year-over-year decline in over a decade and would damage buyer sentiment, according to Banc of America Securities analyst Daniel Oppenheim.”
“Also, the analyst sees the supply of existing homes for sale to rise from 6.8 months in June to more than seven months in July. ‘This excess supply will continue to put pressure on home prices,’ Oppenheim said.”
“The Commerce Department on Thursday is slated to release sales of new homes for July, and economists are predicting a 3% decline. Read more on the outlook for July home sales. Oppenheim noted home builders ‘likely limited the decline by increasing incentives or reducing prices.’”
“Lowe’s Cos. shares lost as much as 5.5% Monday after second-quarter earnings that came in below analysts’ average forecast and cut its profit forecast for the full year. ‘Like Home Depot, Lowe’s is experiencing the deceleration in sales that typically follows a slowdown in housing turnover,’ Goldman Sachs analyst Matthew Fassler, who has Lowe’s rated at neutral, wrote in a research note.”
“Delisting is a scary prospect for shareholders. Once stocks are off the major exchanges, they’re usually much less liquid. Fannie Mae, which finances one of every five home loans in the United States, has been out of compliance with New York Stock Exchange listing standards since 2004, the last time it filed a quarterly earnings report. Yet NYSE hasn’t delisted the stock.”
“NYSE deciding it was too big to remove. The Exchange sent a proposal to the Securities and Exchange Commission saying that in very rare circumstances, delisting a company would be ’significantly contrary to the national interest and the interests of public investors, notwithstanding a delay in an annual report filing that extended beyond one year.’ In January, the SEC agreed. Fannie Mae did not immediately return a call seeking comment.”
“While the possibility of delisting is a threat that makes companies take listing requirements seriously, ‘the perception is that if you’re big enough, like so many things, you are more or less in the drivers’ seat,’ said Maureen O’Hara, a professor at Cornell University.”
http://thehousingbubbleblog.com/?p=1297
‘Fannie Mae, which finances one of every five home loans in the United States, has been out of compliance with New York Stock Exchange listing standards since 2004, the last time it filed a quarterly earnings report. Yet NYSE hasn’t delisted the stock.’
If they had done what the regulations require, the GSE’s (Freddie stopped filling not long after) wouldn’t have been able to issue bonds, or certainly not at AAA levels. Isn’t this what regulation is supposed to be about? It’s almost like we’d be better off without these government regulators. Think about how much damage could have been avoided if the GSE got stopped in their tracks in 2004-2005.
u need to beg for a home loan from your masters.
“The National Association of Realtors commissioned a recent study that predicted that the elimination of the deduction for state and local taxes could result in a decrease in home valuations of between 10 percent and 17 percent.”
It’s great to hear that the GSEs may finally realize their long sought affordability goal.
“Lower home values could also lead to problems—again—for the government-sponsored entities Fannie Mae and Freddie Mac that have guaranteed some home mortgages, which are secured by homes worth materially less.”
Maybe this would be an opportune moment to get the government out of the mortgage insurance business. Markets work far better when investors have to bear the consequences of dumb, stupid lending.
National Association of Realtors commissioned a recent study
I sure would like to see how “commissioned study” was defined. Ya don’t think the result of the study was effected by the consultant’s desire to be hired again, do ya? Nah. That kind of thing certainly never happens.
I’ll take their prediction and raise them one…I predict if the MID is reduced as suggested, the result is a big nothingburger.
“a big nothingburger.”
It’s all a big nothingburger at current grossly inflated asking prices of resale housing. Demand won’t stop falling until prices correct.
Much like how “global warming” studies work. The answer is pre-determined to always need more govt intervention and higher taxes.
“Markets work far better when investors have to bear the consequences of dumb, stupid lending.”
+1000
Hauula, Hawaii Housing Prices Crater 7% YOY
https://www.movoto.com/hauula-hi/market-trends/
“The ongoing strength in the sector can be attributed to cheap and available
capitalcredit.”There, fixed it for you.
Denver, CO 80209 Rental Rates Plummet 11% YOY As Inventory Skyrockets And Demand Craters
https://www.zillow.com/denver-co-80209/home-values/
*Select rental price from dropdown menu on rental chart
Most private corporations have a fringe benefit rate of between 25-35%, depending on the type of employees, while Fairfax County’s rate is 56%, with the police at 66% and other uniformed personnel at 73%.
#payfairness
Prepare for tax n rent hikes
SC DMV fees going up 160% on 1 Jan. Current prices below with 1 Jan price hikes in parentheses.
Motorcycles $10 ($26)
Utility or Camper Trailers $10 ($26)
Title $15
People who are 65 or older or who have a disability* $20 ($36)
Trailers with an empty weight more than 2500 lbs. $20 ($36)
People who are 64 $22 ($38)
Passenger cars $24 ($40)
RVs $24 ($40)
Permanent Trailer Plate $87 ($103)
Cars in OR $86.