Housing Bubble Predictions: 2nd Half Of 2011
What’s your housing bubble prediction for the second half of 2011? Some from the beginning of the year: “No new stimulus or bailouts from a gridlocked congress for 2011. Housing prices will continue to fall. Massive cuts to city/county and state public workers. Massive cuts to state budgets (this is very deflationary). Interest rates creep up (about another 1%). We will overshoot 2.5X median wage in many areas for housing prices. More foreclosures. More people walking away. But still no where near bottom.”
“Newsweek and Time will NOT have a cover that housing in the worst investment ever. Canada will pop. Expect no help from Canadians buying cheap American properties.”
A reply, “I was thinking about that earlier today: Will 2011 finally be the year housing is identified as the worst investment ever, or will it take until 2015 for the MSM to figure that one out?”
From Canada, “Canada’s housing bubble will finally pop. Really loudly. Would you pay $500000 for a mobile home in Ft.McMurray or $700000 for single. Check out resource rich Saskatoon. $400000 to live in that hot spot. Resources be damned, the prices in Canada are nuts.”
A reply, “Not everywhere. Much of Alberta’s housing market is fueled by the energy industry. As long as oil prices continue to rise, oil and gas activity will continue to grow and housing will, at the very least, remain stable. Employment is high and wages are high in Alberta. As long as that continues, people will continue to buy homes regardless of what they cost. And regardless of how stupid that may be.”
“I was looking forward to a decline in rural real estate values. We’ve been looking for awhile now for a small acreage, a couple of acres or so, so hubby could have some space and a shop to pursue his car restoration hobby. But at over 100K an acre, even out in the middle of BFnowhere, it just hasn’t been remotely realistic.”
One added, “I believe Canada will pop BIG time, being many FB purchased homes using low interest rates. This is a recipe for disaster, being the 30 year rates are only locked in for FIVE years. After that time, a new loan is reissued using current rates. If rates go back to “normal” numbers (IE 8-10%), many Canucks will find themselves unable to carry the loan. This law was imposed to protect the 5 or so “national” banks.”
Back to the lower 48, “It will be a year of continued financial turmoil, combined with more of the same extend and pretend issues. The big predictable financial crisis will be Spain, and the EU will decide to print their way out of this ever spreading mess just like the US. Smaller banks will continue to fail at the same rate. We will see QE3 - 4, gas prices will continue to climb as will Comodities, metals and silver. The disparity between wealth and poverty will not diminish. Home prices where I am, coastal socal, will continue to drop at a rate too slow for my liking. I expect a 5-10% drop at most in 2011. Unless something crazy happens, there will be no major collapse, no additional US wars, and our government will continue to kick the can down the road. Amazingly, it will be more of the same.”.
Another, “My prediction is muni and state budget default drum beats will thump increasingly louder in the MSM until the Fed gov steps up and hands out some more bail outs for unemployment, job creation (which once more will not be spent on programs meant to help us long term) medicare/medicaid, and other mandated programs. Of course this option will only be available through QEIII and although everyone will accept it with deep foreboding, they will accept it because why face hardship today when you can put it all off till tomorrow.”
One on rates, “The Fed’s war on savers ostensibly is to keep mortgage interest rates low so FB’s can re-fi.
Oh dear, that is a whole chain of non sequiturs IMHO. The Fed funds rate is only loosely coupled with mortgage interest rates, which I believe are generally tied to LIBOR, not the Fed funds rate. IIUC LIBOR is controlled by bankers in the UK. And even if mortgage interest rates are low, FB’s can’t take advantage of them if they are underwater, as most of them are.”
“Mortgage lenders know going forward that a mortgage is no longer a safe investment protected by a good security interest. Now that housing prices have gone down they have found that they can lose principle on these loans, especially in the so-called non-recourse states. Perhaps there will be a spread between mortgage interest rates between the “recourse” and “non-recourse” states going forward.”
One said, “Stimulus package will come close to breakeven after all parties who can pay back do so. I was against it at first, and the banksters benefited most, but in the long run it may turn out to be a reasonable choice.”
One had this, “I think the March-May timeframe will cause lots of heartburn natinwide as the question of raising the debt ceiling (yet again) comes to a head. The ceiling will be raised - but with strings attached. Hopefully, that string is Pay-Go. That aside, California is overdue for a massive earthquake.”
And another, “1. Higher prices for all commodities and things we all use and need with the government still saying there is little or no inflation. 2. Here in North Florida, I believe unemployment will go up, not down as so much of our economy was based on building, selling and financing real estate (which still have many years of suffering to go)and the military which I think will see big reductions due to the deficits. Ditto for many other Sunbelt cities.”
“3. I think we’ll see major riots in at least one U.S. big city as continued unemployment leads young people to revolt against the government run by boomers and seniors who are leaving all their mistakes and debts for the younger generation to clean up. The young people are truly screwed beyond all belief.”
A personal prediction, “I predict I will continue renting for all of 2011.”
A reply, “In Soviet Russia we didn’t even have predictions.”
Do you guys think we will have a war with China. A bullet war, not a currency war.
I suppose that depends on the outcome of the US/China Central Bank War.
http://www.washingtonpost.com/wp-dyn/content/article/2010/03/25/AR2010032503772.html
What I also find humorous is that we always accuse China of currency manipulation because China refuse to let our own currency manipulation work (i.e. won’t let RMB appreciate against he dollar).
“They are manipulating currency because they won’t let our currency manipulation take effect!”
No chance.
China is very much like the United States — it is not an expansionist, internationalist country, and it has a large internationalist strain.
The U.S. got sucked into a global role by the two world wars, and ended up the world’s policeman. Expect China to not follow suit.
I meant a large isolationist strain. Goes back millenium.
The ruling tribe has been assimilating other tribes for millenia. They just took a breather.
The US and China will use proxies to fight any war.
Not this year; maybe this century.
Certainly! No doubts about it.
Ammo mfg: (numbers in Tillion$)
China: 38
USA: 2
Have any stats to offer on unwed males under age 40, USA versus China?
BOOKSHELF
JUNE 24, 2011
The War Against Girls
Since the late 1970s, 163 million female babies have been aborted by parents seeking sons
By JONATHAN V. LAST
Mara Hvistendahl is worried about girls. Not in any political, moral or cultural sense but as an existential matter. She is right to be. In China, India and numerous other countries (both developing and developed), there are many more men than women, the result of systematic campaigns against baby girls. In “Unnatural Selection,” Ms. Hvistendahl reports on this gender imbalance: what it is, how it came to be and what it means for the future.
In nature, 105 boys are born for every 100 girls. This ratio is biologically ironclad. Between 104 and 106 is the normal range, and that’s as far as the natural window goes. Any other number is the result of unnatural events.
Yet today in India there are 112 boys born for every 100 girls. In China, the number is 121—though plenty of Chinese towns are over the 150 mark. China’s and India’s populations are mammoth enough that their outlying sex ratios have skewed the global average to a biologically impossible 107. But the imbalance is not only in Asia. Azerbaijan stands at 115, Georgia at 118 and Armenia at 120.
…
This is an absolutely disgusting way for a society to act- aborting girls. It shows just how disturbed they are as humans.
“It shows just how disturbed they are as humans.”
On this board there are some who love to mock programs like social security. I will go out on a limb and say that what we are seeing is the natural outcome of creating an Ayn Randian “paradise”. Parents in China know that they will need their only child to look after them in their old age, and if they have a daughter she will most likely end up caring for her in-laws and not for her own parents. Thus a son is an asset and a daughter is a liability.
It will be “interesting” to see how millions of young Chinese men cope with the hopelessness of ever finding a mate. Perhaps China will loosen up its immigration rules to allow the importation of brides from other parts of Asia.
I think you’ll find that’s been happening for quite a while
On Sale, Girls Look for Chinese Husbands
In contrast, young North Korean women are sold as brides to Chinese farmers in northern border villages, while older ones take menial jobs working in restaurants or karaoke rooms. “We estimate about 80 percent of North Korean women who fled the North are sold as brides to Chinese men,” Kim says.
http://ipsnews.net/news.asp?idnews=56325
and it’s not a recent trend
http://www.time.com/time/magazine/article/0,9171,543843,00.html
You wonder how any Supreme Being could be indifferent from this sort of systematic atrocity.
I don’t know if this is a 2H2011 prediction, so much as a long-run forecast, but given the birth dearth, I predict that either through benign neglect of our immigration policy or deliberate demographic engineering, the U.S. will eventually face a need to open up the immigration spigots to allow young people from abroad to fill in the demographic crater left behind by the U.S. birth dearth.
Let’s hope the INS is sufficiently alert to create favorable selection before this happens. As our immigration policy currently stands, it is difficult for highly-qualified foreign workers with valuable skills to enter the U.S., and relatively easier for an illegal with a black market entry strategy to get into the country.
U.S. NEWS
JUNE 16, 2011
U.S. Births Fell Again on Weak Economy
By Associated Press
U.S. births apparently fell for a third year in a row, probably because of the weak economy.
Births had been on the rise for years, and the number hit an all-time high of more than 4.3 million in 2007.
But the count has been dropping since then. Last year, it fell 3% to slightly more than four million births, according to preliminary figures released Wednesday by the Centers for Disease Control and Prevention.
It’s possible the decline is leveling off: The falling birth rate seemed to bottom out in October, November and December. However, it’s too early to say whether that marks an end to the trend, said Paul Sutton, a CDC demographer who was the report’s lead author.
Hitting Bottom?
The report is a first glimpse at 2010 births from state health departments. It doesn’t include an actual review of birth certificates or specifics about what’s going on in different groups of women.
The CDC plans to do more analysis later. But the preliminary number usually is pretty close to the final statistics, officials said.
Experts believe the downward trend is tied to the economy, which officially was in a recession from December 2007 until June 2009 and is still flagging. The theory is that women who are unemployed or have other money problems feel they can’t afford to start a family or add to it.
…
it is my privilege to know two young girls from China (Madison and Molly). They are precious beyond words.
I predict that in the 2nd half of 2011, the vast majority of the large cohort of new college graduates with no jobs will postpone decisions to marry. This will lead to a continuation and exacerbation of the U.S. birth dearth.
Not mentioned in the article below: As the U.S. birth rate falls, the mortality rate normally would be expected to rise, as an aging population dies off more quickly. With the demographic bulge of baby boomers entering old age, the mortality rate will rise more steeply than it would in a demographically stable country. A lower birth rate coupled with an increased share of the U.S. population near the end of the line is predicted to result in a declining population of current U.S. residents.
Immigration and emigration are the wild cards.
Another prediction: In a decade or so from now, economists will fully comprehend the role of the post-WWII baby boom and freeway construction project in driving the birth of suburban McMansion tract home developments — aka the Housing Bubble. If you look at the Housing Bubble from a demographic perspective, you may as well date its origins back to the end of WWII, when fundamental demand driven by the baby boom started the wave of building which never really stopped until 2006 or so.
Who will be around over the next decade to snap up all those family-sized McMansions the baby boomers will be trying to unload?
The Atlantic
A Bad Economy Means Fewer Babies
By John Hendel
Jun 15 2011, 5:33 PM ET
When times are tight, it’s tough raising a family; and the contemporary economy has taken a statistical toll on America’s households: Since 2007, the number of U.S. births has declined consistently, according to new CDC numbers reported by the AP. The number now hovers just above 4 million, down 3 percent. It’s also possible, the AP notes, that the lower figure is due to a drop in immigration, thanks to a tanking job market.
Sorry about the misplaced link; cumulative fatigue has overtaken my editing skills.
Bullets?
I’d love to see the hardware we have for wars we *REALLY* need to win.
“I’d love to see the hardware we have for wars we *REALLY* need to win.”
Desert Storm and the Highway of Death didn’t get it up?
No, I’m not saying it like that. I don’t like violence.
I mean: do you really think it would be bullets if we were battling for survival and not oil pipelines?
The fear of financial ruin in divorce has kept many men in western societies from marrying. That is part of the cause of the birth dearth. Households of married people are now the minority in the U.S.
Even China is having a rapid increase in older people. By 2050, 40 percent of the Chinese will be 65 or older, according to The Economist magazine.
My point as well, homes are going to be depreciating assets until Americans have families again, and I am referring to educated taxpayer families.
“…homes are going to be depreciating assets until Americans have families again…”
That’s a really great reason to avoid purchasing a family-sized McMansion at an artificially inflated price, Bill!
The fear of financial ruin in divorce has kept many men in western societies from marrying.
Maybe the bigger fear is the responsibility that goes with marriage and family.
“The fear of financial ruin in divorce has kept many men in western societies from marrying.
Maybe the bigger fear is the responsibility that goes with marriage and family.”
I think that its a bit of both, but make no mistake, the young guys, especially in the USA, are well aware of how a divorce lawyer could clean their clocks.
In the late 80’s my boss’s boss went through a divorce. His ex’s attorney was demanding SEVENTY percent of his pay in child support and alimony. He threatened to quit working and beome a bum. The lawyer “backed off” and “settled” for 50% of his salary.
“His ex’s attorney was demanding SEVENTY percent of his pay in child support and alimony.”
That the ex would expect this kind of settlement is a good hint at a possible factor that might have led to the divorce.
P.S. I don’t plan to ever get divorced, but if I were ever in the position of facing a clearly unfair settlement, I would definitely play the boss’s boss’s card — threaten to become a bum before agreeing to become a slave to my ex.
Alimony is not new. Divorce is much more common because women will not stay in bad marriages like they did in previous generations (pre-Boomer). The entry of women into the workforce gives them the option to leave if the situation becomes unbearable.
That said, I think many marriages are too quickly cast aside. It is a big commitment and not to be made lightly.
“I think many marriages are too quickly cast aside.”
I agree. Of all the divorces I have witnessed close up among friends and family, the cure to a difficult marriage proved almost if not outright worse than the disease. The challenge is to stay married over the long term without perpetuating behaviors which our partners find increasingly intolerable over the course of many years together.
“The challenge is to stay married over the long term without perpetuating behaviors which our partners find increasingly intolerable over the course of many years together.”
Have people always been so annoying, or is this something new to our culture?
I assume that a good chunk of the people have always been so annoying, but most of us have lost our ability to put up with it. We get instant gratification now in so many other areas, who wants to put up with real people?
I think people have always been annoying and the expectations placed on the marriage relationship have changed.
In past generations, people expected that it was forever, that you would put up with your spouse’s foibles - for the sake of the children. It’s primary purpose was procreation. Each spouse’s duties were well defined. Domestic violence was not recognized as a problem. Growing up, I knew of one divorced woman in my neighborhood. Dads worked, moms stayed home.
In recent generations, marriage has become a vehicle for fulfillment. If it is not satisfying all of the needs of each spouse, then there is something missing. Roles are more fluid. No fault laws have made it much easier to get divorced and divorce has lost much of its stigma.
Let’s face it, everyone suffers in divorce. IMO, the marriage rate is down because there are more women choosing not to put up with immature men. Now if we could get both sides to give a little …
“Have people always been so annoying, or is this something new to our culture?”
I’m thinking about a ballet by Tchaikovsky, ‘The Nutcracker,’ based on a Christmas story by E,T.A. Hoffmann. The little girl Clara is madly in love with her nutcracker doll, but her little brother can’t resist the temptation to wreck her happiness by taking away the doll and breaking it. And there are also scenes where the little boys are teasing just for the sake of annoying others, just as my kids are prone to do. Mind you this story was written in the early 19th century, and set in northern Europe; admittedly, this is where my ancestors lived.
I’m pretty sure that the capability to annoy others is part of the human genetic makeup — a trait which evolved because it confers survival advantage. People who are so nice that they never, ever rock the boat to risk upsetting anyone else often times seem to get steamrolled by the world’s boat rockers. At least this is what I have observed in my career and my personal life. ‘The squeaky wheel gets oiled.’
That said, I have a hard time with persistent behavior whose deliberate intent is to annoy others (e.g., “teasing” without ever backing down). One of my sons is prone to spells of this sort of behavior; he likes to keep pushing until he is past the breaking point of open conflict with his brothers or disciplinary retaliation from his parents. I suppose it beats boredom…
People who are so nice that they never, ever rock the boat to risk upsetting anyone else often times seem to get steamrolled by the world’s boat rockers.
That’s been my tendency…and I’ve heard psych types describe it in much less flattering terms than “nice”. I’m trying to work on it.
IMO, the marriage rate is down because there are more women choosing not to put up with immature men.
While I am certain that there is some truth to this, consider that while there is an entire industry that caters to brides and not to grooms, who are a mere afterthought. Have you ever seen a “Groom” magazine?
Bottom line: a lot of guys have no interest in getting married or having kids. I know a guy who is a poster child for this. He shacked up with his girlfriend of 10+ years. He made it clear he didn’t want children and took measures to make sure that was the case. After 10+ years of begging him to reconsider she moved on.
He didn’t shed a tear upon her departure and soon had a younger girl parked in his bed.
Sorry ladies, but collectively you enable jerks like this guy. The sad thing is that I also know some “nice guys” who might not be the manliest types out there and who strike out consistently with the ladies. “Nice guy syndrome” is very real.
I know too many divorced “persons” who have to keep working even though they are not in good health, all to pay their ex. So many devastated, destitute, divorced “persons” out there who will never go through the minefield again.
Many people are not getting married, not because they fear marriage, but they fear financial ruin when divorced. 50% loss of your net worth? That, to me, is ruin. It could take more than a decade to make up for that loss when you could use the next decade to bolster your financial independence.
My own asset allocation plan hedges against a 50% loss in my net worth. It may get to 30% loss in the next collapse, but no biggie.
I would rather be a single “person” than a divorced “person.”
There. I removed gender from the above, knowing there is a sensitive “person” as a regular here.
Married couples no longer a majority in households. Now only 48%.
Yet I still see ads flooding the airwaves implying “happy married couples.” Are those companies losing a chance to market to single people or single parents? Eventually Madison Avenue will discover there are a lot of single people with high disposable income and start marketing to them.
Risk averse or self centered people should not get married and should not have children. Even in the best of relationships, there is a risk of tragedy. And anyone not willing to put another’s needs ahead of their own is not a good candidate for either marriage or parenthood.
I applaud those who recognize such traits in themselves and make the decision not to form a family, although I feel they are poorer for it. But then, financial success or ruin is not a big motivator for me. I am more attuned to relationships and family is important to me.
I think proxy wars are highly likely, if not inevitable. Which is why I try to avoid buying anything made in China. The global competition over natural resources is about to get ugly. Thanks to female infanticide China also has an overage of womanless males, which does not bode well for internal stability. Nothing like focusing national attention on external enemies to justify internal crackdowns on dissent and get the populace focused on a common enemy.
“Will 2011 finally be the year housing is identified as the worst investment ever, or will it take until 2015 for the MSM to figure that one out?”
The label “worst investment ever” won’t be applied to housing until the Housing Crime Syndicate management directs the MSM to do so.
You can choose to ignore the powerful forces that is The Housing Crime Syndicate or acknowledge it and proceed accordingly.
Jun 13, 2005 – TIME Magazine Cover: Home $weet Home
Link:
http://www.time.com/time/covers/0,16641,20050613,00.html
If I recall correctly, TIME Magazine had a cover in ‘80 or ‘81 proclaiming the “death of equities”.
Maybe I should renew my subscription to TIME. The cover story is a great contrarian indicator.
+1 Goebbels style collusion with Greenspan’s mortgage fraud.
“Will 2011 finally be the year housing is identified as the worst investment ever, or will it take until 2015 for the MSM to figure that one out?”
We’re not even close. A lot haven’t even gotten around to the issue of whether it’s a wise decision to buy a house much less whether it’s a good investment.
I have two new coworkers in the past 6 months where the first thing they did was rush right out and buy a house. Most likely, f’ing stupid. But they didn’t ask my opinion and I didn’t offer it. Renting in San Diego is no joy, but you couldn’t force me to buy a house here right now if you put a gun to my head.
“you couldn’t force me to buy a house here right now if you put a gun to my head.”
That sounds like a RealtorScum Utopia. They’d love it.
Greg — Thanks for reaffirming my view. I believe you have been around here for longer than I have (I got here just before the bubble popped). Considering all the hoopla about how much prices have fallen here, it is amazing to me how hard it is to find any reasonably priced half-decent homes on the market.
I think you might have found the HBB a little before I did. I think I found it in late spring of 2006. If I’d found it a year earlier, I would have been a lot better off.
I still find housing prices quite elevated compared to 2000 levels - and relative to rentals prices, and rental prices still quite elevated relative to the supply and economic situation in 2000. I expect some of the excess supply will be absorbed by people moving back from Riverside County as increased commuting costs will make that a less attractive option even with dirt cheap housing.
But I’m almost completely at a loss as to the timing and circumstances that will eventually restore the current situation closer to an equilibrium state. I just don’t know how to factor in an unknown amount of external intervention of unknown effectiveness.
I don’t think you can have a floor under housing until you have a floor under the economy and in terms of a sustainable economy, that level is most likely somewhere below where we are now. That poses lots of other issues beyond the impact on housing.
I have two new coworkers in the past 6 months where the first thing they did was rush right out and buy a house. Most likely, f’ing stupid. But they didn’t ask my opinion and I didn’t offer it.
My brother did that. I told him to wait. He was itching because he was offered some closing cost assitance by his new employer. I told him that those few thousand bucks would be more than offset by depreciation. He then told me that Raleigh was different.
Four years later his 20% down payment is gone and he’s underwater as his builder is now selling the same model he bought for 30%+ less than he paid.
The itch to buy a house seems to be something that transcends intellect and rationality.
One of my old friends son’s just bought a condo. Days later it was announced the banks are laying off again. He works for B of A. He’s not even married so I’m not sure being only a few years out of college why it was so necessary to jump. Must’ve bought the kool-aid that prices had bottomed out and didn’t want to be priced out.
People don’t sell houses that often.
There are lots of people who read the papers and watch the news, but don’t think that *their* house could have lost any value.
And they still remember uncle Joe and aunt Helen that clear $300k five years ago when they sold.
“And they still remember uncle Joe and aunt Helen that clear $300k five years ago when they sold.”
Good point. This delusion is alive and well as just yesterday I heard someone say “I won’t sell it for less than my neighbor did”.
The neighbor sold in 2006.
Here is my prediction. As housing prices continue to plunge, lower income people might be able to afford to move into suburban neighborhoods and school districts they were previously frozen out of. Particularly if they are renting from speculators, and double or triple up in large houses.
This is a very different country than 50 years ago, but the suburbs now are in the same situation older central cities were back then. And back then the result was white flight, blockbusting, etc.
Since the media loves to fan fears, I could see some incidents of people moving in from the other side of the tracks whipped up into hysteria.
The poor will go for the McMansions and other faux monstrosities first, so the mature tree-lined established 1200-sqft places with hardwood floors and one bathroom won’t be turning brown too fast.
One reason I’m reluctant to buy (one of several) is that whole neighborhoods and communities are still in flux. I don’t want to buy and then have some Section 8 scum or renters-from-hell move in next door, or in a ‘hood where empty houses are attracting vagrants.
With stagnant wages and the unemployment rate of 20% amongst the lower income strata, they are not going to be buying that many surburban homes.
Not buying, renting.
Here’s how it worked in Brooklyn in the 1960s. Grandma or Grandpa kicked off or decided to move near their kids in the suburbs. The old house was chopped up into three to six units, unofficially, and rented out to the poor.
Sometimes that led to another house selling cheap. The same “landlord” then bought other houses and chopped them up. Often they were city employees, who were only concerned with public services in the suburbs where they lived, and had plenty of time to check up on their properties while they were “working.”
Even in better neighborhoods, those who had moved away often held onto their childhood homes and rented them out, because they could not be sold due to redlining.
The other alternative was fires. Which led to more redlining, this time by insurance companies. Come to think of it, there has been less of that than might have been predicted.
“Not buying, renting.”
Maybe, but they would have the longer commute to work. And $2 gas ain’t coming back.
Man, this is tough. Prices around me are falling, but I have no idea what the rest of 2011 will look like. I think for some people it’s going to become obvious that we’re not going back to 2006 anytime soon. I think we’re getting close to moving beyond denial. So, the answer becomes, what next?
I don’t think young people will riot. They’ll simply live in mom and dad’s basement and surf the web on their iPhones. They’ll have part-time jobs at Target and pretend like it’s temporary. They have the ultimate extend and pretend opportunity if their Boomer parents saved a little money / paid off the house. I have two BILs that live with their dad who lives with his mom. I think this is the new normal - negative household formation.
I agree with WT that we will see a new round of “there goes the neighborhood” hysteria. Real or imagined, it’s already happening.
I see knife catchers left and right. I will see more.
My school district acted “surprised” when ARRA funds expired. Florida received $700 Million in RTTT funds - we’ll see how they act when those expire. I am not worried about my job /wife’s job (yet) because I haven’t seen anyone good let go, only people that haven’t been doing their job. The second half of 2011 looks o.k. for my family in this regard.
I can’t imagine what investors will pile into next. I’m sure whatever it is, it will find a way into my wallet. The “food crisis” appears to be stalling - a lot of BOGO deals at the supermarket.
As for Florida, Gov. Scott’s deregulation of insurance is a wild, wild, wild card. If the insurance companies overplay their hands, people will simply stop paying. I wouldn’t want to work for an insurance company in Florida right now. I predict that will be a volatile industry.
As for Florida, Gov. Scott’s deregulation of insurance is a wild, wild, wild card. If the insurance companies overplay their hands, people will simply stop paying. I wouldn’t want to work for an insurance company in Florida right now. I predict that will be a volatile industry.
This is already happening with employer-provided health insurance. As it gets more costly for the employees, they’re doing without.
Which doesn’t bode well for the long-term success of the health insurance industry. When fewer and fewer people can afford your “must-have” product, you have a problem.
But I can’t think that all of the current price gouging is just the health insurance industry’s way of making as much money as possible before it goes under. I think it’s only a matter of time before the employer-based private health insurance system implodes and is replaced by a single payer system.
I’m to the point where I think I’d rather die than give a health insurance company my money every month.
My prediction:
Obamacare will eventually fail. Obama chipped very deeply around the margins of the for-profit system, but in exchange, he promised not to kill the for-profit system entirely. That system is inherently flawed: the young and healthy pay in to to the private sector while the old and sick and poor are passed off onto the government. It was a great system for the fat health insurance companies and their fat investors: Socialize the risk, privatize the profits.
During the Obamacare debate, there was a great deal of talk about “triggers;” if people weren’t covered or the health insurance companies got too greedy, or if the exchanges didn’t work, then there would be an automatic trigger to a public option. The lobbyists bought off the Senate to make sure the triggers never made it into any legislation.
Obamacare will fail to cover the populace at a good price — no legislation can do that as long as health is a for-profit industry. But those triggers are coming about on their own. The middle class is tapped out. The health insurance companies have become so greedy that they can no longer hide it: they let the cat out of the bag when they hired hitman Paul Ryan to assassinate Medicare and hired governors to cut Medicaid to finite amounts.*
However, Obamacare succeeded in bringing about the natural triggers, which IMP will bring about a better system (public option/single payer) even if it takes a decade.
———————
* For medicaid, the government (state and local) generally pay for medical for everyone that qualifies. A block grant is a finite amount, and the state governor gets to choose who gets the medical care, which mean many many poor will go without. If Medicaid goes to block grants, a lot of the populace is going to find out very quickly that Medicaid pays not just for the welfare queens (their favorite whipping boy), but also for 2/3 of nursing home costs.
It makes just too much darn sense to close the cycle by allowing the young and healthy pay for the old and sick and poor.
“I think it’s only a matter of time before the employer-based private health insurance system implodes and is replaced by a single payer system.”
I agree, the HD plans that everyone is being herded into are the final step before going over the cliff. For the average J6P an HD plan is basically no insurance as he can’t afford the deductibles and hence doesn’t go see the doctor. What happens when HD plans become too expensive? Do they remove the preventive care (children’s vaccinations and annual checkups) that are not subject to the deductibles? Do they keep increasing the deductibles to the point where only 1 in 1000 policyholders actually meets it? And if we get there, why bother having insurance?
I think that all these people who have jumped onto the “healthcare” career bandwagon will get to meet our good friend, Mr. Pink Slip.
“I think it’s only a matter of time before the employer-based private health insurance system implodes and is replaced by a single payer system.”
Only if the public is ready to have every single aspect of their lives dictated by government. Are you ready?
Only if the public is ready to have every single aspect of their lives dictated by government. Are you ready?
I’m not saying we won’t do our best to screw it up, but it doesn’t have to be that way. We have other things that are treated as public utilities that work pretty well compared to the shenanigans of the private market (see Enron). I will take the “socialism” of public power utilities over being screwed by Enron every day of the week. And after the screwing we’ve gotten from the health insurance companies over the years I think a public utility could do much better at that, too.
“Only if the public is ready to have every single aspect of their lives dictated by government. Are you ready?”
As opposed to insurance companies who can discrimate against you based on your credit score?
Anyway, I’d trade my crappy HD plan for Medicare in a heartbeat.
Remember kidz:
Obamacare death panels = gov bureaucrats kill granny
For-profit InsuranceCo death panels = invisible hand of free market
heh… ARRA funds. They were profitable while they lasted. Buy American! Rah rah rah!!!
“My school district acted “surprised” when ARRA funds expired. Florida received $700 Million in RTTT funds - we’ll see how they act when those expire.”
How aware are your coworkers of the situation? Do any of them realize that some of them might not have been working the past two years without those funds and might not be working once those funds go away?
Many are not aware, and they don’t care. There are quite a few, who are aware and think every 2-3 years there will be something new that will take care of it. ARRA + RTTT means 5 years of additional *not* FL funds.
I am keenly aware of it. The fiscal end of 2013 should be interesting, but it’s possible that we’ll have enough attrition and retirements…
“Many are not aware, and they don’t care. There are quite a few, who are aware and think every 2-3 years there will be something new that will take care of it.”
Even though we’re still going through the greatest financial crash/looting that most people have ever experienced, it’s still astounding the degree to which many/most remain oblivious to what has happened or is happening financially and how it may impact them directly.
I was talking to a former coworker a few weeks ago. He’d mentioned to coworkers that there was a proposal that would result in a 5 percent pay cut with the money directed to pension fund contributions. The reaction was, “at least we’ll get a bigger retirement”. The reality is that pay would be cut, money siphoned of to the pension fund, and at best one might get the pension that was promised (or less).
If you’re not paying attention now, you are very likely to get fleeced or worse.
And more and more of that negative household formation will happen in rental housing, as the baby boomers don’t seem to be paying off houses as their parents did.
I have given up making projections.
Eventually we’ll have to stop the $1.5T a year deficits. When we do, we will return to full economic collapse mode.
When this will happen, I have no clue.
“I have given up making projections.”
I gave up making predictions for my personal/family life. I have been wrong every year since I graduated high school. The longest I’ve been in one “set” is 1.5 years (that just ended).
“full economic collapse mode”
I love this. To quote the immortal words of the Decider: “bring it on”
From the Calgary Real Estate Review for June 2011:
+32% increase in sales of SFH
Prices down 0.5% from a year ago
Median price was $417K down from $418,900 a year ago
Inventory down 21% from a year ago
Condos:
Sales up 30.5% yoy
Prices up 1.5% yoy
Inventory down 23% from a year ago
http://calgaryrealestatereview.com/
There are no official June 2011 stats available for Edmonton yet however it appears that for SFH:
Inventory is slightly down: June 2010/4202 June 2011/4192
Median price is up: June 2010/$359,750 June 2011/$365,000
Sales are up: June 2010/912 June 2011/1042
For Edmonton Condos:
Inventory is down: June 2010/2458 June 2011/2204
Median price is down: June 2010/$230,000 June 2011/$220,000.00
Sales are down: June 2010/466 June 2011/448
http://www.bobtruman.com/Edmonton_SFH_stats/page_1918017.html
What will the second half of 2011 bring for Alberta?
Oil is just over $94/bbl today and hasn’t gone below $75/bbl for the last year.
Activity is ramping up again in the oil patch, companies are screaming for skilled workers and a major labor shortage is predicted in this area by 2014.
The Bank of Canada doesn’t seem inclined to raise interest rates any time soon.
Home building is picking up again and the commercial real estate market in Calgary has rebounded with a vacancy rate of 9.4%, down from 15.7% a year ago. More companies are moving here, keeping wages and employment high and competitive. That truly is the key to the housing prices here.
I haven’t heard any popping noises, unless you count the corks from the champagne bottles.
‘unless you count the corks from the champagne bottles’
It’s all a lot of fun til somebody loses an eye…
LOL. After all those childhood BB gun fights my buddies and I survived with eyeballs intact (miraculously), I don’t want to push my luck at this stage.
Oooh, look. It’s a housing-bubble cheerleader. We haven’t had one of those to pick on for a long time. FUN STUFF!
If you’re referring to me, no “housing bubble cheerleader” here. I responded to this thread because Ben quoted a couple of my earlier posts regarding the Alberta real estate market, in this topic.
Like it or not, the facts speak for themselves. Although many, myself included, would love to see lower housing prices, wishing, praying or predicting the demise the real estate market in Alberta over and over like a mantra, will not make it so.
Nope. All we have to do is wait.
I see canadian realtors are as corrupt and dishonest as those in the states.
Thanks for the heads up RealtLiar Lola.
Is it really hard for you to notice the slowdown in home price appreciation that is underway? We learned just a few years ago that this is a sign of a bubble about to implode. First prices reach levels where buyers cannot pay any higher prices, no matter how much more crazy loan underwriting standards get. Next the slice of demand which banked on ever-rising prices is sidelined — those who have not already bought by now, at least. Once demand starts to contract, slowing prices morph into falling prices, and a bubble implosion is underway.
Any questions?
Couldn’t one simply keep an eye on strawberry prices?
One could keep an eye on strawberry pickers who qualify for $700,000+ loans.
Perhaps you should pay attention to what’s happening in the US, Lola, to catch a glimpse of your housing future. Even the most hammered markets are not done correcting. Your bust will just come later. But, while beautiful, Canada just ain’t “all that and a bag of chips.” I’ll laugh heartily when prices are finally in the cellar in the next decade.
‘pay attention to what’s happening in the US’
History shows we can’t expect that. For instance, When the California central valley headed down, the inland empire was the center of the universe. When the inland empire started collapsing, Los Angeles was no doubt immune. When LA went down, the Bay Area was immune. The same thing could be said about dozens of relative bubbles.
Mantra? I thing if anything the HBB has always talked about fundamentals. What are the price to rent or income levels in Alberta? As I said in the Calgary magazine article back in 2007, Texas had a resource boom in the 70’s/80’s, and collapsed all the harder because of it.
‘while beautiful, Canada’
I drove up to Alaska about a decade ago. I liked Canada, (it was the summer). Alberta was OK, but I’d rather live in British Columbia, however I don’t see how people make a living there. I’m not going to get into the regional bashing thing, but face it; Canada is just another place. Another place with a housing bubble.
Canada is just another place where people have gone seriously into debt to have more than they can afford. The decline will be leveraged.
More for sale signs in Eastern Ontario (Upper Canada) than I have ever seen before.
Canada…do they have short mild winters?
Garth Turner (www.greaterfool.ca) (I hate it when posts with links get delayed here) says that Vancouver SFH (single family home) is 10 times average income and Toronto SFH is 7 times.
Blue Sky: upper New York State? my wife and I went to the Carousel Mall near Syracuse in May. It was the most un-crowded mall I’ve been to.
rms: when it get really cold, sound changes, jet planes sound much louder because the sound travels better in the denser air, in Ottawa people put on snow tires, in Québec they must by law. Maple syrup is made from the sap of maple trees. The sap runs when daytime temperatures are above freezing (0° C) and nighttime temperatures are below - in April.
Blue Sky: upper New York State? my wife and I went to the Carousel Mall near Syracuse in May. It was the most un-crowded mall I’ve been to.
Music to my ears. I’ve always hated that mall and I hate it’s crook developer Congel. I’d love to watch that guy lose both of his area homes. I only go there about 2x a year and it was absolutely dead last time I went too. Yet they’re trying to convince us that expansion is going to draw new tennants.
They built it too close to a sewer treatment plant so it often stinks in the back parking lot in hot weather. Several people have thrown themselves from the top floor to commit suicide and the mall doesn’t do anything to change the design. And on weekend nights crimes w/weapons involved is reported enough to keep me away. They probably come over from the strip clubs which are really across some fields/road from the Macy’s side. Then there’s the stories the mall workers tell us never make the papers. Thanks, I’ll stick to my burb stores and the internet.
Lola,
Stick around. Not all who hold contrary opinions are trolls. Different perspectives deserve to be discusssed on their own merits. Though as a general warning, NAR dissemblers tend to beat a hasty retreat once they show their colors in here.
If you think it is bad in Alberta, you should take a look at Vancouver. At least you have oil there.
“Oil is just over $94/bbl today and hasn’t gone below $75/bbl for the last year.”
Don’t have the stats handy, but after talking to my GM assembly line worker BIL this morning, I take the impression that a massive number of electric cars are going to enter the U.S. fleet over the next few years.
Perhaps China will pick up any slack in oil demand due to the U.S. reducing ours?
I have heard that the proposed new CAFE millage standards will need a lot more electric cars in the fleet to get the average up to the low 50mpg range. Where would one invest $ to take advantage of this? Auto mfg., battery makers or maybe the electric drive train components? I for one would love to have a electric car if it can go over 100 miles to the charge and could be recharged in a reasonable amount of time (less than 30 min. at 440 volts).
I don’t mind if it takes all night to charge as long as it’s cheap enough. If it’s going to be over 20k then I want it to be a hybrid that can also power my house during an outage.
BlueStar
Tesla is coming out with the Model S. 350mpc (c=charge) and it will charge in under an hour. plugincars dot com has the fleet by all the manufacturers.
PB- Bring on the plugin. My Volvo is 17 years old. We’re waiting.
Telsa has produced what, 1,500 cars?
Your gonna have to wait a loooong time.
Electricity is just the transmission medium. The cars will be running on coal, one step removed.
massive number of electric cars ??
I think smaller motors are just as important…
Canada has always had oil, and oil prices have always gone up and down. Canada has not, on the other hand, always had a housing bubble.
First rule of observational thinking:
A change in one variable can not be explained by a nonchange in another variable.
More of the same. Same asking prices from sellers, with steadily increasing rents and people falling over themselves to rent from FBs at insane prices. Same for used cars.
As I’ve said before, the best asset to acquire will be real estate you bought in the 70s or 80s. How do I get some of that now? Time machine?
(side story: I was eyeing a 2001 Jeep Cherokee (90k mi) to replace my 1998 Jeep Cherokee (260k mi). Guy selling it sold it within a week for asking which was almost $7k. Ugh.)
It almost seems that older used cars are actually appreciating.
Cash for Clunkers took a lot of perfectly serviceable and affordable cars off the market. So ironically the working poor have to shell out more for transportation. Isn’t hope ‘n change wonderful?
From wikipedia:
“On August 26 the DoT reported that the program resulted in 690,114 dealer transactions ”
That’s a drop in the bucket, when you consider that there are still 1,000,000 new cars sold every month, and most of thoise sales create a usewd car trade in..
The real cause of the used car shortage is that 5-7 million used cars that would have come onto the market every year are not, since people are keeping their cars much longer.
There isn’t a shortage of 2-10 year old used cars because of C4C.
Rents will be falling soon in the PNW. If anything, people start moving away to escape them, and the supply grows. Not everyone is an overpaid code monkey. I remember in the early 2000’s in downtown Seattle, they couldn’t give places away. There was free rent offered, and people were also moving into nicer apts. for less money than they were paying.
Predictions for 2nd half of 2011:
- Falling home prices
- Increasing rate of distressed home sales, as robo-signing crisis morphs into panic selling of bloated REO inventories
- Continuation of extended period of low rates from the Fed, as they have been pushing on a string for years already and still are
- Plunge protection efforts in Fall 2011 possibly not sufficient to offset a stock market crash
- Anyone’s guess is as good or better than mine as regards raising the debt ceiling, instituting QE3 or implementing a final solution to wind down GSEs
I predict the Treasury bond market impacts of the absence of QE2 in the second half of 2011 will be masked by unannounced interventions designed to smooth the transition.
End of QEII Like Daddy Warbucks Leaving Store: Pimco
Published: Friday, 1 Jul 2011 | 8:20 AM ET
By: Catherine Boyle
The end of the second round of quantitative easing in the US has been likened to a department store’s biggest customer leaving the store by Tony Crescenzi, a strategist at Pimco.
“Picture a department store where a few customers are inside standing by the store shelves waiting for new inventory,” he wrote in a note. “A truck is outside – it’s the Treasury truck, and it is back again at the store to unload a fresh supply of treasurys to refill the store’s emptied shelves.”
…
“The store’s biggest customer, the Fed, quickly grabs about 70 percent of the supply. The remaining buyers compete for the scraps that are left,” wrote Crescenzi.
“Doing the math, it is easy to see why the remaining buyers have been willing to pay up to own Treasuries – the Fed has left them with slim pickings worse than the scramble by people piling into a Wal-Mart on Black Friday at 3 am to fill up their carts before others do. It’s human nature to want what others have.”
Crescenzi compared the conclusion of the plan to: “The store’s biggest customer with the fattest wallet leav(ing) the store.”
There won’t be any immediate effects of the ending of the programme, according to Crescenzi, because the Fed has “cleaned out the shelves”.
“The remaining buyers therefore dash to the shelves and scurry to buy whatever the Treasury truck delivers,” he continued.
“As the days pass, the Treasury truck keeps on backing into the store to deliver a fresh supply of Treasuries as it must because with a $1.4 trillion budget deficit, the there are a lot of treasurys to unload and find buyers for.
“Soon enough, the shelves fill up and the stock effect becomes a negative for prices, all else equal of course, and so long as Daddy Warbucks stays out of the store,” he wrote.
“It is likely that over time the attractiveness of these assets will wane,” he concluded, adding that the US dollar’s status as a reserve currency would also be hampered by the end of the programme.
Nice post Pbear….Written in a way that most can understand whats going on with QE…
PB keeps it real. One of the HBB’s most valued posters.
Was just talking to a colleague last night who is moving out of CA to a less expensive housing market. The asking price of the home he wants to buy sounds plenty affordable to someone who is leaving CA and taking a good paying job, but the home appraised at $30K below asking, so financing is not available. The seller has to move, but I suppose renting the place out or keeping the home off the market until the market comes back are options for the seller?
Where is their new home state? Did they buy one there too?
Duh. Reading comp apparently isn’t my strong suit. Where they moving to?
Colleague: Wyoming
Delusional seller: Montana
Is he bringing his job with him? He will take a loss on the Wyoming place. They’re way behind the curve when it comes to bubble poppage. If he’s bringing a decent job with him he may not care, though.
New job; presumably decent pay (but I didn’t get into details w/ him).
At this stage of the housing bubble collapse, I generally refrain from getting into detailed discussion of peoples’ household financial situations relative to home purchase decisions. I used to openly share my opinions about the future direction of housing prices when a crash was imminent, but I was so frequently ignored by people who should have known better that I decided it wasn’t worth the waste of breath.
Back then, I also underestimated the lengths to which Uncle Sam would intervene to offset the invisible hand of the free market. Seeing the vast scale of market distorting interventions in the mortgage lending market and the supply side of the purchase market have made me far less confident of my ability to predict where this goes from here.
Back then, I also underestimated the lengths to which Uncle Sam would intervene to offset the invisible hand of the free market.
Does the invisible hand even exist in the real world? As long as there are monopolistic mega corps I don’t believe that the invisible hand even exists.
“Does the invisible hand even exist in the real world?”
Absolutely, and even in the face of government interventions. Individuals take actions which they believe will best meet the economic needs of their situations; for instance, if everyone knows that home prices are falling, a large number of them will avoid catching a falling knife.
The aggregate effect of many individuals behaving in the market to further their economic self interests creates the force of the invisible hand.
“for instance, if everyone knows that home prices are falling, a large number of them will avoid catching a falling knife”
But if the banking clan can just print money then the house prices remain high, even if no one is buying.
I think we give J6P too much credit. Corporate America can all too easily control him.
The “invisble hand” has failed to serve us against monopolies like banking, healthcare and Corporate America in general.
I know the concept of Adam Smith’s “invisble hand” sounds compelling, but the big fish can easily circumvent it by buying out the government.
“But if the banking clan can just print money then the house prices remain high, even if no one is buying.”
If this is the plan, then it evidently isn’t working very well.
The Financial Times
Last updated: June 28, 2011 3:51 pm
US home prices drop 4% in April
By Shannon Bond in New York
The kick-off of spring buying helped support the US housing market in April, but home prices dropped 4 per cent from the same period a year earlier as falling sales and a weak labour market weighed on the sector.
Meanwhile, US consumer confidence fell to a seven-month low as Americans worried about high unemployment.
Prices of single-family houses in the 20 largest US cities sank 4 per cent from April 2010, the steepest drop since November 2009, according to the S&P/Case-Shiller home price index. The yearly fall was in line with expectations, following a 3.8 per cent decline in March. Prices in the spring and early summer of 2010 had been boosted by the government’s first-time homebuyers’ tax credit.
…
IIRC there are many on this board who complain repeatedly that prices are NOT falling, or least not fast enough in the desireable parts of the country.
Sure there are places like Vegas or Phoenix that idiotically overbuilt. But if there was truly an “invisible hand” of the market places like Rancho Bernardo would remain so insanely priced.
Anyway, what I’m trying to say is that if we didn’t have monster TBTF corporations that maybe there would be an effective invisible hand. But just look at the MLS monopoly, even today they remain mostly unchallenged and get away with charging outrageous comissions. THe invisible hand has done next to nothing to break that monopoly. Or healthcare. Or what about big oil? We’re paying through the nose when there is record sized inventory.
I still think that the idea that an unorganized rabble will somehow be able to mindlessly counter concerted efforts by the megacorps to be nothing more than a pipe dream. It might have worked in Adam Smith’s days when almost all business (except for the banksters of course) was “small”. Was the invisible hand able to counter Rockefeller and his monopolies?
“…but the home appraised at $30K below asking, so financing is not available.”
Report these un-American activities to the NAR!
“The asking price of the home he wants to buy sounds plenty affordable to someone who is leaving CA”
This pool of suckers is the only source of buyers left for the Realtor Crime Syndicate.
Not knowing the market you’re looking at is deadly. Don’t expect a Realtor to give you the facts. They will ALWAYS distort and lie about current asking prices.
I think he knows the market; it’s just that for his income level plus whatever his wife will bring in, the home is not that expensive — especially compared to what you would have to pay to live in comparable housing in CA.
“Newsweek and Time will NOT have a cover that housing is the worst investment ever.”
And accordingly, housing will NOT bottom out by year-end 2011.
Newspeak and Slime will continue to be corporate propaganda outlets.
I stopped reading those rags over decade ago.
Posted something like this yesterday, but then noticed a 10 hour stall and my query never appeared. Tried this morning and it still did not go through. Automatic server-censoring? Conspiracy?
I have been out of commission (work overload) but am now coming up for air. And, what better thing to do than turn to HBB for some wisdom? And the question that is on my mind concerns the machinations in Washington over the national debt. So, I ask you, do you think the US is headed for some kind of major transformation akin to the French Revolution (which resulted in the rise of Napoleon)?
I ask because the refusal to extend loaning power to the crown in 1788 is what precipitated the French revolution. The crown owed money to Dutch bankers. Because the interest payments could not be made without further loans, the crown asked for the equivalent of a rise in the debt ceiling. Upon being denied, the king sought to counter the power of the deniers by calling the Estates-General into session–a quasi-parliamentary body last having meet some 150 years before. When they met in 1789, they basically demanded an end to absolutism. The king refused, which ultimately led to a showdown in which both the EG and the crown lost.
I wonder are members of Congress students of history trying to repeat it, or idiots playing hot potato with a grenade?
Your thoughts? Are we in danger of entering a process that could dissolve the union or in some other way fundamentally change the nation’s political form? And if so, for better or worse?
IAT
Interesting. I learn something new on this board almost every day.
“I wonder are members of Congress students of history trying to repeat it…”
Har!
“Are we in danger of entering a process that could dissolve the union or in some other way fundamentally change the nation’s political form?”
1. How long have we have been at war in Afghanistan?
2. What happened to the Soviet Union after a protracted war in Afghanistan?
I realize it is different here and all.
Here is a white paper on the topic from a conservative think tank:
White Paper
September 14, 2009
Escaping the “Graveyard of Empires”: A Strategy to Exit Afghanistan
by Malou Innocent and Ted Galen Carpenter
Malou Innocent is a foreign policy analyst at the Cato Institute who focuses on Afghanistan and Pakistan. Ted Galen Carpenter, vice president for defense and foreign policy studies at Cato, is the author of 8 and the editor of 10 books on international affairs. His most recent book is Smart Power: Toward a Prudent Foreign Policy for America.
Given the nature of the conflict in Afghanistan, a definitive, conventional “victory” is not a realistic option. Denying a sanctuary to terrorists who seek to attack the United States does not require Washington to pacify the entire country, eradicate its opium fields, or sustain a long-term military presence in Central Asia. From the sky, U.S. unmanned aerial vehicles can monitor villages, training camps, and insurgent compounds. On the ground, the United States can retain a small number of covert operatives for intelligence gathering and discrete operations against specific targets, as well as an additional small group of advisers to train Afghan police and military forces. The United States should withdraw most of its forces from Afghanistan within the next 12 to 18 months and treat al Qaeda’s presence in the region as a chronic, but manageable, problem.
…
I predict that it will be revealed that there wasn’t a proper legal chain of ownership in the MERS system, and the robo-signing fraud wasn’t a result of the banks cutting corners because they were cheap and/or overwhelmed, but was because they simply didn’t have the proper documentation without faking it, and no one at the higher levels wanted to sign their names to the fraud.
The current lull in foreclosure activity will be revealed to be less about hiding losses, or squeezing the last few bucks out of FBs, or using them as free housekeepers etc, than about the banks puzzling over (and perhaps bargaining with regulators or attorneys general about) how to proceed without proper documentation.
I also predict the banksters will get a pass, again. The law will be ignored, again.
My prediction is more looting by the elitists, and more pain for Joe 6-pack. The wealthy will see their stocks and overall portfolios perform beautifully, with magical weeks on Wall St. like this past one thanks to the sh!tty policies of Bernanke and Obama, while the eroding middle class and poor will continue along their slippery slope to financial ruin. The jobs market will continue to get worse as the year wears on, and the Fed may decide to juice the markets yet again, which will again go right into the pockets of the wealthy. In turn, there will be more fake economic health until the same crossroads arrives in 2012, wash, rinse, repeat. I’ll continue to shun the i-Phone, live even more frugally, and learn to hate the political and financial scum even more.
So why haven’t you bought stocks in the last two years? These rich people you hate put a gun to your head just before you pushed the “buy” button? You could have made more money playing their game.
I don’t rub elbows with pigs, or dance with the devil.
So why haven’t you bought stocks in the last two years ??
Well, if you are at the end of your prime earning years, lost your job or have had to take a job paying far less than you previously earned then the idea of losing “any” money is off the table…You just can’t earn it again…
Even retired people should have some of their portfolio in equities to protect against inflation.
My prediction is more looting by the elitists, and more pain for Joe 6-pack.
Really sticking your neck out on that one, GB. Are you expecting fireworks on the Fourth, too?
Nope. I’m not expecting fireworks due to local budget deficits. Nice try, though..
GrizzlyBear I love your anger, and agree.
I predict millions of FB’s will get a reinstatement of their loan status, forgiveness for non-payment, and this controlled collapse will go on for years.
I walked the tracts we are interested in today. I left our phone and email with a note calling us a “cash & close”. I figure with a dry MLS, it’s worth a shot.
Met a Paralegal w/ one of BOA short sale dept. She said they are using an real Appraiser and a BPO. Some of the spreads are $150K due to the high loan balances. $400K-$500K price point.
“…dry MLS…”
The California water shortage has morphed into a drought of used homes for sale — despite many, many more that could potentially be on the market over the next decade.
I expect ‘more than expected’ California homes for sale over the next ten years.
PB
In our So Ca area, I found 98 homes for sale between $325K-$425K in the MLS, but when you narrow the search to 4 bdrms, 22 show up. Subtract out two-story, and homes on main and secondary thoroughfares, we have a choice of maybe 4, and two are overpriced flips.
So, yesterday, using a Tract List & Zillow to locate floorplan sq ft, to match it to our desired floor plan, I hit the streets. I might to it again on the 4th.
Hbb’ers:
Any suggestions on what to say in my next flyer, to calm the “this is a scam” concerns?
With so many people in default, it is pretty amazing how limited the selection of homes is for end-user buyers in SoCal. I suspect the all-cash investor crowd, catching a whiff of inflationary potential in the Fed’s QE1 and QE2 interventions, have snapped up whatever inventory they can in the hopes of protecting themselves from potential currency decline. The result is a very limited selection for end-user consumers whose interest is buying a home as a place to live, not as an investment.
I suspect the all-cash investor crowd, catching a whiff of inflationary potential in the Fed’s QE1 and QE2 interventions, have snapped up whatever inventory they can in the hopes of protecting themselves from potential currency decline”
there whole baby boomer lives they have only know inflation, and anyone who lived through previous deflation is dead.
If they just looked at demographics they might hold off on snapping up homes.
“If they just looked at demographics they might hold off on snapping up homes.”
In ten years from now, the MSM will report the dwindling demand for family-sized housing relative to the supply generated by retiring baby boomers as some kind of unforeseen revelation (’Nobody could have seen it coming!’).
Simply say in your note that you are looking for a single story, 4 bedroom, etc., etc., on a side street in this neighborhood and saw their floorplan on Zillow. Don’t put in that you’re “all cash”, save that for the negotiation round.
4 brds and single story and about 400K
very tough in this area. it would have to be 1960’s vintage
I gave up looking will wait some more. I expect contiuned deflation as the price we will pay for too much debt. because of my prediction I’m not in a hurry to buy. I like the duplex homes in Moorpark there you can sometimes find a single story 4 bedroom for under 400k, downside not much yard and most are attached.
I rent one now the owner bought it for 425K about 1.5 years ago. One just like it detacted went for 409K in Dec.
Most homes around here that are single story 4 bedrooms are about 500K. 2 story homes are more common.
I predict that at least through a good part of 2012 that what cannot go on for ever will continue to go on…
High house prices, huge budget deficits, unsustainable debt and probably more…
My predictions for the second half 2011
Housing prices:
I expect the second half of 2011 to be a lot like the first half.
Housing prices are still higher than 3x median income in most areas, and still above their inflation adjusted norm, as demonstrated by the Case-Shiller index.
As such, I expect housing prices to continue to drop at about the same rate they did in 2010 - around 1% per month.
Most “experts” will predict a much slower rate of decline, if they predict a decline at all, which will result in another six months of “unexpected” or “worse than expected” declines in housing prices.
The bottom:
Most areas will not reach a bottom this year, but near the end of 2011 a few areas will actually reach their Case-Shiller inflation adjusted norm, resulting in a dead cat bounce in housing prices, before stabilizing at the lower level.
While this will happen in 2011, it will go largely unremarked at that time, because the numbers won’t be published until the following year.
Unemployment:
Unemployment numbers will improve slightly.
Most people on the hbb will attribute this to people falling off the rolls rather than actually getting jobs.
The main stream media will report it alternatively as a positive
sign that the economy is back on it’s feet, or as a quirk in the
reporting which doesn’t paint the real picture - which way they
spin it depends on if the editorial is about how great
things are or how much of a crap sack world we live in.
The HBB:
As the 2012 elections draw closer, more and more posts will
be made blaming either Republican or Democrats for something.
While amusing to veterans of the HHB, these posts will offer
no useful incites or even constructive criticism, and can continue
to be ignored.
The Fed:
The massive inflation caused by the credit bubble will continue to deflate, which would result in deflation if the fed didn’t interfere.
But they will interfere, doing the minimum necessary to keep inflation at 0-2%, largely by buying bonds.
They won’t call this “causing inflation by printing money” or
“quantitative easing”, but rather claim it as a continuation of a successful policy to stabilize currency.
They may even claim to be winding down the program, but whatever they claim, they will continue buying bonds at about the same rate they have been.
Since nothing much has changed from the first half of 2011, they will continue to offer to same low interest rates they have been.
Now I’m not an economist, so you might be tempted to believe some or even all of my predictions, but remember “prediction” is just a fancy word for “guess”.
All predictions should be viewed with a healthy dose of skepticism.
“Now I’m not an economist,…”
I predict professional economic forecasters will continue to embarrass themselves in the second half of 2011 with forecasts which bear little resemblance to what actually occurs.
Unemployment numbers will improve slightly.
Most people on the hbb will attribute this to people falling off the rolls rather than actually getting jobs.
It’s actually pretty easy to verify. The Dept of Labor does publish the absolute number of jobs. If the number decreases its a good sign that unemployment is worse.
I was taking a long walk yesterday and passed many =<3 year old vehicles parked near the road all shined up with for sale signs on them and I’d like to buy one, especially a fairly new truck, but I know just as is the case with houses, the sellers can’t sell at market prices because they all owe more than the market will pay. The entire area is saturated with houses,boats,cars,trucks,motorcycles, all for sale and no buyers willing to pay what people want for the stuff. That’s one of the horrors of the debt based economy is the reality that the market can’t adjust in real time and so we have the farce of houses on the market for years at prices double what real people would or could pay. The so called “investors” who buy houses for cash then flip them to other “investors” strike me as a class of suckers. Just cuz you have or can get cash doesn’t mean you have sense and many of these people are paying too much for the properties they’re “snapping up”….
“…the sellers can’t sell at market prices because they all owe more than the market will pay.”
Where are you located? Does anyone keep track of the number of used cars not selling because they are underwater and hence priced above market value?
In most markets there is a shortage of used cars, I’ve never seen such high asking prices and such low inventory at car dealers.
That’s what we get with a “consumer led” economy where we don’t actually make anything, junk and debt. The only economic activity is buying things, which only creates minimum wage service jobs. If there hadn’t been easy credit there would have been much more outrage at the offshoring and NAFTA type agreements, but the credit (and the toys that credit bought) cushioned people for a while.
+1…
Better the devil you know than yet another Wall Street insider trying to hit up the U.S. Treasury for future bailouts and other sorts of disguised welfare payments to banksters?
Wall Street looks to fill Treasury Secretary post after potential Geithner exit
By Peter Schroeder - 07/03/11 05:34 AM ET
Treasury Secretary Timothy Geithner’s potential departure is highlighting how much Wall Street’s reputation might have recovered from the financial crisis — and sparking chatter that one of their own could take his place.
Multiple reports indicated Thursday that Geithner is mulling an exit from public service after a deal is struck to raise the debt limit.
…
I predict it will become increasingly obvious in 2011H2 that the GSE wind down plans amounted to cheap talk with an indefinite time horizon over which to carry out any action.
In the long run, you are dead, and the GSEs can stay zombiefied for longer than you can keep breathing.
THE OUTLOOK
JUNE 20, 2011
Government Stays Glued to Mortgage Market
By NICK TIMIRAOS
WSJ’s Mitra Kalita reports the nation’s weak housing market will likely keep the government in the mortgage business for a long time to come. U.S. taxpayers are currently on the hook for $138 billion. AP photo.
A weak start to the spring housing season, which could be underscored later this week by reports on sales of new and previously owned homes, is raising the prospect that the U.S. government will dominate the mortgage market for a long time.
The fragile housing market is complicating Washington’s stated goal of dialing back its support after it has reduced stakes in the financial-services and auto industries. The slide in home prices in turn is weighing on the economic recovery, and it threatens to hamper a bipartisan push to unwind the emergency support policymakers enacted three years ago.
Falling prices are eroding consumer confidence and hindering job mobility by leaving millions of borrowers trapped in homes worth less than what they owe. A glut of bank-owned foreclosures has slowed residential construction, damping a major source of job growth. In some markets, the share of buyers paying in cash for homes has hit its highest levels in years, a red flag that prices could fall below “fair value” due to a lack of credit.
Fannie Mae and Freddie Mac, government-sponsored entities intended to foster mortgage lending, face a hard balancing act. They are trying to restore sound lending standards without choking off access to mortgages.
“We’re not going to get a recovery in housing until the average borrower can get a mortgage,” says Kenneth Rosen, a housing economist at the University of California, Berkeley.
The government took over Fannie and Freddie in 2008 to prop up the housing sector, and taxpayers are on the hook for $138 billion. The government can’t walk away from those losses unless it’s willing to sacrifice confidence in U.S. investments and risk even bigger losses for the housing market.
Together with the Federal Housing Administration and federal agencies, Fannie and Freddie are behind nine in 10 new mortgages. The firms don’t make loans; instead, they buy them from lenders, repackage them for sale to investors as securities, and offer guarantees to make investors whole if borrowers default.
…
Wild card: What if TTT leaves the Treasury and his successor thinks zombie GSE support is a sucky policy?
What are the odds of a guy with that view being allowed to succeed TTT?
“A weak start to the spring housing season, which could be underscored later this week by reports on sales of new and previously owned homes…”
I stand by the prediction that I made earlier this year, that this year will be the bottom in U.S. home sales transactions volume, but not prices — or at least real prices (inflation is a wild card as regards nominal prices).
How often do you hit a fifty-year low in anything!?
New Home Sales Dip In May As Prices Rise
by The Associated Press
Housing remains the weakest part of the U.S. economy, analysts say. Last year was the worst for new-home sales on records dating back half a century.
June 23, 2011
Fewer Americans bought new homes last month, the latest sign that the struggling housing market won’t rebound this year.
The Commerce Department says new-home sales fell 2.1 percent in May to a seasonally adjusted annual rate of 319,000 homes. That’s far below the 700,000 homes per year that economists say must be sold to sustain a healthy housing market.
…
The nice thing about the BBC is that they are out of reach of the long arm of NAR scum propagandists. Thus they can report a headline which gets straight to the point — no BS used home seller spin, such as focusing on the volatile month-on-month data blip rather than the more reliable indicator of the year-on-year change.
21 June 2011 Last updated at 14:29 ET
US existing home sales down 15% amid weak recovery
Sales of previously occupied US homes fell 15% in May from the previous year, an indication the economic recovery remains halting, analysts said.
Also, the median price for existing homes fell 4.6% in May from May 2010.
The National Association of Realtors put the decline down to rising petrol prices and bad weather in April that kept home shoppers away from sales.
…
A seasonally adjusted 4.81 million existing homes were sold in May, down 3.8% from five million in April, and 15.3% from 5.68 million in May 2010, the National Association of Realtors said.
But the group warned that May 2010 sales were inflated because of the pending expiration of a tax credit for home buyers.
…
I predict that Yun’s hope that we are already at the low point of the year already will prove misplaced, as the red-hot spring sales season morphs into the ice-cold fall home sales shutdown.
And next year’s pickup in sales (if it happens) will be accompanied by a further slide in home prices, as desperate sellers finally transition from the denial phase of the housing bust to the bargaining phase. This will actually be a good thing for NAR members, as an illiquid market generates no sales commissions. Why these fools think unaffordable prices work to their advantage leaves me perpetually befuddled.
Cheers!
JUNE 21, 2011, 11:51 A.M. ET
UPDATE: US May Existing-Home Sales Down 3.8% From April - NAR
WASHINGTON (Dow Jones)–Sales of previously occupied homes in the U.S. fell in May to the lowest level in six months, indicating that the slumping housing sector was stuck in a deep funk during the crucial spring selling season.
Existing-home sales decreased 3.8% from a month earlier to a seasonally adjusted annual rate of 4.81 million, the National Association of Realtors said Tuesday. April’s sales pace was revised downward to a rate of 5.0 million per year. It was the weakest showing since November.
Economists surveyed by Dow Jones Newswires had expected home sales to fall by 5.0% to an annual rate of 4.80 million.
The median sales price was $166,500, down 4.6% from $174,600 a year earlier.
The inventory of previously owned homes listed for sale, meanwhile, fell slightly at the end of May to 3.72 million, representing a 9.3-month supply at the current sales pace. That compared with a revised 9.0-month supply in April and a healthy level of about six months.
The housing sector has continued to struggle, and is one of several burdens on the slowing overall economy.
“The housing economy shows no sign of recovering,” said Steven Ricchiuto, the chief economist for Mizuho Securities.
However, Lawrence Yun, NAR’s chief economist, expressed hope that the second half of the year will be better.
“This may actually be the low point of the year,” he said.
…
Regarding the WSJ’s report that US existing home sales dropped 3.8% from April, I always like to measure the current rate of change on an annualized basis, for comparison with year-on-year figures. This is not intended to be a prediction, as the month-on-month figure is far more volatile.
That said, the reported 3.8% drop in U.S. existing home sales from April 2011 to May 2011 occurred at an annualized rate of (drum roll, please):
((1-(3.8/100))^12)-1 = -37%.
One way to interpret this figure: If used home sales transactions continued ON AVERAGE to decline at this rate for the period from May 2011 through May 2012, then the year-on-year drop in U.S. used home sales transactions would be OVER TWICE AS LARGE as the one reported for May 2010 — May 2011.
But I don’t expect this to happen, as it seems more reasonable to conjecture that eventually, transaction volume will pick up in conjunction with further real price declines. This is just a conjecture, of course…
I note that home prices were already well into the bubblicious stratosphere by 2004. Why anyone would assume this is where a bottom will be reached is a mystery to me.
Let me suggest outright that the pretext of this article is dumb (”IS your home worth as much as it was seven years ago?”), as most Americans are either clueless about the values of their own homes (”My home is unique”), oblivious to the role of markets in setting prices, or both.
Off the Charts
For Home Prices, It’s Back to at Least 2004
By FLOYD NORRIS
Published: July 1, 2011
IS your home worth as much as it was seven years ago? If so, you’ve done better than most Americans.
What is most impressive about the decline in home prices is the ubiquity of the fall and how many years of gains were wiped out. Real estate agents, using some dubious statistics, used to claim that national home prices had never fallen for an entire year, even if there sometimes were regional markets that suffered for a year or two.
The most-followed index of home prices, the Standard & Poor’s/Case-Shiller 20-city composite, managed a small rise in April, the first gain after seven months of declines, but it remained at a level first reached in May 2003.
None of the 20 regions — each “city” is actually a collection of metropolitan areas that include suburbs — have prices now that are as high as they were in 2005, as can be seen in the accompanying graphic. Only four of them, New York, Washington, Seattle and Portland, Ore., have prices as high as they were in 2004.
The return of prices to levels seen many years ago has occurred in areas where prices soared during the boom as well as in regions where there seemed to be no bubble in home prices. From the end of 2001 through the end of 2006, prices in the San Francisco region rose 69 percent, far more than the modest 13 percent increase in the Denver area. But prices in both regions are back to where they were in 2001.
…
“The return of prices to levels seen many years ago has occurred in areas where prices soared during the boom as well as in regions where there seemed to be no bubble in home prices. From the end of 2001 through the end of 2006, prices in the San Francisco region rose 69 percent, far more than the modest 13 percent increase in the Denver area. But prices in both regions are back to where they were in 2001.”
The bubble in some areas was only a modest rise where prices would have been falling otherwise absent the bubble. That values are falling back to similar past pricing levels is hardly surprising.
I predict the tacit collusion among lenders to hold shadow inventory off the market will continue in 2011H2, and the looming shadow inventory overhang will continue to create a drag on home sales and prices in many local markets formerly referred to as “a bit frothy.”
Foreclosures loom in shadows
Hidden inventory stuck in legal system may soon find its way into Lee market
Jul 3, 2011
Demand for homes in Lee County is brisk and prices are headed up - that’s usually the sign of a healthy market.
But hovering over that cheerful landscape is a cloud of houses that, while they aren’t officially for sale, are headed that way.
It’s called “shadow inventory” and experts say it could hold down prices for years before it goes away.
Estimates vary on how many homes are in that category or even which ones should be counted, but here are some numbers:
-5,000 to 7,000 foreclosures in the county have been pulled back by lenders unsure their cases are sound. The cases generally were dismissed without prejudice, meaning they could be refiled when paperwork and ownership issues are resolved.
-About 6,000 more properties are working their way through the county court system.
-Locally owned banks alone were holding $35.9 million worth of non-accruing real estate debt as of March 31. That’s debt borrowers have stopped making payments on.
-Thousands of houses are owned by people who haven’t yet been foreclosed on but are far behind on their mortgages and have no prospects of catching up.
When those homes are likely to come back on the market, and what effect that would have, is an open question.
Jeff Tumbarello, director of the Southwest Florida Real Estate Investment Society and a real estate agent with Steelbridge
Realty in Fort Myers, said a surge likely wouldn’t harm the market.
“People think that going forward there’s going to be a monster dump” by lenders pushing foreclosed properties onto the market, he said. “But institutions aren’t going to all do it at the same time.”
…
It’s called “shadow inventory” and experts say it could
holddrive down prices for years before it goes away.I predict the Fed will continue behaving dangerously in 2011H2.
The Friday Podcast: Fed Behaving Dangerously, Fed President Says
Categories: Currency, Podcast
02:49 pm
July 1, 2011
Every time the Fed’s key policy committee met last year, almost everybody in the group agreed on what the Fed should do.
On today’s Planet Money, we talk to the one guy who, meeting after meeting, cast the lone “no” vote: Thomas Hoenig, president of the Kansas City Fed.
Hoenig thinks the Fed is repeating mistakes of the past, keeping interest rates too low for too long. That risks creating another bubble — and another crash, he says.
Hoenig says the Fed’s decision to lower interest rates in 2003 helped fuel the credit bubble that led to the recession:
If they had not been agressive in lowering unemployment in 2003, I might not be working in my field today. At that point, even the temp companies were not talking to me. If I had not been able to get some freelance work through local contacts, I might never have made it back into IT.
If we can’t lower unemployment now, how will our young people get their first jobs? How will the long term unemployed get back into the workforce?
“If we can’t lower unemployment now, how will our young people get their first jobs? How will the long term unemployed get back into the workforce?”
The retirement wave of the baby boomers will continue, and eventually the remaining workforce will no longer be able to absorb the workload. Those currently employed will move-up leaving vacancies for the fresh faces.
Nothing that some more offshoring can’t handle.
The retirement age of many baby boomers has been put off at least a year or two because of the changes in the age at which you can get social security. At least mine has.
Interest rates could have been much higher and it would have made little difference in the bubble. The bubble was created due to use of Option type loans with little or no qualifying and no money down.
Point in case. Interest rates are EVEN LOWER today, yet there is no bubble and prices are falling, because lending standards are very tight.
Thus the FED’s decision to lower interest rates had nothing to do with the bubble.
“Thus the FED’s decision to lower interest rates had nothing to do with the bubble.”
But the Fed’s decision to do NOTHING about ridiculously-low lending standards had _EVERYTHING_ to do with the bubble.
The Fed had the authority to prevent this train-wreck from happening by regulating the banks during the bubble, and requiring lending to be done in a sane way. They chose not to do so.
Heck, they didn’t even _say_ anything about being concerned about the lack of lending standards; instead, they cheerled the “innovation” and expressed concerns about any efforts to interfere with it.
I blame the Fed primarily for this debacle.
I totally agree on the lending standards. The Fed did have the authority and the responsibility to protect our monetary system. It failed in a very catastrophic way…
A co-worker who lives in Westalke Village CA tells me most of his neighbors are over 80, one just died. he goes on to wonder what will happen to home prices in the next few years in his area as more of his neighbors die of old age.
Westlake village could be Rancho Bernardo, lots of really old folks live in both places. Prices didn’t fall as much in these costal CA areas compared to Phoenix where I used to live. Always noticed a much younger poorer crowd in AZ.
Could it be that younger people are thrown to the wolves in new cities like phoenix and old folks are more set in older areas with there prop 13 and pensions ? which of the 2 lifestyles predict the future is easy to see. Unless they come up will a way to avoid death.
he goes on to wonder what will happen to home prices in the next few years in his area as more of his neighbors die of old age.
If the places are paid for the heirs might just rent them out, waiting (in vain) for the days when house prices come “roaring back”
The retirees aren’t just in RB, but I don’t think you’ll see nearly as many retirees in San Diego in the future. Costs are higher and pensions for future retirees are lower. The middle class has been increasingly priced out and retirees are next. The retirees have lasted longer only because more of their costs and income were locked in. But as you noted, they won’t live forever and some turnover will be coming soon.
I beg to differ. I expect SD will always remain a retirement haven, but many of those retirees will come from elsewhere, as top 1% of the wealth distribution retirees displace those who spent their lives working in SD without accumulating sufficient savings to retire here.
That will be a bitter pill for many San Diegans to swallow when they are forced to move to flyover country tp retire. It wasn’t more than a few decades ago when an ordinary, not near the beach house in La Jolla didn’t cost a king’s ransom.
Is this a hint that more housing stimulus is soon to be announced? For instance, is HUD directly involved in withholding used home inventory from the market?
I am missing the fundamentals to back this rhetoric. For instance, what evidence backs up the opinion that home prices are “very unlikely” to fall any further? My impression is that many analysis (e.g. Robert Shiller) are openly acknowledging that further housing price declines are quite likely.
Is Donovan an established expert at predicting the future direction of housing prices? Or is this more of a stopped-clock used home seller’s opinion intended to flummox the dwindling numbers of prospective buyers with buckets of money and boxes of stupid (”There has never been a better time to buy”)?
July 3rd, 2011
08:49 AM ET
Obama’s housing chief: Now’s the time to buy
CNN Associate Producer Gabriella Schwarz
Washington (CNN) – Housing prices have hit rock bottom and the economic climate is prime to purchase a home, said Housing and Urban Development Secretary Shaun Donovan.
In an interview broadcast Sunday on CNN’s “State of the Union,” Donovan said declining foreclosure rates make him hopeful, adding that it is “very unlikely we see a significant further decline.”
…
I don’t see anything in his NY Times or wiki bios that offer clues as to why we should or should not believe him:
http://www.nytimes.com/2008/12/13/us/politics/13web-donovan.html
http://en.wikipedia.org/wiki/Shaun_Donovan
It looks like most of his time beyond his university education has been spent in various public housing agencies. I don’t see anywhere that he has any background in economics.
“I don’t see anywhere that he has any background in economics.”
Given the dismal recent track record of professional economic forecasters, would a background in economics make his opinion more or less credible?
Maybe more if he isn’t a complete shill. But his background doesn’t suggest he has the education or experience to make the forecast he’s making with any confidence he’ll be right for the right reasons.
So far as I am aware, professional economic forecasters would NEVER go out on such a flimsy limb by claiming, “We are at a housing bottom RIGHT NOW. There has never been a better time to buy!” Professional forecasters tacitly acknowledge their inability to accurately time a housing market bottom by making deliberately vague statements, such as “The housing market will bottom out by the end of next year.”
Perhaps Donovan has a more accurate crystal ball than all the other serial bottom callers. Or perhaps DC is about to unveil the next round of stimulus, which he presumes will work better than all the failed stimuli employed to date.
“…studied public administration at the Kennedy School of Government and architecture at the Graduate School of Design at Harvard…”
I guess all it takes to make a housing market price forecast is hutzpah, as it appears that nothing in Donovan’s background qualifies him to offer an informed judgment.
I predict that federal government officials will continue cheerleading higher home prices over the foreseeable future. And I expect that if home prices continue to fall in the face of unbridled jawboning, nobody in high office whose prediction spectacularly failed will ever look back and acknowledge their folly.
I see no mention of a housing bottom in this widely-respected Harvard economics professor’s current assessment of the US economic outlook:
What’s happening to the US economy?
By Martin Feldstein (chinadaily dot com dot cn)
Updated: 2011-07-04 10:49
CAMBRIDGE - The American economy has recently slowed dramatically, and the probability of another economic downturn increases with each new round of data. This is a sharp change from the economic situation at the end of last year – and represents a return to the very weak pace of expansion since the recovery began in the summer of 2009.
…
The fall in house prices pushed down sales of both new and existing homes. That, in turn, caused a dramatic decline in the volume of housing starts and housing construction. That decline is likely to continue, because nearly 30% of homes with mortgages are worth less than the value of the mortgage. This creates a strong incentive to default, because mortgages in the US are effectively non-recourse loans: the creditor may take the property if the borrower doesn’t pay, but cannot take other assets or a portion of wage income. As a result, 10% of mortgages are now in default or foreclosure, creating an overhang of properties that will have to be sold at declining prices.
…
The pattern of weakness accelerated in April and May. The relatively rapid rise in payroll employment that occurred in the first four months of the year came to a halt in May, when only 54,000 new jobs were created, less than one-third of the average for employment growth in the first four months. As a result, the unemployment rate rose to 9.1% of the labor force.
The bond market and share prices have responded to all of this bad news in a predictable fashion. The interest rate on 10-year government bonds fell to 3%, and the stock market declined for six weeks in a row, the longest bearish stretch since 2002, with a cumulative fall in share prices of more than 6%. Lower share prices will now have negative effects on consumer spending and business investment.
Monetary and fiscal policies cannot be expected to turn this situation around. The US Federal Reserve will maintain its policy of keeping the overnight interest rate at near zero; but, given a fear of asset-price bubbles, it will not reverse its decision to end its policy of buying Treasury bonds – so-called “quantitative easing” – at the end of June.
Moreover, fiscal policy will actually be contractionary in the months ahead. The fiscal-stimulus program enacted in 2009 is coming to an end, with stimulus spending declining from $400 billion in 2010 to only $137 billion this year. And negotiations are under way to cut spending more and raise taxes in order to reduce further the fiscal deficits projected for 2011 and later years.
So the near-term outlook for the US economy is weak at best. Fundamental policy changes will probably have to wait until after the presidential and congressional elections in November 2012.
Martin Feldstein, Professor of Economics at Harvard, was Chairman of President Ronald Reagan’s Council of Economic Advisers and is former President of the National Bureau for Economic Research.
Here is a back-o’-the-envelope calculation to support Professor Feldstein’s point about the housing price outlook:
“As a result, 10% of mortgages are now in default or foreclosure, creating an overhang of properties that will have to be sold at declining prices.”
The number of underwater mortgages in the U.S. continues to reach new heights
On behalf of Rosenbaum Law Offices posted in Foreclosure on Thursday, March 10, 2011
When most people discuss the recent housing crisis, they automatically reference the record number of foreclosures that have taken place over the last few years. While this is certainly important, there is another component of the housing crisis that is worthy of some discussion: underwater mortgages.
An underwater mortgage is a phenomenon whereby the actual value of a home is far less than the amount owed on a mortgage.
Currently, the number of underwater mortgages in the United States is reaching record highs thanks to falling home prices. (In December, home prices dropped the most since the housing bubble burst in 11 of 20 major cities.)
In fact, a recent report by CoreLogic - a national firm that gathers business/housing data - indicated that roughly 11.1 million mortgaged homes in the United States or 23.1 percent were underwater at the end of the last business quarter (October 2010 to December 2010).
…
Based on 11.1 million mortgaged homes, or 23.1 percent, underwater, an estimate of the recent number of U.S. mortgages with outstanding principle balances is
11.1m/23.1% = 48m.
Ten percent of these is 4.8m, which seems in line with other current estimates of the number of mortgages currently in default or foreclosure, aka the “shadow inventory” of homes destined to come back on the used home market over the next decade or so.
This debt ceiling story is suggestive of a meteorite approaching the earth. In the event of a direct hit, catastrophic consequences will ensue, but the astronomers somehow can’t determine whether impact is imminent. Meanwhile the masses go about their daily business in blithe oblivion.
Debt ceiling debate raises default worries
Article by: CHRIS FARRELL
Updated: July 2, 2011 - 11:51 PM
Q My wife and I are too close to retirement and are willing to trade safety for income so that our 401(k) is totally invested in T-bills. Unfortunately, I believe there is a real risk of our government defaulting. If its does, what happens to the money in T-bills?
A First of all, it’s a disgrace that we even have to address the issue of whether the United States will default on its debts. Ever since Alexander Hamilton, the first treasury secretary and a brilliant financier, the world’s wealthiest nation has always paid its debts. Every investing primer published by mutual fund companies and investment textbooks describe U.S. Treasuries — bills, bonds and notes — as default-free investments. Translation: That’s as safe as it gets.
Yet there’s serious talk in Washington about letting the United States default on its debt. The trigger for how the unthinkable became at least remotely possible is the government’s $14.29 trillion debt ceiling. The risk of default sharply increases unless Congress raises the debt ceiling by Aug. 2. Now, the immediate danger if the debt ceiling isn’t raised is that the government won’t be able to borrow money to pay for commitments it has already made. The government could scramble for a time, but eventually it could run out of room to maneuver. Long before then, the markets could lose confidence in U.S. Treasurys.
The outcome? Interest rates on U.S. Treasury securities would soar. Treasurys are the benchmark for setting rates elsewhere in the economy, from commercial loans to home mortgages. A U.S. default would send a fragile global economy spiraling lower. The outcome could be toxic.
That said, the political saber-rattling hasn’t upset global investors yet. How do we know this? Because the yield last week on three-month Treasury bills was at 0.02 percent and the 30-year Treasury bond was at 4.32 percent. The market isn’t buying Washington’s rhetoric — yet.
The nation would be entering uncharted financial territory with a default. But I wouldn’t panic. It’s important to remember that the government will eventually make good on its debt even if the unthinkable comes to pass. The pressure from investors — from American retirees to the Chinese government — will be too great. In this sense your investments in U.S. Treasurys remains safe. And there are alternative investments, ranging from FDIC-insured savings accounts to blue-chip dividend paying stocks.
…
I note that just one month from now, we will know how this turned out. Nonetheless, I have no predictions to offer, other than that default seems unlikely, except that the current political equilibrium seems highly unstable, making default more likely.
2nd Half 2011 prediction:
HBB posters will continue with their fervent efforts to cut through MSM propaganda to unveil the real story of the housing bubble collapse.
Best prediction yet!
Between the double-whammy of artificially-inflated housing prices and a shortage of entry-level jobs, the recent crop of new college graduates is shaping up as Generation Screwed.
Why do our fearless leaders support deliberately inflating housing prices, making it all the more difficult for new college graduates facing a dismal job market to get a foothold in life? The decision about whether housing prices go up or down would be best left to the invisible hand of the free market. Market-distorting intervention results in unfairly screwing one group (Generation Screwed) to favor another (geezers with accumulated home equity wealth), and charging the U.S. taxpayer for the cost of the intervention.
Also worth noting that the 10% drop in median income from two years ago for new college graduates lucky enough to find a job (from $30,000 to $27,000) stands in sharp contrast to colleges and universities raising tuition to cover the increasing cost of keeping the doors open.
Graduates feeling job-hunt doldrums
By Rob Kuznia Staff Writer
Posted: 07/02/2011 01:41:29 PM PDT
Updated: 07/02/2011 10:18:17 PM PDT
Ronnell Hampton, center, graduated last month from CSUDH and is struggling finding work. He is currently working part time at the university giving campus tours to incoming students. (Scott Varley Staff Photographer)
For Ronnell Hampton, a first-generation college student who hails from inner-city San Diego, graduating in May from California State University, Dominguez Hills in Carson with a bachelor’s degree was a major triumph. But his sense of accomplishment has since been dimmed by the job hunt.
He’s applied to after-school programs and childhood development centers, as well as to such companies as Target, Citibank, T-Mobile and AT&T. Nothing. He’s even tried the Dollar Tree and Starbucks, to no avail.
“I’m keeping my hopes high - I don’t want to feel defeated,” said Hampton, 23, who in recent years has gone to high schools in his native San Diego to tout the promise of college. “All I can do is put my best foot forward and hope everything will work out.”
Hampton, who majored in a program dealing with negotiation, conflict resolution and peace building, is among tens of thousands of new college grads across the nation struggling to enter the workforce.
Locally, comprehensive job placement statistics are difficult to come by. But a recent national survey by John J. Heldrich Center for Workforce Development at Rutgers University delivered bleak news.
According to the May survey, the unemployment rate among 2009 graduates from four-year universities stood at 22.4 percent. Another 22 percent were working in jobs that did not require a college degree. Of those who had found a job that required a degree, the median income was $27,000 - down from $30,000 two years ago. Among 2010 grads, 56 percent had held at least one job by spring, down from 90 percent three years earlier.
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“Of those who had found a job that required a degree, the median income was $27,000 - down from $30,000 two years ago. Among 2010 grads, 56 percent had held at least one job by spring, down from 90 percent three years earlier.”
If you factor in the 44 percent of 2010 grads who DID NOT hold at least one job by spring into the median calculation, then you get a number a lot closer to $0 than $27,000. For instance, suppose that the tail-end 6 percent of the 56 percent which had held a job were paid the current minimum wage in most U.S. states of $7.25/hour, and assume they work full time. Then the median, including $0 for the tail-end 44 percent of 2010 grads with no work, and assuming 2 weeks off, would be $7.25*2000 = $14,500, with a big notch effect down to $0 at the 44th percentile, just six percentage points below the median.
Such is the downside of a minimum wage law during a period of stagflation.
Ronnell Hampton will likely have to leave sunny San Diego to find his first real job. OTOH, maybe he didn’t learn anything?
2nd Half of 2011 Predictions:
1. THE RICH WILL KEEP GETTING RICHER
2. THE POOR WILL KEEP GETTING POORER
3. THE MIDDLE CLASS WILL KEEP GETTING SCREWED IN A FUTILE ATTEMPT TO ADEQUATELY FUND WELFARE-FOR-THE-WEALTHY PROGRAMS.
Op-Ed Columnist
Corporate Cash Con
By PAUL KRUGMAN
Published: July 3, 2011
Watching the evolution of economic discussion in Washington over the past couple of years has been a disheartening experience. Month by month, the discourse has gotten more primitive; with stunning speed, the lessons of the 2008 financial crisis have been forgotten, and the very ideas that got us into the crisis — regulation is always bad, what’s good for the bankers is good for America, tax cuts are the universal elixir — have regained their hold.
And now trickle-down economics — specifically, the idea that anything that increases corporate profits is good for the economy — is making a comeback.
On the face of it, this seems bizarre. Over the last two years profits have soared while unemployment has remained disastrously high. Why should anyone believe that handing even more money to corporations, no strings attached, would lead to faster job creation?
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Yet another 2011H2 prediction:
Stealth bailouts, which implicitly favor home owners over priced out bitter renters, with no paper trail to show where the money came from, will continue with little or no fanfare.
So long as the money for personal bailouts in excess of $100,000 are coming out of the coffers of private banks, I have no problem with this.
If federal tax dollars are used to discriminate in favor of households which made poor financial decisions at the expense of those who didn’t, I question the legality, not to mention the questionable prudence of rewarding bad choices and the arbitrary and discriminatory nature of the handout. For instance, why not just hand the $150,000 over to some poor new college graduate with no job, to tide him over until the economy improves? What is it about home ownership that qualifies people for welfare payments?
Big Banks Easing Terms on Loans Deemed as Risks
By DAVID STREITFELD
Published: July 2, 2011
As millions of Americans struggle in foreclosure with little hope of relief, big banks are going to borrowers who are not even in default and cutting their debt or easing the mortgage terms, sometimes with no questions asked.
Last year, JPMorgan Chase cut in half what Rula Giosmas owed on her condominium in Miami.
Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.
Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.
Ms. Giosmas, who lives in Miami, was not in default on her $300,000 loan. She did not understand why she would receive this gift — although she wasted no time in taking it.
Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.
Before Chase shaved $150,000 off her mortgage, Ms. Giosmas owed much more on her place than it was worth. It was a fate she shared with a quarter of all homeowners with mortgages across the nation. Being underwater, as it is called, can prevent these owners from moving and taking new jobs, and places the households at greater risk of foreclosure.
“It’s a huge problem,” said the economist Sam Khater. “Reducing negative equity would spark a housing recovery.”
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NOW I finally understand why the lady in the NY Times mortgage debt writedown qualified for a $150,000 handout:
SHE WAS A SAVVY AND DESERVING REAL ESTATE INVESTOR!
“I used to say every day, ‘Why doesn’t anyone get rewarded for doing the right thing and paying their bills on time?’ ” said Ms. Giosmas, who is an acupuncturist and real estate investor. “And I got rewarded.”
This article has raised the temperature under my collar. Why is Megabank, Inc bailing out greater fool real estate investors and throwing the rest of America under the bus?
http://www.nytimes.com/2011/07/03/business/03loans.html?src=recg
The invisble hand is AWOL once again.
The conditions for the invisible hand to function properly include so-called perfect competition among a large number of small firms. You won’t get much of that when 65% or so of the banking system is concentrated in the hands of an all-powerful cartel of a few Wall Street Megabanks.
The simple fact is that IF real estate prices find their way down to an acceptable level there is not enough bailout money in the universe to save the biggest banks or our economic system. Thus it is better to write down loans than accept lower values..
Now say FB A with a JP Morgan loan catches wind that FB B with a JP Morgan loan got a bailout to the tune of half of her principle. What if FB A demanded the same deal; could JP Morgan legally discriminate in favor of FB B, and deny FB A his bailout?
I am going out on a limb and predicting Greece defaults by the end of the year triggering all those nasty credit default swaps.. Do we have a wee bit of exposure there?
I predict that talk of a Chinese bank bailout will reach a crescendo in 2011H2. I take the impression that it really isn’t different in China…
July 4, 2011, 8:00 p.m. EDT
China debt woes point to bank bailout
By Chris Oliver, MarketWatch
A local government uses dye to create a giant hammer and sickle in a field on the outskirts of Shanghai, celebrating the 90th anniversary of China’s Communist Party.
HONG KONG (MarketWatch) — China’s banking system will require an eventual bailout by the central government, according to some analysts, who said figures released last week on the size of local-government borrowings point to the need for a rescue.
Credit Suisse economist Dong Tao said the numbers backed up concerns he’s been voicing for the past two years on China’s toxic loan problem.
“Ultimately, we believe that the central government will need to separate the local government’s bank debt from banks’ balance sheets and recapitalize the banks,” Tao said in a note following the release of data on China’s local-debt obligations by the National Audit Office.
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I predict that Midwestern Main Street taxpayers will be involuntarily compelled over the foreseeable future to continue helping Californians to buy million-dollar homes with $700K+ federally guaranteed loans.
Conforming loan limit drop would raise costs
By Rose Meily, for Silicon Valley Community Newspapers
Posted: 07/04/2011 07:32:01 PM PDT
More than 30,000 California families will face higher down payments, higher mortgage rates and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration, Fannie Mae and Freddie Mac are reduced beginning Oct. 1, according to analysis by the California Association of Realtors.
“By reducing the conforming loan limit, thousands of California home buyers will be shut out of homeownership,” said Beth L. Peerce, the state group president. “The higher mortgage loan limits are critical to providing liquidity in today’s housing market and are essential to our housing recovery.”
The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae and Freddie Mac government-sponsored enterprises can buy or guarantee. The limits were originally raised in February 2008 as part of the economic stimulus, allowing the government-sponsored enterprises to guarantee more loans at a time when private capital was tight. Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively affecting housing affordability for California home buyers.
Congress temporarily raised the conforming loan limits for such high-cost areas as Silicon Valley from $417,000 to $729,750 and has extended them annually through fiscal year 2011. They are set to expire on Sept. 30.
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I predict the slide in the dollar’s reserve currency status will continue.
The Financial Times
June 27, 2011 3:58 pm
Dollar seen losing global reserve status
By Jack Farchy in London
The US dollar will lose its status as the global reserve currency over the next 25 years, according to a survey of central bank reserve managers who collectively control more than $8,000bn.
More than half the managers, who were polled by UBS, predicted that the dollar would be replaced by a portfolio of currencies within the next 25 years.
That marks a departure from previous years, when the central bank reserve managers have said the dollar would retain its status as the sole reserve currency.
UBS surveyed more than 80 central bank reserve managers, sovereign wealth funds and multilateral institutions with more than $8,000bn in assets at its annual seminar for sovereign institutions last week. The results were not weighted for assets under management.
The results are the latest sign of dissatisfaction with the dollar as a reserve currency, amid concerns over the US government’s inability to rein in spending and the Federal Reserve’s huge expansion of its balance sheet.
“Right now there is great concern out there around the financial trajectory that the US is on,” said Larry Hatheway, chief economist at UBS.
The US currency has slid 5 per cent so far this year, and is trading close to its lowest ever level against a basket of the world’s major currencies.
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My prediction? There have been so many points in this bubble’s history where I’ve said wait until this time because then this will happen and either the fed or state govs have stop gapped the problem before the crisis ever even hit people’s consciousness. The latest was July 1st, the start of the next fiscal year in NY. I thought there would be much browbeating due to numerous lay-offs. I might have to wait until later in the week but the silence so far is deafening.
I predict that if I keep telling my husband our opportunity is just around the corner he will begin looking for another wife because the man’s patience is really starting to fray around the edges. It’s hard to say whether the down periods he sometimes battles are watching just how far our governments (world/fed/state) will go to resurrect the beast or whether he’s just sick of having so much of what he wants to do on hold. Before we married, he used to build houses. Having his work shop, his John Deere, his boats in storage and not being able to tinker and create is starting to work on him after 4 years. He is a man that makes a decent dime now. Unless the market totally collapses, there will be an inheritance. I think he’s thinking by the time we go for it, it’ll be when he’s too old to enjoy it. Or maybe he’s afraid w/my health issues I’ll get really sick before we get to enjoy it.
There’d better be fireworks this fall or I fear my entire credibility w/him will be gone.
I watched a friend’s marriage fall apart the last 2 weeks. It was a complicated situation fer sher but the spark was housing: She wanted to downsize and he was determined to keep the beautiful house. Now it’s freaking ugly. It’s not always the woman that demands the house.