The Housing Bubble

Sign of the times:

You just will not believe this story that happened yesterday in FL. I went to a new trendy/hip restaurant/bar that just opened four days ago. The place was pretty crowded and doing good business as any new opening seems to in our small town. The owner is a remote aquaintance and he was there schmoozing customers as you would expect. Here is where the story gets really interesting and weird and just hard to believe in fact as well as coincidence:

On the way from the parking lot, I happen to notice a credit card on the sidewalk which I pick up. Upon inspection, I realize that its not a credit card but a government-issued EBT card (they have an American flag background, fyi) and the card has the name of the user imprinted on the front like a credit card. The name on the EBT card was none other than that of the OWNER OF THE RESTAURANT! As I was having a beer the owner comes by to schmooze “how is everything, etc…” and I hand him his card and say “You dropped this in the parking lot, Jim - and what the hell are you doing on food stamps?”

The guy was totally embarrassed and sheepishly explained how he was really struggling in the months before he opened and what the hell, its free food. blah blah… I just shook my head and changed the subject. I just coudn’t believe it. I guess everybody really IS doing it. This country is really in trouble, people.

i know he came accross as a “mean old man” last night…but i did like newt’s response to them regarding their “gotcha” questions.

it’s about time the MSM got called out during prime time.

I’m now seeing more and more economists say that we should try to inflate our way out of some our federal/state/local/corporate/financial/personal debt overhang. Usually, 4.0% to 6.0% inflation for several years is mentioned, as if it could be fined tuned this way. That would also allow real cuts in wages without nominal cuts and the associated drama.

Comparing deleveraging through inflating away debt or a spiral of bankruptcies as part of Great Depression II, who wins and who loses, and which makes sense?

If it has the choice, should the U.S. choose the Andrew Mellon route — liquidate, liquidate, liquidate — or the modern equivalent of dumping the gold standard?

Lately its been he!!! for train riders here…1 little mishap and the whole system goes down….

1 small derailment and long island is literally stopped in its tracks, and it happened at a rail yard with at least 75 sets of tracks….what they couldn’t reroute the train to another set of tracks in 15 minutes?

http://en.wikipedia.org/wiki/Sunnyside_Yard

http://www.nbcnewyork.com/news/local/Switch-Problem-Fixed-After-Slowing-NJ-Transit-Residual-Delays-127581108.html

Why aren’t we spending the money on mass transit? oops we must protect the poppy fields in afghany just think of hundreds of thousands of junkies going cold turkey…

Is the supposed looming San Diego housing shortage for real, or is it merely an artifact of too many homeowners who remain in their San Diego County homes years after going into mortgage default, plus vacant homes not yet for sale? I’m quite sure that renting will outpace buying in the coming years, given how many households’ credit situation have been hammered by the housing bubble collapse; the solution for that would seem to be to build more apartments.

Housing shortage looming, builders say
Renting will outpace buying

With a roiling stock market and stagnant housing market, it may seem premature to think about another boom and how to cope with a potential housing shortage in San Diego County.

But that’s what area builders of for-sale and for-rent homes are talking about.

The concern is that supply will lag behind demand and lead to low vacancies and spikes in prices and rents.

Alan Nevin, vice president at MarketPointe Realty Advisors, a consulting company to the industry, says a shortage already exists in apartments, as evidenced by a 4.1 percent vacancy rate recently reported, and a looming shortage in for-sale homes in three to five years once renters with good credit want to buy.

“If we continue to grow 15,000 to 20,000 jobs a year in the private sector, I think we will definitely result in a shortage,” Nevin said. “There will be an imbalance between supply and demand, and that will gradually drag up prices, and most of that increase will come at the bottom end of the market, starter homes.”

The area has been losing jobs in recent years, but SANDAG projects a growing job market over the next few years.
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The Census Bureau compares construction investment from Jun 2011 and Jun 2010, by category (table 2).

http://www.census.gov/const/C30/release.pdf

“Lodging” and “religous” take the biggest hits, while “power” was the big winner.

when is the dollar going to lose its reserve status in the world ?

At the rate the FED is going to prop up bubbles it can’t be too far off.

and what effect will it have on Americans? Might be hard to pay off all this debt if creditors won’t accept dollars and the treasury has to convert to another form of currency .

Is the stock market crash already over, or were the up days last week merely evidence of G-7 central bank international financial market manipulation?

What the G-7 Did in 72 Hours to Avoid an Exact Repeat of the 2008 Market Crash
On Thursday August 11, 2011, 10:08 am EDT

In the 72 hours following a Group of Seven conference call on August 7, the U.S. Federal Reserve announced its intention to keep interest rates low for another two years, the European Central Bank began buying government bonds, and the Bank of England indicated its preparedness should it need to add more stimulus. Though not a G-7 nation, Switzerland also recently renewed efforts to curb the rising value of the Swiss franc.

While confidence in lawmakers’ abilities to combat the economic problems being faced around the world has been crumbling, central banks have been stepping up, and have “so far been the tower of strength,” according to Stefan Schneider, chief international economist at Deutsche Bank AG in Frankfurt.

In a statement issued August 7, finance ministers and central bankers from G-7 nations said thy will “take all necessary measures to support financial stability and growth in a spirit of close cooperation and confidence.” On August 8, the European Central bank, which is based in Germany , a G-7 nation, renewed its bond-purchasing program after 18 weeks, widening its focus this time around to include Italy and Spain , which after Germany and France are the euro zone’s third- and fourth-largest economies.

On August 9, the Fed announced that it would keep its interest rates at a record low until mid-2013. On August 10, Bank of England governor Mervyn King told reporters that officials are prepared to expand stimulus should the need arise. Yesterday, Switzerland’s central bank said it will increase the supply of francs in order to lower the currency’s “massive overvaluation”.

While banks’ efforts aren’t as coordinated this time around, the last 72 hours have been the biggest, broadest push by central banks to combat economic problems since the Fed, ECB, and four other central banks cut interest rates in October 2008 after Lehman Brothers collapsed. While he says that central banks have been getting their act together, Mohamed El-Erian, chief executive officer at Pacific Investment Management Co., says that “we have to recognize that what they do is necessary but not sufficient…We need other agencies, whether in the U.S. or in Europe, to get their act together.”
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Is the officially-sanctioned robo-signing mortgage fraud scheme behind us yet?

Robo-signing their lives away
Updated: Tuesday, 09 Aug 2011, 6:20 PM EDT
Published : Tuesday, 09 Aug 2011, 5:40 PM EDT

Jordan Burgess

DAYTON, Ohio (WDTN) - Eddie Miller fought for his country in the Gulf War, but now he’s battling just to keep his home.

“When you’re in a position that you’re losing everything, you have a feeling that it’s your fault, that you’ve done something wrong,” Miller says.

Miller was kicked out of his home and lived out of his car for a month until those at Miami Valley Fair Housing discovered that his foreclosure case involved a practice known as robo-signing.

Robo-signing is when a someone signs off on a foreclosure without reviewing it first, or when someone forges a signature to approve a foreclosure.

Miami Valley Fair Housing has since helped Miller move back into his home.

“It’s a wonderful feeling to have your house again and to know someone is there to help you with it,” Miller says.
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Well,
my weekend topic suggestion is how Section 8 and other government programs that assist the poor with their housing costs act to set an artificial floor under the real estate prices.
The housing vouchers are in my opinion nothing but a pass through to the landlord.
I know landlords that had modest houses that rent for $850-1100/mo to people who don’t work, but get housing subsisdized by the state of NY in the Albany area. & this was ten years ago! These rates imply you must make $50 grand a year just to compete with the people on welfare.
just sayin….

In Dayton, Brown Joins Homeowner Advocate to Call for Crackdown on Foreclosure “Robo-Signing” Practice That Undermines Homeowners and Ohio’s Economy
August 12, 2011
by Ohio RealEstateRama

Call for Action Follows News Reports of Banks and Mortgage Processors Continuing to Forge Signatures and Submit False Affidavits Brown Has Authored Legislation to Keep Ohioans in Their Homes and Stem Foreclosure Crisis; Sent Letter to Federal Regulators Urging Them to Better Protect Consumers and Prevent Further Illegal Practices

DAYTON, OH - August 12, 2011 - (RealEstateRama) — In the wake of reports that banks and mortgage processors have continued forging signatures and submitting false affidavits, U.S. Sen. Sherrod Brown (D-OH) called for renewed federal efforts to crackdown on this risky, illegal practice that undermines Ohio’s housing market during a news conference today. Also known as robo-signing, this unlawful act has forced thousands of homeowners into foreclosure and raised doubts about the ownership of hundreds of thousands of mortgages. Brown is chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection.

“While Wall Street said they’ve stopped using fraudulent and illegal practices that damage Ohio’s housing market, it’s clear that the illegal foreclosure mill is still running its dangerous course,” Brown said. “A complete economic recovery requires a recovery of our housing market. We should be helping families stay in their homes, not gouging homeowners and flooding an already depressed housing market with illegal foreclosures. We need to work to protect homeowners, not bank executives.”

Brown was joined by Edward Miller, a Gulf War veteran from Kettering, a victim of robo-signing whose home went into foreclosure in May 2010. Montgomery County Commissioner Debbie Lieberman and City Commissioner Nan Whaley, along with Jim McCarthy, president and CEO of the Miami Valley Fair Housing Center, Inc., also discussed the practice of “robo-signing” and its harmful effects on not just homeowners, but also Ohio’s housing market and economy as a whole.

Brown outlined landmark legislation to prevent future servicer fraud and errors, improve foreclosure counseling and prevention, and reform oversight of mortgage-based investing. The Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011 would expand access to foreclosure prevention services, while increasing protections for homeowners and investors in mortgage-backed securities.
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Has anyone heard of new business opportunities which have sprung up as a result of the U.S. housing crash?

Here is an example:

Housing crash lures marijuana growers to U.S.: RCMP
Cheaper real estate means higher profits for traffickers
By Chad Skelton, Vancouver Sun August 8, 2011

The U.S. housing crash has lured some marijuana growers to move their operations south of the border, according to an internal RCMP report obtained by The Vancouver Sun.

“Some VOC [Vietnamese Organized Crime] groups have moved their marijuana grow operations to the United States where the lower cost of real estate (in some regions) allows them to operate a more profitable enterprise and where they can also avoid police/customs detection at the border,” states the RCMP report.

The report, obtained by The Sun through the Access to Information Act, also argues that the “softening of marijuana laws” in some states has made the U.S. a more attractive destination for growers than it once was.

For more than a decade Canada has been home to a multibillion-dollar marijuana-growing industry, the bulk of whose product has been shipped to the U.S.

B.C., where the largest number of those operations are located, has generally been seen as an attractive place for drug gangs to set up shop because the legal penalties for growing marijuana here are more lenient than in the U.S.

However, the RCMP report suggests the dramatic plunge in U.S. house prices has caused some gangsters to re-evaluate whether B.C. is really the best place to do business.

Since 2007, house prices in the U.S. have dropped by roughly a third nationwide and in some markets, like Las Vegas, by more than half.

During that same period, prices in most Canadian cities have been flat or rising, with particularly large price gains in Metro Vancouver.

Growing operations tend to be located in residential properties so real estate is one of the biggest expenses for growers.

Lt. Richard Wiley of the Washington State Patrol’s narcotics division said he’s seen an increase in the last few years in Asian crime groups from Canada setting up growing operations in the state.

“There’s no doubt that organizations involved in marijuana production in Canada have moved to the United States in large numbers,” he said. “There’s a significant number of them in the Puget Sound area, but they’re also in many other parts of the United States: the San Francisco Bay Area, Houston. They’re quite spread out in the United States now.”
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Did growth controls exacerbate the housing boom and bust?

Planet Gore
The hot blog.

Growth Controls = Housing Collapse!
August 5, 2011 12:30 P.M.
By Sterling Burnett

It’s widely recognized that the collapse of the housing market was the spark that led to the meltdown in the U.S. economy and a significant contributor to some of Europe’s ongoing economic woes. And the general consensus seems to be that the problems in the housing market began with a loosening of lending standards (encouraged by federal policies and loan subsidies via the federally chartered Fannie Mae and Freddie Mac), along with the trading of mortgage-backed securities, the risks of which no investors really understood (indeed, they didn’t seem to understand the make-up of these particular financial instruments at all).

However, recent research by a Wendell Cox, a colleague of mine at the National Center for Policy Analysis, points to another significant — perhaps the most significant — but widely unrecognized factor in the nation’s housing collapse: Restrictive land-use regulations. Cox argues persuasively that so called smart-growth policies played a primary role in the 2008 housing bubble’s bursting and continue to contribute to sinking housing values.

The NCPA paper shows that the majority of losses in the housing crash were overwhelmingly concentrated in metropolitan areas with restrictive land-development regulations. Indeed, Cox shows that land price premiums that ballooned during the bubble would have been less likely to develop if those metropolitan areas had been able to better respond to market pressures.

Restrictive land-use policies prevented the ability to respond to increased demand for home ownership caused by the greater availability of mortgage credit. Therefore, prices inevitably increased, encouraging speculation which spiked housing prices even higher, especially among the national 50 largest metropolitan areas:
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Do you think the U.S. is already in a new recession?

Inasmuch as the board of S&P is heavily weighted with Friends of Bushes, to what extent do you think that this week’s downgrade is a function of Wall Street telling Congress, “Look what we can do to your re your re-election prospects if you don’t play it our way”?

I’m finally getting around to watching Too Big to Fail with me loverly wife, after she recorded it months back during a short period when we had an HBO trial. I’m enjoying it very much, and it is actually instilling a large measure of sympathy in my heart for Hank Paulson’s plight during Fall 2008. Many of my favorite actors appear in the movie, including William Hurt as Hank Paulson — excellent casting! We had to kick our kids out of the room multiple times to avoid exposing them to the “F” word.

I’m curious if Ben, Tim and Hank really worked together as closely as depicted in the movie; if so, any notion that the Fed is independent of the White House is a complete sham.

So far as I am concerned, the jury is still out whether the Fall 2008 bailouts “worked,” especially regarding the plan to avoid a Japanese-style “lost decade.”

We just finished watching “Too Big to Fail.” One of the key messages of the movie seemed to be that thanks to Big Hank’s TARP, the U.S. successfully avoided the Japanese fate. For that reason, I find it ironic that a Wall Street Journal article in tomorrow’s edition expresses serious doubts on this very point.

MARKETS
AUGUST 13, 2011

This Time, Maybe the U.S. Is Japan
By MATT PHILLIPS And JUSTIN LAHART

It is a comparison that underlines the current plight of the U.S. economy: as bond investors grapple with their new reality—a downgraded U.S. credit rating and two more years of zero-interest rates—they are increasingly looking to Japan for guidance.

Since Standard & Poor’s stripped the U.S. of its triple-A credit rating on Aug. 5 and the Federal Reserve followed on Tuesday with a statement that interest rates will be at near-zero until at least mid-2013, bond traders have been recasting their models. Many have been using the experience of Japan, which was first downgraded from triple-A in 1998 and has had near-zero rates for the better part of a decade.

It is an analogy others have tried to apply before, but traders and investors say the similarities between the two countries have never been more apparent.

“We’re all looking for a data set to compare it to. And the closest one, with a very large, developed bond market is Japan,” says Jim Caron, global head of interest-rate strategy at Morgan Stanley. “That’s the only comparison that we can make and it’s still not apples-to-apples. But it’s the closest we can come.”

As an economist at the New York Federal Reserve, Kenneth Kuttner wrote a paper explaining why, in the aftermath of the dot-com bust, the U.S. was decidedly not like Japan. The stock market decline paled in comparison to the bursting of Japan’s real estate bubble, the financial system was strong and the U.S. government had the fiscal leeway to boost spending if the economy weakened. “It was very easy to be smug at that point,” says Mr. Kuttner, now a professor at Williams College. “Now, I’m running out of reasons to say the U.S. is all that different.”

On Wall Street, traders are emailing each other comparisons of Japan’s low bond yields to the once-unthinkably low rates now being seen on U.S. Treasurys. Analysts have been digging into records to see how Japanese bonds traded after it was stripped of its triple-A credit rating in 1998.

Strategists now think the yield on the 10-year Treasury note could drop below 2% in coming months, from 2.23% now. With a yield of 1.05% on its 10-year note, that is territory Japan has occupied for a while.

Short-term Treasury rates are also now in the same ballpark as Japan, having dipped lower since the Fed’s recent statement. Two-year Japanese bonds yield roughly 0.15%; the U.S. yields 0.18%. One-year Japanese government debt yields roughly 0.12%; the U.S. one-year note yields just 0.10%.

“The rate process in Japan is the model that we’re looking closely at,” says William O’Donnell, chief Treasurys strategist at RBS Securities in Stamford, Conn., adding later that short-term rates near zero and declining long-term rates is “the lesson from Japan.”
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“Economist Chris Thornberg says he does not believe involvement by the federal government in the single-family home rental market will be any more successful than other federal interventions such as loan modification programs and homebuyer tax credits.”

This comment brings to mind a burning question. I thought the plan was for Geithner to step down after the debt ceiling negotiation. What happened?

At any rate, I note that federal housing market policy has been an unmitigated disaster since the housing bubble popped. Wouldn’t it be a great idea for Obama to start over with a clean economic sleight going into the 2012 elections, rather than hanging on to a holdout from the original economics team who would make a very convenient target for Republican candidates to remind the American public what hasn’t worked over the past four years? Perhaps some fresh ideas could come into play as replacements for “extend and pretend” Japanese lost decade economic policies.

Senator Paul to Seek Vote of No Confidence in Treasury Secretary Geithner
Published on 10 August 2011 by admin in Press Releases

WASHINGTON, D.C. – Sen. Rand Paul today announced his intention to introduce in the U.S. Senate a vote of no confidence in Treasury Secretary Timothy Geithner. Following Sen. Paul’s call for Secretary Geithner to resign this weekend, his intention to introduce a resolution underlines Secretary Geithner’s gross mismanagement of the U.S. economy.

“The stock market gave a vote of no confidence to Timothy Geithner yesterday and for the past 11 days. Geithner has shown no acumen in predicting, diagnosing, or treating America’s economic woes. The time has come for him to resign,” Sen. Paul said.

Sen. Paul’s motion stems from Secretary Geithner’s failure to institute policies to curb rising unemployment, prices and debt. The passage of the motion would indicate that the U.S. Congress has no confidence that Treasury Secretary Timothy Geithner will institute policies that will reverse the downgrade in America’s debt. During his tenure at the Federal Reserve and as Treasury Secretary, Secretary Geithner had a direct role in the failure of the Fed to diagnose and act on the housing crisis. He presided over bank bailouts, auto bailouts and failed trillion-dollar stimulus plans.

This is timely, as I believe the Republicans are fixing to blame the economic woes of the first Obama term on his economic policies.

Clearly the problems were already in place during Shrub’s time in office.
Obama has done all he reasonably could with the terrible hand he was dealt. Hopefully a majority of Americans are smart enough to understand this. The Great Recession started on Shrub’s watch, and never really ended yet.

Roubini: Bush Responsible for Economic Woes
Aug. 12, 2011

In a clip from his interview with WSJ’s Simon Constable, Dr. Nouriel Roubini insists that it was the policies of George W. Bush that caused the current U.S. economic crisis.

Roubini lays it out so simply: Shrub cut taxes for the rich and got us into two wars. Obama inherited the worst economy in seven decades, and now the Republicans are trying to blame him for trying his best to cope with it.

Guess what, America: The situation at hand was Shrub’s fault!!!

I just can’t imagine voting for Rick Parry. Having grown up as a preacher’s son, I can’t bear the prospect of hearing our CIC lecture the Nation on passages from the Bible.

REGION: Issa weighs in on GOP presidential candidate Rick Perry
By MARK WALKER | Posted: Friday, August 12, 2011 8:00 pm

Back home in California for the congressional summer recess, Rep. Darrell Issa gave a backhanded nod to Texas Gov. Rick Perry on Friday.

He told a San Diego audience that when compared to California, the 2012 Republican presidential candidate “kicked our ass” when it came to creating jobs and a business-friendly tax environment.

“His entire claim to fame is all the jobs he created,” Issa told more than 200 people gathered in a hotel ballroom. “He took almost all of them from us.”

Issa said Perry, who is expected to formally announce his presidential bid on Saturday, benefited greatly from onerous regulations in California that prompted some companies to move to the Lone Star state.

“Now I personally am not sure I can vote for a man whose only brag is that what we threw away, he took in,” the Vista Republican said during a luncheon address sponsored by Lincoln Club of San Diego County and San Diego County Taxpayer Association, reiterating: “I don’t think he grew the jobs, I think we threw them out.”
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