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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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S H A D O W I N V E N T O R Y
- How big?
- How bad?
- Deferred maintenance?
- Is it all legal?
- Collusion?
- What can we do?
- How many houses in your ‘hood?
- Who’s responsible?
Squatters say foreclosed homes beat homeless shelters
http://www.latimes.com/news/nationworld/nation/la-na-squatters-20111222,0,5121151.story - 182k -
I’d like to see an updating of adverse possession laws. Basically, if the owner does not maintain a building and pay property taxes, it should be taken by someone who will.
Who?
Well, for properties in small town and rural locations which had aging boomers as the potential market, perhaps the aging boomers — now with retirement plans downsized to a subsistance lifestyle.
Free housing. No need to commute. A vegatable garden. Perhaps do it your self solar panels from Home Depot. Used clothes that will no longer be sent to Africa because no one here wants them.
Just need a few Social Security bucks for heat, property taxes, and internet service, and you’re good to go.
So, you are going to set up a town commission to take applications, decide who is “worthy” to receive a free house and pass them out? Might work in a place so small that everyone knows everyone else and the people who most need/deserve the free housing are obvious and could sort of be picked by consensus. What if there are more empty houses than worthy recipients?
What about bigger places where that sort of work would be too overwhelming for volunteers, where people don’t know everyone? So, set us some sort of government office. Accept applications. Hire people to investigage the applicants. Let the neighbors interview the possible new person, maybe? What else?
And who pays when someone comes forward and sues the town. Lawyers cost.
This is unworkable. Can’t be done. Nice fantasy that the bad (or lazy or clueless) people/banks/bond holders can lose their asset quickly and it will go to a worthy good citizen. It will never happen.
You are making this way too complicated.
See “Oklahoma Land Run of 1889″
The government could make a fortune by selling the TV rights.
This is sounding very Oil City plan to me. But at that low level of pricing, the house would cost more to fix up than to buy one in better condition at a normal sale.
Polly,
You should look into the case of the Hotel Syracuse. It is presently owned by some group from Israel. But they have not been consistent paying their taxes. The city of Syracuse was floating the idea in the media that they would seize the building and sell it to a group from NYC that wanted to updated it and restore it to its former glory. Of course the Israeli group coughed up $200k in back taxes at the last minute but the property is still sitting idle. The city of Syracuse has made a public statement that if they miss another tax payement they’ll move to take the property. We’ll see. Notice how locals do not play any part in this little fiasco. It is all the 1% from places far away.
“… locals do not play a part in this little fiasco.” Just taking and spending the $200K. Somehow hard to believe the hotel requires $200K a year in government services.
Certainly not paying property taxes WILL get a property seized. Governments being what they are, it is my understanding that property tax liens ARE superior to mortgages. It used to be considered a slow process, but compared to the current foreclosure speed it it could seem pretty rapid.
Perhaps this is the game the banks are playing: pay the taxes, but don’t take title and let the “owner” shoulder the liability. This let’s them, “wait to see what happens.”
Certainly not paying property taxes WILL get a property seized.
Certainly not true of the property abutting us on Cape Cod. It was abandoned by a developer after putting in the foundation. People used it to dump their electronics instead there of paying a fee at dumps. It was 1/2 full of old TVs, sofas, and other assorted junk which eventually the town or some schmuck buyer would be stuck digging out, especially after the kids who partied there starting lighting things on fire. You could often hear kids smashing glass over there late at night. It had been abandoned for years and the town said there was nothing they could do about it. I know there were years of accumulated back taxes involved and the town claimed they couldn’t find the owner. Yet for some reason, they wouldn’t/couldn’t seize. You can google the satellite view of the neighborhood and see that 10 years later, it’s still just an abandoned junk yard.
$ H A D O W I N V E N T O R Y has fallen down and can’t get $old,…Help!
Worry not, Muggy. The US retains its AAA rating. Now be a good sheep and get back to watching the Kardashians and focus on what the MSM deems important, like the size of Michelle Obama’s backside.
I second Muggy’s suggestion.
Politicians Are Feces®
Realtors Are Liars®
According to a new Vanity Fair article by Joseph Stiglitz (I won’t post the link because it takes forever to load:
“Here’s the reality: in the years leading up to the recession, according to research done by my Columbia University colleague Bruce Greenwald, the bottom 80 percent of the American population had been spending around 110 percent of its income.”
“The fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support. Without these, unemployment would have been high. It was absurd to think that fixing the banking system could by itself restore the economy to health. Bringing the economy back to ‘where it was’ does nothing to address the underlying problems.”
Now does anybody else remember the tough early 1990s economy? Who was blamed for taking too much and not putting in enough? Who was held accountable, and forced to accept lower benefits, diminished services, and lower wages?
The poor, particularly the minority poor, immigrants LEGAL AND ILLEGAL (the 1994 to 1996 cuts were for both equality) and those living in older central cities.
As we see, large groups of people are going to be much worse off. There are simply claims on more than exist, in the public and private sectors. So who deserves to be the target this time? Who deserves to be blamed?
1) The poor, particularly the minority poor, immigrants LEGAL AND ILLEGAL (the 1994 to 1996 cuts were for both equality) and those living in older central cities.
2) The well off, particularly the top 1 percent?
3) The seniors, who voted for less in taxes and more benefits for themselves, particularly retired public employees with their gold plated pensions?
4) Younger generations, who should accept lower wages, little in retirement benefits, and little in public services so businesses and governments will have the funds to allow those older to keep the promises they have made to themselves?
Who is not going to be hurt in the years ahead?
Those wealthy enough to pick up good assets once they eventually reach fair fundamental valuations, and hold them for the long-haul?
Half of this country is now poor or near-poor.
Consumer spending is 70% of the economy.
Welcome to the recoveryless recovery
And from Bloomberg: U.S. Personal Spending Rises Less Than Forecast
“Consumer purchases rose less than forecast in November as a drop in wages encouraged Americans to seek discounted merchandise at the start of the holiday shopping season.
Personal spending climbed 0.1 percent for a second month, while wages and salaries fell 0.1 percent from October”
4) Younger generations, who should accept lower wages, little in retirement benefits, and little in public services so businesses and governments will have the funds to allow those older to keep the promises they have made to themselves?”
make China work for nearly free make China buy debt to finance our retirements
if they refuse to keep doing this we can sue them
An update on adverse possession laws would be great.
Just this week I had a discussion with drumminj about Social Security, and should people be allowed to opt-out and invest it themselves. I countered that if the goverment offered an opt-out, that will just put cash in people’s pockets and retailers (especially of “needs” like food or gasoline) will raise their prices to absorb that extra cash, to where the cash become a necessity instead of a luxury. Then no one would be able to save.
Well, now we have a test case. Today, or sometime, the Republican house and the Senate will approve a two-month extension of the payroll tax cut (which will probably be extended). President Obama has very visibly said that tax cut has put, and will continue to put, $40 in every paycheck for the working classes.
We should follow up with what happens. Do you think people will frugally save the money? Do you think people will spend it? Pay the minimum on the CC card? Or will prices on coffee and peanut butter rise until that $40 is the “new needed normal?”
In the short term, IMO it will probably go to the CC card. In the long term, IMO it will be the new normal.
You already have the data. The 2% cut is just an extension of the cut that was implemented last year. What happened to gas and peanut butter and rent prices last January (I think it started at the beginning of the calendar year - someone may want to check). Be sure to do the regression analysis to factor out the impact of whatever was happening to pretax income at the same time.
Good luck with that analysis. A few little things like elastic supply and trade across borders might interfere with the results, not to mention the downdraft of 10 million peeps without jobs.
The local pizza shop is testing Oxide’s Captive Market Theory. In response to falling sales they have doubled their price to maintain their cash stream. This observer will report back on the results.
“In response to falling sales they have doubled their price to maintain their cash stream.”
Wow! My forecast is that they will be out of business in a year.
Maybe. Maybe not.
In several industries locally, there is currently a “last man standing”. Price hikes are the order of the day. They can get away with it, because of the cost involved in starting up competition from scratch, and that the people with all the money have figured out that a monopoly is more profitable than competition.
Our local machine shop is a classic example. All of the others have gone Tango-Uniform. His nearest “competitor” is 70 miles away, in a bigger city, and charges more (because his competitors have also gone T-U). So he charges at a rate just below the other guy. And is more profitable, because his taxes and lease are cheaper. The only thing these guys have to worry about is Fedex and UPS cutting their rates (and making it cheaper to ship heavy stuff like blocks and crankshafts).
His main problem is finding guys who are skilled machinists, who will work unlimited overtime for $12/hour.
Someone needs to remind him that monpolies work both ways. If he has work for 5 people and there are only 5 qualified people in town or willing to move to his town, then he has to pay enough to get them into his shop.
then he has to pay enough to get them into his shop.”
H1B visa because there are just not enough qualified Americans to do the work.
That’s why I’m emphasizing NEEDS. The pizza example may not apply, because you can walk away from pizza and choose Subway instead.
Let me expand on X-GS fixer’s last-man standing example: Let’s say there are two competing gas stations A and B.
A charges $3.12.
B comes tries to compete, and charges $3.10.
A still does well even with a higher price, because there are customers close by, and hey, 2 cents ain’t much.*
B sees that A is getting away with $3.12, and raises to $3.13.
Customers close to B still choose B, because it’s not worth the penny** if they have to drive to A.
A sees that B is getting away with $3.13, and raises to $3.15.
Repeat. Notice, there is no collusion between the stations, YET they can get away with price hikes. The reason this works is because 1) customers have to buy gas 2) customers won’t notice the creep 3) they’ll decide it’s not worth it to go to the competition if the competition is so close in price. 4) bonus if you have brand-recognition that people would pay a little more for.
This is the type of “inflation” I’m seeing on most products. Peanut butter, manicures,*** oil changes, and … rent. For bigger ticket items, people notice the difference more, but the industry is more likely to have a monopoly. Like, health insurance.
—————-
*Hey, the reason two cents ain’t all that much is because Obama just got you 40 bucks to spend. That $40 bucks will easily cover the 25 cents in gas, the 40-cent rise in a loaf of bread, the 50 cent rise in those shot-glass desserts at Applebees, the $1.50 rise in the rotisserie chicken, and the $5 rise at the manicurist. The question is, when that tax cut is over, will those prices go back down by $7.65? Nope.
*** If Blue’s pizza shop had raised prices 10% at a time instead of doubling all at once, it may have worked. But the owner needs all his gold now.. so he’s forced to kill the goose. His own goose is cooked.
***Women see these as “needs.” I don’t see why, but there it is. (My manicurist is a Swiss Army knife.)
“(My manicurist is a Swiss Army knife.)”
Needs suddenly transform into wants when the money for the needs is no longer there.
When the need for a manicurist by enough people is satisfied by a Swiss Army knife then the need for manicurists dwindles a touch and the unemployment rate for manicurists move up a notch.
What one sees happening (if one chooses to look) is a consumer-based economy transforming into something else.
Back to basics, maybe?
Comment by Itsabouttime
2011-12-22 10:46:50
Talk talk talk about how bad real estate is, how anyone who bought during the boom was stupid, how the fundamentals demand a 50% price correction, how this is certain the only question is when. Do this over and over and over and over, to anyone within earshot. Get this buzz going so loudly that even the deaf MSM becomes aware of it. In other words, break the illusion that all is well and this is just a blip.
If you do this incessantly, and if after this you still want to buy something, prices should be within reason. But, you may have to be willing to continue to take losses for awhile, because prices will probably over-correct and if you buy on the way down, it may continue going down even lower than fundamentals suggest.
IAT
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Everyone should take a look at IAT’s post. The Housing Crime Syndicate didn’t develop their monopoly on housing market by telling the truth. The lie and they do so frequently with the help of the media over 50 years now.
Tell the truth, no matter the threats, and do so frequently. You got the blog, you got the internet, you got friends, etc. Get the word out frequently.
Er, I’ve been talking for about 7 years now. What if *I* still want to buy something?
Declare war or be defeated.
I admire your ability to formulate detailed strategy.
Good grief Oxy read AIT’s post.
Errrrrr….I’ve lost friends not because I’ve spoken out about housing but simply because they’ve been irked I haven’t bought yet. I started getting reports this summer about someone making snarky remarks to mutual friends and the thing is it wasn’t behind my back. They were just as eager to confront me head on as if it made any difference in their life. This was the million dollar home purchaser. She said they had to stretch to buy and yet she got very agitated that I was waiting.
In my circle, speaking out about the housing syndicate would be tantamount to taking all my clothes off and waving a flag on the steps of town hall. It couldn’t rid me of friends and associates fast enough.
What I’m saying RAL is it’s not time yet. Not time at all. As long as central banks apply all the band-aids and paper clips to keep the Ponzi going, people just won’t allow themselves to focus on the full picture. Or maybe they sort of allow themselves to see it in the middle of the night but if everything they’ve got is riding on the game being true, they don’t want to hear anything to the contrary.
I’m thinking the real “oh sh%t” moment won’t happen until 2015. This is far enough in the future to bankrupt many of todays speculators counting on 2005 prices in 2015 to make their “investments” whole. Around this time the truth should then be plainly visible that housing is not a real investment and should generally be a minimized expense. By then rational expectations should have taken hold that housing will either a) lose money, or b) stay roughly in line with inflation, some key locations being excepted.
All around I’m hearing talk about “it’s a great time to buy, etc”. This kind of talk was also heard in 2009 and look what has largely happened since then. If this is a 9-inning ball game, we’re probably still in the top of the 4th.
Around this time the truth should then be plainly visible that housing is not a real investment ‘
the truth will be plainly visable that 1/3 of the population can’t retire and expect all current workers to pay for it when the jobs are gone.
and voting ourselves benifits we don’t want to work for is a lame way to run a Country
She said they had to stretch to buy and yet she got very agitated that I was waiting.’
Thats werid. And also why I don’t talk about it much I don’t need any more weridness after all I moved back to S. CA
although Phoenix was worse about buying not buying
I think here in S. CA they just think I’m poor in Phoenix they were younger and dumber in general and needed the comfort of the herd all going down together.
you don’t need friends like that