A Price To Pay
It’s Friday desk clearing time for this blogger. “As debate rages about whether the Federal Reserve’s aggressive asset-buying policy will revive a frail economy, some prominent central bank watchers have made it clear just where they stand on the subject. ‘The Fed will write $1 trillion or more in checks over the next twelve months, the ECB will write the same,’ Bill Gross, the founder of Pimco, the world’s biggest bond funds, wrote via Twitter. ‘(There is) reflation ahead. (It) will create asset bubbles but little growth.’”
“Martin Feldstein, a former chairman of the Council of Economic Advisers which advises the U.S. president on economic policy, said the Fed’s decision to buy mortgage-backed assets for an unlimited time means the central bank has now embarked on a ‘very dangerous strategy’ that could lead to high inflation and destabilizing asset bubbles.”
“‘I would prefer they did something rather than nothing and an asset bubble may be a small price to pay for that,’ said Nizam Idris, managing director, head of strategy for fixed income and currencies at Macquarie Bank in Singapore.”
“‘What we’re dealing with is the new norm,’ said Cliff Long, CEO of the Emerald Coast Association of Realtors. ‘A lot of times, people think we’re dealing with slumping sales, but in reality there’s no such thing as slumping sales in a new economy. This is the new norm and this is the message that homebuyers have to accept.’”
“Long said he believes the housing market will continue to improve, partly because of a recent increase in Asian buyers who are looking to invest in the Northwest Florida market. ‘Our market has no place to go but up,’ Long said.”
“A new analysis shows the condo market is losing the most as the Vancouver housing sector cools. ‘Buyers are being very cautious. However, the variety and choices of housing that is available as well as price reductions will spur activity sooner rather than later,’ says Chris Simmons with Royal LePage. ‘Chinese buyers have not been as active in the housing market as in previous years,” he adds. But he expects them to return’ once prices stabilize.”
“Wei Min Tan, executive VP of Castle Avenue Partners at Rutenberg Realty, says that his ‘gut feeling’ is that 25% of the condo buyers in Manhattan are international. Tan is working with clients from Hong Kong, China, Singapore and the U.K. and he reports that business is booming. Why? Tan explains, ‘New York real estate is cheap globally. It may be the most expensive in the U.S., but it’s still cheap globally — 10th on the list of the most expensive properties in the world’s most popular cities.’”
“‘Condos in New York average $1,300 per square foot,’ he adds. ‘Compare that to the most expensive, Monaco which is $4,500; London, $3,500; Paris, $2,400. There’s a huge property bubble in China and Hong Kong now — so much speculation and sky-high prices have convinced investors to come here to buy.’”
“About 80 percent of speculators from the prefecture-level city in southeastern Zhejiang have been trapped by their property investments that have recently depreciated 30 to 50 percent from levels in 2010, state media reported. While property speculation is rampant in the mainland, Wenzhou wheeler- dealers are known as the most hardcore - often overextending themselves by investing at home and overseas.”
“Their speculative activities domestically have been blamed for soaring real estate prices in China, where they have been nicknamed ‘locusts.’ Veteran Wenzhou speculator Zhang Ming said he borrowed 30 million yuan from friends and relatives, who put up their own firms and properties to secure mortgages from banks. ‘In 2010, I spent 38 million yuan buying four floors of houses in Wenzhou. But now, I cannot sell them for even 20 million yuan,’ he lamented.”
“In Chongqing, one Wenzhou investor dumped 90 flats onto the secondary market, saying he needed to liquidate. Another speculator said: ‘I don’t know whether to sell or not. But I am sure I will lose a lot.’”
“The mainland’s latest home boom - or bubble - commenced at the end of 2008, when the country launched a series of stimulus measures to weather the global economic crisis. Some analysts warned of a potential credit default by the end of the year, as more than 70 percent of the funds tied up in property speculation came from underground loans and banks. ‘If all these people go bankrupt due to depreciation in property assets, their businesses are done,’ an unnamed banker said.”
“A few years after the fall of Saddam Hussein’s regime in 2003, the pillars of Kurdistan’s real estate market started to rise unexpectedly. Real estate agents say that less than a decade ago, a plot of land in Erbil’s Bakhtiyari neighborhood cost only around $3,000. Now, that same lot is worth around $230,000, illustrating an increase of almost 75 times. Anwar Anaid, a professor of political economy at the University of Kurdistan, attributes the rise in real estate prices in Kurdistan to a ‘herd mentality.’”
“‘As soon as there is rise in prices, large numbers of people enter the market. As soon as there is rise in prices, large numbers of people enter the market. And normally the cultural tendency is that people think the price increase will go on forever,’ said Anaid.”
“Data out from RealtyTrac shows flipping is making a comeback in parts of the country, mostly those hardest hit by the housing crash. The story locally shows more caution. The Seattle metro area, which includes Bellevue and a small part of Pierce County, rings in at No. 15. In the past three years, the average gross profit of flips has been $58,930, and the flip takes about 113 days. Gross profit doesn’t take into account the cost of repairs, which vary widely by property.”
“In Pierce County, flips are up 58 percent from 2011, but gross profit is still in the negative — an average loss of $4,857 since 2010. Several Washington counties has negative gross profits, including Spokane, at an average loss of $124,358. The negative numbers were ’somewhat surprising to us, but is likely the result of a very competitive flipping market and possibly an unexpected decrease in home prices (unexpected on the part of the flippers),’ RealtyTrac VP Daren Blomquist said.”
“Nationally, almost 100,000 homes have been flipped in the first six months of the year, and that’s up 25 percent from 2011. California, Arizona, Nevada and Georgia are the top states to flip right now. In the top metro areas, Phoenix, Las Vegas, Los Angeles and Miami are tops.”
“Marquita Shealey is having a tough time after the Lithonia, Ga., house she bought lost more than half its value in two years. The loss put the 29-year-old first-time buyer in the same position as about 31 percent of U.S. homeowners, according to Zillow: She is upside down. She can’t sell and take a loss and has also suffered some other financial hits, such as expensive home repairs and a split with the man with whom she bought the house. So she is stuck in a home that suppresses her ability to flex with new financial constraints. She cut back spending and is considering pulling her daughter out of private school.”
“‘I thought once I closed, everything would be smooth sailing,’ Shealey said. ‘Now everything is on me.’”
“Georgia real estate investor Bob Massey said he has friends with one child who want to sell their small house and move to a more spacious home, but they cannot because they are underwater. The couple is holding off having a second child. Another friend in the military moved here from Maryland but cannot sell his underwater home there. If they are able to rent it, the income will still be less than the mortgage payment and the couple will have to make up the difference.”
“‘Here is a young couple spending an extra $400 or $500 a month and trying to keep his credit clean because it affects his job,’ Massey said.”
“Those underwater are a mix of people who have lost jobs and are having a difficult time financially and those who can afford their monthly payments, but resent paying top dollar for a languishing investment. ‘I meet with a lot of people who are upside down and for most part can afford the payments. And a lot are looking for an easy way out,’ said Bartow County, Ga., real estate agent Bill Cook. ‘They don’t want to pay … is there a way around it? Really, there isn’t.’”
“With the average sale price of a single-family home in Jamaica Plain this year hitting well over $500,000, according to data provided to the Gazette by local real estate agent Paul Melanson from Coldwell Banker Residential Brokerage, the Gazette asked real estate agents in other markets what that budget could buy. In Missoula, a small and liberal city in western Montana, that budget could buy ‘half the valley,’ Mark Twite of Twite Realty Corp. said.”
“Rentals are just as big a bargain. The average rent for a two-bedroom apartment in JP is $2,000 a month, according to Melanson. For that, in Missoula, one could rent a six-bedroom, three-bath, 3,300-square-foot house, with front and rear porches, fireplace and a family room in the basement, according to rentals.com.”
“For a little more luxury in Montana, that same budget could also afford a four-bedroom, newly-remodeled 2,600-square-foot house with granite countertops, walk-in closets and a volleyball court and fire pit, on half-an-acre of land. ‘I’d rather be a lamp post here than a millionaire in Boston,’ Twite said.”
“My summary insight from studying hundreds of years of all types of manias and panics is simply that bubbles always burst, and then they go back to where they started or a bit lower. Even we’ve seen doubling and better in the stock prices of homebuilders. It’s unlikely that this latest bubble bursting in real estate is truly finished.”
“We shouldn’t be surprised at what happens after a major housing bubble bursts as Japan went through this starting in 1991 after home prices rose 160% in just 6 years and then fell 64% — and they are still down that much 21 years later as a smaller generation followed a large baby boom for the first time in history. The U.S. followed with a 130% bubble up in 6 years from 2000–2006. The Japanese market went back just below where its bubble started in 1986. For that to occur in the U.S., home prices would have to fall 55% – 65%, not the 34% we saw at worst in 2009.”
“Around the world, the greatest bubble by far occurred in Shanghai, up 525% since 2000, and in China in general. (China’s supposed to have a soft landing?) Mumbai saw a 400% bubble, Dubai 300% and Seoul 205%. The greatest bubble in developed-country cities starts with Brisbane, Australia at 210% followed by 180% in Miami, 170% in L.A. and 165% in Vancouver. There are many cities that could see real estate drop 70% to 85%!”
“The real estate bubble is like a popcorn popper with different markets frothing over and peaking at different times, but all will burst ultimately. Given that real estate is so local, the best way to gauge the downside potential of your home or commercial real estate is to find out what it was worth at the beginning of 2000 at best and the beginning of 1996 at worst. If you can’t take that much heat consider selling and renting for the next three years plus. From around early 2015 forward we could see the greatest bargains in real estate of our lifetime.”
“‘I would prefer they did something rather than nothing and an asset bubble may be a small price to pay for that,’ said Nizam Idris, managing director, head of strategy for fixed income and currencies at Macquarie Bank in Singapore.”
There it is: It’s always better to do something rather than nothing, no matter how destructive the consequences to the underlying real economy.
These people aren’t even pretending anymore:
‘In the space of 30 days, five major central banks round the world took turns to deliver aggressive stimulus measures in a bid to counter a deteriorating economic outlook and boost domestic growth. While financial assets such as stocks have reacted positively to the moves, one analyst suggests that the central banks could have made a bigger impact if they had coordinated their actions and announced measures on the same day.’
‘According to Kathy Lien, managing director of BK Asset Management in New York, a joint action by the global central banks would have been much more impactful, at least from an equities perspective. “(If) the goal of these central banks is to drive up the price of stocks, bonds, housing and other assets, it is too early to say whether they failed or succeeded.”
http://finance.yahoo.com/news/central-banks-coordinated-stimulus-moves-072531812.html
We’ve moved into fantasy land if central bankers think they can fix prices of houses and stocks.
‘While financial assets such as stocks have reacted positively to the moves, one analyst suggests that the central banks could have made a bigger impact if they had coordinated their actions and announced measures on the same day.’
Here is my conjecture about how the fantasyland mentality came into being:
1) Some bright economist a long time ago noticed that when the economy was doing well, big-ticket, long-lived asset prices went up.
2) At some point, muddle-headed latter-day economists got causality backwards, and a new-age theory was born that higher asset prices would make the economy do well.
3) The Fed augmented its dual mandate to keep unemployment and inflation low with a third related objective of supporting asset prices, on the assumption that higher asset prices would serve to help keep unemployment and inflation low.
And this is how the real economy learned to stand on its head.
I think they actually are fixing prices by containing and controlling inventory releases of the property the have taken as REO.
I’ve been watching the markets here in Tampa for years now. I would like to find a nicer house while prices are much lower than 2007, but it seems they get bought up very quickly if they are what I consider a “good deal”. They barely make a listing before they are sold.
But, there are Many overgrown, abandoned and houses in disrepair. I have noticed a trend. The houses are left to sit until the other houses in the neighborhood, that were previously abandoned and in need of repair are marketed and sold.
Once they have new occupants, the latest of the abandoned properties seem to go into foreclosure and get into the market over the next few months.
In other words, there are lots of vacant houses, but only a limited number come up for sale at any given time. Once occupied, some of the other vacant houses get some attention and a for sale sign. I am seeing what I consider “controlled releases”.
So, in addition to gaming the interest rate and terms of buying, the next market manipulation is inventory control. I believe this is why some people have stated they have “bid wars” in their neighborhoods. The FED, in collusion with the Banksters, controls the inventory of most of the foreclosed houses in the US of A. I believe it is working with them, taking their bad loans for cash and then releasing the houses back in a slow motion play to support higher prices.
I’ve seen many houses with blue tarp roofs of late, meaning the house sat unattended, and unrepaired until the roof began leaking, but they don’t immediately put it up for sale so that someone might come and fix it. Some months later, repairs may be made and the house put up for sale. Usually gone before you can find out the listing price.
Is this only in my area?
What is unclear to me in Florida is how many of the vacant homes are being dealt with in a controlled release, and how many are simply mired in their foreclosure process.
Per the August LPS Mortgage Monitor, a shade over 13% of all mortgages in Florida were in some stage of the foreclosure process.
That’s a lot of homes that can’t yet be sold.
That’s a good question. The average turnaround that I’ve seen from when a bank actually takes title to sold is still in the neighborhood of 5 or 6 months. They don’t stay listed for that long.
Bad Andy, are you in Florida? Foreclosure Radar has good data for the West Coast, they report the average length of time between bank taking possession and resale as being 284 days in California…UP from 234 days a year ago (a steady march upwards). I don’t know if this means there are fewer attractive new homes going to the bank (which are easier to re-sell quickly), or because the bank is slow playing their sales processes.
I’ve heard anecdotes implying that either could be the case.
“I think they actually are fixing prices by containing and controlling inventory releases of the property the have taken as REO.”
That’s only part of the housing price support program.
There’s also QE to purchase MBS and suppress mortgage interest rates, federal guarantees of principle on FHA, Fannie Mae and Freddie Mac loans, continuation of the conforming loan limit on (federally guaranteed) ‘affordable housing’ loans up to levels of $729,750 in high priced markets, extend-and-pretend programs to allow banks to ignore losses on real estate assets, ‘Save-Our-Homes’ bailouts which enable homeowners in mortgage default to live rent-free for an indefinite period of time, pressure on the GSE regulator to make provision for principle writedowns, top-down intervention to enable underwater borrowers to refinance at lower rates than they signed up for, and probably at least ten other housing price support measures that I’m not thinking of as I type this post…
“The FED, in collusion with the Banksters, controls the inventory of most of the foreclosed houses in the US of A. I believe it is working with them, taking their bad loans for cash and then releasing the houses back in a slow motion play to support higher prices.”
This is the kind of question I assume will be cleared up when the Fed is audited, no?
Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts
September 2, 2012
Note: This article originally appeared on Unelected.org in 2011 and is re-posted here for historical and educational purposes. Figures may have changed in the last year.
Reading the information and looking at the numbers yourself is ALWAYS something we highly recommend.
The first ever GAO (Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year.
Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill (HR1207), so that a complete audit would not be carried out.
Ben Bernanke (pictured to the right), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets.
Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning.
What was revealed in the audit was startling:
$16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland.
From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest.
Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious – the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.
To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion.
The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.
In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received $814 billion dollars.
As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.
…
I used to think that the Fed was trying to stimulate the real estate market to get another bubble going but what they have done is invite billions of dollars in launderable money into the property market. The stories of Chinese “investors” buying up property are legion but what most folks don’t know is that this isn’t just savings but money that has been stolen, scammed and absconded with by Chinese bureaucrats trying hard to hide their ill-gotten gains. Think I’m just throwing stones?
http://www.guardian.co.uk/commentisfree/2012/sep/17/rage-elite-stolen-chinas-soul
I’m sure these Chinese “investors” aren’t the only folks dumping billions in criminal enterprise cash into the market. Lots of funny money out there for everybody.
“But, there are Many overgrown, abandoned and houses in disrepair. I have noticed a trend. The houses are left to sit until the other houses in the neighborhood, that were previously abandoned and in need of repair are marketed and sold.”
This is the problem which naturally arises when the too-big-to-fail Megabank, Inc Wall Street banking cartel gets discriminatory access to the Fed’s ZIRP discount window lending. They can snap up all the housing assets and hang onto them until they have almost fallen apart, then sell the shitty real assets to investors at a premium, thanks to their collusive ability to withhold inventory from local markets which would be otherwise released if not held by strong hand owners. Eventually end users may get a trickle-down shot at the shitty used houses, still priced at a premium to their real value, of course.
Whether or not the law is enforced, the Sherman Antitrust Act says that collusion to fix prices is illegal. If Mitt Romney came out and announced he was going to crack down on this crap, I would vote for him in a heartbeat.
“If Mitt Romney came out and announced he was going to crack down on this crap, I would vote for him in a heartbeat.”
As much as I hate these two criminals, in this case, I would be writing checks and doing local campaigning for him.
As long as “something” moves he collects a commission.
“As soon as there is a rise in prices large numbers of people enter the market.”
This is true for a market where Price equal Value but it is not true in a market where value is determined by fundamentals.
People flocked to buy Beanie Babies when the price went up but they do not do the same for tomatos. The value of one is driven by price, the value of the other is driven by something else.
If fundamentals are not used to determine the correct price and thus it is left to Price to determine the correct price then there is no way something can ever be overpriced. If the price rises from a thousand dollars to ten million dollars then ten million dollars is the correct price in a market where Price equals Value. And if the price drops from ten million dollars down to a thousand dollars then that too - a thousand dollars - is the correct price.
IMHO.
“As soon as there is a rise in prices large numbers of people enter the market.”
Only true if the market is governed by bubble dynamics, not fundamentals.
“And if the price drops from ten million dollars down to a thousand dollars then that too - a thousand dollars - is the correct price.”
Isn’t that where QE.X comes into play — to make sure that drop back to a thousand dollars never happens? (Not to suggest it will work…)
I’m tired of these BS Econ 101 concepts of price or value or supply or demand. They don’t apply to needs industries, or populations where some people have so much money that they can pay a higher price for the sole purpose of shutting other people out and still not feel it, or where the accounting can be stretched indefinitely instead of having an immediates effect, or where some people can create money faster than others can labor for it, or where the product itself decomposes away, or in a global system where an unlimited supply of untapped labor blows a giant hole in what used to be a closed system, or where even the currencies themselves don’t have much meaning.
In other words, the concepts barely apply at all.
Stick to hard science. You don’t know squat about econ.
Let me contextualize that remark a bit. I work with hard scientists. Some of them come to me for investing advice, which I give freely, only to see them ignore it. Others lecture me on my own investing decisions, which I don’t bother to defend, as I realize that people who are clueless about economics wouldn’t understand them anyway.
Why waste your breath?
She’s shockingly ignorant.
It’s just extraordinary.
The “one potato, two potato” approach to reasoning.
I bet her “hard science skills” are not much better. Of course, she works for the government and not for JPL or NASA so that’s pretty much a given.
Don’t be silly, she’s not a scientist. She works around science.
Stunning.
“‘I thought once I closed, everything would be smooth sailing,’ Shealey said. ‘Now everything is on me.’”
Yeah…you’re not alone, Shealey.
“Martin Feldstein, a former chairman of the Council of Economic Advisers which advises the U.S. president on economic policy, said the Fed’s decision to buy mortgage-backed assets for an unlimited time means the central bank has now embarked on a ‘very dangerous strategy’ that could lead to high inflation and destabilizing asset bubbles.”
I find it encouraging to see a high-level consensus forming to suggest unconventional central bank asset purchases directly lead to destabilizing asset bubbles. We’ve come a long way from the day when anyone who pointed out asset bubbles forming right and left was shouted down as a tinfoil-hat wearing lunatic.
Maybe the Fed can hold an academic conference at some point in the future where they invite a bunch of academic superstars to pontificate on where asset bubbles come from.
Well, they won’t be able to blame this on Wall Street:
‘The mainland’s latest home boom - or bubble - commenced at the end of 2008, when the country launched a series of stimulus measures to weather the global economic crisis.’
BTW, Australia just cut rates again, even though unemployment is low. Canada is maintaining low rates and their economy isn’t bad off. And the US govt has become Subprime Sam. Lot’s of FB stories to come:
‘I meet with a lot of people who are upside down and for most part can afford the payments. And a lot are looking for an easy way out,’ said Bartow County, Ga., real estate agent Bill Cook. ‘They don’t want to pay … ‘
‘They don’t want to pay … ‘
Simple solution: DON’T BUY STUFF YOU CAN’T AFFORD.
“But he expects them to return’ once prices stabilize.”
Housing bubble version of cargo cult thinking…
“There’s a huge property bubble in China and Hong Kong now — so much speculation and sky-high prices have convinced investors to come here to buy.’”
We now see Californication of housing on an international scale. In the same way that Californians liberated their equity to purchase investment properties in Idaho, Utah, Nevada, Oregon and Arizona, wannabe Trumps in China and Hong Kong are investing in London, Paris and NYC.
I can’t wait to see how this turns out in a few years, after these bubble-era investments come home to roost.
“Their speculative activities domestically have been blamed for soaring real estate prices in China, where they have been nicknamed ‘locusts.’”
Chinese equity locusts — who’d've thunk?
BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAAAAAAAAAAAAAA!!!!!
‘We now see Californication of housing on an international scale’
That’s what I told the Globe & Mail. This is the rolling bubble we experienced years ago, now crossing oceans. And we saw how damaging that was.
From the comments to the Vancouver story:
‘envy and sour grapes’
‘So many people who aren’t in the Vancouver market almost drool when they talk about a “crash” or the “bubble bursting”. Get over yourself. There will be ups and downs, of course. Right now, I like what is happening in Vancouver. Prices will drop a bit and then stabilize and keep climbing at a moderate, reasonable pace. But if you think Vancouver dirt will ever be cheap, think again. I bought in 2003 and my townhouse has almost tripled in value. Go ahead, drop 10%. I don’t care!’
Another:
‘Chinese buyers’
‘lol lets hedge our bets on the chinese coming in and saving us. The very fact that the chinese have had such a negative effect on affordability should be a warning to city planners and all those who see the long term implications of an unaffordable city. The reality is this is a bubble, its a speculative bubble and the bubble as all bubbles do will burst. The fundamentals simply aren’t in place for someone to pay high mortgages when rents are far lower and in a declining economy. We need to follow austrailia and strongly limit foreign ownership then you will see a real bubble burst.’
“That’s what I told the Globe & Mail. This is the rolling bubble we experienced years ago, now crossing oceans.”
It was a financial wildfire on land, and it will be a financial tsunami crossing oceans.
“Get over yourself.”
I’m over myself already. Looking forward to LMFAO when greater fools lose their shirts in the incipient Vancouver real estate collapse.
The global tsunami took six years to reach those distant shores. It’s just the first wave though.
My manufacturing colleagues in Germany tell me they are starting to take a beating. International wealth harvesting is getting more difficult.
Chinese buyers are not legitimate buyers. This is money laundering plain and simple.
“Nationally, almost 100,000 homes have been flipped in the first six months of the year, and that’s up 25 percent from 2011. California, Arizona, Nevada and Georgia are the top states to flip right now. In the top metro areas, Phoenix, Las Vegas, Los Angeles and Miami are tops.”
Each home that is flipped generates a commission for some Realtor™, right?
Twice.
Does an acquisition at the courthouse steps generate a commission payable to anyone other than the trustee’s fee? I didn’t think so.
Who said anything about trustee sales? Once it becomes REO, a used house salesperson sells it. If it’s to be flipped, it will probably be done with a UHS again.
Not only do they get a commission from the lender, it can be above 6% if the house is cheap enough. I see $30,000 REO’s that pay $3,000 to the agents involved.
I understand that Ben, but most “flippers” that I’ve seen have been mainly active on the courthouse steps.
“My summary insight from studying hundreds of years of all types of manias and panics is simply that bubbles always burst, and then they go back to where they started or a bit lower. Even we’ve seen doubling and better in the stock prices of homebuilders. It’s unlikely that this latest bubble bursting in real estate is truly finished.”
Now that the Fed is in the bubble reflation business, what makes the writer think this bubble might not endure forever?
“We shouldn’t be surprised at what happens after a major housing bubble bursts as Japan went through this starting in 1991 after home prices rose 160% in just 6 years and then fell 64% — and they are still down that much 21 years later as a smaller generation followed a large baby boom for the first time in history. The U.S. followed with a 130% bubble up in 6 years from 2000–2006.”
The home construction boom shows up in U.S. data going back to 1991, and housing markets in most parts of the country started inflating around 1996.
“The Japanese market went back just below where its bubble started in 1986. For that to occur in the U.S., home prices would have to fall 55% – 65%, not the 34% we saw at worst in 2009.”
It’s different here in the U.S.
“The real estate bubble is like a popcorn popper with different markets frothing over and peaking at different times, but all will burst ultimately. Given that real estate is so local, the best way to gauge the downside potential of your home or commercial real estate is to find out what it was worth at the beginning of 2000 at best and the beginning of 1996 at worst. If you can’t take that much heat consider selling and renting for the next three years plus. From around early 2015 forward we could see the greatest bargains in real estate of our lifetime.”
Interesting to see the advice to rent and wait now, a full five years after the first major leg down in U.S. housing prices and more than five years after the smart money adopted this strategy…
As regards the notion that All Real Estate is Local and reversion to pre-bubble prices, it seems quite clear that some areas (Detroit, for example) have had a major retrenching while others (San Diego, Washington DC, NYC, etc) haven’t.
Time will tell if the ‘bubbles always burst’ rule will eventually apply to every U.S. local market or not.
“‘I thought once I closed, everything would be smooth sailing,’ Shealey said. ‘Now everything is on me.’”
Take a look at this (non)thinking. Seriously. You pay a massively inflated price for what is always a depreciating asset and you think it’s going to be “smooth sailing”? What is wrong with people? This is where your trouble begins. Yet when it goes bad, which it always does, they will blame everything and anything else except their own flawed thinking.
This thinking is pervasive. I don’t know what the genesis of it is, when it began but it is there where you’ll find the criminality.
“the man with whom she bought the house.”
Notice they didn’t say “her husband.” That’s the real problem. If you’re going to depend on a person’s income, you need the financial protection that marriage offers.
Ah…marriage. Guaranteed!
Here’s the documentary:
http://www.youtube.com/watch?v=2d9DfnJwRNk&feature=related
I’m the out of place guy with the mortgage. Sold the farm and took a job in town. The kids are all grown up now and I’m raising as much heII as I can.
Your mileage may vary.
Pimp, I’ll offer my observation based on hiring and training employees and also based on teaching - I taught some math and science at a private school and also ran some math and science study groups in college.
“Thinking” presupposes “*focus*.” If you lack *focus* it doesn’t matter how smart or how dumb you are - thinking will not be productive. The thing that strikes me over and over is that people in the U.S. lack focus.
This deficit starts at a very early age. Lack of focus is cultural (learned) although there may be some innate component as well. But clearly in my travels I’ve seen some cultures that are focused and some that are not.
That overwhelming majority of American’s are basket cases when it comes to focus. And from what I can tell the iPhones and unlimited sources of entertainment are not helping matters.
I believe focus can be taught. Meditation can be used to build focus if done in the correct way. Doing intellectual drills builds focus. Sports can be used to builds focus. Any activity where you get to the point where your mind wants to wonder but you force it to stay with the task at hand will build focus. It is a self discipline. It is not easy to master. But it is a prerequisite to many other skills including structured thinking.
I’ve personally taken kids that supposedly had low I.Q.’s and learning disabilities and turned them completely around to becoming achievers just by teaching them to focus. And you don’t need drugs to do it.
True. Thank yo for stating this. Music and the arts create focus too.
You require persistence too. The ability to not get frustrated and just keep trudging along.
You don’t get instantaneous rewards whether you study a foreign language or the violin. It’s a hard uphill slog in muck that keeps forcing you down. But you keep at it.
And one day, you find yourself looking out at the gorgeous vista below.
And yes, I agree. It requires focus.
Faster Pussycat, Sell Sell, I’ll take that as a rather (rare) endorsement. One day perhaps we shall have tea. That is my hope.
“You don’t get instantaneous rewards whether you study a foreign language or the violin. It’s a hard uphill slog in muck that keeps forcing you down.”
What is wrong with me that makes me enjoy torturing myself so much?
It’s good for you.
Great observations and experience SF Bay Area. Thank you.
Kurdistan? Really?
I think we found out where those two C-5s loaded with pallets of $100 bills ended up at.
I’ve spent quite a bit of time in Kurdistan. What a joke!
End the Fed Protest at the Federal Reserve Bank in St. Louis, MO Sept 22, 2012
Published on Sep 23, 2012 by thenewsurvivalist
Protestors met at the Federal Reserve Building in St. Louis, Missouri, to protest the takeover of the American Government by the international bankers who make up the Central Bank of the U.S. known as the Federal Reserve, and the other Central Banks around the world who are destroying the American Dollar to collapse the American Economy and transfer all the wealth of the Western Nations, particularly the U.S., to the bankers so they can issue in One World Currency and One World Bank controlling One World Government. QE3, which the mainstream media has called “QE Infinity” because this one is never ending, will result in 35 billion dollars A MONTH of America’s wealth handed to the banksters disguised as “bailouts.” In reality, it is the takeover of America and the end of American Sovereignty, unless we are able to END THE FED!
Sorry late post:
Just watched the documentary Four Horsemen.
Finally found the perfect explanation of our economic model. Best I think I have seen on the subject. Ranks up there with the Power of Nightmares and The Century of Self. I got it off usenet binaries, maybe available by P2P too.
http://www.fourhorsemenfilm.com/
Political language—and with variations this is true of all political parties, from Conservatives to Anarchists—is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind. - George Orwell
Go, student loans!