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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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It’s interesting how the media shapes the ‘news.’
http://finance.yahoo.com/news/consumer-sentiment-stalls-november-145901325.html
‘Consumer sentiment stalled at the end of November as uncertainty grew over federal tax and spending programs next year, a survey released on Wednesday showed. ‘The late-month retreat was accompanied by more economic uncertainty about future federal taxes and spending programs and the inability of the political parties to reach a settlement,’ survey director Richard Curtin said in a statement.’
Now, did they ask consumers why their sentiment had stalled and the reply was ‘the inability of the political parties to reach a settlement’? Or did they just interject that conclusion as it was ‘accompanied’ by the survey?
And I thought I was the only one who noticed this.
Bloomberg…. yep…. Bloomberg radio does this ALL the time when the ypre-announce whisper numbers before the “official” data release. Rather than just report their speculation, they shape the cause to steer sentiment. If you’re not paying attention, you believe it. But when you listen to what they’re saying, it’s blatantly obvious what they’re doing. Tune in some time and listen to Vinnie DelJudice who is supposedly Bloombergs “US Treasury correspondent”. It’s freaking laughable.
PS- The motive to misrepresent? Your guess is as good as mine but I believe much of it is for international consumption.
Remember Tass?
It’s interesting how the media shapes the ‘news.’
I’ve wondered the same thing about our universities. One has to wonder what sort of current economic view they convey these days?
Marxism
Oh please. The busiest department at just about any college is the school of business. Trust me, they don’t teach Marxism in Biz School. I had to take an Econ class for my MBA. Marx wasn’t even mentioned.
“Marx wasn’t even mentioned.”
Didn’t you even begin to suspect your professor was a closet communist?
Feminism
Do Americans have more or less to be grateful for than they did in 1980?
That’s the time the old post-New Deal liberal order, unions and industry were starting to collapse, precipitating the era we have been in since, or had been through 2007 or so.
It’s also the time that those born from 1930 to 1955 or so took over our institutions from the Greatest Generation, and those born afterward entered the labor and housing markets.
I think we have a great deal to be grateful for, such as modern new inventions and greater prosperity.
With all the news talk about how this decade compares with that, it’s often not even comparable.
My first computing experience began in High School with a Wang card-reader that barely did arithmetic.
Shortly thereafter, a hand calculator emerged, priced about $450 that could do multiplication and division and even had a percent key. Wow.
By 1980, my College had a computer that worked with punch cards. By 1985, it was fully integrated with computer data consoles and a few programming languages. Apples, Amiga, Commodore and IBM laptops had all entered the market.
I started out with a 16k laptop that was an amazing 4 times the previous model for data storage, with a floppy disc, rather than cassette tape storage. We also had the first COLOR “RGB” consoles. I started out with amber and green screens. You can see where this is going.
I used to stay up nights drinking beer with computer geeks and downloading data on a 1200 baud modem. Soon we got a 2400 bps modem and WOW, we doubled out data stream. It was like magic.
WE didn’t have the WEB, web-sites, internet access (only university inter-library access and bbs services). We didn’t have Cell Phones. My first dial-up systems used a rotary telephone. Most kids don’t even know what that is.
My college car was a 1972 Datsun pickup. It was built poorly, but mechanically unstoppable.
Cable TV? You must be joking. We started out with 5 network channels in the 1960s. That was it.
World satellite communications? Didn’t exist.
VCR’s had begun to be developed. Then we got DVD’s around the 1990’s or so.
My 8-track and cassette players have been replaced by CD’s. Online music?? MP3 players?? what’s that?
Shopping “malls” were new creations. WE had local stores and strip centers for 1/2 my adult life.
Jet skis? What are you talking about? Snow mobiles?
Look around your house. I still have VINYL records and still play them. I like to put the stylus down on the track i want to hear.
But lots of the stuff you have didn’t exist in 1980.
ONline library? Forget about it. You need to look something up? A trip to the local library and a dig through the Card Catalog (no computer files). 3×5 cards. Index cards. Rotary Business lines with Phone books delivered for every phone.
The advances of medicine and available care could fill a book. I never had an MRI before 1999.
I could go on for the rest of the day.
A lot has changed and in many ways our lives are much easier and more efficient. I think my standard of living is mostly improved. I am communicating with you in ways that were not possible in 1980 or even 1990.
But all this has come at a cost. We spent way too much to achieve a greater, bigger and richer society. I say that collectively, as I personally did not. I got dragged along by the purveyors of Big Government as the pandemic to every social ill.
There have been vast improvements to people’s lives, but societies live by way of comparison. We all live better than most Regal Elites of past generations to whom “salt” was a luxury, Ice was shipped around the world for cold (before refrigeration), Books were rare, and “climate controlled” buildings were simply a dream.
The simple truth is that whatever “new thing” some people are able to possess, others will feel left out and “oppressed” because they don’t have one, too. And somehow, it’s not fair and the government should “do something” about it.
We live in a world of scarcity, not abundance. Human efforts have created more abundance, but the desire to “fairly distribute” it will remain a source of conflict so long as humans are working to debate and resolve the issues.
Unfortunately “credit” allows people to live more abundant lives and create the illusion that they are more “wealthy” than they really are. This includes societies as well as individuals. While my personal fortunes are ones of comfort (not rich) and occasional luxury of “dining out”, I FEAR for the future, as my SAVINGS are the target of people who think they deserve to have my past work “re-distributed”. I am better off now than in 1980 when leaving school and continuing to work. I don’t think I will be in 5 more years. Who can say?
As for the vagaries of “timelines” whereby we delineate certain “ages” , “events” “dynasties”, etc., i’ll pass on that for now. History is a dynamic flow from one generation to the next (even the idea of “generations” is difficult to pinpoint). Ideas and laws are constantly changing and evolving even before some event X is used as a trigger or motivation for the events that follow. Slavery was a dying institution before the Civil War and given more time would most likely have been legislated away. We’ll never know.
Had war not been declared over the occupation of Danzig, would there have been a WWII? We’ll never know. WE only have past events to judge, and make conjecture about what “might have happened”. It’s like a “pre-emptive strike”. The new thinking here is that the government can arrest you for what they suspect you might do.
That’s Constitution Law at its finest.
It’s a “new way” of interpreting our most honored traditions. I fear this, too.
There were real gains in information technology, and the information and entertainment people had access to. And, though it was expensive, health care.
But much of the rest of the apparent gains in the standard of living over the past few decades have been funded by debts, public and private. And now that has collapsed, the standard of living is falling.
In the early 1990s recession, when people were down, I put together a spreadsheet with a variety of economic, social and environmental indicators comparing the so-called “good old days” with the “recent bad years” to show things were, in fact, better. I’m pretty sure that for most people, especially young people, I could make the opposite case today.
Fancier toys do not make a for a better life. 20 years ago I wasn’t constantly keeping my ear to the ground, hoping to dodge the next wave of layoffs. I would gladly trade my flat panel TV and high speed internet for some peace of mind.
Well said Colorado and I agree wholeheartedly.
Dio,
That was a good trip down memory lane.
It’s funny, my toilet has more computing power than the earliest computers.
Seriously.
A 200 year-old country is apparently worth more than a 230 yer-old country. America’s net worth is more negative every year now.
Would love to know everyone’s favorite Thanksgiving side dish. And does anyone out there detest canned candied yams and marshmallows with a vehemence that compares to my own?
Travel safely, all!
Green bean casserole is #1 on my “Holiday Food to Avoid” list.
And does anyone out there detest canned candied yams and marshmallows with a vehemence that compares to my own?
I hate that dish with a passion.
As for my favorite … that would have to be real au gratin potatoes.
No, ahansen, I detest those candied yams and marshmallows even more than you. So, cue up the food fight in 3,2,1…
Actually, I’m going to Thanksgiving at the home of two of my walking buddies. They’re both gourmet cooks. I’m taking notes.
LOL Slim,
Actually those wretched things would make good projectiles for a sling shot. I haven’t had a good food fight since…well, maybe it’s best not to talk about it in polite company.
Here’s a story I always remember on Thanksgiving:
Every year the local Chamber of Commerce staged a turkey bowling competition for the town children. For those unfamiliar with the activity, it began in the 1970’s when Butterball introduced it’s familiar frozen-turkey-in-a-net-bag, and graveyard shift grocery store stockboys began staving off boredom by bowling them down the aisles into two liter plastic soda bottle “pins” late in the wee hours. If you’ve ever hefted a frozen Butterball turkey you know those suckers are harder than rocks, so the next day’s shoppers were none the wiser when they pulled their Thanksgiving dinner out of the freezer case.
Anyway, it was 2003 and the local CofC had set up a greased slip-n-slide alley in the parking lot of the hardware store for the kids to bowl turkeys, and as he rang up my PVC couplings inside I asked the owner if he planned to go out and show them how it was done.
Bob was a neighbor of mine, and I always knew him to be fat and jolly, like a big old redneck Santa Claus, but at this his face grew dark and his disapproval was almost biblical. “My mama grew up in the Depression” he thundered, “and I can still remember her telling me about all the times she and her little sisters went to bed crying because they were hungry and there was nothing to eat.” Solemnly now he said, “I never waste food. You never know when it might come again.”
My sometime handyman, Indian Pete, was standing in line behind me and overheard what Bob had just said. “That turkeybird gave its life to feed you, you know” he said simply. “You ought to honor it.”
They were total buzzkills, but they were right, you know….
Rutabegas or turnips, a little butter, salt and pepper. I eat half a plate.
Broccoli crowns flashed in no stick pan with olive oil with kosher salt and garlic…
And don’t forget to add the garlic at the very end.
There is nothing much worse than burned garlic.
By contrast, few flavors appeal to me more than properly roasted or sauteed garlic. On Sunday I roasted a whole head of garlic, mashed it with my mortar and pestle, and mixed it in with a large batch of mashed potatoes. My FIL, who claims to not care for garlic, ate a large amount.
“There is nothing much worse than burned garlic.”
And sadly there are alot of people who don’t know the difference between burned and unburned garlic. It turns quick and it’s tough to see if it’s something you don’t cook with often.
I like candied yams but have no use for the marshmellows. Who started that, anyway.
I used to hate candied yams, but now I love them. I barely eat them, though, because they are so bad for you. My favorite is probably baked pineapple.
I love beets and will be BBQing a few on the grill, smoked w cherry wood! Yum!
Best Thanksgiving side dish? Stuffing, of course (properly made).
Worst side dish? Bad stuffing, which includes any made with cornbread or, god help us, oysters.
I like candied yams, as a small side dish amongst many others. They’re better with glazed pecans on top, not marshmallows.
Steamed (or boiled) carrots and celery. Add a little butter. Delicious! Mom’s cooking. Happy Thanksgiving everybody!
pecans
Is the Grexit on or off?
Without the EU, Europe will be just a ‘faceless’ extension of US
by Vahram Ayvazyan
21 November 2012
Taking into account their gross domestic product and their limited resources it is obvious that European nations cannot catch up with dynamic Asia and the ‘global south’, if they go it alone
Despite winning the Nobel Peace Prize, the European Union would not make the EU’s founding fathers - Robert Schuman, Jean Monnet and Alcide de Gasperi - happy in these days of turmoil. Those men were enthusiastic about the very idea of Europe and were adamantly working on the establishment and institutionalisation of a collective identity known as the ‘European’.
In contrast, the current heinousness of the EU political elite would cause the founding fathers a great deal of heartache. If the fathers got acquainted with phrases like Grexit and Brexit as well as the failures of the governments in Spain and Italy vis-à-vis ‘Europeanisation’, Eurosceptics and the gloomy public opinion on the EU as a socio-political entity - they would no doubt be extremely depressed.
We are now witnessing an unprecedented increase in anti-European ideas, projects and movements within the confines of the motherland. Eurosceptics, who thumb their noses at the future of the fantastic project initiated by the founding fathers, are just playing havoc the feelings of the citizens of the EU. Those guys who put forward Grexits, Brexits are urging the Europeans to go through hell.
…
cannot catch up with dynamic Asia
The one with the mother of all housing bubbles?
I’m thinking of a hypothetical punk rock band name: Mother Bubbles.
Bubble? Blimp? MotherShip?
I expected you to say “Pimpslapped Shills”
Bubble Riot?
ft dot com
November 21, 2012 5:17 pm
German doubts force rethink on Greece
By Alex Barker in Brussels
German objections to suffering losses on official loans to Greece have forced the eurozone to explore more complex means of helping Athens cope with its debt mountain.
After almost 10 hours of intense talks on Tuesday night, eurozone finance ministers failed to agree on how fast to cut Greece’s debt pile. They called a further meeting next week to settle differences and release €44bn of long-overdue aid.
The main stumbling block was Berlin’s refusal to back “illegal” cuts to the interest rates on bilateral loans to Greece or return the profits from the European Central Bank’s purchases of Greek bonds, said people involved in the talks.
An alternative proposal involves offering €10bn of extra loans to Athens from the European Financial Stability Fund, the eurozone’s temporary bailout pot. The option is seen as a leading contender for a compromise deal.
This extra lending would support a more ambitious scheme to purchase Greek bonds held by private investors, part of a package of debt relief measures to bring down Athen’s debt to significantly below 120 per cent of economic output by 2022.
Sanctioning a new €10bn of bailout loans would pose a considerable political challenge to several countries and require the backing of restless parliaments in Germany, Finland and the Netherlands. In part to address the inevitable political concerns, officials are drawing up options to back the new loans with collateral from Greece’s privatisation programme, which aims to raise €50bn.
Berlin’s demand that any new measures must not represent a fiscal transfer to Greece – which the German government sees as illegal – means that the degree of support given will vary country by country.
…
So the other day, I saw another warning notice of rent non-payment on the door of an apartment in my building. If that person doesn’t pay up, they’re out in 30 days. Or less, since I’m guessing they missed the current month’s rent.
But we never hear about the plight of the renter. If a homedebtor gets behind in their payments or goes into foreclosure, it is years before they’re forced to move. If a renter misses a payment, he’s evicted in 30 days. But you know what? Both are humans. Both may have families.
What exactly is it about the homedebtor going non-current in their payments or facing foreclosure that evokes such sympathetic howls of grief and agony from the media, the Fed and the government, whereas nary a peep is heard about renters being evicted in 30 days if they miss a payment?
Why is that?
A couple of stories from Tucson:
First one comes from a long-time bicycle buddy who lives in a part of town where there are a lot of renters. And evictions.
He and his girlfriend like to go through the stuff that gets evicted along with the tenants. Seems that a lot of their former neighbors ditch the cleaning supplies when they move on. Quoth my friend: “Pat and I haven’t had to buy shampoo in years!”
Second one is how the local electric company has this charming habit of posting a big orange tag on properties where the bill hasn’t been paid.
It’s a very visible tag. Which means that all of us neighbors see it.
And some of us start the countdown on how much longer those (usually crummy) neighbors will be amongst us.
Why is that?
It’s really simple. An apartment can easily be rented out again after an eviction, whereas a foreclosure usually represents a massive financial loss to the creditor (the banksters). So they lobby for programs to help keep FB’s in their houses, with the bailout money ending up in the bankster’s pockets.
It has nothing to do with whoever is living in the property.
Why is that?
I think people see renters as inherently more footloose and mobile, not attached to any one place. A move for them is seen as no big deal.
People see ‘homeowners’ as people who have ‘put down roots’, are raising a fam, the whole American Dream thing.
It’s not always accurate, but that’s the perception.
Wall Street overwhelmingly backed Republicans over Democrats by a nearly 4 to 1 margin, and Romney over Obama by a 3 to 1 margin. (1) Will this make Obama more likely to put a leash on Wall Street, and stop their extractive policies? (2) Or will Obama and the Democrats’ desire for money lead them, hat in hand, back to their Wall Street paymasters?
—
(1) http://www.opensecrets.org/pres12/sectorall.php?cycle=2012
(2) http://www.economist.com/node/21552589
“There are two potential candidates for extractive elites in Western economies. The first is the banking sector. The wealth of the financial industry gives it enormous lobbying power, including as contributors to American presidential campaigns or to Britain’s ruling parties. By making themselves “too big to fail”, banks ensured that they had to be rescued in 2008.
Much of current economic policy seems to be driven by the need to prop up banks, whether it is record-low interest rates across the developed world or the recent provision of virtually unlimited liquidity by the once-staid European Central Bank. The long-term effects of these policies, which may be hard to reverse, are difficult to assess.”
Wall Street overwhelmingly backed Republicans over Democrats by a nearly 4 to 1 margin, and Romney over Obama by a 3 to 1 margin.
Boy, those guys really know how to invest. Not.
Hardly matters, Neuro. Obama’s a banker’s President. One candidate or another, Wall Street would continue to win. How many bankers did Obama jail for the 2008 fiasco? Hint: Rhymes with “nobody”.
Wither the shadow inventory?
November 21, 2012
10 markets with most vacant homes
10. Las Vegas
It’s not surprising that Las Vegas, the poster child of the housing downturn, adds high vacancy rates to its litany of problems with overbuilding and high foreclosure rates. Between peak and trough, Las Vegas housing prices plummeted by 60.4%. This decline in home values in Las Vegas and other housing markets in the state have contributed to Nevada’s being the only state in the country where the total worth of homes is less than the total amount owed on these homes.
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Weekend topic: How much will the Hamas/Israel truce affect oil prices? Other commodities?
What future commodities will soar or drop?
Some predict gold over $2k and copper sinking due to the overall sluggishness of the global economy. Corn?
Should ethanol be made from sawgrass instead of corn?
I’d really love to see some intellectual exchanges instead of partisan bickering.
Nuke ‘em, Ben!
When (not if) we see comparable drops in San Diego prices to those realized this past year in Fort Lauderdale, I may finally dip my toes back into the purchase market.
4. Fort Lauderdale, Fla.
While seven in 10 markets Trulia analyzed showed increases in vacancy rates, the vacancy rate in Fort Lauderdale actually decreased by almost 1%, indicating a strengthening housing market. And although the 4.4% increase in asking price is far from the strongest growth of all the metro areas measured, it is among the top third. One concern is that the average price per square foot has dropped 59.3% in the past year.
Detroit is majorly screwed: Number one in shadow inventory and most affordable price per square foot, yet the pace of sales is still dropping.
Why not include functional illiteracy? Why would any company move to Detroit if half the population can’t read or do math?
Even if the land was bulldozed and given for FREE it still may not make economic sense to build a business in Detroit
Why aren’t more Californians cashing in their home equity gains and moving inland to Detroit?
Can you say REAL ESTATE IMPLOSION?
1. Detroit
Detroit’s housing market has taken a larger hit than most in recent years due to problems in the automobile industry. Between their highest and lowest points, homes prices dropped 39%. The median price per square foot of just $47 is the lowest out of all 100 metropolitan areas measured. For every new or resale home listing on Trulia, nearly another three are in some stage of the foreclosure process. A troubling thought for anyone contemplating selling a home in this oversaturated market is that despite low home prices (the average listing is under $48,000), the number of sales has actually decreased by more than 27% in the past year.
The worst places are in the sand states and rust belt. In other words, places without jobs.
I know a Canadian economist who just bought his first home. I’m guessing he isn’t among those forecasting a 10% drop next year…
Reuters poll sees Canadian house prices down 10%
By Adam Button
November 9, 2012 at 15:19 GMT
You never know exactly when a bubble will pop but 2013 is looking like the year that Canadian housing rolls over.
A Reuters polls says prices are expected down 10% and that homebuilding will slow sharply in 2013. It doesn’t say who was polled but I suspect it was economists.
In my opinion, the market is incredibly bad at pricing in lower house prices. The market tends to wait until the effects spill over to the real economy or until the central bank takes action. Patient players could hit the jackpot on CAD shorts next year.
ANALYST: Canadian Home Prices Will Plunge 25% From Here
Mamta Badkar | Oct. 26, 2012, 3:18 PM
Canada’s sub-prime mortgage industry is said to be growing and there are supposed to be $500 billion in high-risk mortgages in the Canadian housing market.
But some like Robert Shiller have argued that if Canada’s bubble were to burst, Canada’s experience would be very different from the U.S. because banks aren’t as burdened by sub-prime loans and because the mortgages are insured by the Canadian Mortgage Housing Corp. (CMHC).
A new report by Capital Economics however says Canada is “not immune to potential sub-prime problems”.
While they argue that there isn’t a sharp distinction between prime and sub-prime lending and that non-prime mortgages account for 20 percent of total residential, unlike the 50 percent touted by many, they do think there is too much optimism about Canada’s housing market:
…
It was mentioned here before do you think one of the unintended consequences of ohbahhmacare is a take this job and shove it attitude?
Will this open up possibilities of people finding a job they love, or starting their own business?
The middle class is decapitalized. Don’t expect to see a wave of small business creation like we saw in the 1990s. You need capital to start a small business. $100K isn’t an unreasonable starting point for a business that will survive. Only a very tiny minority of people can come up with that level of funding. And the HELOC is out as a source.
I predict a lot of people will try anyways due to sheer desperation, and the government will go beserk, fining people left and right for “violations” of law in trying to run an undercapitalized small business. After all, government levels will be grasping for any source of revenue by then. This will draw out the inspectors and auditors into other small businesses, established ones, so small business as a sector will find itself almost literally attacked (by local governments particularly). So this is probably a good time for the predatory sorts to seek employment in government inspection and auditing offices.
Look,
if the end result is gonna be WW3, why don’t we just skip it and start WW2 and a half?; a quick well managed destruction of a bunch of people and things… so we can have another post war boom…
so we can have another post war boom…
Broken window theory?