The Housing Bubble

what enabled wall street to turn the housing market into a casino? We did fine for quite a long time and then boom, the casino chips appeared.

Globe and Mail - Why lower home prices are a national priority:

“If Canada wants to slay its household-debt dragon, it will have to cut down house prices at the knees. But there’s an economic price to pay for that – and it goes well beyond a cooling of the residential real estate sector.

The Bank of Canada – one of the twin forces in Ottawa, along with the Finance Department, that are working to bring runaway consumer debt loads back under control – published a study this week that found that house prices are a key catalyst both for household debt and for spending. On the surface, this seems a pretty obvious conclusion; a higher house price means both bigger mortgages and bigger outlays of consumer’s money on home purchases.

But the kicker here is that house prices appear to drive non-mortgage debt, too – the more valuable your house, the more debt you’re likely to take on outside of your mortgage. And, since close to half of all non-mortgage debt is used to finance consumer purchases, higher house prices ultimately boost our national consumption, too.

This is the wealth effect so many people talk about in relation to house prices. The more valuable your house, the more implied wealth is contained in your household – and the more you can (and, it appears, do) take advantage of the wealth by borrowing against it to buy more things.”

http://www.theglobeandmail.com/globe-investor/investment-ideas/why-lower-home-prices-are-a-national-priority/article7233016/

Politico - Possible NYT layoffs rattle media:

“In the news business, no one is safe - not even senior editors at The New York Times.

The media business was shaken on Friday when it was reported, first in New York Magazine and confirmed by POLITICO, that managing editor John Geddes, assistant managing editor Jim Roberts, dining editor Susan Edgerley, former Washington editor Rick Berke, and former Times Magazine editor Jerry Mazorati could all be casualties of the Times’ effort to cut costs.

“It is hard to imagine there are too many sacred cows left in any newsroom, given the general state of our industry,” Raju Narisetti, the head of The Wall Street Journal Digital Network and a former Washington Post managing editor, told POLITICO, without specifically responding to the New York Times cuts but talking about ongoing cost cutting efforts across American newsrooms.

Times executive editor Jill Abramson told staff in December that the paper had to cut 30 newsroom positions, but would be “forced to go to layoffs” if it could not secure enough voluntary buyouts. With the Jan. 24 deadline for those buyouts fast approaching, only two staffers — culture editor Jonathan Landman and reporter Jacques Steinberg — have publicly accepted the offer, though others are believed to have done so privately.”

http://www.politico.com/story/2013/01/media-rattled-by-possible-nyt-layoffs-86083.html

Does Realtor Magazine have a swimsuit issue?

Shadow Inventory Threat Wanes | Realtor Magazine
http://realtormag.realtor.org/daily-news/2013/01/03/shadow-inventory-threat-wanes - 42k - Cached - Similar pages
Jan 3, 2013 … The number of homes in “shadow inventory” dropped from 2.6 million in October 2011 to 2.3 million in October 2012, according to a new report …

Relatively wealthy homeowners were the big political victors in the “fiscal cliff” deal:

Housing: ‘Cliff’ deal is providing bonus for homeowners
8 hours ago • Kenneth Harney
Washington Post Writers Group
WASHINGTON

Although it wasn’t a total win for homeowners and sellers, the patchwork legislation that emerged from the “fiscal cliff” fracas on Capitol Hill came pretty close. In fact, it even reached back and resuscitated two key tax benefits for housing that had expired more than a year ago. Now homeowners will be able to take deductions on their upcoming 2012 tax returns that they assumed were no longer available.

Here’s a quick tally sheet on what the new legislation could mean for you as a buyer, seller or owner.

• Do you, like millions of Americans, pay mortgage insurance premiums or guarantee fees on an FHA, VA, Fannie Mae, Freddie Mac or Rural Housing loan? The American Taxpayer Relief Act - the fiscal cliff compromise bill - allows you to write off the insurance premiums you paid during 2012 along with your mortgage interest, provided your household income does not exceed $110,000. Legal authorization for this deduction expired at the end of 2011. But the new bill retroactively permits write-offs for all of 2012 and 2013 for qualified borrowers.

• Did you do some energy efficiency renovations in your home during 2012, installing insulation, energy-saving windows, doors, roofing material, nonsolar water heaters and the like? Maybe you’re thinking about doing a little green rehab in 2013? For either year, you may be able to claim up to a $500 tax credit thanks to the revival of a home energy improvement incentive that lapsed in 2011. Five hundred bucks may not sound huge, but remember: It’s a credit, not a deduction, so it means $500 off the bottom line of your federal tax return.

• Are you planning a short sale of your underwater home this year or hoping to receive a principal reduction on your loan as a result of a mortgage modification by your lender? The new legislation reauthorized the Mortgage Forgiveness Debt Relief Act that had been scheduled to terminate Dec. 31, and spares you potentially punitive federal taxes on the amount forgiven. Had the debt relief exception in the tax code not been renewed, large numbers of underwater owners participating in short sales - where banks agree to accept less than the full amounts owed on a loan as part of a sale to a new buyer or investor - would have faced taxation on the full amount forgiven, as if it were regular income.

Lenders and real estate brokers say thousands of financially distressed homeowners would have been devastated by the expiration.
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$91 million in 2004 to $28.5 million in 2013

Palm Beach investor Jeff Greene snaps up downtown West Palm condos

Posted: 6:12 p.m. Friday, Jan. 11, 2013
By Palm Beach Post Staff Report

WEST PALM BEACH —
Real estate investor Jeff Greene has added to his growing portfolio of Palm Beach County properties with the purchase this week of most of the condominiums in a downtown West Palm Beach building.

Greene of Palm Beach paid $28.5 million for 166 units in The Strand, a high rise at the corner of Evernia Street and Narcissus Avenue. He is expected to rent out the condos, which are 95 percent occupied.

The building, with views of the Intracoastal Waterway, Palm Beach and the Atlantic, was sold by Boston-based Cross Harbor Capitol Partners.

North Miami Beach-based American Land Housing Group built the 15-story Strand in 2002. Condo converter Margolias Realty Group bought it a couple years later for $91 million.

Only 109 of 275 units sold to buyers, leaving the 166 Greene bought this week. In 2006, The Strand went to its mezzanine lenders, CrossHarbor Capital Partners.

In 2005, the apartments became condos, ranging in price from the mid-$200,000s to just under $1 million.

The Boca Raton office of ARA announced the sale Friday. ARA’s Avery Klann, Marc deBaptiste and Hampton Beebe represented Cross Harbor Capital Partners in the transaction.

http://www.seattlepi.com/news/article/ICE-says-activist-s-role-didn-t-spur-mom-s-arrest-4186664.php

Another example of the rule of law breaking down.

Will President Obama order the Treasury to mint a $1 trillion coin? It’s possible
National Monitor, Staff | January 12, 2013

It’s the question making its way around Washington: Will President Barack Obama order the U.S. Treasury to mint a $1 trillion coin in order to avoid the debt ceiling debate.
…

Articles such as the one I am about to post explain the reason why I expect the Fed to suppress long-term interest rates for “longer than expected.”

But I keep coming back to the same question: Are there any exogenous factors which could force an early exit upon them?

There is a fatal flaw in the thinking that the end of the bond bubble will be a boon for equities. Higher interest rates can spell the kiss of death for both bonds and equities, as was learned on Black Monday (October 19, 1987).

ft.com > Comment >
Editorial
January 11, 2013 6:38 pm
Rebirth of equities ain’t necessarily so
Knowing what we do not know about where stocks will go

The cult of equity is dead; long live the cult of equity. That seems to be the rallying cry of a week in which stock price indices touched pre-crisis highs and $18.3bn flowed into equity funds in the US alone, the fourth-biggest weekly figure in 20 years.

The stock markets have not been lacking in good news recently – some of it better described as an absence of bad news. The US did not go over (all of) its fiscal cliff. Eurozone leaders have not triggered renewed market panic. There are outright positive signs, too, that things are on the right track. In the US, the housing market and the banks are returning to good health. In Europe, European Central Bank president Mario Draghi has promised to do what it takes to eliminate the risk of the single currency breaking up, and markets largely believe him.

With the financial world gradually normalising – as noted by Mr Draghi on Thursday – the case for the equity bulls is straightforward enough. For the past decade, bond returns have left stocks in the dust. What started with a popped dotcom bubble continued with the flight to the safety of sovereign bonds during the crisis and central banks’ ever more aggressive actions to keep interest rates low. But as yields shrink to nothing, bond prices cannot go on rising much higher. And one day soon – so the argument goes – what has gone up must come down. The funds that then come out of bonds will surely benefit equities.

Well, it ain’t necessarily so, as Ira Gershwin would say. Many things must go right for this scenario – the ultimate return to the old normal – to play out.
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Greece has given the green light to an unpopular package of tax reforms, in order to meet requirements of international creditors. Opponents say the changes will bite the less well off, without scratching the wealthy.

Greece’s Parliament early on Saturday approved controversial new tax changes designed to boost government revenues, as part of conditions laid down by foreign lenders supplying the economically-troubled country with emergency loans.

“It is a bill of fiscal necessity and responsibility, required for us to get our next loans tranche,” Finance Minister Yannis Stournaras said to lawmakers.

http://www.dw.de/greece-alters-tax-code-to-appease-lenders/a-16516868

Obama’s socialist utopia gets out of control (linked from Drudge Report)

Section 8 Housing voucher distribution canceled after thousands waiting in line get out of control:

“A chaotic scene erupted at the Taylor Human Services Center when the crowd waiting for a Section 8 Housing voucher distribution got out of control.

Police say thousands of people from all over the area were at the center. Many were homeless, single moms, or disabled. They were hoping to get help paying for their housing from the government.

“There was elderly, disabled people, pregnant single women. They were here for help, to get their section 8 vouchers. It just shows you what a desperate need… some were here since yesterday,” said Rhianna Rodriguez.

7 Action News is being told there were 1,000 vouchers available and 5,000 people showed up trying to get one.

The crowd had grown overnight as more and more people arrived. Witnesses say the line stretched for a mile down Lange Road.

Police say, when the time came for the vouchers to be distributed, there was a mad rush for the door. Officers tried to control the crowd, but couldn’t.”

http://www.wxyz.com/dpp/news/region/wayne_county/section-8-housing-voucher-distribution-canceled-after-thousands-waiting-in-line-get-out-of-control

Hope and Change

Forward

Ben Bernanke’s Fingerprint Is Clearly Present In The Current Rally
Lance Roberts, Street Talk Live | Jan. 12, 2013, 5:46 AM
Lance Roberts is the host of “StreetTalkLive.”

For the last four years the Federal Reserve has been actively engaged in supporting the stock market by suppressing interest rates to historically low levels, and injecting liquidity into the financial system, through a variety of different programs. The most notable, and widely discussed, of these programs has been the Large Scale Asset Purchase programs (see here and here) which have become known as Quantitative Easing or Q.E.

There are two important considerations revolving around Q.E. programs. First, the Fed is currently simultaneously involved in two Q.E. programs totaling $85 billion a month. Considering that we are more than 4 years into an “economic recovery” the need for such liquidity injections is very telling about the real strength of the economy. Secondly, each program has had a diminishing rate of return as shown in the combined chart below.

What the chart shows is the history of each program from its inception post decline to May 31st of the following year. The first QE program followed the 48% decline in the S&P 500 due to the financial crisis. From that low point the markets rallied 34% to the end of the program 2010.

Following the expiration of QE 1 the market declined by 14% which pushed the Fed to enact QE 2 in order to “stimulate consumer confidence and boost asset prices.” QE 2 worked as planned and boosted the market by 28% until its conclusion in the early summer of 2011.

As witnessed previously, as the effects of the Fed’s liquidity was extracted from the system, the market deteriorated and fell 19% as the economy slowed and the first debt ceiling debate ensued. Worried that the economy may well slip into recession the Fed acted to once again support the financial markets, and the economy, by utilizing a different approach and implementing a bond reinvestment program which became known as “Operation Twist.” From the lows of the market in the summer of 2011 the market was only able to muster a 19% increase before stalling and declining once again by 10%.

The story line changed somewhat in 2012. As the market declined in the early summer of 2012, with the Eurocrisis once again rearing its head, the markets, now very accustomed to the Fed intervening and providing support, began to advance in anticipation that Bernanke’s “printing press” would once again be unleashed. Like the sound of the bell to Pavlov’s dogs, the market rallied strongly during the summer months reaching its peak as the announcement of QE 3 was made in September. QE 4 was announced shortly thereafter to replace the expiration of the “Operation Twist.”

The recent rally has attracted much attention as the markets flirt with their highest closing levels since the 2008 stock market crash. For many individual investors they are now back to where they were five years ago. I need not remind you that getting back to even is not an investment strategy. The question, however, is how much further the advance can go? (Note: For clarity purposes I have intentionally left out Operation Twist since that program did not expand the Fed’s balance sheet.)
…

I think we can all agree we do not want to live like this: tp://www.bbc.co.uk/news/world-asia-china-20998147

Why I think there is some serious gold manipulation going on, heavy physical demand but heavy paper selling.

http://www.mining.com/american-eagle-gold-coin-sales-set-for-best-january-since-1999-60234/

CNN on Staying in Your Foreclosed Home - YouTube
http://www.youtube.com/watch?v=KP8sTMhvkaE - 208k - Cached - Similar pages
Jan 31, 2009 … CNN on Staying in Your Foreclosed Home … Many of the loans that were made in the past five years that have created so many problems …

My brother just fought through surgery, radiation and chemotherapy. Had to take all of his vacation time for the year but made every rent payment. Right at the end of it all Sandy hit (he lives in Long Beach on Long Island) he had to move out for a couple of months and while gone still had to pay his rent to keep the appartment.

How to Stretch Out a Home Foreclosure for Years

By Laura Rowley
Posted 10:00AM 10/18/11

For Janet, a 48-year-old attorney and mother of five who asked that her full name not be used, the process has stretched out for nearly 900 days, and counting. That’s more than two years without paying a single mortgage payment.

Her story is a lesson on how to keep a roof over your head.

From Success Story to Distressed Homeowner

And she bought property: “I reinvested every dollar I was making into real estate,” she recalls. “Some were vacation rental homes, or flipped homes, but I was always reinvesting.”

In 2006, Janet was diagnosed with breast cancer. She took out home equity lines of credit on the three properties she owned to pay the bills while she underwent treatment. “I thought the worst that could happen is I would sell the properties to pay off the debt, be healthy and go on my way,” she says.

Janet fought through surgery, radiation and chemotherapy. Too sick to work, she went on Social Security disability. In 2007, she put her homes up for sale. The first two went into foreclosure.

A Short Sale Fail

In spring 2009, Janet and the kids moved into the smallest of the homes. She owed about $298,000 on the mortgage and roughly $44,000 on a second lien. In December 2009, she found a buyer willing to give her $100,000 in cash for it in a short sale. Her lender, Bank of America (BAC), didn’t respond, and the court scheduled a foreclosure auction for February 2010.

In mid-2010, Janet’s cancer recurred and she began another round of treatment. She got a fiscal reprieve in October when the bank froze all of its foreclosures while it conducted an investigation of its processes. (Bank of America is still trying to cope with the aftermath of the mortgage meltdown.)

Embracing the Delays

In the meantime, Janet tried the mortgage modification route. From September to mid-December, she called the bank more than two dozen times to request its Home Affordable Modification Program application package.

In March 2011, Bank of America wrote to say Janet wasn’t eligible for HAMP because the home wasn’t her primary residence. She sent copies of her voter ID card, electric, sewer, water, and other bills showing she lived in the house.

In June, Janet learned she’d been approved for a trial period in HAMP — but the modified payment would be $19.96 higher than her original one. “I thought, ‘What kind of crack do you people smoke?’ If I couldn’t pay the first one, I can’t pay $19.96 more,” she says. “I sent a letter in to begin the process again.”

In the letter cancelling the HAMP offer, Bank of America suggested Janet try to do a short sale.

Lesser of Two Evils

Janet says for now, she’ll continue to return the ball every time it lands in her court, and will sue if necessary. “My original loan was with Washington Mutual, which was sold to Countrywide, which was sold to B of A, and I truly believe they don’t have the requisite documentation to foreclose,” she says. “But I still have avenues I can pursue on their own crazy agenda before I pursue mine.”

Janet’s ultimate goal: Hang on for another 18 months until her youngest kids graduate high school. She concedes the dubious ethics of her quest, but argues it’s the lesser of two evils — gaming the foreclosure system versus becoming homeless.

“I get it — it’s a moral hazard, but it’s not by choice. If I could have traded cancer and the loss of my profession, I would have,” Janet says. “People should walk in each other’s shoes before they make those moral high-ground judgments.”

http://www.dailyfinance.com/2011/10/18/how-to-stretch-out-a-home-foreclosure-for-years/ - 93k

Gun popularity still going strong at least in Phoenix. This morning while buying ammo for both my handguns I asked about the CCW class. The guy there says sign ups are back logged for several weeks. But he gave me a flyer and said there is a chance someone won’t show up, so I could show up before a class and try to take the place of a no show.

Pelosi and Obamarx have been the gun industry’s best friends for getting business.

Special Report: The latest foreclosure horror: the zombie title

By Michelle Conlin
COLUMBUS, Ohio |
Thu Jan 10, 2013 1:58pm EST

(Reuters) - Joseph Keller doesn’t expect he’ll live to see the end of 2013. He blames the house at 190 Avondale Avenue.

Five years ago, Keller, 10 months behind on his mortgage payments, received notice of a foreclosure judgment from JP Morgan Chase. In a few weeks, the bank said, his three-story house with gray vinyl siding in Columbus, Ohio, would be put up for auction at a sheriff’s sale.

The 58-year-old former social worker and his wife, Jennifer, packed up their home of 13 years and moved in with their daughter. Joseph thought he would never have anything to do with the house again. And for about a year, he didn’t.

Then it started to stalk him.

First, in 2010, the county sued Keller because the house, already picked clean by scavengers, was in a shambles, its hanging gutters and collapsed garage in violation of local housing code. Then the tax collector started sending Keller notices about mounting back taxes, sewer fees and bills for weed and waste removal. And last year, Chase’s debt collector began pressing Keller to pay his mortgage, which had swollen, with penalties and fees, from $62,100.27 to $84,194.69.

The worst news came last January, when the Social Security Administration rejected Keller’s application for disability benefits; the “asset” on Avondale Avenue rendered him ineligible. Keller’s medical problems include advanced liver disease, hepatitis C and inactive tuberculosis. Without disability coverage, he can’t get the liver transplant he needs to stay alive.

“I can’t make it end,” says Keller. “This house, I can’t get out.”

The Kellers are caught up in a little-known horror of the U.S. housing bust: the zombie title. Six years in, thousands of homeowners are finding themselves legally liable for houses they didn’t know they still owned after banks decided it wasn’t worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.

Since 2006, 10 million homes have fallen into foreclosure, according to RealtyTrac, a number that in earlier, more stable times would have taken nearly two decades to reach. Of those foreclosures, more than 2 million have never come out. Some may be occupied by owners who have been living gratis. Others have been caught up in what is now known as the robo-signing scandal, when banks spun out reams of fraudulent documents to foreclose quickly on as many homeowners as they could.

And then there are cases like the Kellers, in which homeowners moved out after receiving notice of a foreclosure sale, thinking they were leaving the house in bank hands. No national databases track zombie titles. But dozens of housing court judges, code enforcement officials, lawyers and other professionals involved in foreclosures across the country tell Reuters that these titles number in the many thousands, and that the problem is worsening.

The Kellers live in their daughter’s dining room, where their queen-size bed leaves little room to maneuver. Joseph can’t sit, stand or sleep for more than 15 minutes at a time. He can’t take pain medication because of his diseased liver. Every few months, he makes a trip to the emergency room, where doctors drain his abdomen of excess fluid.

Last May, Chase’s debt collector, Professional Recovery Services, sent Keller a letter: “At this time,” it said, “we are able to offer you a settlement of $25,258.41 on this account to be paid within 15 days.” He lacks that kind of money, as well as the $11,759.08 he owes to the county in back taxes.

“He’s dying,” says Keller’s daughter, Barbara. “He needs his name off this house.”

http://www.reuters.com/article/2013/01/10/us-usa-foreclosures-zombies-idUSBRE9090G920130110 - 112k -

I’d like to see a Congressional committee called “The Unintended Consequences Committee.”

Bills would have to be run through this committee so that members wouldn’t only be voting on the name of the bill (”The Help For Widows And Orphans of Military, Police and Firefighters Bill”) but the actual spectrum of outcomes.

Even as San Diego’s housing market comes roaring back, the number of families in crisis seems to be steeply rising.

Morning Report: Crisis Calls More Than Doubled
Posted: Saturday, January 12, 2013 6:00 am | Updated: 5:49 pm, Fri Jan 11, 2013.
by Sara Libby

An assistant police chief recently said crisis calls to San Diego police — calls that involve people who are suicidal, or those who are mentally ill — have shot up more than 50 percent since 2008.

Our Lisa Halverstadt crunched the numbers and gave him a True rating:

The numbers back up Long’s claim.

Long believes a still-unstable economy may be behind the increase in calls.

California and other states across the nation have reduced mental-health funding and resources to balance their budgets in recent years.
…

This severe global warming has frozen us San Diegans to a point where our rents no longer justify the sun tax we pay to live here.

Californians Brace for Several Nights of Freezing Temperatures
Story Published: Jan 12, 2013 at 10:22 AM PST
Story Updated: Jan 12, 2013 at 10:22 AM PST

SAN DIEGO (AP) — Californians are bundling up with sweaters and gloves and stocking up on firewood as they brace for several nights of very unseasonable freezing temperatures.

The National Weather Service is forecasting morning frost on San Diego beaches. Big Sur, on the central coast, prepared for daytime highs almost 20 degrees below Boston’s. Even the snowbird haven of Palm Springs faced the possibility of freezing temperatures at night.

In addition, San Diego zookeepers turned up the heat for chimpanzees, tourists covered their hands on Hollywood walking tours, and some farmers broke out wind machines and took other steps to protect crops from freezing.

Freeze warnings were in effect in San Diego County valleys and this Saturday morning with lows in the 20s and 30s.
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I have no problem with responsible owners collecting guns and using them responsibly. It’s when folks like the ones in the stories posted below have ready access to guns that I get nervous.

“We need more government to pay for all of the additional government.”

- Anonymous Progressive

“Is there any activity, food, service, habit or thought that the progressives will not attack and try to eliminate?”

- Concerned freedom lover

“Chaos - When you absolutely positively have to fundamentally change a perfectly good country in just under two terms.”

- Nickpapageorgio