Getting In On The Action
The Birmingham News reports from Alabama. “There are signs that a housing recovery could be around the corner for Alabama. But could the debt currently being accrued by college students get in the way? In Alabama, 54 percent of college graduates left school with at least some student debt in 2011. The average debt load for Alabama graduates in that year was $25,192, just slightly less than the national average, according to The Project on Student Debt. ‘Higher student loan debt can inhibit sales, particularly with starter homes,’ said Steve Fleming, senior VP at Birmingham-based National Bank of Commerce. ‘If starter homes lag, that causes a ripple effect in the market that prevents current owners from moving up.’”
“Ronnie Bell, a 2008 graduate from Auburn University, confirms that outstanding student loan debt balances are impacting his and his peers’ home-buying plans. And in some cases, those outstanding balances are having a strange effect — motivating some recent graduates to go back to school. By entering into a graduate program, recent grads are often able to defer payments on their existing debt. If payments are deferred for 24 months or more, the existing accounts no longer count toward a loan applicant’s debt-to-income ratio, Bell explains.”
“It’s not a solution for every prospective home buyer, though. ‘It’s really hard,’ Bell says, ‘and you have to be able to make payments [on deferred loans] to get ahead.’”
The Morning News in South Carolina. “Numbers released last month show that the Greater Pee Dee area was a standout in the state’s recovering real estate picture with increased home prices, increased listings and a tightening supply. Despite record low mortgage rates, around 3.4 percent for 30-year fixed mortgages, Forrest Stanley, chairman of the Pee Dee Realtor Association Board, said in a note to realtors that government regulations from the Dodd-Frank Act and Consumer Protection Act, both spawned from the economic crisis, could impact housing this year.”
“‘Dodd-Frank was created to address abuses in the industry,’ Stanley said. ‘While realtors recognize the need for additional regulation, regulators must avoid adopting unrealistic requirements that will affect homeowners and potential buyers, as well as do harm to the recovering housing market.’”
The Sun News in South Carolina. “Michael Atwood, broker in charge for Coldwell Banker Chicora Real Estate’s office in North Myrtle Beach, said the low interest rates now are helping fuel buying. He said rates in the 2004-2006 boom were from 6.5 percent to 7.5 percent. Today, they’re half that and mean that people can buy more expensive homes than if the rates were higher. ‘People who can afford a $100,000 house now can buy a $140,000 house,’ he said.”
“But banks remain skittish about mortgage lending, and Atwood believes that depresses the local market by as much as 15 percent. He said current bank caution about loans mean there’s a 20 percent fallout, where potential buyers don’t buy because they can’t get loans. ‘We traditionally never had more than 3, 4, 5 percent fallout,’ he said.”
The Sun Sentinel in Florida. “Q: With home prices increasing lately, I am hearing more about people ‘flipping’ properties again. How do I get in on the action? – Anonymous. A: Flipping is a perfectly legitimate business – as long as you aren’t lying to a lender about your intentions or otherwise scamming the system. A prospective buyer’s lender may have requirements that the investor (you) own the property for a certain period of time or that the increase in the resale price not exceed a certain ratio. For these reasons, most flips involve an end buyer paying cash. And cash buyers usually are experienced, so you could be stuck with the home for a long time if you don’t purchase it at the right price.”
The Palm Beach Post in Florida. “Palm Beach County’s condominium and townhome prices edged up in December, ending the year at their highest level in 12 months as inventory dropped, investors bought in bulk and developers hurried plans for new communities. Real estate experts say the condo market is exceedingly attractive to investors, who can rent out units and rely on associations to maintain the property.”
“In December, 79 percent of condo sales in Palm Beach County were cash deals — typically a sign of an investor purchase. Cash was used to pay for about 50 percent of Palm Beach County single-family homes bought in December. Palm Beach billionaire Jeff Greene is responsible for taking hundreds of units off the market in recent months. The Related Group took over control of Boynton Beach’s 14-story Promenade condominium in December and plans to market the estimated 300 unsold units to South American and Canadian investors.”
“Brian Saver, a West Palm Beach-based broker, said investors buying today are doing so when the market is on the upswing and that some of his clients who bought earlier are already cashing out with decent returns. One investor he works with bought several downtown West Palm Beach condo units for $100,000, rented them out, and recently sold them for about $150,000. ‘We’ve done that over and over again,’ Saver said.”
The Miami Herald in Florida. “Six Florida cities rank among the best places to buy foreclosures in 2013, according to RealtyTrac. The No. 12 ranking for the metropolitan area of Miami, Fort Lauderdale and Pompano Beach was based on the area having a 29-month supply of foreclosures, with foreclosures accounting for 28.7 percent of all sales during 2012. The average price discount on a foreclosed home in the Miami-Fort Lauderdale-Pompano Beach area was 31 percent in 2012, when foreclosure activity rose 36 percent from a year earlier, RealtyTrac said.”
“Anthony Askowitz, a broker with RE/MAX Advance Realty II in Miami, said the reality of the foreclosure market is more nuanced than such statistics suggest. ‘The inventory of foreclosures on the market is very low. It’s highly competitive right now for a foreclosure or a property put out as a quote ‘good deal,’ Askowitz said. ‘Multiple offers is the norm.’”
The Herald Tribune in Florida. “The RealtyTrac report indicates the surge in new defaults that rocked the area’s court system last year is likely to continue through at least 2013. ‘We’re going to start to see a lot more foreclosure sales,’ said Jack McCabe, a housing consultant in Deerfield Beach, who studies the Sarasota market closely. ‘There’s just so much hidden inventory. The banks were holding onto these as long as they could.’”
“That uptick could bring relief for an overall housing inventory in Southwest Florida starving for more listings to meet buyer demand. But it also will keep downward pressure on prices, while fueling the foreclosure backlog of 16,446 pending cases in the local court system — a clog estimated to take four years to clear, records show.”
The Orlando Sentinel in Florida. “Merritt Island real estate agent Lynn Jones said her office has not seen an abundance of foreclosure sales — but said that is likely to change. Jones said agents in her ERA Showcase Properties office typically get a request once a week for a broker’s price opinion on a foreclosed property. But in just the past week, Jones said, agents have been getting as many as 15 such requests a day. ‘That shows that they’re going to be opening up that pipeline with more foreclosure listings,’ she said.”
From Florida Today. “Danita Bell, an agent with Re/Max Beach Towne in Melbourne, said there are pockets of foreclosed properties in Brevard that are becoming eyesores. ‘It’s a bit of a Catch-22,’ said Bell, who specializes in foreclosed and short-sale properties. ‘The banks don’t want the homes to go into disrepair. They want to be able to sell them again. But until they take full possession, there’s not much they can do.’”
The Florida Current. “Flanked by Senate President Don Gaetz and House Speaker Will Weatherford, Attorney General Pam Bondi on Thursday reaffirmed her commitment to see all of the money from a multistate settlement with five large banks. After the press conference, Weatherford suggested some of the money could be used to pay for more judges to handle foreclosure cases. Although Florida has funded pay for retired judges to help clear foreclosure cases over the last two years, no new judgeships have been created in six years. The Florida Supreme Court is asking legislators to add 63 new judgeships this year.”
“‘I think it very well could (go to new judges). We all know that there’s a backlog, it still takes over 800 days to go through the mortgage foreclosure process in Florida. That’s one of the highest in the country. We should be ashamed of that; we need to fix that,’ Weatherford said.”
“Chief state economist Amy Baker said the amount of foreclosures, the lengthy process to move homes back into the market and the large ’shadow inventory’ of distressed homes yet to become foreclosures will continue to weigh down Florida’s housing market until 2016. ‘It’s not just the foreclosures, the 300,000 or so that are in the pipeline right now, it’s those that haven’t yet our official data that we’re concerned about.’”
The Tampa Bay Times in Florida. “Only 55 percent of the 167,000 Floridians who were foreclosed on between 2008 and 2011 have filed claims under a $25 billion settlement reached with big banks, Attorney General Pam Bondi said Friday. And efforts to gin up more responses, including paying nearly $200,000 for operators to call people directly, have still netted a response rate lower than the national average.”
“‘What happens if you’ve had your house foreclosed on and you get a letter from the bank? You’re going to toss it, probably, not thinking it’s good news,’ said Bondi.”
“Unresponsive homeowners, attorneys said, could be racked by ‘borrower fatigue’ under an avalanche of bills and bank mailings. Others may simply question the effort. Thousands of Floridians who sought similar relief from the Independent Foreclosure Review were told last month that their submissions would be discarded in favor of an $8.5 billion settlement with flat payouts. Banks could also share some blame for the tepid response. More than 300 Floridians have filed complaints over issues with the broader settlement, a monitor said in November.”
“That month, Tampa Heights homeowner Candace Savitz, 59, received a settlement letter from Bank of America and was told she had two weeks to respond. Frantic to make the deadline, she called more than 30 times before she heard an answer and was able to apply. In the weeks since, though, she said she has been run through a maze of contradictory answers and redundant requests for paperwork, with no loan relief yet to show. She worries now that the bank will tell her she does not qualify or is out of luck.”
“‘They act like they’re doing you such a big favor,’ she said. ‘It’s just a big dog-and-pony show. … I’m not optimistic. Not anymore.’”
I suppose it doesn’t matter how false and incorrect the script is, everyone sticks to the narrative.
And you know how inversions work. You know the truth is the opposite thus do not buy housing now. The Fed proxies like hedge funds want to out of their bad investment of a few million excess empty houses and want you to buy them at a grossly inflated price.
Fools are easily fooled. Don’t be one.
From the Miami Herald:
‘The No. 12 ranking for the metropolitan area of Miami, Fort Lauderdale and Pompano Beach was based on the area having a 29-month supply of foreclosures…’The inventory of foreclosures on the market is very low.’
‘On the market’, says the UHS. But you have a 29 month supply, as measured by Realty Trac.
From the Palm Beach Post article:
‘We are consistently pushing the market right now on pricing and we’re able to do that because of a lack of supply,’ said Brian Saver…According to Zalewski, about 100 new condominium towers have been approved for Palm Beach, Broward and Miami-Dade counties. He said developers are itching to get merchandise on the market for 2014 when the supplies are really expected to dry up.’
The BS is really deep in south Florida.
And in Florida as a whole because of their stupid 2+ year foreclosure process, the supply of shadow inventory is far greater than 29 months. People seem to forget that if prices get too high in one area (Miami) they’ll move to another.
“The BS is really deep in south Florida.”
What? Just cause we have people who take million $ cash out refis and then get $18 million whistle blower settlements for the lender not having the proper paperwork when they are trying to foreclose on the properties she took the $million out of and never paid back?
Or cause we have millions of people living in houses for 5 years without making a mortgage payment and are told the inventory is so tight and that is why house prices are rising?
Or cause we have developers itching to get merchandise on the market while there is a huge shadow inventory? Which reminds me, there is a developed piece of land in Jupiter that has had underground utilities and roads in since late 2005 when they shut it down. Every year since they have done something (privacy wall, guard gate etc.) to keep the permits going. When they crank again on that I will consider it full blown bubble 2.
From the Palm Beach Post comments:
‘Posted by wazee
Isn’t it flipping houses and real estate bubble dogma what got our nation and the world into trouble? Then why is the news media back to the same old tricks too? What part of people losing their homes and much of their savings INVESTING in property as if it isn’t something you live in based upon having a JOB or INCOME has not sunk into peoples brains after the past few years? It is as if people paid to have a hammer smashed down on their hands and those holding the hammers want to start the same trend! Who are buying these condos? Have there been jumps in peoples incomes? Or is this story more hype by real estate dealers to sucker new buyers into purchasing from last batch of flippers?
Posted by Soupmaned
So, 79% of these deals are all-cash investor purchases. Not people buying these places to actually live in. So they’ll still be empty. And this is a news story. Like the last paragraph mentions, the actual flippers who know what they’re doing are already flipping the places. It’s already passed time, but the wanna-be’s will start coming in now and losing their shirts. Should be interesting at least.
Posted by SteveinWPB
The banks have over 25,000 houses off the market in shadow inventory in order to maintain their over-priced mortgages. The banks own over $12 trillion of our country.
Any conjectures on for how many more years (decades?) the housing mania will last before it collapses in a heap of rubble?
‘ David Stockman, former director of the Office of Management and Budget in the Reagan Administration tells The Daily Ticker, “I would say we have a housing bubble…again.”
‘Stockman argues a combination of artificially low interest rates and speculation are to blame, not unlike the last boom and bust cycle in real estate. “We don’t have a real organic sustainable recovery because in a world of medicated money by the central bank, things aren’t what they appear to be,” Stockman argues.’
‘And according to Stockman, it’s this medicated, cheap money being put to work by investors that’s driving the apparent healing in some of the hardest hit real estate markets in the country. “It’s happening in the most speculative sub-prime markets, where massive amounts of ‘fast money’ is rolling in to buy, to rent, on a speculative basis for a quick trade,” he contends. “And as soon as they conclude prices have moved enough, they’ll be gone as fast as they came.”
‘As soon as the Fed has to normalize interest rates, housing prices will stop appreciating and they’ll probably head down,” he explains. “The fast money will sell as quickly as they can and the bubble will pop almost as rapidly as it’s appeared. I don’t know how many times we’re going to do this, and the only people who benefit are the top one percent - the hedge funds, the LBO funds, the fast money people who come in for a trade, make a quick buck, and move along to the next bubble.”
‘As for the “American Dream” of home ownership, Stockman argues the past model where the government was trying to get to 69% home ownership was a huge policy mistake that led to no-downpayment loans, liars loans, and a degradation of lending standards. He says the government should have no dog in the hunt when it comes to ownership versus renting. “Let the market decide,” Stockman says.’
http://finance.yahoo.com/blogs/daily-ticker/housing-bubble-2-0-david-stockman-133026817.html
Nice post Ben….
‘As for the “American Dream” of home ownership, Stockman argues the past model where the government was trying to get to 69% home ownership was a huge policy mistake that led to no-downpayment loans, liars loans, and a degradation of lending standards. He says the government should have no dog in the hunt when it comes to ownership versus renting. “Let the market decide,” Stockman says.’
Historically, the American homeownership rate has been in the 62-66% range.
When the ‘ownership’ rate was at its peak, the percentage of equity in those houses was at an all time low.
the percentage of equity in those houses was at an all time low ??
Spot on Ben….Are you really a homeowner if you have negative equity ?? Or, are you just a renter of the debt ?? If you have negative equity, then you really own nothing of value….
From what I see, I think we have the START of the next bubble, but prices compared to rents aren’t nearly as out of whack in many places as they were in 2005-2007. Monetary policy is certainly pumping as fast as they can to re-inflate.
From what we know, you’re a liar.
From what we see, you’re still a liar.
“‘As soon as the Fed has to normalize interest rates, housing prices will stop appreciating and they’ll probably head down,” he explains. “The fast money will sell as quickly as they can and the bubble will pop almost as rapidly as it’s appeared. I don’t know how many times we’re going to do this, and the only people who benefit are the top one percent - the hedge funds, the LBO funds, the fast money people who come in for a trade, make a quick buck, and move along to the next bubble.”
Stockman talks just like a HBB regular…
Yeah, a regular who still thinks eventually the Fed has to normalize interest rates. Do they really?
‘a regular who still thinks eventually the Fed has to normalize interest rates’
It’s interesting how casually someone can suggest reality can be suspended indefinitely. Interest rates are the price of money and time. Money is the largest market traded in the world. Many times commodities, stock or bonds. You’re saying a few dozen men and women can sit around in marble buildings with computers and control this market forever.
It wasn’t that long ago that everyone, even Greenspan, said the Federal Reserve doesn’t control long term interest rates. Then a few years ago it was said that the Fed had lost control of long term rates, because they couldn’t get them to rise. Now they tell us rates will be low for x number of years.
Who’s to say rates wouldn’t be low no matter what the Fed did? What if all this ‘extraordinary’ stuff coming out of the Fed is to maintain the illusion that they are in control. That they are really terrified and are throwing trillions at anything that moves to keep their system alive.
I don’t know what’s going to happen, but I’d bet something will change in this picture. Fixed income investors, like pensions are losing valuable compound interest. Older people are actually saving more/spending less to make up for it, undercutting what the Fed is trying to do. There are trillion$ parked in bonds that are earning nothing.
Most of all, I don’t believe that mere men can do this thing you suggest. And what we have now is a period of complacency, with no fear. I happen to think fear in the markets will make a comeback. And when that happens, we’re going to find out just how real or phony the Federal Reserve is.
It’s interesting how casually someone can suggest reality can be suspended indefinitely.
I understand your point and I don’t think reality can be suspended indefinitely. But it would appear that IF they have control and it’s not an illusion they like to foster, they may be willing to continue their current course until a new money system is required. I’m not convinced that they will be scared into stopping out of fear of destroying the dollar.
“Fixed income investors, like pensions are losing valuable compound interest.”
Most interesting disconnect in the MSM:
- Private pension plans are struggling with funding issues due to skyrocketing liabilities and contribution requirements because of the perpetual low-interest rate monetary policy in force;
- Public pension plans are struggling due to offering overly generous benefits for which funding is unavailable (no mention here of the role of the low-rate environment).
No flattery intended BJ but that’s one of the best, direct, truthful posts I’ve read here in a long time.
Thank you.
It’s late to be making new posts, but on the topic of U.S. pension plans, I submit that governments and private firms are in a similar pot of stew regarding the balance of pension fund assets and liabilities. In short, the Fed’s QE-fueled ultralow long-term rate environment has put defined benefit pension plans in the position of needing to make historically large contributions in order to meet funding requirements needed to provide promised benefits.
Overly-generous pension programs for public sector employees has nothing to do with it.
Just imagine how ugly pension liabilities would look if valued using a realistic discount rate reflective of recent (past five years) experience!
Case in point: Calpers, the world’s largest pension plan, enjoyed a 1% return on its fund for its 2011-2012 fiscal year.
BUSINESS
February 3, 2013, 11:00 p.m. ET
Low Rates Force Companies to Pour Cash Into Pensions
By MIKE RAMSEY and VIPAL MONGA
Ford Motor Co. expects to spend $5 billion this year shoring up its pension funds, almost as much as the auto maker spent last year building plants, buying equipment and developing new cars.
Some of America’s biggest companies are shifting cash that could be used for development or expansion into pension funds as low interest rates designed to spur the economy push up pension liabilities. Mike Ramsey joins Markets Hub.
The nation’s second-largest auto maker is one of a who’s who of U.S. companies pouring cash into pension plans now being battered by record low interest rates. Verizon Communications Inc. contributed $1.7 billion to its pension plan in the fourth quarter and—highlighting companies’ sensitivity to this issue—Boeing Co. now reports “core earnings” to separate out pension expenses.
“It is one of the top issues that companies are dealing with now,” said Michael Moran, pension strategist at investment adviser Goldman Sachs Asset Management.
The drain on corporate cash is a side effect of the U.S. monetary policy aimed at encouraging borrowing to stimulate the economy. Companies are required to calculate the present value of the future pension liabilities by using a so-called discount rate, based on corporate bond yields. As those rates fall, the liabilities rise.
Of course, low interest rates also help companies. Ford, for instance, can borrow money cheaply and use it to offer cut-rate loans or other discounts to help sell its cars. Ford borrowed $1.2 billion to contribute to its pension.
When interest rates rise again, the pension shortfalls should narrow and could even become surpluses. But when that will happen is difficult to predict. The Federal Reserve has committed to keeping rates low for another two years at least.
Pension plans became popular in the U.S. in World War II as a means of compensating workers rather than using pay raises.
As the workforce grew, these pension plans grew enormous. They started to fall out of favor because of their large balance sheet liabilities and costs in the 1980s. Companies shifted from defined benefit plans—those that manage the investment portfolio and guarantee set payments to retirees—to defined contribution schemes like 401(k) retirement savings plans, where the retirees are responsible for their own investment decisions.
Jeff Chiappetta, 66, a retired plant manager at Chrysler Group LLC, watched a portion of his pension designated for management-level workers disappear in Chrysler’s 2009 bankruptcy proceedings. He watches keenly what is happening to pensions.
“Luckily, the majority of [my pension] made it through bankruptcy,” he said. “Do I feel lucky to have grown up in an era where I had a pension? Definitely. But can that be sustained? It looks like it can’t.”
…
And what we have now is a period of complacency, with no fear. I happen to think fear in the markets will make a comeback. And when that happens, we’re going to find out just how real or phony the Federal Reserve is.
+1 Total cognitive dissonance!
A venal congress, investment banker’s impunity, drone assassinations, illegal wars, economic propaganda pronouncements, second amendment encroachments, etc., and yet the average unemployed Joe is so confident that his tyrant’s safety net programs will be there like the rising sun that he can see little reason for Tocqueville style civil disobedience. For now.
Most interesting disconnect in the MSM:
- Private pension plans are struggling with funding issues due to skyrocketing liabilities and contribution requirements because of the perpetual low-interest rate monetary policy in force;
- Public pension plans are struggling due to offering overly generous benefits for which funding is unavailable (no mention here of the role of the low-rate environment).
+1 The British used opium to achieve that glazed-over effect.
The world’s central banks have been working somewhat in tandem. But it looks like that this may be the year of the currency wars. Beggar thy neighbor policies are then inevitable. Will reality shake out for the US then?
Also I’ve been watching Fukushima news. No one talks about it but if Arnie Gunderson and his types are correct, within 5 years we’re going to have to face the economic implications of that reality. Food supply issues, birth defect issues, cancers and strokes on the rise.
Any conjectures on for how many more years (decades?) the housing mania will last before it collapses in a heap of rubble?
The same time it becomes an actual heap of rubble?
It won’t take that long, IMO. The rubble heap phase is decades away; the housing bubble dead cat bounce will end much sooner, accompanied by the now-familiar refrain: “Nobody could have seen it coming!”
I think it will take a complete generation to extinguish the memory.
“I think it will take a complete generation to extinguish the memory.”
Although the great depression 1 folks are mostly dead now, I’m old enough that I grew up listening to them, in fact some of them pretty much wouldn’t shut up about the topic, and I got the impression that they pretty much had it figured out in just a couple years.
Via the idiocracy effect and the mass media effect we may be stupider or slower now but you’d still think it couldn’t be that much slower. Maybe a decade?
The Herald Tribune in Florida. “The RealtyTrac report indicates the surge in new defaults that rocked the area’s court system last year is likely to continue through at least 2013. ‘We’re going to start to see a lot more foreclosure sales,’ said Jack McCabe, a housing consultant in Deerfield Beach, who studies the Sarasota market closely. ‘There’s just so much hidden inventory. The banks were holding onto these as long as they could.’”
“That uptick could bring relief for an overall housing inventory in Southwest Florida starving for more listings to meet buyer demand. But it also will keep downward pressure on prices, while fueling the foreclosure backlog of 16,446 pending cases in the local court system — a clog estimated to take four years to clear, records show.”
Funny how that supply and demand thing works.
“…..defer loan payments……”
A relative is the poster child for that plan. Eventually got a Doctorate in Music before he actually started repaying his student loans.
Don’t know if he filed Chapter 11 before or after the law changed.
This guy goes back to college so his student debt doesn’t count against getting a house loan. How could that go wrong?
By entering into a graduate program, recent grads are often able to defer payments on their existing debt. If payments are deferred for 24 months or more, the existing accounts no longer count toward a loan applicant’s debt-to-income ratio, Bell explains.
Yeah…how could that go wrong?
“Yeah…how could that go wrong?”
+1 You just can’t “make this up.”
“If payments are deferred for 24 months or more, the existing accounts no longer count toward a loan applicant’s debt-to-income ratio…”
Worth repeating.
The path to being judgement proof.
The path to being judgement proof.
Staying in college forever doesn’t seem like a viable path to anything to me.
I know a lady that is trying to stretch the deferrment until she dies. She’s been in school 22 years.
Ditto
“….huge policy mistake…..”
That depends on who the policy was intended to benefit.
If it was intended to turn the populace into indentured wage slaves, permanently anchored to one physical location, making it easy for the vampires in business and government to track them down, I’d say “Mission Acccomplished”
Seems to me their policies have worked fabulously. The Wall Street crony club is doing as well as ever, having extracted a tremendous amount of wealth from the economy. When the Wall Street swindles blew up, the government put the population on the hook for paying it off so the cash flows to the brains of Wall Street would remain uninterrupted.
I saw one graph showing that the financial services industry’s profits per capita have returned to where they were before the recession. That only was possible due to unprecedented intervention by the federal government, which is one reason I’ve become estranged from our political system and the charade presented by the major parties.
I do not like to post long reads…But, I did work my way through the individual comments on the Stockman piece…I am going to go against my normal tendency and post a number of them that I found interesting and hopefully some of you will also;
Its not just a housing bubble, we have a stock market bubble, capital goods bubble, dollar bubble and government debt bubble. And all bubbles will pop ‘eventually’. When this will happen? In the next 1-2 years, when investors realize there isn’t any real economic growth in the US and this so called ‘recovery’ is all due to the Feds creating lots of money and giving it away for free to big banks. When this happens interest rates will go sky high and house prices will drop dramatically. Inflation is the root cause of these things. If you don’t believe there is inflation or to much money in the system you have your head in the sand.
Stupid is as stupid does. When housing prices are driven by investors instead of demand, wll duh, you get unrealistic values. The mere fact that anyone still thinks housing should be a driving part of our economy tells us we didn’t learn a single thing from the last go round. The US needs to return to being a producer instead of trying to produce wealth through debt.
30 year mortgages do not make sense and will be scarce after Fed stops interfering in the markets. This is because the nature of jobs has changed, and there is no job that can be considered stable enough to guarantee income for 30 years. Given that - where should the equilibrium home price be?
The eventual rise in interest rates will be to counter inflation. But housing is the best defense against inflation, hence its continual rise. The richest 1% will continue to buy property and rent it to those who can no longer afford buying. The 69% ownership that Mr. Stockman is alluding to is actually no ownership at all: One does not own a house in which he has no equity. Most homeowners are actually renters, and their mortgage payments are no more than rental payments to the real owners of the property they live in. The new tax that Mr. Obama has imposed on families earning more than $450k will prove to be the biggest impediment for wealth acquisition at the bottom of the wealth pyramid, and the greatest gift to the 1% richest people and institutions on the top. He should have taxed wealth, not income.
Government meddling with the economy always brings about unintended consequences. The Fed in trying to manage the economy is simply going to destroy it in the long run. This nation is in deep shi#..
You went off the rails on the 5th paragraph.
Housing is never an inflation hedge. EVER.
When this will happen? In the next 1-2 years, when investors realize there isn’t any real economic growth in the US and this so called ‘recovery’ is all due to the Feds creating lots of money and giving it away for free to big banks.
“Investors” no longer care. They’re just playing the Fed and momentum.
On that subject, last weekend was the second time this year I’ve seen a car occupied by middle-aged Asian women cruising my neighborhood and slowing down by each house for sale. If they’re American citizens, OK. If they are corrupt Chinese nationals looking to stash looted money in an “investment,” that’s not OK no matter how much realtors, banks and politicians think it’s OK.
“30 year mortgages do not make sense and will be scarce after Fed stops interfering in the markets. This is because the nature of jobs has changed, and there is no job that can be considered stable enough to guarantee income for 30 years.”
Oh brother, the days of working for a company 30 years ended quite some time ago, most of us are on our 4th or 5th job easily and continue to pay that 30 year mortgage off.
A 30-year mortgage gives you the ability/privilege to pay it off in 17 years, as I did 7 years ago. If we had had financial problems such as job loss, we would have just paid at the 30-year rate.
Not underwater.
No regrets.
It’s not rocket science folks, it is your philosophy. Buy and hold. Half of our retirement is in BRKB. House is paid off.
We don’t have to give a shit about most of the government machinations.
Got tired of rent increases every six months in 1986. The older you get, the harder it is to relocate after an impending rent increase.
Buying worked great for us, but it will not necessarily work well for all in all markets and circumstances. I bought in 1987. Rates were high and fell thereafter. Four refinances. No cash out.
Rates are now artificially low and lenders rarely attempt to tack on “junk fees”, which could add thousands. Time to buy?
Buy and hold and be secure, if not possibly bored. However, if your house went up or down, the replacement house you want will have gone up or down accordingly depending on the difference in price.
Buy now and supply anecdotes or visit open houses and ridicule them.
Either way, it’s great fun! -
“I bought in 1987.”
Please don’t conflate your situation with anyone who bought a house 1998-current. You bought 10 years pre-global housing/credit bubble. And I’ll wager 10 years from now, prices will be lower than 1987 levels.
Yahoo! News reports Recession, tech kill middle-class jobs.
Five years after the start of the Great Recession, the toll is terrifyingly clear: Millions of middle-class jobs have been lost in developed countries the world over.
And the situation is even worse than it appears.
Most of the jobs will never return, and millions more are likely to vanish as well, say experts who study the labor market. What’s more, these jobs aren’t just being lost to China and other developing countries, and they aren’t just factory work. Increasingly, jobs are disappearing in the service sector, home to two-thirds of all workers.
They’re being obliterated by technology.
Year after year, the software that runs computers and an array of other machines and devices becomes more sophisticated and powerful and capable of doing more efficiently tasks that humans have always done. For decades, science fiction warned of a future when we would be architects of our own obsolescence, replaced by our machines; an Associated Press analysis finds that the future has arrived.
“There’s no sector of the economy that’s going to get a pass,” says Martin Ford, who runs a software company and wrote “The Lights in the Tunnel,” a book predicting widespread job losses. “It’s everywhere.”
The numbers startle even labor economists. In the United States, half the 7.5 million jobs lost during the Great Recession were in industries that pay middle-class wages, ranging from $38,000 to $68,000. But only 2 percent of the 3.5 million jobs gained since the recession ended in June 2009 are in midpay industries. Nearly 70 percent are in low-pay industries, 29 percent in industries that pay well.
Experts warn that this “hollowing out” of the middle-class workforce is far from over. They predict the loss of millions more jobs as technology becomes even more sophisticated and reaches deeper into our lives.
The most vulnerable workers are doing repetitive tasks that programmers can write software for — an accountant checking a list of numbers, an office manager filing forms, a paralegal reviewing documents for key words to help in a case. As software becomes even more sophisticated, victims are expected to include those who juggle tasks, such as supervisors and managers — workers who thought they were protected by a college degree.
That’s OK, it’ll just give us more time to pursue things higher up on our hierarchy of needs.
Pretty sobering Rancher….
The 69% ownership that Mr. Stockman is alluding to is actually no ownership at all: One does not own a house in which he has no equity. Most homeowners are actually renters, and their mortgage payments are no more than rental payments to the real owners of the property they live in.
And, when you pay off your mortgage, try this little experiment: Stop paying your property taxes. Then you’ll find who REALLY owns your house.
“30 year mortgages do not make sense and will be scarce after Fed stops interfering in the markets. This is because the nature of jobs has changed, and there is no job that can be considered stable enough to guarantee income for 30 years. Given that - where should the equilibrium home price be?”
Owning is part of the family thing, and other expenses bloom as the children become teenagers. The home should really be paid-off within the first 10-yrs; 30-yrs just doesn’t pencil-out.
“most of us are on our 4th or 5th job easily and continue to pay that 30 year mortgage off.”
Most? Because that worked out so well for millions of suckers from 1998-2013?
Liar.
‘We’re going to start to see a lot more foreclosure sales,’ said Jack McCabe, a housing consultant in Deerfield Beach, who studies the Sarasota market closely. ‘There’s just so much hidden inventory. The banks were holding onto these as long as they could.’”
There is no doubt about this. The only desirable inventory in Miami is marked up 40%-50% more than its worth and dribbled out on the market.
I looked around lot’s of rentals compared to last year homes prices way up from when I bought this time last year ( or made the offer deal took 6 months to close)
I smell a bubble again this is not good Told wife we may need to sell and rent again what a way to live
“Stockman sees a rise in interest rates as the trigger for any kind of bust. He says you can’t have zero rates forever, referring to the Fed’s ZIRP and quantitative easing policies of the last several years.
“As soon as the Fed has to normalize interest rates, housing prices will stop appreciating and they’ll probably head down,” he explains. “The fast money will sell as quickly as they can and the bubble will pop almost as rapidly as it’s appeared. I don’t know how many times we’re going to do this, and the only people who benefit are the top one percent - the hedge funds, the LBO funds, the fast money people who come in for a trade, make a quick buck, and move along to the next bubble.”
Then you better get selling and get what you can get for it because it’s going to be less tomorrow for years to come.
“Today, they’re half that and mean that people can buy more expensive homes than if the rates were higher. ‘People who can afford a $100,000 house now can buy a $140,000 house,’ he said.”
That’s a very strange way to phrase that they’re overpaying by $40K.
Interest rates don’t matter to housing sales at all. The median J6P WILL absolutely positively be living in the median house almost by definition. The only thing interest rates control is how much large of a loan median income J6P will take out to live in his median shack.
This has caused some real estate paralysis for me. I’ve been stuck in my “starter home” for almost 15 years, and frankly I don’t know if I’ll ever be able to leave at this rate. There’s no way I would ever take out a low rate mortgage knowing that it guarantees a bankruptcy later when both rates and prices revert to the norm. So, here I sit, unable to buy a boomer’s house. I’m “OK” with my starter house, but even the nicest prison is still a prison. In other words I don’t want to leave, but I don’t like being unable to leave.
If you’ve been in the same house for 15 years, I hope you took advantage of falling interest rates and refinanced the note to reduce your term. In 1998 mortgage rates were around 7-8%. In 2003 they fell dramatically.
(I realize this is a late post)
Yes, I refinanced and basically continued paying the higher rate. Still paying almost $1300/mo today, but not for much longer…
the intesting question to me in all of this is the end game .. I have no doubt that whatever the Fed does or does not do with rates will be temporary .. if they tighten, they will loosen just as quickly if the economy slows or stops.. so, I suspect we will have perpetual low rates for as long as the eye can see until the Fed is no longer in control.. the question is, when will that be ? what will be the triggers or leading indicators when the Fed’s actions no longer are as relevant as the the world’s response(s) to those actions ? I have thought for a while that we’ll experience low interest rates for the foreseeable future, but, when the rates decide to really go up, they will go up relatively quickly indicating the (Fed’s) US dollar ball game is over..
WOW! Call a Real Estate School in CA or Texas and you wont believe how many people are getting back into it! CA passed some new laws so it is a little tougher but still a joke, you can sells shoes at Payless one day then home 2 mos later. No brains required. I just talked to the good people at Allied.
If the feds keep rates low for 2 more yrs, the banks can finally start unloading the huge inventory. They just need to all agree (collusion) to take it slow and not flood the market. So far, that are all playing together nicely.
“If payments are deferred for 24 months or more, the existing accounts no longer count toward a loan applicant’s debt-to-income ratio, Bell explains.”
So where is Dodd Frank? No due diligence required by the bank issuing the loan before they sell it to the Feds? No accountability. Don’t worry the taxpayers will back it, right?
Just another step towards the ultimate “all he’ll breaking loose”. Sharpen those sticks boys.
Real estate experts say the condo market is exceedingly attractive to investors, who can rent out units and rely on associations to maintain the property.”
Nobody has yet to convince me that renters in Florida can afford $1500+ rents. Wages don’t support it.
4 people in a 2 bdrm unit…. it is a new game
BSing the public is your game.
Why? I am a renter, on the sidelines, waiting to buy when the time is right. I believe we are in Bubble 2,0 in Calif. How is any of this BS? It is all verifiable, if you have a brain.
You’re an established liar. We know that.
“Nobody has yet to convince me that renters in Florida can afford $1500+ rents. Wages don’t support it.”
+1 So you don’t think those Southern Baptist Evangelicals can come up with $1500 every 30-days? Bingo, I don’t think they can either.
Gotta love the stupid on a stick.
The Sun News in South Carolina. “Michael Atwood, broker in charge for Coldwell Banker Chicora Real Estate’s office in North Myrtle Beach, said the low interest rates now are helping fuel buying. He said rates in the 2004-2006 boom were from 6.5 percent to 7.5 percent. Today, they’re half that and mean that people can buy more expensive homes than if the rates were higher. ‘People who can afford a $100,000 house now can buy a $140,000 house,’ he said.”
Which means that 140,000 house you bought is going to depreciate to 100,000 once interest rates go back up.
Um. Duh.