February 10, 2013

The Year Of The Belated Knife Catcher?

Readers suggested a topic on the current housing markets. “Are the reports of short supply and bidding wars true in your area? I thought they were somewhat born out in my area, PHX’ but did quite a bit of looking on zillow last night and saw something I hadn’t been expecting, lots of recent price reductions and a pretty decent supply in my range. Not huge reductions mind you, and not down to where they should be in my opinion, but cut by 5 -15 k in most cases. Is 2013 the year of the belated knife catcher?”

A reply, “Don’t know if you consider this a bidding war: I put in a backup offer (25K over the listing price) on a large piece of ground despite knowing the seller had already accepted an offer. They declined my backup offer because there’s also a third, all cash offer (don’t know the amount). My realtard told me I could up my offer more to stir up the bees nest and I told him every party but me wins in that game so forget it.”

Another said, “We are a town of 110,000 residents…6 or seven square miles I believe…Home to many of the biggest High-Tech companies of the world…We have a grand total of 26 single family residences available in the entire city…So when you put in the mixer, obscenely low interest rates, with high paying jobs, and inventory available near zero guess what happens…A medium size house (1500 sq.ft.) is running in the $550 + square foot range…Smaller homes (1000 sq.ft.) are running in te $600 + range…Bigger homes (2500 sq.ft.) are running in the $450 + range.”

“A home near me that I was watching in 95008 just sold…It was on what is considered a big city lot and had a 1400 square foot house on it that needed a boat load of work top-to-bottom…It was listed for $600,000. and sold for $654,000. with 34 offers many of which were all cash. With that said, I can drive 30 miles away and find foreclosures & short sales…I can drive 60 miles and find good houses for $150. per sq.ft….90 miles and it hits $100. per ft…Kind of a disconnect the likes I have never seen before and I have been in the same zip my entire life.”

The Los Feliz Ledger. “Southern California’s housing market ended 2012 with the highest December home sales in three years, the result of robust investment activity, a record level of cash buyers and more sales gains in move-up markets, according to DataQuick. The median sale price jumped nearly 20% from a year ago, pushed higher by greater demand and the market’s shift away from foreclosure resales and toward more mid- to high-end deals, DataQuick reported.”

“Locally, in the Los Feliz area, 13 homes were sold in December, the latest date for which there is data. The median price sold in December 2012 was $843,000 a 32.6% decline from the same time period in 2011. However, condo sales, although only seven were reported, saw a median price gain of 5.6% to $412,000.”

The Seattle Times. “A condo in downtown’s Four Seasons Private Residences sold earlier this month. Why is that news? Because it was the first sale at the ultraluxury project since October 2010, according to county records. Ten of the Four Seasons’ 36 condos remain for sale, more than four years after the building was completed.”

“Pre-sale buyers, including some of the city’s most prominent citizens, quickly closed on 22 of them, paying anywhere from $1.29 million to $11.4 million. Then the economy tanked and prospective buyers all but disappeared, despite steep price cuts in early 2010. Brokers report some properties are getting multiple offers. And Insignia, the only big project now under construction, isn’t scheduled to be finished until late next year.”

“‘The inventory’s about 10 percent what it was in 2008,’ says James Stroupe, a broker with Realogics Sotheby’s International Realty. ‘Buyers are really being squeezed.’”

The Boston Globe. “Bob Ford’s three-bedroom Brockton home was built more than 40 years ago. By today’s standards, the modest raised ranch may be considered a starter house. In recent years the property’s value plummeted, from a high of $308,900 in fiscal 2007, when assessments reflected the hot real estate market of 2005, to just $188,300 this fiscal year, a drop of 39 percent. Ford’s annual property tax bill, on the other hand, increased 9.6 percent during the same six-year period, to $3,178 this year, up from $2,900.”

“‘Our tax bills just keep going up, and yet the city claims it’s broke,’ said Ford, 69. ‘Where is all of our money going? No one knows.’”

The Faribault Daily News. “Having gone through years of both housing boom and bust, south central Minnesota now has a rising number of vacant housing units in the area. Across all five counties examined by the Daily News, housing stock has increased during that same 11-year period. But even though there are more housing units in southern Minnesota, a larger percentage of them are empty. For example, Rice County saw more than 4,000 housing units built between 2000 and 2011 — a 21 percent increase. At the same time, the amount of vacancies in Rice County rose from about 1,200 units, to more than 2,200 vacant units — a 91 percent increase.”

“‘The root of it has to do with the simple rule of supply and demand,’ said Bill Effertz, Steele County Assessor. ‘Right now, there is an overabundance of supply.’”

“Although vacancies are notably a growing problem in southern Minnesota, the outlook is not bleak. Minnesota experienced record sales in housing during 2012 as the state claws its way out of the recession. ‘The market has improved,’ Effertz said. ‘But there are many variables that go into it.’”

The Bradenton Herald. “As a Realtor who survived the Great Recession’s housing-driven boom, bubble and burst, with Florida as ground zero, Kelly S. Quigley nonetheless ‘had one of the busiest weeks’ recently in her nearly decade-long career. Quigley and fellow Realtor Linda Roe Dickinson were co-agents for a $1.175 million sale overlooking Longboat Key from the mainland in southern Manatee County.”

“Coldwell’s Barbara Ackerman, a perennial contender and frequent top-producing Realtor in the region, points out that ‘with the recent development of Anna Maria Island, the Manatee end of Longboat has many more dining and shopping opportunities’ than in bygone days. As far as activity in the market goes, ‘with the stock market strong and interest rates so low, there is no question that there is far more interest than even a year ago. If you don’t buy this year, you’ll really be missing out,’ she said.”




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79 Comments »

Comment by Combotechie
2013-02-09 08:21:36

“The inventory’s about 10 percent of what it was in 2008. Buyers are really being squeezed.”

So are the realtors. Squeezing buyers puts a cramp on sales volume - which screws the realtors - but it helps boost the price of houses - which benifits the banks.

An increase in a house’s price also increases the value of the comps. And since the banks have mortgages backed by the comps then the value of these mortgages rises right in step with the rise in value of the comps.

The realtors carry the burden of hustling to make their scant numbers of sales when the pickings are few and the banks get to reap the rewards for the same reason, the pickings are few.

Love the NAR. Somebody has to work hard in order to save the banks, it might as well be the NAR.

Comment by In Colorado
2013-02-09 09:19:24

I think that the NAR is hoping that the rising prices will get reluctant buyers off the fence. The thing is, I don’t think that there are really that many of them. As we’ve said before here, baristas with Bachelor’s degrees aren’t going to buy houses.

Comment by Carl Morris
2013-02-09 09:43:48

No but it sure pulls in buckets of investor dollars. I expect this to be repeated until there are no investor dollars left either.

 
Comment by Ben Jones
2013-02-09 11:34:43

‘I don’t think that there are really that many of them.’

Yeah, we have to read through hundreds of rah-rah stories to find out house-owner formation is dropping and has been for years. The builders economist says prices are up because only wealthier people qualify for loans. Like 2005, it’s hard to know what’s really going on when the media goes into full cheer-leading mode.

This isn’t like trying to get the public excited about a football game. These are serious decisions that can change peoples lives. Luckily, it appears most aren’t falling for it. Heck, people are staying away from/getting out from under house loans in droves.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 12:24:33

What I don’t understand is where it says in the government’s mandate that it should be in the business of encouraging low-income households to get themselves on the hook for repaying hundreds of thousands of dollars in mortgage debt?

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Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 12:33:06

Finally a Republican initiative I can love. Too bad this discussion was missing from the 2012 presidential race.

BTW we used to live within a few miles of the foreclosure home in the linked image. If this is typical of areas where the FHA has made federally-guaranteed loans in amounts north of $600,000, then I would guess they are in much worse shape than is reported.

Republicans Seek FHA Changes as Prelude to Housing Overhaul
By Cheyenne Hopkins & Clea Benson - Feb 6, 2013 10:20 AM PT

A worker removes furniture from a foreclosed home in Richmond, California. The Federal Housing Administration insures a portfolio of about $1.1 trillion in home loans and now backs 15 percent of U.S. mortgages for home purchases. Photo: Justin Sullivan/Getty Images

Republican lawmakers say they will seek changes at the financially troubled Federal Housing Administration as a first step toward a broader overhaul of the U.S. government role in housing finance.

The House Financial Services Committee held a hearing today on the role of the FHA, the first in a series of panels that may lead to legislation that would shrink the government mortgage insurer’s market share and shore up its bottom line. That is a more urgent priority than winding down government-owned Fannie Mae and Freddie Mac, which buy mortgages from lenders and securitize them, lawmakers said.

“It is going to be a priority of this committee to forge a sustainable housing finance system in this country,” Representative Jeb Hensarling, the Texas Republican who leads the Financial Services panel, said at today’s hearing.

“Given their high loan to value, low credit score policies and high rates of default, it’s an open question whether FHA has now morphed into Countrywide,” Hensarling said, referring to the troubled mortgage bank that was purchased by Bank of America Corp. during the financial crisis. “Arguably the FHA has now become the largest subprime lender all with the blessings of the administration.”

President Barack Obama’s 2013-2014 budget is expected to reflect that FHA will require a Treasury subsidy for the first time since it was founded in the 1930s, largely due to defaults on loans it insured as the housing market crashed. The FHA could fall as much as $16.3 billion short of the cash it is required to keep on hand to cover all projected future losses, according to an independent actuary.

 
 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 17:25:06

“Glenn Cook
What Romney really said about foreclosures
Posted: Aug. 26, 2012 | 2:12 a.m.
Updated: Aug. 26, 2012 | 11:12 a.m.

New radio ads attacking the Romney-Ryan ticket hit the airwaves in swing states a few days ago, and the one specially crafted for Nevada uses Mitt Romney’s own words: “Don’t try and stop the foreclosure process. Let it run its course and hit the bottom.”

The statement is plenty familiar to Las Vegans. Romney said them 10 months ago, during an Oct. 17 meeting with the Review-Journal’s editorial board. And as soon as the comments were published, Democrats began assailing the Republican candidate for president as a mean, heartless, bank-loving slumlord who had no sympathy for Nevadans and their worst-in-the-nation housing woes. With Senate Majority Leader Harry Reid, D-Nev., leading those cries, the comment quickly went national.
…”

This kind of attack politics is pretty standard nowadays. The problem is that the Free Market Champion candidate proved himself unwilling to hold his ground. Instead he wasted the rest of the campaign hiding behind a wall of propaganda like a typical government bureaucrat would do.

 
Comment by rms
2013-02-10 02:19:39

“Republican lawmakers say they will seek changes at the financially troubled Federal Housing Administration as a first step toward a broader overhaul of the U.S. government role in housing finance.”

I want to see the accommodative money simply run-out, over night, and I want to hear Tom Brokaw’s lamentations on the television and youtube. Enough is enough.

 
Comment by snake charmer
2013-02-10 12:15:33

I thought that was the government’s mandate — that we all pay interest, happily ever after amen. Sure beats democracy.

 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-10 12:18:48

Article posted: 2/8/2013 5:23 AM
FHA’s new mortgage fees will pack a bite
By Ken Harney

WASHINGTON — If you want to buy a house with minimal cash by using an FHA-insured mortgage, here’s some sobering news: Thanks to an ongoing series of fee increases and underwriting tweaks — the most recent of which were announced Jan. 31 — FHA is getting steadily more expensive, and may not work for you.

FHA is the Federal Housing Administration, the largest source of low-down-payment mortgage money in the country. Its minimum down payment is just 3.5 percent, compared with anywhere from 5 percent to 20 percent or higher from conventional, nongovernment sources. For decades, FHA’s affordable financing has made homeownership possible for first-time buyers with modest incomes and credit history blemishes.

But in the wake of losses tied to bad loans insured during the housing bust years, FHA has been raising its loan insurance fees and backing more loans to applicants with higher credit scores. With the latest increases, things have gotten to the point where some lenders wonder whether the agency is trying to move away from its traditional customers.

Dennis C. Smith, broker and co-owner of Stratis Financial Corp. in Huntington Beach, Calif., is blunt: “I think FHA is putting itself out of business with the moves they’ve made in the past couple of years.

 
Comment by Rental Watch
2013-02-11 00:46:59

“This kind of attack politics is pretty standard nowadays. The problem is that the Free Market Champion candidate proved himself unwilling to hold his ground. Instead he wasted the rest of the campaign hiding behind a wall of propaganda like a typical government bureaucrat would do.”

So, when faced with a choice between:

1. A president that has done nothing but try to delay/stop foreclosures; and
2. An opponent who’s initial public position (as unpopular as it was) was to allow foreclosures to occur, and when faced with the political backlash (pushed by the opponent), he softened his stance (such change being pretty standard as well),

You chose #1?

Sorry if I think being consistently on the wrong side is worse (public persona and private views).

 
 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 12:40:56

The housing market cheerleaders who claim a rising rate of household formation in the coming years will save the housing market have ignored the elephant in the room.

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Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 12:44:34

People with no money will tend to not buy houses at anywhere near 2006 peak housing bubble price levels.

Focus
Behind the falling US birthrate: too much student debt to afford kids?

The record-low birthrate in the US is showing no signs of bouncing back, even with the economy on the mend. Evidence is growing that huge student debt may be deterring people from starting families.

By Gloria Goodale, Staff writer / January 30, 2013

Karen Hu and her husband plan their meals for the week at their home in Oakton, Va. She has accumulated $164,000 in college debt, which means ‘children just don’t fit’ into their lives right now, she says.

Los Angeles

Karen Hu of Oakton, Va., is 28, married, graduated from law school – and thinking about babies. But that’s as far as she and her husband, a software programmer, have gotten: just thinking. What’s holding them back?

For one, Ms. Hu is finding it a challenge to land a good job in the post-recession economy.

For another, her student debt – some $164,000, with a monthly payment of $818 – is forcing the couple to think hard about taking on the additional expenses that come with having a child. “Children just don’t fit into that scenario,” Hu says.

Multiply that tale by tens of thousands of couples and you get the lowest birthrate in US history. American women of childbearing age are having babies at a rate of 63 per 1,000 women – nearly half the peak rate of the baby boom era of the 1950s, the Pew Research Center reported at the end of 2012.

No surprise, recessions typically coincide with a birthrate dip, as financial uncertainty prompts couples to postpone adding new mouths to feed. But the economy is recovering, and there’s no sign yet that the birthrate is rebounding. Some analysts now wonder if the unprecedented scale of early indebtedness stemming from student loans, affecting nearly one-quarter of the overall US populace of childbearing age, has become a permanent deterrent to parenthood.

“This is something that we have not had during earlier recessions,” says Chris Christopher, senior economist at IHS Global Insight, an international consulting group. If college costs keep rising and students continue to borrow heavily to pay for their education, the record-low birthrate may become the “new normal,” he suggests. “This is a real monkey wrench in the works of our families and economy.”

 
Comment by Pimp Watch
2013-02-09 14:01:12

Multiply that tale by tens of thousands of couples and you get the lowest birthrate in US history.

You better believe it. And there are many liars here on the blog and abroad who want you to ignore this demographic reality.

*If you buy a house today…. you’re going to lose alot of money. ALOT of money. Just like millions of others who paid massively inflated prices for what is always a rapidly depreciating asset from 1998-2013.

 
Comment by Montana
2013-02-09 14:08:26

Not a problem, Congress is diligently working on a population replacement plan.

 
Comment by AmazingRuss
2013-02-09 14:50:51

Must have fresh debt slaves, or thw whole thing collapses.

 
Comment by joe smith
2013-02-09 15:58:02

I’d like to expand what others have said (yes, household formation is low and will keep falling) but expand it further.

Not only do we have a falling birthrate in the U.S., but we also have most of the children being born into the families (or lack thereof) that can have the least resources and ability to parent.

On average, you would want responsible, educated, married people to have children. Instead, we combine the low rate of childbirth with rising rates of children born to single parents, uneducated parents, unemployed parents, etc. More kids being born into families of gun-toting Bible-thumpers, less kids born to symphony-going rationalists.

We are becoming an idiocracy.

 
Comment by Bill in Los Angeles
2013-02-09 16:29:16

Congress is too “stoopid” to be aware of that. Legalizing millions of poor people “immigrants” won’t mean the houses costing over $50,000 will be saved from foreclosure.

 
Comment by Ben Jones
2013-02-09 16:34:48

‘less kids born to symphony-going…’

There’s probably less children born in a house with a harpsichord too.

 
Comment by Carl Morris
2013-02-09 17:36:52

There’s probably less children born in a house with a harpsichord too.

That’s funny…

 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 19:57:19

I have to confess that I have at most once ever stepped into a house with a harpsichord in it…and I have been a professional musician for over thirty years now.

 
Comment by Pimp Watch
2013-02-09 21:20:41

“There’s probably less children born in a house with a harpsichord too.”

I read this on my phone while waiting to be seated at our favorite eatin’ joint and nearly fainted from laughter. My wife said “WTF is wrong with you??!”

 
Comment by rms
2013-02-10 02:40:36

“Karen Hu of Oakton, Va., is 28, married, graduated from law school – and thinking about babies. But that’s as far as she and her husband, a software programmer, have gotten: just thinking. What’s holding them back?”

Educated, yes, but are they smart enough to keep a realtor from shagging them both with a $450k Joshua tree?

 
Comment by scdave
2013-02-10 10:07:11

For another, her student debt – some $164,000, with a monthly payment of $818 – is forcing the couple to think hard about taking on the additional expenses ??

Being capable, and I guess I should add my children being fortunate enough not to need to borrow for college I have quite honestly been shocked to learn of the size of this student debt issue..Call me nieve or just old but I had no idea that there was this kind of borrowing going on with students in college at this massive level..

I really learned about it more in depth here on the HBB…What a scam on our young people in this country…Burying them in debt even before they have a good stable job or even know what the hell where or what it is they will be doing…

The priorities set forth over the last twenty years or so in this country quite honestly “suck”….

 
Comment by Rental Watch
2013-02-10 11:24:46

“The priorities set forth over the last twenty years or so in this country quite honestly “suck”….”

Indeed. But at the same time, making a priority “every kid gets a college education” isn’t helping things…giving people debt to buy overpriced goods just raises prices.

I’m in the same boat with my kids…fortunate enough to be saving for their college from the day they were born. If I continue, they will have no student debt either.

 
Comment by scdave
2013-02-10 11:39:27

But at the same time, making a priority “every kid gets a college education” isn’t helping things ??

We, as a country, should “attempt” to help our young adults develop a skill set that allows them to take a position in our society…

Long ago, I thought college degree was important and valuable for everyone…I no longer believe this…In fact, I probably have swung the other way…

I have no formal college degree…But, I have taken a boat load of college level courses and educational sessions over my lifetime that were specific to the area of my interest…

 
Comment by Rental Watch
2013-02-11 00:56:48

“We, as a country, should “attempt” to help our young adults develop a skill set that allows them to take a position in our society…”

Bingo.

IMHO, stopping public education at 12 grades is, in my opinion, fairly arbitrary, and certainly determined to be OK from prior decades, not necessarily the current world environment. A 12th grade education simply doesn’t do it today.

The two things that I think we should consider are:

1. Much bigger push into trade schools; and
2. Consider expanding free public education to include a 13th (and 14th) grade–I’m not talking mandatory, nor am I talking about an aimless education that is often the first two years of traditional University. I’m talking about practical general education that isn’t taught in the first 4 years of HS, that might give someone a better idea of the direction they want to take. Is this an Associate Degree? No, probably not, but something in between a HS diploma and AD.

 
Comment by localandlord
2013-02-11 07:17:55

My parents bought a clavichord about halfway through my childhood.

 
Comment by Montana
2013-02-11 10:52:26

I dunno, I think if a student had taken all the college prep classes at my HS as it was then in the 60s (4 yrs math, 3 yrs science), plus maybe some drafting and shop, he would be a good hire in the trades and higher skilled crafts. Coasting through on bonehead subjects? not so much.

But that’s applying public school as it was then. I don’t really know how degraded the high school curriculum is these days.

 
 
 
 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 12:35:56

“So are the realtors. Squeezing buyers puts a cramp on sales volume - which screws the realtors - but it helps boost the price of houses - which benifits the banks.”

Sounds like a scam designed to enrich the managers of Megabank, Inc and screw the little people on Main Street.

 
Comment by rms
2013-02-10 02:11:24

“An increase in a house’s price also increases the value of the comps. And since the banks have mortgages backed by the comps then the value of these mortgages rises right in step with the rise in value of the comps.”

+1 And by God don’t let the county’s tax-base slip!

 
 
Comment by Ol'Bubba
2013-02-09 08:41:10

No potatoes?

Comment by Potato
2013-02-09 10:15:45

Only you. The PotatoHead.

Comment by Ol'Bubba
2013-02-09 14:01:09

That’’s MISTER Potatohead to you, pal.

 
 
 
Comment by Ben Jones
2013-02-09 08:45:47

Along these lines:

‘A report this week from Barclays downgrading the stocks of several of the nation’s largest public home builders drew quick contest from the National Association of Home Builders, but not for the main premise. The Barclays report centered largely on, “stretched” stock valuations, but it also cited a secondary concern about new home prices.’

“New home prices have dramatically outpaced existing home prices, and the reason for that is because you have a very constructed mortgage market today. The only people who can buy are people who are very well off, so that’s created a positive mix shift,” noted Barclay’s analyst Stephen Kim in an interview on CNBC. ‘But if everybody’s hopes and dreams about housing come true, which is what’s driving the valuations on the stocks, guess what’s going to happen? You’re going to get a lower mix of buyers into the market which is going to bring new home prices down even as existing home prices are going up.’

‘In their most recent quarterly statements, all of the largest public home builders reported large annual jumps in the average prices of their homes sold. “New home prices are advancing faster than existing home prices because demand has increased and, as Kim did admit, the mortgage filter is allowing only higher income or at least higher net worth people through the application net, and they are purchasing higher valued homes. But that is true of existing purchases as well,” argues David Crowe, chief economist for the NAHB.’

‘if everybody’s hopes and dreams about housing come true’

Gotta love the objective financial media…

Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 17:27:53

Irrational exuberance is not only back, but it actually never even went away, thanks to the Fed’s hair-of-the-dog housing market stimulus measures.

Comment by snake charmer
2013-02-10 12:24:31

Isn’t that the truth. I awyays have been part of the doom crowd, but I now have developed the most profound cynicism towards our political, economic and social leadership.

 
 
 
Comment by 2banana
2013-02-09 10:03:18

“‘Our tax bills just keep going up, and yet the city claims it’s broke,’ said Ford, 69. ‘Where is all of our money going? No one knows.’”

To the public unions.

In the not too distant future - your town’s public union pensions ALONE will consume 100% of its tax revenue.

Don’t worry - public unions give nearly 100% of their campaign donations to democrats. And they reward the public unions with golden contracts for their support. And being that Massachusetts in a deep blue state - you probably voted democrat also.

So shut up and pay your fair share. It is what you wanted.

Comment by skroodle
2013-02-09 11:56:00

2000 called and wants your union meme back.

In the South, many Police and Fire unions are staunch Republicans.

Comment by joe smith
2013-02-09 15:50:12

2/3 of the census tracts that receive the most entitlement money voted for Romney.

Most coastal types underestimate the amount of poor white trash in the south and midwest.

 
 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 19:55:18

Do you really have an axe to grind against the Democratic party?

Or are you a paid Republican party hack?

Enquiring minds want to know.

 
Comment by WT Economist
2013-02-10 10:04:30

To debts, pensions and retiree health care.

Younger workers, those actually providing services, aren’t getting much of a deal, even if they are in the public employee unions.

Especially if they are in the public employee unions. Those cashing in and moving out will point to them and claim they are underpaid.

Comment by scdave
2013-02-10 10:24:51

Those cashing in and moving out ??

I have always wondered what the percentage is of pension checks that are sent out of the state of california through CalPeers…All that money, earned in California, being payed for by california tax payers, avoiding any further california income tax and that cash being spent in another state…I have a feeling that the percentage is fairly large…And, if you think about it, quite a windfall for area that these retires settle in…Its like bringing a job with you with much of the income being disposable…

 
 
Comment by scdave
2013-02-10 10:16:27

In the not too distant future - your town’s public union pensions ALONE will consume 100% of its tax revenue ??

I hope the bond holders in Stockton California stick by their guns and take the issue to the supreme court…

 
 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 12:19:23

“‘The inventory’s about 10 percent what it was in 2008,’ says James Stroupe, a broker with Realogics Sotheby’s International Realty. ‘Buyers are really being squeezed.’”

Redfin shows 1,726 homes (houses, condos and townhouses, including MLS listings and foreclosures plus for-sale-by-owner homes) on the San Diego County market, the lowest I ever recall seeing on the market, which I have sporadically watched over the past eight years. This is for a region with roughly three million residents and one million households.

Something tells me the market is nearing (another) breaking point…

Comment by Carl Morris
2013-02-09 13:01:42

It’s gonna be tops with breaking points all the way down, I guess.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 13:07:48

I’m guessing rising inventory and falling prices lie in store beginning at some point over the next decade, kind of like happened in California from 1991-1996…

 
 
 
Comment by T.O. Steve
2013-02-09 15:21:12

I have a friend in Toronto who’s a carpenter. He bought his current house in the south Annex downtown neighborhood for $225,000 in 1991. It’s now worth a million and he’s paid for it. He meets his neighbours - lawyers, bankers, etc. and they ask him what he does and he says “I’m a carpenter”. He bought an investment property in 2009 and has made good income off it. He’s looking at buying another house to rent out.
Meanwhile, I have other friends who are smart, motivated, with work experience who have been unemployed for six months. I look at the job listings and it’s looking pretty rough out there.
It doesn’t make sense to me.

Comment by joe smith
2013-02-09 16:15:23

Your friend should sell that TO house while he can still get a mil for it. Then he can rent a few yrs and buy once the housing market craters.

Comment by Pimp Watch
2013-02-09 21:23:52

You and the Dingbat are on the outs huh?

 
 
Comment by BetterRenter
2013-02-09 22:30:00

A carpenter living in a million USD house? Sounds like he needs to sell, live all Oil-City-like for a spell. He can always live DOWN, meaning in a smaller house in a worse ‘hood.

What doesn’t make sense to me is when people sit on piles of capital like that, when it could be working for them. Is there a capital-gains tax hit in Canada?

Comment by Bill in Los Angeles
2013-02-10 13:49:10

Before the bubble, in Tucson, a guy delivered pizza to my apartment. We chatted a bit. He claimed to own land near Ina and Oracle valued at $1,000,000. That was back in the late 90s.

Comment by Pete
2013-02-10 16:20:36

“Before the bubble, in Tucson, a guy delivered pizza to my apartment. We chatted a bit. He claimed to own land near Ina and Oracle valued at $1,000,000.”

Did you tip him?

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Comment by Lionel
2013-02-09 17:57:12

I don’t want this in any way to be misconstrued with admiration, but I am amazed at how well the Fed has managed to reinflate what had appeared to be out of air 4-5 years ago. Twice this week I’ve had coworkers remark about how they had been outbid on Seattle area properties, with properties getting “snatched up.” Naively I didn’t think I’d hear of such things in my lifetime. And here we are, such a short time later, with buy now or be priced out forever warnings. Yuck.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 19:53:27

What is so amazing about stealing from pension funds what is given to the real estate industrial complex?

The part that amazes me is that the Fed is openly engaged in wealth redistribution schemes that normally are the province of Congress. I’m surprised no Congress critters object to this de facto usurpation of their duties.

Comment by BetterRenter
2013-02-09 22:39:58

CIBT said: I’m surprised no Congress critters object to this de facto usurpation of their duties.

Because it’s what’s keeping the lid on. It’s keeping them from being strung up, either politically or physically. The Fed is the Congressional hatchet man. Currently, it’s chopping up the middle class while the Congress plays gaily in the Rotunda, seeming to be blissfully unaware of the dastardly deed. To date, this has worked really well, as Americans still love their Representatives and Senators.

When it comes time for vox populi, the Congress will just demonize the Fed like it’s demonizing the ratings agencies now. The Congress serves itself; it’s filled with savvy millionaires who are well schooled in the art of political survival.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-10 09:50:04

“Currently, it’s chopping up the middle class while the Congress plays gaily in the Rotunda, seeming to be blissfully unaware of the dastardly deed. To date, this has worked really well, as Americans still love their Representatives and Senators.”

Do FOMC members realize their policies are chopping the middle class into bits?

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Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-10 09:53:54

“…Americans still love their Representatives and Senators.”

Really?

January 08, 2013
Congress somewhere below cockroaches, traffic jams, and Nickelback in Americans’ esteem

Our newest national poll finds that Congress only has a 9% favorability rating with 85% of voters viewing it in a negative light. We’ve seen poll after poll after poll over the last year talking about how unpopular Congress is but really, what’s the difference between an 11% or a 9% or a 7% favorability rating? So we decided to take a different approach and test Congress’ popularity against 26 different things. And what we found is that Congress is less popular than cockroaches, traffic jams, and even Nickelback.

 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-10 10:06:51

Feb. 9, 2013, 6:02 a.m. EST
Global ‘credit supernova’ turns 2013 bull into bear

Commentary: Bill Gross warns about Fed’s cheap-money schemes
By Paul B. Farrell, MarketWatch
NASA

SAN LUIS OBISPO, Calif. (MarketWatch) — Bill Gross predicting a “Credit Supernova.” Yes, that’s what the “Bond King” sees dead ahead. He knows, his firm has $2 trillion at risk of collapsing into the “Black Hole” coming after the Credit Supernova, when the Federal Reserve cheap money finally explodes in America’s face, brings down the economy, again.

Gross’s Credit Supernova metaphor is the explosive headline on his latest Pimco newsletter. So what’s a supernova? Jump over to the Space.com’s parallel universe where you’ll discover a supernova happens when a “blindingly bright star bursts into view in a corner of the night sky … burns like a … brilliant point of light.”

A supernova is “the explosion of a star that has reached the end of its life … Supernovas can briefly outshine entire galaxies and radiate more energy than our sun will in its entire lifetime.”

Yes, a supernova is the “explosion of a star that has reached the end of its life.”

“End of its life?” Is America’s star economy burning out? Sure sounds like it: Gross is doing more than just hinting with his Credit Supernova metaphor. He’s predicting the collapse of the American economy and global financial markets, far worse than the 2008 Wall Street bank credit collapse, worse than the 2000 dot-com crash.

As the folks over at Business Insider put it: “Investment banks have morphed markets with ‘Ponzi Finance.’ And time is almost up.”

Fed’s Ponzi scheme: Credit expansion killing economic growth

Business Insider’s Matthew Boesler summarized Gross’s rather cryptic metaphor this way: Gross’s newsletter “tackles the relationship between credit expansion and real growth” where under Bernanke the Fed’s cheap-money bubble makes our monetary problems get bigger as the Fed keeps kicking them down the road.

So the Fed’s “Ponzi Finance” must run its printing presses full blast to pump more and more credit into the economy “just to cover increasingly burdensome interest payments, with accelerating inflation the end result.”

The problem is huge: Bernanke’s Ponzi Finance is self-sabotaging. Endless cheap money upsets the balance between credit expansion and real economic growth, resulting in diminishing returns: “Each additional dollar of credit seems to create less and less heat. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. Over the last decade, it has taken $10, and since 2006, $20 to produce the same result.” Bad news.

Yes, Wall Street and central banks worldwide are the engine driving Bernanke’s Ponzi scheme straight into a Credit Supernova bubble. Why? Because in the past generation more and more of the Fed’s new credit was channeled into market speculation, distorting the balance between markets and the real economy.

“Investment banking, which only a decade ago promoted small-business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi Finance.”

Gross warns: As a result, “our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic — it is running out of energy and time. When does money run out of time? The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets,” a trend that’s already accelerating as more and more investors wise up to Wall Street’s dangerous Ponzi Finance, anticipating that a Credit Supernova will soon bring down Bernanke’s totally mismanaged monetary system, probably in 2013, months before his scheduled retirement.

 
Comment by Carl Morris
2013-02-10 13:24:16

“…Americans still love their Representatives and Senators.”

Really?

Yes. All that bad stuff is just how we feel about everyone ELSE’s critters. Ours are looking out for us.

 
Comment by Pete
2013-02-10 16:48:57

“All that bad stuff is just how we feel about everyone ELSE’s critters. Ours are looking out for us.”

Exactly. I want to choke the news writers who cite low congressional approval ratings and spin it as though it means something. These critters, even bible-belt yahoos, are generally doing what their constituencies voted them in to do. To be angry with them for doing their job well is beyond silly.

 
Comment by Patrick
2013-02-10 17:07:42

Cantankerous

Bill Gross I think is right - although maybe not so “brilliantly” because personal survival skillsets will kick in with any sudden financial misfires.

But kicking Bernake and his free institutional money out is a good start.

A major bondholder can see the light. Why can’t the MSM? The longer we wait the harder the fall will be.

Does anybody doubt what would happen to the stock or real estate markets if interest rates really started to rise?

 
Comment by Robin
2013-02-10 19:23:49

Oddly, I think stocks up and R/E down.

 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-11 01:01:23

“Oddly, I think stocks up and R/E down.”

It didn’t work out that way in 1987; the bond market crashed in the spring, and the stock market crashed 20% in one day on Black Monday, October 19, 1987.

Of course, perhaps it is different now, as there was no Plunge Protection Team back in 1987.

 
 
 
Comment by Carl Morris
2013-02-09 22:58:15

Team orders?

 
 
Comment by scdave
2013-02-10 10:34:47

remark about how they had been outbid on Seattle area properties ??

Its also interesting that we are hearing this same mantra from many different locations in our country and in others…At the same time, we see area’s that are on there backs not to far from these hot area’s…Is it something as simple as jobs ?? I am not quite sure…Is it interest rates ?? Thats what I suspect….I don’t think these “hot” area’s would be so hot if borrowing costs were more in line with historical rates…

We will get higher rates some day….Either by choice or default….

 
 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 19:44:03

I’m happy to report that the editors at The Economist magazine agree with my opinion that the U.S. mortgage interest deduction amounts to welfare for the wealthy.

Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-09 19:50:30

True confession: Several of my nieces and nephews study in Chinese immersion schools. But so far as I know, none of them were given subscriptions to The Economist.

Social mobility in America
Repairing the rungs on the ladder
How to prevent a virtuous meritocracy entrenching itself at the top
Feb 9th 2013 |From the print edition

“MERITOCRACY” tends to be spoken of approvingly these days. Its ascendancy is seen as a measure of progress. In the dark ages, the dumb scions of the aristocracy inherited their seats on cabinets and on the boards of great companies. These days, people succeed through brains and hard work.

Yet the man who invented the word meant it as a pejorative term. In “The Rise of the Meritocracy”, published in 1958, Michael Young, a British sociologist and Labour Party activist, painted a futuristic picture of a dystopian Britain, where the class-based elite had been replaced with a hierarchy of talent. Democracy was dispensed with. Clever children were siphoned into special schools and showered with resources. The demoralised talentless masses eventually revolted.

The world is starting to look a bit like Young’s nightmare vision. The top 1% have seen their incomes soar because of the premium that a globalised high-tech economy places on brainy people. An aristocracy that gambled its money away on “wine, women and song” has been replaced by a business-school-educated elite whose members marry one another and spend their money wisely on Mandarin lessons and Economist subscriptions for their children.

It is, of course, good that money flows to talent rather than connections, and that people invest in their children’s education. But the clever rich are turning themselves into an entrenched elite. This phenomenon—call it the paradox of virtuous meritocracy—undermines equality of opportunity.

A very American paradox

This is happening throughout the rich world, where elites have proved remarkably adept at passing on privilege down the generations (see article). But it is most acute in America. Back in its Horatio Alger days, America was more fluid than Europe. Now it is not. Using one-generation measures of social mobility—how much a father’s relative income influences that of his adult son—America does half as well as Nordic countries, and about the same as Britain and Italy, Europe’s least-mobile places. America is particularly exposed to the virtuous-meritocracy paradox because its poor are getting married in ever smaller numbers, leaving more children with single mothers short of time and money. One study suggests that the gap in test scores between the children of America’s richest 10% and its poorest has risen by 30-40% over the past 25 years.

American conservatives say the answer lies in boosting marriage; the left focuses on redistribution. This newspaper would sweep away tax breaks such as mortgage-interest deduction that help richer people, and target more state spending on the poor. But the main focus should be education policy.

 
 
Comment by Bigguy
2013-02-10 08:03:58

Wow, I’m super flattered my suggestion for the topic was picked! I feel like Steve Martin in The Jerk screaming “The new phone books are here!”

So far the response seems to be that the bidding war propaganda is correct in places in California and Seattle. Plus my report on Phx area? (Plus Romney something …)

Anywhere else?

Comment by Ben Jones
2013-02-10 11:40:07

In the summer of 2011, I went to the trustee auctions in Phoenix for two days. I don’t know if you were reading then, but I blogged about it live. First, it was hitting about 115 degrees in the afternoon. People were showing up with coolers, laptops and many obviously were there everyday. Eventually, there were 4 auctions going on at any given time, with a couple dozen bidders/observers around each table. This went on for 6 hours each day.

I pointed out that because these houses were pre-foreclosure, chances are none of the bidders had been inside. So basically a hundred or 3 hundred houses were being bought, sight unseen, each day. I overheard these bidders (mostly young guys, but not all) on their phone conversations, trying to raise money. “It will probably sell for 140 thousand; if you rent it for $1000 a month your return will be…”

I haven’t been back since. But I was convinced there was a full-on speculative bubble in Phoenix in 2011.

Comment by scdave
2013-02-10 12:13:43

I remember that post Ben…Site un-seen…My goodness…

 
Comment by Bigguy
2013-02-10 17:06:57

I remember that post as well. Wasn’t living here then, though. I seem to bring the appreciation wherever I go right as I get there, pricing me out cause I’m not nutso ( at least on this issue).

I think I’ve been checking in here since 04!, definitely since no later than 06. We all owe you a tremendous debt Ben.

 
 
 
Comment by snake charmer
2013-02-10 12:48:18

I haven’t been down there for awhile, but it disappoints me to read that Anna Maria Island is being developed. It was one of the few places left on the peninsular Gulf coast that still felt like Old Florida, with smaller houses and local establishments.

Here in Tampa things are proceeding in a troubling way. I’ve noted the cars cruising my neighborhood with older Asian occupants. There are at least a dozen McMansions presently under construction, with sizes and designs identical to the 2005-06 time frame. Realtors are placing flyers in my mailbox and on my doorknob, noting area actitvity and asking whether I am interested in selling my home.

Our culture’s response to getting poorer is to act as if we were richer. What will this look like in ten years? What will the world look like in ten years?

Comment by Bill in Los Angeles
2013-02-10 13:52:47

I dunno, but if you can find me a gulf front two bedroom house with its own private gulf-facing beach on Siesta Key for under $300,000 and not advertised “as is” please let me know!

 
 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-10 15:46:06

Is the mortgage interest deduction considered to be a form of government-provided low-income housing assistance (aka “relief”), similar to FHA loans?

If it isn’t an “affordability” program, then what is it?

Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-10 15:49:34

Can anyone who thinks they understand the political rationale for providing welfare to the wealthy, kindly explain?

Mortgage tax deductions: Our largest housing assistance program
By Colleen OConnor Toberman, Minnesota 2020
February 07, 2013

I always look forward to my tax refund this time of year. Thanks to our mortgage and student loans, my partner and I receive a decent refund that we use to pay down student debt or perhaps enjoy a vacation.

Homeowners enjoy the benefit of our nation’s largest housing assistance program: the mortgage interest tax deduction. Taxpayers may deduct the interest they pay on their mortgages for their first and second homes, up to a principal mortgage amount of $1 million. Both the federal government and Minnesota allow this deduction on residents’ income taxes. In our state, this amounts to $330 million each year that the state allows in tax-writeoffs.

We usually think of this as benefiting the middle class, but 78 percent of the deductions go to households with incomes over $100,000, with 35 percent of it benefiting those earning over $200,000. Those with the most expensive homes get to deduct the most. Many people in lower tax brackets don’t even benefit from itemizing their deductions. And we’re not just talking about modest primary residences here. A “home” may include an RV, yacht, or cabin, not just someone’s first home. In addition, the same deduction applies to up to $100,000 of a home equity loan used for non-housing expenses, giving homeowners a tax break on their debt that renters cannot access.

Despite all of this, many homeowners would claim that they have never benefited from a government assistance program… but we have. In fact, we get the bulk of housing assistance. Again, Minnesota spends $330 million on this tax break. We spend only $28 million on supportive services and housing for those at risk of homelessness. We spend just $350,000 on shelter for those who have lost everything.

 
Comment by Carl Morris
2013-02-10 16:18:24

A form of government-provided high-income housing assistance?

 
Comment by Cantankerous Intellectual Bomb Thrower™
2013-02-10 19:22:05

McManus: Tax reform that hits home
Op-Ed
The mortgage interest deduction doesn’t directly support homeownership; instead, it supports mortgage indebtedness. It needs to go.
February 06, 2013|Doyle McManus

Would you support a tax reform measure that could help reduce the federal deficit, remove a needless distortion in the economy and make the system fairer?

Me too, which is why I’m taking aim at a sacred cow: the home mortgage interest deduction.

That’s right, the mortgage interest deduction that every homeowner, including me, loves.

If you listen to home builders and real estate agents, they’ll tell you that the mortgage interest deduction is what makes homeownership possible for millions of Americans.

Yet last year, homeownership in the United States, battered by mortgage foreclosures, sank to 65%, a 17-year low, while next door in Canada, where taxpayers don’t get a deduction for mortgage interest, homeownership continues to rise, reaching more than 69% last year, according to Toronto’s Financial Post.

The reason is that our mortgage interest deduction doesn’t directly support homeownership; instead, it supports mortgage indebtedness, which isn’t the same thing at all.

If the goal is really to increase homeownership, a better idea might be to offer a tax break aimed more precisely at middle-income families buying starter houses — a tax rebate for interest on the first $200,000 in mortgage debt, for example.

But that’s not how the mortgage deduction works. First, it’s only useful to people who itemize deductions, which only about 30% of taxpayers do. Second, it helps people with big mortgages more than those with small ones. Third, like all deductions, it helps people with the highest incomes (who get the equivalent of 39.6% of their mortgage interest knocked off their tax bill in the top bracket) more than people with lower incomes (who get 25% or less off if they itemize). Moreover, if someone buys a vacation home, that mortgage interest is deductible too, as long as the total debt is under $1 million.

But don’t take it from me. Take it from the economists at the Mercatus Center, a mostly conservative think tank at Virginia’s George Mason University.

“Most taxpayers do not benefit from this deduction at all or receive a very small benefit,” they wrote in a report issued last month. “The only taxpayers who do receive a large benefit are those in the upper income brackets…. Its primary effect is to encourage Americans who would have already been able to afford a house to take on even more debt.

“Recent empirical research suggests that the mortgage interest deduction increases the size of homes purchased but not the overall rate of homeownership,” they wrote.

 
 
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