Pushing The Bubble As Far As Possible
It’s Friday desk clearing time for this blogger. “There are growing concerns around the country about the potential of another housing bubble. Home prices are rising too fast, some economists say, especially in areas like Boise. Median home prices for Ada County are showing a 33 percent increase in January 2013 compared to the same month last year. I would suggest not getting too excited about these jumps in home price statistics. They are great for consumer confidence, but to put this into perspective, let me share a comment I received from Barbara in Boise.”
“‘I beg to differ with these recent stats,’ said Barbara. ‘My $440,000 home that I purchased in May of 2011 just got appraised for $410,000, so I don’t understand where all these housing stats are coming from.’ Many homeowners who are trying to sell or refinance are noticing this same issue. The positive housing statistics do not match their experiences with their own homes.”
“Given the improvement in local and state residential real estate demonstrated by last week’s 2012 Florida Realtors statistics, there’s a lot of positive buzz, and possibly a bit of wishful thinking taking place among would-be sellers, Realtors, mortgage brokers, appraisers, developers and contractors. But a reality check still shows a murky future: Up to a tenth of Florida homes, and almost a fifth of Manatee-Sarasota area homes are in some state of distress”
“‘Of the 475,000 completed Florida foreclosures since 2006, banks, realty funds and other financial players still hold an estimated 200,000 housing units,’ said Jack McCabe, CEO of McCabe Research & Consulting. That is roughly equivalent to the total number of 2012 statewide single-family home sales as reported by the Florida Realtors. ‘There are currently 377,000-plus open foreclosures in Florida state courts, and 80 percent of them will become distressed transactions in the coming two to three years,’ McCabe estimated.”
“But that is the tip of the iceberg, says McCabe. ‘Another 550,000 additional Florida homeowners are 90 days-plus delinquent and thus subject to future foreclosure filing,’ he said. ‘Taken together, there are 1.1 million distressed residential properties in the state. About 40 percent of Floridian mortgage holders who are current on payments are nonetheless underwater.’”
“‘Bottom line is that, if you only pay attention to Realtor data, everything looks great,’ summarized McCabe. ‘However, if you remove the blinders and consider underlying financial market activity and data, there’s still trouble in paradise and it’ll take another two to three years to achieve a normal healthy real estate market.’”
“California’s rate of homeownership continued a years-long slide in 2012 and is now the second lowest in the nation, according to a new Census Bureau report. Just 54.1 percent of Californians lived in homes during the last quarter of 2012 that they or their families owned. Only New York, at 53.1 percent, had a lower rate. The report covers the annual housing survey dating back to 2005, when California’s home ownership rate was 60.1 percent. It has declined every year since.”
“Gov. Dannel P. Malloy and state Attorney General George Jepsen said they are submitting a bill to the General Assembly that would require banks to dispatch only mediators who have the authority to enter into a settlement. State officials said the foreclosure crisis has not yet abated in Connecticut, noting there were 16,500 foreclosure petitions filed with courts in 2011 and 19,300 in 2012. ‘Our goal is to help people stay in their homes as long as possible,’ Jepsen said.”
“Linda Casanova, of Branford, said she knows what it’s like to enter into mediation with a bank. After losing her job, Casanova said she faced foreclosure in the fall of 2010. ‘Mediation was never a good experience for me. My goal is to keep and afford my home. And I’m still dealing with Bank of America,’ Casanova said.”
“The Brazilian government is keen to offer as much support as it possibly can to the nation’s housing market. President Dilma Rousseff is still committed to helping people get themselves on the first rung of the property ladder. Brazilian house hunters are already benefiting from the lowest interest rates in the South American country’s history and this extra investment from the state is an added bonus.”
“Adolfo Sachsida, an economist in Brasilia at the Institute for Applied Economic Research, told Bloomberg that ‘the government is throwing more money at it [housing sector] to keep it expanding. This market employs a lot of people and they want to keep it heated so employment doesn’t drop,’ he added.”
“In an interview with the Bloomberg news agency, Martin Andersson, the head of Sweden’s Financial Supervisory Authority, expressed his concern about Swedes’ mounting debts. ‘Swedish households today are among the most indebted in Europe and we cannot have household lending that spirals out of control,’ Andersson said.”
“According to Sweden’s National Housing Board, Sweden is already in the midst of a housing bubble, with homes overvalued by around 20 percent. As property prices have risen 25 percent since 2006, Andersson warned of a possible ‘downturn’ in the Swedish housing market. ‘House prices cannot just continue upwards in eternity,’ he told Bloomberg.”
“When Poland joined the European Union in 2004 there followed a massive property boom with price increases of 23% recorded in 2005 and 28% in 2007. Since 2008 house prices in Warsaw have fallen by 13.1% in that period but the biggest casualty has been the city of Lodz which saw its house prices plummet by 35.7%.”
“Marcin Plazinski, of Emmerson Real Estate, said: ‘Poland’s property market has not rebounded and prices may drop further yet because some developers who anticipated a recovery in 2010 and 2011 began developing and now there is an oversupply of housing.’ In addition, cash-strapped owners wanting to sell are adding to the problem and the market is described as being ‘awash with unsold units.’”
“Like other export-led economies in East Asia, China experienced a property bubble during the export and investment boom. The difference is that the government in China controls all the land and gets most sales proceeds as revenue. It has motivated the government to push the bubble as far as possible. This is why China has both a price and quantity bubble.”
“The quantity side is especially severe. NBS data showed that 10.6 billion square meters of properties were under construction at the end of last year, of which half were residential and the other half office and commercial. An average price close to the market price now would put the value of this inventory at around 1.5 times GDP. Such a high level of inventory value has never occurred anywhere else. It is hard to imagine where the money would come from to absorb it.”
“Sherry Sheng, a 29-year-old Shanghai policewoman, bought herself a 4,000 yuan (S$792) black fur jacket, splurging for the last time before she starts paying off the mortgage on her first home. Ms Sheng is part of a generation of middle class that Chinese media has dubbed ‘fang nu,’ or housing slaves, a reference to the lifetime of work needed to pay off their debts. They’re taking on mortgages even as the government maintains property curbs to damp prices that have almost tripled since China embarked in 1998 on a drive to increase private home ownership.”
“‘It’s a treat for myself because I could never afford such a luxury after I start repaying my housing loans next month,’ said Ms Sheng, who paid 1.1 million yuan for the one-bedroom apartment on the city’s western outskirts and will be using about 70 per cent of her salary to service her mortgage.”
“Some home buyers are taking advantage of low interest rates and federal programs to get better deals on houses and use the current housing market in their favor. ‘You get more house for the money with the rates being so low,’ says Fayon Haines, loan officer for the Arkansas Federal Credit Union. Austin, a suburb outside of Cabot, is booming because Haines says buyers also qualify for the federal government’s Rural Development Program. ‘Your town must have less than 25,000 people. You can get 100 percent loan as long as you have 660 credit score and good credit,’ said Haines.”
“Instead of letting the market go through a much needed correction after the crisis began, new Federal Reserve chairman Ben Bernanke pursued a policy bent on ’stabilizing’ the value of assets. Since 2008, Bernanke’s Fed has kept the Federal Funds Interest Rate close to zero percent and it has increased its balance sheet by just under three trillion dollars by purchasing Treasuries and mortgage-backed securities from member banks.”
“According to David Stockman, the former head of the Office of Management and Budget, what Bernanke’s policies have created is simply another housing bubble. He sees a similar combination of artificially low interest rates and speculation producing the current housing boom just like the boom during Greenspan’s tenure. Unemployment and underemployment are still very high. Many employed middle income buyers are still reeling from the last bust. The huge price increases we are seeing is the work of speculators fueled by Bernanke’s easy money policies.”
“The bust will come when rates rise, the malinvestments of the boom become unsustainable at the higher rates, and the speculators liquidate their positions leaving small investors holding the bag. It will be 2008 all over again for many, except this time it will be Ben Bernanke’s Housing Bubble.”
“In the past four years, central banks in the advanced economies have been opting for new rounds of quantitative easing (QE) because the global financial crisis has exhausted the traditional instruments of monetary policy. Initially, these policies were characterized as ‘extraordinary’ but ‘temporary.’ As these monetary policies remain in place, they are growing less effective, but continue to inflate potentially dangerous asset bubbles in Asia, Latin America and elsewhere.”
“During the past four years, the bloated balance sheets of the central banks of the United States, the European Union and Japan have doubled and then almost tripled to almost $10 trillion. While these monetary policies create a perception of stability, they also provide a pretext to defer structural reforms, which, in turn, creates a moral hazard.”
“Theoretically, bloated central bank balance sheets in the developed world are a means to an end. In practice, they have become a part of the problem. Printing self-illusions is a dangerous way to play with fire.”
The Case-Shiller index has been flat for three years in nominal terms. CPI adjusted, it is still falling, this despite everything the Fed/FedGov is doing to prop up the corpse. News of a new bubble is either cherry picking or outright BS. One would expect a sucker’s rally at this stage, but even that is a bust.
New home starts may be up an insignificant amount YoY, but on the larger view, they are still way below anything seen since 1960.
Buckle up.
This new “bubble” is the dead cat bounce from the 2011-2012 selling season. I have a feeling that this next leg of the housing downturn will be much faster and sharper than the previous one.
I do predict that when the drop starts analysts will howl that it was “unexpected” and “no one could have seen it coming” as the hedge funds off-load their rental properties to greater fools at hefty profits.
What makes you believe the ubiquitously activist Bernanke Fed will not assume their customary role as “buyer of last resort” to prevent the next leg down you are predicting from ever occurring?
Why do you believe the Fed can buy every single item in the world?
I wouldn’t go that far.
Just noting that the plans announced in the early-2012 White Paper have been successfully executed, with no sign of any change of course in the works.
The Bernanke gives the green light for screwing taxpayers who played no part in the Ownership Society as either lender or buyer:
“We caution, however, that although policy action in these areas could facilitate the recovery of the housing market, economic losses will remain, and these losses must ultimately be allocated among homeowners, lenders, guarantors, investors, and taxpayers.”
Taxpayers stand out on the list as the non-FIRE sector participants, and hence most vulnerable to getting screwed for someone else’s financial folly.
I am a DEM supporter normally, but I honestly believe if the FED comes across as buying all the homes in the U.S. to keep this ponzi scheme going, then Bernanke will lose his job because the DEMs will lose their job, starting with POTUS… and that would be a good thing in the long run to finish flushing this housing tird once and for all..
No argument here.
The only aspects of the “Craaaater Hypothesis” I’ve been poking fun at are the notions that:
- We will see X change in real prices (inf. adjusted) in Y period of time and
- The Z% adjustment will be anything near uniform across various regions of the country or categories of houses.
Expect the largest nominal declines in areas that were presumed “safe”.
1. Washington, DC
2. San Diego, CA
3. San Francisco, CA
4. Other?
“Buckle up.”
You better believe it. You’ll be thankful you didn’t buy a house in the last 12 years.
I bought a bunch of houses in ‘08, ‘09 & ‘10. I give thanks every day. They cash flow, the tax benefits are tremendous and I purchased them all at way below reproduction cost.
You keep saying I’ll be sorry, in the meantime, I have collected $12,000 a year in cash flow and paid down debt by $30,000 a year……multipy by three = $36,000 in cash flow and $90,000 in principal reduction.
Next year will be even better. More cash flow and larger principal payments. And Zillow forecasts $200,000 in appreciation, which we are starting to see in the comparable sales.
I must say this:
“Don’t get stuck in recovery denial, just like many got stuck in bubble denial.”
“And Zillow forecasts $200,000 in appreciation, which we are starting to see in the comparable sales.”
You are nothing but a market-timing speculator who is going to get his ass handed to him in short order.
You are missing the point Peak. It is sort of ironic you use the name Peak. It occured in 2006. Seven years have passed. It is about time you recognize the “peak” has come and gone…..sort of like your perspective on housing.
I am not speculating on anything. I am an investor. I invest in rental housing and provide excellent service to people seeking a home to rent.
I make a great return on my investment and in 2 more years, I will have 100% of my investment returned and in my pocket. My “ass” will not even be at risk. The downside rish will be minimal and non-recourse. The upside potential will be a nice retirement.
I understand the housing bubble, in no small part by participating in this blog since 2006. I continue to be amazed however, by those hanging around waiting for the housing bust. It has come and gone.
Worst. Housing. Bust. Ever.
At least around here.
Gotta agree with Jingle on this. I was a frequent visitor on this sight back in 05-06 when everyone was telling me to buy and I was getting the usual ‘your a nut’ looks when I mentioned the bubble. Have to say I lost some friends, but I bought my first house in Oct 11 and and it’s up 25% already. Just finished fixing up my first rental and found a great couple who where happy to get it. Still getting the ‘your a nut’ looks, so I figure I must be on to something.
“When Poland joined the European Union in 2004 there followed a massive property boom with price increases of 23% recorded in 2005 and 28% in 2007. Since 2008 house prices in Warsaw have fallen by 13.1% in that period but the biggest casualty has been the city of Lodz which saw its house prices plummet by 35.7%.”
My wife is Latvian, same thing happened there. My mother-in-law owns a couple apartments and a house there, and the values exploded in ‘06 and ‘07. Then they, well, exploded again, but in a different way.
‘Latvia…same thing happened there’
It’s difficult to find a country that isn’t in some phase of a real estate bubble. There’s a housing bubble in Kurdistan.
Bulgarian Properties for sale and rent
You have decided to buy or rent a property in Bulgaria? BULGARIAN PROPERTIES makes this easy and affordable, with full protection of your interests!
We have been working for our foreign clients for 10 years now. We look after their interests in Bulgaria. We do everything to make them happy. Because that is our job… Because we – BULGARIAN PROPERTIES – are the biggest and most respected Bulgarian real estate agency specializing exclusively in working with foreign buyers.
With our help thousands of buyers from around the world have found the best properties for their needs, have invested wisely and have become proud owners of second homes in our beautiful country. There is something for everyone in Bulgaria and we are here to help you find it!
In your property search we know you will need the following very simple and important things and thus we provide them to you:
A wide choice of properties throughout Bulgaria.
The best prices and discounts. We never stop searching for them for you!
Honesty, respect and attention, because you deserve it!
Reliability and protection of your rights and interests. We work for you!
A full range of services when buying, furnishing or managing your property.
Trust us! We’ll do our job professionally!
Don’t laugh, they had quite a few of those Bulgarian property stores here in Cyprus. They collapsed right before the Cypriot housing bubble did.
Nice to see you again, Mugsy.
Thanks! I hope you’re feeling well these days.
It’s difficult to find a country that isn’t in some phase of a real estate bubble.
As I’ve said before, the entire world has been brainwashed into believing that housing is supposed to be unaffordable.
I disagree; I think it’s the other way. Americans are brainwashed into believing that housing is supposed to be affordable.
The rest of the world understands reality. In second and third world countries, food is something like 1/3* of their budget because you have to eat something. In Eastern Europe, people extract joy from buying fancy phones because housing is too expensive to even think about buying, but you have to live somewhere. “Needs” are the only way to make a profit these days, so those are the prices that will skyrocket.
—————
*By American standards, that’s hugely unaffordable. Even when I was a “starving student” making close to minimum wage, my food budget never went over 20% or so, and I was a healthy eater.
I think it’s the other way. Americans are brainwashed into believing that housing is supposed to be affordable.
The rest of the world understands reality.
Wow. Americans are finally about at the end of living memory of having places you could just go stake a claim and put up some crude shelter yourself for free. Europeans have been used to having to live in the cracks between what was claimed by their rich and aristocratic. Which they came here to get away from. Are you saying it’s time for us to just accept that as well?
A rubble bubble?
‘Poland’s property market has not rebounded and prices may drop further yet because some developers who anticipated a recovery in 2010 and 2011 began developing and now there is an oversupply of housing.’
Isn’t this EXACTLY where the U.S. is, with the bulldozers cranking up again subject to the Fed’s blessing?
A lot of Polish workers moved to Ireland to work in construction.
Flush with cash, their families bought houses in Poland.
The new expensive houses I saw in the mountains of southern Poland didn’t appear to be owned by families of workers who struck it rich. They appeared to be speculative in nature and owned by people from other countries or from the big city. We rented one of them. It was for sale…
“‘Bottom line is that, if you only pay attention to Realtor data, everything looks great,’ summarized McCabe. ‘However, if you remove the blinders and consider underlying financial market activity and data, there’s still trouble in paradise and it’ll take another two to three years to achieve a normal healthy real estate market.’”
HBB trivia time: Jack McCabe has guest posted here.
‘if you only pay attention to Realtor data, everything looks great’
And it’s not just the UHS, but the media. Places like yahoo finance have at least one silly housing article every day. If you think about it, how do these “Realtors” get their propaganda out?
I got into this discussion with a poster here about the Chinese investor stories. He said it was a myth. I replied that true or not, it was part of the mania. Then the story came out about the fake Chinese investors in Vancouver. So the question is, why do they need fake investors if demand is real?
I’m starting to think a lot of this “new” bubble is just hype. Of course, all bubbles have some amount of hype, but this has bullsh*t written all over it.
I’m starting to think a lot of this “new” bubble is just hype. Of course, all bubbles have some amount of hype, but this has bullsh*t written all over it.
Thanks for saying that, Ben. It means that our HBB party is going to keep rollicking right along.
Oh, thanks for keeping the bar open for us.
When I came to this blog 7 years ago (give or take) I thought that this would be a great place to find out what was going on and in a year or two I’d stop coming here. Little did I know that this charade would still be rolling along all these years later.
The housing bubble not the blog
“I’m starting to think a lot of this “new” bubble is just hype.”
I figured you new this long ago.
Absolutely it is a media driven fantasy. But it’s actually helping affordability because the MLS inventory is skyrocketing with new listings by chumps who think they’re going to cash out.
This next leg down that we’re entering is going to be breathtaking.
I recall a similar conversation or threat in about 2006 or 2007 when most folks on here recognized that the media was part of the problem, and in bed with the real estate thugs who provided a sizable chunk of their advertising dollars..
thread
“…it’ll take another two to three years to achieve a normal healthy real estate market.”
Methinks he severely underestimates the time it will take to undo the massive damage the Fed’s distortionary housing price ’stabalization’ policies have wrought.
First we have to get past the end of QE3 and the inexorable race to the exits by real estate investors who snapped up “low-end” (under $300,000) residential housing to capitalize on the huge infusions of Fed funds into the mortgage market. This will take at least three years to even begin to play out. It could take well over a decade after that for local residential real estate markets to recover from the massive heavy-handed infusion of federal intervention and revert to local fundamentals.
As you watch this drama play out, always bear in mind:
All Real Estate is Local.
wait, p-bear, are you saying that the Great Craaaater isn’t going to happen for another 8-10 years???
The amount of rent that I would have paid during even 8 years is substantially more than I will pay in total interest for my mortgage.
Not exactly what I meant. In fact, the timing is highly unpredictable, and heavily dependent on FOMC decisions about whether and how much to continue propping up housing prices going forward.
For one example, suppose the Fed ended QE in 2015. Suddenly $40 bn a month in MBS purchases no longer were happening. Do you think this might have a slight chilling effect on U.S. home purchase demand?
And as to the 8-10 years, that would be more of a predicted time to the end of the steepest part of the next leg down, not its onset. I refer you to the Japanese housing market experience from 1990-2010 as an example of how a short steep slide can transition into a protracted gradual slide.
The amount of rent is HALF your current carrying costs.
Given the improvements I’ve put into the house, yes, I’ve been throwing down a lot more than my rent had been.
Like I said, twice a day PW is right. How long before you are finished with the renovations /repairs?
‘China has both a price and quantity bubble…NBS data showed that 10.6 billion square meters of properties were under construction at the end of last year, of which half were residential and the other half office and commercial. An average price close to the market price now would put the value of this inventory at around 1.5 times GDP.’
Ooops!
So long as their bubble keeps growing, we have nothing to worry about.
Quite ironically, the minute the news breaks about how monetary policy has no role in blowing asset bubbles, the next stock market rally is underway!
Bernanke Said to Minimize Asset-Bubble Concern at Meeting
By Rich Miller - Feb 21, 2013 9:00 PM PT
Federal Reserve Chairman Ben S. Bernanke minimized concerns that the central bank’s easy monetary policy has spawned economically-risky asset bubbles in comments at a meeting with dealers and investors this month, according to three people with knowledge of the discussions.
The people, who asked not to be identified because the talks were private, said Bernanke made the remarks at a meeting in early February with the Treasury Borrowing Advisory Committee. Fed spokeswoman Michelle Smith declined to comment.
The Fed chairman brushed off the risks of asset bubbles in response to a presentation on the subject from the group, one person said. Among the concerns raised, according to this person, were rising farmland prices and the growth of mortgage real estate investment trusts. Falling yields on speculative- grade bonds also were mentioned as a potential concern, two people said.
U.S. stock prices have fallen over the past two days on speculation that the Fed may slow the pace of its purchases of Treasury debt and mortgage-backed securities, in part because of worries about asset bubbles. The Standard & Poor’s 500 Index stood at 1,502.42 at 4 p.m. in New York yesterday, down from a five-year high of 1,530.94 on Feb. 19.
Speculation about scaled-back asset purchases by the Fed was fanned by the Feb. 20 release of minutes of the central bank’s last policy-making meeting in January.
…
These bankers run everything off the cliff before it dawns on them there is a problem:
‘Kiwibank has today launched a six-month fixed home loan rate of 4.79 per cent, the bank’s lowest rate in its 11-year history. The new rate is a cut of 0.46 percentage points - down from 5.25 per cent - and is being offered as a “limited time special”. The bank said the rate is not restricted to new customers, has no minimum lending requirement and no debt/equity restrictions.’
‘Kiwibank chief executive Paul Brock said the current home loan market is very competitive and the Kiwibank offer could be the lowest rate offered by any bank for many decades.’
‘Reserve Bank governor Graeme Wheeler last week kept the official cash rate at 2.5 per cent, but singled out rising house prices as a threat to the country’s financial stability. “The bank does not want to see financial stability or inflation risks accentuated by housing demand getting too far ahead of supply,” Wheeler said.’
“These bankers run everything off the cliff before it dawns on them there is a problem:”
Another favorite banker trick is to run off the edge of a cliff after a running start, then as they are falling, announce to the world, ‘Nobody could have seen it coming!’
With a nice Doppler effect as fall into the abyss.
Aaaaaaaaaaaaaaaaaaaaagh!
Bankster running off cliff while trying not to get run over by a truck
“Many homeowners who are trying to sell or refinance are noticing this same issue. The positive housing statistics do not match their experiences with their own homes.”
It couldn’t possibly mean that the real estate people are LYING, could it?
You can get 100 percent loan as long as you have 660 credit score and good credit ,’ said Haines.”
———————-
Hmmm, there multiple definitions of ‘good credit’.
I don’t know if this has been posted before…..
but half of property owners in Detroit are NOT paying their property tax bill.
“The News reviewed more than 200,000 pages of tax documents and found that 47 percent of the city’s taxable parcels are delinquent on their 2011 bills. Some $246.5 million in taxes and fees went uncollected, about half of which was due Detroit and the rest to other entities, including Wayne County, Detroit Public Schools and the library.
Delinquency is so pervasive that 77 blocks had only one owner who paid taxes last year…”
So is this a taxpayer’s revolt?
Link here
http://www.detroitnews.com/article/20130221/METRO01/302210375
But not ONE insane public union pension has been not been paid.
But not ONE insane public union benefit has not been paid.
We will soon see many cities like this. They will still take in billions in taxes yet provide not ONE city service to those taxpayers.
The money has all been spent. A contract is a contract. It is only fair. It is for the children.
60 years of unbroken liberal/progressive rule with out of control of public unions……………what could go wrong?
“Why pay taxes?” asked Fred Phillips, who owes more than $2,600 on his home on an east-side block where five owners paid 2011 taxes. “Why should I send them taxes when they aren’t supplying services? It is sickening. … Every time I see the tax bill come, I think about the times we called and nobody came.”
In other Detroit news….
http://www.forbes.com/sites/kylesmith/2013/02/21/detroit-gave-unions-keys-to-the-city-and-now-nothing-is-left/
Detroit can’t even light its own streets - but has plenty of money for this.
I am sure glad public unions give nearly 100% of their campaign cash to democrat/obama so we can repeat this experiment all across america.
The Detroit Federation of Teachers, which enjoys rich pay packages (corrected for purchasing power, Michigan teachers are the best paid in the nation, reported the Mackinac Center for Policy Policy), would do the UAW proud. Its employees pay only ten percent of the cost of their insurance premiums. While they take extravagant numbers of sick days or personal days — 8 per teacher — they also cash in on “unused sick days” to the tune of $14.5 million a year.
What other industries are so surprised when you aren’t sick that they pay you a bonus? Then again, we’re talking about a group that paid people to quit — $4.1. million in “termination bonuses” were handed out to teachers’ union members in 2010-2011. And last December the city inexplicably sent out archaic “longevity bonuses” ranging from $150 to $750 depending on years of service for non-union municipal employees, even though the benefit was removed for unionized employees in 2009.
Termination bonuses are quite common in corporate America. They are often targeted at older and more senior employees.
So you are OK with million dollar bonuses handed out to teachers?
In a bankrupt city?
Paid for by property taxes?
February 22, 2013
Euro zone shrinks while U.S. housing grows
Other charts show plateauing of foreclosure prices, botox climbing
‘Taken together, there are 1.1 million distressed residential properties in the state. About 40 percent of Floridian mortgage holders who are current on payments are nonetheless underwater.’
Aha! Recovery!!!
I take it there are far fewer distressed residential properties in California than in Florida, even though California is a much larger state, as we have the Homeowner Bill of Rights, plus billions and billions of dollars on the way from Megabank, Inc to help troubled homeowners.
Californians get big part of $46 billion mortgage settlement
Published: February 22, 2013 Updated 41 minutes ago
By Dale Kasler — dkasler@sacbee.com
After suffering some of the biggest losses from the housing crash, Californians are getting the lion’s share of a $46 billion nationwide settlement from top mortgage lenders.
Troubled California homeowners should get nearly $20.6 billion from the year-old national settlement, according to a report released Thursday.
California’s share represents about $2 billion more than originally expected, said Katherine Porter, a law professor who is overseeing the statewide distribution of benefits for Attorney General Kamala Harris.
Five big mortgage servicers – Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo – entered into a nationwide settlement last year over charges of lending and servicing abuses. In a report released Thursday, national settlement monitor Joseph Smith Jr. said consumers have already received more than $42.3 billion in various forms of relief. He said the total payout should hit $46 billion.
The huge sum being distributed in California is partly a reflection of how hard real estate prices collapsed when the housing bubble burst, said Porter, a professor at the University of California, Irvine.
“We do have a relatively high fraction of people who are underwater and delinquent,” she said.
…
“In a report released Thursday, national settlement monitor Joseph Smith Jr. said consumers have already received more than $42.3 billion in various forms of relief. He said the total payout should hit $46 billion.”
Am I reading this correctly to say there is only $3.7 billion in additional relief forthcoming?
What happens when the relief for troubled homeowners runs dry?
Since when were homeowners getting any of this money?
I was wondering what politicians are on the take and how they are grabbing the dough before it trickles down to troubled homeowners?
getting the lion’s share of a $46 billion nationwide settlement from top mortgage lenders.”
All this and good weather too
“Theoretically, bloated central bank balance sheets in the developed world are a means to an end. In practice, they have become a part of the problem. Printing self-illusions is a dangerous way to play with fire.”
U.S. Fed balance sheet grows for third straight week
NEW YORK | Thu Feb 21, 2013 4:29pm EST
Feb 21 (Reuters) - The U.S. Federal Reserve’s balance sheet expanded for a third straight week to another record size in the latest week, due to its purchases of Treasuries and mortgage-backed securities, Fed data released on Thursday showed.
The Fed’s balance sheet, a broad gauge of its lending to the financial system, stood at $3.077 trillion on Feb. 20, compared with $3.056 trillion on Feb. 13.
The Fed’s ownership of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and the Government National Mortgage Association (Ginnie Mae) totaled $1.033 trillion compared with $1.010 trillion the previous week.
…
‘Pimco Founder Bill Gross called out the Federal Reserve on its vigilance in three major areas, during a CNBC interview on Friday. “I don’t think the Fed is vigilant in terms of the negative aspects of zero-bound rates,” Gross said in an appearance on “Squawk Box” with St. Louis Fed President James Bullard. “I don’t think they’re vigilant in terms of other central banks and their quantitative easing policies,” he added. “I don’t they’re vigilant in terms of asset prices.”
‘Bullard fought back, responding, “I think we are [vigilant]. We take all those aspects into account.” The Fed has better systems in place to track financial markets, Bullard said, adding, “We certainly talk to the other central banks. We are well aware of what they’re doing.”
‘According to the Fed release, “many participants” expressed concerns about “potential costs and risks arising from further asset purchases.” Echoing that concern in Friday’s interview, Gross said, “One of the problems that the Fed has had over the past 10 years is that they have not focused on asset prices.”
‘The Pimco co-CIO argued the Fed’s focus on unemployment and inflation - which he acknowledged has been vigilant - was “almost to the asset price-exclusion,” causing it to miss the 2008 housing bubble and “the destruction that asset prices can wreak upon an economy, in addition to higher inflation.”
http://finance.yahoo.com/news/pimcos-gross-fed-not-vigilant-170214615.html
‘February 7, 2013. Overheating in Credit Markets: Origins, Measurement, and Policy Responses’
‘The question I’d like to address today is this: What factors lead to overheating episodes in credit markets?1 In other words, why do we periodically observe credit booms, times during which lending standards appear to become lax and which tend to be followed by low returns on credit instruments relative to other asset classes?’
‘The third factor that can lead to overheating is a change in the economic environment that alters the risk-taking incentives of agents making credit decisions. For example, a prolonged period of low interest rates, of the sort we are experiencing today, can create incentives for agents to take on greater duration or credit risks, or to employ additional financial leverage, in an effort to “reach for yield.”11 An insurance company that has offered guaranteed minimum rates of return on some of its products might find its solvency threatened by a long stretch of low rates and feel compelled to take on added risk.12 A similar logic applies to a bank whose net interest margins are under pressure because low rates erode the profitability of its deposit-taking franchise.’
‘Moreover, these three factors may interact with one another. For example, if low interest rates increase the demand by agents to engage in below-the-radar forms of risk-taking, this demand may prompt innovations that facilitate this sort of risk-taking.’
‘I hope you will take this last example in the spirit in which it was intended–not as a currently actionable policy proposal, but as an extended hypothetical meant to give some tangible substance to a broader theme. That broader theme is as follows: One of the most difficult jobs that central banks face is in dealing with episodes of credit market overheating that pose a potential threat to financial stability. As compared with inflation or unemployment, measurement is much harder, so even recognizing the extent of the problem in real time is a major challenge. Moreover, the supervisory and regulatory tools that we have, while helpful, are far from perfect.’
‘These observations suggest two principles. First, decisions will inevitably have to be made in an environment of significant uncertainty, and standards of evidence should be calibrated accordingly. Waiting for decisive proof of market overheating may amount to an implicit policy of inaction on this dimension.’
http://www.federalreserve.gov/newsevents/speech/stein20130207a.htm
”Stein, who voted in favor of continued asset purchases at the Fed’s January meeting, singled out the speculative grade bond market as an example of potential over-heating. Investors have piled into speculative-grade bonds, rated below Baa3 by Moody’s Investors Service and lower than BBB- at Standard & Poor’s, driving yields down. The extra yield investors demand to hold the securities rather than Treasuries has fallen to 4.92 percentage points as of Feb. 20 from the record high of 21.82 percentage points in December 2008, according to the Bank of America Merrill Lynch U.S. High Yield Index.’
‘In his Feb. 7 speech, Stein also discussed mortgage real estate investment trusts, which he said had “grown rapidly” by using low-cost, short-term financing to fund purchases of longer-term debt.’
‘Mortgage REITs’ holdings of government-backed home-loan securities rose to about $350 billion last year, from about $90 billion in 2008, according to Nomura Securities International estimates last month.’
‘The “first line of defense” if bubbles emerge “needs to be regulatory and supervisory” actions rather than changes in monetary policy, according to Bernanke.’
http://www.bloomberg.com/news/2013-02-22/bernanke-said-to-minimize-asset-bubble-concern-at-meeting.html
Toxic Mortgage Superfund SIV?
Is there any way to calculate the size of the windfall Megabank, Inc earned by selling their toxic MBS to the Fed at a premium?
“California’s rate of homeownership continued a years-long slide in 2012 and is now the second lowest in the nation, according to a new Census Bureau report. Just 54.1 percent of Californians lived in homes during the last quarter of 2012 that they or their families owned. Only New York, at 53.1 percent, had a lower rate. The report covers the annual housing survey dating back to 2005, when California’s home ownership rate was 60.1 percent. It has declined every year since.”
When Blackstone owns CA I wonder if they will fund the State pensions ? Or just raise rents ? Maybe they can lobby the government to up section 8 payments ?
<i?“‘I beg to differ with these recent stats,’ said Barbara. ‘My $440,000 home that I purchased in May of 2011 just got appraised for $410,000, so I don’t understand where all these housing stats are coming from.’ Many homeowners who are trying to sell or refinance are noticing this same issue. The positive housing statistics do not match their experiences with their own homes.”
I think that part of her problem is that her house is a 400K house. I don’t know about Boise, but in my neck of the woods those not only aren’t selling, but even the local realtors admit it in the media.
200K houses on the other hand, do sell fairly quickly in my little burg. I suspect that might also be the case in Boise. There just aren’t that many 6 figure income households in flyover.
Funny you mention that:
‘In Northern Colorado, (Eric Thompson) said about 3,500 new houses will come to market in the next 12 to 24 months. But the seller’s market doesn’t exist across all price levels, he said. Homes over $300,000 in Loveland and $400,000 in Fort Collins are in oversupply, producing a dual market, he said.’
“We’ve never seen this dynamic to this extent,” Thompson said.’
Yup, I saw that article. I was really surprised to see him admit that.
A $400K house in Boise is a pretty fancy place. Here’s an example. Sale pending at $415K. About 3,500 square feet in about the nicest neighborhood on a hill overlooking a golf course.
http://www.zillow.com/homes/hearthstone-boise-id_rb/#/homedetails/260-E-Hearthstone-Dr-Boise-ID-83702/79598425_zpid/
That’s about the same out here. 400K is high end.
http://www.realtor.com/realestateandhomes-detail/5113-Stoneridge-Dr_Loveland_CO_80537_M29033-39890
02/03/2013 Listed for sale $420,000
01/25/2012 Listed for sale $499,900
05/02/2005 Sold $475,000
http://www.zillow.com/homedetails/5113-Stoneridge-Dr-Loveland-CO-80537/13888249_zpid/
Yup, that price range is stone cold. Not that many 6 figure households who can afford them. I’m sure they local realtors are hoping for a “trade up” chain, though I have my doubts it will happen.
Here’s what ~400k would get you here. Pretty nice, IMO.
The homedebtor trying to sell this will probably end up with a nearly 100k haircut (purchased for 530k in 2004).
http://www.zillow.com/homedetails/4815-Keswick-Rd-Baltimore-MD-21210/36590538_zpid/
It’s not worth half that. That’s why it hasn’t sold and the debtor is underwater far deeper than he realizes.
That would be quite a bit less out here.
I didn’t say it was “worth it”, obviously it’s still high. Even after the $100k haircut it would still be too much to pay, IMO.
People buying in that area are buying for the area–good schools, extremely white, shares a ZIP with the nicest areas in the city. Attracts a certain kind of buyer that really isn’t my style.
oh look… another homedebtor that has a $100k “haircut” to look forward to: http://www.zillow.com/homedetails/3-W-Melrose-Ave-Baltimore-Md-21210-Baltimore-MD-21210/2115842711_zpid/
‘My $440,000 home that I purchased in May of 2011 just got appraised for $410,000, so I don’t understand where all these housing stats are coming from.’
She’s quite correct. Were seeing this same outcome play out around the country. The bottom is far below us and the losses are mounting.
“‘Bottom line is that, if you only pay attention to Realtor data, everything looks great,’
They are a serious problem. They are here on this blog.
Direct housing bubble report from my trip to San Fran last week.
Opened up the local paper.
Huge full page advertisement from a real estate office.
Showing a cute but small 3bd ranch with a one car garage on a postage stamp lot.
The advertisement?
xxx realtor sold this house with 28 offers in 2 weeks! At $117,000 OVER the $999,000 listing price.
We are in the obama housing bubble v2.0.
Retail Apocalypse: Why Are Major Retail Chains All Over America Collapsing?
TEC | 2-18-2013 | Michael Snyder
If the economy is improving, then why are many of the largest retail chains in America closing hundreds of stores? When I was growing up, Sears, J.C. Penney, Best Buy and RadioShack were all considered to be unstoppable retail powerhouses. But now it is being projected that all of them will close hundreds of stores before the end of 2013. Even Wal-Mart is running into problems. A recent internal Wal-Mart memo that was leaked to Bloomberg described February sales as a “total disaster”. So why is this happening? Why are major retail chains all over America collapsing? Is the “retail apocalypse” upon us? Well, the truth is that this is just another sign that the U.S. economy is falling apart right in front of our eyes. Incomes are declining, taxes are going up, government dependence is at an all-time high, and according to the Bureau of Labor Statistics the percentage of the U.S. labor force that is employed has been steadily falling since 2006.
When you step back and take a look at the bigger picture, the rapid decline of some of our largest retail chains really is stunning.
Just check out some of these store closing numbers for 2013. These numbers are from a recent Yahoo Finance article…
Best Buy
Forecast store closings: 200 to 250
Sears Holding Corp.
Forecast store closings: Kmart 175 to 225, Sears 100 to 125
J.C. Penney
Forecast store closings: 300 to 350
Office Depot
Forecast store closings: 125 to 150
Barnes & Noble
Forecast store closings: 190 to 240, per company comments
Gamestop
Forecast store closings: 500 to 600
OfficeMax
Forecast store closings: 150 to 175
RadioShack
Forecast store closings: 450 to 550
Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.
“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal- Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company.”
So what in the world is going on here?
The mainstream media continues to proclaim that we are experiencing a robust “economic recovery”, but at the same time there are a whole host of indications that things are continually getting worse.
Even global cell phone sales actually declined slightly in 2012. That was the first time that has happened since the last recession.
We are a nation that is in an advanced state of decline. But as long as the financial markets are okay, our leaders don’t seem too concerned about the suffering that everyone else is going through.
If the economy is improving, then why are many of the largest retail chains in America closing hundreds of stores?
Because we’re being lied to? I don’t know.
What I do know is that we just had an all-hands to talk about last year’s numbers and this year’s projections. Our target for this year is 70% of actual revenue for last year. Seems kind of nuts. They say it’s because we got a big one-time order last year that won’t be seen again this year. OK…but still seems really pessimistic.
“Why Are Major Retail Chains All Over America Collapsing?”
Read up on the lives and careers of two men if you want to understand the lions’ share of the explanation: Sam Walton and Sol Price.
Price Club changed America’s shopping experience
By Peter Eisner, December 15, 2009
Sol Price, then Chairman of the Board of The Price Company, speaking to a meeting of the National Association of Accountants in 1985.
Sol Price, 93, a business visionary whose Price Club retail stores revolutionized the way millions of Americans shop — in no-frills warehouses that offer bulk items at cheaper prices to consumers willing to pay membership fees — died Dec. 14 at his home in La Jolla, Calif. His family said he had been in declining health in the last two years and did not cite a specific cause of death.
The retail models that Mr. Price pioneered with Fed-Mart in 1954 and Price Club in 1976 were the inspiration for companies such as Wal-Mart, Sam’s Club and Costco, with which Price Club later merged. Sam Walton, who started Wal-Mart in 1962, later admitted he “borrowed” many of Mr. Price’s innovations, to which Mr. Price half-jokingly responded, “If I was so helpful, why don’t you just pay me a finder’s fee?”
If Mr. Price, as the acknowledged father of warehouse superstores, found consumers receptive to his approach, the same could not always be said of manufacturers. Initially, many producers, sometimes pressured by traditional retailers, rejected selling their products to Fed-Mart and Price Club.
Mr. Price responded by creating his own store brands, guaranteeing equal quality at a lower price. The resulting sales volume forced manufacturers to give in, said Walter Loeb, a retail consultant and board member of the Washington-based National Retailers Federation. Manufacturers needed the sales. “They had to sell” to Mr. Price, Loeb said.
Mr. Price was determined to keep prices and overhead low, figuring he would make a profit on the volume of sales. He paid high wages, worked with labor unions and gave generous benefits to his employees. In return he demanded scrupulous honesty and ethics in the pursuit of the lowest possible prices.
Bob Ortega, author of a biography on Walton, “In Sam We Trust,” described the differences between Walton and Mr. Price. “Sam Walton and Sol Price came from right angles to one another in their approaches to life and work,” Ortega wrote. “Price liked to claim he read the Daily Worker instead of the Wall Street Journal. . . . He was considerably more generous with benefits and wages than other discounters, Walton included. And, unlike Walton in those days, Price gave money to charities generously and often, through a foundation he created and to which he handed $70 million.”
…
“It will be 2008 all over again for many, except this time it will be Ben Bernanke’s Housing Bubble.”
It seems quite likely Bernanke will have left the stage by the time of the next SHTF moment, raising the prospect that his successor will take the blame for the bubble Ben reflated.
“Median home prices for Ada County are showing a 33 percent increase in January 2013 compared to the same month last year. I would suggest not getting too excited about these jumps in home price statistics. They are great for consumer confidence, but to put this into perspective, let me share a comment I received from Barbara in Boise.”
‘I beg to differ with these recent stats,’ said Barbara. ‘My $440,000 home that I purchased in May of 2011 just got appraised for $410,000, so I don’t understand where all these housing stats are coming from.’”
We’ve been over this time and again, but for Barbara’s benefit, why not go over it one more time?
An increase in the median home sale price potentially reflects two changes: One is the own-price increase in what individual homes sell for, and the other is change in the quality mix of homes that are selling. Given all the reports in the present episode of low-end homes getting snapped up by investors, my guess is that Barbara is confounding an uptrend in the distribution of homes that are selling with her likely correct finding that her own home is losing value.
There is nothing whatsoever inconsistent about this seeming divergence; in fact, if the value of luxury housing is dropping along with all other homes, enticing investors to aim higher, and low-end inventory has been sucked dry, it is entirely plausible for a rising median sale price to mask an across-the-board decrease in the prices of individual homes.