Buying Because Prices Are Going Up
Readers had some questions on the current housing market. “Two weeks ago on the local news radio station they interview a local hot shot broker. He was gushing over home sales and how great of a summer it was going to be, but what struck me most is he said ‘81 percent of buyers in 2013 are move up buyers who already own a house.’ I was shocked it was that high. First off using his numbers in theory you should put back 81 houses on the MLS for every 100 houses sold (excluding rental property) with new houses rounding out the other 19 percent.”
“Second, in my area I wouldn’t necessarily label them as ‘move up’ as to say get a better or bigger house, I’d label them as ‘move out’ as in get out of the McMansion and move to a cheaper place. I’ve seen more higher end homes on the market in my area than lower end homes. Buyers who realize how bad of an idea it was to buy that big place, plus if you were a 2005 buyer with 8 and 6 year old kids, those kids are now 16 and 14. College and empty nesting are just around the corner. Selling now to get out of your bad investment sounds pretty damn good now. Only question is: What happens when everyone in your neighborhood has the same idea?”
“Just a few weeks ago we were talking about how bad the sequester was going to hit the local economy. Defense Contractors and lawyers being interviewed on the local news about how a double digit percentage paycut were going to kill the local economy. Car dealerships couldn’t sell high end cars, restaurants at dinner time were vacant and just like that …….BOOM…….houses are selling like hot cakes. I just can’t see how with lingering pay cuts and furloughs around the area you could even think of buying now.”
A reply, “There’s a lot of people out there that made money during the boom, and they are desperate to do so again. They’ll see what they want to see and jump, and there are enough to create an echo bubble (for lack of a better term.) But you’re right, with the cuts in spending coming there’s going to be a lot of businesses (and housing investors) learn the meaning of deflationary spiral.”
One added, “California’s unemployment rate is still at a recession-level 9.6%, several years after the Great Recession officially ended. But that hasn’t stopped the housing market from prematurely roaring back to bubble-era price appreciation rates. Something about this market doesn’t smell right.”
One said, “I hear the term ‘It’s a good investment.’ So just what is a good investment? Baseball cards or beanie babies or cars or antiques (what is quality here) or art or sculpture or violins or PM’s or stamps or ? What is their premium to buy or sell or house or insure or can be freely move in bad times or?”
“Just remember that one man’s garbage is another man’s banquet. What I find of interest since my youth is that market makers have conned people into believing something is a ‘good investment’ when truly it isn’t. Fools and their money are soon parted and that is why we will always have wealth distributed unequally.”
From KTVN in Nevada. “I sat down with Michael Wood, a realtor with Re/Max Realty. He said homeowners are opting to short sale as opposed to foreclosing. I asked Wood if that is healthy for the real estate market. ‘It’s great if you’re a buyer and you can be the lucky buyer of a short sale and you can at a great price. It’s not good for everybody else, because what it does is short sales can, at times, artificially deflate a true housing value.’”
“Wood said even finding a short sale in this market isn’t going to be easy. He said there’s only about five weeks worth of inventory left, meaning homes available. Wood said he is seeing an average of five bids per home and up to 15 on others. Homes that are being sold for less than $300,000 are even more scarce because they are being swallowed up by investors.”
“Along with investors, Wood said 35% to 40% of his clients are relocating from California and looking to buy. All this adds up to low inventory, which means newer homes are starting to be built again. Wood said Di Loreto Homes has 19 reservations on homes here in Reno that aren’t even built yet.”
“I asked Wood, if he is concerned about another real estate bubble forming and bursting on all of us. He said he’s not concerned, at least not yet. ‘The last time we’ve been this high was 2009. We’re on the same trajectory going up as we were back in 2004 to 2006, right before the bubble. However, we started in the high $200’s. I think it becomes cause for concern if we see this string continue for another 12 to 16 months.’”
The Aledo Times Record in Illinois. “Sixteen of the 25 cities surveyed in the GateHouse Media’s Western Illinois Division project showed an increase in housing construction permits from 2011-2012. The total number of permits in the 25 cities grew from a low point of 219 permits in 2011 to more than double, 440, in 2012.”
“‘I think we’re kind of skating along the bottom,’ said Ty Livingston, East Peoria’s director of planning and community development. ‘One thing that hopefully shows there’s light at the end of the tunnel, even though we only had 31 permits, about half were spec homes.’”
Southern California Public Radio. “The lack of foreclosures in Southern California has contributed to housing supply crunch that, in combination with other factors—low interest rates, investors chasing deals—has driven up prices. ‘It’s likely that there will be no relief in terms of more foreclosure inventory in the next few months,’ said. ‘The California Homeowner Bill of Rights that took effect in January will in fact likely further reduce foreclosure inventory in the short term, but will likely result in a backlash of delayed foreclosure inventory near the end of the year or early next year.’”
“Stuart Gabriel, an economist who runs the Ziman Center of Real Estate at UCLA, agrees. He pointed out that banks currently holding foreclosures or dealing with a pipeline of distressed properties have an interest in not flooding the market. The two-step here is obvious: banks want to originate new mortgages and take advantage of a rising price environment; and they want to sustain property values in areas where they operate.”
“‘We know there’s a stock of foreclosures out there waiting to be resolved,’ he said. ‘Banks and financial institutions strategically regulate the pace of foreclosures so that they won’t further damage the markets where they hold a lot of loans.’”
TVNZ in New Zealand. “The International Monetary Fund (IMF) is warning that rising house prices are threatening the stability of New Zealand’s economy. BNZ chief economist Tony Alexander told ONE News the IMF is warning that property speculation could cause an economic shock. ‘They’re simply noting that there is a risk if the housing market does move into that more speculative stage then if there is a shock that hits the economy, we’d see some relatively strong falls in prices,’ he said.”
“Olly Newland, a property developer, says only certain sectors of the housing market have seen real growth while many areas remain stagnant. ‘The areas that are increasing the most are the middle class areas if you like, the mum, dad and three kids in the leafy suburbs.’”
“Those are areas like Mt Eden in Auckland. For example, in June last year one house sold for $700,000. Nine months and a renovation later, it is back on the market, listed at $985,000.”
“The IMF’s Dr Brian Aitken noted in the report that rising house prices are much more of an issue this year compared with last year, largely due to supply constraints in Auckland and Christchurch. However, Aitken warned that there also appears to be some easing of mortgage lending standards and as a result there is an emerging risk of sustained rapid price growth giving rise to a bubble type situation.”
“In response to the report, ASB Chief Economist Nick Tuffley told TV ONE’s Breakfast this morning that the Reserve Bank (RBNZ) is already developing prudential tools to slow bank lending, as the IMF suggested. But Tuffley said that tools, such as loan to value restrictions which could be used to ward off a sharp spike in house price inflation, would only be used sparingly by the RBNZ.”
“‘It’s more about building up the resilience in case we do go through that period of prices pushed up quite dramatically and then fall back for some reason. What they worry about is that if the price growth continues, we go back to the 2000’s and what they are worried about is that sort of behaviour where we all start buying because house prices are going up, and that risks putting prices up further than they probably should be going,’ he said.”
The house next door to me, which was purchased at auction, is already under contract.
Are you saying it was flipped/resold by the buyer at the auction? Did he fix it up? Do you know the auction price and the current asking price?
Along with investors, Wood said 35% to 40% of his clients are relocating from California and looking to buy ??
Three couples that we meet occasional on RV trips have moved from California to Reno…Purchased a year or two before retirement and made the physical move immediately after retirement…Tax flight…
‘Everything changed in the 2000s as property developers bought up farmland and water rights, seeing an opportunity to transform Fernley from a bedroom community of Reno into a commercial hub. Young couples and retirees flocked from California and the population more than doubled in just a few years. US Census numbers showed that in 2005, the area’s population growth was the third-fastest in the country, as Fernley surged from about 8,500 people in 2000 to at least 20,000.’
“We gained the pluses of that growth,” McCassie said. “But we also got the negatives. We’re seeing home invasions in Fernley, Nevada. It’s just crazy, we never had that.”
‘And as foreclosures have pushed families out of their homes, investors have swept in to buy them at pennies on the dollar and rent them out. The effect has been to create a new, lower class of residents in a place wary of outsiders.’
“I think it’s a lower income, it’s a different quality of people,” McCassie said. “You can drive around and tell which one’s a rental. There’s no lawn, there are cars everywhere, there’s trash.”
Yes Ben…Just shows the insanity of it all…A full blown pyrimid game…I lived in Reno for a couple of years in my early twenties so I know the area pretty well…Fernley ?? Are you kidding me !!
in 2005, the area’s population growth was the third-fastest in the country, as Fernley surged from about 8,500 people in 2000 to at least 20,000. ??
Why Fernley ?? Answer; Because they could….
https://www.google.com/#
Fernley is Amazon.com’s main warehouse/shipping depot for the west coast.
See http://www.youtube.com/watch?v=Z2Bs0nqVyqs
Well at least they have plenty of minimum wage jobs to support those rental houses.
Fernley, NV is in the middle of BFE. There are no jobs in Fernley. The commute to Reno is 40 miles, or more depending on where you’re going. Reno has a horrible job market. So, you’re buying a house with a minimum 80 mile per day commute to a town with few jobs, most of which are low paying. Brilliant. The “investors” are going to get cut off at the knees.
Isn’t zero interest rates, $6 trillion in new deficits, borrowing 46 cents of every dollar the government spends and the fake obama “recovery” great!
Now shut up and pay your fair share.
Reno-Tahoe Industrial Park is between Fernley and Reno. There are lots of distribution/warehouses locating there (WalMart, Diapers.com, Petsmart, Toys-R-Us, etc.). Apple is also building a data center in the area.
They don’t take a lot of people, so there aren’t A LOT of jobs, but you don’t need to drive all the way to Reno for the job.
Tell me more about my hometown.
Back in 1976 I was offered a professorship a the medical school but turned it down because of the towns transient nature and lack of projected water in the coming years. I guess the water problem was no problem!
No one sells a big house because their kids turn 14/16.
I know plenty of people that buy a bigger house after their kids graduate college because they now have extra money.
Saving something at that stage in life would be unthinkable for them?
That makes no sense at all. The parents who pay for their kid’s college education typically cough up the down payment on their kid’s first home… So, where’s all this extra money coming from? Oh, silly me. The parents just inherited money from their dearly departed parents…. All is revealed.
Interior Dept. cuts mineral payments to 35 states
CHEYENNE, Wyo. (AP) — The U.S. Department of Interior is cutting federal mineral payments to 35 states by about $110 million this fiscal year as part of the automatic federal spending cuts that started this month.
Wyoming Gov. Matt Mead announced this week that his state faces the biggest cut — at least $53 million over the next five months. Wyoming is the nation’s leading coal-producing state and last year received nearly $1 billion in federal mineral payments.
The federal government paid a total of $2.1 billion last year to the states, representing their share of revenue from energy and mineral production that occurred on federal land within the states, as well as offshore.
http://www.acadianabusiness.com/business-news/acadiana-business/13365-interior-dept-cuts-mineral-payments-to-35-states
$53 million = (53/1000) X $1 billion = 5.3% cut — significant, but not exactly a game changer.
The house next to me is already occupied by the new buyers….
Nov. 2012 - foreclosure auction
Jan. 2013 - FB kicked out with Harley and cases of beer
Feb. 2013 - house on market, sells in 5 days
Mar. 2013 - new buyers move in
The new buyers are quite a pair of 50-something guys. Both divorced. They were friends from college and decided to pool their post-alimony income on a house. They had been sharing a rented house and told me they had to move quick since they “lost” several houses they had tried to purchase.
Selling price $180K whereas Zillow says $140K.
Incredible. Some people say gold buying is an addiction. Next to real estate buying, gold buying is certainly not an addiction.
People mentioning “gold bugs” - well what about real estate bugs?
“real estate is up, therefore I should buy!” “Gold is up, therefore I should buy!”
BTW: Next week is another good gold buying week. Gold is up or down? I don’t know. But I buy regularly. I cannot buy a decent house once a month. If I could buy one decent house per month for the next 20 years (240 houses) I think I might come out ahead. Or not. I will stick to buying gold once a month.
At least in the case of gold, you can buy in small increments, and avoid the problem of forking over a fortune at peak bubble prices, the way so many real estate investors did.
Of course, it is also possible to buy real estate in small increments, e.g. through REITs, but if you know for sure that real estate is always going up, why not use leverage to invest in ten or more houses and become a millionaire?
At least in the case of gold, you can buy in small increments, and avoid the problem of forking over a fortune at peak bubble prices, the way so many real estate investors did.
You can _sort_ of buy RE in small increments: e.g. you could purchase C-S futures contracts of growing size on a long-term basis. I’m sure the transaction costs would not be trivial, but they’re not that high either.
That would be a rough approximation of buying RE on a dollar-cost averaged basis.
I’m starting to check out Bitcoin, not primarily as a substitute for gold but as a way to store some cash more safely rather than under the mattress.
“…you could purchase C-S futures contracts of growing size on a long-term basis.”
At a price that doesn’t reflect the expected impact of QE-to-infinity MBS purchases on future housing prices? Call me skeptical if you wish, but I doubt it…
“Falling housing prices to dramatically lower and more affordable levels is positively bullish for the economy.”
Peter Schiff- “Housing prices will continue falling for years”
Peter Schiff Kicks Off 2013 With Another Bomb - Is Right On Housing Again
http://www.youtube.com/watch?v=G0u8sRevgEw
I’d certainly agree on that. The powers that been never seem to consider the needs of ordinary people and younger generations.
You know who “won” in the housing bubble? Miami. Unlike some of those exurban ghost towns, it turns out people really wanted to live in new luxury towers in what had been a dead city center. But not at the cost those luxury towers cost to build.
Thanks to the bubble, a whole bunch of towers were built, went bankrupt, had their debts written down, and were successfully filled with renters. The whole rest of the country has ended up subsidizing that development.
Overbuilding is the Red State equivalent of subsidized housing (and office space and retail space). And because the subsidy is back door, after the financial meltdown and bailout, they don’t even have to admit that in the end its taxpayer money! And their housing projects are much nicer than our housing projects.
Florida is not a red state anymore. Sure there are some QT, filed areas obsessed with guns and gays but it’s a purple state now.
I mean WT (white trash) not qt.
My parents Florida house is in a WT area, port St. Lucie. Hence they get few visitors despite having a huge house and boat down there.
Their Maryland house has the advantage of being close to civilization.
it turns out people really wanted to live in new luxury towers in what had been a dead city center. But not at the cost those luxury towers cost to build.
Thanks to the bubble, a whole bunch of towers were built, went bankrupt, had their debts written down, and were successfully filled with renters.
I suspect this will be the case in many cities beside Miami. There are a lot of people who want to live downtown in almost any city- particularly young people- but most cannot afford a half million dollar condo. Write down the value of the condos, and put them up for reasonable rent, and they’ll fill up most everywhere.
“But you’re right, with the cuts in spending coming there’s going to be a lot of businesses (and housing investors) learn the meaning of deflationary spiral.”
The long-forecast deflationary spiral has long been offset by an ever vigilant effort by the Fed to prevent it.
Why would anyone expect this situation to ever change?
Good point PB.
It’s “been deflationary” in 2009 when VFINX gained 1%.
It’s “been deflationary” in 2010 when VFINX gained 14.91%.
It’s “been deflationary” in 2011 when VFINX gained 1.97%.
It’s “been deflationary” in 2012 when VFINX gained 15.82%.
So far this year my admiral fund version of this, VFIAX, gained over 10%.
If this is deflation, I’d like to see inflation.
Wall Street is disconnected from the real economy.
One does wonder, if the great credit expansion is over, what is making the stock market index go up? If it’s not over, one migt want to step aside before everyone else. If it is over, one might want to run.
Relax. The Vanguard 500 index fund annual rate of return since nearly 38 years ago is 10.74% as of March 1. This is about in line with the rate of return of broad markets since 1926.
The best deal is to consider which asset class has the best historical returns over the long haul (wars, recessions, depressions, various crises) and bias your investing toward that.
From my perspective, at age 18 in 1977 it appeared the trend was for the stock market to crash and gold to win. I did not expect the reverse of Jimmy Carter to happen in 1980. Barry Commoner was a strong contender under the strongly socialist Citizen’s Party. It appeared that either Commoner or Carter would win in 1980 and make the U.S. go far deeper into socialism. But it did not happen. It was less socialism that happened instead, with more room for people to buy stocks and profit.
I think it’s possible for gold to crash in 2016 and stocks to tumble 50% before gold crashes, but then stocks will recover.
Big government itself is cyclic. The S&P 500 will go far higher in the next 20 years.
Bill,
I get it that the world didn’t end in the ’70s. I bought an ounce then at the nosebleed price of $80. I also saved silver dimes in the early ’60s because my uncle told me the government was going to stop making them out of silver, unthinkable.
What I think you are saying is that betting on credit expansion has been a very good tactic for the last 38 years; it may pause or have a correction, but it will always be a good bet; expansion is unstoppable.
I wonder, when the stock market “tumbles” again, can this country afford to prop it back up again for those like you? I know lots of people who were pretty sad last time about their 401Ks, but it has cost us an unimaginable amount of debt to make them feel better. My personal impresion is that this debt generated recovery is not economic expansion, and not a real recovery of what lies under stock prices.
I get it that the world didn’t end in the ’70s.
I have outlived so many predictions of oncoming doom so far in my lifetime, I have lost track of them. Very little of modern life was predicted then or earlier, not even in science fiction and fantasy writings.
We must remind ourselves that buying stock is merely a means of providing capital for businesses to grow and to profit from the growth. As tresho says, very little of modern life was predicted in the 70s or earlier, not even in science fiction or fantasy writings. IOW, not all equations stay the same.
Bitcoin or its successor might be the next big revolutionary thing. This could separate politics from currency. In turn, this could stop government from using inflation to finance its growth, and government will instead have to raise taxes significantly or cut spending on nanny state programs and being world cop.
Medical discoveries related to resveratrol lately: Some researchers claim there are people alive today who will live to age 150. Think about this as a way to encourage people to save in less risky assets or not have to save as much and depend on compounding to retire in 100 productive years.
Gold and Bitcoin are basically my ways of insurance against crises. But stock investing is still the quickest way to financial freedom for most of us who have taxes withheld. My favorite funds outside my 401k are VTCLX, VSGAX, VEMAX, VWESX, VFIAX, and DODFX. I buy a certain dollar amount of shares at regular intervals and have been doing so for all before, during, and after the 2009 dip.
‘I wonder, when the stock market “tumbles” again, can this country afford to prop it back up again for those like you?’
What the country can ‘afford’ to do matters far less than what the FOMC decides is in the country’s best interest. For now, they have decided that quantitative easing is best, including long-term Treasury and MBS purchases. Invest accordingly.
DON’T FIGHT THE FED!
“We must remind ourselves that buying stock is merely a means of providing capital for businesses to grow and to profit from the growth.”
Given how the trend is for companies to buy back stock (to prop up stock prices) I don’t see how that really applies these days. What percentage of stock sales transactions are for newly issued shares as opposed to resale?
It seems to me that buying and selling stocks isn’t all that different from from flipping houses.
The Importance of stock market and How Stock Market is Important for Countries [sic] Economy:
http://www.sharetipsinfo.com/economy-stock-market.html
If you get around the spelling and grammar problems, this is a great article.
The two ways to grow a business are 1) to borrow and 2) to issue stocks. Take away 2 and you just will have borrowing.
To deride stocks and the stock market as a mere casino is very arrogant in the face of a few hundred years of its existence. If the stock market was bad for an economy, you’d think no country would want it. But more and more countries are establishing stock exchanges. Just a few years ago Iraq did just that.
The two ways to grow a business are 1) to borrow and 2) to issue stocks. Take away 2 and you just will have borrowing.
What about making a product people like, selling it, and reinvesting (at least some of) the profits?
What about making a product people like, selling it, and reinvesting (at least some of) the profits?
correct. savings is being overlooked. it is a very viable way to grow a business/company.
“‘We know there’s a stock of foreclosures out there waiting to be resolved,’ he said. ‘Banks and financial institutions strategically regulate the pace of foreclosures so that they won’t further damage the markets where they hold a lot of loans.’”
‘resolved’
Did he mean ‘liquidated’?
“Did he mean ‘liquidated’?”
Did he mean the hidden inventory in his imagination ?
He lives in a world of truth, whereas you live in one of imagination. In your case, ignorance is obviously bliss, but I have a feeling that’s to change very soon.
So where are the usual idiots like Housing Analyst to tell us how bad the market is ?
‘how bad the market is’
Depends on what you mean by bad. When I read that 19 houses have been bought from one builder, pre-construction, in Reno, it sounds kinda speculative. I don’t give a rats butt about houses. I do care about what this bubble might mean for the economy and everyone in it. I realize there are some that are only concerned if their little shack goes up or down.
You know what is really concerning? That we are even seeing this stuff go on. There was a time when house prices weren’t on the headlines of every financial page. When we had a real economy based on real jobs. IMO, the US has turned into ponzi schemes layered on manipulation, floated by printing presses at the central bank. Celebrate that if you want, but it looks like a pretty shaky situation to me.
“it looks like a pretty shaky situation to me.”
Shaky is what you get when the structure is founded on spin.
The reality?
Mortgage applications haven’t been this low since 1997. There is no recovery… yet. A recovery in housing is dramatically lower prices by definition.
To invoke the expression of one of our more notable contributors;
The market is booming,
but where are the buyers?
Inventory is looming,
Realtors are liars.
There was a time when house prices weren’t on the headlines of every financial page. When we had a real economy based on real jobs. IMO, the US has turned into ponzi schemes layered on manipulation, floated by printing presses at the central bank.
Sadly, this has become a global phenomenon.
“IMO, the US has turned into ponzi schemes layered on manipulation, floated by printing presses at the central bank.”
IMO, this already started to end badly with the initial wave of U.S. housing bubble collapse which started in August 2007. Thanks to the Fed’s hair-of-the-dog stimulus, it will end much worse. I just hope history properly blames Alan Greenspan and Ben Bernanke for the carnage to come, even though current MSM propaganda has given them a pass.
Lesson learned from years of observing the housing bubble:
The damage from bad economic policies can pile up for years and years, and can take many decades to correct.
Get ready for it. As for myself, I plan to become more philosophical and less materialistic in the coming decades as a coping mechanism. Those Americans who are irrevocably materialistic will suffer immensely in the coming decades.
U.S. Economy
Why Japan’s “Lost Decades” Are Headed to America in 2016
By Keith Fitz-Gerald, Chief Investment Strategist, Money Morning
December 26, 2012
It’s only been a little more than a week since Shinzo Abe won election as Japan’s latest Prime Minister in a landslide-election victory and the pundits are already lining up telling investors to “buy Japan” because it’s “dirt cheap.”
The hope is that Abe’s promises of fresh stimulus, unlimited spending and placing a priority on domestic infrastructure will be the elixir that restores Japan’s global muscle.
As a veteran global trader who actually lives in Japan part time each year, and who has for the last 20+ years, let me make a counterpoint with particular force - don’t fall for it.
I’ve heard this mantra eight times since Japan’s market collapsed in 1990 - each time a new stimulus plan was launched - and six times since 2006 as each of the six former “newly elected” Prime Ministers came to power.
The bottom line: The Nikkei is still down 73.89% from its December 29, 1989 peak. That means it’s going to have to rebound a staggering 283% just to break even.
Now here’s the thing. What’s happening in Japan is not “someone else’s” problem. Nor is it something you should gloss over.
In fact, the pain Japan continues to suffer should scare the hell out of you.
And here’s why…
‘What’s happening in Japan is not “someone else’s” problem’
As I’ve mentioned before, does anyone remember the first central banker or politician to set this in motion in Japan? Of course not. So do you think Bernanke is worried about his “legacy” of $100k speeches and wall street consulting? Is Obama worried he will miss any meals after he has “foamed the runway” for banks?
Yet we see posters here, “ooo, my shack is cash flowing, woopee!” Who gives a sh*t? We’re witnessing the economic destruction of generations of people in this country.
Yet we see posters here, “ooo, my shack is cash flowing, woopee!” Who gives a sh*t? We’re witnessing the economic destruction of generations of people in this country.
that’s it in a nutshell.
Is this the first time on record that a housing recovery has led a jobs recovery?
Something smells very wrong about this. In fact, it smells like an incipient echo bubble collapse.
California unemployment is highest in US, but construction continues to improve
Matthew DeBord | March 18th, 2013, 7:52am
Housing Starts In June Rise To Highest Level In Three Years
Justin Sullivan/Getty Images
A construction worker installs a window in a new home in San Mateo, California. Construction hiring in California has improved steadily for several consecutive months.
California tied Rhode Island for the highest unemployment rate in the U.S. in January, the Labor Department reported Monday. Both states currently stand at 9.8 percent.
California’s unemployment rate has been stuck at 9.8 percent for three months in a row. However, the state continues to be among the nation’s leaders in job growth. California has added 254,900 jobs since January of 2012, second only to Texas, which has added 310,900.
And any comparisons between California and Rhode Island are of the apples-to-oranges variety: Rhode Island has less than half a million total employed workers, while California has over 14 million.
Construction continued to show marked employment improvement in California in January, according to the Bureau of Labor Statistics. More than 7,000 construction jobs were added in from December to January; only the leisure and hospitality sector did better, adding a little over 8,000 jobs.
It was the third consecutive month of construction hiring increases in California. And on a year-over-year basis, the state saw construction add 17,600 more jobs this January than in 2012.
Nationally, construction added 28,000 jobs in January, so a quarter of those were in California. At this point, it’s reasonable to expect that this trend will continue. Spring is typically a stronger season for real estate than winter, and throughout California, inventories of homes for sale are so limited that sales have been falling, after recovering for much of 2012.
Prices, on the other hand, have been rising. Homebuilders have recognized this and have started to ramp up new construction. Housing starts still are well below the level achieved before the financial crisis, but they’re higher than they’ve been in four years.
…
Recession Watch
California’s Economic Recovery Has Been a Tale of Two States
By Albert Samaha Fri., Mar. 29 2013 at 2:56 PM
When President Obama was elected in November 2008, the national unemployment rate was at 6.5 percent, and quickly rising. The Great Recession was picking up speed. By the inauguration, the unemployment rate had reached 8.5 percent. It eventually peaked a year later, in January 2010, at 10.6 percent. And it’s been a slow trudge back ever since.
San Francisco, of course, weathered the maelstrom better than most cities. The city didn’t fall as far, and has been climbing back up more quickly — from housing market to job growth.
The most recent labor data show that the upward trend continues for the Bay Area, particularly from San Mateo up through Marin. But while SF has helped solidify the economies of its neighbors, the region’s success has only underscored California’s economic stratification.
San Francisco, Marin, and San Mateo counties were the only ones in the state with an unemployment rate below 6.5 percent in February (not seasonally adjusted), according to preliminary data released by the state’s Employment Development Department. Meanwhile, 34 of the state’s 58 counties had a rate above 10.6 percent.
The economy is certainly improving all around. In February 2012, the country had a (not seasonally adjusted) unemployment rate of 8.7 percent (8.3 if seasonally adjusted, which is how it’s usually presented). This year, it was at 8.1 percent (7.7 adjusted). The improvement has been more dramatic in California: from 11.3 percent to 9.7.
Of the 22 counties below that state average, eight are in the Bay Area. In fact, seven of the 10 lowest unemployment rates are Bay Area counties, including four of the lowest five.
Marin County had the lowest rate in the state for February, at 5.4 percent (which is still higher than the national average when Bill Clinton left the Oval Office). San Mateo County was second, at 5.9 percent, followed by SF, at 6.3, Orange County, at 6.5, and Napa County, at 7.0.
But there is a deep drop off from there. More than three-quarters of California’s counties had unemployment rates worse than the national average. Fourteen counties had rates above 15 percent, and two of those– Colusa and Imperial– were at Great Depression-era marks above 24 percent.
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Dumb question of the day:
Has there ever been a point in time since 1913 when the Fed’s top-down monetary policy interventions did not stand free enterprise and a rational approach to participating in the U.S. economy as either a worker, a consumer or an investor, COMPLETELY ON ITS HEAD?
Why does the Fed pretend that providing incentives for dumb economic behavior is somehow beneficial?
Has there ever been a point in time since 1913 when the Fed’s top-down monetary policy interventions did not stand free enterprise and a rational approach to participating in the U.S. economy as either a worker, a consumer or an investor, COMPLETELY ON ITS HEAD?
1945 to ~1970 seemed like a pretty good run. Patient, low risk, long-term investing paid off, without the need of bubbles.
So I guess the collapse of Bretton-Woods was the catalyst for the era of collapsed bubbles and TBTF bailouts?
The inflation required to pay off the Viet Nam war, coupled with the Arab oil embargo, and new competition for our manufacturing base, combined to create a perfect storm that crippled the decades-long Keynesian expansion and set the political stage for Reagan to bring in Greenspan and the trickle-down economics that have been destroying us ever since.
‘1945 to ~1970 seemed like a pretty good run’
Like Jim Rogers said recently, give me a trillion dollars and I can show you a good time:
‘The charts below show clearly just how far the once mighty US Dollar has fallen…Since 1999, the dollar has fallen in value from about 123 mg of gold to less than 21 mg today – a drop of more than 80%. Overall, from 1900 to 2010, the dollar fell from 1500 mg to 25 mg, losing over 98% of it’s purchasing power. Penny candy now costs 50 cents. The “Five and Dime” is now the Dollar Store.’
‘The future, however, looks even bleaker. Recent comments from the Federal Reserve indicate that near-zero interest rates and “quantitative easing” (Fed-speak for money printing) can be expected to continue “for an extended period.”
http://pricedingold.com/us-dollar/
Like Jim Rogers said recently, give me a trillion dollars and I can show you a good time:
That pretty well describes the Reagan ‘Miracle’. Except the trillion was borrowed.
http://www.american.com/archive/2013/march/the-next-real-estate-bubble-farmland
As long as it isn’t farmland…?
Dear God,
Please let me live long enough to see these Communist oligarchs lose their shirts!
Sincerely,
Get Stucco Cantankerous Bear
Here’s to hoping the Fed collapses along with these Red Chinese communists’ real estate investments.
Chinese Politicians Are Buying Billions In U.S. Real Estate
Submitted by Tyler Durden on 01/22/2013 21:12 -0400
Back in September, we explained that when it comes to “boom” in US real estate, there are three key driving forces: i) the Fed’s monetization of mortgage backed securities whose impact however is at best to stabilize the demand floor (and judging by the recent collapse in refi activity even that is questionable), ii) an implicit subsidy as banks keep millions of units on their books (to get a sense of how much check out at the chart in “Six Month + Delinquent Mortgages Amount To More Than Half Of Bank of America’s Market Cap”) in some phase of the foreclosure process, and away from clearing in the market, and perhaps most importantly, iii) the fact that the NAR can legally launder offshore money courtesy of being exempt from anti-money laundering provisions. This allows billions in ill-gotten offshore cash, sourced primarily from Russia and China, to be “invested” in US real-estate, with no cost or pricing discrimation and without any questions asked from any authorities. Because, sure enough, the final result can be spun as a “boom” in real estate by the administration and the banks so very invested in reflating the housing bubble.
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Is $64 billion a lot or a little with respect to the size of Megabank of America’s operation?
Home
Six Month + Delinquent Mortgages Amount To More Than Half Of Bank of America’s Market Cap
Submitted by Tyler Durden on 12/19/2012 09:02 -0400
For those curious why many people are scratching their heads how the market cap of Bank of America has nearly doubled in the past year, here it is: “Bank of America Corp. has amassed $64 billion of mortgages that are at least six months delinquent and have yet to enter foreclosure, more than twice the amount held by its four largest competitors combined.” $64 billion is more than half the market cap of Bank of America as of this moment.
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Being a too-big-to-fail Wall Street Megabank means never having to say you’re sorry.
Bank of America gets most complaints about mortgages, new database shows
March 29, 2013, 8:36 AM
Bank of America is the most-complained-about company when it comes to mortgages, garnering more than 15,000 complaints on issues such as loan modifications and servicing since late 2011, according to information released this week from a federal database of consumer complaints.
Other top complained-about companies are Wells Fargo, with about 8,000 mortgage-related complaints, and J.P. Morgan Chase, with about 5,000 mortgage complaints, according to the Consumer Financial Protection Bureau’s database that covers mortgages, and other products such as credit cards and student loans.
“When we get complaints directly from our customers or through the CFPB or other sources, we thoroughly investigate them and if we’ve made a mistake, we work to do what’s right for our customer,” wrote Tom Goyda, a Wells Fargo spokesman, in an email.
Bank of America and J.P. Morgan Chase did not respond to a request for comment.
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A $6.2 Million Apartment for a 2-Year-Old? Such is NYC’s Luxury Housing Market
Sarah Goodyear
Mar 28, 2013
Talk about investing in the future. A Chinese woman recently purchased a $6.5 million condo in the One57 building in Midtown Manhattan, which is to be New York’s tallest residential tower when it’s completed next year. She wasn’t buying the place for herself, she explained to her broker, but for her young daughter. Her very young daughter.
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This bull cannot be stopped!
Too bad single Americans aren’t similarly prohibited from buying up single-family homes, and pricing young families out of the market.
RPT-UPDATE 1-Three major Chinese cities to enforce new property cooling measures
Sun Mar 31, 2013 11:24pm EDT
(Repeats story from Sunday)
(Reuters) - Beijing, Shanghai and another major city in China’s southwest will implement strict property cooling measures as part of a central government crackdown on the overheated property market, state news agency Xinhua has said.
The move comes as the central government faces renewed pressure to stabilize skyrocketing home prices in several major cities.
Under the new measures, single Beijing residents will be prohibited from buying second homes, Xinhua said on Saturday.
The central government said earlier this month that in areas where property prices are rising too quickly, local governments must strictly enforce a 20 percent capital gains tax and higher down payments for second-home buyers.
Beijing’s municipal government said the tax could be waived if the family only owns one home and has lived in it for more than 5 years.
Shanghai municipal government said in addition to enforcing the capital gains tax, it would apply greater scrutiny to borrowers who come from other cities, are foreign or divorced.
The new rules will take effect March 31, Xinhua said.
The municipality of Chongqing also said late on Saturday it would implement the new property cooling measures and ensure all districts are responsible for stable housing prices.
In 2013, Chongqing will also ensure that the supply of land for housing will not be lower than the average actual supply of the past five years.
China’s southern province of Guangdong said on Tuesday it would work to implement the same directive, singling out four cities, including Guangzhou and Shenzhen, which have also seen home prices rise rapidly compared with other urban centres.
On a population-weighted basis derived by Reuters from official data, Beijing home prices jumped 21.8 percent in February compared with a year earlier. Shanghai home prices were not far behind, gaining 14.6 percent during the same period.
Year-on-year prices for new homes in China rose in February for a second consecutive month. (Reporting by Wan Xu, Megha Rajagopalan and Melanie Lee; Editing by Paul Tait)
Weekend Edition March 29-31, 2013
Hard Landing in China? It’s Just a Matter of Time
China’s Shadow Bankers and the Vampire Squid
by MIKE WHITNEY
“China is displaying the same three symptoms that Japan, the U.S. and parts of Europe all showed before suffering financial crises: a rapid build-up of leverage, elevated property prices and a decline in potential growth.”
– Zhiwei Zhang, Nomura economist
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