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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Mike Whitney nails it yet again. The money quote:
“Everything about the US housing market is fake”
http://www.counterpunch.org/2013/02/11/housing-hijinx/
From the article;
“There remain over 10 million vacant housing units” and that does not include the “shadow supply”.
Again….. if you bought a house 1998-2013, you’re going to lose a lot of money. ALOT of money.
—Again….. if you bought a house 1998-2013, you’re going to lose a lot of money. ALOT of money._—
Same post every month, 7 years. Whatever…
It’s great to see you are finally catching on, despite your mental handicap.
“Sadly, we have a broad, highly paid group pushing hard for a housing “recovery” which simply doesn’t exist.”
The facts are;
-Housing Prices Are falling
-Housing Demand is at 15 year lows
-Housing inventory is massive in the tens of millions of excess empty houses
-Housing prices are grossly inflated… and falling
Buying a house would not be a big deal if people could be confident they could sell it without a major loss.
Well….. Let’s be honest. Housing is loss at any price, ALWAYS. Now at current inflated asking prices, the losses are tremendous compared to any other option. And these losses are irrecoverable.
Suburban Maryland = incalculable losses
Atlanta = incalculable losses
Sacramento = incalculable losses
Buy a house today, and your losses will be incalculable.
Did the Fed and the Bank of Japan “cause” the gold crash?
Fed and Bank of Japan caused gold crash
Commodity prices have been falling since September, culminating in a rout over the past two weeks. That is a classic warning for the global economy.
The upward trend of the great bull market has been broken. The technical damage is brutal. Bank of America expects a further drop to $1,200. Be patient
By Ambrose Evans-Pritchard
7:22PM BST 17 Apr 2013
It is becoming ever clearer that the roaring boom in global equities since last summer has priced in an economic recovery that does not in fact exist. The International Monetary Fund has had to nurse down its global growth forecasts yet again. We are still stuck in an old-fashioned trade depression, with pervasive over-capacity in manufacturing plant and a record global savings rate of 25pc of GDP.
German car sales fell 17pc in March. That should puncture the last illusions that Germany is about to pull Europe out of a self-inflicted slump.
As you can see from the chart below, the divergence between stock markets and the Deutsche Bank index of raw materials is astonishing to behold, so like the pattern in early 1929.
…
The astounding multi-year gold bubble was caused by fears over the Federal Reserve’s actions. Funny how now that the long-overdue crash is in session, all the gold bugs want to blame the Fed for crashing it.
“…all the gold bugs want to blame the Fed for crashing it.”
It is very hard to look one’s self in the mirror and say, ‘Experience keeps a dear school, but fools will learn in no other. And I just proved to myself how big a fool I really am.’
How many houses in your area are hitting the market with ‘unrealistic expectations’? Here in Maryland I’ve seen quite a few houses hitting the market (shooting down the tight inventory theory). One house, which I do like, has overshot my estimate by about 20 percent. It’s on a main road, set back with a nice 1 acre square lot (tree lined, ability to build on it). The price has almost tripled from 12 years ago. In the notes it clearly says “As is”, and looking at the pictures it needs a lot of work and updates.
So how can the average American afford this place? How can I buy a house in 2013 dollars when I currently (after two paycuts) make 1999 dollars? I really do want to buy a house. We like the area and aren’t planning on moving until my daughter graduates high school (She’ll be in the Class of 2029 by my estimates)
The average American CAN’T afford it. Lying Realtors, lenders, etc have conditioned people to believe that unaffordable real estate is normal, that paying a large percentage of their income to a bank as mortgage interest is a good thing.
Lying Realtors, lenders, etc have conditioned people to believe that unaffordable real estate is normal
And not just in the US. This is a worldwide phenomenon.
Unfortunately, HB_2.0 may have already priced you out again. Hopefully, you will be able to save enough money to buy after the next crash. Can you get a mortgage? I’ll bet you could make money if you got a mortgage and sold in a couple years.
Why would anyone want to buy a house when rental rates are half the monthly cost?
Worse yet… housing prices are lower today than they were in 2010….. and falling.
Where I live, renting is not 1/2 the cost of buying. It’s about 2/3. That’s why I rent.
However, since we are apparently in the beginning phase of another bubble, we can probably expect prices to go up by some insane amount over the next couple years. I doubt that this bubble will be much different from the last. I think it will probably just be shorter, since it is driven more by speculators with cash, and less by speculators with no-pay mortgages.
How can we be “in the beginning phase of another bubble” when prices haven’t stopped falling from the previous bubble?
PW:
Prices have turned around in many places. They are now going up, instead of going down. The rate of appreciation is bubblish.
Here in Phoenix the prices have gone up as much as 20% depending on where it is. The really cheep stuff is gone but the prices are still much better than at the peak.
“Prices have turned around in many places.”
Name one.
PW:
Here is the Zillow chart (per square foot) for Arizona: http://www.zillow.com/local-info/AZ-home-value/r_8/#metric=mt%3D11%26dt%3D1%26tp%3D5%26rt%3D14%26r%3D8%252C394976%252C395167%252C395002%26el%3D0
Here is the same chart for California: http://www.zillow.com/local-info/CA-home-value/r_9?disambig=9827_51231_44405_37693&pri=9#metric=mt%3D11%26dt%3D1%26tp%3D6%26rt%3D14%26r%3D9%252C394806%252C395057%252C395025%26el%3D0
This is for Nevada: http://www.zillow.com/local-info/NV-home-value/r_42?disambig=6136_6135_8947_53512&pri=42
I really don’t feel like doing this for all 50 states.
PW:
I just submitted a post with a bunch of links, but I don’t know when it will go through mediation. Check Zillow for California, Arizona, and Nevada. Might as well check it for all 50 states; I don’t have the time. It is a national phenomenon.
However, since we are apparently in the beginning phase of another bubble
There is no way the bounce will last as long as the original bubble. It can last longer than expected (see stocks) but I think it’s nuts to say “the last one lasted X years, so that means we’re XX% of the way into this one”.
Carl:
That is the question of the day, isn’t it? How long can it last, and how high can it go?
Just long enough to maximize the pain.
I really depends on lenders. If lenders get stupid again, prices could go up really high, really fast, in which case we could rebubble really fast.
If lenders don’t get as stupid as fast, we should see a slowdown in the pace of price growth as new housing developments get closer to historical averages, in which case, we might have a long climb, like what was seen coming out of the early 90’s recession.
But the difference with Bubble 2.0 is the proportion of all-cash investors. I don’t think this one is fueled by mortgage lenders.
It may be fueled by some type of loan being given to hedge funds. I know all that cash in the hedge funds isn’t really all cash. A lot of it HAS to be primarily borrowed. It may be borrowed against an asset of some type.
I am trying to think of ways to find out where the money is actually coming from.
like what was seen coming out of the early 90’s recession.
I don’t believe it because that was a real recession that was allowed to run its course, and then a real recovery that you get after such an event. None of the ingredients are in place (yet) for a real recovery.
“It may be fueled by some type of loan being given to hedge funds. I know all that cash in the hedge funds isn’t really all cash. A lot of it HAS to be primarily borrowed. It may be borrowed against an asset of some type.”
Why not?
Major investors in PE funds are institutions…pension funds, foundations, endowments, sovereign wealth funds etc. They have lots of cash…Billions upon Billions.
I haven’t even touched on the billions that are in the hands of large family offices.
There is A LOT of such money that flows into PE without debt.
Lenders were never stupid in the first place. Remember, they offloaded the risk onto the secondary market (Fannie/Freddie) while collecting fees. With no more secondary market, they will not lend. The bubble will fizzle when the cash does.
Well Liars…. to substantiate your lie that prices are rising you post a chart of “values”?
Here’s the TRANSACTION price in:
California- FALLING
http://picpaste.com/pics/753bc1d7b6fbfdc167962bfb319701e2.1366424189.png
Oregon- FALLING
http://picpaste.com/pics/d17363aaee261e0b82bde16570b35c2d.1366424230.png
Washington- FALLING
http://picpaste.com/pics/17c52b168bba17c3c93eb46f5505ef39.1366424283.png
Maryland- FALLING
http://picpaste.com/pics/aae044a5f01ce74c8e0f6282763f45fb.1366424315.png
District of Columbia- FALLING
http://picpaste.com/pics/26b7b2c27a954afe537f07449528361d.1366424346.png
I don’t have the time. It is a national phenomenon.
Note to the reading public:
Prices are falling. Now is a horrible time to buy a house. You WILL lose ALOT of money if you buy now. Rental rates are falling too. Rent for half the price of buying at these horribly inflated prices. Buy later, after prices crater for 65% less.
“The bubble will fizzle when the cash does.”
That’s the hope…unless the Feds start to guarantee worse and worse credit borrowers through the FHA and Fannie/Freddie, essentially making the bad loans limitless again.
“Here in Phoenix the….really cheep stuff is gone…”
This is pretty funny. One of my kids walked away from a house in Phoenix 5 years ago and the bank still hasn’t foreclosed. Five years of squatters and/or just falling apart. Sure, houses are moving like hotcakes.
How is the global economy shaping up these days?
ft dot com
Last updated: April 16, 2013 4:36 pm
IMF cuts 2013 global economic outlook
By Chris Giles in Washington
Olivier Blanchard, chief economist for the International Monetary Fund©Bloomberg
The International Monetary Fund warned that an “uneven recovery is also a dangerous one” for the global economy as it again downgraded its growth forecasts for 2013, while holding out the prospect of relief late in the year.
In its twice-yearly World Economic Outlook, the fund outlined high medium-term risks stemming from doubts about the eurozone’s ability to claw its way out of its crisis, and the ability of the US and Japan to cut public sector deficits and debt.
But the IMF recognised that short-term perils had abated as financial markets approved of the eurozone’s crisis management last year and the US authorities’ willingness to come to arrangements to limit automatic and rapid fiscal tightening under sequestration.
Highlighting the differential outlook for countries’ economic prospects, Olivier Blanchard, chief economist of the IMF, said: “The world economy is as weak as its weakest link.”
He added: “Given the strong interconnections between countries, an uneven recovery is also a dangerous one. Some tail risks have decreased, but it is not time for policy makers to relax.”
…
Are central bankers flying blind these days?
ft dot com
April 17, 2013 8:36 pm
Central bankers say they are flying blind
By Chris Giles in Washington
Growing concern at the International Monetary Fund over the long-term side-effects of interest rates close to zero came as some of the leading figures in central banking conceded they were flying blind when steering their economies.
Lorenzo Bini Smaghi, the former member of the European Central Bank’s executive board, captured the mood at the IMF’s spring meeting, saying: “We don’t fully understand what is happening in advanced economies.”
In this environment of uncertainty about the way economies work and how to influence recoveries with policy, Sir Mervyn King, the outgoing governor of the Bank of England, said that “there is the risk of appearing to promise too much or allowing too much to be expected of us”.
It is troubling for monetary policy experts that their crisis-fighting tools – rates stuck at zero, money printing operations to bring down longer-term interest rates and encourage private sector spending, and efforts to calm financial market fears – might have nasty side-effects.
The central bankers were clear that they had got it wrong before the crisis, allowing themselves to be lulled, by stable inflation, into thinking they had eliminated financial vulnerabilities.
Speaking to the IMF’s conference on rethinking global macro-economies, Janet Yellen, vice-chairman of the Federal Reserve, said: “In the years before the crisis, financial stability became a ‘junior partner’ in the monetary policy process, in contrast with its traditionally larger role.”
The question now was whether central bankers are making the same mistake in their efforts to secure a recovery. Might they be storing up financial distortions that will bite in the future?
…
Any central banker who cannot see the giant and obvious globalization elephant should probably be demoted. To kindergarten.
Considering the MID is multi-national and interdependent, with manufacturers and buyers both far-flung and interchangable, the chances of the global elephant reverting to separate elements are about as unlikely as the actual beast’s skin, limbs and viscera disaggregating and walking off in discrete body parts.
The Bankers ARE the elephant. And they’re very fond of their tusks.
Except for that nasty little problem with the EU falling apart, and the GOP’s likely candidate for 2016 loudly questioning the WTO.
Oligarchs don’t need no stinkin’ WTO, let alone the Euro, to work their global mischief; the interconnections are pervasive and ubiquitous.
It’s not just US vs Them. Every public pension fund in the country is likely invested in global conglomerates; Lockheed has subcontractors on every continent including Antarctica — and off-planet as well. The multi-nationals’ shareholders live in every country– as do their financiers. Oil interests know no borders. Airbus outsources 42% of its procurement to US manufactures. China controls the majority of shipping ports along the west coast of the Americas.
Vast fortunes hidden in private banks worldwide make unravelling, let alone controlling, the international banking system (official and underground) impossible. It transcends governments.
With so much of the U.S. workforce subject to low wage growth, underemployment, unemployment or permanent discouragement, isn’t low inflation better than higher inflation?
Why is a “one-size-fits-all” 2% inflation rate desirable, no matter the underlying economic situation?
Inflation is very, very low. Time to worry?
By Annalyn Kurtz @CNNMoney
April 19, 2013: 3:31 AM ET
NEW YORK (CNNMoney)
Prices aren’t going up very much. Should we celebrate?
Not really. Inflation that’s too low could be a bad sign for the U.S. economy, and some Federal Reserve officials are starting to get concerned.
Speaking to reporters on Wednesday, St. Louis Fed President James Bullard pointed to the Fed’s preferred measure of inflation — personal consumption expenditures, minus food and energy — which recently has shown that prices are up 1.3% over a year ago.
“That’s pretty low,” Bullard said at a Levy Economics Institute event. “I’m getting concerned about that, and I think that gives the FOMC some room to maneuver on its monetary policy.”
…
“I’m getting concerned about that ??
As we all should be….If the job market stagnates as it apparently has, or worse, if we roll over and head back up watch out….Inflation is bad but deflation is even worse because it reflects a macro economy that is in very serious trouble…
What would they maneuver? Do they have any more moves to make?
Part of their poker game strategy is to always pretend to hold a royal flush, no matter how meager the actual hand looks.
Do they have any more moves to make ??
Same moves but bigger…”See Japan”… Dangerously bigger…
Is news of fresh blood spilled in America’s streets good or bad for home sales?
It seems there still is a foreign terrorist at large…
U.S. NEWS
Updated April 19, 2013, 8:30 a.m. ET
Boston Bombing Suspect Killed in Shootout
By EVAN PEREZ, JENNIFER SMITH and PERVAIZ SHALLWANI
U.S. authorities on Friday identified two Russian-born brothers of Chechen background, one killed and the other at large, as the suspects in Monday’s Boston Marathon bombing.
One suspect was identified as 26-year-old Tamerlan Tsarnaev, who was killed in a confrontation with police in Watertown, Mass., according to a U.S. law-enforcement official.
A manhunt was on for the second suspect, identified as Dzokhar Tsarnaev, 19 years old. Both brothers were believed to be involved in the fatal shooting of a Massachusetts Institute of Technology campus police officer during a chaotic series of events Thursday night.
Boston-area residents were advised to stay in their homes after one of the marathon bombing suspects was killed and the second was said to be armed and at large. The WSJ’s Jennifer Smith has the latest details.
The hunt for the younger Mr. Tsarnaev prompted a broad shutdown of public facilities in the Boston area. Massachusetts Gov. Deval Patrick asked people throughout Boston to shelter in place and stay indoors.
The younger brother was the suspect seen wearing a white cap backwards in video and photos released by the Federal Bureau of Investigation on Thursday. The release prompted a large number of tips from the public, federal officials said. The older brother was wearing a black cap in the video and photos.
Police warned residents that the at-large suspect was armed and dangerous.
Authorities said the injured suspect was taken to Beth Israel Deaconess Medical Center in Boston. Dr. Richard Wolfe, the hospital’s chief of emergency medicine, said the man had multiple injuries from what appeared to be both an explosive device and gunshot wounds.
“We believe this to be a terrorist,” said Boston Police Chief Ed Davis. “We believe this to be a man who’s come here to kill people. We need to get him in custody.”
…
View Slideshow
Chaos in Boston.
Matt Rourke/AP
I was awakened by the City of Cambridge calling to tell all residents to stay in their houses and the transit system closed down because a terrorist was in the neighborhood. The high school he went to is right next to Harvard University. He was a star athlete and students who knew him said he was a kid they can’t imagine harming anyone. His father said his brother who was killed was a second-year medical student. It makes no sense. The news gets stranger by the minute.
Your comment sounds a little snobby to me. Mental illness is not limited to poor people, and it usually does not manifest until one’s 30s. Just because this mentally ill person belonged to a wealthy family, does not mean we should assume he did not commit the crime. The guy who shot up the high school recently came from a very wealthy family. They guy who shot up the movie theater was a PhD student before he went crazy.
No, monied individuals are not superior to the rest. They simply have the means to purchase more weaponry.
Mental illness is not limited to poor people, and it usually does not manifest until one’s 30s.
If you have money it’s not “mentally ill”, it’s “eccentric”.
If you have money it’s not “mentally ill”, it’s “eccentric”.
“The Best and the Brightest” - aren’t!
Is religious extremism a form of mental illness?
It makes no sense. The news gets stranger by the minute.
Today’s news has made pretty good sense to me. I’ve been studying history and psychology my entire life, and I have a very long and detailed memory. Working with evolving emergencies as a professional, I have learned to read and think between the lines spoken and presented to me & have long understood that what people say about any situation and what the situation actually is, tend to differ greatly.
Yeah, one crazy guy brainwashes his kid brother, they commit an age-old act of senseless murder and violence, and they are “terrorists”. Where is the political agenda? To what political organization do they belong?
So do we need to fear Russians and every US citizen too now? If we label every crazy act of violence as “terrorist”, then I guess the Department of Homeland Security gets to grab more power at our expense.
So do we need to fear Russians and every US citizen too now?
Human beings are dangerous. Get over it. Pay attention to the life you have to live.
Does the fact that nearly fifty percent of recent U.S. home sales were all-cash transactions reduce the chance of “another housing bubble” (as though the original one had ever ended…)?
ft dot com
April 18, 2013 3:46 pm
US house price rises accelerate
By Anjli Raval in New York
An Exit Realty Consultants ‘for sale’ sign is displayed in front of a house in Stockton California, US
©David Paul Morris/Bloomberg
The housing crisis in America may finally be over, but the bill has yet to be paid
James Jeddeloh, a 61-year-old consultant from Oregon, loves to play golf in Scottsdale, Arizona. So much so that last month the soon-to-be retiree decided to buy a house in the state that boasts 300 days of sunshine a year and turn his holiday destination into a home. But he is not the only one.
Since house prices bottomed out in 2012, homebuyers have rushed to snap up properties at depressed prices in one of the states hit hardest by the housing bust.
“I had been waiting for prices to reach rock bottom and stabilise. The market finally gained some sanity so it was time to get back in the game,” said Mr Jeddeloh.
In the past year, newly confident Americans – particularly families and retired people – bought homes after years of holding off, while investors, large and small, came in their droves looking to turn properties into rental housing.
Spurred by record low mortgage rates and an improving jobs market, homebuyers sopped up existing inventories. Price rises accelerated as homebuilders struggled to meet demand and banks sold fewer foreclosed properties. The question now being asked is this: is the US witnessing the creation of a new housing bubble?
Property research provider CoreLogic said its national home price index rose 10.2 per cent in February, the biggest year-on-year gain since March 2006, with Arizona among the states seeing the largest home price appreciation, up 18.6 per cent.
“Prices were up significantly, with a lot of the subprime properties off the market, so we had to strike while the iron was hot,” Mr Jeddeloh added. “We asked a friend to see the place for us and we put in an offer within 48 hours of the house going on the market.”
In order to get the best deals, homebuyers are participating in bidding wars, property agents are holding flash sales, investors are making all-cash offers and sellers are marking up homes week after week.
“If a house is priced well and in good shape it is not uncommon for buyers to bid 5 per cent over the asking price. We have to be aggressive,” said Jeff Sibbach, a property agent in Scottsdale. “Five out of seven of my clients are doing this.”
Even as thousands of homeowners are still trapped in negative equity, evidence of homebuyer exuberance for existing and new homes in pockets across the US has prompted concern among some industry watchers. These tactics, they caution, hark back to the frothiest months of the housing bubble in 2004-05.
Others are less worried. While more than a quarter of all homes were bought without any downpayment in 2006, almost half today are paid for in cash.
…
Will Ireland-style rules for deadbeat loanowners eventually come to America?
Private schools, cars, satellite TV to be targets in debt rules
New Insolvency Service of Ireland to be launched in Dublin today
Arthur Beesley
Thu, Apr 18, 2013, 08:26
First published: Thu, Apr 18, 2013, 07:00
Mortgage-holders who cannot repay their home loan will be warned today that they must be prepared to forgo sending their children to private schools and give up luxuries such as a second car and satellite television if they seek to enter an official insolvency arrangement to settle the debt.
The Government expects the Insolvency Service to take a firm line with distressed borrowers on their living expenses, the argument being that many borrowers are doing without second holidays and other luxuries to ensure they can make their mortgage repayments.
…
Hmmm….Thats a interesting approach…
Does anyone have a figure on how much money DC has spent in this era of supertight budgets on reflating the housing budget (including $40 bn/month in QE3 MBS purchases, GSE bailouts, etc etc etc)?
Here is an interesting article about “where the money is coming from”. It doesn’t quite get to the primary source, but it’s something. Blackstone is the biggest owner of single-family homes in the United States.
http://moneymorning (dot) com/2013/04/04/are-wall-street-buyers-like-blackstone-group-creating-another-housing-bubble/
It’s Blackstone!
And they are getting money from the GSEs!!!
“While leverage is currently limited, potential financing options include secured credit lines, lending syndicates, high- yield debt, government sponsored enterprise-provided financing, and securitization,” Jade Rahmani, an analyst with Keefe, Bruyette & Woods Inc. in New York, wrote in a note yesterday. ”
(you know what)bloomberg(dot)com/news/2013-01-09/blackstone-steps-up-home-buying-as-prices-jump-mortgages.html
“While leverage is currently limited, potential financing options include secured credit lines, lending syndicates, high- yield debt, government sponsored enterprise-provided financing, and securitization,”
They are NOT getting money from the GSEs.
“leverage is currently limited”
“potential financing options”
Any commentary about the GSEs lending to the Blackstones of the world is speculation about the future…not what is happening now.
Hmmm… You’re right. I missed the “potential” part of it.
We will see record temperatures in the summer this year!
http://www.cnbc.com/id/100657172?__source=xfinity|mod&ticket=ST-39862-EiR3fkzEF2ORcJfV7Xi3cUpshPnx9Mgg6ru-20&rememberMe=null
Interesting move. Does this protect its inventory of cheese from creditors in a bankruptcy?
Are would-be sellers holding out too long before putting their homes on the market?
April 19, 2013, 11:04 a.m. EDT
Home sellers hold out for higher prices
Why homeowners are keeping properties off the market
By Quentin Fottrell
At a time when people are clamoring to buy real estate, many homeowners remain reluctant to put their properties up for sale.
Roughly 75% of Americans feel now is a better time to buy than next year will be, according to a survey of more than 2,000 respondents carried out by real estate marketplace Trulia. But despite rising prices, only 32% believe now is a good time to sell. “The unwillingness to sell does help explain the low inventory,” says Susan M. Wachter, professor of real estate and finance at The Wharton School at the University of Pennsylvania. Inventory is down by as much as 15% year-over-year, according to Realtor.com, but picked up by 2.4% in March over the previous month.
Sellers may be trying too hard to time the market, experts say. “The unwillingness to sell is a bit surprising based on the hard facts of many markets that make it an excellent time to sell now,” says Daren Blomquist, vice president at market researcher RealtyTrac. “It’s human nature to want to sell at the very top of the market and buy at the very bottom.” In hindsight, he says, buyers too would have found much better deals in most markets in 2009, 2010 and 2011, when prices were still dropping, than they would now that prices are rising.
The ones putting their homes on the market now may not have a choice. “Some just cannot hold out further,” says Lawrence Yun, chief economist for the National Association of Realtors. Many people who have new jobs, want to be in a different school district or have other changes in family circumstances will put their houses on the market first, he says.
To be fair, would-be sellers face more difficult decisions in a recovering housing market than buyers, experts say. But that doesn’t mean it’s worth waiting. “House price increases will dampen when the Fed starts to raise rates again,” says Stuart A. Gabriel, director of UCLA’s Richard S. Ziman Center for Real Estate.