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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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For how much longer from here will the parabolic housing price gains continue to accelerate until the echo bubble pops?
Are these news items strongly related?
Latest News
10:01a
BREAKING
Leading economic index up 0.6% in April to 95.0%
10:01a
March LEI revised to 0.2% drop from 0.1%
Can anyone suggest a good reason why gold drops by over 1% a day, ALMOST EVERY DAY?
Apparently gold and the stock and housing markets have gone their separate ways. And gold is dangerously close to the 52-week low of $1,322/oz. If it breaches that, what is the next resistance level?
Gold - Electronic (COMEX) Jun 2013
$1,369.20
Change -$17.70 -1.28%
Volume 119,054
May 17, 2013 9:55 a.m.
Previous close $1,386.90
Day low $1,363
Day high $1,391
Open: 1,385.20
52 week low $1,322
52 week high $1,803
Isn’t it interesting how the dollar and gold move in opposite directions, and how the mere suggestion that the Fed may eventually taper or end QE3 has sent the dollar soaring and gold into a tailspin?
May 17, 2013, 9:27 a.m. EDT
Dollar index nears 3-year high on QE ‘taper talk’
By William L. Watts and Carla Mozee, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar strengthened Friday, trading at its strongest level in nearly three years versus a basket of currencies after a Federal Reserve official projected the possible timing of a winding down of the Fed’s bond buying.
The ICE dollar index (DXY +0.62%), which measures the greenback’s movement against six other major currencies, sat at 84.140, hitting levels last seen in July 2010. That’s up from 83.758 in North American trade late Thursday.
…
Any chance all this “end QE3″ jawboning might turn out to be nothing more than a head fake?
May 16, 2013, 4:31 p.m. EDT
Talk of Fed wind down grows louder
By Steve Goldstein, MarketWatch
WASHINGTON (MarketWatch) — The drumbeat to reduce the rate of bond purchases by the Federal Reserve grew louder Thursday, with a dovish voice joining the group.
John Williams, the San Francisco Fed president, indicated the $85 billion per month of bond purchases can be reduced soon, and that the whole program may be halted this year.
He pointed out the pace of job growth has picked up since the program was launched in September, with an average pace of job growth of 200,000 over the last six months.
“Assuming my economic forecast holds true and various labor-market indicators continue to register appreciable improvement in coming months, we could reduce somewhat the pace of our securities purchases, perhaps as early as this summer. Then, if all goes as hoped, we could end the purchase program sometime late this year,” said Williams in a speech in Portland, Ore.
While Williams doesn’t have a vote this year on the Federal Open Market Committee, he joins other Federal Reserve officials this week calling for a slowdown in the program.
But unlike Richard Fisher of the Dallas Fed and Charles Plosser of the Philadelphia Fed, Williams is decidedly in the so-called “dovish” camp.
…
Can bonds do terribly if everyone and his dog knows they are going to do terribly?
And where would you put your money instead? Gold? Stocks? Houses? Bitcoin?
May 17, 2013, 7:02 a.m. EDT
How bond investors can avoid becoming losers
Commentary: Strategies to capture yield when the fix is in for fixed income
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By Burton G. Malkiel
PRINCETON, N.J. (MarketWatch) — Investors throughout the world are flocking to so-called safe havens.
The 10-year Treasury (10_YEAR +1.81%) has recently been yielding between 1.5% and 2%. Short-term Treasury interest rates are near zero. Even if inflation stays at 2% over the next decade (the informal target of the Federal Reserve), government bonds will provide negative real (after inflation) rates of return.
And if interest rates rise to more normalized levels, bond investors will suffer substantial capital losses. Interest rates are also low in the center of Europe as well as in Japan. There are no “safe” economies where savers are able to earn positive real returns on government bonds.
Most developed countries are burdened with excessive debt. Governments around the world are having great difficulty reining in spending. The easier course of action as seen by politicians is to hold down interest rates to artificially low levels and hope that over time inflation will erode the real value of the debt.
This process, known as “financial repression,” is a not-so-subtle form of debt restructuring — and bond holders will be the sure losers.
We have seen this movie before in the United States. After World War II, the debt-to-GDP ratio in the U.S. peaked at 122% in 1946, even higher than today’s ratio of about 100% The policy response then was to keep interest rates pegged at the low wartime levels for several years and then to allow them to rise only gradually beginning in the 1950s. Moderate-to-high inflation did reduce the debt/GDP ratio to 33% in 1980, but this was achieved at the expense of the bondholder.
The last time interest rates were this low was during the 1940s. Bond investors suffered a double whammy during the 1950s and later. Not only were interest rates artificially low at the start of the period, but bondholders suffered capital losses when interest rates were allowed to rise.
As a result, bondholders received nominal rates of return that were barely positive over the period and real returns (after inflation) that were significantly negative. We are likely to be entering a similar period today.
…
As the broad indexes continue to strike fresh record highs, the idea of the Dow at
20,00030,000 doesn’t seem so crazy anymore, or even outlandish. Jonathan Cheng lays out the case. Photo: AP.May 17, 2013, 10:14 a.m. EDT
Treasurys drop as consumer sentiment rises in May
By Ben Eisen
NEW YORK (MarketWatch) — Treasurys extended a price drop Friday as data showed a jump in consumer sentiment. The University of Michigan and Thomson Reuters consumer-sentiment index rose to 83.7 in May, up from 76.4 in April and above the expectations of economists surveyed by MarketWatch. The leading economic index also rose 0.6% to 96 in April after falling 0.2% in March. Treasurys sold off in response to the data, pushing yields higher. The 10-year note (10_YEAR +1.97%) yield was up 3 basis points to 1.917%, while the 30-year bond (30_YEAR +1.42%) yield was up 3.5 basis points to 3.136%. The 5-year note (5_YEAR +2.27%) yield was up 1.5 basis points 0.807%.
The 30-year Treasury Yield was 2.82% on May 2, 2013. Two weeks later, it is at 3.14%, and appears to be headed up on the many recent warnings on bonds. The loss on 30-year Treasurys is 6.2% over two weeks and growing, and the MSM has yet to utter a peep about it. If the stock market similarly corrected over such a short period of time, the news would be screaming out of the headlines.
“Good investments”:
- Stocks
- Houses
- Dollars under the mattress
“Bad investments”:
- Bonds
- Gold
- Bitcoin
Does that about sum up the status quo investing environment?
“Good investments”:
REITS
they are buying dividend stocks and have run them up
way up
How bad does CA’s unemployment rate look if you factor in all the workforce dropouts into the calculation?
California’s unemployment rate drops to 9%
Job fairs like this one are helping employees find candidates
A job fair on April 30 in Walnut Creek, Calif. (Justin Sullivan / Getty Images / April 30, 2013)
By Alana Semuels
May 17, 2013, 7:37 a.m.
California’s pace of job creation slowed in April, as employers added 10,300 jobs in April, nevertheless pushing the state’s unemployment rate down to 9% from 9.4% the month before.
Employers had added twice as many jobs in March as they did in April. They slowed job creation in nearly every sector, including government, financial activities and trade, according to data released Friday morning by the Bureau of Labor Statistics.
It’s possible that continued uncertainty in Washington, coupled with the effects of the sequester and an expiration of payroll tax cuts is keeping employers’ expectations tempered, said Sung Won Sohn, an economist at Cal State Channel Islands.
“If they have confidence, then they will be ready to hire people,” he said about employers. “The biggest concern is Washington, which is spewing out so much uncertainty that it is dampening confidence and economic growth.”
…
Lies.
Sacramento is BOOMING. (With call center and customer service jobs….)
I need to update the settings on the HBB Joshua Tree extension and I don’t think I’m the only one.
How about a thread where we trace the changes in usernames?
Maybe Sybil will come clean?
Or maybe the clueless will get a clue.
It took ten hours driving to get into LA and back today (normally about 3 hours each way) and I noticed (oh how could I help but notice,) that Federal Recovery Act funds have finally trickled down into make-work highway and infrastructure construction into and out of Los Angeles. I-10 and 1-5 overpasses, underpasses, widening, reinforcements, retaining, regrading, repaving, rerouting, with lots of county and municipal roadwork along the by-ways.
The local radio stations were full of sig-alerts and road closures for construction over the weekend, and traffic was so heavy it literally took me a half an hour to get out of a parking structure and another half hour to go two miles to the freeway onramp.
Even the long-shuttered rest stops have reopened — with mountains of asphalt and aggregate piled around the perimeter. The last time I saw highway work on this scale was several decades ago. Very serious money here. Is similar work going on in other states around the country?
There is some construction in Colorado, but I don’t think it’s any more than usual.
Per The Boss, from Yesterday,
Pendude: ‘Renting costs will remain higher than owning costs’
Ben: Not the house I rent.
‘This context-free debate is so much fun’
I don’t know who you are, but don’t waste bandwidth hitting the comment key more than one time for each comment. And if you don’t like the “debate”, go away.
Actually, I adore debate, particularly reasoned debate.
I particularly enjoy pointing out that banal talking points (”owning costs less than renting”, “renting costs more than buying”) reflect poorly on the profferers (sic?) of said banalities and bromides.
Who I am is a fellow who has been following (with both bemusement and amusement) the housing bubble since 2005. I saved a few family members from being sucked in. Sold a house in a relatively low-bubble area for a nice profit in 2002 after a 1997 purchase, though not for reasons of “bubble” (rather, for a move).
In many places the monthly cost of “ownership” indeed is well greater than the cost of renting. But, not everywhere. I have posted examples before, and can again, if facts, rather than bromides are what is sought.
But, a discussion site is ill served by those who merely want to spout platitudes.
I am here (on occasion, when I have the time, what with after all having a real life when not playing here), to poke holes in those whose approach to multifaceted economic issues is to say “losses will be incalculable”, when, after all, I’m pretty good at calculatin’…
And so forth.