The Housing Bubble

I have to send that link to my kids…

As said previously, Summers’ helicopter is going to blow Bernanke’s out of the water, so I hope you’re ready for that. The Summercopter will be like a Krugmancopter in spirit, but with more bluster, less subtlety, and less academic rigor.

Batten down the hatches, people.

I’ve tried everything and I can’t seem to win…. oh, I get it.

OMG that’s f7cking hilarious!

If you are really not a debt junkie, then you do not have enough cash to compete in this market. We suspect that you are a debt donkey.

Item of interest…

http://www.chron.com/news/houston-texas/article/Financial-roof-falls-in-on-pair-of-TV-house-4559684.php

stocks and homes will take you to the glory land

HA,

You’re totally correct, the recovery is all PR and BS, but there are a few areas that are doing well.

If the press didn’t love this guy so much there’d be a totally different take on the state of union. If a Republican President’s government had done the things that Obama has done, it would be front page news every day, every hour.

Lip

“In short, the story of the Reinhart-Rogoff error tells us a great deal about how the elites use economists and the prestige of the economics profession in order to impose their will on the public.”

Seems like a pretty grandiose generalization there from a single spreadsheet error to a broad description of how the elites snowball the masses.

I think beyond the supply and demand curves, these guys don’t know much, especially in the financial Wild West. There’s no graphing our way out of this one. Yikes.

Reinhart and Rogoff’s response to Krugman:

Nobel laureate Paul Krugman refused to back down in a dispute with Harvard University economists Carmen Reinhart and Kenneth Rogoff over a 2010 paper they wrote that’s been used to justify austerity in the U.S. and Europe.

Reinhart and Rogoff, in a May 25 letter posted on Reinhart’s website, accused Krugman of “spectacularly uncivil behavior” for asserting in an article published in the New York Review of Books that they had withheld data from their research.

The Harvard economists acknowledged on April 17 that they had inadvertently left some data out of their calculations in the study, in response to a paper questioning their methods released on April 15 by researchers from the University of Massachusetts at Amherst. Still, the error didn’t change the basic findings of their research, the Harvard economists said.

Reinhart and Rogoff, in their letter to Krugman, criticized him for asserting that the U.S. and U.K. have the “costless option” of engaging in an open-ended fiscal expansion.

1) http://www.bloomberg.com/news/2013-05-28/krugman-feud-with-reinhart-rogoff-escalates-as-austerity-debated.html

2) Actual response: http://www.carmenreinhart.com/letter-to-pk/

I suppose the slow labor market recovery is a factor. Once unemployment comes down, the wealth transfer from Wall Street’s 0.1% back to Main Street America is going to be an avalanche.

Stocks Back Off On Jitters That Fed Will Remove Punch Bowl
By DONALD H. GOLD, INVESTOR’S BUSINESS DAILY
Posted 05/29/2013 04:25 PM ET

Stocks backed off Wednesday amid rising talk that improving economic data may sway the Federal Reserve to cut back on its $85 billion-per-month bond-buying program.

The Dow Jones industrial average and the S&P 500 each fell 0.7%, while the Nasdaq lost 0.6%. But the indexes pared earlier losses. The Nasdaq had been down as much as 1.1%, while the S&P 500 had sunk 1.2%.
…

How long from now until when the Fed takes away the QE3 punch bowl?

ft dot com
Last updated: May 28, 2013 5:39 pm
US housing lift could crimp Fed buying
By Robin Harding in Washington and Anjli Raval, Tracy Alloway and Michael Mackenzie in New York

The largest rise in house prices for seven years and a surge in consumer confidence have added to a fast-improving US economic outlook, increasing the chances the Federal Reserve will slow its $85bn-a-month in asset purchases.

House prices jumped 10.9 per cent in March from last year’s levels, the biggest increase since the height of the housing boom in 2006, according to the S&P/Case-Shiller index. The rise in prices for homes and other assets helped push the Conference Board’s index of consumer confidence to its strongest level for five years.

The data add to growing evidence that the Fed’s ultra-low interest rates are helping the world’s largest economy through a soft patch caused by tighter fiscal policy and setting the stage for strong growth in 2014.

Stocks rose sharply on Tuesday, with the S&P 500 climbing as much as 1.5 per cent before trimming gains to close up 0.6 per cent, while 10-year Treasury yields closed at 2.17 per cent, the highest since April 2012.

The Fed is likely to welcome that combination of rising stocks and bond yields as a sign markets are optimistic about growth and will tolerate a slowdown in the pace of asset purchases under its third round of quantitative easing.

Ben Bernanke, Fed chairman, said last week that the central bank could slow the rate of purchases at one of its next few meetings. The data suggest that the trough in US interest rates has passed and the window to refinance a mortgage at today’s ultra-low rates is rapidly closing.

“2014 could be the year when the economy starts to show real acceleration,” said Steve Blitz, chief economist at ITG Investment Research in New York. But he cautioned that the Fed’s primary focus is not on asset prices but the real economy, where activity is still growing only modestly.

In another sign of rising asset prices creating a virtuous circle in the economy, Moody’s changed its outlook on the entire US banking system to “stable”. The credit rating agency has had a “negative” outlook on US banks since 2008, when the collapse of the housing bubble sparked a global financial crisis.

The change on Tuesday reflects “continued improvement in the operating environment and reduced downside risks to the banks from a faltering economy,” Moody’s said.
…

Canadians and Chinese with suitcases full of money?

“Aside from QE3 and air, is there anything propping up the prices of U.S. stocks, bonds and houses?”

Susanne Posel
Occupy Corporatism
Aug 1, 2012

A source in the Deutsche Bank claims that in 2008 our financial and monetary system completely collapsed and since that time the banking cartels have been “propping up the system” to make it appear as if everything was fine. In reality our stock market and monetary systems are fake; meaning that there is nothing holding them in place except the illusion that they have stabilized since the Stock Market Crash nearly 5 years ago.

The Deutsche Bank informant says that the cause for the bailout of the banks was a large sum of cash needed quickly to repay China who had purchased large quantities of mortgage-backed securities that went belly-up when the global scam was realized. When China realized that they had been duped into buying worthless securitized loans which would never be repaid, they demanded the actual property instead. The Chinese were prepared to send their “people” to American shores to seize property as allocated to them through the securitized loan contracts.

To stave this off, the American taxpayers were coerced by former President Bush and former US Treasury Secretary Hank Paulson. During that incident, the US Senate was told emphatically that they had to approve a $700 million bailout or else martial law would be implemented immediately. That money was funneled through the Federal Reserve Bank and wired to China, as well as other countries that were demanding repayment for the fraudulent securitizations.

To further avert financial catastrophe, as well as more debt or property seizure threats by the Chinese, the Euro was imploded there by plunging most of the European countries into an insurmountable free-fall for which they were never intended to recover.

All the money that those banks claimed they needed to avert collapse was also sent to the Chinese to add to the trillions of dollars lost during the burst of the housing bubble on the global market.

The only saving grace has been the US dollar being the global reserve currency. However, now this prop is showing signs of wear as foreign nations like China, Russia, India and Iran are dealing in gold as currency and purchasing gold on the market at an exponential rate.

In 1970, Henry Kissinger made a deal with the Saudi Arabian government that American debt would be purchased in exchange for cheap oil. Since then Iran has taken control over the Organization of the Petroleum Exporting Countries (OPEC) by their use of gold as currency which has threatened the direct value of the US dollar as the global reserve currency.

The Deutsche Bank informant says that the financial collapse that happened in 2008 will be realized here in America very soon. Once that happens, there must be full implementation of marital law to control the potential riots and control over citizens that will be desperate to feed their families.

http://www.occupycorporatism.com/government-silently-positions-for-martial-law-as-financial-collapse-arrives-in-america/ - 66k -

Level 3 voodoo.

‘ is there anything propping up the prices of U.S. stocks, bonds and houses?’

Gotta be in it to win it?

Methane emitted by cows! THAT is what props up the prices.

May 30, 2013, 4:19 a.m. ET
Japan PM Econ Adviser Hamada: 10%-20% Random Stock Moves Not Surprising
By Toko Sekiguchi

TOKYO–An economic adviser to Japan’s prime minister said Thursday that movements in stock levels within a 20% range shouldn’t warrant surprise.

“Random stock movements of between 10%-20% are nothing to be surprised about,” said Koichi Hamada, a special economic adviser to Prime Minister Shinzo Abe, speaking on the sidelines of a symposium in Tokyo.

Mr. Hamada, a Yale University professor of economics, also said there is no need to worry about rising long-term interest rates provided real rates, factoring in inflation expectations, were low.

“Since real interest rates are still low, we don’t need to worry about long term nominal rates,” he said.

Recent falls in the Nikkei Stock Average have seen the index shed more than 14% since hitting a 2013 intraday peak on May 23. The benchmark fell 5.2% on Thursday.

Write to Toko Sekiguchi at toko.sekiguchi@dowjones.com

How many more times can the housing market get driven higher by fears of rising mortgage rates before this is over?

Mortgage rates may be heading higher
Julie Schmit, USA TODAY
7:34 p.m. EDT May 29, 2013
Mortgage rates are moving higher, but are still near all-time lows.
Story Highlights
* Mortgage rates rose sharply this month, taking a bite out of refi activity
* Higher rates could spike the home buying market as people try avoid higher rates
* Freddie Mac economist sees 30-year rate topping 4% next year

Mortgage interest rates are back to their highest levels in a year — and may creep higher still.

After hitting a five-month low in early May, rates have made an abrupt turnaround

The average rate for a 30-year fixed rate mortgage for loans under $417,500 hit 3.9% for the week ended Friday, the Mortgage Bankers Association said Wednesday.

That’s the highest since May 2012, and up from 3.59% for the week ended May 3.

The latest increase spurred a 12% drop in refinance applications for the week, the largest single week drop in refinance applications this year, the MBA says.

The rise in rates has “been a very dramatic move,’ says Bob Walters, chief economist for Quicken Loans. “Mortgage rates have jumped more in the past week than they have in years.”
…

too early to sell imo. There is room to run with home prices.

According to your posts a couple days ago, it’s going to take 10 years for mortgage rates to return to 7%. Then it’s going to take another 2-3 years for house prices to drop 30%.

That is, it will take 12-13 years for a low-price-high-interest PITI to equal to my current high-price-low-interest PITI. So I have 12-13 years before even thinking of selling. What do you suppose rental rates are going to be in a decade?

Futures: S&P 500 +0.2% DOW +0.1% NASDAQ +0.1%
Jobless claims increase more than expected
• GDP growth revised down, hurt by cuts in government spending
• Goldman Sachs on recent surge in Treasury yields: ‘It’s for real’

“Jobless claims rise by “more than expected,” and Wall Street stock futures rally in response. Go figure!”

What is there to figure? This news makes it less ikely the Fed will increase rates. Low rates = higher stock prices. It’s investing 101.

many of the 20-30 somethings i know with big-azz mortgages and kidz are broke, living paycheck to paycheck, totally strung out on mortgage debt dope. what money they have left over after making the mortgage they squander on the dumbest sh1t, telling themselves ‘they deserve it’ cus they work so hard spinning that hampster wheel. sad…

You blaming the 47%?

It is free money! Just free for the taking. Only some dumb azz fool would not take the free money.

Just like obamacare is free! And obamaphones. And SNAP cards. And Section 8 housing. And…

There was a story today on the Today Show about a woman who was outbid 8 times on houses in Oakland, CA. Her solution? Snap one up by bidding $100k over the asking price!

Given that you are part of the 99% of Americans who occupy the Middle or Lower Class, would you rather be one of the Lucky-Ducky unemployed, or a lucky sleep-deprived worker?

May 30, 2013, 7:01 a.m. EDT
More workers fall asleep on the job
Napping during office hours is on the rise, giving employers nightmares
Stories You Might Like
* Gold closes higher for first session in three
* The ‘cult of capitalism’ and U.S. moral decline
* Yet another reason to be scared
By Quentin Fottrell

Sleep-deprived employees are increasingly likely to nod off at work. But when it comes to addressing this potential productivity and safety issue, experts say, most employers have been caught napping.
…

By definition every income tax cut is a tax cut for the rich, since only rich people pay income taxes. Since the poor pay no income tax, by definition they will never get a tax cut.

And yes I know the poor pay sales tax and gas tax, etc. That’s irrelevant to the discussion of ***INCOME*** taxes.

Which tax breaks do you want to get rid of? Be specific. See the list below.

Easy sound bites. Hard decisions.

But you might be charged with starving kids and throwing grandma in the street - so you won’t do anything.

Better to keep it as a sound bite. See how easy life can be on the government plantation?

According to the CBO, the biggest tax breaks by dollar value this fiscal year are the tax-free treatment of employer-provided health insurance (about $260 billion), preferential rates for dividends and capital gains ($160 billion) and tax-free contributions to retirement savings ($140 billion). Deductions for state and local taxes ($80 billion), mortgage interest ($70 billion) and contributions to charity ($40 billion) are also among the top 10, as is the tax-free treatment of capital gains on assets transferred at death ($50 billion).

But the CBO noted that tax breaks are essentially equivalent to government spending, intended to encourage and subsidize various behaviors, such as buying a home, saving for retirement and giving to charities.

will save taxpayers

Which taxpayers? If we were net positive, maybe. Since we are not, someone owes that money. And that “someone” is taxpayers.

“the Fed chairman has never had his hand on the wheel”

No kidding. More like he’s had his hand on his d*ck all this time. What a POS.

The hard part is to get the timimg right about how long Ben can fly his helicopter before crash.

Very sad life and ending. And he was trying to turn his life around. Just never made it.

Some will say it was his own bad decisions. Others will ask how much did the government subsidize his lifestyle (had not worked for at least 10 years).

I just say rest in peace.

How’d he get food? His wife.

There is such a thing as “tough love” versus “killing someone with kindness.”

http://www.infowars.com/articles/sept11/ashcroft_stopped_flying_after_cia_warning.htm

Done.

He stole that survey from the IRS but did it anyway.

1 yes
2 no
3 yes
4 no
5 yes
6 no
7 yes
8 yes
9 no
10 no

10 should have an * or there should be an 11th question.

10 Are you worried about future terrorist attacks on our country?

11 Are you worried about future False Flag attacks on our country?

11 yes

Thanks Ben for putting it on the blog and thanks to whomever completes it. Love you guys! <3<3

Badly designed survey but your kid is young. I say badly designed because it’s too black/white, yes/no. Some of my answers won’t make sense for what he’s looking for. For example, I put “no” for less gov’t control and more gov’t control. What we need is smarter/better gov’t control. I also think gov’t _control_ is a bad word. The gov’t shouldn’t be controlling anything, it should be responsive to the people and proactive to ensuring their interests. But control? A very loaded word that can be seen many different ways.

Moreover, while I do not think terrorism is a large threat to our country, I am (moderately) worried about future attacks. But the future is a very long time — I’m more worried about the world my kids will live in than present day attacks. And rather than answering yes, I would’ve like dthe option to say “yes, a little” or maybe 4-5 on a 10 pt scale.

Feeling negatively or positive about the country’s future is also loaded. Are we supposed to answer this in the context of the Patriot Act/SOPA/CISPA/etc? Or in the general sense? I think it’s somewhat idiotic to have a negative feeling about the nation’s future in the general sense. I hope this really isn’t your son’s opinion.

Some of the best advice I ever got in life was actually in a college interview for H where the alum said that everyone he interviews has a 4.0+ and near perfect SAT and “positive attitude” or “can-do orientation” is how he decides who gets his best evaluation when it comes time for recommendations. I have found this to be true throughout my life/career. Does the US have problems? Yes. Does the world have problems? Yes. Does every company have issues? Yes. But if we made a list of virtues of the U.S., they still far outnumber the negatives. To the extent to talk about negatives, it’s a way to overcome them or raise awareness. Maybe even one day change them. Think about if you’re a hiring partner - do you want to hire the associate who drones on about problems?

1-Y
2-N
3-Y
4-N
5-Y
6-blank
7-blank
8-Y
9-N
10-N

“The Ability-to-Repay rule established that most new mortgages must comply with basic requirements that protect consumers from taking on loans they do not have the financial means to pay back.”

What (vanishingly small) percentage of Californians really have the means to repay a mortgage of over $300,000, which is typically needed to buy a home here?

I also point to the following:

http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htm

Updating information to get a more “accurate” Zestimate is still going to get you within +/- 10%.

And unless you are thinking about selling…who cares?

Zillow’s transaction price data and sales volume data is very accurate as they procure it directly from local, city and state assessors and property tax offices.

That example certainly doesn’t show a lower cost of ownership–you have to believe in inflation (wage inflation to pay back the debt with cheaper dollars), and that you are going to stay there for a long time to conclude that buying will be better.

Insurance: Unless you don’t have renter’s insurance, the increased cost of homeowner’s insurance is going to be perhaps $50 more per month…not a huge number.

Opportunity cost of the down payment: What should this imputed cost of capital be? At least the cost of interest, if not more.

Maintenance costs: Gotta include something here that you don’t have with a rental.

Costs ultimately to sell: There is no cost to move as a renter (other than moving costs). Your sales commission will take away 3-4 years of principal reduction.

MI and PT tax deduction: It’s not a reason to buy…since they could go away, but it’s a factor in the near-term.

Rents: Do you believe that $2,200 is market for your rental? If you are below market, you are always at risk of the landlord raising your rent. We are involved in a “buy homes for rent” strategy. Two of the homes in the portfolio currently have tenants at exactly $2,200 per month–our estimate of those homes’ values on resale are between approximately $300k-$325k. I’m assuming if the $614k asking price were $325k, your conclusion would be different…as it sits, I think your math is right, if not understated based on maintenance costs…you must be near a coast?

The trick is to make the value of the house go up each year, so you can imagine you are banking $30+K. In a deflation though, you will bank only pain.

“Just ran my latest price/payment vs rent numbers again. Neighborhood house with similar sq ft but backing the freeway listed at 614k.”

Years back a couple of parents bought a brand new Winnebago to drive for the kids travel season. It was big, it was nice and it was a cool place to go in between games on those long hot weekends.

The first weekend they showed up with it, one of the fathers asked…. I wonder how much that is going to cost to fill up? Another father looked at him and said….. If you can afford to buy that, you don’t have to worry about how much it costs to fill up.

“The coming second housing collapse is going to be breathtaking.”

If it is ever allowed to happen.

“The Obama administration announced Thursday it is extending its key foreclosure prevention program through December 2015.”

Key foreclosure prevention program extended

By Kimberly Miller
Palm Beach Post Staff Writer
Posted: 4:40 p.m. Thursday, May 30, 2013

The Obama administration announced Thursday it is extending its key foreclosure prevention program through December 2015.

The Making Home Affordable Program, created in 2009, has helped 112,804 Florida homeowners with reduced monthly mortgage payments, including nearly 50,000 in South Florida. It was scheduled to sunset at the end of this year.

But of the $29.9 billion dedicated to the program, just $5.2 billion has so far been spent.

“The housing market is gaining steam, but many homeowners are still struggling,” said Treasury Secretary Jacob J. Lew. “Helping responsible homeowners avoid foreclosure is part of our wide-ranging efforts to strengthen the middle class, and Making Home Affordable offers homeowners some of the deepest and most dependable assistance available to prevent foreclosure.”

Since its March 2009 launch, about 1.3 million homeowners have been helped directly by the program. The median savings per homeowner has been $536 a month.

Kevin Maher, community outreach director for West Palm Beach-based DebtHelper.com, said HAMP is a necessary program that can act as a springboard to better loan modifications offered by mortgage servicers and lenders.

“The program has resulted in a lot more modifications than it actually gets credit for,” Maher said. “HAMP also allows people to have a structured way to submit an application that will be complete, which means the chances of a successful outcome are tremendously enhanced.”

But the program was widely deemed a failure before it was it was revamped last year with the intent of increasing the eligibility pool.

The retooled program:

* Allows mortgages on rental properties to be modified. Previously, only loans on homes the owner lived in were eligible.

* Triples the incentives to services that write down principal amounts from between 6 and 21 cents on the dollar to between 18 and 63 cents on the dollar.

* Allows homeowners whose payments are below 31 percent of their income but who cannot afford the monthly mortgage cost because of other debt, such as from credit cards, medical bills or a second lien, to apply for a more flexible program.

* Offers incentives to Fannie Mae and Freddie Mac to reduce principal amounts on underwater mortgages.

Concerns remain about the redefault rate of homeowners given modifications. About 25 percent of homeowners given modifcations in the first quarter of 2011 have defaulted.

For more information, go to http://www.MakingHomeAffordable.gov or call 1-888-995-4673.

What makes you so sure that real estate prices are not destined to go up from now until the long run, when we all are dead? What technical factor implies this can’t or won’t happen? And how do you know all the jawboning about ending QE3 isn’t just a bluff, designed to foster “relief rallies” in gold, stocks and housing when Mr Market calls the bluff?

The reflated bubble seems to have more legs than most realize…

“BANKS REVIVE RISKY LOANS AND MORTGAGES”

It’s different this time because major MSM outlets (e.g. the NYTs) are peremptorily sounding the alarm on crazy loans. By contrast, in 2006, we were the voices of ones crying in the wilderness regarding the incipient destructive effect of subprime lending on the operation of U.S. housing finance.

The blame game against the lenders pushing the bad debt will crush them this time around, as the political scope for offering bailouts like the $700+ bn TARP is nonexistent.

Sorry, subprime debt pimps — the ‘turtles all the way down’ are dead now. Eat, drink and be merry today, for tomorrow you die.

Mammoth: it’s what’s for dinner!

May 30, 2013, 10:08 a.m. EDT
Is Japan the canary in the coal mine?
By Oliver Pursche

After last October’s initiation of “Abenomics”, the quantitative-easing-like monetary policy initiated by Japanese Prime Minister Shinzo Abe, the Nikkei has rallied some 50%. Then, last week, Mr. Abe pushed the Bank of Japan to adopt a higher inflation target of 2%. Markets have reacted with concern and sharp volatility to the announcement, sending the Nikkei down over 7% the day after Mr. Abe made the announcement.

The reaction is understandable, and could foretell how U.S. markets and European bourses may react when higher inflation hits our shores. The problem with the 2% inflation target is that Japanese banks, which hold an enormous amount of Japanese government bonds (JGBs), would likely come under severe capital pressures as this occurs. The thesis is that as inflation rises, interest rates will as well; meaning bond values will drop, causing balance sheet issues for the Japanes banks — a similar fate could be in the cards for U.S. financial institutions.

Even a relatively mild rise in interest rates could have a dramatic impact on bank and insurance-company balance sheets, especially once mark-to-market rules (part of the Basel III and Simpson-Bowles reforms) come into effect in 2014. As a result of having a zero-interest-rate policy (ZIRP) for over a decade, regional Japanese banks and insurance companies already mark-to-market, and are therefore very susceptible to a rise in interest rates.

Investors do not need to panic and should not view this as a broad market sell signal. Rather, this is a real-time case study of how equity markets react to a rising-interest-rate environment. Based on this, we will be monitoring the reaction of various market segments within the Japanese equity markets in an attempt to provide us with better insights as to how U.S. markets may react if or when the Federal Reserve begins to exit its current easing strategy.
…

Critic of big banks wants Fisher to head Fed
May 30, 2013, 3:53 PM

Simon Johnson, an economist who is leading the push for the government to do more to tackle “too big to fail” banks, wants Dallas Fed President Richard Fisher to replace Fed Chief Ben Bernanke when Bernanke’s term expires early next year.

In a post on The New York Times Economix Blog, Johnson, former chief economist of the IMF and now a professor at MIT, said that none of the leading contenders for the top Fed job — Janet Yellen, Tim Geithner and Larry Summers — “has made or is likely to make a clear statement about the critical issue for the next decade – how the Fed should view the financial sector, particularly the various potential causes of systemic risk.”

Johnson compared the threat of global megabanks to the inflation threat of the 1970s.

He said that Fisher has made it clear that he is skeptical of our current financial system and has a very sensible reform plan.

“Unfortunately, the political power of megabanks means Mr. Fisher is unlikely to be called upon,” Johnson said.
…