A Housing Bubble Built On Sand
It’s Friday desk clearing time for this blogger. “With inventory down and prices rising, buyers are exhibiting the kind of frenzied behavior not seen since 2005. It is not enough that they are mobbing open houses, bidding thousands of dollars over asking price, and making all-cash offers. They are going so far as to Google owners and craft pitches in which they pretend to enjoy the same things the sellers do. Family photos are not uncommon. As word spread in Jamaica Plain that Tanya Contos’s Colonial might be going on the market, strangers began ringing her doorbell. ‘It was like trick-or-treating, but for houses,’ she said. ‘They were slipping notes through my mail slot.’”
“The letters are a ploy resurrected from past competitive markets, but do they work? ‘When you have five people writing similar letters telling the same story about how much they love the house, what does that become?’ asked Gary Rogers, a past president of the Massachusetts Association of Realtors. ‘Junk mail.’”
“If you’re relocating to the Washington region from places such as Atlanta, Charlotte or Philadelphia and are looking to buy a home in the $750,000 range, chances are you’ve already experienced a reality check. In those cities, $750,000 would be considered the luxury market — where you can buy an estate on several acres. ‘Buyers who come to our area looking for an equivalent home go through sticker shock in this area when they try to duplicate what they had before,’ said Jeremy Cunningham, a real estate agent who mainly covers Northern Virginia.”
“In this area, $750,000 is considered the mid-range. Luxury starts around $1.2 million, he said.”
“Foreclosure sales plummeted in May after federal banking authorities reminded lenders to play by the rules when foreclosing on homes. Sales at courthouse auctions fell from April to May a combined 25 percent in Santa Clara, San Mateo, Alameda and Contra Costa counties, according to PropertyRadar. There were similar declines across California, the company said. Foreclosure sales have been declining for months and are now 70 percent below their level a year ago in those counties as rising property values pull more homeowners out of trouble and banks work on loan modifications with those who are still struggling.”
“Lenders still have plenty of foreclosed properties that they haven’t put on the market. The number of foreclosed properties they hold has dropped more than 45 percent from a year ago, but they are holding 3,413 foreclosed properties in the East Bay, Peninsula and South Bay, according to PropertyRadar. That’s reduced the number of homes for sale and caused prices to jump, said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland.”
“Foreclosed properties ‘are not being released by investors or banks,’ Brown said. ‘They are completely, artificially jacking up prices.’”
“Foreclosure filings in May more than doubled in Flagler County compared with April, according to a new report. ‘Not only was there a jump in Flagler County for scheduled auctions, but there was a statewide jump of 79 percent as well, so we are seeing an overall trend,’ said Jennifer von Pohlmann, a RealtyTrac spokeswoman. ‘We see the pattern in Volusia as well.’”
“‘We’re starting to see the shadow inventory coming out,’ said local Realtor Ron Wysocarski in Port Orange. ‘It’s a perfect storm. There’s a low inventory and demand is up as those hedge funds are buying and renting distressed houses. Together, they raise prices. There is an appetite now and banks can dump homes on the market without much of an impact because they are being bought up so quickly.’”
“Surging home prices in parts of Dubai and rebounding shopping and tourism markets are prompting developers to announce projects on a scale not seen since the emirate’s property market collapsed in 2008. So far, sovereign wealth, pension and insurance funds are staying away even as they splurge on real estate elsewhere. ‘It’s a thin market and it has a reputation of being something of a casino,’ said Richard Price, chief executive for Asia at CBRE Global Investors, which manages $93 billion of property assets. ‘The housing bubble was built on sand rather than fundamentals.’”
“House-hunters are seeing a return of ‘buy-off-the-plans’ developments which advertise low deposits and no repayments until completion. Marketing material for Urba Residences offers ‘just $1000 down and nothing else for 18 months’ for those using existing equity in their current house, or a 10 per cent cash deposit. Barfoot & Thompson agent Alistair Brown told the New Zealand Herald that of the 140 apartments about 80 had been bought, with about half choosing the $1000 down-payment option.”
“‘What happened in 2007 is everyone piled into those things without thinking them through, thinking ‘Yay the property market will keep rising and in 18 months I’ll have a profit, because they’re $250,000 today and they’ll be $300,000 in 18 months time and I will have only put up $1000. Good for me’. It might not be that way,’ said Real Estate Institute chief executive Helen O’Sullivan.”
“Australia’s GDP growth expanded merely 0.6% in the first quarter. This was after a 0.6% rise in Q4 2012. Minus export growth, Societe Generale’s Albert Edwards writes that gross national expenditure has fallen for two straight quarters. ‘All we have in Australia is, at its simplest, a credit bubble built upon a commodity boom dependent for its sustenance on an even greater credit bubble in China,’ he said. ‘Although a Chinese bumpy/hard landing will bring Australia to its knees, what will will send Australia into a deep recession after 22 years is the collapse in its grotesquely over-valued housing market.’”
“For years the resources boom made Port and South Hedland one of the tightest property markets in Australia. Now, the cancellation of big projects could leave the remote West Australian city with a property glut and a lot of burned investors. Greg and Karen Thompson pulled their home off the market in Hedland after just one viewer inspected the house over three months. The couple, who have lived in the area since 1996, planned to use the proceeds to help fund their retirement. ‘We had to take it off the market,’ Mrs Thompson said. ‘It’s dead.’”
“John Briggs of Port Hedland Real Estate predicts tough times ahead. ‘Sales are few and far between,’ he said. ‘Anybody who has bought in the last 18 months is in for a torrid time.’ ‘Anyone looking to buy into towns like Port Hedland is buying at the wrong end of the market cycle,’ said Gavin Hegney, of valuers Hegney Property Group. ‘There’s also the threat of a collision of new supply coming on the market and falling demand.’”
“A recent report from the Organization for Economic Co-operation and Development revealed Canada has the third most overvalued real estate in the developed world. Ben Rabidoux, creator of the blog Economic Analyst, which looks into housing and mortgage trends, said while low interest rates certainly contributed to the housing boom, said much has been fuelled by the availability of credit.”
“‘It’s not like we haven’t seen periods of relatively low interest rates in the past and even in those periods we found that prices weren’t in the extreme like they are today,’ Rabidoux said. ‘I think it’s very clear — it’s not so much the interest rate itself, it’s that really what we’ve seen in the last decade has been an unprecedented credit boom. And that’s what’s really driving these housing prices.’”
“During the past four centuries, there have been five occasions when major credit bubbles have led to stonking crashes. Tulip mania in 17th-century Holland was the first; the South Sea bubble in the 18th century was the second; the US real estate crash of the 1830s was the third; the 1929 Wall Street Crash and the Great Depression was the fourth. The sub-prime crisis that began in 2007 was the fifth.”
“As the world approaches the sixth anniversary of the freezing up of credit markets, a terrible idea has occurred to investors: we might only be part-way through the crisis. This has come as something of a shock. For the best part of the year markets have been pushing asset prices higher in the belief that the worst of the crisis is over. They have given a big round of thanks to Ben Bernanke, Sir Mervyn King et al for keeping monetary policy ultra-loose and avoiding a repeat of the 1930s.”
“Doubts are now starting to set in, and rightly so. Cheap credit has done wonders for equity and bond markets but precious little to revive real activity. An extremely aggressive and highly dangerous dependency culture has developed and it is not easy to see how central banks get out of the problem that they have created for themselves. There is also a risk that seeking to solve a debt problem with still more debt is creating the conditions for an even bigger bubble.”
“seeking to solve a debt problem with still more debt is creating the conditions for an even bigger bubble”
A postponed crash is more painful. We discuss this frequently but the debt junkies never get it.
What is worrying is that they can postpone it for a long time, at least the next 15-20 years and I’m done with my life by then.
I looked into Aussie, Canadian, Chinese and Indian RE markets. All these countries have very well manipulated the system (banking and RE) in a way that RE never goes down. They have been fairly successful so far, I would say more than 2 decades for Aussie and probably a decade for all the other countries.
I hope it corrects and people get to normal lives, but I doubt it. They always have something up their hat and take it out to postpone it longer.
Very tired of this nonsense.
Time is on your side.
Just a few weeks ago, I could do a web search (or crawl through manually) on China’s real estate or banking and find many articles on their state owned media sites. Now almost nothing is being put out from China itself. Most of what I see is coming from Hong Kong or Australia.
The Dubai boom has to be one of the phoniest ever. I’ve posted many articles recently where they report people lining up around the block to buy pre-construction condos. And then several reports of FB’s wondering when their condos from 2007 will be finished! Check this out from the article above:
‘The vacancy rate for offices across Dubai is 45 per cent, while the central business district has a rate of 15 per cent.’
Yet the developers are planning many billion$ in commercial projects right now.
Yet the developers are planning many billion$ in commercial projects right now ??
Makes you wonder about how dirty that money may be…??
Build it and leave it vacant…So what I guess…At least we got rid of the money and have some physical asset return even if your not quite sure what it might be worth to you or someone else…
You borrow some money. You pay a few contractors to get some work going but keep some for yourself then file bankruptcy. Rinse, repeat. I worked for a guy who did this many times.
Like Dubai, Doha is another bubble city. Doha has been building for the past 3-4 years many many high rise to be used in 2030.
They have a big sign on their downtown: Vision 2030. And 90% of these massive buildings are empty.
The builders keep on building with I would say zero real demand, which in turn pushes prices for all the material and labor high. Money comes in circulation in those countries and ETFs start putting money in their stock markets thereby inflating it. The local people get money and then they want all expensive phones, TVs, vacations and businesses make money.
This has been happening for the past 8-10 years all over Asia/Aussie and it has to end pretty soon. I think the whole world is overbuilt with too many houses. Once prices fall, places like China and India will have a very hard landing. Most buyers (80%) there are speculators.
The US is different here. Our bubbles always crash, even if they do repeat.
“What is worrying is that they can postpone it for a long time, at least the next 15-20 years and I’m done with my life by then.”
That’s why I suggest moving on from whatever plans you might have predicated on a return of normalcy to the U.S. housing market.
It might resemble normal by the time my kids are grown up and starting families, but that is at least a decade away. And I could also imagine the housing malaise to last much longer; look at Japan approaching twenty-five years since their bubble popped!
…”‘When you have five people writing similar letters telling the same story about how much they love the house, what does that become?’ asked Gary Rogers, a past president of the Massachusetts Association of Realtors. ‘Junk mail.’”
So, we’ve got unethical/fraudulent behavior and attempted market manipulation on the part of the flippers. Check.
Hmmm, where have we seen this before? (*scratches his head and goes back 6 years to re-read posts from the housingbubbleblog*)
“Lenders still have plenty of foreclosed properties that they haven’t put on the market. The number of foreclosed properties they hold has dropped more than 45 percent from a year ago, but they are holding 3,413 foreclosed properties in the East Bay, Peninsula and South Bay, according to PropertyRadar. That’s reduced the number of homes for sale and caused prices to jump, said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland.”
“Foreclosed properties ‘are not being released by investors or banks,’ Brown said. ‘They are completely, artificially jacking up prices.’”
So, we’ve got unethical/fraudulent behavior and market manipulation on the part of the lenders. Check.
Yeah…I read that part also…Problem is we just don’t know how much inventory they have…Accounting rules appear to have been suspended for them….Friend of mine had a small 2nd loan on a house..The owners defaulted and spent the next 37 months living rent free…You would have never known it with a drive-by…Boat…F-350 dressed-out to the 10’s….Just makes you wonder how many are out there…
Doesn’t a drop of 45% in the context of continued foreclosures imply that banks ARE working through their inventory? How many of the homes that they ARE holding are in some state where they can’t sell them? (evicting a tenant, fixing damage, dealing with the BK of the prior borrower, etc.) That number is non-zero, and non-trivial.
It is unreasonable to expect that all homes could be dumped onto the market immediately after foreclosure. However, being a local, you also have to ask yourself, what would the net result be if all 3,413 homes were dumped onto the market in the East Bay, Peninsula, and South Bay at the same time?
In a market with several million households, I personally think it wouldn’t do anything…pushing back a wave with a spoon.
‘what would the net result be if all 3,413 homes were dumped onto the market’
About 3,300 future foreclosures.
No, my theory is you’d have 1,000 or so sold quickly while the other 2,400 sit and cause the remaining values to go down. Reality sets in and the market can finally return to “normal.” Unfortunately we’ve allowed this shadow inventory to build-up.
Rental Watch,
You’re untrustworthy. You don’t know the truthful answer to anything. Why? Because you continually exaggerate and misrepresent housing in spite of the fact you have a stake in the direction of prices.
What did you pay for the house you bought in 2011?
You even cut and paste your insults now? Wow.
In April, Zillow has the following sales numbers:
Contra Costa County (1,456: Part of East Bay)
Santa Clara County (1,590: Part of Peninsula)
San Mateo has no number associated with it, but likely adds another 500 (low end) to 1,000.
So, the 3,400 homes represents approximately 1 month of additional inventory.
For some perspective on the demand side, you only have to look at average days on the market in some of the markets around the Bay Area:
From Realtor.com (I know…find me a different source).
Oakland: Average of 15 days on the market
San Jose: Average of 27 days on the market
San Francisco: Average of 28 days on the market
These are the lowest three on the list of 146 markets, with listings down 30% year on year in each of these markets.
The median in the US is approximately 81 days.
So, if you dump all those homes on the market, you add one month of supply, you might temporarily push each of those average days on the market by 30 days, which would still leave them at less than the US median, and far from swamping the market with supply.
‘the 3,400 homes represents approximately 1 month of additional inventory.’
You are missing the point. Those are 3,400 newly minted FBs being stamped out every month. Being swamped with supply is the least of problems. I realize the conventional wisdom is all this buying is a sign of strength, but it’s just the opposite.
My point is that the press continues to imply that if just the banks would release the inventory, it would slow markets down. I completely disagree…the mania is back, and now that prices are seen to be back on the upswing, the Fed is giving prices rocket fuel.
Close to the coast, prices are already rebubbled, but I’m not sure there is going to be a crash at this point given how people are financing the homes. At the peak in 2005, I heard from a lot of people how option ARMs were the single-most popular loan, and being used for affordability reasons. Today, I’m not hearing of option ARMs at all…only cash-rich buyers, and people buying with fixed rate mortgages.
Will some of those folks get out over their skis?
Absolutely.
More than “usual”?
Yes (prices are too high for them not to).
Will it be to the same magnitude as the crash after 2007?
Not based on the kind of financing that people are using.
When you go farther inland in CA, the story is much different–prices haven’t gone back up nearly as much as the inner Bay Area. You just need to look at Zillow’s index for a place like Santa Clara vs. a place like Antioch.
Santa Clara is right at about 100% of peak with no sign of slowing.
Antioch is at about 45% of peak and about 70% of what prices were in 2013.
Liar,
What did you pay for the house you bought in 2011?
I call bull on the cash-rich crap. They’re margin loans. Call it what it is. Those are worse than ARM’s!!
Accounting rules appear to have been suspended for them
Appear to be?
Yeah, and I count no less than FIVE abandoned properties within walking disance of my house, all of which have been vacant and not foreclosed for at least five years.
Yet the builders still build.
Yes, it is the number of defaulted houses with no foreclosure filings that should really be the focus of any shadow inventory discussion. It might be a hard number to determine, but local observers can get a feel for it. Florida, Arizona, Nevada, elsewhere.
“‘We’re starting to see the shadow inventory coming out,’ said local Realtor Ron Wysocarski in Port Orange. ‘It’s a perfect storm. There’s a low inventory and demand is up as those hedge funds are buying and renting distressed houses. Together, they raise prices. There is an appetite now and banks can dump homes on the market without much of an impact because they are being bought up so quickly.’”
And we’ve got deliberate misrepresentation, unethical/fraudulent behavior and attempted market manipulation on the part of the used-house-salesmen. Check.
‘There is an appetite now and banks can dump homes on the market without much of an impact because they are being bought up so quickly’
Not so fast:
‘Analysts have worried that those big price increases are creating another bubble and chasing some first-time buyers out of the market. And now those hefty price hikes are putting the bite on investors, too. Almost half of home investors who were recently surveyed say they plan to buy fewer properties in the next year because of the higher home prices.’
‘And more than half of investors now say they plan to hold their houses for five years or longer – in part because of the rising values which make it longer for them to flip the properties for profits.’
“Higher prices are reducing returns on investment and investors are responding by cutting back on their purchasing plans until conditions sort out,” Chris Clotheir with MemphisInvest.com says in a new report. “Fewer foreclosures, rising property values and competition from hedge funds are making it tough to find good deals on distressed sales.”
‘Investors bought almost a quarter of U.S. homes sold in 2012 – down from almost 30 percent in 2011. A further decline is expected this year.’
Ben, Investors may have decreased in numbers but buyers who want to own to live have come out with the same 2005-6 mentality that RE will go up forever and they don’t want to be left out. Like in DC metro area, there is no supply and banks can get what they want now. People are able to get loans easily and if shadow inventory is brought out slowly, it will be absorbed quickly at high prices and no necessarily by investors. In DC metro, a good house can cost more than a million and a luxury house with acreage would be in many millions. All the cheese is thrown to DC contractors and is spent here.
There are absolutely no good deals nowadays. Seems like we are in another bubble phase. Same bidding wars all over.
No one learnt a lesson, neither did the sheeple nor did the powerful ones (bankers etc.).
What buyers?
Remember….. Housing demand is at 17 year lows and falling.
‘if shadow inventory is brought out slowly, it will be absorbed quickly at high prices and no necessarily by investors’
If you understand supply and demand, you’ll conclude that it doesn’t matter if it comes out slow or fast, the price will find equilibrium. And HA is right; many thousands of people in the US switch from owning a house to renting every quarter right now.
‘Buyers who come to our area looking for an equivalent home go through sticker shock in this area when they try to duplicate what they had before,’ said Jeremy Cunningham, a real estate agent’
Interesting that the UHS take such pride in how expensive it is. Can you imagine boasting about how much groceries cost? Anyway, you know what they say about pride. And IMO, people are paying that much for a house because they think it’s going to make them rich.
“many thousands of people in the US switch from owning a house to renting every quarter right now.”
How much of this was because the people who wanted to buy continued to get shut out by the cash buy-to-rent investors? With prices rising to a point where buying-to-rent makes a lot less sense (and some of those investors are rightfully pulling back on NEW purchases), I suspect we will see the trend that you note reverse overall over the next couple of quarters.
‘How much of this was because the people who wanted to buy continued to get shut out by the cash buy-to-rent investors’
The trend started a long time ago.
‘I suspect we will see the trend that you note reverse’
Oh yeah, people want to buy more when the price gets higher. I do that all the time with tomatoes. I wait until the price goes up and boom, I snap em’ up.
The trend started as people were losing their homes to foreclosure…they had no choice but to become a renter.
People at that time with a choice were renting and waiting, because they didn’t want to put their down payment into an asset that was collapsing in value (and thus wipe out their hard-saved down payment).
Now, people who were foreclosed are able to get a loan again (thank you ObamaLoans). And people who had the down payment feel that the down payment will be safe if they buy.
And unfortunately, people buy high and sell low all the time. People buy into a high and rising stock market because it feels good, and won’t buy (and often sell) into a crashed stock market because they are afraid.
When the exact right thing to do is to buy when people are fearful, and sell when they are euphoric.
With housing though the logic makes sense, especially if you want to protect a measly 5-10% down payment…even small moves downward in the market feels incredibly risky, so until the bottom was clearly formed, people waited.
Now we have a stupid mania again.
This bubble can only be sustained as long as the general public can be tricked into buying now. Based on the people I know, I’d say it’s working. EVERYONE wants to buy now, before they get priced out forever. The only difference this time is that they all know it’s another bubble, and they all plan to sell at the top. Hope their mortgage doesn’t hold ‘em back, tee hee.
The only difference this time is that they all know it’s another bubble, and they all plan to sell at the top.
That should make this “recovery” extra stable.
What’s wrong / illegal exactly with what the banks are doing?
Banks had a bunch of homes on the books. When nobody was buying, they weren’t selling the homes. Now people are buying and they are starting to sell. I fail to see why this is some kind of nefarious action on the part of banks.
People do this all the time. When the value of an item decreases and you have a bunch of that item, you hold on to it. When the value increases, you sell it. Gold is the perfect example. When gold was at $300 an ounce people wore their gold chains, rings, etc. When it hit $1500 people sold the chains, rings, etc.
The banks owned those houses. If they choose to hold on to them for 50 years or 50 days, that’s up them.
‘If they choose to hold on to them for 50 years or 50 days, that’s up them’
No it isn’t. They are required to liquidate bad loans. To play games is masking their capital requirements, making them look solvent when they aren’t. In the case of the non-bank GSE’s, who hold most of the loans, the US taxpayer has been put behind their bonds, etc. Is deceiving the public when the politicians have put our purse at stake ‘up to them’?
Then there is the little matter of manipulating a market such that millions of people are paying more than they would otherwise, and at the same time having the government back 90%+ of the loans. Raising the possibility of trillion$ in losses and millions more foreclosures, with all the suffering that goes along with it. I could probably think of a dozen more, but that should hold you for now.
Is there a law that says a bank that forecloses a house has to sell that house in X number of days?
No, but they used to have to account for it at market value. And that was enough…
There was a poster a couple of years ago that discussed some regulations on how long REO could be held. He seemed to be pretty knowledgeable and might have been a state regulator or with the FDIC.
It’s nefarious because banks are federally regulated, federally subsidized, AND bailed out by taxpayer money.
There’s lots of regulations. IMO what’s going on is they use all these poor lil’ FB tactics to stall the foreclosure in the first place. See why with the accounting rules here:
Caution PDF!
http://www.fdic.gov/regulations/safety/manual/section3-6.pdf
“the US real estate crash of the 1830s was the third”
Huh? Never heard of this one. Andrew Jackson’s losses were incalculable.
‘Historians have traditionally attributed the Panic of 1837 to a real estate bubble and erratic American banking policy. Most speculation concerned western land opened to settlement after Indian removals, but northeastern forests were among the most overvalued holdings. One contemporary observed, “The speculation in Maine timber lands was the first in order, the most extravagant and irrational, and the most ruinous to those engaged in it.” In Massachusetts, Nahant Bank and Boston’s Oriental Bank fell victim to this speculative fever when their assets became dangerously concentrated in unimproved Maine land far from navigable waterways. An 1838 survey confirmed that this property was grossly overvalued and both banks failed.’
‘The effects of the Panic of 1837 also were felt far from home. Global trade with China factored into—and was transformed by—the crisis. Rapid credit expansion and avid speculation in tea, silk, and other products of the Celestial Empire contributed to the failure of merchant houses from London to New York and Boston in the late 1830s.’
Wow, plus ça change, plus c’est la même chose!
c’est vrai que.
C’est la vie!
We should all just short the stock market and be happy.
How did they ever get through it without:
47% of the people on some sort of government welfare
TARP, HAMP, HEMP, QE1/2/3/4 and the Stimulus
Government borrowing 49 cents of every dollar it spends
SNAP, Section 8, free health care, bailouts of bankers
Etc.
Or for the alternate question:
“Why did the Panic of 1837 last about one year will the recession we are in now in going on for six years with no end in sight?”
2ban:
Because this time around, Congress answers mainly to the extremely wealthy individuals who control the largest corporations on Earth. These individuals do not care to see their fortunes lost. Corporations get more government cheese than anyone else, and they don’t have to use a SNAP card to get it.
Corporations love the SNAP card becuase it enables them to pay their workers less. If a worker dies of hunger, then it must be replaced. It’s cheaper to let the taxpayer feed the workers, as long as rich people can have a lower tax rate than everyone else. Overall, this system leads to a ruinous national economy, but who cares? As long as the 1% can get theirs today, then they and theirs will remain obscenely rich for generations.
Rich people had a ZERO income tax in the 1837.
Try again.
This time look at the size, scope, cost and power of the government.
2ban:
There was no income tax back then, duh. Your reply does not follow in any way from my comment.
Details, details, details… I don’t care what anyone says, the 1830s were a great time to buy.
In the long run you can’t lose money on high grade timber needed to build sailing ships. Everybody needs it.
‘the 1830s were a great time to buy’
I knew a guy whose family owned some land in south Texas. His grandfather had bought 1,000 acres for $1 per acre in 1911 or so. He talked me into going down there and spending the night. They had a little house with a well, no AC. Around midnight, the temperature was still above 90 degrees. Clouds of mosquitoes flew by. Every plant had thorns on it. Fire ants everywhere, snakes as big as my arm. When we left the next day I remember thinking I wouldn’t give them a dollar an acre for that godforsaken place.
Upstate New York and the land between Richmond and DC used to be called the ‘Wilderness” and not in a good way.
Today, it is some of the most valuable land in America.
LOL….. You can’t give away land in upstate and that’s a fact jack.
I understand that to this day, farmland values (adjusted for inflation) have still not recovered from the pre-crash prices
Romney’s Inspiration:
By mid to late 1837, many Latter Day Saints (including some prominent leaders) became disaffected in the wake of the Kirtland Safety Society banking debacle, in which Smith and several of Smith’s associates were accused of various illegal or unethical banking actions when the bank, with the charter held by Smith, collapsed just prior to a nation-wide banking crisis. Many critics leveled accusations that Smith was actively misleading KSS members from the beginning of the financial enterprise as it was operating without an official Ohio bank charter and required reserves. Supporters of Smith, on the other hand, hold that the financial institution’s collapse was more than partially due to state and federal financial regulations and that the charges against Smith and his associates are at best inflated.
…
Things changed late in 1837; however, the loss of peace was not caused by violence against the Church but by financial duress. A bank illegally organized by Joseph Smith and other LDS leaders in 1836, The Kirtland Safety Society, failed in November 1837, loosing
Beer and CIG guy is on fire. Go brother Go!
Black Forest is on fire. Go Black Forest Go!
Crater. Buy later.
“…much has been fuelled by the availability of credit.”
People are in denial on this one. They don’t realize easy money is still readily available. Even if they did, it probably would not discourage them from wanting to catch that knife!
That’s right. Mortgage interest rates could increase by 50%, and they would still be on the low end of bubble rates. What matters is that anyone with a “good” (not great) credit score can still buy a house beyond their means with 0% down, and possibly a credit to cover closing costs or appliances. An increase from 3% interest to 4% interest is not going to deter anyone. And the 0% down payment will not deter anyone from walking away if need be, either.
I think it would probably take rates in the 5% range to make any real difference. Remember that on a $300,000 loan the monthly difference between 3% and 5% is only $300. Until the debt slavery stops or money ACTUALLY gets hard to obtain you won’t notice much of a difference.
And to anyone who thinks money is difficult to obtain, 3 years out of a foreclosure the letters are pouring in to tell me about being eligible for a new mortgage…
Yeah…. borrowing costs increasing from 3% to 5% (a 66% increase) is “only” $300/month.
Hey Junkie…..
Howmuchamonth?
“Yeah…. borrowing costs increasing from 3% to 5% (a 66% increase) is “only” $300/month. Hey Junkie….. Howmuchamonth?”
Pretty sure he was referring to the same howmuchamonth club you are and how they would react, where their red lines are, in his opinion.
As the world approaches the sixth anniversary of the freezing up of credit markets, a terrible idea has occurred to investors: we might only be part-way through the crisis. This has come as something of a shock.
Not the sharpest spoons in the drawer, are we?
You got a mouse in yer pocket?
“‘When you have five people writing similar letters telling the same story about how much they love the house, what does that become?’ asked Gary Rogers, a past president of the Massachusetts Association of Realtors. ‘Junk mail.’”
I thought the standard practice was to leave a dead rabbit in the mail box. No?
“There’s also the threat of a collision of new supply coming on the market and falling demand.’”
I portend this quote being oft-repeated in Phoenix, Las Vegas, San Diego, and every other city where Blackstone dwells.
“An extremely aggressive and highly dangerous dependency culture has developed and it is not easy to see how central banks get out of the problem that they have created for themselves.”
What problem? The central banks have no problem. Those employed by these companies are made men. No matter what happens, they will be fine. The problem belongs to the rest of us. The little people. The 47%.
PS
Dear NSA: Go ahead and throw me in a secret jail for saying this. Can you throw 47% of us in a secret jail, and still have it be secret?
There are no secret jails.
You will just be denied obamacare, denied a mortgage/student loans and be endlessly audited by the IRS.
What do you mean “there are no secret jails”? We know there are secret courts, and that a person being tried in a secret court is legally prohibited from revealing that he has been charged. Hence if he goes to jail, then how is he not in a secret jail?
Remember that the NSA is an arm of the military. When the NSA puts people in jail, they become prisoners of war. Laws don’t apply.
POWs are protected by the Geneva Conventions. You’re thinking of unlawful combatants probably.
It’s Not Over: Report Warns Shadow Inventory Threat Remains
http://realtormag.realtor.org/daily-news/2013/06/03/its-not-over-report-warns-shadow-inventory-threat-remains
Commenter: Christopher Lazaro Says…
I work with large institutional buyers wielding, in some cases, billions of dollars in investment capital. I am told by the “smart money” that not all is as it seems and that the US is only about 1/3 or so of the way through the “shadow inventory” glut. There is a widely held belief that the government has brought the flow of these properties to the market down to a trickle in order to boost home prices and stage a recovery. I am also told, and this could simply be hearsay, that Fannie Mae is still sitting on over 3 Trillion USD in bad loans (i.e.: assets, essentially) and the banks, using the wide berth the Generally Accepted Accounting Principals give them, have been shifting tons of these bad mortgages around while they scramble to recapitalize. This, however, can only go on for so long and I expect at least one major bank to either fail (or have a serious problem) within the next 12 months. My sources of information are generally people who are 60+ years of age and been in the real estate investment & brokerage business for 30+ years. They cannot ALL be wrong…
How many people here walk dogs? Take bike rides around the neighborhood? Or drive around town?
Jeez louise! We’ve all seen the shadow inventory! It doesn’t take special glasses to spot it. It’s there!
I walk my dog every day for at least a half hour, sometimes twice. I rarely see more than a handful of people outside, even on warm, low-humidity days. When I pass houses with open curtains, I can see the flicker of large television screens, which makes me think of the “parlors” in Fahrenheit 451.
I used to see obviously empty places on every street; the condition of the yard and foliage is a dead giveaway. Now every street has a McMansion under construction.
‘that the US is only about 1/3 or so of the way through the “shadow inventory” glut’
Nice try, but the GSE regulator has it at much more than that:
‘Some 1.7 million borrowers have missed several payments on mortgages backed by the U.S. government, the inspectors general of the Federal Housing Finance Agency and Department of Housing and Urban Development said in a joint report. ‘Not only are current REO inventory levels elevated … they may rise over the next several years depending on the number of shadow inventory properties that are ultimately foreclosed on,’ the report stated.’
‘Fannie Mae, Freddie Mac and the Federal Housing Administration are backing about nine out of every ten new home loans. Fannie Mae and Freddie Mac owned about 158,000 REO properties at the end of September 2012, while HUD had about 37,000. The report said the shadow inventory, which is made up of loans that have been delinquent for at least 90 days, is more than seven times the inventory of REOs that Fannie Mae, Freddie Mac and HUD currently own. ‘Even a fraction of the shadow inventory falling into foreclosure could considerably swell … inventories of REO properties,’ the report warned.’
‘more than seven times the inventory of REOs that Fannie Mae, Freddie Mac and HUD currently own’
http://thehousingbubbleblog.com/?p=7771
‘I am also told, and this could simply be hearsay, that Fannie Mae is still sitting on over 3 Trillion USD in bad loans’
OK, I’ve asked this many times. Supposedly the govt “bailed out” the GSE’s with $190 billion. How do 2 corporations with a total size of around $5 trillion (pre-bust) get bailed out with $190 billion? What about the 900+ special purpose entities Fannie held off shore in 2005?
I opened the link that Bubbabear posted and read it…I continued to read a few comments after the article…This is what a guy said from Florida;
Of the more than 200 residential buyers I have interviewed in the past year, less than 5% were requiring financing.
Your market is likely to be very different; Miami is a major international destination and has been seeing large sums of capital flowing in from Canada, Colombia, Venezuela, Brazil, Russia, France, the UK, & Germany
Miami is a major international destination and has been seeing large sums of capital flowing in from Canada, Colombia, Venezuela, Brazil, Russia, France, the UK, & Germany
It’s called “Put your money into the US before the SHTF at home!” Been going on forever.
I just found the article to be odd due to the fact of discloser of current state of the market …coming from an NAR source , so I suppose they have to keep their people informed of what could be transpiring soon
“‘that the US is only about 1/3 or so of the way through the “shadow inventory” glut’
… Nice try…”
And yet the MSM offers constant assurances that the crisis is over and the housing market has recovered.
Got duplicity?
“How do 2 corporations with a total size of around $5 trillion (pre-bust) get bailed out with $190 billion?”
Smoke, mirrors, lies and misrepresentations might be the ticket.
Foreclosures Jump as Banks Bet on Rising U.S. Home Prices
Home repossessions in the U.S. jumped 11 percent in May after declining for the previous five months as rising prices and limited inventory for sale across the country spurred banks to complete foreclosures.
http://www.bloomberg.com/news/2013-06-13/foreclosures-jump-as-banks-bet-on-rising-u-s-home-prices.html
…rising prices and limited inventory for sale…
There’s that supply and demand thingie again.
Ahhh,got it !
Restriction of supply versuse demand
In other words, the giant financial service companies are attempting to privatize public resources, socialize losses, scam people out of their homes and other private property … and then rent back to us what we used to own for a hefty price.
http://www.ritholtz.com/blog/2013/06/how-another-housing-bubble-was-blown-and-why/
Paradox between QE & rates
Head’ n for a rate spike soon folks…with no immediate exit strategy for all the bagholders
http://market-ticker.org/akcs-www?post=221783
Just print more money…
“It is not enough that they are mobbing open houses, bidding thousands of dollars over asking price, and making all-cash offers. They are going so far as to Google owners and craft pitches in which they pretend to enjoy the same things the sellers do.”
Are sellers once again requiring buyers to feed the squirrels?
>>Within a month of putting her two-bedroom house in San Francisco on the market recently, homeowner Linda Gao had five offers, each one above her asking price of $699,000. So before accepting the most-attractive bid, she threw in an extra condition: If you want to buy my house, you have to feed the squirrels.
>>Two weeks later, she and the buyer hammered out a contract that included feeding the backyard wildlife, which Ms. Gao has done three times a week for the past two years. “I don’t think it matters if it’s a buyer’s market or a seller’s market,” Ms. Gao says. “Anyone with a good heart would feed them.”
‘They are completely, artificially jacking up prices.’
It doesn’t say ‘legally.’
Is it legal?
This still seems headed for a much worse ending than anyone expected. It brings to mind the NPR story I heard last night about the end game of the Montana land boom in the early 20th century. By the time it was done, many of those who thought they would get rich quick by moving out to Montana to stake a Homestead Act claim were so poor they couldn’t afford a train ticket to travel back to where they came from.
I expect a similar conclusion to the present episode, but we’re not there yet.
Real estate boom and bust in 1910 and 2000: A comparison
Evelyn Cameron/Montana Historical Society Research Center Photograph Archives, Helena, MT
Four women and a child pose in front of the Central Cafe in Terry, Montana in the boom years.
by Sarah Gardner
Marketplace Morning Report for Thursday, June 13, 2013
Slideshow: 100 years ago, a boom and bust fed by hope and greed
“The season of the smiling bank manager.” That’s how author Jonathan Raban describes the 1910s in eastern Montana during the homesteading boom. But he could have been describing the mid-2000s in America during the housing bubble.
Raban’s prize-winning book, Bad Land,captures all the optimism, greed and naïveté that fueled that Montana boom. The reckless lending, too.
Check out our side-by-side comparison of these two booms and busts nearly a hundred years apart… make your own comparisons.
…
I had a very hard time locating this story, from just yesterday, online.
Perhaps the greed pigs at the NAR, a primary NPR supporter, didn’t take kindly to the story?
100 years ago, a boom and bust fed by hope and greed
Homesteaders got title to 320 acres if they built a cabin and stayed three years. The British photographer Evelyn Cameron came across these homesteaders in Marsh, Montana, in 1911.
- Evelyn Cameron/Montana Historical Society Research Center Photograph Archives, Helena, MT
by Sarah Gardner
Marketplace for Thursday, June 13, 2013
If you drive through the badlands of eastern Montana, you can go for miles without seeing another car, a house or even a tree. Then, out of nowhere, on the side of the road, a broken-down plow appears, an abandoned farm house, an old water pump. Remnants of a time when this remote corner experienced one of the biggest real estate booms in American history.
Here’s a CliffsNotes version, just in case your high school textbook omitted this story:
In the 1910s, tens of thousands of people flocked to Montana, lured by the government’s seductive offer of 320 acres of free land, plus some pretty deceptive advertising by the railroads. Some “homesteaders” wanted to settle and make a new life for themselves. Others simply wanted to speculate on rising land prices.
For a while things looked good, thanks to unusually wet years, cheap and easy bank loans and farmers’ belief in a new kind of “dry farming” science that promised bountiful wheat harvests, even on the semi-arid northern plains. Then disaster hit. The rains stopped. Wheat prices plunged at the end of World War I. Drought set in and the homestead boom turned into a bust.
Farms were foreclosed. Over half the state’s commercial banks went out of business. Most of the homesteaders walked away and left Montana for good.
…
“As the world approaches the sixth anniversary of the freezing up of credit markets, a terrible idea has occurred to investors: we might only be part-way through the crisis. This has come as something of a shock. For the best part of the year markets have been pushing asset prices higher in the belief that the worst of the crisis is over. They have given a big round of thanks to Ben Bernanke, Sir Mervyn King et al for keeping monetary policy ultra-loose and avoiding a repeat of the 1930s.”
The mass deception is wearing very thin. May the odds be ever in your favor.
Seriously, when you read that Miami, Phoenix, LA, Vegas, etc are dominated by cash transactions, buy to rent hedges, and frantic flippers, you can only conclude that now is NOT the time to buy real estate.
Lets not be stupid people. BTW rents in northern NJ are NOT rising. However, local property taxes continue to increase, squeezing owners. Landlords are getting their butts kicked because they can’t find qualified tenants who actually pay their rent on time. This is one of the wealthiest counties in the country. What’s wrong with this picture?
It really is a great time to be a renter. How come there are no MSM stories about that?
Exactly Jim.
Rental rates have been slipping for 4 year and are a fraction of the cost of buying at current massively inflated asking prices of resale housing.
Housing Market Watchers Edgy As Mortgage Rates Keep Climbing
by Yuki Noguchi
June 14, 2013 5:06 PM
2 min 28 sec
Mortgage rates have seen a relatively sharp rise this month. The average 30-year fixed-rate loan hit 4 percent earlier in June — a big jump from the record lows of recent years. Some investors are now concerned that the housing recovery could be stifled if rates continue to rise quickly.
The Federal Reserve has two main missions: to maximize employment and minimize inflation. Right now, there are few, if any, signs that prices for goods are spiking, and the job market is still crawling out of its long, deep slump.
The central bank has tried to protect the nascent recovery by keeping interest rates low. One of the ways it does this is by buying massive amounts of Treasury bonds and mortgage-backed securities. The Fed has also reminded investors that it will continue taking such steps until the jobless rate declines to 6.5 percent.
But investors aren’t heeding the Fed’s assurances that, when the time comes, it will wind down its stimulus very slowly.
“I think we, along with many other forecasters, had anticipated that rates were going to rise this year,” says Michael Fratantoni, a vice president of research for the Mortgage Bankers Association. “But [we] had anticipated a gentle floating up of rates as opposed to a sudden jump like we’ve seen.”
…
I used to live in the DC area, specifically Northern VA.
The area that I want to move back to early next year still has some houses that have been on the market for a long time. A lot of sales too; looks like a more active market than 2010. Prices were quite sticky in the neighborhood because it is very nice and no forced sales. The house next door sold when I lived there last in late 2010. From looking at the market now maybe the asking price could be +10% if it were sold, but the house’s interior was dated and I am not convinced it would sell at +10% price. The price I am taking about is in the $600k to $700k range.
So this is probably one of the strongest housing markets in the US and it certainly does not appear to be bubbly as some of these media stories imply.