Financial Barbarians Drive Activity Up The Housing Chain
It’s Friday desk clearing time for this blogger. “A woeful financial crisis (1720) in Europe resulted from the crash of stock prices of the British South Sea Bubble (notice the name). The Bubble was a joint-stock company founded in 1711 as a public-private partnership (PPP) granted a monopoly by the Crown to trade with South America. But the War of Spanish Succession (1713) intervened, and the Bubble was never able to exercise its monopoly fully. Instead, it expanded its operations by selling down government debt (acquired from debt for equity swaps), then a novel financial scheme for which the Bubble’s stock rose in unexpected value, driven by speculators and investors pushed to the alternate new opportunity. From the hyped demand, the overvalued stocks peaked in 1720, and then drastically plunged to a little above its original flotation price.”
“From the experience with the British South Sea Bubble, the other overvalued stocks and assets rising dramatically from inordinate investor demand, and then collapsing to lower than fundamental value from the panic selling, were since then nicknamed ‘Bubbles.’ The nickname stuck.”
“The most fearsome bubble that may occur in the Philippines is the real estate bubble, which is much argued about as here or not here — and if already here, is it to burst soon? Think about it: banks suffering (and surely surviving) a default of 50% of their real estate portfolio would mean about 410.8 billion of the investors/end users money gambled on real estate would have been lost by them. Bailouts and subsidies can only increase money supply more, and did not work as in the US expansionary track, now being re-studied by the Fed. Should the advantage of hindsight be pointing to some traditional measures in preempting bubble situations, like controlling liquidity and inflation, maybe raising interest rates, increasing capital reserve requirements, and surely, strengthening financial institutions — while the economy is still strong?”
“But everyone’s so engrossed in blowing bubbles.”
“The cost of the average home rose by £2,000 a month between April and June to stand at £235,912 – up 2.6 per cent. The cost of the average London home rose by £12,610 to £478,256 but the hottest spots, according to online experts Zoopla, are Ellesmere in Shropshire, Ripon in North Yorkshire, Snodland in Kent, Totnes in Devon and Ormskirk in Lancashire, where increases are 3.2 per cent or above. Even the worst-performing areas – Glenrothes in Fife, Heywood in Greater Manchester and Spennymoor in County Durham, saw prices go up by at least 1.6 per cent in the past three months.”
“The Government hopes further initiatives such as New Buy and Help To Buy will encourage young people with small deposits to get on the property ladder. In a sign of growing confidence, Leeds Building Society yesterday launched a mortgage with a ‘zero’ interest rate for the first six months. Lawrence Hall, spokesman for Zoopla.co.uk, said: ‘Mortgage lending has improved markedly this year, which is unclogging the bottleneck at the lowest end of the market. This is starting to drive activity all the way up the housing chain.’”
“The failure of banks to apply risk management and improve the mortgage industry, combined with the government’s practice of merely issuing regulations to control their high-risk behaviour, are key weaknesses in one of the most vital sectors of Nepal’s financial world. Nepali banks sank a lot of money in real estate for a lack of investment options, which triggered an artificial boom. When the bubble burst due to market saturation and new government regulations, prices plunged, leading to economic turmoil.”
“All these malpractices and an unhealthy investment climate created a trend of lowered lending standards for banks, higher-risk mortgage investment and artificial growth of the mortgage market. So a housing bubble was created when housing prices, especially in the Kathmandu Valley, went on an unhealthy climb, instead of rising gradually with inflation or with a rise in average incomes. When the bubble burst, housing prices tumbled, causing the real estate market to collapse.”
“As a result of adjustable-rate mortgages, financial barbarians, vested interests of promoters and board directors along with loan officers and property valuators, a lack of understanding of market dynamics and the deteriorating financial strength of borrowers, there were adverse consequences on the Nepali financial market.”
“A veteran Moranbah real estate agent has shot holes through a recent Australian Property Investor report which labels the town’s housing market as ‘bulletproof.’ Moranbah Real Estate director Bella Exposito has been involved in real estate in the town for 26 years and said the past two years had been among the most volatile in Moranbah’s history. ‘I wouldn’t call it bulletproof - a rental that used to be $1800 a week two years ago is now $300 to $350,’ Ms Exposito said. She said the last house she had sold went for $320,000, a stark contrast to the $660,500 median house price listed in the API report.”
“Thousands of real estate agents took to Hong Kong’s streets Sunday in protest at government efforts to curb soaring property prices, saying new transaction taxes and other measures are threatening their business. ‘There are 37,000 agents in Hong Kong and there were only 3,000 transactions last month,’ said Raymond Ho, a spokesman for the rally organisers. ‘The policies have frozen the market. A lot of small property agent firms will close in the future.’”
“In the desperate days of the early eighties real estate crash, the developer of a luxury tower on New York’s Upper East Side offered buyers a free Rolls Royce with every condo. Recounting this story to city insiders at the recent launch of Trump Tower Vancouver, one offered this deadpan reply: ‘Well, they could always sleep in it after losing their shirt on the real estate market.’”
“The sudden appearance of sales incentives to attract buyers in the city’s glutted condo market has been nothing short of enthusiastic. And realtors, when not busy employing extra staging techniques to sell new and old properties, are inundated with offers of special $5,000 bonuses if they bring buyers to projects. ‘We have to be careful before saying ‘the sky is falling,’ says Diana McMeekin of real estate marketing firm Artemis. ‘What we’re seeing in the market today is a response to the shift from speculators to long-term investors. The kinds of people that are buying now are owner-occupiers as opposed to ‘flippers.’”
“It wouldn’t be an exaggeration to say Houston’s real estate market is on fire — with record-high median prices and tight inventory. But are we approaching a housing bubble? Or, could we already be in a bubble? Bill Gilmer of the Institute For Regional Forecasting at the University of Houston’s Bauer College of Business, says, ‘Many of the price increases that we have seen over the last twelve months (are) likely to be reversed.’”
“But Gilmer says his prediction of a price reversal applies only to the suburbs, not to the neighborhoods closer to downtown. ‘The good lord will never make any more land inside the loop.’”
“Leslie Appleton-Young, chief economist for the California Association of Realtors, updated attendees at this year’s Awesome Females in Real Estate conference with the latest economic trends from both California and the nation. The California foreclosure funnel is much worse than it looks on the surface, primarily due to the ‘underwater’ inventory. Appleton-Young broke it out in the following way: 435,000 delinquencies; 117,000 in foreclosure; and 61,000 bank-owned. At the current rate of 18,000 distressed sales per month, this means there are 34 months of shadow inventory.”
“When you add the ‘underwater’ category of 2.1 million homes and add it to the other three categories, you now have approximately 10 years of shadow inventory as opposed to 34 months. As Appleton-Young noted, ‘If you don’t have equity, you’re not a homeowner.’”
“Last month, Gov. Brian Sandoval signed a bill that is supposed to make it easier for banks to foreclose on delinquent homeowners. So far, things haven’t quite worked out that way. A mere 249 notices of default were filed statewide last month, down 88 percent from 2,108 notices in May, according to RealtyTrac. It helped improve Nevada’s overall foreclosure rate. Nevada’s foreclosure rate was fifth-highest in the country last month, compared to second-highest in May.”
“With the legal barrier from the robosigning law pushed aside, it’s now ‘entirely upon the banks’ whether they seize more homes, Las Vegas Valley real estate agent Keith Lynam said. ‘They have no more bogeyman to hide behind,’ said Lynam, the 2013 legislative chairman of the Nevada Association of Realtors, which pushed for the changes to the robosigning law.”
“Ohio had more than 90,000 foreclosures last year. In March of 2012, 49 states signed on to the National Mortgage Settlement with mortgage servicers who had admitted to massive ‘robo-signing’ of loan documents and other abuses. The settlement was supposed to be an expedient way for some 1 million people to keep their homes. But Paul Bellamy, director of an advocacy group involved in foreclosure prevention likens it and other programs to ‘foaming the runway, again and again and again.’ As in, preparing for a major crash and trying to keep things from blowing up.”
“The number of foreclosures in Washington state has climbed 78 percent in the first half of this year, according to RealtyTrac. New foreclosure filings have risen as well even though. Real estate economist Matthew Gardner says it’s not because all of a sudden a lot more people can’t pay their mortgages. He says lawsuits in Washington state artificially suppressed the number of foreclosures in 2011 and part of last year. Now that those cases have been settled or ruled on, he says banks are moving ahead, which may give people shopping for a home a little more hope of finding something.”
“‘It’s not going to be the cure-all to the housing shortage, but flushing these homes through the system is amazingly important,’ Gardner said.”
“A major reason behind the financial crisis that started in late 2008 was the fact that the Western countries had built many more homes than were required to house their populations. Ironically the solution that central banks came up with for mitigating the negative effects of the financial crisis was to get home prices up and running again. This was done by printing money and pumping it into the financial system and ensure that the interest rates remain at very low levels. The hope was that at low interest rates people will borrow money and buy homes.”
“Initially people stayed away but gradually they seem to be getting back to borrowing and home prices in Western countries are up and running again.”
“Governments and central banks pushing up real estate prices does help in the short term and translates into some sort of economic growth. But it does have serious long term repercussions as we have seen over the last few years. Albert Edwards of Societe Generale writes in a report titled If UK Chancellor George Osborne is a moron, Fitch’s Charlene Chu is a heroine ‘Young people today haven’t got a chance of buying a house at a reasonable price, even with rock bottom interest rates. What makes me genuinely really angry is that burdening our children with more debt (on top of their student loans) to buy ridiculously expensive houses is seen as a solution to the problem of excessively expensive housing…First time buyers need cheaper homes not greater availability of debt to inflate house prices even further. This is madness.’”
“To conclude, let me quote economist Robert J Shiller from The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It ‘The idea that public policy should be aimed at…preventing a collapse in home prices from ever happening, is an error of the first magnitude. In the short run a sudden drop in home prices may indeed disrupt the economy, producing undesirable systemic effects. But, in the long run, the home-price drops are clearly a good thing.’”
How could members of the worldwide cult of central banking have collectively concluded that blowing real estate bubbles was an effective policy remedy?
Has anyone at the Fed offered comment on this opinion?
I’d love to have 30 mins with Bernanke on national TV on this subject… I’d have about a dozen members of my kid’s generation sitting behind me..
Apparently eat-the-young policies are in vogue, including those which make sure old folks can sell their used homes to young families at a premium.
Because they fear the crash and if they can defer the crash long enough it will become “someone else’s problem”?
July 12, 2013, 7:44 a.m. EDT
The looming threat to the housing recovery
Have the financial markets been taking too many painkillers?
By Brett Arends
A while back, a very good friend of mine had an operation on his arm. In the aftermath, the doctors gave him some Vicodin to deal with the pain. When I next saw him, his arm was in a sling. I asked him how he was doing.
He was in a terrific mood. “I’m as high as a kite,” he said and started laughing. I’ve never seen him so happy.
I don’t mean to be Mr. Gloom, but I sometimes wonder if investors are in a similar state of unreality. For the past few years, a massive dose of free money, thanks to zero-percent interest rates and “quantitative easing,” has sparked a similar sense of euphoria in many financial markets. One shouldn’t overdo analogies, but free money and Vicodin have one thing in common.
They wear off.
Federal Reserve Chairman Ben Bernanke lifted markets with remarks hinting that the era of free money may go on longer than some had feared. Last month, he sent markets into a tailspin just by looking forward to the day when the era of free money would come to an end — when the Fed would start “tapering” off its purchases of government bonds and, indeed, when short-term interest rates would rise.
…
The entire USA economy is pimps, drug dealers, and junkies.
Well…the dealers and junkies go together. There seems to be a piece or two missing with the pimps, though.
I’m not going to speak favorably of the USSR, but at least it was an ideological counterweight. Now there’s nothing, just a single global economic theory centered on debt and financial transactions and turning everything possible into a cash product.
The USSR kept our kleptocrats in check, as they had to maintain the image that “capitalism” was superior in every way to communism. Now that the USSR is gone and the ChiComs have rejected Maosim, our Robber Barons feel confident enough to resume their ransacking
40 years ago we had decent capitalism in America.
Today - we have a government that borrows 46 cents of every dollar it spends and controls nearly every segment of our lives.
More like we have replaced one socialist system with another.
Folks who are demonizing Obama or democrats for the increase in number of people who get food stamps or some sort of government assistance, either do not realise or not able to understand why this has happned.
It is mostly because of republican policies and democrats are also to blame. Republicans openly say and brainwash people in believing that unregulated market is good. Democrats says regulation is good but they ultimately go for laws which are written to circumvent the same thing that they are trying to avoid.
Folks says let market take care of it self. How is one going to survive on minimum wage? People who talk about it have no idea what happens when you get minimum wage. About food stamps (i know there is lot of fraud going on), a family can get perhaps at the most around $500/month, so who in their right mind would not take a job (if you can get one), which would pay you (say minimum wage is $8/hr) 8 x 40 = $320/week = around $1280/month. Folks earning minimum wage perhaps qualify for government assistance and depending on individual circumustances, they can get perhaps get $500/month. And who is paying for these, we all are paying.
My point is what do you want these folks to do? what should they do to a have better life? I guess, there is nothing we can do. Let free market decide how much they can earn. Do you know how minimum wage folks live in India or any hird world country? They live in dumps and don’t even get basic needs of life. Do you want western / developed world become like third world country? And that is where this country going. Some folks are super rich and others are getting poorer and poorer. The one differance between first world and third world was or still is that, no matter what job you have in first world, you would have a reasonably decent life. But in third world, if you are at minimum wage, you have a miserable life.
“Folks who are demonizing Obama or democrats for the increase in number of people who get food stamps or some sort of government assistance, either do not realise or not able to understand why this has happned.It is mostly because of republican policies ”
Of course. When bad things happen under Republican rule, Republicans are to blame. When bad things happen under Democrat rule….Republicans are also to blame.
But I know, I know…you’re not a partisan or anything. You’re a centrist, moderate, independent thinker who just happens to vote Democrat 99.98% of the time and blame Republicans 99.99% of the time.
It’s not just the $500/month food stamps.
It’s free health care via Medicaid worth at least $500/mo.
It’s Section 8 worth at least $500 a month.
It’s LIHEAP worth $50/month.
It’s EBT worth $300-500 a month.
It’s the free Obamaphone worth $100/mo.
It’s the free or heavily discounted HSI worth $25-50 a month.
Add it all up and it’s several thousand dollars a month of welfare. Nobody in their right mind would get a job making $12-15 an hour when you can sit on the couch, watch Oprah and get the equivalent of that job from Uncle Barrack.
I think that you are exaggerating or cluless or part of right wing propaganda or are just selfish. Obama phone is a myth. Also since there is no universal healtcare, folks will go to emergency room if they do not have coverage. How many folks get section 8 housing? Not many so it is myth that folks would not work and instead get government assistance. People working with minimum wage also would get govt. assistance because minimum wages can not provide one with basic needs. Republicans and democrats would make first world look like third world in coming years. By the time people including tea party jerks realise that they have been duped, it would be too late.
“How many folks get section 8 housing? Not many so it is myth”
Yeah you’re right. Practically nobody gets Section 8. Just 3,1M households. You people live in an alternative universe.
“Section 8 of the Housing Act of 1937, often simply known as Section 8, as repeatedly amended, authorizes the payment of rental housing assistance to private landlords on behalf of approximately 3.1 million low-income households. It operates through several programs, the largest of which, the Housing Choice Voucher program, pays a large portion of the rents and utilities of about 2.1 million households. The U.S. Department of Housing and Urban Development manages the Section 8 programs.[1]
I think that you are exaggerating or cluless
He is. He listed food stamps twice. Medicaid is pretty hard to get, especially if you don’t have kids. Section 8 is even harder to get, with waiting lists that are years long. $100 a month “Obamaphones”. LOL! I’m sure those come with a free Escalade too.
A few years ago a relative went through a bad economic patch and qualified for some “welfare”. She got $50 a month in food stamps and a subsidized, non-smart phone which came with a couple hundred of minutes of airtime each month.
That was all she got.
3.1M households are on Section 8. You call that hard to get?
There are 72 MILLION (seventy-two) people on Medicaid. You call that hard to get?
There are 48 MILLION on food stamps. You call that hard to get?
“A record 72,600,000 were enrolled in Medicaid for at least one month in fiscal 2012, up from 71,700,000 in fiscal 2011, according to the Medicaid and CHIP Payment and Access Commission (MACPAC), which provides an annual report to Congress on Medicaid and the Children’s Health Insurance Program.”
Guys, if you haven’t figured it out yet, smithers is our resident troll. He’s a broken record who refuses to reconsider any opinion or position no matter how incorrect you are able to prove his facts/assumptions.
At first I thought he was just an alt identity that Ben was using to spice things up around here, but I was recently reminded first hand that there are real people who are truly this one dimensional.
Everyone is out to get him by conspiring with Al Gore to bring global warming that will force everyone to get gay married and use food stamps to buy lobster and vote democrat 99.9% of the time.
Or whatever.
He’s a caricature of himself but doesn’t realize it. He’s always right(in his mind) and nothing anyone says can ever change that. I’ve never once seen him admit that someone offered new information that caused him to rethink….well…ANYTHING. This is truly the sign of a closed mind.
Bottom line: PLEASE DON’T FEED THE TROLL
Anyone who doesn’t agree with a liberal is a troll.
This is from 1995 but I doubt anything has changed (maybe even worse). http://www.cato.org/pubs/pas/pa240es.html
The Work Versus Welfare Trade-Off: An Analysis of the Total Level of Welfare Benefits by State (Cato Policy Analysis No. 240)
Executive Summary
The value of the full package of welfare benefits for a typical recipient in each of the 50 states and the District of Columbia exceeds the poverty level. Because welfare benefits are tax-free, their dollar value is often greater than the amount of take-home income a worker would have left after paying taxes on an equivalent pretax income.
In 40 states welfare pays more than an $8.00 an hour job. In 17 states the welfare package is more generous than a $10.00 an hour job.
In Hawaii, Alaska, Massachusetts, Connecticut, the District of Columbia, New York, and Rhode Island welfare pays more than a $12.00 an hour job–or two and a half times the minimum wage.
In nine states welfare pays more than the average first-year salary for a teacher. In 29 states it pays more than the average starting salary for a secretary. And in the six most generous states it pays more than the entry-level salary for a computer programmer.
Welfare benefits are especially generous in large cities. Welfare provides the equivalent of an hourly pretax wage of $14.75 in New York City, $12.45 in Philadelphia, $11.35 in Baltimore, and $10.90 in Detroit.
For the hard-core welfare recipient, the value of the full range of welfare benefits substantially exceeds the amount the recipient could earn in an entry-level job. As a result, recipients are likely to choose welfare over work, thus increasing long-term dependence.
Today - we have a government that borrows 46 cents of every dollar it spends and controls nearly every segment of our lives.
No, we don’t. Why do you keep repeating this lie? Are you a compulsive liar?
The CBO has estimated that this years budget deficit will be about 600B. That means the government will borrow 15 cents of every dollar it spends, not 46.
“The CBO has estimated that this years budget deficit will be about 600B. ”
Gotta love Democrats. They’re celebrating a $600B deficit as some sort of achievement.
During evil Bush’s entire 8 years the deficit was above 500B only once. During Obama’s 5 years, every one of his deficit has been above 500. And 4/5 years it was above $1T.
VIVA FISCAL DISCIPLINE
VIVA OBAMA
http://www.google.com/imgres?imgurl=http://www.foundry.org/wp-content/uploads/2009/03/wapoobamabudget1.jpg&imgrefurl=http://blog.heritage.org/2009/03/24/bush-deficit-vs-obama-deficit-in-pictures/&h=330&w=400&sz=26&tbnid=r1Q3QJi-SRhIsM:&tbnh=90&tbnw=109&zoom=1&usg=__eheHB7jR0xkWnwJtknz0iXaMDuE=&docid=t-VFAMC10FnjCM&sa=X&ei=gjTgUfG8Jc3BiwLkmICwBg&ved=0CEUQ9QEwAw&dur=556
Gotta love Democrats. They’re celebrating a $600B deficit as some sort of achievement.
That doesn’t change the fact that 2Banana is lying.
Yeah you’re right. Practically nobody gets Section 8. Just 3,1M households.
You do realize that 4 times as many people are eligible and don’t receive vouchers because, unlike foodstamps, they are rationed?
You do know that people line up overnight in freezing temperatures in tony and “prosperous” Ft. Collins to get on the waiting list for a voucher, because even the waiting list has a limited number of spaces?
You do know that in Orange Co, California, that the waiting list is CLOSED and is not accepting new applicants?
But yeah, all you have to do is quit your job and live like a king.
US Federal budget for 2012, from Wikipedia:
“The enacted budget contained $2.469 trillion in receipts and $3.796 trillion in outlays, for a deficit of $1.327 trillion.”
This means the plan was to borrow $.35 per dollar spent. Still pretty bad. I don’t know if the actual numbers are available yet. What source are you using Mr. Smithers?
Can the deficit actually be cut by 55% from $1,327 billion to $600 billion that quickly? Colour me skeptical.
“But yeah, all you have to do is quit your job and live like a king.”
When did I say live like a King?
I said that instead of working a menial job making $12-15/hr you can receive the equivalent via welfare without working.
“Can the deficit actually be cut by 55% from $1,327 billion to $600 billion that quickly? Colour me skeptical.”
Obama stopped the seas from rising. Cutting $500B from the deficit is nothing compared to that.
EBT stands for electronic benefit card. It is a method for delivering a benefit. It isn’t a benefit program. Listing it as a separate benefit is lying.
Actually, the “T” stands for transfer, so it is really a description of the way a benefit is transferred to a card.
Wrong Polly.
EBT is a cash transfer card. It is its own separate welfare payment, just pure cash money. It is independent of food stamps or Section 8 or Medicaid or anything else.
The program isn’t called EBT it’s called something like Welfare Cash Payment Transfer. EBT is just the slang term for it. But it is its own program in addition to the myriad of other welfare programs available.
The name is Temporary Assistance for Needy Families (TANF). Which is hilarious that “temporary” means multi-generational. It’s cash money to mooches and leeches.
Swipe, Swipe BABY!
Economy and standard of living is a ratio of productive workers ( income ) verus non productive workers ( expenses ) .
You can make alot of money availible to productive workers and get GDP up. I don’t think it does much to make money availible to non workers. Bernake should know this.
We can see this right now corporations have big cash hoards and government which is taken to giving money to non workers ( safety net ) is broke.
Outsourcing, the new computer economy plus natural demographics is whats running this economy now.
Low interest rates are just a sugar high
At this point I’m pretty sure this is how policy is determined at the Fed™.
LOL, when I hit the link I was hoping that’s what it was! I’ve sent that to several friends when discussing Fed policy.
The Fed has essentially one tool. Providing liquidity to the markets, either directly (through asset purchases), or indirectly (by changing the Fed’s target rate).
Try to fix a car if all you have is a hammer. That car is going to get all smashed up.
The legislature/executive branch has lots of potential tools, but they need to agree upon which one to use, and they are like a bunch of kids in a sandbox fighting over toys that they wouldn’t even be touching if the other kids weren’t around.
Blame the Fed, or blame politicians.
I blame them all. The Fed for trying to fix the car with a hammer, and the rest of Wash DC for refusing to pick up a wrench.
You forgot the headless chicken and the kazoo - the Fed has those tools at their disposal too.
(click my link above if that makes no sense - all will be revealed)
There is plenty of voodoo magic going on…BTW, did Housing Analyst ever give you the source for his 4.4MM homes in CA?
Hey RW/Rental Watch….
Ask your employers at Cal Assoc of Realtors
Move along liar.
How long from now until rising rates kill the dead cat bubble bounce?
Mortgage rates hit 2-year high
By Lily Leung
8:16 a.m. July 11, 2013
A neighborhood in Carmel Valley. A neighborhood in Carmel Valley. — Howard Lipin / Union-Tribune staff
Fixed mortgage rates have jumped to a two-year high after they cooled off a bit last week, says a report from mortgage giant Freddie Mac on Thursday. The spike, likely spurred by an encouraging jobs report, could price out more potential buyers from the housing market and make consumers increasingly antsy.
The average 30-year fixed-rate mortgage was 4.51 percent, up 4.29 percent from the same time a year ago. The last time it was around that level was summer of 2011, when the monthly average was 4.55 percent.
The 15-year fixed-rate mortgage averaged 3.53 percent, rising from 3.39 percent last week, bringing it to a roughly two-year high.
Freddie Mac chief economist Frank Nothaft said June’s jobs numbers fueled speculation that the Fed will wind-down its bond-buying stimulus program. The effect: Bond yields increased, as did mortgage rates, he added. Mortgage rates track the yield on the 10-year Treasury note.
The significant jump in fixed mortgage rates will likely cause a “dampening impact” on San Diego’s price appreciation, said Mark Goldman, real estate professor at San Diego State University. Increasing mortgage rates means decreasing affordability for consumers. In effect, more homesellers are having to reduce their prices, Goldman said.
Although mortgage rates have been rising at a quick pace, they’re still lower than normal, Goldman said. The 30-year-fixed rate mortgage averaged 5.87 percent in 2005, the height of the local real estate market.
“We were worried about a bubble anyway,” said Goldman, referring to recent price cuts he’s heard about it. “We all like lower rates, but the rate is still great. It’s not the end of the world.”
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Rex Nutting Archives
July 12, 2013, 6:02 a.m. EDT
Has Fed killed housing, and with it, the economy?
Commentary: Higher home prices have been most positive development
…
How long from now until rising rates kill the dead cat bubble bounce?
It already has in my nabe. Houses were selling in the Spring. Now? They are languishing, especially those above 300K. But even those below 300K are not moving all that much. Cheaper, 200K houses in other nabes are still selling, though at a slower pace from what I have heard.
Have to agree with IC’s observation, a bunch of houses in my neighborhood (burbs of Chicago) moved in early Spring really quickly at decent prices (ie probably up about 5-10% from last year)…now, the market is dead, dead, dead.
Steve, I am also in the Chicago ‘burbs (north). Asking prices have always been so astronomical, it’s hard to tell whether they have declined or not. Properties are moving, but not very fast unless they are (relatively) reasonably priced.
And yet, a construction fence has gone up around one of the few remaining small ranch houses in my neighborhood. Some day, poof! another small house will bite the dust.
http://www.chicagomag.com/Radar/Deal-Estate/July-2013/1-2-3-4-And-If-You-Have-Some-Millions-More/
“The real estate market is really popping, and that’s particularly true in the $1 million-and-up category. In the first six months of 2013, 709 homes in the Chicago area sold for $1 million or more, according to Midwest Real Estate Data LLC; that’s 35.8 percent more than sold in the same period in 2012.”
Yep, the real estate market is DEAD DEAD DEAD!!
“Some day, poof! another small house will bite the dust.”
One of the more overlooked downsides to the bubble; small houses disappearing. I guess if you don’t need much space you have to live in a condo.
The other day while out for a walk, I saw a nice big lot with an obvious teardown-candidate old farmhouse at one end of it. Thought how nice it would be to subdivide the lot and build two small (1000-1200 sq ft) houses on it. Maybe there is a career of sorts for a person who wants to build smaller homes at modest profit…but then they have to compete for lots with the builders of McMansions.
“The other day while out for a walk, I saw a nice big lot with an obvious teardown-candidate old farmhouse at one end of it. Thought how nice it would be to subdivide the lot and build two small (1000-1200 sq ft) houses on it. Maybe there is a career of sorts for a person who wants to build smaller homes at modest profit…but then they have to compete for lots with the builders of McMansions.”
My GOD!! A big house on a big lot??? That should be criminal. And it’s racist too.
‘In the first six months of 2013′
Those numbers are looking back in time.
The first 6 months ended 12 days ago. How much more recent data do you want? The first 6.33 months?
You buy a house, you close 1-2 mos later, right? March-April houses were moving. Right now, last month or two, not so much.
I’ve only been watching the neighborhood sales for, oh, 13 years or so. I’ll post here January 2014 and apologize to everyone if I’m wrong. That being said, Mr. S, if you’d like to offer me 7 figures for my house you have a deal.
It’s great to see housing prices falling to dramatically lower levels in Chicago.
Considering houses depreciate always, why expect anything else?
http://picpaste.com/pics/ce97180e5b42733ea972e0efb2a4c217.1373650723.png
Ah, Smithers. Our resident contrarian. If I had suggested building another McMansion on that big lot, you would have said something against THAT.
It must suck to be you.
“Ah, Smithers. Our resident contrarian. If I had suggested building another McMansion on that big lot, you would have said something against THAT.”
But you didn’t.
Your guys are something else. Every data point out there shows housing is moving and fast but since it’s not updated every 45 seconds, it doesn’t count.
Yes houses take 1-2 months to close. As they always have. Nothing new about that. The % gains are YOY which means the 1-2 month lag time was there a year ago as well.
You people live in your own little bubble where no houses ever sell, where everyone lives on minimum wage, where the sun never shines and misery is everywhere for everyone. I promise you, most of the doom and gloom is in your heads.
Housing demand is at 17 year lows….. Moving and fast? Seriously Slithers?
Gloom and doom?
Pick yourself up off the floor and cheer up Slithers. Falling housing prices to dramatically lower and more affordable levels is positively bullish!
I promise you, most of the doom and gloom is in your heads.
For some reason that made me picture smithers in ten years or so, living in a cardboard box randomly yelling “Wash me!!” at passers by.
I promise you, the idea that en economy can function forever with fundamentals this far out of whack is in your head.
Smithereens:
1) But housing inventory is up just about everywhere in the United States.
2) Look up your history on tariffs. The United States has always done best under a policy of reasoned tariffs. Not too low; not too high.
“The first 6 months ended 12 days ago. How much more recent data do you want? The first 6.33 months?”
Great of you to miss a totally obvious softball once again. The point was basically that with the bond (and mortgage bond) market crash, the recent real estate Boomlet is soon heading to Bust.
Why live life driving while looking through the lens of the rear-view mirror when your car comes equipped with a windshield and headlights?
I think it’s slowing down here as well Ventura Co CA
I get these updates from Vic Seibert (who has a address in Carmichael now ? ) somtimes 3X a day
a few months ago all were pending. now not so much
I get all homes under 500K in 93021. I have noticed the square footgae has gone down over the last year. Reminds me of grocery shopping. Same price smaller package.
I’m sorry, but don’t sales always slow down starting in July? Given that it takes 1 to 2 months to close and another bit to settle in, if you aren’t under contract by late June, you aren’t going to be in by the start of the school year. Not relevant for everyone, but it is relevant for a lot of people. I thought the whole idea of the “spring selling season” was that people wanted to move over the summer, not in September.
I think you’re right Polly. Here is the information on Denver:
http://www.zillow.com/local-info/CO-Denver-Metro-home-value/r_394530/#metric=mt%3D24%26dt%3D1%26tp%3D6%26rt%3D6%26r%3D394530%26el%3D0
Can’t speak to the situation on the ground on a day to day basis, but here is the data from Zillow on numbers of homes sold through the end of May 2013.
Two observations:
1. It looks like May 2013 was the best May in terms of number of sales since 2007; and
2. Peak selling season in the Denver Metro (close of escrow) is July/August with then a pretty steep decline.
If I were a betting man, I would expect the total number of closings to fall off starting in September, just like in most years–with a 2 month closing process typically, you would expect to see this dropoff in new contracts written starting around now (meaning fewer “pending signs”).
Only in the rearview mirror will you be able to see if the dropoff more or less extreme than prior years…in that regard, year-on-year data is what to look for.
May 2012 to May 2013 was up 55%. That’s a big damn number. I’ll bet that sales are up less year on year June/June and July/July, just because I’ll bet part of that 55% year on year increase was due to people jumped in this spring after waiting, and finally deciding that they had waited long enough.
http://www.zillow.com/local-info/CA-Ventura-County-home-value/r_2061/
Here is the Ventura County….not nearly the bump up as there was in Denver, FLAT year on year, but similar seasonality.
Sale-to-List price ratio would tend to indicate that the issue has to do with supply more than demand:
http://www.zillow.com/local-info/CA-Ventura-County-home-value/r_2061/#metric=mt%3D44%26dt%3D1%26tp%3D6%26rt%3D6%26r%3D2061%26el%3D0
If there was weaker demand, sellers would have less ability to hold their asking price, and you would see the sale-to-list price falling, not rising.
I guess your neighborhood is special IC. The rest of Denver….
“Homes priced from $200,000 to $350,000 are the hottest on the market, according to several real estate experts, often drawing multiple offers within 24 hours of listing — most over the asking price. If a seller can’t close on the first offer, the next one is likely at or near the offer price of the first, putting even more pressure on the buyer with the highest bid. Some buyers who have worked hard to find and land a house are surprised to find that their offer is higher than the amount at which the property appraises — sometimes by thousands of dollars.
http://www.denverpost.com/breakingnews/ci_23475772/colorado-housing-market-buyers-caught-price-squeeze#ixzz2YqjYRVEC
Bzzz. Wrong again. Even the Denver Post is now reporting that it’s slowing down.
Ha!! When I read that comment I laughed so hard that I smithered myself! Gotta’ go wipe.
Then go wipe your smithers…. pronto!
I guess your neighborhood is special IC. The rest of Denver….
I don’t live in Denver. Everybody here but you seems to know that, but that doesn’t surprise me.
It never got as hot in Loveland as it did in Denver. Of course, only select nabes in Denver got “hot”. And as Ben pointed out, even the Denver Post has admitted that the market is suddenly cooling off.
And the cooling in Loveland has been very sudden. I was reporting just two months ago that houses in my nabe were selling briskly, especially at the lower end. Now the “Under Contract” stickers on the for sale signs are conspicuous by their absence.
I’m seeing the resale inventory climbing here in Tucson. And sales don’t appear to be red-hot.
Financial Times
July 12, 2013 8:28 pm
JPMorgan warns on mortgage profits
By Tom Braithwaite, Tracy Alloway and Stephen Foley in New York
Jamie Dimon, chief executive of JPMorgan Chase, warned of a “dramatic reduction” in future mortgage profits as a strong start to Wall Street’s earnings season was marred by worries about interest rates.
JPMorgan Chase and Wells Fargo, the two biggest US banks by market value, surpassed analysts’ estimates, with $6.5bn and $5.5bn in net income for the second quarter.
But both showed withdrawal symptoms from the anticipated end to the Federal Reserve’s ultralow interest rate policies. The Fed’s crisis response sparked a boom in mortgage refinancing and allowed banks to release billions of dollars of reserves. JPMorgan’s profits were flattered by a $1.5bn reserve release on Friday.
The risk is that these sources of profits are drying up before they are replaced by new revenues from rising loan demand or investment banking activity.
Mr Dimon cautioned that the end of the wave of mortgage refinancing would depress profits significantly if rates stayed flat or rose. Tim Sloan, chief financial officer of Wells Fargo, said: “Originations related to refinancing has got to come down. It’s just simple math.”
The state of the mortgage business concerned investors. The average rate on a 30-year fixed-rate mortgage stood at 4.52 per cent on Friday, according to Bankrate.com, a research company. That is up more than a full percentage point in two months.
Recent survey data from the Mortgage Bankers Association have shown marked declines in loan applications since rates began to rise sharply two months ago. The MBA said that applications for loans on newly built properties slid 15 per cent in June compared with the previous month, while its weekly index of mortgage refinancing applications has halved since the start of May.
…
One word,
Inflation!!
Seems everyone forgot there can be wage inflation.
Minimum wage really needs to be $15.00 an hour now.
I take it you want to really push the theory that the minimum wage has no effect on unemployment rates to the limit?
There is no inflation adjustment for minimum wage currently and this is a big problem no one wants to hear.
So were going to start exporting tennis shoes again, not likely
Why would we want to be in the tennis shoe exporting business. Is this a highly lucrative source of export income for the U.S. which supports high-paid jobs?
No, it’s a source of income for people who don’t qualify for a better source.
Since wages are set globally raising our minimum wage to fifteen dollars will end up pushing more of our jobs to some other place.
Anymore the primary criteria that sets wages is whether or not a particular job can or can’t be worked somewhere else.
If a job can be worked somewhere else then global wages will prevail. If it can’t be worked somewhere else then local wages will prevail.
“…will end up pushing more of our jobs to some other place.”
One of those other places is under-the-table employment opportunities for illegal immigrants. We have ALOT of that around here in SoCal.
If a job can be worked somewhere else then global wages will prevail. If it can’t be worked somewhere else then local wages will prevail.
And those jobs have pretty much been offshored already.
Or we could just charge tariffs. As long as the US is the major driver of business initiative in the world, then we can do that, and we should.
There is no inflation adjustment for minimum wage currently and this is a big problem no one wants to hear.
It is adjusted here in the Centennial State, but they use the FedGov’s bogus price index as a rule, so the minimum wage here has been rising 1-2% a year. At that rate of increase it will take decades for it to reach $15/hr.
It’s easy to make above minimum wage. Learn a skill or two. If your labor is worth more than $7/hr someone will pay you more than $7/hr. If your labor isn’t, nobody will.
It’s that whole demand/supply thinngy. It works for labor as it does for anything else.
Paying someone $15/hr for producing $5/hr of labor value does nothing but incentive an employer to find an alternative means for production…ie a machine. Why liberals can’t understand this simple concept is one of life’s great mysteries.
Maybe we can’t understand it because the financial services industry is handsomely compensated for producing nothing of value.
“Maybe we can’t understand it because the financial services industry is handsomely compensated for producing nothing of value.”
Nothing of value? LOL. Do you honestly think an efficient capital market in the trillions of dollars doesn’t produce any value? Wow. Just wow.
Who do you think funds startups in Silicon Valley?
When a company needs capital to expand, where does it get that money?
When a company goes public, who makes that happen?
When a hospital needs $100M for a new wing, where does that money come from?
When a guy with an idea for a new business needs $25K for a prototype, where does he get that money?
If you answered EVIL FINANCIAL SERVICES INDUSTRY for all of these questions, you get a cookie.
In none of those instances did the financial services industry produce anything. And the model you romanticize comes straight out of a television commercial. If Glass-Steagall ever is reinstated maybe you’ll make some sense.
We have a system where people who trade paper, often corruptly, make more than a brain surgeon. Unlike you, I don’t agree with that, find it “efficient,” or exalt the people who do it.
Dumb question of the day: What is the difference between ‘Feds’ and ‘the Fed’?
Feds shy away from crackdown on ‘nothing down’
By Dan McSwain
5 p.m. July 6, 2013
FILE - In this June 19, 2013 file photo, Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington. A majority of the more than two dozen economists polled in an Associated Press survey late last week agree with the Fed’s plan to start slowing its bond purchases later this year if the U.S. economy continues to strengthen. Higher long-term rates will likely result. (AP Photo/Susan Walsh, File) FILE - In this June 19, 2013 file photo, Federal Reserve Chairman Ben Bernanke speaks during a news conference in Washington. A majority of the more than two dozen economists polled in an Associated Press survey late last week agree with the Fed’s plan to start slowing its bond purchases later this year if the U.S. economy continues to strengthen. Higher long-term rates will likely result. (AP Photo/Susan Walsh, File) — AP
It looks like regulators are chickening out on a major tightening of lending standards for mortgage loans. Low down payments are here to stay, and may be poised for a big comeback.
Although this certainly helps homebuyers, owners and Realtors, it won’t do much to protect the banking system or smooth out the ups and downs of the real estate market, which have become particularly volatile in San Diego.
On Tuesday the Federal Reserve outlined new regulations that may eventually reduce systemic risk by increasing the amount of equity a “too big to fail” bank must hold. The Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. are scheduled with the Fed this week to unveil detailed proposals on leverage.
But the Fed went easy on small and regional banks, and it backed away from a proposal that would have discouraged lenders from making loans without at least a 20 percent down payment from the borrower.
What a difference a few years makes.
In 2009 Washington was full of talk about raising minimum down payments. Prices were plummeting in the U.S. housing market, and mortgage defaults were skyrocketing. This had triggered a global financial panic as investors and creditors discovered that giant banks were holding highly leveraged portfolios of troubled mortgage-backed securities.
President Obama talked about requiring borrowers to contribute at least 10 percent of a purchase price for a mortgage down payment. Sheila Bair, Obama’s former chief of the Federal Deposit Insurance Corporation, gave speeches calling for a 20 percent standard.
Their reasoning was straightforward. The more equity borrowers have in their houses, the less likely they are to walk away from their mortgages. And when properties do fall into foreclosure, lenders are less likely to lose money when their loan balances are smaller percentages of the values.
They were right about one thing: Federal support for cheap and easy mortgages helped pump up the housing prices – and led to the big deflation – so removing some of that support could at least moderate the next cycle. This is a big deal for San Diego, where zoning constraints on new construction tend to increase the swings in prices up and down.
…
That’s what gets me. This isn’t just a depressing economic failure, it’s a spectacular political failure. I’ve never seen anything like it.
If politicians can keep doing what they’re doing and keep getting re-elected, well, they are going keep doing it.
Politicians are just humans who wipe their behinds like everyone else. They are doing a job, like anyone else who does a job. And they’re interested in advancing their own interests, like any normal human being would be.
“The Government hopes further initiatives such as New Buy and Help To Buy will encourage young people with small deposits to get on the property ladder. In a sign of growing confidence, Leeds Building Society yesterday launched a mortgage with a ‘zero’ interest rate for the first six months. Lawrence Hall, spokesman for Zoopla.co.uk, said: ‘Mortgage lending has improved markedly this year, which is unclogging the bottleneck at the lowest end of the market. This is starting to drive activity all the way up the housing chain.’”
Why are Western governments so eager to use young families as cannon fodder in the War on Affordable Housing Prices, going so far as to offer them the same kind of subprime loans that led up to the Wall Street Financial Panic of 2008?
Why are Western governments so eager to use young families as cannon fodder
I think this is happening in Asia as well.
Because young people have not been around to know any better.
So we are going to start exporting tennis shoes again Ha!
There is no inflation adjustment for minimum wage currently and this is a big problem no one wants to hear.
Are you suggesting the minimum wage should be adjusted upwards for cost of living allowance? Wouldn’t doing that tend to increase the unemployment (and illegal / under-the-table employment) rate?
Well lets put it this way,
I predict there will be wage riots in the near future.
Is this your personal expectation or do you have somebody else’s prediction to fall back on?
How does one predict the occurrence of riots?
Just me,
So whatever,
When you can’t afford to live you Riot.
“When you can’t afford to live you Riot.”
Speak for yourself.
I prefer to either cut spending or increase income when I can’t afford to live, but that’s just me.
Increase income , yes I think that is what it is about…
Anyway very easy to see there are just a few of us left who lived through the 60’s and 70’s.
Good luck out there !!
The 60s-70s. were also inspired by the assassinations of the era like JFK, RFK, MLK, George Wallace and Malcolm X. Maybe that’s the missing ingredient?
I don’t know if the riots will be over wages, or if they will be in the near future, but I agree that social instability is coming. There’s only so long that frustrated young people can be distracted.
I predict there will be wage riots in the near future.
That’s why I believe that, all the right wing bluster notwithstanding, that no one will touch the foodstamp and school lunch programs. The $120B spent on them is but a very small percentage of the federal budget, dwarfed by SS, Medicare and Military spending. As long as there are foodstamps, there won’t be any riots.
Check out the size of the crop insurance too, $93 billion. That’s a lot of money for BigAg. Are they expecting some huge crop failures or just trying to catch up with past losses. The beef herd is still at 60 year lows from the current drought.
The cost of these programs is cheap, compared to the costs that would happen if a pizzed off, armed to the teeth populace was forced to chew their bootstraps.
So the obvious solution should be…….ban guns, and you can do whatever you want to the homeless/starving.
Which is why current Republican policies are (on the face) illogical.
-Force women to carry rape babies to term, then make them figure out a way to boostrap themselves.
-Harping about “family values”, then creating policy that destroys families economically.
-No restrictions on firearms, and no money to deal with the consequences of the policy.
-A libertarian-like, pathetic, candy-crapping unicorn faith in “free market” solutions, when every other economy in the world is using government policy to grab as many jobs as possible, and/or to create a technical and industrial base to compete/combat the US in the future.
-”Law and Order” for minority kids grabbing a few hundred bucks worth of chips from a convenience store, but a free pass to the banksters/pigmen/squids.
-Promoting a whiny, eight-year-old-girl-like sense of victimhood, where you hear stuff like “I’m a victim, because blacks use the “N-word”, so why can’t I?”
GOP = Grampa Overly Pizzed party.
“The $120B spent on them is but a very small percentage of the federal budget”
Exhibit A as to why nothing will ever be cut. No matter what it is, no matter the cost, there will always be this argument….it’s ONLY $100B, it’s nothing, leave it alone.
I’m not that yet I remember a time when $100B was an enormous amount of money. Now it’s change found under the couch cushions for some. And we wonder why we have a $17T debt and growing.
This is the #1 reason I quit the GOP. I realized that while they spouted their phony family values drivel, they were doing everything possible to economically undermine my family.
This one gets an honorable mention. I have heard people from other countries ask me why the US government doesn’t do more to protect its jobs base. We are the world’s patsy and laughing stock when it comes to that.
“-A libertarian-like, pathetic, candy-crapping unicorn faith in “free market” solutions, when every other economy in the world is using government policy to grab as many jobs as possible, and/or to create a technical and industrial base to compete/combat the US in the future.
This one gets an honorable mention. I have heard people from other countries ask me why the US government doesn’t do more to protect its jobs base. We are the world’s patsy and laughing stock when it comes to that.”
Learn your history kids. Protectionism NEVER works. Not once. Never, ever in the history of economics has it worked. As in ZERO TIMES. It never works. See Smoot-Hawley as Exhinits A-Z on why protectionism is the stupidest public policy out there.
But why let pesky facts get in the way of a good socialist diatribe, eh boyz?
Lemme ask you boyz a question….how many Apples or Twitters or Ciscos or Amazons or Ebays or Facebooks or Googles or Microsofts have come out of countries that impose tarrfifs? About the only I can think of is Skype that was developed in The Netherlands. Aside from that virtually every major technology company of the past 30 years has been American. All that without protectionist measures. But how can that be?
How many new miracle drugs have come from France in the last 20 years? How about Japan?
You are right, protectionism does protect jobs. In dying industries. Is that really what you want? Keep jobs in dying industries while allowing other countries to invent the next miracle drug or come up with the next Apple?
Joseph Schumpeter was one of the great economist. He is a semi-God in Japan credited with being a significant instrument in their post WW2 economic miracle.
Here is what he said about trade:
“It is a fact that in a regime of free trade the essential advantages of international intercourse are clearly evident. The gain lies in the enlargement of the commodity supply by means of the division of labour among nations, rather than in the profits and wages of the export industry and the carrying trade. For these profits and wages would be reaped even if there were no export, in which case import, the necessary complement, would also vanish.”
And this is about protectionism….
“Protective tariffs alone - and harassment of the alien and of foreign commodities - do not basically change this situation as it affects interests. True, such barriers move the nations economically farther apart, making it easier for imperialist tendencies to win the upper hand; they line up the entrepreneurs of the different countries in battle formation against one another, impeding the rise of peaceful interests; they also hinder the flow of raw materials and foodstuffs and thus the export of manufactures, or conversely, the import of manufactures and the export of raw materials and foodstuffs, possibly creating an interest in - sometimes forcible - expansion of the customs area; they place entrepreneurs in a position of dependence on regulations of governments that may be serving imperialist interests, ”
This was written almost 100 years ago and it is as salient today as it was then. Free Trade works. Protectionism doesn’t.
Lemme ask you boyz a question….how many Apples or Twitters or Ciscos or Amazons or Ebays or Facebooks or Googles or Microsofts have come out of countries that impose tarrfifs?
Most of them came out of “business unfriendly” California,
Learn your history kids. Protectionism NEVER works. Not once.
Yeah, that’s gotta be why the Chinese are cleaning our clocks.
“Most of them came out of “business unfriendly” California,”, you are very very smart. righties are crazy and do not know that what they are professing is going to harm them but they keep drinking the Kool-Aid
Typical HBB subject change. Let;s try again.
Answer the question….what great companies/technologies have been produced in countries with protectionist policies? What great new industries have come from those countries?
And I don’t mean a copycat like the Chinese version of Google. I mean a Google type of company that didn’t exist before that was created in France or Germany or Japan or China. How about a Facebook? An ebay? An amazon? A Paypal? A Microsoft? A Walmart. Sure there are lots of mega retailers today. But Walmart was the 1st. They revolutionized retail worldwide. What WM really revolutionzied was supply chain management and distribution. It’s incredible how efficiently WM moves its merchandise. And they did in evil America. Dell and Compaq did the same for PCs. Also in evil America and even eviler Texas.
And all this was done because we don’t have protectionism. We let old industries wither and die which leads to new industries replacing them. Adam Smith wrote about this 250 years ago. And yet liberals still refuse to accept that free trade = prosperity. Truly a mystery.
Lemme ask you boyz a question….how many Apples or Twitters or Ciscos or Amazons or Ebays or Facebooks or Googles or Microsofts have come out of countries that impose tarrfifs? About the only I can think of is Skype that was developed in The Netherlands. Aside from that virtually every major technology company of the past 30 years has been American. All that without protectionist measures. But how can that be?
The answer to this question is exactly the opposite of what you think it is. From the earliest days of the computer industry the federal government has poured billions into research and development. The fruit of that R & D was then handed over to private industry for free. This is known as corporate welfare. If you look at the iPhone, which might be considered to be the highest achievement in consumer electronics, there are dozens of different “technologies” involved in that product whose development was funded in whole or in part by the federal government.
A lot of this information is hard to find. Even though I’ve read about it a bit over the years I though that the federal R & D has petered out in the 1980s. It turns out that I was wrong. For example, when the two Google guys developed their search engine as Stanford grad students, the project was funded an NSF grant.
A new book came out recently that has covers this issue. It’s called The Entrepreneurial State by an economics professor named Mariana Mazzucato. This is a section from a review in Forbes:
Her case study for myth-debunking is the iPhone, that icon of American corporate innovation. Each of its core technologies–capacitive sensors, solid-state memory, the click wheel, GPS, internet, cellular communications, Siri, microchips, touchscreen—came from research efforts and funding support of the U.S. government and military. Did the public see an iPhone dividend? Not really. The “stay foolish, stay hungry” geniuses ran away with the gains, says Mazzucato, and now the company is under fire for not paying enough taxes or creating enough high-wage jobs in the U.S. Apple’s five-year R&D spending as a percentage of sales has hovered around 2% to 3%, while companies such as Nokia and Samsung Electronics spend 9% and 8%, respectively. Steve Jobs’ real genius was not in developing new technology but integrating technologies invented somewhere else, often backed by tax dollars.
@in Colorado:
One of the interesting things about why California is successful in creating new businesses is BECAUSE of at least one “business unfriendly” practice. The one that comes to mind is employee non-compete agreements.
My wife is an attorney, and she was talking about an employment agreement that was getting in the way of a startup (a non-compete was hindering the employee from starting a company in a different state), and her comment was “that would never fly in California”.
Apparently employee non-compete agreements are pretty much unenforceable under California law except in very specific circumstances–which allows employees from some of the best tech companies in the world to leave quite easily to start a company (and it doesn’t hurt that the funding often comes from VCs who were entrepreneurs themselves).
And they can then poach other talent from tech companies to build their team if they have a good idea.
This free flow of employees is pretty anti-business, but very pro-entrepreneurship, and creates an enormously competitive environment–which is very good for innovation.
“what great companies/technologies have been produced in countries with protectionist policies? What great new industries have come from those countries? ”
Let me ask a similar question;
What great companies/technologies have been produced in countries with readily available Twinkies, Coke and quickly delivered affordable pizza? What great new industries have come from those countries?
No, hold on, that’s not what I meant…
What great companies/technologies have been produced in countries with readily available low risk capital, Coke and quickly delivered affordable pizza? What great new industries have come from those countries?
Damn it. Hold on.
What great companies/technologies have been produced in countries with several hit TV sitcoms featuring a prominent Gay character? What great new industries have come from those countries?
Huh? Which ones?
“Check out the size of the crop insurance too, $93 billion. That’s a lot of money for BigAg. Are they expecting some huge crop failures or just trying to catch up with past losses. The beef herd is still at 60 year lows from the current drought.”
Big Ag is all about lobbying and pork, from subsidized commodities to irrigation projects to porous borders for cheap brown labor. And we now import more food than we export, a five year trend, IIRC. Consumer food prices would likely more than double if Ag were run as a free market business, so the shell game continues.
It’s called lower prices aka deflationary spiral. And it’s coming to every city town and state in America.
It’s called lower prices aka deflationary spiral. And it’s coming to every city town and state in America.”
I would say this instead
In a global ecomomy were somone else will buy it ( Smith Foods ) its called a Lower standard of living and its coming to every city and state in America, except Washington DC of course
You’re another one in for a rude awaking.
“As a result of adjustable-rate mortgages, financial barbarians, vested interests of promoters and board directors along with loan officers and property valuators, a lack of understanding of market dynamics and the deteriorating financial strength of borrowers, there were adverse consequences on the Nepali financial market.”
So Nepal had pretty much the same housing bubble issues as the U.S. Who’d've thunk it possible?
I hope that the crisis will be end in the next year. Flats and hauses will have normal prices. I think today is the last chance to buy something in promotial price.
I hope the crisis will be end in the next year, too. Everybody should plan to snap up as many flats and hauses as possible today to get rich next year by selling at normal prices.
right on bro
““The sudden appearance of sales incentives to attract buyers in the city’s glutted condo market has been nothing short of enthusiastic. And realtors, when not busy employing extra staging techniques to sell new and old properties, are inundated with offers of special $5,000 bonuses if they bring buyers to projects…”
Ooooooph! What is that horrific smell!?! Oh, now I remember- its the fetid stench of desperation. First comes the ‘bounty’ to the used-house-salespeople if they can bring in another sucker, dead or alive. Next comes the ‘incentives’ (bribes): ‘free’ swimming pools, ‘free’ appliance upgrades and ‘free’ cars to entice the weak-minded to buy at a grossly inflated price. Yes, the cheese in the mousetrap is always ‘free’.
‘Australia’s top economists warn the fallout from the end of the peak of the mining investment boom could be messier than expected. Much will depend on things that are out of our control, such as the relative value of the dollar and the rate of Chinese growth. Shane Oliver, the chief economist from AMP Capital, believes mining investment ‘likely already peaked, probably in the second half last year’.’
‘Rules to limit flat pre-sales and regulate estate agencies have hit the home market, with sales expected to decline drastically over the next few months, according to Centaline (Macau) Property Agency Ltd.
The realtor says there were only 150 home deals last month, down by about 90 percent from May, after the law regulating the pre-sales of unfinished flats came into force.’
‘The Macau economy remains sound and the home market is [for] end-users. So there has not been a price cut-down like in Hong Kong since the U.S. news,’ said Centaline director Jacky Shek Po Tak. United States Federal Reserve chairman Ben Bernanke said the loose monetary policy conditions of the quantitative easing policy may wind down later this year. This move would boost the city’s interest rate – currently near zero – as the territory’s currency is indirectly pegged to the U.S. dollar.’
‘Mr Shek said it would be ‘difficult for the [home] market anywhere to escape unscathed’ if the world’s biggest economy tightens monetary policy. The consequences would introduce ‘pressure for home prices to go down.’
‘The bubble isn’t bursting; prices are on the way up, nationally. But Vancouver home prices are inching downward. ‘I don’t think the market is going to magically pick up, as far as the number of transactions. Part of the falling-off of the numbers is some of the offshore buying is not there anymore. That’s when you start to look at average prices and you can be misled,’ Bill Binnie, broker and owner of Royal LePage North Shore tells News1130. ‘It looks like prices have dropped further than they really have because the offshore market was buying some very expensive properties.’
From the comments:
‘Don’t buy the snakeoil salesman hype says: Why oh why do we look to Real Estate Boards and Companies for unbiased statistics and advice on real estate? Its akin to cigarette companies touting the benefits of smoking.’
‘Realtors are ultimately salesmen, working for commission, representing sellers with a mandate to get the highest possible price for a seller’s property. Basically it is a realtor’s (individuals, companies, boards) best interest to trumpet rising or steady prices, to under-report losses/weakenesses and to spin any data that can manipulated to be positive (like sales up since last June 2012, June 2012 of course being the worst June sales month in 10+ years).’
‘Unfortunately, far too many take advice from their bankers and realtors (and mother in laws) and don’t do the math or grasp the negative impact that buying an asset high that is on a declining price trend, in a time with rising interest rates is financial suicide. This is not early 2000′s those days are long gone, the speculators (investors) are exiting the market in droves, real estate is simply over-valued.’
‘Seeking knowledge… says: Fully agree on the RE shenanigans. Do a Google search on Vancouver’s “yellow helicopters”, “groupon condo buying”, “fake Asian condo buyers”, “fake $38M house in West Van”, “Vancouver newspaper newsvertising ariticles”, etc., etc.,’
‘Just crunch the numbers of what 1% rate increase (let alone a 3% increase) will do to your mortgage and other loans and you will faint.’
‘Da price go up? says: Wow da property price go up and da price go down, up, down all the live long day. Dayo… Dayo,, the price go up and da price go down in da Vancouva Town…. La La La La….. Price go up and Da price go down 2 times 4 times 6 times jump… Da price go up and da price go down.’
OK, so the last comment wasn’t very informative, but it was kinda funny.
‘Just crunch the numbers of what 1% rate increase (let alone a 3% increase) will do to your mortgage and other loans and you will faint.’
Where are the HBB real estate pimps this morning? Shouldn’t they be reminding us about now that even after a 3% increase, mortgage rates would still look great by historical standards?
They are all out there becoming super-moguls. Investing in the only solid asset that never, never, ever depreciates. Real estate. It doesn’t matter what the price, location or condition, because its always a no-brainer. Snap ‘em up, Boys! Snap ‘em up…
“becoming super-moguls”
Remember Tom Vu?
http://www.youtube.com/watch?v=hnda41lj6go
I do. He was always posing in an expensive sports car flanked by a couple of shapely, bikini-clad young women. It was the sort of approach tailor-made to attract somebody unemployed, stoned and watching an informercial at 2:00 a.m.
There are several posters on HBB who think they are Tom Vu.
The article says a standard 2-story home in Vancouver is $1.15 million, so a home there is unaffordable whether the rate is 0% or 200%.
I wouldn’t faint if the interest rate rose, because I would have already been unconscious after seeing the price.
And how would you know how to evaluate the price?
“And how would you know how to evaluate the price?”
I invented a steam-powered evaluation device that has blinking lights and tape reels, makes popping noises and spits out price papers. Funny thing is, it always prints out the same papers, each of which says $1.15 million is unaffordable. I wish I wouldn’t have spent so much time creating that machine, my wife could have easily told me the same thing.
Yet that same intuition you claim to possess magically disappears when were talking about $100k.
It seems you have a stake in the direction of prices huh Knucklehead?
“I invented a steam-powered evaluation device that has blinking lights and tape reels, makes popping noises and spits out price papers.”
That’s awesome. Do you have tape reels that make it pump out stock tips?
“Do you have tape reels that make it pump out stock tips?”
Yes, when the big mouth-shaped whistle on top blows I run over to it in my greasy lab coat and goggles and it prints “Buy LEH and ENE” over and over again. I really need to look up those symbols.
People have been predicting the forthcoming Vancouver R/E crash for 30 years. Any day now boys, any day now.
Really? 30 years?
Typical Slithers….. all talk, no truth.
Sure is a good thing your maladvice only applies to boys, Smithereens. That saves the girls, women, and men from the impending financial misery.
For a median priced house a 1% increase would result in a whopping $60 extra payment. RUN FOR THE HILLS EVERYONE!!!!!!
1% or 10%. A distinction without a difference when prices are massively inflated.
mmmkay Slithers?
Do I count as a housing pimp? Today I attended a seminar on soils and foundations that ended with a discussion of the power plant our HA built in North Carolina.
560′ smokestack and it was leaning like the tower of Pisa.
Talk about rapidly depreciating - Kraaaaaator…..
The teacher was proud that his firm had set things right for a mere $625K and had pictures to demonstrate.
Not to worry, the incredibly rich Chinese investors will swoop in with truckloads of cash, offering 60% over asking price- snapping them up sight unseen- for all of these properties in Macao and Hong Kong, once again driving prices into the stratosphere, because everyone knows that RE always goes… Wait- Macao and HK are part of China, right? OK, let me start over:
Not to worry, the incredibly rich BRAZILIAN investors will swoop in with truckloads of cash, offering 60% over asking price- snapping them up sight unseen- for all of these properties in Macao and Hong Kong, once again driving prices into the stratosphere, because everyone knows that RE always goes up. There. All better now.
There is going to be the Mother of all Hangovers after the collapse of the Housing Bubble 2.0.
I saw something the other day on the subject of Chinese corruption suggesting that over $2 trillion had left the Chinese mainland in the past decade.
Hookers and blow, baby. Hookers and blow…
Hookers and blow=realtors and their medium of exchange
They spent it on dried shrimp cakes and firecrackers.
“The Bubble was a joint-stock company founded in 1711 as a public-private partnership (PPP) granted a monopoly by the Crown to trade with South America.”
Are the GSE twins destined to be labeled by historians as the modern day version of the South Sea Bubble PPP?
““Thousands of real estate agents took to Hong Kong’s streets Sunday in protest at government efforts to curb soaring property prices, saying new transaction taxes and other measures are threatening their business. ‘There are 37,000 agents in Hong Kong and there were only 3,000 transactions last month,’ said Raymond Ho, a spokesman for the rally organisers. ‘The policies have frozen the market. A lot of small property agent firms will close in the future.’”
In other news, The International Guild of Buggy Whip Manufacturers staged a violent demonstration outside the White House, demanding that the government protect their civil right to make a living wage.
Oh the huge manatee!
‘I have not done any transactions for more than six months following the series of government curbs imposed.” This was the lament of a staff member at Ricacorp Properties, who last month went from being a manager to a lowly sales agent. “This is the worst time of my life. I was not even panicking during the 2003 SARS epidemic when it seriously hurt the home market,” said the man, who declined to be identified.’
‘The agent said that during SARS transactions in his district only slowed, but they have nearly come to a standstill now. For instance, only one apartment changed hands at Metro Harbour View in Tai Kok Tsui this month.’
‘Working in the real estate industry for 11 years, the agent was forced to resign as a sales manager at Midland Realty before he switched companies, while most of his subordinates chose to leave the sector under the lackluster property market - especially after the latest curbs.’
‘However, non-homeowners who hold hopes of buying a flat fully support the government’s measures and do not sympathize with agents. Housewife Mrs Yip, who rents in Tseung Kwan O while waiting for a buying opportunity, said: “At least, I can see some home price cut in recent months. The property agents gained a lot when the market boomed in the past two years, so they should be prepared for the low tide in the market.”
The property agents gained a lot when the market boomed in the past two years
How do you say “real estate always goes up” in Mandarin?
How do you say “real estate always goes up” in Mandarin?
房地產一定會漲
I still can’t say it MV…..
Thanks for your good work Ben.
From the Nepal story:
“a lack of understanding of market dynamics and the deteriorating financial strength of borrowers”
Is there any place in the world that has not been infected by western style real-estate financing schemes and the leveraged balance sheets that inevitably wreck the country’s economy? It must have been pretty slick trick to get Nepal to have a real-estate bubble considering the size of it’s population and GDP.
‘Fannie Mae converted a huge non-cash profit into a deficit-reducing payment to the Treasury by borrowing the money without having it count as part of the national debt even though taxpayers guarantee it. Too bad we can’t all use that stratagem to pay our own bills.’
http://finance.fortune.cnn.com/2013/07/12/fannie-freddie-accounting/?source=yahoo_quote
Hope and Change = Smoke and Mirrors.
You know, the more I think about it, maybe that whole thing is just a big misunderstanding. Maybe he really said, ‘Smokin’ choom’. If so, then most of the last 5 years makes a lot more sense.
Those words have been neutered. So has “justice.” This president has been the opposite of change.
better get those checks cut to the Treasury while Fannie and Freddie are still liquid, because I don’t see them around in 4 years when this next downleg happens.. US taxpayers will revolt I suspect on the next go round.. personnaly, my vote will hinge on this as it is clear that my children’s future is completely tied to the role of the USG in inflating and supporting housing prices … or not.. “or not” will get my vote..
“Leslie Appleton-Young, chief economist for the California Association of Realtors, updated attendees at this year’s Awesome Females in Real Estate conference with the latest economic trends from both California and the nation. The California foreclosure funnel is much worse than it looks on the surface, primarily due to the ‘underwater’ inventory. Appleton-Young broke it out in the following way: 435,000 delinquencies; 117,000 in foreclosure; and 61,000 bank-owned. At the current rate of 18,000 distressed sales per month, this means there are 34 months of shadow inventory.”
“When you add the ‘underwater’ category of 2.1 million homes and add it to the other three categories, you now have approximately 10 years of shadow inventory as opposed to 34 months. As Appleton-Young noted, ‘If you don’t have equity, you’re not a homeowner.’”
With 4.4 MILLION excess, empty and defaulted houses in California, it seems our friend Lester Appleton is beginning to acknowledge it.
Pretty shocking statement, coming from that source.
My sentiment exactly.
Imagine if this one hopeless, helpless realtor were truthful more often?
She’d find herself out of a job.
HA, are you married? If not, you should really attend next year’s Awesome Females in Real Estate conference, find a nice woman there to settle down with, and start your new lives together with a purchase of a home.
I have no need for a hooker…….. Carry on Pimp.
And where is RealtorsAreLiars”? His input on this would be sweet.
Ahhh, the Trifecta of Fail: a wife with a chip on her shoulder, who is a realtor AND grossly overpaying for a house. I’d rather eat hot, broken glass.
A gasoline enema would be more pleasant
oh my word…… the mere thought of that…
With an open fire burning nearby, for good measure…
So, she’s credible now that she makes comments that you like? How about these comments, does they make her MORE, or LESS credible:
“Appleton-Young made the following predictions about the California housing market:
Single-family sales will increase 1.3 percent from 440,900 in 2012 to 446,420 in 2013.
The median home price will increase from $319,300 in 2012 to $354,800 in 2013 (an 11.1 percent increase). This represents a dramatic uptick from the bottom of the California market in 2009 when the median price was $275,000.”
Not all the delinquencies will become foreclosures and not all homes that are underwater will become foreclosures. She also assumes that with more supply of distress there will not be more distressed sales.
In fact a “normal” level of delinquency is approximately 300k homes (less than 5% of mortgages in the state).
Run scumbag Run!
Even your bosses at CAR know there are 4.4 MILLION excess, empty and defaulted properties in CA.
And to remind the reading public;
Housing Affordability Index: Still Worthless”
“In the past, we have discussed how worthless the NAR’s Housing Affordability Index is.”
http://www.ritholtz.com/blog/2013/07/housing-affordability-index-is-still-worthless/
And our blog housing pimp Rental Watch or “RW” is right there defending NAR.
Imagine that.
You are quoting an CAR economist to support your viewpoint.
I’m telling you that the CAR economist is wrong (as they typically are).
That’s funny.
Duck Liar Weave!
“When you add the ‘underwater’ category of 2.1 million homes and add it to the other three categories, you now have approximately 10 years of shadow inventory as opposed to 34 months. As Appleton-Young noted, ‘If you don’t have equity, you’re not a homeowner.’”
It looks like Ms. Leslie has shifted her tune from the last time I saw her name quoted.. she’s still a paid shill for my book.. when I lived in CA, I heard her quote something to the effect of “some people actually think that housing prices in Marin County will decrease in our lifetime.. giggle, giggle, giggle”.. like all the non-believers were imbeciles or something.. in fact, I think Ben had that quote from her on his blog one day..
maybe she’s covering her tracks because she saw how wrong she was back then and how much leather she got stuffed in her mouth as a result of her cheerleading .. I don’t trust her, regardless..
and Rental Watch, you are wrong - just because..
I’m used to being wrong “just because”. That’s OK.
And a liar.
Oh, she went much further than that. Marin was “God’s Country”. Seriously. She must have a new boss now or something. Perhaps the Blackstones need another crash so they can buy in at profitable levels again. Dunno.
LESTER!
2008 occurred because the over leveraged financial community ran out of buyers for their fake paper so that their liquid assets couldn’t cover their daily requirements. (overnight Libor)
In other words - their unrestricted gambling couldn’t be covered from new Ponzi funds anymore.
Funny how they are not flaunting their “attempts” to improve their liquidity.
Next financial crisis ? Someone will try to buy a loaf of bread for a dollar.
that and massive, massive amounts of fraud and culpability on the part of the Fed and USG..
I can make a loaf of organic sourdough bread for less than a dollar.
“Governments and central banks pushing up real estate prices does help in the short term and translates into some sort of economic growth. But it does have serious long term repercussions as we have seen over the last few years. Albert Edwards of Societe Generale writes in a report titled If UK Chancellor George Osborne is a moron, Fitch’s Charlene Chu is a heroine ‘Young people today haven’t got a chance of buying a house at a reasonable price, even with rock bottom interest rates. What makes me genuinely really angry is that burdening our children with more debt (on top of their student loans) to buy ridiculously expensive houses is seen as a solution to the problem of excessively expensive housing…First time buyers need cheaper homes not greater availability of debt to inflate house prices even further. This is madness.’”
Exactly !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I hope everyone realizes that the only really important thing in business is positivity. For instance, during the company 5-leg race, one must appear to be having fun. Actual productivity is meaningless. It’s all about looking positive.
“It’s all about looking positive.”
+1 That’s the subliminal screen saver message.