The Housing Bubble

They are unhappy, because they are stuck. $25,000/mon is not a very much rent when your property taxes on $15 million are $12,500/mon! So they may net $100,000/year on a $15 million, or a sub 1% ROI. If they have a loan, it is likely they are in negative cash flow. All they can do is hope for some appreciation to cover their losses. Get Stucco…….appropriate name for these guys….

We had a smaller scale, but similar issue here in Phoenix at the peak of the bubble.

There were all these condos that were “supposed” to be worth half a million or more. When there were no buyers at that price, the owners/builders decided to rent them out “until the market improved”.

When they tried to rent them out, they found that the rental market would only bear about $1200-1500 a month. This indicated the ACTUAL fundamental value of the half-million-dollar-condo was more like $125K to $150K.

The builders and Fooked Buyers responded, “But they have to be worth more than that, because it cost more than that to buy them.”

My response, of course, was “That is why high-rise condos are only built during bubble times.”

If the best they can rent it for is $25,000 a month, then market fundamentals indicates it is probably worth about $2.5 million.

No worries about the money spent. These guys are robbing their own people blind so that the Persians and Jews can play in Beverly Hills. Shed no tears for those corrupt maggots. (The realtors of course are included in the insult.)

Is this a trend? Because watching the million dollar homeowners getting all huffy and offended over the $25,000 a month lease proposals was hysterically funny…in a rewardingly sick kind of way.”

I can ask I work with a Jewish engineer who flips homes with a Persian investor down that way - Pacific Palasades.

Its probably TV drama hour.

I would totally move in and then not pay the rent.

I’ve seen that show. They also have one for New York
The last episode I watched gave me a mix of disgust and entertainment. This real estate investor was demanding the broker find a cheaper home to flip for a 20% profit in a short time. Apparently, everyone was failing this task. When told that might be impossible, he just became irrational.

On that show, there is a trend of leasing, because they can’t find buyers at the outrageous prices the sellers demand. People at the showings often comment how the properties are overpriced, sometimes by 2 million or more.

The one about NY is worse. A lot of investors bought properties they never even saw and refuse to sell unless they make over 20% in profits from the original 2006 selling prices.

“…ruthless young Jewish realtors selling ugly overwrought houses to Persian investors for millions of dollars…”

Sounds awesome!

Long-term bond prices have been falling. Have you been noticing?
By Allan Sloan,July 25, 2013

We hear lots of talk about the bond market these days. So let me ask you a simple question: Do you think you’d notice if a key bond-market segment took a one-day hit equivalent to a 600-point drop in the Dow? Answer: No, you wouldn’t. How do I know that? Because when such a drop took place recently, almost no one outside of a few bond experts noticed.

Here’s the deal. On July 5, the market price of 30-year Treasury bonds fell about 4.1 percent — the equivalent of a 615-point drop in the Dow, which at the time was around 15,000. That’s a really serious drop, folks. If you owned $10,000 of 30-year Treasurys due in November 2042, for example, the value of your investment would have declined by $354, exceeding the $275 of annual interest the bond pays. So you lost more than a year’s interest in one day. Pretty scary.

When last I looked, that bond was trading at about 83.9 percent of face value, which means that holders had lost almost six years’ worth of interest in the eight months since the bond was issued. Collectively, holders of this issue, which has a face value of $16 billion, had lost more than $2.5 billion. To use the technical term: Yech!

Don’t feel bad if you didn’t know about this hideous drop. Few people do. That’s because although the Dow and Standard & Poor’s 500, which track the stock market, have huge public recognition, there’s nothing equivalent for the bond market. So bonds can fall — or rise — sharply, with few people other than bond mavens realizing it.
…

Fortune’s Sloan: You Don’t Understand the Bond Market
Thursday, 25 Jul 2013 12:00 PM
By Michael Kling

Did you notice a key segment of the bond market suffered a drop equivalent to a 600-point drop in the Dow Jones Industrial Average in a single day? Most people didn’t.

The price of 30-year Treasury bonds plunged 4.1 percent on July 5, writes Allan Sloan, Fortune’s senior editor at large. That would equal a 615-point drop for the Dow.

That goes to show that you don’t know as much about bonds as you think you do. But most people don’t either.
…
This Treasury bond was recently selling for just under 84 percent of its face value. The loss in value since the bond was issued eight months ago equals almost six years’ worth of interest. Investors holding the 30-year Treasury have lost a total of over $2.5 billion.

The 30-year Treasury bond price has been falling since July last year, Sloan notes. Meanwhile, the Dow is up 23 percent since last year, and the S&P 500 is up 26 percent.

“So we’ve had a big, endlessly discussed bull market in stocks at the same time we’ve had a far-less-noticed yearlong bear market in bonds, with the 30-year Treasury yield rising to about 3.65 percent from a low of 2.25 percent,” Sloan states.

Values of long-term bonds fell even though the Federal Reserve bought about $1 trillion bonds over the past year. As their values fall, their yields rise. And values fell even though short-term bond rates, which the Fed directly controls, remain near zero.

Long-term yields jumped when Fed Chairman Ben Bernanke remarked that the Fed might start slowing its bond purchases later this year. But yields were already rising — and prices were falling — for 10 months, Sloan asserts.
…

Market Outlook: Another Troubling Sign For Stocks
Jul 26 2013, 03:35

The U.S. stock market continues to push along steadily to the upside. Not only are stocks firmly established in a long-term uptrend, but they also appear to have room to continue higher into the near-term. Overall, the performance of the U.S. stock market remains most impressive. Unfortunately, stocks are increasingly traveling this upside path alone, as many other major global markets and asset classes that are highly correlated with stocks have either already ground to a halt if not turned lower beginning as long as two years ago. The longer this disconnect lasts and the more stocks move higher by themselves, the greater the probability that U.S. stocks will finally succumb and fall in line with the rest of the crowd. And one of the latest categories to fall off the upside path is high yield bonds, which is particularly troubling since it is not only among the categories most closely related to U.S. stocks, but it also opens up a tangled web of related issues to consider.
…

“That’s why you should minimize or eliminate your exposure to long-term bonds.”

Can any strategy which is that obvious actually be correct?

How to Play the Coming Bond-Market Rout
by Alexander Green, Chief Investment Strategist, The Oxford Club
Monday, August 12, 2013: Issue #2097

You know it’s coming. Every experienced investor who is paying attention knows it’s coming. I’m talking about the upending of bonds that will take place in the months and years ahead. However, there is a smart, low-risk way to play it… and earn a decent return.

Let’s start with the basics. Picture a seesaw with interest rates on one side and bond prices on the other. When interest rates go down, investment-grade corporates and Treasuries go up. When interest rates go up, these same bonds go down.

Why is this so? Think about it. If new bonds are coming out with higher coupons, your old bonds must fall in price so that the yield rises to what new ones are paying. If that weren’t the case, your bonds would be unsalable. After all, no one voluntarily buys similar (or identical) bonds with lower yields.

Let me concede that ordinarily I am not a stock or bond market timer. But I take off my “market-neutral” cap under certain unusual and well-defined circumstances. In the stock market, it’s when values and sentiment reach extremes.

For example, when low valuations combine with great fear and anxiety – as they did in the depths of the recent financial crisis – you can buy with confidence, content in the knowledge that this is virtually always a superb long-term opportunity. And when high valuations combine with optimism and euphoria – as they did in the housing bubble six years ago or the Internet bubble 13 years ago – you need to pare back or get the heck out, confident that history shows these situations always end badly.

There are two reasons that this is one of those rare times in the bond market. The first is that we are at the tail end of the greatest bull market in bonds in more than 100 years. Too many fixed-income investors are either naive – looking solely at historical returns – or complacent. From the peak of interest rates in the hyper-inflationary early ’80s, interest rates have now declined to the point where most investment-grade bonds offer a prospective negative real return. (In other words, your return after inflation is likely to be less than zero.)

The other reason is that the Federal Reserve, in its attempt to goose the economy, has distorted the fixed-income market. Recall our seesaw. When the Fed buys bonds to keep mortgage rates and other long-term rates artificially low, it does it by driving bond prices artificially high.

Do you really want to own a low-paying asset that the federal government is temporarily pricing high? I didn’t think so. That’s why you should minimize or eliminate your exposure to long-term bonds. Those are the ones that will be hurt the most when interest rates rise.
…

I have a very simple multiple-choice question for the HBB brain trust.

Which event is most likely to happen next?

1) A major downside U.S. stock market correction

2) A further significant drop in the U.S. long-term bond market

3) Both

4) Neither

Why Bonds Are Still The Worst Investment
August 12th, 2013

Sasha Cekerevac: The recent shift in market sentiment towards interest rates has caused many people to begin scratching their heads, wondering what this means for their investment strategy.

This move up in interest rates should not be a surprise to my readers, as you’ve been hearing me discuss this issue since last December, when I opined that the worst investor mistake you could make is to remain heavily invested in long-term bonds.

Obviously, with the market sentiment shift we’ve seen in bonds over the past couple of months, if you adjusted your investment strategy at the time that I warned my readers, this would’ve saved you a significant amount of money.
…

Just in case any readers here missed the relevance of my frequent posts on the long-term bond market rout since early May 2013 to the housing market, allow me to explain:

As you may have suspected, based on the Fed’s monthly QE3 purchases of $40 bn in mortgage-backed securities along with $45 bn in Treasurys, the bond market is integrally connected to the housing market. In particular, when interest rates on high-quality long-term bonds (e.g. long-term Treasurys) increases, so does the interest on mortgages.

The flip-side of higher mortgage interest rates is a lower principle balance on the amount that can be financed out of a given mortgage-funded home buyer’s housing purchase budget. In other words, a side-effect of the little-publicized recent bond market rout was a sizable drop in purchase demand for houses from mortgage-funded end-user buyers. Luckily the all-cash investors (hedge funds, Chinese buyers, Canadian buyers) are still out there snatching up properties, or the U.S. housing market recovery would be in serious trouble.

One more question:

Is decoupling between the U.S. stock and bond markets temporary?

Fed Seen Tapering Quantitative Easing Next Month
By Joshua Zumbrun & Catarina Saraiva - Aug 13, 2013 9:00 PM PT

Federal Reserve Chairman Ben S. Bernanke next month will probably reduce the central bank’s $85 billion in monthly bond purchases, according to 65 percent of economists surveyed by Bloomberg.

The Federal Open Market Committee’s first step may be small, with monthly purchases tapered by $10 billion to a $75 billion pace, according to the median estimate in a survey of 48 economists conducted Aug. 9-13. The Fed will end the buying by mid-2014, they said. In a survey last month, half of economists predicted a Fed reduction in bond buying at the next scheduled FOMC meeting Sept. 17-18.

“While the data hasn’t been great, it’s been good enough to support the notion of tapering,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, and a former Richmond Fed economist. “They want to wind this down in an orderly way and get it done in a reasonable period of time.”
…

Assertions:
1) Our economy has about 10% of GDP ($1.5T a year) in trade imbalances (foreign and domestic). That is $600B a year leaking from the economy via international balance of payment deficit and almost $1 trillion a year being added to the accumulated cash and cash equivalents held by the people that already have more money than they can spend.

2) To keep the economy functioning, despite 10% of GDP cash leaking from active circulation, we’ve created lending conditions that allow 10% of GDP new debt to be borrowed into existence every year.

This is how we’ve gone from $4T total debt in 1980 to $42T today. I could do the math again if interested, but basically, we’ve gone from each household’s share of total debt being about 2.5x median household income to 6.7x.

3) In 2007, when households hit their personal borrowing limits, the economy began to collapse. Why? Because we could not generate the $1.5T a year new debt/money that our trade imbalance plagued economy needs to function.

The solution, of course, was for the government to step up with $1.5T a year deficits. Yay us. We have some semblance of an economy, because we’re able to keep generating the new debt/money that we need.

4) What is our end game?

Household debt has not increased in years. Businesses have been adding debt at an impressive rate, but less than half the rate needed to keep up with our trade imbalances drain of cash from circulation.

So, what do we do?

a) Increase household incomes so households can take on more debt?

b) Government $1T++ deficits forever?

c) Attack and reverse the trade imbalances so that we’re no longer dependent on 10% GDP new debt/money being created every year?

d) Let interest rates rise, defaults to skyrocket, the debt (and offsetting money) to vanish into the pit of bankruptcy, complete the total wipeout crash trajectory we were on in 2008 before sub-inflation interest rates and massive government deficits leveled out the crashing economy?

It all starts with the imbalances in the flow of cash. Everything else is a symptom of creating the loose lending that we need to keep the economy functioning in the face of those massive imbalances.

Municipal Bonds: Equipped To Weather Rising Rates
Jul 25 2013, 19:15
By Guy Davidson

Muni bonds suffered a rout recently when anxiety over the Fed’s taper of bond buying roiled fixed-income markets, leaving many investors wondering where to turn. As it turns out, munis have historically been effective shock absorbers. We believe that, given the right positioning, munis can help weather rising rates.

Most investors are aware of the tax advantages of munis. Coupon income is generally exempt from federal taxes and, if investors live in the issuer’s state, often from state and local taxes too. But munis have something else going for them that may come in very handy when Treasury yields rise: they typically don’t act like Treasuries.
…

Michigan Muni Fund Lost 5% of Assets as Detroit Went Bust
By Brian Chappatta - Aug 14, 2013 9:01 PM PT

The biggest Michigan-focused municipal-bond fund lost 5 percent of its assets to net withdrawals last month as Detroit sank into bankruptcy, according to Morningstar Inc.

Investors took $66 million from the $1.3 billion Franklin Resources Inc. (BEN) portfolio, Morningstar said yesterday in a report. It said muni-bond funds shrank by $10.2 billion in July, half by those holding intermediate- and long-term bonds.

“The Detroit bankruptcy filing kept municipal-bond funds in heavy redemptions,” Morningstar’s Michael Rawson said in the report. “July marked the fifth straight month of outflows,” he said, with net withdrawals of $29.7 billion for the period.
…

Aug. 15, 2013, 6:15 a.m. EDT
Thank Detroit: Muni bonds are a bargain
By Michael Fabian

Despite what is happening in Detroit and what a certain blonde, prognosticating analyst believes, investment-grade municipal bonds look relatively cheap at current levels.

I think we actually have to thank the talking heads in the financial media for their general negativity regarding munis, as they have turned what would have normally been a small blip in a very deep and expansive marketplace into a much larger concern.

Just like what occurred circa late 2010, where a selling frenzy unlocked one of the greatest opportunities to own tax free bonds since the depths of the financial crisis. Here we sit once again with many municipal bond indexes on their lows, and tax equivalent yields on many highly rated issues above comparably rated investment grade corporate securities.
…

Meredith Whitney says Detroit will start a wave of municipal bankruptcies: FT
July 23, 2013, 4:40 PM

Banking analyst Meredith Whitney says the effects of Detroit’s declaration of bankruptcy last week on the multi-trillion dollar U.S. municipal bond markets will be “staggering.”

Whitney has faced a good deal of ridicule since her prediction late in 2010 that a wave of “50 to 100 sizeable” municipal bankruptcies would strike across the U.S.

But in a commentary in the Financial Times on Tuesday (subscription required), Whitney remained adamant that the fiscal structure of America’s cities is unsustainable. Whitney noted in the piece that “there are five more towns like Detroit in Michigan alone.”
…

Yes, because most munis are fully funded.

(snark)

In Southern California radio ads are touting California bonds to the unwashed masses. “An opportunity to get in before the Big Boys do”, say the ads.

No dollar shall escape.

Since municipalities have started going bankrupt, the clear answer is ‘no’.

Are munis the “safe” part of the bond market?”

F no Cities are going bankrupt all over the place.

California economist says real US debt $70 trillion
Published August 15, 2013
FoxNews.com

Feb. 24, 2012: A national debt clock is shown during a campaign event for Mitt Romney in Kalamazoo, Mich. (AP)

The federal government has been low-balling the public for years on how much debt it actually has, a University of California, San Diego economics professor says, adding that the real amount is $70 trillion – not $16.9 trillion.

James Hamilton’s claim the United States is in a much deeper financial hole than many realize comes as Congress gets ready for another budget battle when lawmakers return in September. Both sides have been digging in on their policy positions over the debt, spending and the country’s future fiscal health.

Hamilton believes the government is miscalculating what it owes by leaving out certain unfunded liabilities that include government loan guarantees, deposit insurance, and actions taken by the Federal Reserve as well as the cost of other government trust funds. Factoring in those figures brings the total amount the government owes to a staggering $70 trillion, he says.

Hamilton believes important areas of federal off-balance-sheet commitments include loans for post-high school education, the Federal Deposit Insurance Corporation and the Federal Reserve System.

“The biggest off-balance-sheet liabilities come from recognition of the fiscal stress that will come in the form of an aging population and rising medical expenditures,” Hamilton says, adding, “It is worth noting that there are many historical episodes in which off-balance sheet liabilities ended up having quite significant on-balance sheet implications.”
…

California economist says real US debt $70 trillion

Published August 15, 2013

The federal government has been low-balling the public for years on how much debt it actually has, a University of California, San Diego economics professor says, adding that the real amount is $70 trillion – not $16.9 trillion.

James Hamilton’s claim the United States is in a much deeper financial hole than many realize comes as Congress gets ready for another budget battle when lawmakers return in September. Both sides have been digging in on their policy positions over the debt, spending and the country’s future fiscal health.

http://www.foxnews.com/politics/2013/08/14/california-economist-says-real-us-debt-70-trillion-not-16-trillion-government/ - 46k -

In other news

Treasury Ran $98 Billion Deficit in July–But Debt Stayed Exactly $16,699,396,000,000

August 14, 2013 - 4:15 AM
By Terence P. Jeffrey

(CNSNews.com) - The Treasury Department’s Financial Management Service (FMS), which publishes both the federal government’s official Daily Treasury Statement and its official Monthly Treasury Statement, is reporting that in July the federal government ran a deficit of $98 billion but that the federal government’s debt remained exactly $16,699,396,000,000 for the entire month.

The FMS said that the deficit went up $98 billion ($97,594,000,000) in the Monthly Treasury Statment for July, which it released on Monday.

At the same time, the FMS said the debt stayed at exactly $16,699,396,000,000 in its Daily Treasury Statements, which are published every business day. The Daily Treasury Statements show the daily value of the federal government debt that is subject to a legal limit set by Congress.

At the static $16,699,396,000,000 level that the Treasury reported for every day of July, the debt was just $25 million below the legal limit of $16,699,421,000,000 that was set in a law passed by Congress and signed by President Barack Obama.

If Treasury’s daily statements were to declare that the government had borrowed an additional net $98 billion to cover the $98 billion deficit the Treasury declared in its monthly statement for July, the Treasury would be conceding that the government had already surpassed the legal limit on the debt–and has been violating the law by continuing to borrowing additional money.

Instead, even as the Treasury was running up the $98-billion deficit it reported in the July Monthly Treasury Statement, every one of the 22 Daily Treasury Statements published for July said the Treasury had closed out the previous business day with exactly $16,699,396,000,000 in debt.

The Daily Treasury Statement for Aug. 12, released Tuesday afternoon, says the debt remained stuck at exactly $16,699,396,000,000 during the first 12 days of this month, too.

On May 17, the first day the Treasury reported that the debt had hit exactly $16,699,396,000,000–and was thus just $25 million below the legal limit–Treasury Secretary Lew sent a letter to House Speaker John Boehner saying he was beginning to implement what he called “the standard set of extraordinary measures” to prevent the Treasury from exceeding the legal limit on the federal debt.

Since Lew sent that letter–announcing that he would use “extraordinary measures”–the debt has remained stuck at exactly $16,699,396,000,000 for 87 straight days.

That includes all 31 days in July when Lew’s Treasury says it was running a $98 billion deficit.

When Lew stops using “extraordinary measures” to keep the debt at exactly $16,699,396,000,000, the government will have another debt-limit crisis.

http://cnsnews.com/news/article/treasury-ran-98-billion-deficit-july-debt-stayed-exactly-16699396000000 - - Cached - Similar pages

More that can be paid?

As in: Somebody will have to learn to do without?

Debt = somebody’s money. Poof the debt and you poof somebody’s money.

LOL, there’s a headline on the google news aggravator page that says a California economist puts the real debt at $70 TRILLION!

Fo-shizzle.

Buying a home in today’s hot market is like buying a lottery ticket guaranteed to win.

Because all the houses are being flipped into rich people houses by huge RE investment fund monopolies and there won’t be any houses left to buy?

Housing Analyst has nothing productive to say. Just the same garbage daily. Common sense and civil discourse used to rule here. Today it’s not that way.

It’s become enjoyable because we are in consensus that the home price recovery is real with a permanent exponential upward trajectory. So let’s all give each other a big round of applause for our ever-increasing piles of equity.

HA has turned this place into mostly meaningless drivel with the occasional meaningful thread.

Don’t kick off Housing Analyst.

I agree. Please don’t.

That kind of rejection can scar a 12-year-old for life.

I think it’s safe to say at this point that HA is not getting kicked off. I have learned that if I don’t reply to his daily-repeat posts, then I don’t end up in a fight with him. It’s really not that bad when you think about it.

A lot of people recently borrowed money becuase they got the loan at zero (or near-zero) interest. Had nothing to do with confidence.

That is good. This is exactly what we need. Crashing (hopefully) stock market, drastically increasing housing inventory (probably price crash soon), and lower unemployment. This will put us in a much better position.

What is it about “realtor” that compels criminals to become a realtor?

“Village Idiot Accidentally Locks Himself Into Realtors Office He’s Vandalizing” 8/12/13, WeaklyDumbSh!ts,com

This August indeed feels like fall in central NY. It was 48 degrees overnight. Glad I brought my morino wool!

It is glorious in DC. Warm but not too hot. Much less humid.

I went to the concert on the west steps of the Capitol last night. Marine Corps Band plus watching the sun set over the Mall and Washington Memorial as the sun painted the clouds pink and lavender. Music from Copland’s Billy the Kid was especially good. I wonder what the Army Band is playing Friday…

While it’s still in the nineties the clouds have moved in up here in eastern Washington. It’s nice to get away from the direct sunlight; better to be slow-baked rather than broiled. Autumn bicycling is my favorite. Colors.

pro-immigration reform ad that features an illegal immigrant who wants to serve in the military.

Every neocon is a little giddy today…

As if “serving in the military” is something admirable we should want our immigrant population aspiring to. In the absence of any constructive economic model, gotta keep that MIC churning.

Wonder what concessions Zuckerberg is getting in exchange for this PR show of support?

What about the rest of us common people, who are all by NSA definition criminals and terrorists? What about WE, the PEOPLE? Huh? Huh?

There used to be 1000 FBI agents investigaging finnacial crimes. Now the number is closer to 100 because the rest have been shifted to anti-terrorism duty.

You get what you pay for.

Is that good, bad, or ugly?

1 Year LIBOR at .67%. Anyone know the distribution of mortgages that are indexed to the LIBOR vs. the 10 year Treasury?

The the deflationary spiral rage.

Like Bernanke even cares any more.

meh, it’s the usual shake-em-out that happens every once in a while. tomorrow it’ll be to the MOOOOON, Alice!

Your landlord is ripping you off, while I’m building equity.

SMELL TEST!

We’ve been averaging about 1.5 million housing starts per year for the last 20 years. We peaked a bit over 2 million a year in the bubble, but average that in over 20 years and we’re still at 1.5 million units a year for the last 20 years.

This means that over the last 20 years, we’ve built about 30 million housing units. The top end of your range of “excess, empty, defaulted”.

For there to be 30 million excess houses, it would mean that not a single one of the houses built in the last 20 years was needed.

USA population in 1990: 248 million people
USA population today: 316 million people

And you are saying we didn’t need to build a singe house in the last 20 years?

O.C. home sales hit 7-year high; median at $540,000
Thursday, Aug 15, 8:00 pm

Orange County home sales hit their highest level in nearly seven years last month, with 3,648 deeds changing hands in May.

That’s the highest number of homes sold here since June 2006, market tracker DataQuick Information Systems reported Tuesday.

Meanwhile, the median home price – or price at the midpoint of all sales – was $540,000, up 24 percent from the year before, to the highest level since the home-price …
…

Southern California home sales, prices make big gains
Homes in the 1800 block of West Badillo St. in West Covina on Wednesday, Oct. 10, 2012. (SGVN/Staff photo by Watchara Phomicinda)
By Gregory J. Wilcox, Los Angeles Daily News
Posted: 08/14/13, 6:17 PM PDT | Updated: 6 hrs ago

Southern California home sales soared 23.5 percent in July, hitting an eight-year high for the month as inventory began building and prices continued making strong gains, a market tracker said Wednesday.

July’s sales totaled 25,419 new and previously owned houses and condos across the six-county region, up from 20,588 a year earlier, said La Jolla-based DataQuick. Sales increased 17.6 percent from 21,608 in June.

And they closed in on the long-term average level, settling 0.5 percent below the July average of 25,541 since 1988, when DataQuick began tracking the market.

Sales have not been above that long-term average for any month in more than seven years.

July’s median house price increased 25.8 percent to $385,000 from $306,000 a year earlier. The median was unchanged from June and is the highest for any month since April 2008, when it was also $385,000.
…

Ummm…yes. From the Palm Beach Post July 8, 2013

“Housing prices are surging: Is it too late to buy a home?”

The story, buy now or be priced out forever.

Are you noticing the best home sales this summer in your area since the first bubble peak (2006)?

It’s very localized. Broomfield and Brighton, Colorado are both part of the Denver metro area, yet the housing markets in them are a study in contrasts. Houses in Broomfield sell in days with multiple offers. Meanwhile, Brighton languishes in foreclosure hell.

Yes. The selling prices right now are shameful. Raw land at over peak-bubble, and second homes at 2/3 peak bubble prices — after two years of near-total inactivity.

I am noticing an astonishingly high rate of increase in the inventory of real estate for sale in Irvine. Crazy high. Those prices will crash hard and soon.

(vv vv vv dot) movoto (dotcom) /statistics/ca/irvine.htm#city=&time=5Y&metric=Inventory&type=0

“a rendering of new homedebtors”

Is that an established collective? (Brings to mind An Exaltation of Larks)

My ex-wife’s aunt bought a condemned house in Lincoln Nebraska for $1 about 20 years ago. It had been flooded by a frozen and burst pipe.

It needed to be gutted to the studs, treated for mold, re-wired and plumbed, then re-sheet rocked. They put about $50K into it, and a CRUD ton of sweat equity, but ended up with a very nice house that they sold a decade later for about $150K. They sold because their kids were grown and out, and they wanted a smaller place.

Location. Location. Location.

In the DC-Baltimore corridor, this is especially true, for a) distance from work and b) distance from criminals. You want to minimize a) but maximize b).

I recall seeing a beautiful house for sale, 3 stories, beautiful yard, hardwood floors throughout for maybe a quarter or a third of the price it would have gone for normally. I looked on the county crime map and of course, the situation was explained: a murder outside the house, crime (theft, assaults) galore in the neighborhood and a rape of sex offenders living nearby.

I closed the listing and moved on, silently wishing the best of luck for any uninformed purchasers. Hopefully no young families.

I think you have the cart before the horse.

First we flattened the tax rates, allowing the ubber rich to skim (and keep) more off the top. Then we were forced to loosen lending so that the economy could function in the face of massive cash drains.

And yes. Trade imbalances can not be persisted forever. They result in excess debt buildup on the parties with the deficits. Interest on the debt just widens the deficit.

For almost 50 years, we’ve embraced trade imbalances, and funded them by creating lending conditions that have allowed us to generate new debt/money at 3x the sustainable rate.

The rich-getting-richer seems great, until you wake up and realize that it is only possible as long as everyone else can keep going further into debt to generate the new money that the rich are accumulating.

simply not going to pay the extraordinary cost of living, high taxes, or overcrowded conditions to live there.
You mean you won’t “pay any price, bear any burden” to live in Heaven on Earth? You’re un-American!

In the hottest places I’ve lived, evenings & nights nearly always provided daily respite. Winter usually doesn’t relax its grip for weeks at a time.

Traffic is pretty nasty in Phoenix, though.

As a So-Cal girl m’self, I find it difficult to tolerate anything outside the range of 72-74 degrees F. However, I have also lived in many places, and there is weather. Personally, I just don’t like Phoenix becuase I hate the desert, but everyone has their preference.

Why?

What is it that would be gained from a stock crash? Higher unemployment? More government spending? Lower interest rates again?

What is it that you hope will result from a stock market crash?

A year in cupcake jail for bank fraud? No wonder people are not afraid of doing it.

Fabrice Tourre can rip off a billion dollars from a mark - and be following company policy - and only be hit with a civil suit, not criminal charges.

But cross the financial sector - and even it’s just hiding a few hundred thousand in assets in trying to execute a short sale - and it doesn’t matter if you’re a state Supreme Court justice. You’ll go to jail.

It’s a demonstration of where the power in this country resides. Impressive demonstration.

3-5 year Tbills. Any return is better than cash. Holding to maturity, only risk is inflation, which I find to be minimal.

For inflation to take hold, we’d need higher wages, which I don’t see coming. Without increased wages, with households already maxed out on debt, inflation results in falling demand, which in turn ends inflation very quickly.

Retire comfortably and live the Mr. Money Mustache lifestyle.

Wait for crashes. Buy houses and stocks and bonds.

I’d probably keep about half in cash, but spread around at different financial instituions and some in the mattress.

Some stocks, some gold, few bonds and maybe a nice hobby farm in the sticks.

I wouldn’t have a timeframe to move (ie 3-5 years) but more looking to see where the bubbles are forming and crashing.

30% gold mine stock ETFs, 40% in VFIAX, and 30% in t bills

Heck, I’m not even trying to make money. I’m just hoping to not lose too much.

Sure, here you go.

Are you smarter than an 8th grader? Rare test from 1912 shows what students were quizzed over

A copy of a test administered to Kentucky eighth graders in 1912 was recently donated to the Bullitt County Historical Museum, showing curious and dated idiosyncrasies between the 20th century and the 21st. The museum’s owner tells the Daily News about what it means.

By Beth Stebner / NEW YORK DAILY NEWS
Tuesday, August 13, 2013, 5:38 PM

http://www.nydailynews.com/news/national/rare-test-1912-shows-students-quizzed-article-

The belief is that bond prices and stock prices are up, only because of QE.

The positive (falling) jobless claims data indicates that QE is going away, causing people to believe that stocks and bond will fall. In this case, belief causes reality as everyone tries to beat the move, creating the move.

Money coming out of stocks and bonds has to go somewhere, thus commodity move.

In my opinion, QE is not the real cause of the return of the stock bubble. QE lowers leverage allowing banks to make more loans, but the debt numbers show no real new debt is being generating in the private sector.

The money flowing into the economy is coming from government debt. It is the government deficits supplying the new money, and that is not effected by QE.

But, too many, do not believe that government spending is “real” money, though it clearly is. It does not fit their political dogma, so are unable to see it.

(AND, I’m not in favor of huge government deficits driving us into debt at an unsustainable pace. BUT I’m also not in favor of private sector debt increasing at an unsustainable pace. I’m not in favor of embracing trade imbalances that have made us dependent on ever increasing debt in the first place.)

10 year treasury yield hit a 2 year high…if rates continue to rise that will put downward pressure on corporate earnings…perhaps the market is beginning to price that in?

“You see the market behaving irratically and no news…”

Some HFT computer caught a virus.

“You see the market behaving irratically and no news outlet spends any time explaining why the downward run is occurring.”

I heard today that the market was a combination of fear, hope and greed loosely tied to the business cycle. Hope that helps.

GDXJ is on a rampage! I have a 31% gain on my holdings of this ETF and bought my first batch five weeks ago. Graphically, it is breaking out of its down trend for the 12 month period. That is very good news for junior miners.

And, how are dollars created? What gives them value?”

Easy they are created by lending and backed by the promise of work to pay them back. Future work gives them value.

Now a question for you. what happens when borrowers can’t work enough in the future to pay back the dollars ?

I think we are discovering what will happen ..

Another question when will housing peak ?

Only if the powers that be give up on trying to keep the house of cards standing, and finally let it crash. Then, it will be deflation, not higher interest rates, that will increase the purchasing power of the money that doesn’t get wiped out in the crash.

Most of the RIO transactions around Phoenix are for FAR above the current market value.

The banks take the house back for what they are currently owed. That way they do not have to book the immediate loss. When they sell it into the market later, it does count toward median price statistics and comp sales. It is only that over-inflated price that they buy it from the trustee that is excluded.

At least, that is my understanding.

It appears the stock market is upset that people aren’t spending more on what business is selling than business is paying them, and the Federal Government isn’t going into debt fast enough.

And it’s not like interest rates have shot up to the sky like they did 30 or so years ago.

In the early days of a Republic, based on rule of law, statues of statesmen are erected. In the latter days, the republic is replaced by mobocracy and rule of men. And statues of tyrants are erected. Hillary is erected - no wonder she wears the pants in the family.

“The housing dam has broken. Holland is sitting on some 650bn euros in mortgage loans, with many properties worth 25% less than they were before the financial crisis.”

It’s somehow super appropriate that Holland, the country where Tulipmania took hold a few centuries ago, would experience the leading edge of global housing bubble collapse!

How long until the U.S. bubble gets dragged into the undertow?

“He suggests the fault lies with politicians looking for votes who failed to act on warnings and correct the state’s unsustainable generosity; the mortgage tax breaks were costing taxpayers an estimated 14bn euros a year.”

That’s peanuts!

By contrast, the mortgage interest deduction (aka Welfare for the Wealthy) in the U.S. is going to cost over $1 trillion over the next decade. And that is but one of myriad federal government housing subsidy programs designed to benefit the already-wealthy.

Research
Tax Simplification and the Mortgage Interest Deduction
By Andy Winkler
July 29, 2013

Summary Points
* The CBO estimates the Mortgage Interest Deduction will cost over $1 trillion from 2014-2023.

* Just 4% of home sales in Q1 of 2013 were above $750,000.

* 40% of home sales over $750,000 were in California

The mortgage interest deduction is a commonly used itemized deduction that has proven to be costly, and now contentious. A fundamental tax overhaul aimed at limiting or eliminating preferential tax expenditures in order to simplify the code and lower overall tax rates, as is being discussed in Congress, will likely modify the mortgage interest deduction. The Joint Committee on Taxation issued a Working Group Report on tax reform that included seven different options for the mortgage interest deduction including capping the deduction, expanding it, changing it to a credit, and leaving it untouched. [1]

The Congressional Budget Office estimates that the mortgage interest deduction will cost over $1 trillion from 2014 to 2023, about as expensive as the deduction for charitable contributions and the child tax credit combined. [2] The benefits of the deduction are largely skewed to those more likely to be homeowners versus renters but also more likely to itemize deductions (See Figure 1) – the highest income quintile.
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Walmart is a terrific operator… They didn’t suddenly become stupid
I visit a couple of different Walmarts weekly. I think they are becoming stupid. Not suddenly, but step by step.
I recently visited their website to see whether or not their stores stocked Pop-rivets. Got a ton of irrelevant links online, but no answer to my specific question. At the store, the answer was “No.” Their website used to be able to answer a question like that, but no more.

Well, no comment on the indicator, but why is gold goi g up while the ten year yield goes up? GDXJ was my best buys (two batches, both in dips), the last five weeks. Miners were down so much and all the pundits were treating them like typhoid Mary’s. I was greedy on them while most people were fearful.

PBS, you were one of my contrarian indicators for gold. I would have never touched gold stocks three months ago.

Worst Day for Markets in Two Months as Signals Are Mixed
Peter Foley/European Pressphoto Agency
The Dow Jones industrial average and the S.& P. 500-stock index both fell nearly 1.5 percent.
By THE ASSOCIATED PRESS
Published: August 15, 2013

The stock market was pummeled on Thursday after two big companies issued grim sales forecasts and economic data added to investors’ concerns that the Federal Reserve would soon start winding down its economic stimulus program.

The Dow Jones industrial average fell more than 225 points, its worst day in nearly two months. Investors also sold off bonds, driving the yield on the 10-year Treasury note to its highest level in more than two years.

Before the start of trading, Wal-Mart Stores cut its estimates for annual revenue and profit, warning that cautious shoppers are spending less. The news followed a disappointing revenue forecast from Cisco Systems late on Wednesday.

In a twist, more signs of resilience in the nation’s economy weighed on the stock market. Reports on inflation and the job market appeared to raise the odds that the Fed would begin winding down its $85 billion monthly program of buying Treasury and mortgage-backed securities as early as next month. Many investors think that the Fed’s effort to keep interest rates extremely low has underpinned the stock market’s record run.

“People are worried that this move up in interest rates will kill the recovery, and we won’t see the anticipated second-half improvement in growth and corporate earnings,” said Alec Young, global equity strategist at S.& P. Capital IQ.

The Dow industrials lost 225.47 points, or 1.5 percent, to close at 15,112.19. The Standard & Poor’s 500-stock index fell 24.07 points, or 1.4 percent, to 1,661.32. The selling swept across all 10 industry groups in the S.& P. 500.
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‘Surprising New Fed Study - Is it Preparing Americans for a Market Crash?’

http://finance.yahoo.com/news/surprising-fed-study-preparing-americans-170806272.html

The fact that you and I are both ready leads me to suspect that CRASH ROUND TWO will never occur. If everyone anticipates a near-term crash, then they presumably have already dumped the investments which they fear will soon crash. In other words, the crash is already priced into market values of the investments the crash-wary previously unloaded (e.g. stocks, long-term Treasurys, etc).

15 August 2013 Last updated at 22:53 ET
Edward Snowden documents show NSA broke privacy rules
The National Security Agency headquarters in a file photo The National Security Agency is based in Fort Meade, Maryland, outside of Washington DC

The US National Security Agency (NSA) broke privacy rules and overstepped its legal authority thousands of times in the past two years, according to documents leaked by Edward Snowden.

The incidents resulted in the unauthorised electronic surveillance of US citizens, according to documents published by the Washington Post.

Mr Snowden, a former NSA contractor, has leaked top secret documents to the US and British media.

He has been given asylum in Russia.

On Thursday, the Washington Post posted on its website a selection of documents it said had been provided by Mr Snowden, who fled the US in June after providing documents detailing NSA surveillance programmes to the Guardian and Washington Post newspapers.
‘Operator error’

The documents purport to show that the unauthorised interception of telephone calls and emails of Americans and foreign nationals on US soil resulted from errors and departures from standard agency processes, including through a data collection method that a secret US surveillance court later ruled unconstitutional.
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NSA reportedly broke privacy rules thousands of times
Published August 15, 2013
FoxNews.com

The National Security Agency has overstepped its authority and broken privacy rules thousands of times every year since being given new surveillance powers by Congress in 2008, The Washington Post reported citing an internal audit and other secret documents.

The documents, which the Post claims it received earlier this summer from NSA leaker Edward Snowden, detail how the controversial agency has crossed the line many times over in its collection of massive amounts of data from around the world.

Despite repeated claims by officials that the NSA does not spy on Americans, the Post reports that the bulk of the infractions involved improper surveillance of Americans or foreign targets in the U.S. Some of the infractions were inadvertent, caused by typographical errors resulting in U.S. calls or emails being intercepted. Others were more serious.

The Post reported that the most significant violations included the unauthorized use of information on more than 3,000 Americans and green-card holders. In another incident, the Post reported that a “large number” of calls from Washington were intercepted in 2008 after the Washington area code 202 was confused with the code 20, which is the code for dialing to Egypt.

In total, an NSA audit from May 2012 reportedly found 2,776 incidents in the prior 12 months of improper collection and handling of communications.

In another case, the special court that oversees the NSA did not learn about a new collection method until it had been underway for months. The court ruled the method unconstitutional, according to the Post.
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