When Is A Housing Bubble Not A Housing Bubble?
Readers suggested a topic on the housing bubble hustle. “Just heard an ad on the radio for a national mortgage lender. The fellow said something to the effect of ‘as prices go up, interest rates are sure to follow!’ Imagine if someone made a similarly deceptive statement about a nutritional supplement. Or about any other product. Street corner hustlers run the shell game and dice and card games. None of these are government backed. But once the hustle becomes big enough, it becomes useful for politicians to protect and advance it.”
A reply, “Also, once a hustle becomes IMPORTANT enough, it becomes useful for politicians to protect and advance it. Lenders have a stake in keeping RE prices up so the value of their mortgages will be kept up. Homeowners and home buyers (who, together, make up the majority of voters) also have a stake in keeping RE prices up since this is where most of them have their money ‘invested’.”
“So many have an interest in High RE prices and few have an interest in lower RE prices so high RE prices is what we end up with.”
“There is no balance here, the other side of the argument (the lower-RE-price-just-might-be-a-good-thing argument) is never presented because it has been declared to be in the National Interest that RE prices be supported. This means hustlers have an unspoken license to hustle as long as their hustle acts to support RE prices. (A blatant example, IMHO, is the behavior of RE ‘investors’ who use huge pools of OPM to pump up RE prices in targeted areas so as to extract hefty fees for themselves in the form of capital gains and while doing so enjoy no opposition and no oversight whatsoever as to what they are up to.)”
The News Journal in Florida. “Andrew Hardesty has gotten used to country living. In 2008, he and his wife purchased a home near Flagler Beach that sits between a lake and what looks like a country field. Here’s the catch: Hardesty’s home is in the middle of an unfinished subdivision called Eagle Lakes. Today, more than 60 similar developments sit mostly vacant in Volusia and Flagler counties.”
“Of the subdivisions started in 2007, records show that 2,257 out of 2,554 lots have no homes on them — an 88 percent vacancy rate. A total of 19 subdivisions were created a year later. Today, 56 percent of those lots are vacant. John Adams, general manager of Adams Cameron & Co. Realtors, said new homes haven’t been needed recently as the number of existing homes soared to about 10,000. Now that number is down to 3,500.”
“‘We don’t have homes to replace’ existing ones that come off the market, he said, ‘and I think the builders understand that.’”
The Star Tribune in Minnesota. “Despite a barrage of new apartment buildings in the Twin Cities metro area, demand for rentals continues to outstrip supply. The average vacancy rate in the seven-county area dipped to 2.3 percent at the end of June, causing the average metro rent price to increase 3 percent to $979, according to a second-quarter survey by Marquette Advisors. Much of the demand is being fueled by young professionals and empty nesters who don’t want to make a long-term commitment to homeownership and are interested in the perks of urban living.”
“But with thousands of apartments on the drawing board, the metro market is expected to soften in the coming months, leading some to believe that a construction bubble is on the horizon. Despite lower rents in some suburbs, affordability continues to be a serious problem metrowide, particularly because most of the apartments being planned and built are upscale. A report by the Minnesota Housing Partnership (MHP) shows that since 2000, rents have risen by 6 percent while incomes for renters have fallen by 17 percent.”
“The study showed that low-wage workers in common occupations like food preparation and retail sales can’t afford to rent a two-bedroom apartment in any Minnesota county, and that statewide, there are only 38 units of rental housing available for every 100 extremely low-income renters. ‘When rental housing becomes too costly, all renters suffer, but the impact is especially severe for children,’ says the MHP’s executive director, Chip Halbach.”
“Marquette Advisors vice president, Brent Wittenberg said that for now, there’s no shortage of people — namely young professionals and empty nesters — willing to pay for luxury digs. ‘These are people who can afford to buy who are making the conscious decision to rent,’ he said.”
Global News in Canada. “Buying your first home may seem like a pricey move, especially for younger people and amidst growing concern Canada’s housing market could crash. The Canadian Home Builders Association – Lethbridge Region is going on the defensive, saying there’s no danger of that in Lethbridge, adding that the market is strengthened by younger buyers and a diverse southern Alberta economy.”
“One Lethbirdge home builder is selling condos in the $170,000 range and throwing in a semester of tuition, worth $4,000. The target market? Students. The CHBA believes the investment is more than financial. ‘It’s giving their children the opportunity to learn what it’s like to be a homeowner, so when they’re ready, they’re knowledgable,’ said CHBA’s Angie Zuba.”
The Independent in the UK. “When is a housing bubble not a housing bubble? When both the Chancellor of the Exchequer and the Governor of the Bank of England tell you it isn’t, of course. So, naturally, it would be wise to ignore the latest data from the Royal Institution of Chartered Surveyors (Rics) and the Government’s own Office for National Statistics (ONS). And within the details, both surveys suggest that while London – with its strange fascination for overseas buyers and investors – remains the powerhouse for the market, house prices and, more importantly, sales, are starting to move in most other parts of the country. Indeed Rics highlighted the point that two of the worst performers in recent years, the West Midlands and North-east, are now trending at 14-year highs.”
“Even now, the equivalent of Corporal Jones from Dad’s Army is running down the corridors of Whitehall and along the pavement of Threadneedle Street shouting: ‘Don’t panic. Don’t panic.’ Well, just ignore him.”
“The fact is that not only is the housing market taking off at a rate most economists find at least surprising, if not yet worrying, but the Government has already primed it to shoot ahead even more. The first phase of the Help to Buy scheme, which came in April and covered only new-build homes, has clearly stimulated the market. But there is every chance that when it moves into its next phase, covering older properties and including a government guarantee on part of the mortgage, the market could well become over-stimulated.”
“The Shore Capital economist Gerard Lane fears he may be a little cynical in his views on this subject. He suggests that the politicians (I assume he means the Tories) would not be particularly unhappy if there were something of a housing boom in the run-up to the May 2015 General Election. He even dares to imply that a housing boom, feeding through into the domestic economy during a period of cheap money, would make it easier for the Treasury to sell its stakes in Royal Bank of Scotland and Lloyds Banking Group. Come, Mr Lane, you are not being cynical enough.”
‘He suggests that the politicians (I assume he means the Tories) would not be particularly unhappy if there were something of a housing boom in the run-up to the May 2015 General Election. He even dares to imply that a housing boom, feeding through into the domestic economy during a period of cheap money, would make it easier for the Treasury to sell its stakes in Royal Bank of Scotland and Lloyds Banking Group’
In the UK, they are less fearful of speaking their minds about stuff like this.
‘There is no balance here, the other side of the argument (the lower-RE-price-just-might-be-a-good-thing argument) is never presented because it has been declared to be in the National Interest that RE prices be supported’
Take the recent ‘bubble’ speeches from Obama. Reportedly, he mentioned bubbles 5 times in 4 days. Yet made the point that more immigrants would boost house prices! Even when warning about bubbles, he calls for higher prices. And no one in the media said boo about it.
Even US economists who are sheepishly saying there might be a bubble, in a few small places, don’t dare say lower house prices are desirable.
This article deserves to be reposted on a daily basis!
Inside Real Estate
Are Home Prices Inflating A Sun Belt Housing Bubble?
By Bloomberg News
Posted 08/22/2013 05:33 PM ET
A five-bedroom house in Las Vegas sold for $499,000 in mid-July, double what it went for three months ago. In Phoenix, a similar house sold this month for $600,000, gaining $273,000 since March.
Bubbles are inflating in Nevada and Arizona even as housing in the rest of the country recovers at a more sustainable pace. Gains in the two desert cities are the biggest since the height of the real estate boom, just before their plunge to the bottom of the national housing collapse. This year, Las Vegas and Phoenix have topped the nation in price rises, according to the S&P/Case-Shiller property-value index.
“They’re clearly in bubbles,” said Karl Case, one of the creators of the index. “What can go up can go down — real quick.”
…
The atmosphere here is uncomfortable. After having sold in NY in 2006, we’ve been serially renting SFHs in Las Vegas. Three rentals in (one sane LL, one crazy, one unpleasant PM), I am tired of moving, though it’s nice to be able to move with the changing demands of our family. I’m okay where we are now, but worry that my current (accidental) landlord will look to dump the place now that he’s above water. I know he doesn’t really want the place.
One of the pleasant things that happened was the crazy LL disappeared and didn’t charge us rent for a year.
“…the crazy LL disappeared and didn’t charge us rent for a year.”
Comment, Congratulation on the free year of squatting, how did the crazy LL story end, did the “home” end get snapped up in sheriff’s sale, NODs and NOTSs, etc? Please, do tell.
OCSR
Local realtor showed up as LL’s rep and was surprised we were there. He said let’s get you paying some rent. I said fine, right after you prove you’re legit. He was, we haggled over rent, I got him down $200. We stayed another two months, got another place closer to school and moved on. The short sale didn’t work out and the house went into default.
It was weird. I was amazed at how long it went on, and kept reminding myself that having this extra money every month was not normal and would not last. There are thousands of long term squatters here who are going to have to get back to reality when it ends.
You got free rent for a year? I wish that would happen to me. I’m glad at least someone is getting a benefit out of these rolling asset bubbles.
People here in Las Vegas either regard the squatters as victims or scum. I anxiously await the foretold glut of rental housing; the prices of rentals are still very high (less than half) in comparison to the monthly mortgage nut.
Yes, I know we don’t have to pay for repairs - but it’s still quite the chunk of change difference. It doesn’t matter anyway. There’s still very little choice available, even if we could complete with the cash buyers.
I thought there would be a little more supply with the Mortgage Forgiveness Debt Relief Act, but I think they all expect to be above water shortly (some already are.)
Screwed up my cut and paste. I meant to say rents here are twice as much as a monthly mortgage payment.
Nonsense. Not even remotely close. After PITI and losses to depreciation, rental rates are substantially less per month.
Tarara:
If your rent is 2x the mortgage, then you should buy a house. Buy a hundred of them. Rent them out.
Tarara:
I just did a quick check on craigslist and Zillow for Henderson, NV. It appears that rents are approximately the same as equivalent mortgages at today’s rates. On the other hand, renters don’t have to cover vacancies or maintenance. In other words, Las Vegas prices are slightly higher than they should be, but I don’t see why you would be paying 2x the mortgage. That’s not what the market is paying, and there is no reason to pay that.
There’s still very little choice available, even if we could complete with the cash buyers.
How is that possible? I thought that those all-cash buyers were investors, planning to rent out the houses.
Shouldn’t the rental pool be huge by this point?
I zillowed it (FWIW) - $150K est, 30 year 4.45%, 20% down, $700 mortgage, rent $1,400. The LL could likely get more than $150K if he put it on the market.
Our rent has become high for the area (been here three years.) I have discussed a rent reduction w/the LL, no. Family matters have made it difficult to pack up and go as we did before (mother had a stroke, take care of her FT. Makes it easy to put off.)
It’s certainly bigger, but the rents for an equivalent place are still in the same range as we pay now. I look every day.
Things are changing here, though. As I said, I anxiously await the Vegas rental glut predicted by Mark Hanson.
Nonsense.
And renters don’t need “20% down” nor are buyers putting 20% ldown.
I grant you the wishing prices they list for rentals may not be what they’re actually getting. I don’t know about that.
The majority of cash buyers here are investors (and the large ones have already stopped buying) but another group beating out the financed are the deep pocket crowd, who are inexplicably are also willing to overpay.
Hey, HA, I’m with you. These prices are ridiculous. When we sold our house in NY in 2006, we felt guilty (briefly.)
It may really be “different here” in Las Vegas, though I think it may regain the crown of poster child for the housing bubble (as if it ever relinquished it.)
I’m hoping the fall will bring some changes.
“When we sold our house in NY in 2006, we felt guilty (briefly.)”
Heh… I don’t guilt you for it. Where in NY?
Yorktown Heights, Westchester County. We bought in 1993.
Lucky, not smart.
Good timing.
NY, especially WC is looking at a very steep declines. For sale signs everywhere.
I tell people back there. They don’t listen.
Hey Tarara:
I think if you want to truly compare the monthly cost of buying to the cost of renting, you have to act like you put 0% down on the mortgage, just for calculation purposes. Otherwise, you are under-representing the cost of the house.
Will do. Never thought about that; you’re right.
Oh, and I also forgot to say that you have to consider the property taxes and insurance. If you calculate it with 0% down, add taxes, and add insurance, the mortgage would probably be closer to $1200/month, which is probably the true rental value of that house. I guess your landlord is overcharging you a bit, but he can’t rely on that for very long.
I’m kind of ambivalent about Vegas. Inventory has been increasing for a year, which tells me that prices will come down. On the other hand, there isn’t a HUGE advantage to renting over buying. If you buy a house now, then you might come out even in the long run. If you wait, then you can probably get a lower price, but you might make up for that in the rent that you have been paying in the meanwhile. It’s not a cut-and-dry decision right now.
You are exactly right - I figure the rent should be about $1,200. I already told him if we leave he wouldn’t get what we pay from anyone else (Pyrrhic victory, hooray for me.)
I was interested in another (even more expensive) rental on the same block so the PM knew I really wanted something in the area, so I got hosed.
I don’t want to get into personal stuff, but we wanted to be close to UNLV so when my Aspergers-y daughter learned to drive she had a much shorter distance to kill anybody (I kid, sort of…) So I was willing to pay a premium on the rent. As the years go by, it’s more irritating. It’s a one story house, which is good for my mother’s wheelchair.
Honest local realtors (all three of them) have been warning of a downturn in the fall. We’ll see.
Why does Shiller always blame the Housing Bubble on “psychology”? Is he gunning for a future seat on the FOMC?
Shiller: Stock Market Showing Bubble-Like Behavior
Wednesday, 31 Jul 2013 11:23 AM
By Dan Weil
The stock market may have entered the dreaded bubble territory, says Yale economist and market expert Robert Shiller.
Various stock indices repeatedly hit record highs in recent weeks, and the Standard & Poor’s 500 Index has soared 153 percent from its March 2009 low, closing at 1,685.96 Tuesday.
In his book Irrational Exuberance, Shiller defines a speculative bubble as “a situation in which news of price increases spurs investor enthusiasm, which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase.”
The increase since 2009 has been dramatic, he told CNBC. That “certainly has generated stories that are optimistic,” he said. The gains are causing more people to enter the market as “latecomers,” regretting that they didn’t get in four years ago, Shiller explained.
“It does have an aspect of a bubble to it. I think it is highly priced,” he said. “This reminds me of 1996, when … people assaulted me for calling a bubble, because it lasted for another 3 ½ years. So you never know when these things will come to an end.”
Shiller also sees a bubble in parts of the housing market, as the S&P/Case-Shiller index of home prices has surged 12.2 percent in the year through May.
“The cities that bubbled in the past are bubbling again,” he noted. “It seems partly psychological. They’ve seen it before, and they’re ready for it again.”
…
Editor’s Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.
I think Shiller is pretty good about the way he words things. He is careful to say that “It seems partly psychological”. The key word here is “partly”. The mass psychology doesn’t get triggered until AFTER the market is first manipulated by some greater force. While I agree that positivist psychopathy enables bubbles to grow larger than otherwise expected, it is not the primary cause.
• Obama is the politician in chief, like all presidents. A major component of his job is getting votes for himself and his party.
• The net result is that Obama is going to be sending incoherent messages - word clouds - so that he appeals to all sides of an issue. Like John Kerry who was for something or another before he was against it.
• Also, this sort of word cloud is well suited to Internet searches. Search Obama bubble and you get Obama railing against the bubble. Search Obama immigration and you get Obama supporting immigration. Search Obama house price and you get Obama supporting high house prices.
• It’s intriguing Obama is talking against bubbles nowadays. Some bloc of voters he wants to reach must have some inkling of how they are negatively impacted by them. The rest of his statement shows that doesn’t really matter (yet), but he wants to get the word cloud circulating.
• As far as the media goes: for example, DC news radio is pretty much a forum for reading advertisers’ and politicians’ press releases. It’s fast, smooth, fills space, makes everyone who matters to that business happy. So the media is happy to rebroadcast snippets of the word cloud as they see fit.
• Reporters are mostly not selling in-depth analysis. They are selling narratives and stories that people will want to hear. Reporters are not going to irk the people who pay their salaries - the advertisers, be they the NAR or political campaigns.
So…I’m in the market to buy a home but prices are sky high, jobs are becoming part time, and companies are laying people off. The list goes on.
I believe the government agencies and the Realtors Association are making up numbers. I really can’t believe the housing market is improving especially after every realtor I’ve spoken to states a >50% of his sales come from investors. That doesn’t sound like growth, that sounds like people parking their money.
I would like to buy a house, but do we see a burst happening here in the future? Any thoughts…? Or do we just watch the fed stimulate and falsify the economy more and more.
Smart man you are. You have a nose for BS. If you act now, you’re sentencing yourself and your family to a lifetime of debt service(slavery) for an asset that depreciates rapidly at a grossly inflated price.
For now?? Rental rates are half the cost of buying. Rent while you sit back and watch the wheels come off this thing.
“…do we see a burst happening here in the future? Any thoughts…?”
Obviously with housing going up at the fastest rate since 2006 and the U.S. federal government fully supporting further housing price gains, no bursting bubble is possible in the foreseeable future.
• The government, via Fannie, Freddie and Ginnie, has been controlling just about 100 percent of the mortgage market over the past five years. (about 2 trillion dollars)
• The Federal Reserve has then been buying from the government, per its public statements (it could be more, it’s impossible to know) 480 billion of those mortgages packaged in mortgage backed securities. About a quarter of the available MBS.
• If the government were not buying those mortgages for packaging and sale into MBS, the business model would collapse. No private investors are going to lend at these income to price valuations, and at these interest rates.
• It’s a combination of the government buying all the mortgages in the country and packaging them for sale into MBS, and the central bank then buying a quarter of those mortgage backed securities (MBS) that has led to the current price points.
• THE QUESTION: Is this business model sustainable? At this moment in time, it benefits the Finance, Insurance and Real Estate (FIRE) sector. And current homeowners and mortgagees. HOWEVER, it harms future house purchasers by forcing them to go deeper into debt. Answer this question and you’ll get an idea of what might happen in the future.
‘you’ll get an idea of what might happen in the future’
Knowing it’s unsustainable doesn’t tell you what’s going to happen, really. Finance will become more expensive, house prices will fall and some will be underwater; that will be the end of it? This is missing a few important issues. Why are the governments and central banks pushing these bubbles in the first place? Because the economy is not functioning well and is choked with debt. And the people in charge only know one tool to stay in power; print money, manipulate things like interest rates.
One needs to only look back a few years to recall much more than house prices falling. Consumer spending, etc. How many billions of loans went bad? Remember the dark humor of the 201K?
And then there’s the usual call for more of the same. The central banks won’t stop printing money. Here’s why I think Obama is talking about bubbles; what has become unsustainable are the bubbles themselves. Stocks, houses and bonds. In the past few years corporations with lousy credit have been able to borrow hundreds of billion$ at historic low rates. Many of these companies shouldn’t even be around, much less issuing bonds. So when they fall on their face, Obama sees that people may be a little sick of the bailout thing, and could be positioning himself to say, ‘I warned you this might happen’. Plus, could it be too much for a weak economy? What’s the solution; even more people on food stamps? The true unemployment rate is somewhere around 14%. Incomes are falling. What will the central bank do, cut interest rates from 3%? Buy bonds? Heck they’re doing that and have been for years.
Much of this is the difference between a boom and a bubble. Bubbles always crash, hard. We’re going to find out which it is.
‘When the Federal Reserve was ramping up its asset purchases to support a flagging U.S. economy, many officials overseas criticized the United States for putting undue upward pressure on their currencies. Most memorably, Brazilian Finance Minister Guido Mantega suggested rich countries were engaged in a “currency war” or a race to devalue to gain a trade advantage.
Now that the Fed is moving toward shuttering its bond-buying program, currencies in emerging markets have begun to plunge and there are growing fears of a possible crisis.
The Indian rupee and Turkish lira have sunk to record lows against the dollar, while the Indonesian rupiah has hit a four-year low. Mexico and Korea have faced pressure, as has Brazil, which last week put up $60 billion to stem the real’s slide.
The risk of these pressures snowballing into a crisis that engulfs the world economy was the focus of much of this year’s Federal Reserve conference at Jackson Hole, whose theme was the global dimensions of monetary policy.
Central bankers from around the world attended the conference, which wrapped up on Saturday, and their conclusion was not startling: unconventional monetary policy in developed nations such as the United States, while appropriate for domestic objectives, can have big spillover effects.’
http://finance.yahoo.com/news/central-bankers-debate-risks-withdrawing-024820589.html
The true unemployment rate is somewhere around 14%.
That’s what U-6 currently shows, Ben, but ShadowStats estimate of U-6 as computed prior to 1994 is closer to 23%—and trending up slowly the past few years, not trending down like the official numbers.
I trust that more than the official numbers.
http://www.shadowstats.com/alternate_data/unemployment-charts
Thanks for that post Jonesy. Thought provoking indeed.
What I personally find interesting but seldom (if ever) pointed out is how the Fed has positioned its balance sheet as the mortgage market toxic asset Superfund site. Remember when Henry Paulson proposed a Structured Investment Vehicle (SIV) to serve this purpose? I guess it was unnecessary, as the Fed had the capability all along and simply chose not to exercise it at the time.
Remember when Henry Paulson proposed a Structured Investment Vehicle (SIV) to serve this purpose?
Yeah, I remember. At the time, I was angered by the idea of the SuperSIV, but looking back, I think we would have been better off with that approach.
I think that as an official governmental vehicle, the SuperSIV would have had more transparent accounting. With the Fed, which has very little in the way of accountability, we are much more likely to never understand what actually happened.
“HOWEVER, it harms future house purchasers by forcing them to go deeper into debt.”
Are they using guns nowadays to force house purchasers to go deeper into debt?
Hey Brian:
I don’t see how the prices can continue to increase for very long, even while inventory is increasing everywhere. If you keep your finger on the pulse of the market, you will probably notice your options getting better with time.
I think Obama may be under the impression that a bubble is just the crash part of the bubble. He may not be aware the the crash part can’t happen without the boom part.
Either that, or his Wall Street buddies already have him backed into the perfect corner. I have little doubt that he is being extorted by the very system that made him President. “We will make you President, as long as you bail us out of the crash-parts of the bubbles that we create”.
“But once the hustle becomes big enough, it becomes useful for politicians to protect and advance it.”
The British government was a partner in the South Sea Bubble which spectacularly inflated and collapsed a couple of centuries ago.
My standing hypothesis is that although government complicity in manias can serve to increase their duration, they also inadvertently worsen the damage when the ultimate collapse occurs.
Time will tell whether the government-sponsored U.S. Housing Bubble will enjoy the same fate.
“…both surveys suggest that while London – with its strange fascination for overseas buyers and investors – remains the powerhouse for the market, house prices and, more importantly, sales, are starting to move in most other parts of the country.”
…
“The fact is that not only is the housing market taking off at a rate most economists find at least surprising, if not yet worrying, but the Government has already primed it to shoot ahead even more.”
…
How many other governments besides the UK and the U.S. are in the business of rewarding foreign residential real estate investors with ever-increasing home prices?
Maybe the idea is to make sure the last round of greater fools/bagholders are all foreign. Rake in the cash, then deflate the assets we sold them.
I think something like this happened to Japanese buyers of American commercial properties in the late 80s.
“Maybe the idea is to make sure the last round of greater fools/bagholders are all foreign. Rake in the cash, then deflate the assets we sold them.”
It totally makes sense to me to orchestrate the final collapse of the Housing Bubble so its negative economic impacts land on foreign soil.
At any rate, nobody is putting a gun to the heads of the all-cash foreign investors and forcing them to buy.
Wells Fargo just announced they are laying off 2300 people in their mortgage unit…What does that portend ??
I recall recently seeing a story about mass planned layoffs at Wall Street investment banks, but can’t find it. If you have it handy, please post.
Not familiar with that article but would not be surprised….I just sense that we could see some negative numbers this winter…Retailers other than just a few are not doing well…
Phony Government GDP Numbers Hide Shrinking U.S. Economy-Peter Schiff
Money manager Peter Schiff claims the real U.S. Gross Domestic Product (GDP) is closer to “$13 trillion” than the official government number of “$16.6 trillion.” That is a discrepancy of $3.6 trillion! Schiff explains, “The government keeps telling us the economy is getting bigger, but millions of Americans are leaving the workforce. We’ve got record numbers of people on food stamps . . . and part-time jobs are replacing full-time jobs. How is that consistent with a growing economy? It’s not.”
http://usawatchdog.com/phony-government-gdp-numbers-hide-shrinking-u-s-economy-peter-schiff/
Shiff is making the mistake of measuring the economy by its effect on the average person. Doesn’t he know that the new government only cares about the “citizens of the world” (i.e., the 1%)? If he would just focus his efforts on the uber-wealthy, then his analyses would be more palatable to the politicians and the press, and he could make some serious bank!
Yup.
The 99% merely serve as scam bagholders and cannon fodder.
The Housing Market Could Well Be In Crash Mode Now
The massive mult-trillion Fed/Government stimulus dumped into the housing market is starting to fade now - hard. In addition, the rapid move higher in interest in May triggered by Bernanke’s flash of Tourette’s syndrome when he blurted out his “taper” mistake is going to start showing up in the home sales numbers, starting with today’s disastrous new home sales report for July.
http://truthingold.blogspot.com/2013/08/the-housing-market-could-well-be-in.html
“…starting with today’s disastrous new home sales report for July.”
I guess if enough gloomsters say it was disastrous, then it must be true. Never mind that new home sales were up by 6.8% year-on-year.
EARNINGS
Updated August 23, 2013, 11:48 a.m. ET
New-Home Sales Tumble
Higher Mortgage Rates Create Concern
By JOSH MITCHELL and ERIC MORATH
CONNECT
WASHINGTON—Sales of newly built homes fell sharply in July, a possible early sign that higher mortgage rates are starting to slow the housing recovery.
…
Fed officials are closely studying reports such as Friday’s sales figures to gauge the strength of the U.S. economy as they decide if and when to slow the bond purchases. Officials have said they have been looking for signs of strength in the economy before doing so.
…
Even with the decline, sales in July were 6.8% higher than a year ago.
…
if the bankers still have properties to unload u can bet there will be no crash.
there has been a house around the corner sitting empty for two years at least. grass is dead and piles of flyers on the porch. there has been no interest to try and sell it.
U can get a good feeling of how much shadow inventory is out there by cruising around the subdivision and counting the dead lawns. I think I will do that this weekend and try and get a rough estimate.
Isn’t it unusual for sales to decrease in July? Besides, look at the inventory numbers. Even without including the shadow inventory, the number of vacant homes on the market is going up everywhere, and has been for months. This has been happening throughout the spring, and into the summer. Very unusual, no?
Not just unusual. Very uncommonly unusual.
The last time we saw it happen was in 2006 at the peak and 2010 at expiration of the home-debtor tax credit fraud.
“The Housing Market Could Well Be In Crash Mode Now”
It is.
As you know, demand is at 14 year lows…. well what little demand there was just evaporated 45 days ago. And as you know, as demand collapses, prices collapse.
Look out below.
Look at the Census data. SFH starts are at a 60+ year low. This is the collapse of a lifetime, and it’s only getting started.
Had three California consumer experiences today that make me wonder if the whole economy isn’t back in crash mode:
1) Hit CostCo at midday, and maybe for the first time ever on a Saturday, had no waiting in line.
2) Next headed over to Trader Joe’s. Again, no waiting, in the early afternoon (i.e. peak Saturday shopping time).
3) Hit one of the local chain restaurants for dinner with my boys. They had open tables at 6pm (prime dining hour) and throughout the time we dined.
Either everyone who lives in San Diego is on vacation somewhere else at the moment, or else others besides us are feeling the pinch (again!). Luckily for me, my wife can adjust her hours of work (and pay) on the margin, or we would be really hitting the brick wall about now.
When was the last time you saw a headline like this in a major urban daily newpaper?ARE YOU CONCERNED ABOUT THE SLOWDOWN IN San Diego COUNTY’S JOB GROWTH AND THE RISE IN THE UNEMPLOYMENT RATE?http://www.utsandiego.com/news/2013/aug/25/tp-are-you-concerned-about-th…
http://www.utsandiego.com/news/2013/aug/25/tp-are-you-concerned-about-the-slowdown-in-sd/
Some of the comments were confusing and there were not that many so its hard to take anything away that give some sense of where San Diego is headed…I think our economy is just bifurcated right now…Detroit….Inner core in a renaissance…Out-lying area’s in a death spiral…Central Valley of California just not doing very well….Silicon Valley doing very well…When there is no work you go to the place that there is work…Maybe thats why some urban cores are doing well…
“…Although only a few observers have noted the vested interest in error that accompanies speculative euphoria, it is, nonetheless, an extremely plausible phenomenon. Those involved with the speculation are experiencing an increase in wealth–getting rich or being further enriched. No one wishes to believe that this is fortuitous or undeserved; all wish to think that it is the result of their own superior insight or intuition. The very increase in values thus captures the thoughts and minds of those being rewarded. Speculation buys up, in a very practical way, the intelligence of those involved.
This is particularly true of the first group noted above–those who are convinced that values are going up permanently and indefinitely. But the errors of vanity of those who think they will beat the speculative game are also thus reinforced. As long as they are in, they have a strong pecuniary commitment to belief in the unique personal intelligence that tells them there will be yet more. ..Strongly reinforcing the vested interest in euphoria is the condemnation that the reputable public and financial opinion directs at those who express doubt or dissent. It is said that they are unable, because of defective imagination or other mental inadequacy, to grasp the new and rewarding circumstances that sustain and secure the increase in values…”
-John Kenneth Galbraith
A Short History of Financial Euphoria
Dude, I have it on good authority that the stock market is actually “flat”. Hence, I should start dollar-cost averaging by investing in the 401k. Otherwise, I would be giving up the free money from the employer semi-match (which doesn’t fully vest until I’ve been at the company for six years). I would also be losing out on the “free taxes”, which are due and payable upon accessing the funds when I’m old.
These are the twists of logic that a human mind can contrive.
It’s great to know that U.S. economic leaders are finally aware of the Housing Bubble’s existence and are actively taking measures to prevent it from harming the economy.
Markets
Obama White House Is on Economic Bubble Alert
By David J. Lynch August 22, 2013
Photograph by Andrew Harrer/Bloomberg
President Barack Obama, who took office amid an epic financial collapse, wants to make sure the economic recovery he’s helped engineer doesn’t set the stage for the next bubble. While the president has frequently talked about the need to move beyond what former White House economic adviser Jared Bernstein called a “shampoo economy” (as in lather, rinse, repeat), the topic of overheated markets has moved front and center once again. Obama this month spoke four times in five days of the need to avoid what he called “artificial bubbles,” even though the economy grew at just a 1.7 percent rate in the second quarter and employment and factory usage remain below pre-recession highs. “We have to turn the page on the bubble-and-bust mentality that created this mess,” he said in his Aug. 10 weekly radio address.
Six years after the housing meltdown ignited the worst recession since the 1930s and vaporized $16 trillion in American household wealth, real estate and equity markets are roaring again. Home prices are surging in places such as Las Vegas and Phoenix. U.S. stocks are near record highs, with the Standard & Poor’s 500-stock index up about 16 percent this year. In the past year investors’ use of borrowed money to buy stocks is up about one-third, to a near record. American companies have issued about $240 billion in junk bonds this year, more than twice the amount during the same period in 2007. “Clearly, this is a growing concern both in the administration and at the Fed,” says Adam Posen, a former member of the Bank of England’s monetary policy committee.
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I recently had a conversation with a young man fresh out of college. His professor taught him that macroeconomics is useless. You can’t do anything with it. Only microeconomics contains the information needed to make the best investment decisions. Hence, this professor’s students will never know if there’s a bubble in anything. After all, a bubble is only detected on the macro level, and none of them will ever waste their time on the useless pursuit of studying the economy at that level.
Those on this blog would probably argue that microeconomics are useless against a backdrop of macroeconomics that goes undetected. If you buy a stock that is relatively undervalued (compared to other stocks, or compared to itself last year), then you are getting a good microeconomic deal. If the entire stock market is overvalued because of a bubble, then you are getting a bad deal, and your pocketbook won’t know whether it’s a bad macro deal or a bad micro deal.
I guess this is how bubbles get to not be bubbles. It happens because the overwhelming majority of investors have no interest in macroeconomics at all. They were “taught” that macroeconomics is useless. Taught by someone who was apparently raised in an era of relative government competence, and who relies on the system not to be corrupt, and who is blind to the obvious rolling bubbles that have dominated the US economy for decades.
“When Is A Housing Bubble Not A Housing Bubble?”
(Channeling William Jefferson Clinton):
It depends on what the definition of Housing Bubble is.