The Housing Bubble

On-the-scene news from Boulder tonight/Coexistance with the floodwaters. Stay safe Carl, Colo, goonie et al:

“…The gurgling woke me up.

Then water suddenly threw up out of the shower. I was saved because the muddy water flowed across the floor and down into the heater vents, probably leaking in to the dirt crawlspace. It filled a foot deep in the bathtub but didn’t overflow. After about an hour it stopped and drained out.leaving the mud on the floor.

It’s mostly mud without poop, fortunately. Streets are flooded with the same muddy water….”

They say it will keep raining

While Canadian prime minister travels and occupies his mind with problems like military intervention in Syria or paying country debt to IMF, the common Canadians are struggling with their own personal debt. It has been stated here many times before, but I will repeat it: Canada has one of the highest levels of the household debt in the world. What does it mean in practice? It means, for example, that many elderly citizens are still struggling to pay their mortgage, even they have been retired from their work. How is it possible? Bank of Montreal is not making this question, but I think it is pretty obvious. It is possible because there is no “political will” that would change it. Politicians are too occupied with international relations and with pipeline they barely find some time to take care of their own fellow citizens.

“…Our long national foreclosure nightmare may be over. The number of new foreclosure filings in August hit its lowest level in nearly eight years, according to RealtyTrac, an online marketer of foreclosed properties……”

More signs of recovery from the craziness of 2002-2006. It has only been 7 years since the popping sound woke us from a deep sleep of denial.

“Just for the record; there is no shortage of housing. Not in California, not in Tokyo, not anywhere. And there will come a day (again) when the media will tell us, ‘there’s a glut of houses for sale in….’, and regale us with sob stories, ‘I was doing great until the economy went south and my income went away and I can’t get rid of this damned house!’”

~Ben Jones, August 8, 2013

This false notion…. this lie….. that there is a shortage of housing in the US is laughable considering there are tens of millions of excess empty houses out there. A sea of them. And it’s growing. Day by day.

“Housing’s ‘Shadow Inventory’ Still Haunts Banks”

http://news.yahoo.com/housings-shadow-inventory-still-haunts-banks-152949909.html

With tens of millions of excess empty houses and another 35 million additional houses that are just beginning to empty as boomers expire, banks themselves will become haunted houses.

How many excess empty houses are Fannie and Freddy (Phoney and Fraudie) holding? Any estimates? 5 million? More?

If you take on mortgage debt at current massively inflated housing prices, you’ll enslave yourself for the rest of your life.

“Debt is bondage.”~ Suze Orman, May 11, 2013

“Mortgage Defaults Skyrocketing”

http://www.billsbills.com/blog/mortgage-defaults-skyrocketing-hamp-has-failed

Default is what happens when the price of housing is grossly inflated.

This is in addition to the massive amount of defaulted properties held by banks, Freddie and Fannie.

“The losses associated with buying resale housing at current massively inflated asking prices is irrecoverable.

Rental rates are half the cost of buying.”

Correct.

That explains why housing demand is at 14 year lows… and falling.

“With 25 million excess, empty and defaulted houses and another 35 million houses to be vacated as boomers die off, what do you think is going to happen to housing prices?”

I have a an idea what’s going to happen.

“Why would pay more than new construction cost ($60 per square foot=materials, labor and profit) for a depreciating 20+ year old resale house?”

Because that’s what dumb borrowed money does?

“Mortgage delinquencies take a sharp turn up”

http://www.cnbc.com/id/100914292

And they’ll continue rising for as long as transactions occur at massively inflated prices.

And remember, today’s sale at a massively inflated price is tomorrows default.

Score one for the plumber…

———————-

The plumber vs. the billionaire
Pollutico | 9/11/2013 | Rich Lowry

Michael Bloomberg is the mayor of New York and a media mogul who weekends in Bermuda and whose net worth is an estimated $27 billion. Victor Head runs a plumbing business with his brother in Pueblo, Colo.

The two clashed from a distance Tuesday in the Colorado gun recalls, and Head gave the billionaire a righteous drubbing. The defeat of two pro-gun control Colorado state senators in recall elections sends a message that should be heard all the way back on the Upper East Side, and maybe even in Hamilton.

It wasn’t too long ago that Bloomberg’s Mayors Against Illegal Guns was supposed to be the great equalizer in the gun debate. For too long, the National Rifle Association had dominated with its big dollars and its fierce commitment to its cause. Bloomie would change that. Or so we were told.

This was before dozens of mayors quit the organization, some of them explaining that it had dawned on them that the group wasn’t against illegal guns so much as for making more guns illegal. And that was before the Colorado recall. The vote reinforces the failure of gun control in Congress earlier this year, with the extra sting of a direct populist rebuke.

Nevertheless, it was a career-ending vote for the two targeted Democrats.

The recallees, state Senate President John Morse of Colorado Springs and Sen. Angela Giron of Pueblo, weren’t fighting on hostile territory. In terms of registration, Morse’s district is split three ways among Democrats, Republicans and independents. Giron’s district is much more favorable, a heavily working class and Latino area that has been a Democratic stronghold forever. President Barack Obama carried it by nearly 20 points in 2012.

Democratic National Committee Chairwoman Debbie Wasserman Schultz waved off the defeats with the usual explanations. She said the Colorado recalls were the result of “voter suppression, pure and simple,” and pinned the blame on the NRA and the Koch brothers.

As for the NRA and the Koch-backed group Americans for Prosperity, they certainly played in Colorado. The pro-recall forces were still badly outspent, by as much as 8-to-1 according to some estimates. Bloomberg wrote a personal check for the anti-recall side for $350,000.

Head still got Giron to agree to hold one more town hall before the vote on guns, and this time roughly 1,000 people showed up. If Giron didn’t realize then that she had a populist revolt on her hands, she needed to be in a different line of work — and now she is.

Anybody notice the intentional suppression of mortgage app discussion in the media yesterday?

Here’s a factoid.

Yesterdays purchase application data fell to a 5 year low..

And demand for housing is at 1997 levels…. and falling.

And all this because prices are massively inflated.

Guess what else just began falling?

“And don’t forget. The 82 million boomers that just began to die off own or did own 1.7 houses per paired couple. That’s alot of excess empty houses.”

BINGO… “vacation” houses are all owned by boomers.

“Houses are rapidly depreciating asset no different that automobiles.”

Exactly. And the losses to depreciation are magnified tremendously when you finance a rapidly depreciating asset like a house for 30 years.

I keep reading articles about how September is going to be a terrible month for stocks, a veritable perfect storm, etc.

And yet the U.S. stock market keeps going up.

What gives?

interview transcript with economist and author tyler cowen discussing his new book ‘average is over’

http://www.npr.org/2013/09/12/221425582/tired-of-inequality-one-economist-says-itll-only-get-worse

the future belongs to lucky ducky

welcome to the recoveryless recovery

it’s a good thing the gun ban in d.c. is working and keeping the streets safe!

oh wait…

‘one man was killed and three others were wounded in a shooting that occurred about midnight wednesday on a street just south of new york avenue nw, d.c. police said.

the location of the shooting is about two blocks from tyler house, a low-income apartment complex where 13 people were injured in a mass shooting in march linked to a dispute between neighborhood crews. police have made arrests in that case.’

http://www.washingtonpost.com/local/four-shot-one-fatally-off-new-york-avenue-in-northwest-dc/2013/09/12/a355400c-1b9c-11e3-a628-7e6dde8f889d_story.html

Turns out that QE3 and Syria tensions were among the best things to ever happen to gold. Now that both are going away, so is the premium they added to the gold price.

Sept. 11, 2013, 2:26 p.m. EDT
Gold ends lower for a second straight session
Syria developments, next week’s Fed meeting in focus
By Myra P. Saefong and Polya Lesova, MarketWatch

SAN FRANCISCO (MarketWatch) — Gold futures finished modestly lower Wednesday, with the market on edge as efforts toward a diplomatic solution to avoid U.S. military intervention in Syria continued, and as investors looked for hints on what the U.S. Federal Reserve will say about monetary policy next week.

Thursday’s data on weekly jobless claims may offer the next clue on whether the U.S. central bank will decide to taper its bond-buying program at its two-day monetary-policy meeting next week.

Gold for December delivery (GCZ3 -2.64%) fell 20 cents to settle at $1,363.80 an ounce on the Comex division of the New York Mercantile Exchange. Prices had touched a low of $1,356 in electronic trading.
…

And in case you missed out on your daily Soul Train fix:

http://www.youtube.com/watch?v=fOPVmvqi7JY

soylent green is the solution:

‘most of the nation’s oldest population is now clustered in the northeast and growing rapidly, according to census data, straining medical, housing and transportation budgets and forcing lawmakers to look for new approaches. and legislators and governors are reaching the conclusion that the way to pay for the elderly is to cater to the young.

that’s because younger residents just beginning their careers make up the foundation of a tax base that can support older workers who have retired or will soon do so. and a decade of dramatic internal migrations away from northeastern states and toward the sun belt and mountain west is putting those shrinking tax bases into the spotlight.’

http://www.washingtonpost.com/blogs/govbeat/wp/2013/09/12/the-northeast-is-getting-older-and-its-going-to-cost-them/

Is it possible for da boyz to somehow prop up the stock market by dumping losses on gold bugs?

I don’t claim to know how this might work; just find it puzzling to see stocks hover at the flat line when gold is getting hammered for no reason.

“I’m calling it a soft landing — a return to what is considered to be more normal market conditions,”

- Leslie Appleton-Young, Chief Economist, California Association of Realtors

“Maybe we need something new. That’s all I’m prepared to say”
“I’m sorry I ever made that comment.”
“When I get my new term, I’ll let you know.”

- Leslie Appleton-Young, Chief Economist, Cal. Assoc. Realtors
When asked about her “Soft Landing” prediction

Instead of “prepared” misrepresentations, how about just speaking truthfully about this debacle that is housing? Who is “preparing” these tall tales for you to read and why?

“Trayvon Martin was, for the black community, a symbol of every young black male, each with vivid memories of averted faces, abrupt street crossings, clicking car locks and insulting police searches. As we move up the socioeconomic scale, the memories extend to attractive job openings that suddenly disappear when a black man applies, to blacks interviewed just to prove that a company tried, and even to a president some still hate for his color. It’s understandable that Trayvon Martin serves as a concrete emblem of the utterly unacceptable abuse, even today, of young black men.”

http://opinionator.blogs.nytimes.com/2013/09/11/getting-past-the-outrage-on-race/

Remax CEO Margaret Kelly, 2007 states “guaranteed appreciation” and “it’s a ‘perfect’ time to buy” a house.

http://youtu.be/TD2_NmPevVs

Pink Floyd - We Don’t Need No Education

“More than two-thirds of U.S. states are spending less per child on schools than they were five years ago, a study found, showing how slowly governments are replacing funding that was cut because of the recession.

In dollar terms, Alabama led the decline. Funding there shrank by $1,242 per student since 2008, adjusted for inflation. It was followed by Wisconsin, where the figure slid $1,038, and Kansas, with a $950 cut.”

Alabama and Kansas don’t need no uppity book learning. Books make Negroes forget their place and turn people commie!

http://www.bloomberg.com/news/2013-09-12/most-states-school-funding-tumbles-since-recession-study-finds.html

It’s a good thing all the other taxpayers are making up the difference to pay for their employees’ Medicaid, food stamps, school lunches, Earned Income Tax Credits, Section 8 vouchers, Obamaphones, et cetera

“America’s richest family, worth more than $100 billion, has exploited a variety of legal loopholes to avoid the estate tax, according to court records and Internal Revenue Service filings obtained through public-records requests. The Waltons’ example highlights how billionaires deftly bypass a tax intended to make sure that the nation’s wealthiest contribute their share to government rather than perpetuate dynastic wealth”

http://www.bloomberg.com/news/2013-09-12/how-wal-mart-s-waltons-maintain-their-billionaire-fortune-taxes.html

Housing Bubble In Full Bloom, Zany Price increases, And Now A Sudden Slowdown

Cities have seen dizzying home-price increases that are giddily reported and fuse with pandemic housing hype and trillions from the Fed into a self-propagating force. And it has become accepted wisdom that the housing market would recover all the way to where it was in 2006, which would represent a complete recovery, a sign that the Fed has done its job, that it cured at least one of the ills that has been dogging this economy for so long.

http://www.testosteronepit.com/home/2013/9/11/housing-bubble-in-full-bloom-zany-price-increases-and-now-a.html

“When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.” — P. J. O’Rourke

I thought of this as I was considering the dilution of QM/QRM.

Just got another credit card solicitation from my bank. They are offering a 15 month no interest bait. What puzzles me is why don’t any credit card solicitations offer a no-catch trial period for cash advances? I’d love to free up cash flow for a few months with the help of a bank but I never see anything offered, or at least anything transparent. I think any credit lines for cash equivalence offered ever in a solicitation have strings attached and gotchas that are not disclosed straight-forwardly. I understand they loan you out money if you have equity in a house and can let you rack up credit card charges in the many thousands, but when it comes to getting some cold hard cash without much fanfare, the banks don’t wanna allow for that. In these low interest rate environments and all the cash banks keep tied up in who knows what, they are awfully stingy. Are they worried that they will never see that cash again if they disperse it in a no-fee cash advance? We are talking 4% fee just to get a cash advance from a bank. This is why I tend to keep minimum amounts of cash in a bank. They really are stingy.

California Notice Of Defaults Up A Whopping 38.7% In Second Quarter

http://www.ksby.com/news/california-foreclosures-rise-in-2nd-quarter/#_

war’s back on.

The “Real” America: Near Record 20% Struggle To Afford Food, Highest Since Crisis Began
Zero Hedge | 9/12/13 | Tyler Durden

With US equity markets on a 7-day roll and excited TV anchors proclaiming the worst over and new all-time highs must signal recovery as they ‘celebrate’ five years on from Lehman, the following two charts of the state of real America should open a few eyes to just how blinded American has become to the truth (unless you live it). A stunning 20.0% of Americans were found to have struggled to afford food in the last year - surging in recent months to its highest since the peak of the crisis in 2008 - as American’s ability to consistently afford food has not recovered to pre-recession levels. Furthermore, Americans access to basic needs (13 factors including housing, healthcare, and food) hovers near record lows - dramatically lower than pre-recession levels. The Gallup polls point to a very different image of American than Dow 15,000 - and is set to get worse as the food stamp program is set to be cut in November.

More Americans are struggling to afford food — nearly as many as did during the recent recession. The 20.0% who reported in August that they have, at times, lacked enough money to buy the food that they or their families needed during the past year, is up from 17.7% in June, and is the highest percentage recorded since October 2011. The percentage who struggle to afford food now is close to the peak of 20.4% measured in November 2008, as the global economic crisis unfolded.

It’s 2007 all over again on my cul de sac. The teardown mania has returned, as the second ranch house in the span of one month succumbs to the bulldozer. Both lots are at the entrance to the oval, which means construction traffic will be interfering with leaf pickup throughout the fall and with the snowplows all winter. Yippee!

LOLZ….. c ya.

Good read:

Unheralded Victory: The Defeat of the Viet Cong and the North Vietnamese Army, 1961-1973 by Mark Woodruff

Some days you get the bear, other days the bear gets you.

This story is a housing market Schadenfreudist’s dream. Enjoy!

The Financial Crisis: Five Years Later
After Las Vegas’s Housing Crash, Fraud, Ferraris, and Gun Fights
By Felix Gillette September 12, 2013
Resident Vance photographed many events in the Meridian courtyard. Here, in November 2010, a visitor rests
Photograph by Frazzetta/Vance

Jan. 20, 2009: The National Association of Home Builders predicts a 29 percent drop in real estate prices

Amid the housing boom and subsequent bust, no place in the country heaved up more extreme real estate behavior than Las Vegas. During the first six months of 2009, the city racked up the highest rate of foreclosure of any major metropolitan area in the U.S., according to RealtyTrac. Citywide, 1 in 13 properties had fallen into foreclosure, more than six times the national average. And by 2009 no place in Las Vegas had evolved into such a baroque and extravagant set piece of housing horrors as the Meridian Private Residences.

Through a set of binoculars mounted on a tripod by a window in his living room, Robert Vance, 60, watched it happen. When things got really weird, which was often, he took photos. “The homeowners association asked me if I saw something bizarre, to get a record of it,” says Vance, a film technician who lived in a three-bedroom condo on the fourth floor. The year 2009 proved to be a vintage one.

Designed to look like a Mediterranean oasis, the Meridian is located on E. Flamingo Road, which passes through the heart of the Las Vegas Strip, past the Bellagio fountains and the Paris Casino’s miniature Eiffel Tower. In 2005, American Invsco, a real estate company in Chicago, bought the 16-acre gated community through a subsidiary LLC and converted its 678 rental apartments into condominiums. At the time, new condominium projects were sprouting up across the city. Interest from abroad was huge, which meant that American Invsco could sell condos almost exclusively to people who had no intention of ever moving in.

In glossy brochures distributed at parties from Las Vegas to London, American Invsco guaranteed that for a period ranging from 12 to 36 months, anyone who joined their corporate “leaseback” program would (a) have their taxes covered, (b) get their homeowners association fees paid, and (c) receive a generous monthly rental income. It assured investors it would cover all three incentives, even if the buyer’s unit was unoccupied. It was the quintessential sales pitch, reflecting the prevalent spirit of a madcap era: Investors could buy, hold, then flip a property without ever setting foot inside.

Only 14 were ultimately sold to owner-occupiers, according to one subsequent estimate by a former American Invsco manager. The other 98 percent of the units were bought by investors who lived in far-off places such as New York, California, Canada, the U.K., Ireland, Italy, and Japan. Time would prove that selling the bulk of a condo development to absentee owners on the eve of a real estate collapse is not a great recipe for community stability. (American Invsco did not respond to several interview requests.)

Like the legions of people who arrive in Las Vegas hoping to get rich on blackjack or roulette only to find that the system is stacked against them, the boom-time real estate investors, once stripped of their cash and illusions, hastily got out of town. At the Meridian, according to one estimate by a member of the homeowners association, roughly 490 of the units eventually went into foreclosure or short sales.1

From his living room, with its magnificent view of the casino-studded skyline, as well as of the Meridian’s communal areas, Vance watched the condo complex empty out. And the more deserted the property got, the sketchier it felt for those who remained.

One day, Vance called the police to report that someone appeared to be stealing furniture out of empty units; the police told him that unless it was his condo being robbed, there wasn’t much they could do. Another night, at 2:30 a.m., Vance got a call from a neighbor who heard noise coming from the trash receptacle area. The next morning, Vance looked around. He found that in the dead of night, somebody had been filling the Meridian’s industrial-strength trash compactor with boxes of condominium documents.

With each passing foreclosure, who owned what at the Meridian grew more opaque. One Thursday in April 2009, a group of day laborers showed up and erected a chain-link fence blocking the primary driveway to the complex. Some company, which none of the residents had ever heard of, claimed it owned the land and was owed back rent. Eventually, the dumbfounded condo owners paid the bill, and the fence came down.
…

I think this is footage of a young Barrack Obama in a confrontation with Opie Taylor.

http://www.youtube.com/watch?v=thQLfeND4SI - 149k -

tapering is simply an illusion to keep you in the dark.

I have never understood how QE would ever help the average worker but I can see how it has held up many banks from failing by indirectly buying up their failed mortgages at par, and how it has supercharged the stock market (gamblers).

It almost seems as though the Fed wants to cover Basel now while it can get away with it. Their inflation gamble will hit them. They have been lucky so far because they did not help employment and thus demand.

To get this economy going we have to move away from protecting the banks and stock markets and deal directly with Joe 6pack.

That can only be done now with aggressive innovation, marketing and govt largesse to spike it.

It is so funny to hear bankers say that it will be easy to reach 6% by 2018 when they haven’t been able to budge from 3% despite the avalanche of money QE has deposited over the last five years.

Until a strong government led by people who can understand the excesses of the system ie merge capital, hedge funds, and deposits ! and get so many different percentages you cannot even calculate their safety. How can laws allow this ?

Meanwhile, fundie Muslim violence spreads to other nations like a cancer

http://www.bloomberg.com/news/2013-09-12/thousands-flee-in-south-philippines-as-islamic-violence-spreads.html

Coming to the USA too. In my own apartment complex there are fundie Muslims. A guy wearing a long gown. A woman all veiled. Orange County.

I think if I was dictator I would require all beaches be clothing optional for those between 18 and 30 as long as they are not obese. Also clothing optional shopping malls. Make the fundie Muslims leave America…please?

Wall Street remains highly unpopular five years after crisis
By Domenico Montanaro, Deputy Political Editor, NBC News

Americans continue to overwhelmingly dislike and distrust Wall Street five years after the collapse of Lehman Brothers and the ensuing financial crisis, according to the latest NBC News/Wall Street Journal poll.

Forty two percent said they have a negative view of the New York financial institutions while just 14 percent have a favorable opinion. The remainder of respondents had either a neutral view or no opinion. That is the lowest rating of any institution included in the poll. In comparison, 45 percent view President Barack Obama favorably while 25 percent expressed the same about the Tea Party.

The antipathy remains high despite record gains in the Dow Jones Industrial Average of more than 15,000 points, which is 3,000 points above than where it was when the market began its decline in 2008.

Still, a majority of Americans – 52 percent – continue to say they have been either greatly or somewhat affected by Wall Street crises and the housing market over the last three to five years. That’s just seven points lower than in the immediate aftermath of the financial collapse in October of 2008.

Americans also remain deeply pessimistic about the state of the economy. Just 27 percent think the economy will get better in the next year, while almost half of the country – 48 percent – thinks it will be about the same, the lowest since July of last year.

Despite months of slowly improving economic data, a majority – 52 percent – disapprove of President Barack Obama’s handling of the economy, his worst rating since August of 2012.

Part of this is likely because of the disconnect between Wall Street and the job market. Recovery in the job market has happened at a much slower pace than the gains on Wall Street.

After the financial collapse of 2008, the jobless rate spiked to 10 percent a year later – eight months after Obama took office. Four years later, that rate stands at 7.3 percent – a decline, but not back to the pre-economic meltdown levels of unemployment in the five percent range.

There was a small spike in economic optimism just before the last presidential election. In October 2012, a high of 45 percent said the economy would get better in the next 12 months. But nearly a year later and with the election season over, nonpartisan pessimism is back.

With the top 1 percent taking home more money than at any time since 1928, there is also evidence in the poll of the widening income inequality gap. More Americans consider themselves poor than 15 years ago, the last time the question was asked — in boom economic times.

Twelve percent consider themselves poor compared to just seven percent who said so in 1998. And there are more people saying they make less than $30,000 a year – nine percent now versus five percent in 1998. But adjusting for inflation, an annual $30,000 today is equivalent to making just $21,000 in 1998.
…

If you don’t ever post on Facebook, tweet on Twitter, do searches on Google or Yahoo, or use gmail or hotmail, then you won’t have to worry so much about the NSA spying on you.

Zuckerberg Says Feds ‘Blew It’ on NSA Spying Issue
By Angela Moscaritolo
September 12, 2013 03:53pm EST

Facebook CEO Mark Zuckerberg on Wednesday said the U.S. government has done a bad job explaining the NSA’s spying efforts.

Speaking at the TechCrunch Disrupt conference in San Francisco, Zuckerberg said it’s the government’s job to protect U.S. citizens from terrorism but also defend our freedoms and protect the economy.

“I think they did a bad job balancing those things here,” Zuckerberg said. “Frankly I think that the government blew it. They blew it on communicating the balance of what they were going for here with this.”

For instance, the government’s initial comments that it was not spying on Americans left confusion for global companies, Zuckerberg said.

“It was like – Oh wonderful, that’s really helpful to companies who are trying to serve people around the world, and really going to inspire confidence in American Internet companies,” Zuckerberg quipped. “It’s like, thanks for going out there and being clear about what you were doing.”

Facebook has been pushing the government to be more transparent about its actions, he added. The company, along with Google and Yahoo, this week filed suit asking the Foreign Intelligence Surveillance Court for permission to publish more information about the requests it recieves from the government for user information.

Facebook last month released its first official government transparency report, revealing that U.S. government officials made up to 12,000 requests for user data in the first six months of 2013, far higher than any other country on the social network’s list.

Zuckerberg’s comments about the NSA leaks were part of a wide-ranging discussion that touched on everything from Yahoo’s new logo (which he said “seems fine”) and Bill Gates to Facebook’s initial public offering.
…

Five years after the Fall 2008 financial firestorm, and the financial markets are still FOOBAR.

Maybe QE1, QE2 and QE3 were an abysmal failure?

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