The Housing Bubble

Detroit News: Most properties in Wayne County foreclosure auctions repeat cycle of unpaid taxes

Detroit — Wayne County treasurer officials are foreclosing on thousands of properties from tax scofflaws, only to sell them to buyers who don’t pay taxes either, newly released records show.

Nearly 80 percent of 18,568 properties bought at the treasurer’s controversial foreclosure auctions in the last two years are now delinquent on taxes, according to county records from this month. One recent study found the bankrupt city of Detroit alone is owed about $70 million in taxes from the properties.

The situation frustrates critics who have been pushing for an overhaul of the annual online auction, which ends its first round this week. They argue the auction breeds a vicious cycle: Speculators buy properties for as little as $500 apiece, sit on them or milk houses for rental cash for three years without paying taxes until they are foreclosed on again.

Many of the bulk buyers The News examined from the last two auctions were tax delinquents, including 117 properties purchased in 2011 by attorney Robert Vanderwoude and put in the name of Detroit resident Bernice Pinkston-Carpenter.

All but one of the 117 properties is behind on taxes, for nearly $625,000 as of earlier this month. The average auction sale price for the properties was $650.

Wayne county can seize the land under a clause the treasurer added to deeds in 2011 and 2012 that requires buyers stay current on taxes or risk losing properties. The reform was added after a series of stories in The Detroit News about buyers who buy back their own foreclosed properties.

“We don’t want to sell properties to people who aren’t going to pay taxes,” Chief Deputy Treasurer David Szymanski said. “We are trying to break that cycle.”

But his office doesn’t have a plan on what to do with the land it takes back. Szymanski said he would hope to work with the state or city land banks to sell the properties to buyers who have proven to be more responsible.

A separate group wants Detroit Emergency Manager Kevyn Orr to step in.

A proposal being pitched by a coalition of community groups and backed by the Michigan Legislative Black Caucus, called Project 99, would have the city seize the properties now through a nonprofit and sell them to buyers deemed responsible. The plan would take only properties owned by investors, not owner-occupied ones.

Detroit — The first big brawl in Detroit’s bankruptcy case will play out this week when the city’s lawyers try to persuade the judge that two Wall Street banks deserve to cut in front of pensioners and bondholders in the debt payment line.

Emergency Manager Kevyn Orr’s bid to untangle a complicated debt transaction blamed as one of the underpinnings of Detroit’s plunge into bankruptcy could set the stage for the rest of his plan to rescue the city from crippling debt.

His proposal to pay UBS AG and Bank of America at least $250 million to terminate an interest rate swap arrangement that went bad for the city during the recession is opposed by insurers of the debt who stand to lose millions of dollars and retirees owed billions of dollars in promised retirement benefits.

Some legal and financial experts also question why Orr is trying to settle with the two big banks so quickly in the bankruptcy process.

“He gave the banks a big, wet sloppy kiss,” said Michael Greenberger, a financial derivatives expert at the University of Maryland law school. “Why should the banks get 75 to 82 cents on the dollar, but the Detroit workers get 10 cents on the dollar? Whose life is destroyed by this?”

A committee of retirees also is urging U.S. Bankruptcy Judge Steven Rhodes to reject the settlement, which will be litigated over three days of hearings set to begin Tuesday.

“Once (the banks) take this money, that’s money that’s not available to satisfy the claims of the other claimants,” said Peter Shapiro, a South Orange, N.J., financial consultant who advises cities and states on interest rate swaps.

Orr has said he has no choice but to pay UBS and Bank of America a large chunk of what they’re owed because the banks control access to $15 million a month in casino tax revenues through another deal that staved off bankruptcy for the Motor City in 2009.

“The city needs the casino revenue badly,” Orr said last month in a sworn deposition. “Every day that we don’t have access to casino revenue, we cannot make the necessary reinvestment in this city to provide for the health, safety and welfare of the citizens.”
…
In 2006, city leaders agreed to a fixed 6.3 percent interest rate on $800 million borrowed to pour into the pension funds. As part of the deal, the banks dangled what seemed to city leaders like a lucrative advantage: The banks would pay Detroit the difference between variable interest rates and the city’s fixed rate.

Based on rates at the time, the deal made the actual monthly payment for taxpayers less than 1 percent, city records show.

The deal was hailed by Wall Street insiders for its creativity in financing part of the $1.44 billion that former Mayor Kwame Kilpatrick borrowed in 2005 and 2006 to fund pensions. It also appeared to lower costs for Detroit’s beleagured general fund.

City leaders effectively bet that variable interest rates would remain high, which would keep the costs to Detroit low — but the opposite occurred.

The city’s situation got worse in 2009 when Wall Street rating agencies downgraded Detroit’s credit rating to junk status, triggering a default on the swaps and the threat of an immediate $400 million termination payment that could have sent the city into bankruptcy, Harris said.

Harris, working under interim Mayor Ken Cockrel Jr. at the time, negotiated a deal with UBS and a Bank of America subsidiary to pledge the city’s $15 million in monthly casino taxes as collateral to keep the swaps arrangement in place — and avoid the potentially lethal termination fee.

“There was no question in anybody’s mind, because the city couldn’t come up with the $400 million, that bankruptcy was right around the corner,” he said.

Should have gone bankrupt then & there.

Surrogacy agencies in China and the United States are catering to wealthy Chinese who want a baby outside the country’s restrictive family planning policies, who are unable to conceive themselves, or who are seeking U.S. citizenship for their children.

Emigration as a family is another draw - U.S. citizens may apply for Green Cards for their parents when they turn 21.

While there is no data on the total number of Chinese who have sought or used U.S. surrogates, agencies in both countries say demand has risen rapidly in the last two years.

U.S. fertility clinics and surrogacy agencies are creating Chinese-language websites and hiring Mandarin speakers.

Comment by Ben Jones
2013-09-22 17:04:30

The Federal Reserve has been creating a bunch of money since the 90’s and vast amounts in the last few years. Does it take a decade or two for inflation to show up? Or do we just get bubbles?
——————————————————————————–

What exactly am I supposed to be looking for to “show up?”

I know what the signs of poison ivy are, but how do I know when Im experiencing “inflation?”

For those of you who enjoy freezing in the dark in your house.

Obama’s is just keeping his campaign promises.

He promised to ruin the coal industry.

He promised to raise taxes.

He promised to ruin health care.

If your electric costs double - how many more jobs lost?

How many more homeowners forced into bankruptcy?

——————–

New carbon emission rules will devastate the coal industry
American Thinker | 9-21-2013 | Rick Moran

The UN’s climate change panel is set to release a report next month that reluctantly concludes there has been no warming of the earth in at least the last 15 years. Fewer and fewer people are believers that climate change is man made.

This hasn’t stopped the Obama administration from releasing new rules governing “carbon pollution” at new power plants that would mean the virtual destruction of the coal industry.

When Silicon Valley gets going it spills over into the Central Valley…

http://cl.exct.net/?ju=fe5d1c717262047f741d&ls=fe1b1d777d6c017e741275&m=fefc1172766306&l=fed1157376640678&s=fe35157277640d7d711074&jb=ffcf14&t=

Hmmm, followup on China’s ghost cities…

http://www.businessinsider.com/revisiting-chinas-ghost-cities-2013-9

Your kewl new gold i-phone is covered in blood

Wall Street Journal - Foxconn Says 11 Injured in Large-Scale Fight at Chinese Campus:

“Foxconn Technology Co. said a large-scale fight that broke out last week at one of its campuses injured 11 people, the latest in a series of violent confrontations among the company’s workers that follows a summer of heightened unrest at Chinese factories.

The violence at the Foxconn plant followed a similar, though much larger-scale, fight last year at another facility in which a fight between two drunken workers escalated into unrest involving about 2,000 workers.”

http://online.wsj.com/article/SB10001424052702303759604579092641376933788.html

Here’s a “victim” who used to make six figures but didn’t save enough for retirement. How many millions of baby boomers will follow this path?

“About 7.2 million Americans who were 65 and older were employed last year, a 67 percent increase from a decade ago, according to government data. Yet 59 percent of households headed by people 65 and older currently have no retirement account assets

http://www.bloomberg.com/news/2013-09-23/why-100-000-salary-may-yield-retirement-flipping-burgers.html

Liberace,

How did your harpsichord sound in the ravens lockerroom last nite? Were you able to tune out the echo?

So long as the housing market rally continues, why does this story matter one iota?

The Fed Archives
Sept. 23, 2013, 10:11 a.m. EDT
Fed’s Lockhart, Dudley downbeat on outlook
Economy may have lost ‘mojo,’ says Atlanta Fed president
By Greg Robb, MarketWatch
Reuters
Dennis Lockhart, who heads the Federal Reserve Bank of Atlanta and is shown at right with his Chicago Fed counterpart, Charles Evans, suggests there is evidence that the U.S. economy has lost steam.

WASHINGTON (MarketWatch) — Two senior Federal Reserve officials speaking Monday expressed disappointment with the pace of the U.S. recovery, with one, Atlanta Fed President Dennis Lockhart, saying the economy may have lost dynamism.

“Is America losing its economic mojo?” Lockhart asked in a speech in New York to a summit on creative leadership sponsored by the Louise Blouin Foundation. “There is some evidence to the affirmative.”
…

You have to wonder if the end of Citi consultant Summers’ Fed Chair appointment prospects is contributing to the decline in Citi shares?

Bulletin New index components Goldman, Nike, Visa all contributing to Dow 30 decline »

Sept. 23, 2013, 10:10 a.m. EDT
Citi falls sharply, weighing on financial stocks
By Sital S. Patel

NEW YORK (MarketWatch) — Financial stocks fell on Monday on reports of a possible drop-off in bank trading revenue ahead of third-quarter earnings.
…

Here is something “most” have agreed on for as long as I have been paying attention (well over a decade already!).

Watch for the phase-out of direct welfare payments to get offset by an increase in stealth welfare payments to farmers (e.g. subsidized crop insurance).

Most Agree ‘Welfare For Farmers’ Has To Go
by Frank Morris
September 23, 2013 4:00 AM
4 min 30 sec

The farm bill which Congress is bitterly divided over is set to expire at the end of this month. Included in it is the $5 billion a year subsidy called Direct and Counter-cyclical Payment Program. It shells out money to farmers and land owners regardless of need or loss.

Inventory is down down down and rents are going up up up

Displaced residents encountering tightest rental market in 13 years:

http://www.dailycamera.com/topbusinessstories/ci_24148291/boulder-county-flood-victims-facing-housing-crunch

Remember when Obama promised that you could keep your doctor under Obamacare?

“With insurance marketplaces set to open next month under the new health care law, consumers may find that insurers have limited their options for doctors and hospitals”

http://www.nytimes.com/2013/09/23/health/lower-health-insurance-premiums-to-come-at-cost-of-fewer-choices.html?pagewanted=all

Quantitative Easing Worked For The Weimar Republic For A Little While Too

There is a reason why every fiat currency in the history of the world has eventually failed. At some point, those issuing fiat currencies always find themselves giving in to the temptation to wildly print more money…

http://theeconomiccollapseblog.com/archives/quantitative-easing-worked-for-the-weimar-republic-for-a-little-while-too

‘Every day, 22 veterans take their own lives. That’s a suicide every 65 minutes. As shocking as the number is, it may actually be higher.’

http://edition.cnn.com/2013/09/21/us/22-veteran-suicides-a-day/index.html

“housing will make you poor. Real poor”

It certainly does at current massively inflated asking prices of resale housing considering prices are 250% higher than long term trend. If you buy a house in this environment, you’ll be deep in debt for the rest of your life.

Don’t do it.

Hey 2Ban, this is your boy-savior Ted Cruz… He wouldn’t even study with “lower Ivy” grads when he was in law school. Imagine what words he’d have for you. ROFL.

—————————

“The elite academic circles that Cruz was now traveling in began to rub off. As a law student at Harvard, he refused to study with anyone who hadn’t been an undergrad at Harvard, Princeton, or Yale. Says Damon Watson, one of Cruz’s law-school roommates: “He said he didn’t want anybody from ‘minor Ivies’ like Penn or Brown.”

http://talkingpointsmemo.com/livewire/in-law-school-ted-cruz-only-studied-with-students-from-harvard-princeton-or-yale

More proof Ted Cruz is an @$$hole:

“It’s hard for Ted Cruz to be humble. Part of the challenge stems from his résumé, which the Texas senator wears like a sandwich board. There’s the Princeton class ring that’s always on his right hand and the crimson gown that, as a graduate of Harvard Law School, he donned when called upon to give a commencement speech earlier this year. (Cruz’s fellow Harvard Law alums Barack Obama and Mitt Romney typically perform their graduation duties in whatever robes they’re given.) ”

Read More http://www.gq.com/news-politics/newsmakers/201310/ted-cruz-republican-senator-october-2013#ixzz2fjPqcO6A

Demonstrating an overall decline in casual dining, Darden Restaurants on Friday reported first-quarter earnings that were much lower than expected. It also announced major cuts, including job eliminations, Reuters reported.

Darden’s holdings include the Olive Garden and Red Lobster chains.

“Darden in the most recent month was a little bit ahead of the industry, so it is a broader industry problem,” Jeffrey Bernstein, senior restaurant analyst with Barclays, told CNBC.
In a conference call today, CEO Clarence Otis said Darden would cut costs by $25 million in the current fiscal year and $50 million in 2015, including laying off 85 support staff members, according to Reuters. Otis had stated in a release earlier that the sluggish recovery would continue to affect restaurant sales.

Matthew DiFrisco, director and senior restaurant analyst at Lazard Capital Markets, told CNBC that the decline of middle-class casual dining could be connected to an unstable housing market.

“I think with the volatility of the mortgage rates and also the frugalness of the consumer that [the] sector’s very discretionary, and you saw some contraction there,” DiFrisco said.

On the one hand, the timing of my short on the stock market doesn’t matter, since most of my shares were sold in July by someone who broke into my account. On the other hand, I think I must be crazy because the market literally appears to be crashing ever since the day after I was GOING to sell my shorts. This is why I hate stocks so much. I wish I could buy low-priced houses and rent them out for income. That would be so much less risky.

Interesting but unrelated to housing: Ben Jealous (head of the NAACP) is 1/4 black and has a Columbia UG/Oxford grad school pedigree. Also went to a fancy private HS in Monterrey, CA.

Here’s his bio from wikipedia:
———————————
“Jealous was born in Pacific Grove, California and grew up in Monterey Peninsula, California. He holds a B.A. in political science from Columbia University and a master’s degree in comparative social research from Oxford University, where he was a Rhodes Scholar. Jealous went to York School in Monterey for high school.

His mother, Ann Todd Jealous, who is black, is a retired psychotherapist from Baltimore, Maryland who participated in Western High School’s desegregation.[3] She is also the author, with Caroline Haskell, of Combined Destinies: Whites Sharing Grief about Racism, released in April 2013.[3] His father, Fred Jealous, who is white, from New England, is the Founder and President of the Breakthrough Men’s Community and participated in Baltimore sit-ins to desegregate lunch counters.[3] As a multiracial couple, it was illegal for them to get married in Maryland until 1967; therefore, they had to marry in Washington before returning to Baltimore.[4] Afterward, Jealous’ father was disowned by his white family from New England.[4]“

Is the taper on or off the table?

Itchbyitch,

Are Realtors liars?

Housing Analyst Raises Concerns of Artificial Price Appreciation

“Home price appreciation has been so rampant, particularly in California and Florida, that flippers and get-rich-quick scam artists are flourishing again,” said Chris Cagan, VP at John Burns. “Just as in the mania of 2004-06, flippers make money when the party is raging, but inevitably,” SOMEONE LOSES WHEN THE PARTY IS BUSTED”.

http://www.dsnews.com/articles/analyst-warns-of-artificial-appreciation-2013-09-20

Bears will growl.

Roubini bearish on gold, but optimistic about U.S. and Japanese stocks
September 23, 2013, 3:01 PM

Prominent economist Nouriel Roubini, who is known as “Dr. Doom,” on Monday offered a negative take on gold and certain emerging markets, along with kind words for U.S. and Japanese stocks and the dollar.

“Why are we bearish on gold? Several reasons,” he said while delivering the keynote address at IndexUniverse’s Inside Commodities Conference in New York.

Roubini said tail risks for the global economy have declined and that’s hurt demand for the metal often seen as a safe haven. In addition, gold will be pressured by a strengthening dollar and real interests rates going higher, said the economist, who is known for his generally gloomy views.

In response to a question on areas where he’s more optimistic, Roubini suggested overweighting equities vs. bonds, and within equities, focusing on advanced economies rather than emerging markets — in particular U.S. and Japanese equities rather than European or U.K. stocks.

Roubini was gloomy on commodities in general, saying the “commodity supercycle” is likely over.

“Most commodity prices over the next couple of years are going to be lower rather than higher,” he said. Roubini cited Chinese growth slowing and becoming less resource-intensive, plus the Federal Reserve starting to wind down its stimulus measures. As he did with gold in particular, he also cited higher interest rates and a strengthening dollar, adding that “dollar doomsday folks” are wrong. The U.S. has advantages over other developed nations with its demographics and technology, he said.

Another area to be gloomy? Certain emerging markets with current account deficits and other challenges. Roubini said he’s concerned about nations such as Indonesia, India, Brazil, Turkey and the Ukraine.
…

Ha ha ha!

I just found out that my dear late aunt left me a canal-front lot in Port St. Lucie FL and I thought that I’d let y’all know so that you would keep me from getting too excited about it.

Turns out that a quick look at Zillow did that quite well!

Don’t be a chump for a sump-pump
The list of good reasons to buy a home includes the desire to put down roots, the freedom to pick your own wallpaper, or even the urge to finally discover what a sump is, and why it needs pumping.

But nowhere on the list will you find “to beat rising mortgage rates” as a reason to rush out and buy a house.

Unless you’re considering that place down the street where the renters never clean up the yard. In that case, you should buy tomorrow and keep the neighborhood beautiful by either hiring a lawn service or renting to a sorority for supermodels.

Not exactly a case of mee-ouch!

To hear some people talk, anyone who doesn’t buy a house yesterday is losing out big time, because mortgage rates have climbed by nearly a full percentage point during the last 12 months. This indeed could be a panic-inducing financial development if it weren’t for the fact that mortgages are cheaper now than they were during World War II, a time when the housing market was depressed because home buyers feared they’d have to learn the German phrase for “closing costs.”

So how much of a hit has a prospective homeowner taken since last year? Rates went from an average of 3.6 percent to 4.5 percent, meaning that on a $100,000 loan, your monthly payment has gone up $52.04. That’s a real budget-buster, being about what the average American spends on caring for the family cat.

(I won’t say you can overcome the slight increase in cost of home ownership by ditching your cat, but let’s note that you don’t get much equity out of Fluffy’s hairballs, either.)

Over the life of a 30-year loan, that $52 will increase your total interest cost by nearly $19,000. Contrast that to rates in 2005 at the peak of the housing bubble, when a 30-year loan averaged 5.87 percent. People couldn’t grab mortgages fast enough then, even though the total interest cost at that rate was more than $30,000 higher.

No house of pain, please

The time to buy a house is when you can afford it, including down payment, fees, insurance, taxes, moving costs and upkeep. You also should be able to stay put for five years to recoup your purchase costs.

If mortgage rates go up, you can buy a less expensive property, put more money down, buy down your mortgage rate by paying points, or work out some combination of all of those. For example, borrowing $90,000 instead of $100,000 at 4.5 percent would keep your monthly payment the same as borrowing $100,000 at last year’s rate.

Don’t let the overwhelming desire to grab a home, sweet home mortgage rate sour your finances. Buy what you can afford when you’re ready, and you, too, can enjoy years of happy sump pumping.

Times are even worse in Detroit than we thought, from today’s Detnews:

U.S. Bankruptcy Judge Steven Rhodes agreed to delay a crucial hearing on a proposed settlement of $250 million in debt tied to the City of Detroit’s pension crisis.

The city requested a delay of the hearing, which was set for today and Wednesday, because it is “engaged in ongoing discussions” over the interest-rate swaps, which are held by UBS and Bank of America.

The settlement would pay the two banks between 75 and 82 cents on the dollar. In exchange, the banks would drop their claim to about $11 a month in revenue from the city’s three casinos.

Jain = Sikh version of ‘Smith’

siliconindia Real Estate
eal Estate >> News
Salaried Real Estate Investors In Mess As Loan Cost Pinches
By PTI | Monday, September 23, 2013

Mumbai: The deepening economic slowdown, rising cost of living and low wage revisions, coupled with higher interest rares, are forcing salaried professionals who had earlier invested in properties to put them up for sale, say industry experts.

People who had invested in properties some 10-15 years ago are now finding it difficult to service their home loans which have become too expensive now due to the rising interest rates and falling rental yields.

According to a survey, resale inventory has increased nearly 30 per cent over the last six months.

“Economic slowdown has hit the real estate industry. Salaried professionals who had invested in properties five-six years ago to cash in on the boom, are now looking to sell them as they are finding it difficult to cope with the high cost of living,” property portal Housing.co.in co-founder and marketing head Advitiya Sharma told PTI.

He said the resale market is currently dominated by young professionals and the high cash inflows that the sector gets, has made it a lucrative field.

“In the current economic conditions, finding a tenant with higher rents has become more challenging as people have become cautious due to uncertain economic conditions and are thus opting for properties with similar or lower rents,” DTZ India chief executive Anshul Jain said.

Primary buyers are willing to deal in the resale sector than new homes due to the risks involved in new projects, said Shashank Jain, executive director, PricewaterhouseCoopers.

“Such resale inventory is mainly concentrated in large metro cities. Buyers are looking at such opportunities as they get closer to possession prices and do not have to worry about risks involved in new projects. On the other hand, sellers benefit as they can get higher returns on their investment, than settling for low rental yields,” he said.

Jain further mentioned that this situation will, however, not attract investors.

“Such deals will attract primary buyers. But people who are looking at investing in properties at this moment, may not consider this option,” he added.
…

Rising interest rates could impact real estate recovery, survey says
By Josh Salman
Published: Thursday, September 12, 2013 at 11:32 p.m.
Last Modified: Thursday, September 12, 2013 at 11:32 p.m.

Climbing interest rates could weaken Florida’s brisk housing recovery, especially among middle-class families and first-time homebuyers, a new University of Florida survey concludes.

But real estate experts in Southwest Florida have suggested this region should escape the brunt of the impact because nearly two-thirds of all buyers pay cash for residences here.

The university’s review found the general investment outlook for all sectors of the market declined for the first time in two years in the second quarter ended June 30.

The survey of 145 real estate analysts, investors and brokers shows optimism from previous quarters has waned — and will continue to weaken if mortgage rates rise.

“There are a lot of deals being done right now. That’s why the market has really picked up,” Timothy Becker, director of UF’s Bergstrom Center for Real Estate Studies, said in a statement. “But as those interest rates start to tick up and if they continue at this pace, it’s going to get to the point where it’s difficult to make deals work at the current rates.”
…

I have to check on that long-term Treasury mutual fund I snapped up a couple of months back. If the stock market correction gathers steam, it could do quite nicely!

The American Dream - The Story of Your Enslavement

http://www.knowledgeoftoday.org/2012/01/american-dream-with-international.html

Housing “Recovery” Endgame Escalates

“Och-Ziff were perhaps a little early but used the last 10 months to unwind their real estate and exit the landlord business as the hedge-fund sponsored echo-bubble in housing rolled over into the mainstream.”

“Oaktree, which specializes in distressed investing, and Carrington had initially planned on converting their portfolio into a real estate investment trust. But investors have now decided to simply exit the trade. Their asking price for the portfolio could not be learned.”

http://www.zerohedge.com/news/2013-09-23/housing-recovery-endgame-escalates

Poh Eddie…poh, poh Eddie…

Atlanta Housing Market Slowdown on its Way
Real Estate Brokerage Redfin Explains why Atlanta’s Hyper Home-Price Growth will Taper or Even Drop by Year End
By Redfin Corporation
Published: Thursday, Sep. 12, 2013 - 6:08 am

ATLANTA, Sept. 12, 2013 — /PRNewswire/ — Redfin (www.redfin.com), the technology-powered real estate brokerage, today released its first-ever in-depth analysis on housing market conditions focusing specifically on the Atlanta metro area. After a year of uncharacteristically steep home-price growth, several factors indicate that the Atlanta housing market can no longer support double-digit growth rates, and the market will most likely see a sustained slowdown by the end of this year.

The report shows:

* Mortgage rate increases priced some buyers out of the market, a likely cause for the dip in August home sales. Rates are likely to continue to rise as the Federal Reserve’s quantitative easing program winds down. In an August survey, nearly 30% of Redfin buyers looking for a home in Atlanta said that they would “step back” or “stop” their home search if mortgage rates rose above 5%.

* Investors are leaving the market, with the number of homes purchased by firms decreasing from 28% to 23% of sales.

* Sellers are accepting lower prices, with Redfin buyers paying an average of 5% below list price compared to 1% below a year ago.

* New construction will ease inventory shortages. As of July, Atlanta had issued the third largest number of new residential building permits in the country in 2013.
…

Sounds like India is a bit ahead of the U.S. on the next round of global housing bubble collapse.

India’s economic slowdown puts the squeeze on home prices
Rebecca Bundhun
Sep 23, 2013 Updated: Sep 23, 2013 19:10:00

India’s economic slowdown, high inventories of unsold homes and changes in regulations by the central bank, are set to put downward pressure on home prices in major cities, experts say.

Yashwant Dalal, the president of the Estate Agents Association of India, says that rates are set to fall as the festive season approaches. “Prices are on a deep slope and will be tumbling fast,” he says, explaining that property prices in Mumbai have risen to unrealistically high levels.

“The residential real estate demand has been subdued in the recent past with the consumers following a wait-and-watch policy,” according to a report on Mumbai’s property market released this month by Icra, a credit rating firm in India. “With the approvals gradually flowing in, the pace of new launches is expected to increase, thereby leading to increase in supply in the market.

“Going forward, considering the increase in inventory levels, subdued demand scenario with no immediate improvement in sight, and uncertain macro environment, the developers would find it difficult to increase prices. While the announced prices appear to have remained firm in the recent past, there has been a tacit price correction brought around through innovative marketing schemes being offered by developers.”

The Reserve Bank of India (RBI) recently banned banks from issuing loans under the “80:20 scheme”, which through a three-way agreement between the lender, the developer and the homebuyer, allowed the customer to pay 20 per cent upfront, while the remainder of the loan would be issued to the developer, regardless of the stage of construction.

“Several viewpoints have been floated since the RBI announced this ban, largely speculating on a fall in real estate prices as a consequence,” said Ashutosh Limaye, the head of research and real estate intelligence service at Jones Lang LaSalle India. “It has been opined that developers’ holding power will be significantly reduced, forcing them to reduce prices. This analysis of the situation is based on the currently high levels of inventory that developers are saddled with, especially in larger cities like Mumbai, Bangalore and Delhi.

“Indeed, inventory levels in the leading seven cities in India are much higher than the comfortable industry levels seen around eight to 10 months ago, which is between 14-15 months’ worth of unsold supply,” Mr Limaye added.
…

The echo bubble has spread inland to Enid, Oklahoma!

September 23, 2013
Addressing the housing problem
By Robert Barron, Staff Writer Enid News & Eagle

ENID, Okla. — Enid employers are concerned they will be unable to fill vacant jobs, while employees are concerned they will not be able to find proper housing.

Whitney Box, city of Enid director of strategic and long-range planning, outlined concerns raised in a recent housing survey done by Enid Regional Development Alliance.

The price of housing in Enid has risen 34.5 percent since 2005, she said, and there is a critical need for lower-cost housing, or homes priced $150,000 and below. The average sale price of a new home in Enid has risen to $247,000.
…

In GovSpeak, affordable means MORE EXPENSIVE.

Monday, September 23rd, 2013 | Posted by University of Hawaii Economic Research Organization
The Unintended Consequences of Affordable Housing Policy
Honolulu (courtesy of Watchdog.org)

By Carl Bonham for UHERO - Honolulu City Council Resolution 13-168 would amend the percentages of affordable housing units that developers must provide to receive authorization for housing projects. Current city policy requires that 10% of a development’s units must be affordable for households earning no more than 80% of the HUD median income for Honolulu.

Another 10% of units in a development should be affordable for families earning between 80 and 120% of the median income, and 10% for families earning between 120 and 140% of the median income. The resolution proposes that the mix of affordable housing required of developers be reconsidered. The intent is to change the requirements in a way that leads to more affordable housing for those who need it the most.

While requiring developers to set aside a fraction of a project to be sold at below market prices may seem like a reasonable way of dealing with the problem of affordable housing, economic theory and years of experience suggest exactly the opposite. Such requirements, known as inclusionary zoning (IZ), act as a tax on developers with the proceeds used to subsidize housing for gap income households earning between 80 and 140 percent of the median income. But that tax reduces incentives for developers to produce all forms of housing, and will reduce the overall supply of housing units and increase the price of housing.

In 2010, UHERO conducted a comprehensive review of studies that analyzed IZ policies across the United States.1 Approximately 90% of the studies concluded that IZ increases the market price of housing and decreases housing units available in the market. Of the 18 studies that were able to quantify the effect of inclusionary zoning on housing market outcomes, 13 found that IZ policies both increased the market price of housing and decreased housing units available in the market, and three more studies found evidence of at least one of those effects. UHERO’s report concluded that “Inclusionary Zoning policies have failed in other jurisdictions, and are failing on Oahu.” Such policies have not delivered substantial numbers of affordable housing units to households the programs were designed to help.

The undersupply of housing services relative to household formation on Oahu is a chronic problem. While IZ policies are politically appealing, they mistakenly tax housing to encourage more of it! The effect of a tax on the production of any product, housing included, is relatively straightforward. The extra tax imposed by IZ increases the cost to developers and limits the supply of housing provided. Facing the additional cost, developers will build fewer housing units, all else equal. In the worst case scenario, if the expected loss on the affordable units does not allow developers to meet their required rate of return, then projects will never get off the ground. The primary means of insuring the project is viable is to produce more upscale, higher priced homes to offset the loss on the subsidized housing.2 So, the IZ tax not only reduces the overall supply of housing, it also changes the mix of housing by encouraging higher end and more expensive housing developments.

“Low-cost housing is usually produced through a process called filtering where existing housing units drop in cost as their relative quality falls, rather than through construction of new, lower-cost units.” (Feldman, 2002 p. 9) Over time, the existing stock of housing depreciates and declines in quality relative to new amenity rich units. For example, new housing often includes central air-conditioning and energy saving appliances, whereas twenty years ago few housing units would have such amenities.
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Another day, another drop in the Citigroup share price…

Just think how ugly their business outlook might be if it weren’t for the U.S. housing recovery now underway!

Sept. 23, 2013, 5:18 p.m. EDT
Citigroup to cut 1,000 in mortgage division
By Sital S. Patel

NEW YORK (MarketWatch) — Citigroup Inc. (C -3.20%) will cut 1,000 jobs in its mortgage business in the U.S., according to a statement by the firm on Monday. The firm is making nationwide cuts after higher interest rates have slowed down its new loans and refinancing business. “In response to decreased demand for mortgage originations and refinancing, CitiMortgage is eliminating some positions in sales, fulfillment, underwriting and mortgage default functions predominantly at Citi sites in Las Vegas, Nevada and Irving, Texas,” said the firm in a statement. The firm’s Las Vegas office will see about 760 cuts, while its Irving, Texas cite will see approximately 100 cuts. The cuts make up about eight percent of the firm’s mortgage division. Citi is the latest firm to announce cuts in its mortgage division following disappointing results. Citigroup shares fell more than 3% in trading on reports of a drop-off in trading revenues.