The People Who Get Hurt Are Holding The Bag At The End
It’s Friday desk clearing time for this blogger. “As most local Americans in Miami haven’t fully recovered from the crisis, international investors are filling the void. ‘Ninety percent of my clients do not live here at all,’ said Miami-based realtor Andy Katz. ‘I go out and shoot the video of five properties that they may like. If there is one that they really like, they get on a plane, but most of my clients do not get on a plane, they just say ‘hey I am going to purchase let me wire the money,’ he said.”
“Those looking to gain a foothold in Metro Vancouver’s already pricey housing market are facing another hurdle as key financial institutions across the country move to hike mortgage rates. Credit Counselling Society’s Scott Hannah advises homeowners in tight financial situations to adjust their spending habits so that they can meet mortgage payments. Better to let go of the car altogether than go into consumer debt and risk losing a house, which in the long-term will earn equity, he said. ‘The worst thing you can do when the rates go up quicker than the housing market cools off is now be in a position where you have to sell your home,’ Hannah said. ‘You’re going to lose money.’”
“In August, Jonathan Stilley, an Austin realtor, addressed the state licensing board about a complaint he submitted involving a possible appraiser mistake that could have over-valued a home in a north Austin neighborhood. According to real estate records reviewed by the KVUE Defenders, the home sold in April for $325,000. That’s $50,000 more than the second highest priced home in the area. Since the home sold, home prices in that neighborhood jumped. In 2012, the average home listed for about $204,000. Homes are now listing for nearly $60,000 more. ‘These kind of things can cause real estate bubbles,’ said Stilley. ‘This is exactly what happened in Phoenix and in Scottsdale and in Miami and in Los Vegas, and the people who get hurt, are the ones holding the bag at the end.’”
“Of the 39 first-time foreclosure filings this year in Flossmoor, 46 percent were conventional mortgages, 23 percent were adjustable rate mortgages and about 31 percent were Federal Housing Administration loans, said assistant village manager Patrick Finn. He said the overwhelming majority of FHA mortgages were taken out well after the housing market’s collapse. ‘This is suggestive of a pattern where individuals may have attempted to capitalize on depressed prices but still borrowed beyond their means,’ he said.”
“Gary Pleskac paid too much for his house in Chesterfield County. Pleskac bought his house for $166,500 in 2005. A Realtor told him she could list the property for $139,000. ‘I didn’t buy at the top of the market, but you could see it from there,’ he said.”
“Clayton Gits of Keller Williams Realty in Richmond said the housing market is skittish. It stalled this summer after the interest rate on a traditional mortgage loan rose a full percentage point to about 4.5 percent since May, he said. ‘The housing market is addicted to these low rates,’ Gits said, adding that rates are still low by historic standards but have been kept artificially low through the Federal Reserve buying bonds and mortgage-backed securities via the printing press. That, along with the nation’s high deficit and debt levels, does not bode well for the housing market or the economy in general, he said.”
“This shadow inventory of homes that are vacant — or soon to be — totals anywhere from 40,000 to 80,000, a conservative estimate, according to Dennis Smith, president of Home Builders Research, a Las Vegas consulting firm. Yet just a few miles away, backhoes and bulldozers are breaking ground for new homes. Buyers stream into sales offices and model homes. ‘In this town, if they’re empty now, chances are they’ve been occupied by squatters,’ Smith said. ‘And if they’re empty now, the upkeep on that house is zero.”’
“Tighter credit and falling housing prices in the eastern Chinese city of Wenzhou have led to a wave of mortgage defaults and abandoned properties in the city, where persistent property-price drops have flown in the face of a national upturn in prices. ‘The loose credit environment in the previous years caused many people in Wenzhou to be excessively leveraged. The party is over and some people are being forced to sell off their assets,’ said Johnson Hu, an analyst at CIMB Securities.”
“Home buyers at two housing projects on the city’s fringes are in dire straits. The two projects - one in New Town and the other in west Howrah - had been launched with much fanfare around the same time in 2006, both endorsed by the government. Seven years on, they remain hopelessly unfinished, having failed to meet several deadlines. Souvik Das, who lives in Dubai, said his loan application was approved on February 8, 2013, days before the bank printed the auction notice. ‘Why did the bank not warn us about the project status? We would never have bought apartments in a project mired in financial difficulties,’ said Souvik, who continues to pay Rs 55,000 as EMI fearing he will otherwise be declared a defaulter.”
“Developers of several high-end housing projects in Ho Chi Minh City are making large price cuts to spur demand as the prolonged property slump continues. The high-end segment suffers from excessive supply while there is great demand for housing among low-income earners. Official data shows that in HCMC the number of unsold apartments has crossed 12,610. Economist Tran Du Lich said the high-end segment should not be aided since the market has to resolve itself with developers lowering prices, which is ‘the best solution’ to improve liquidity.”
“Real estate agents are working with second-tier lenders to organise finance for borrowers with small deposits amid fears of the house market seizing up once new lending restrictions are imposed. Australian lenders coming into New Zealand fell outside the restrictions while non-trading banks were already here. Professionals Lower Hutt owner John Ross said his firm is so concerned about the impact of the restrictions it is working with alternative lenders to help buyers into homes.”
“‘We have gone straight to some lenders,’ he said. ‘We need to have finance so we can keep selling houses.’”
“At what point did things become so unsustainable that none of my friends in high-paying jobs in Sydney can afford the deposit on a house without their parents’ help? And even then, if they are lucky enough to have wealthy parents, they are lumbered with huge mortgages as the average house price is about $700,000 and the average unit $500,000. You see ‘entry-level’ houses advertised for $1 million.”
“Where does the bubble end? With 100-year mortgages that we pass onto our grandchildren? Somewhere along the line our parents’ generation became enamoured with debt. The very notion of debt is that it is OK to have, until it’s not. Debt is not growth. Our grandparents didn’t believe in debt and were debt free in the 1970s. Why should our parents have more right to an investment property through tax breaks than a young person to a first home? Why does our government feel compelled to protect the status quo?”
“Remember the last stage of any bubble is the fear of missing out. If we are indeed here in Sydney property now, it might not be such a good thing for our parents or the politicians, but it might just help those of us forgotten by them too.”
“Clayton Gits of Keller Williams Realty in Richmond said the housing market is skittish. It stalled this summer after the interest rate on a traditional mortgage loan rose a full percentage point to about 4.5 percent since May, he said. ‘The housing market is addicted to these low rates,’ Gits said, adding that rates are still low by historic standards but have been kept artificially low through the Federal Reserve buying bonds and mortgage-backed securities via the printing press. That, along with the nation’s high deficit and debt levels, does not bode well for the housing market or the economy in general, he said.”
A realtor that thinks. Refreshing.
Existing Sales (Resales) Matter More to the Economy than New Sales…Contrary to Popular Belief
As we await builder earnings and New Home Sales data this week (you should all have a great handle on what to expect; if not let’s do a quick call), I thought it was a good time to put out some “New-Era Housing-U” material. It’s amazing how age-old, old-school housing economics, metrics, and clich’s still reverberate loudly through most all research and thought processes today. The note and data below are on the misguided belief that builders/New Home Sales still matter more than Existing Sales to the macro economy.
http://mhanson.com/archives/1489
that would be the taxpayers———”they never complain” is what the pols say
I find it quite amazing how we went back to the gravy train of relying on asset prices to get any kind of growth in the economy. Basically all the losses from the last bubble have been passed on to the taxpayer and we start another party.
I guess goosing asset prices is a lot easier then trying to create some good jobs?
As long as we have to compete with Asian slave labor, we can forget about wages going up no matter how well-trained and well-educated our workers are.
‘As long as we have to compete with Asian slave labor’
Add this to the housing bubble as something our politicians don’t even acknowledge as a problem, much less address.
‘we went back to the gravy train of relying on asset prices to get any kind of growth in the economy’
Bernanke and his pals did this without one peep from the media or government. They just announced, ‘yep, it’s housing, we’re all in.’ It has failed.
Look, if housing bubbles actually did provide sustainable growth, it would never have collapsed in the first place.
“…Look, if housing bubbles actually did provide sustainable growth, it would never have collapsed in the first place.”
^^This^^- in spades! And the corollary that I tell people and get more than a few blank stares in return is, ‘And if the government had the tools or even knew HOW to fix it, it would have been fixed by now.’ The powers-that-be are not ‘in control’ of any of this, nor are they truly ‘confident’ that they even understand it. They are flailing and trying not to look like imbeciles so that they don’t stampede the herd. They are simply reacting with an ever-decreasing bag of tools and increasingly obscured vision of what is really happening beneath the muddied economic waters. They are not steering this boat- it is dragging them around by the balls.
Now THAT is fawkin beautiful truth!!!!!!!!!!
They are not steering this boat- it is dragging them around by the balls.
Soon to die in this position?
http://i.imgur.com/ca52yA8.jpg
http://finance.yahoo.com/news/uk-acts-reduce-housing-bubble-080449013.html
‘The Bank of England could get new advisory powers to intervene in Britain’s Help to Buy scheme, aimed at freeing up mortgage lending, if there are signs it is creating a housing bubble.’
‘Critics fear the scheme is stoking an unsustainable housing boom , and the move by U.K. finance minister George Minister is seen as an acknowledgement that Help to Buy might have to be pared back if prices rise rapidly in London and the south-east of England.’
In New Zealand, the UK, Hong Kong and Australia, they actually debate about the housing bubble in their houses of congress. In the US, they haven’t a clue.
“At what point did things become so unsustainable that none of my friends in high-paying jobs in Sydney can afford the deposit on a house without their parents’ help? And even then, if they are lucky enough to have wealthy parents, they are lumbered with huge mortgages as the average house price is about $700,000 and the average unit $500,000. You see ‘entry-level’ houses advertised for $1 million.”
________________________________/
I remember having a lunchtime conversation in 2004 or 2005 in which a colleague mentioned that married friends of his, both physicians, could not afford a house in San Francisco. I said “when two doctors can’t buy, then something’s really wrong.” No one at the table expressed any agreement with me. The response was some variation of “everybody wants to live there.”
It’s now been fifteen years since I last was in Australia, but what’s happening seems so inconsistent with the national character that I almost wonder if that character has mutated, much like the American character has mutated.
What the world is seeing in Australia and elsewhere is generations of wealth being transferred to a class of financial parasites. Where is our leadership? I’ve come to the conclusion that our leadership is not just acquiescing in this result, but actively promoting it.
‘He said the overwhelming majority of FHA mortgages were taken out well after the housing market’s collapse. ‘This is suggestive of a pattern where individuals may have attempted to capitalize on depressed prices but still borrowed beyond their means,’ he said.’
FHA just changed the rules allowing FB’s to buy a house 1 year after a short sale or foreclosure. I haven’t read one article criticizing the move.
There are so many people with destroyed credit who went through foreclosure or a short sale that the market cannot survive without their participation. You can now buy a new car with a credit score in the 400’s.
@25% interest?
25% interest doesn’t matter when the buyer has no intention of making the payments. The finance originator doesn’t care either, since he’s going to sell the note anyway.
Next up? The Fed buys junk car loans. Then Charge Card paper, then Detroit and San Bernardino Muni Bonds, then?
It’s now been fifteen years since I last was in Australia, but what’s happening seems so inconsistent with the national character that I almost wonder if that character has mutated, much like the American character has mutated.
The entire world has been brainwashed into believing that housing is supposed to be utterly unaffordable. The Banking Clan celebrates its success.
“when two doctors can’t buy, then something’s really wrong.”
Before the 2007-2008 collapse, tales were circulating of doctors who were hesitatint to buy houses while their administrative assistants were using subprime loans to snap them up.
“Where is our leadership? I’ve come to the conclusion that our leadership is not just acquiescing in this result, but actively promoting it.”
Were you unaware that they are the very ones who are benefiting from their own policies?
http://en.wikipedia.org/wiki/List_of_current_members_of_the_United_States_Congress_by_wealth
‘This is exactly what happened in Phoenix and in Scottsdale and in Miami and in Los Vegas, and the people who get
hurtbailed out, are the ones holding the bag at the end.’“He said the overwhelming majority of FHA mortgages were taken out well after the housing market’s collapse. ‘This is suggestive of a pattern where individuals may have attempted to capitalize on depressed prices but still borrowed beyond their means,’ he said.”
Nobody could have seen it coming!
This just in:
‘ The U.S. Federal Reserve has engineered a housing bubble to divert attention away from growing inequality in the country, according to controversial Societe General strategist Albert Edwards.’
‘Edwards, who is known for his bearish views, argued that the Fed’s surprise decision last week to keep its stimulus program intact would continue to inflate house prices in the U.S.. The idea behind the Fed’s bond-buying program is to free up more funds so that banks have more money to lend to home-buyers. With more buyers on the market, and interest rates near record lows, house prices should increase.’
‘There is correlation between the rising U.S. house prices and soaring inequality levels, according to Edwards, who argued the was Fed deliberately pushing up prices to offset the impact of rising inequality. He also said that quantitative easing mainly helps the wealthy, by boosting the value of investors’ stocks and bonds and enriching management figures via share buybacks.’
“While governments preside over economic policies that make the very rich even richer, national consumption needs to be boosted in some way to avoid underconsumption ending in outright deflation,” Edwards wrote.’
‘Investors should make no mistake,” he said. “The anger of the 99 percent will ultimately not be bought off by yet another central bank inspired housing bubble, engineered to pacify them and divert their attention as their real incomes fall and inequality continues to grow.’
http://finance.yahoo.com/news/fed-accused-covering-soaring-inequality-115000950.html
‘ The U.S. Federal Reserve has engineered a housing bubble to divert attention away from growing inequality in the country, according to controversial Societe General strategist Albert Edwards.’
Since wealthy families tend to own homes and low-income families tend to rent, doesn’t this engineering of higher home prices actually serve to increase the wealth gap, especially when more and more homes are investor-owned and the share of American families who own homes are shrinking?
The only people I read about who are making money on this bubble are real estate investors.
Not really…. I know a couple dozen that qualify as wealthy…. $10 million + and not one of them own a SFR. Not a single one.
I didn’t mean to suggest that people can’t do better by not buying a home; merely that the only people making money off the bubble are the fly-by-night investors who will be able to easily unwind their holdings when prices start to tank again.
tl;dr summary (at the top this time): Incomes and net worth have been stagnant and declining for a long time. Real income is at 1987 levels. Net worth excluding house has been declining since 2000 (PDF) and I suspect many years before that, due to the debt culture pushed by Wall Street and politicians. Policy makers think things are going swimmingly because they look at employment and their own experience, as they are just people too. Their policies are making their social circles very wealthy. They believe, as it is convenient to do so, that the wealth will eventually “trickle down” to the masses, despite the fact that Wall Street is not producing anything that actually improves the standard of living. It is an extractive profit-making enterprise.
Policy makers are people too. In their world, everything is great. And getting better. And has been for a long time.
Here’s the problem: They noticed that everything was going swimmingly during the tech bubble and housing bubble. High employment. However things were not going swimmingly for everyone. Here’s a chart of real (inflation-adjusted) median household income from 1984 to today.
Also - this is not net worth. I have a strong suspicion net worth, excluding the house, has been on the decline for decades. Here’s a chart from the Census bureau: http://www.census.gov/people/wealth/files/Wealth%20Highlights%202011.pdf
It has been on a slow decline since 2000, and I’ll bet a long slow decline before that. Why? Because of the increasing debt culture, pushed by both politicians and Wall Street.
Why excluding the house? Because a million dollar house plus a dollar will get you a cup of coffee. “Liberate the equity”, one of the most deviously brilliant PR slogans from Wall Street, means you put your house up as collateral for a loan that you Must. Pay. Back. Or give up the house.
Technological improvements mask a lot of financial degradation and stagnation. Improved cancer treatments, improved car safety, improved computing resources, improved building materials - these are all independent of net worth. They improve the standard of living, but they mask income and net worth declines.
Not only is real income down, but prices have risen, in some cases substantially. Housing, higher education and health care are the obvious examples, but there are others. The image of running faster and faster to stay in place has existed since Alice in Wonderland but is more fitting all the time.
One fact that tells me a lot is that seven of the top ten richest counties in the U.S. are now around Washington, D.C.
“‘In this town, if they’re empty now, chances are they’ve been occupied by squatters,’ Smith said. ‘And if they’re empty now, the upkeep on that house is zero.”
How can a home both have zero upkeep and be occupied by squatters? Don’t squatters tend to leave a trail of filth and destruction? For instance, what if the ‘empty’ home is turned into a flop house or a meth lab?
How can a home both have zero upkeep and be occupied by squatters?
I took him to mean that the houses had NOT been maintained, not that they didn’t NEED to be maintained.
In other words, the empty inventory is very likely trashed.
Perhaps it gets down to the usual confusion between cash flow (nonexistent) and balance sheet impacts (highly negative and getting worse by the day).
“In August, Jonathan Stilley, an Austin realtor, addressed the state licensing board about a complaint he submitted involving a possible appraiser mistake that could have over-valued a home in a north Austin neighborhood.
“Mistake” huh? Besides…. this seems like a realtor puff piece. There isn’ta realtor on the planet that would question inflated asking prices of resale housing.
Good propaganda though.
Boy oh boy. Looking like it may be time to sell!! Then pick up a deal with cash 3 years later!! Why can’t people remember back 4 - 5 years?!?!?!?
Sir, folks who look back never move forward? I have been in the real estate game a long time, there is going to be no deal 3 years from now. Three years from now unemployment will be under 6%, new GOP administration in place firmly, world tired of conflict and so lower military spending. Smaller Gov’t, lower health care cost created by competition, firms willing to pay better wages, because folks will pay their own way. Major cities will begin infrastructure projects a big bonanza for labor trades. Oil at all time low prices, colleges will see less enrollment prices of tuition to come down. Mortgages 6.5% won’t matter, wages and spending will increase, bank interest rates will keep up so seniors start to spend again.
I could go on farther, ask yourself this, the civil war, Great Depression, Nazi Germany and Imperial Japan, Obama elected twice and we are still standing? America is in for a huge revival in 5 years or sooner bank on it, I know because I have follow graphs and trends all my life and I do pretty will.
No country is interested in China as the leader of international monetary or anything else, so they all look to our country. Don’t ever sell us short unless a meteor hits the world or worse, then who cares about housing or buying a car?
“Developers of several high-end housing projects in Ho Chi Minh City are making large price cuts to spur demand as the prolonged property slump continues. The high-end segment suffers from excessive supply while there is great demand for housing among low-income earners.
The anti-war crowd used to cheer thusly circa 1968:
Ho, Ho, Ho Chi Minh, The NLF is gonna’ win!
I think it should read:
Ho, Ho, Ho Chi Minh, The N.A.R. is gonna’ win!