October 25, 2013

A Tool For The Ruling Class To Plunder

It’s Friday desk clearing time for this blogger. “Portland is easing into the real estate market’s slower months, and prices and sales volume are falling as a result. ‘The first half of the year was such an active market that I’m not sure we could have continued on that trajectory,’ said Jason Waugh, president of Prudential Northwest Properties. ‘You’re talking double-digit appreciation in every category across the board. Quite frankly, that’s what happened in ‘03, ‘04, and ‘05, and look at what happened.’”

“‘Phoenix has slowed down a little bit over the last two or three months,’ said Floyd Scott, owner of the Arizona Foothills franchises of Century 21. ‘The inventory has been creeping up, and that’s dampened price increases,’ Scott said, and added that multiple bids evaporated two months ago. ‘There may also be some resistance to higher prices.’”

“In Southern California, the frothy run-up of earlier this year has similarly slowed in the second half, reversing the usual seasonal trend, according to a Realtor. ‘The market has cooled off some,’ said Tom Adams, owner of Century 21 Adams and Barnes, in Glendora and Monrovia. Adams said there has also been a marked slowdown in Chinese investors’ interest in area real estate, which had been brawny through the spring. Rapid price escalation has played a part in that, he said. ‘Interest rates ticked up a little bit, prices have gone up and consumer confidence has dropped,’ Adams said. ‘Our first-time buyers are being hit by rising prices and interest rates, and the strictness of the mortgage qualification system is still squeezing a lot of people out.’”

“People who are shopping around for a condo unit to buy in Toronto have lots to choose from these days. ‘There’s a lot of inventory to choose from,’ says real estate agent Christopher Bibby. Mr. Bibby points to the example of the coveted DNA lofts at King and Shaw. In the past, agents would set an offer date and wait for multiple bids. Last spring a one-bedroom plus den was listed with an asking price of $379,000. It sold after four days for $420,000. More recently Mr. Bibby says, a unit with the identical layout was listed for $399,000. It sold after two-and-a-half weeks on the market for $10,000 below asking. ‘I feel the buyers are in the driver’s seat right now,’ Mr. Bibby said.”

“Real estate agents witnessing the strongest spring in a decade say it’s no surprise Sydney prices have surged. While property owners will be happy to see the value of their homes increasing, Australian Property Monitors senior economist Andrew Wilson warned the party may not last. ‘We are now getting a flood of listings from sellers who want to take advantage of these strong conditions,’ he said.”

“In ‘China’s Housing Bubble Born to Burst,’ a well known Chinese financial commentator and columnist states that the communist regime’s totalitarian economic system will cause an impending economic crisis in China. Niu Dao is an award-winning blogger who is a financial commentator on the state-run CCTV, a consultant to Essence Securities, and a teacher at Tsinghua University. His post on Sept. 26 warns that the coming crisis will bring disastrous consequences.”

“In a subsequent Oct. 8 article, which was deleted from the website Sina shortly after it was published, Niu explained that the Chinese people’s human rights are not protected at all under the communist totalitarian regime. In a sense, the Chinese people are not citizens, but veritable ‘residents’—they are nothing without a dwelling. That is the main reason why the Chinese Communist Party (CCP) dares to magnify the housing bubble indefinitely, and why the Bank of China dares to print money wantonly, Niu wrote. The housing bubble has become a tool for the ruling class to plunder national wealth.”

“In the over 20 years since Japan’s asset bubble burst, it has had 13 different prime ministers. For China, Niu wrote, it won’t be an issue of a change of prime minister, but rather the fall of the regime. China’s bubble is even bigger than Japan’s bubble was back then, according to Niu.”

“Societe Generale analyst Albert Edwards says that ‘exactly the same bozos who missed the last bubble deny there is one now.’ In November 2008 Queen Elizabeth II asked why ‘no-one saw it coming.’ Edwards says they did - ‘but were ignored amid the euphoria - exactly the same way they are being ignored now.’ He reflects back to five years ago when ‘we were standing in the ruins of the worst slump in living memory.’ He says we are now back to that point.”

“Now ’signs of bubbles abound, the most visible one being house prices.’ Edwards thinks we ‘have truly slipped into another space and time dimension’ where he sees headlines concerned with a German property price boom. London house prices have just risen by 10 per cent in just one month. Edwards says we’re ‘in the midst of the mother of all housing bubbles.’”

“Since March first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen have seen annual price rises of over 15 per cent. Societe Generale’s Wei Yao has called these rapid house price increases ‘hopelessly strong’ with policy makers locked in what Edwards calls ‘the same old failed credit stimulative policies as the west to keep growth going.’”

“In November of 2010, Ben Bernanke shocked the world with an unprecedented editorial in the Washington Post. In it, he presented the ‘virtuous’ case for an extended period of quantitative easing. For the first time in history, a Fed Chairman was openly admitting to pursuing a policy to pump up the stock market. By itself this would be shocking, but Bernanke was not stopping there. Bernanke was essentially advocating the creation of another bubble in housing through lower mortgage rates.”

“This, of course, has disproportionately helped the wealthy, who own the vast majority of financial assets. Bizarro Robin Hood is causing the wealth gap to widen to extremes, leaving many disenchanted by stock market gains. As for the real economy, growth remains anemic and the average household (real median income) is still faring worse today than at the supposed end of the last recession. As Stan Druckenmiller said on CNBC in September after the Fed’s no taper decision, ‘This is fantastic for every rich person. This is the biggest redistribution of wealth from the middle class and the poor to the rich ever.’”

“President Obama has now officially announced his intention to nominate Janet Yellen, current vice chair of the Federal Reserve, to succeed current chair Ben Bernanke. Yellen has done little to make anyone believe she is ready to challenge that institution in any serious way. When asked about her time at the San Francisco Fed, a district which covers not just California but also Nevada and Arizona, she responded that regulatory oversight during the housing boom was ‘careful and appropriate.’ Perhaps that explains why she missed the greatest housing boom in US history, despite sitting right on top of it.”

“The Beige book reports from Yellen during this time also repeatedly reflect a regulator who perceived mortgage credit quality as strong. If some of us could spot an overheated housing market from Washington, you really have to wonder how anyone could miss it sitting in San Francisco. The answer is that she wasn’t even looking for it.”

“Just as we now repeatedly hear concerns about a weak US labour market, which is true, we heard the same concerns after the Dot com bubble. But the Fed reaction was to keep the pedal-to-the-metal with loose monetary policy for far too long, and the result was a massive housing bubble. Since that bubble was creating jobs, it was largely viewed from the Fed as a good thing. All evidence suggests Yellen shared this benign perspective on the housing bubble, at times echoing Bernanke’s claim that everything was well contained.”

“If Barack Obama’s objective in nominating Yellen is to signal continuity at the Fed, he’s achieved it. We will have continuity in a belief that asset bubble-driven consumption creates jobs, despite considerable evidence to the contrary. We will have continuity in a Fed that generates massive imbalances in our financial system and then injects endless liquidity into that system to cover up its mistakes. We will also have continuity in a Fed that does not hesitate to rescue Wall Street. But the Federal Reserve is an institution desperately in need of change. Yellen isn’t it.”

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Comment by Taxpayers
2013-10-25 05:14:34

as the 10yr/mort rate falls ?
did the market slow down in winter 04?

there’s no wage growth folks

Comment by inchbyinch
2013-10-25 05:44:12

“there’s no wage growth folks”
Add salary deflation and few jobs to the toxic mix. We’re in trouble.

The art of networking is 80% of the hope finding a new position.

Comment by Combotechie
2013-10-25 05:53:06

“We’re in trouble.”

And yet many of my co-workers who have lucrative, cushy jobs can hardly wait until they turn 62 so they can retire.

Sixty-two, or in some cases sooner than sixty-two.

Comment by Salinasron
2013-10-25 06:08:02

Cushy jobs don’t necessarily translate to a cushy retirement!

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Comment by inchbyinch
2013-10-25 06:10:00

3/4 of my professional networking group are Engineers and IT folks. All thought they’d slide into retirement. It didn’t happen. One guy worked on the Univac I. He’s 87 and still consulting. Cool guy.

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Comment by Combotechie
2013-10-25 06:39:55

One of my co-workers just turned 88. He draws top wages, a full pension, and full Social Security.

I can do two out of three (and plan of doing so): I can draw the wages and the SS but I can’t draw the pension until I retire. He gets to draw the pension because he started drawing before the rules were changed so he’s been grandfathered in.

Comment by inchbyinch
2013-10-25 07:30:28

Totally cool that your co-worker likes to work at 88. I think it’s in an Engineer’s DNA.

Comment by In Colorado
2013-10-25 08:55:39

One of my co-workers just turned 88. He draws top wages, a full pension, and full Social Security.

My FIL is 89. He was a prominent mining engineer who climbed up to the level of VP in Thyssen’s US mining division. He now lives in a “memory care” facility as we wait for Alzheimer’s to claim him. When we visit him, more often than not he doesn’t recognize me, even though he’s known me for over 30 years.

Fortunately for him, he has pension income up the wazoo (about 15k per month) so paying for the home for him and his wife (she has dementia) is not an issue.

Comment by Carl Morris
2013-10-25 09:31:32

The interesting thing about working in tech is that people seem to fall into two camps. The ones who don’t really do or know much of anything unique who get laid off in their 50s and scrape by until they can get SS and Medicare if they don’t make it into management. And the others who have unique knowledge.

You would think the second category would also become obsolete, but because tech moves so fast, the youngsters never learn the old stuff. Which means the old guys with unique knowledge and skills can work the rest of their life if they want if “their” stuff continues to be used.

I never understood how big the difference was in the two categories until recently. My old jobs were always in the first category. This job has shown me the second category exists. I got an MBA thinking management was the only way, but I’m starting to question that now.

Comment by Taxpayers
2013-10-25 06:04:06

BAHHHHHH linkedin- I’d be pissed to see employees hanging out there

Comment by inchbyinch
2013-10-25 06:40:39

My networking group swears by social media, yet they have all been unemployed a l o n g time. Social media isn’t my flavor.

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Comment by Housing Analyst
2013-10-25 06:55:32

There’s always need for coffee fetchers.

Comment by In Colorado
2013-10-25 09:13:04

I think that Linked In is a waste of time. It’s never helped me find a job and I have almost 300 “connections”.

Comment by Carl Morris
2013-10-25 09:32:53

My networking group swears by social media, yet they have all been unemployed a l o n g time.

Sounds like you need some different contacts.

Comment by Carl Morris
2013-10-25 09:35:15

I think that Linked In is a waste of time. It’s never helped me find a job and I have almost 300 “connections”.

It hasn’t gotten me a job yet, but it generates a surprising amount of recruiter contact, which admittedly is mostly worthless. What I do like is that it helps me keep up with guys I used to work with that aren’t good enough friends to stay in constant contact but are still handy to know. I consider that useful. Without it I might never know what happened to them and if they are still working in my field.

Comment by RioAmericanInBrasil
2013-10-25 06:19:20

We’re in trouble.

Brasil pode estar em apuros também.

Sooner or Later, Brazil’s Housing Bubble Will Burst
Posted on September 11, 2013 · 8 Comments

By Samy Dana (via Folha/Uol).

It is not the first time that I warn you about the risk of a property bubble burst in Brazil.

Sooner or later, the market will become aware of the overwhelming and irrational rise in property prices, and like a domino effect, prices will quickly correct, as always happens during bubble bursts. Remember that these same prices took several years to climb.

This week the issue came to the fore again when the economist Robert Shiller, professor at Yale University, warned Brazilians about the “dot-com bubble” and the housing bubble in the United States, and placed Brazil in his speech of concern.

According to Shiller, “property prices have doubled in recent years, and now people are taking loans to buy real estate. If prices collapse, this will lead to the same problem we had in the United States.”

All this excessive speculation can be summarized in four points :

Comment by Taxpayers
2013-10-25 06:47:25

no worries they have free hc

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Comment by In Colorado
2013-10-25 08:39:32

Brasil pode estar em apuros também.

Sometimes Portuguese and Spanish are very similar:

Brasil puede estar en apuros también.

What is interesting is that without ultra low interest rates or zero money down/fog a mirror schemes you can still have a bubble.

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Comment by RioAmericanInBrasil
2013-10-25 08:47:54

Sometimes Portuguese and Spanish are very similar:

In writing sometimes yes. And that was very similar. In pronunciation, not so much at all.

They they talk funny down here. lol

Spanish would have been easier for me. But such is life.

Comment by In Colorado
2013-10-25 09:17:24

In pronunciation, not so much at all.

I know, it has a “buzzy” sound to a Spanish speaking ear. I once heard it described as sounding like someone taking in Spanish while drunk.

Comment by RioAmericanInBrasil
2013-10-25 19:00:22

I once heard it described as sounding like someone taking in Spanish while drunk

And with cotton ball in one’s mouth admiring French..


But it sounds beautiful being sung…. One of the best latin languages in music, imo.

Comment by Whac-A-Bubble™
2013-10-25 07:34:27

Don’t know about your example, but I can say that the two-decades long Japanese real estate price collapse played out against the backdrop of very low interest rates.

At some point in the erosion of fundamentals, low rates are no longer sufficient to prop up housing prices.

Comment by Taxpayers
2013-10-25 06:48:28

is your county getting ready for a RE TAX increase/ grab?
their logic is pricesare up so they deserve more !

Comment by Housing Analyst
2013-10-25 06:56:36

For them, it’s all about the free sh*t. For us it’s all about paying for it.

The Free Sh*t Army is on the march.

Comment by In Colorado
2013-10-25 08:33:11

is your county getting ready for a RE TAX increase/ grab?

They can’t, because we have TABOR.

Comment by scdave
2013-10-26 07:56:20

They can’t because we have Prop.#13

Comment by Whac-A-Bubble™
2013-10-25 07:21:25

Oct. 24, 2013, 7:52 a.m. EDT
5 cities where homes are getting less affordable
These markets may soon be out of reach for many buyers
By AnnaMaria Andriotis

Home buyers can’t catch a break. Not only is it becoming harder to get a mortgage, but real estate prices have risen so much this year that buyers—much like during the housing bubble—can no longer afford the home in the first place.

Median-income households can afford a median-priced home in just eight of the 25 largest metropolitan areas in the U.S., according to data released today by Interest.com, which tracks consumer credit. That’s down from 14 of 25 a year ago. On a larger scale, the study found that it is harder to afford a home in all 25 metro areas. The findings support those of a similar study released earlier this month by Trulia, an online real estate marketplace, which found that home prices were increasingly falling out of reach for many middle-class buyers. In 14 of the top 100 metro areas, more than half of for-sale listings in early October were too expensive for these buyers.

The study underscores the impact the recent spike in home sales is having on regular home buyers. For much of this year, buyers have been re-entering the housing market, eager to purchase a home before mortgage rates rise further. But for-sale listings have been limited as investors who have been snatching up homes are turning them into rentals (rather than selling them to would-be owners), and by homeowners who are holding off listing their properties in the hope that prices rise even further in the next few months.

In addition, buyer frenzy to get in before mortgage rates spike has backfired on, well, the buyers. Many “have been so desperate to buy something that they are bidding each other out,” says Eric Tan, a Los Angeles-based listing agent with Redfin, a national brokerage. Tan says buyers he has worked with have gone to extremes telling him they will match any offers he gets—effectively bidding against themselves—and waiving clauses in contracts that are supposed to protect them.

Still, the hype may not last. Fed up with rising prices, buyers have started retreating in recent weeks, agents say. And sellers in some markets have gotten the timing wrong and are listing now in anticipation that buyer demand has not abated.

For buyers, the main issue is that the math just doesn’t add up. Home price gains are outpacing the rate at which income is rising. While that was often the case during the housing bubble, it was a lot easier to get a mortgage with little or no cash down. In addition, as mortgage rates rise, the buyers can no longer get approved for as large loans.

Here are the metro areas where affordability has declined the most over the past year.

Comment by Whac-A-Bubble™
2013-10-25 07:28:21

“If some of us could spot an overheated housing market from Washington, you really have to wonder how anyone could miss it sitting in San Francisco. The answer is that she wasn’t even looking for it.”

If her Fed chair appointment goes through, she’ll have another chance:

Where Even the Middle Class Can’t Afford to Live Any More
Emily Badger
Oct 10, 2013

High-cost cities tend to have higher median incomes, which leads to the simple heuristic that, sure, it’s costlier to live in San Francisco than in Akron, but the people who pay bills there make enough money that they can afford it.

In reality, yes, the median household income in metropolitan San Francisco is higher than it is in Akron (by about $30,000). But that smaller income will buy you much, much more in Ohio. To be more specific, if you make the median income in Akron – a good proxy for a spot in the local middle class – 86 percent of the homes on the market there this month are likely within your budget.

If you’re middle-class in San Francisco, on the other hand, that figure is just 14 percent. Your money will buy you no more than 1,000 square feet on average. That property likely isn’t located where you’d like to live. And the options available to you on the market are even fewer than they were just a year ago, according to data crunched by Trulia. To frame this another way, the median income in metro San Francisco is about 60 percent higher than it is in Akron. But the median for-sale housing price per square foot today is about 700 percent higher.

The gulf between those two numbers means that the most expensive U.S. cities aren’t just unaffordable for the average American middle-class family; they’re unaffordable to the relatively well-off middle class by local standards, too.

To use an even more extreme example, the median income in metropolitan New York is about $56,000 (including families in the surrounding suburbs). If someone making that much money wanted to buy a home on the market this October in Manhattan, the most expensive home they could afford would cost about $274,000. A mere 2.5 percent of for-sale housing that’s available in Manhattan now costs that little. Oh – and those properties are averaging 500 square feet.

Trulia ran these numbers based on the assumption that a family shouldn’t spend more than 31 percent of its pre-tax income on housing (and that it must pay local property taxes and insurance). This data also assumes that a family makes a 20 percent down payment on a home – a daunting feat even on a six-figure income in somewhere like Los Angeles or New York.

By those calculations, these 10 metros are the least affordable, using Census data on median incomes (note that the data refers to metros, not cities):


In San Francisco, a household making $78,840 a year can top out buying a home worth about $409,000. 24 percent of the homes for sale in the area were below that threshold last October. Now it’s just 14 percent. In fact, in every one of those 10 metros, a smaller share of homes are considered affordable now to the middle class than last year.

Comment by United States of Crooked Politicians and Bankers
2013-10-25 15:30:37

“Where Even the Middle Class Can’t Afford to Live Any More”

This is what happens when the majority of the wealth is funneled to the top. As many of us have been saying since 2005 or earlier, to the victor go the spoils. The very people who caused the financial meltdown are controlling the lion’s share of property now, and higher and higher prices benefit nobody but them. It cannot work long term, but in the interim it is absolutely hammering the little people while the elites watch their fantastic wealth grow at a pace never before seen.

Comment by Whac-A-Bubble™
2013-10-25 07:30:37

The Grim Math of the Working-Class Housing Crisis
Sarah Goodyear
Oct 22, 2013

Earlier this month, the former front man for Talking Heads, David Byrne, wrote an essay about how New York was losing its artistic heart and creative edge because of the rising cost of living. “Middle-class people can barely afford to live here anymore, so forget about emerging artists, musicians, actors, dancers, writers, journalists and small business people,” wrote Byrne. “Bit by bit, the resources that keep the city vibrant are being eliminated.”

The plight of artsy types in cities gets a lot of attention these days, perhaps because it is personally relevant to lots of people in the media. And yes, working artists are vital to any city, especially a place such as New York that bills itself as a cultural capital. But forget, for the moment, about the artists. The deeper and more systematic erosion of urban life is happening among a less glamorous set of people – the ones who fill the tens of thousands of jobs that undergird every single U.S. city.

These are the home health aides, the fast-food workers, the janitors, the teachers’ aides, the delivery people, the manicurists, and countless others who are making more than minimum wage but less than enough to meet the soaring cost of living – not just in New York, but in cities around the country. These people, increasingly, are falling off the shaky ladder of economic viability, and many are being pushed into homelessness.

“There’s fewer and fewer places for working-class people to live.”

According to statistics from the National Alliance to End Homelessness, overall homelessness in the United States declined slightly from 2011 to 2012, falling by 0.4 percent. But the number of people in homeless families actually rose over the same period, by 1.4 percent. The NAEH report states what may seem like the obvious to account for the problem: “Homelessness is essentially caused by the inability of households to pay for housing.”

Comment by 2banana
2013-10-25 09:18:44

Nothing can stop the Permanent Democrat Supermajority

Funny how the big government, high tax, public union goon controlled cities/states are the least affordable for the middle class…

Must be just a coincidence.

Comment by Carl Morris
2013-10-25 09:38:09

All those houses, all those people. But we can’t let those people live in those houses because the banks would take a loss and that simply isn’t allowed.

Comment by Whac-A-Bubble™
2013-10-25 07:32:47

Who would work as Fed chair for those who object to Yellen’s appointment? (Or is “End the Fed” the only option, in these folks’ minds?)

Comment by Ben Jones
2013-10-25 08:00:01

How about central bankers who believe housing bubbles should be stopped, not encouraged? They have this type in New Zealand, Singapore, Hong Kong and Germany.

“I’m beginning to see signs, not just in my district, but across the country, that we are entering, once again, a housing bubble,” Richard Fisher, chair of the Dallas Federal Reserve said after a speech to the Economic Club of New York last week. He pointed to the $40 billion worth of mortgage-backed securities that the U.S. Fed is buying each month, a policy designed to sop up many of the toxic subprime lending still weighing down the balance sheets of the nation’s banks, but that Fisher warned is helping to fuel low mortgage rates.’

‘Meanwhile, 80 per cent of the nearly 525,000 homes in foreclosure in the U.S. still haven’t been listed for sale, sometimes years after they were repossessed by the bank, according to a new report from foreclosure-listing firm RealtyTrac.’

Comment by Whac-A-Bubble™
2013-10-25 09:51:36

Central bankers who see problems with unlimited punch bowl spiking appear to be very rare birds. Whether today’s easy money policy saves the world from GD2 or seals its inevitability is beyond my predictive skills.

Central Banks Drop Tightening Talk as Easy Money Goes On
By Simon Kennedy & Jeff Kearns - Oct 24, 2013 11:05 AM PT
The era of easy money is shaping up to keep going into 2014.

The Bank of Canada’s dropping of language about the need for future interest-rate increases and today’s decisions by central banks in Norway, Sweden and the Philippines to leave their rates on hold unite them with counterparts in reinforcing rather than retracting loose monetary policy. The Federal Reserve delayed a pullback in asset purchases, while emerging markets from Hungary to Chile (CHOVCHOV) cut borrowing costs in the past two months.

We are at the cusp of another round of global monetary easing,” said Joachim Fels, co-chief global economist at Morgan Stanley in London.

Policy makers are reacting to another cooling of global growth, led this time by weakening in developing nations while inflation and job growth remain stagnant in much of the industrial world. The risk is that continued stimulus will inflate asset bubbles central bankers will have to deal with later. Already, talk of unsustainable home-price increases is spreading from Germany to New Zealand, while the MSCI World Index of developed-world stock markets is near its highest level since 2007.

‘Go Wild’

We are undoubtedly seeing these central bankers go wild,” said Richard Gilhooly, an interest-rate strategist at TD Securities Inc. in New York. They “are just pumping liquidity hand over fist and promising to keep rates down. It’s not normal.

Comment by scdave
2013-10-26 08:20:40

Its apparent it was all orchestrated after September 2008…

Flood the market with liquidity to lower rates to basically zero..

Open the window to banks & institutions @ 1% which allows them to buy bonds at 2% to improve cash flow

Suspend accounting rules that allow banks to hide and not book non-preforming real estate loans from everyone..

Low rates move investors back into the stock market thereby improving rates of return and help heal damaged 401k’s

Fed enters the arena with QE

Ultra low rates along with crashing real estate prices bring out buyers levered & cash

Prices rise allowing banks to leak out non-preforming real estate loans in a way that does not crash their balance sheet

And here we are…

Comment by Ben Jones
2013-10-25 08:18:01

The headline at Yahoo Finance right now:

‘How the Job Market is Killing Housing’

‘It’s all about the housing market. Jed Kolko, chief economist for Trulia.com, tells The Daily Ticker that this jobs report is terrible for housing. “The economy helps the housing market and the housing market should help the jobs market but right now neither one of those is working as it should,” he says.’

‘Even though prices have rebounded and sales are back to normal levels, construction is still about 40% below normal levels, construction has really been the laggard in this economy,” says Kolko. While this lag in new home construction is partially because of the abundance of unoccupied homes, it also goes back to the jobs problem.’

“A lot of young people are still living in their parents homes. They haven’t become first-time homebuyers, they aren’t even renting. That means we haven’t formed many new households and without a lot of new households there is less demand for new construction,” says Kolko.”

‘Employment for 25-to 34-year-olds, the prime age group for housing demand, is just 75%.’

Comment by Taxpayers
2013-10-25 08:26:10

27 is the new 18 (age)

I’d go for raising the voting age

Comment by Carl Morris
2013-10-25 09:39:52

And the draft age?

Comment by Whac-A-Bubble™
2013-10-25 09:52:37

Or is it the other way around: How housing market stimulus is killing the jobs market?

Comment by Ben Jones
2013-10-25 10:37:15

There’s two things about this; if I am paying more for a house, I have less to spend on other stuff. And using resources and energy to push house prices up, is resources and energy not going towards sustainable growth.

The Greenspan/Bernanke/Yellen plan is to encourage debt based consumption and asset inflation. Weighing down households with additional debt may eventually look to have been a bad idea.

Comment by United States of Crooked Politicians and Bankers
2013-10-25 15:34:12

“There’s two things about this; if I am paying more for a house, I have less to spend on other stuff.”

This is the point I have been trying to hammer home for years. High priced housing kills our economy. Yet, the talking heads blather on about how higher prices help the economy due to the wealth effect. TRIPE!

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Comment by Housing Analyst
2013-10-25 11:57:39

While this lag in new home construction is partially because of the abundance of unoccupied homes, it also goes back to the jobs problem.’

Isn’t it disgusting that the liar who made this statement gets away with it?

There wouldn’t be;

a)unoccupied houses

b) Lag in construction

c) a “jobs problem”

…..if housing prices weren’t so massively inflated.

Comment by snake charmer
2013-10-25 08:21:20

It seems like England, Australia, Canada, etc. are in a melt-up phase. As is China. And I see Greenspan has a new book out, asserting that 2008 was almost universally unforeseen. No doubt what’s coming will, officially, be almost universally unforeseen too.

This feels like an economics version of 1917, when no one in charge could envision anything different than more of the same.

Comment by In Colorado
2013-10-25 08:27:38

That is the main reason why the Chinese Communist Party (CCP) dares to magnify the housing bubble indefinitely, and why the Bank of China dares to print money wantonly, Niu wrote. The housing bubble has become a tool for the ruling class to plunder national wealth

Comment by In Colorado
2013-10-25 08:28:38

Oops! Hit the wrong button!

Anywho, I meant to say that even the ChiComs get it.

Comment by Ben Jones
2013-10-25 08:42:25

‘China’s property prices have continued to boom, but the phenomenon of the so-called ghost cities, a result of high vacancy rates, has been worsening. In the past, the ghost cities were mainly third-tier or fourth-tier cities, but recently first-tier cities have also seen the rise of this phenomenon, with Shenzhen’s neighboring Daya Bay area going into an apparent state of hibernation, ringing alarm bells in relation to the abnormal development of the mainland property market, our sister paper Want Daily reports.’

‘Although Guiyang’s property market didn’t see any sharp fall in prices, part of the city runs the risk of becoming a ghost town, with lots of the new buildings towering at 40 stories but equipped with only three elevators that take at least half an hour during peak office hours.’

‘In the past, Fengdu was the only celebrated “ghost city” in China. Now, as China accelerates its urbanization efforts, 12 new ghost cities have been created with few inhabitants, including four in Inner Mongolia and even two in the prosperous Jiangsu province, as Want Daily reported in mid-July.’

‘According to the Terminology Committee of National Science and Technology, a ghost city is a geographical term referring to an abandoned city with depleted resources. Now, however, the definition has been expanded to describe any city with a high vacancy rate, few inhabitants or that is dark at night.’

Comment by Ben Jones
2013-10-25 08:38:30

‘Speaking at an FT event yesterday Mark Carney, the new Governor of the Bank of England (BoE), signalled a break with the policies of his predecessor by announcing a sweeping overhaul of the way the central bank deals with lenders in financial difficulties. Carney said the BoE had a duty to ‘keep up’ with events and provide a backstop to enable greater dynamism in financial services. He said five words described the BoE’s willingness to provide liquidity if banks need it: ‘We are open for business,’ the Financial Times writes.’

Comment by Bluestar
2013-10-25 09:16:52

So he speaks the words that everybody already knew. It’s an important aspect of behavioral economics that mesh well with what we know about psychology. I posted a story yesterday about the paradox of the NSA spying and a recent Gallup poll that showed Americans were LESS concerned (vs. 2000) about the government spying on their emails or even their personal computers. Note the poll question framed to target ’suspects’ AKA enemies of the state so that deflects the natural feeling of distrust we have for big government in the name of security.
Back to the Governor of the Bank of England, transparency has become a new feature of our own FED too. Yellen has been pushing for this for years and there is no comparison between the FED statements 30 years ago and today. Ever try to find the minutes of FED during the Volker or early Greenspan years, or even quotes from the meetings?

Here’s a flashback:

“Last year, Bernanke became the first chairman to hold regular news conferences. He has also sat for televised interviews and held town-hall meetings.

Collectively, Bernanke’s efforts have been intended to make the Fed’s decision-making process less secretive, to cast himself as open and accessible and to counter his critics.

Not until Greenspan’s tenure did the Fed even announce any changes in its benchmark rate. Until then, financial firms had to study the Fed’s purchases of Treasurys in the bond market to try to determine whether it was raising or lowering rates.

Previous chairmen tended to think the Fed operated best when it could keep financial markets guessing.”


Jack Smith, AKA Bluestar

Comment by Whac-A-Bubble™
2013-10-25 09:43:19

‘We are open for business,’

Translation: Our Megabanks are too big to fail.

Comment by snake charmer
2013-10-25 11:04:37

Is there any industry in England other than the financial services industry? I guess the North Sea oil fields count, but those are depleting rapidly. Trying to have a comparative advantage in financial permissiveness is not a long-term strategy.

Comment by In Colorado
2013-10-25 12:39:15

BMW makes MINIs (Coopers, Clubmans, etc.) near Oxford. We used to own one. Fun to drive, but a real piece of junk that keeps breaking and is expensive to fix.

Comment by Carl Morris
2013-10-25 13:29:46

I’ve heard that from other owners, too. All the failure points of an expensive BMW in a package that you’re likely to put miles on a lot faster.

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Comment by Doom
2013-10-25 16:00:09

Well in my younger days I owned a Miata, a kick to drive but it also turned to junk after 3 years and wasn’t ‘t exactly cheap to fix? Ford parts you know, that says it all.

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Comment by Ben Jones
2013-10-25 08:47:59

‘Our addictions to debt and cheap money have finally caused our major international creditors to call for an end to dollar hegemony and to push for a “de-Americanized” world.’

‘China, the largest U.S. creditor with $1.28 trillion in Treasury bonds, recently put out a commentary through the state-run Xinhua news agency stating that, “Such alarming days when the destinies of others are in the hands of a hypocritical nation have to be terminated.”

‘In addition, Japan (our second largest creditor holding $1.14 trillion of U.S. debt) put out a statement through its Finance Minister last week saying, “The U.S. must avoid a situation where it cannot pay, and its triple-A ranking plunges all of a sudden.”

‘We arrived at this condition because our central bank has compelled the nation to rely on asset bubbles for growth and prevented the deleveraging of the economy by forcing down interest rates far below a market-based level.’

‘For example, instead of allowing debt levels to shrink, the Fed’s virtually free money has now caused consumer credit to surge past the $3 trillion mark by the second quarter 2013; that is up 22 percent in the past three years. And of course, the Federal government massively stepped up its borrowing beginning in 2008, piling on over $6.8 trillion in additional publicly traded debt since the start of the Great Recession.’

‘While most are now celebrating the end of government gridlock (however ephemeral it may be), the truth is few understand the consequences of our addictions.’

‘The real problems of government largess, money printing, artificial interest rates, asset bubbles and debt have not been addressed at all. Rather, Washington has merely agreed to perpetually extend its lines of credit and to have the central bank purchase most of that new debt.’

Comment by In Colorado
2013-10-25 09:22:00

‘Our addictions to debt and cheap money have finally caused our major international creditors to call for an end to dollar hegemony and to push for a “de-Americanized” world.’

Who will buy their crap then when are forced to make our own stuff again (which would suit me just fine)? We are still the consumer of last resort.

Comment by polly
2013-10-25 10:08:22

Plastic lite brite pegs used to be made in the United States. Plastic lite brite pegs. Manufactured in the United States. I have the package sitting on a chair right now.

Comment by 2banana
2013-10-25 09:25:03

The US dollar is the worst currency for a reserve currency but it beats any alternative.

China will never use a Japanese currency for a reserve currency. Never.
Japan will never use a Chinese currency for a reserve currency. Never.
How many times in the last 100 years has the Russian currency defaulted?
How many times in the last 100 years has the German currency defaulted?

Maybe they can use the Swiss Franc or English Pound. Except they have no military to back up anything.

Bitcoin? Gold? Nothing is very practical.

Comment by Whac-A-Bubble™
2013-10-25 09:42:19

Great post — thx!

Comment by Bluestar
2013-10-25 10:06:09

Maybe it’s not the absolute size of the debt that worries them. Other than a few Scandinavian countries 90% of the rest of the world has so much debt it couldn’t mathematically pay it off without massively devaluing their currencies. It’s the instability of our congress that freaks them out, and for good reason too.

Just heard Sen. Rand Paul has threatened to put Janet Yellen’s Fed nomination on hold in exchange for an audit of the Federal Reserve. I assume that before this thing gets rolling there will be a private meeting between certain Republican Senators and Bernanke (with a string of Wall St. titans) who will set them straight on why they don’t REALLY want to know what’s buried under the vaults.

Jack Smith, AKA Bluestar

Comment by Ben Jones
2013-10-25 11:32:17

‘In the above video, Cumberland Advisors’ David Kotok expresses his outrage over Paul’s move.’

“Senator Rand Paul has just kicked every man and woman, investor, 401k-owner, IRA-owner, businessperson, borrower in the gut,” the chief investment officer tells The Daily Ticker. “The Federal Reserve needs consistent policy – get off their back, Senator Paul! You are doing a disservice to the United States of America.”

Squeal David. Squeal like a pig!


‘In the 100 years prior to the establishment of the Federal Reserve, there were 18 distinct recessions or depressions:

1815, 1822, 1825, 1828, 1833, 1836, 1839, 1845, 1847, 1853, 1860, 1865, 1869, 1873, 1887, 1890, 1899, and 1902.

Since the establishment of the Federal Reserve, there have been 18 recessions or depressions:

1918, 1920, 1923, 1926, 1929, 1937, 1945, 1949, 1953, 1958, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2008.

The Federal Reserve was supposed to have been established to smooth out the economic cycle, thus preventing booms, busts, recessions, and depressions, and to preserve the purchasing power of the currency. Since 1913, the dollar has lost something like 95-97% of its value.

Given all that info, what does the Fed actually do for us? Print money, give it to bankers who spend it before prices go up, and let the common man pay for it all. Let’s have an audit!’

‘Kotok? Just another Wall St windbag!! All they want is to keep the printing machine running at full blast.’

‘The Feds money printing is the only way people like David Kotok could have ever became “investment advisor’s”. He knows that, and it is why he fears taking away the Feds punch bowl. It will expose that his trading gainsw ere all caused by the Fed. He doesn’t know how to trade a free market.’

Comment by Housing Analyst
2013-10-25 12:37:50

Kotok is forever flapping his jaws and propagandizing on Bloomerg.

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Comment by Bluestar
2013-10-25 12:58:30

Boy, living in the early 1800s was brutal. They seem to have had a economic disruption every 3-4 years. You can guess things got pretty wild leading up to the civil war when there were individual states issuing their own currencies. By contrast the recessions from 1953, 1958, 1960 and 1969 were when the middle class made their greatest gains in wages and standard of living. After Vietnam/Watergate most Americans permanently lost faith in their national government.

Jack Smith, AKA Bluestar

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Comment by MightyMike
2013-10-25 17:09:31

The Federal Reserve was supposed to have been established to smooth out the economic cycle, thus preventing booms, busts, recessions, and depressions, and to preserve the purchasing power of the currency. Since 1913, the dollar has lost something like 95-97% of its value.

There are a few problems with this statement. You probably coudn’t find a reputable economist, whether liberal or conservative, who thinks that recessions can be prevented altogether. Monetary and fiscal policy can reduce the number and severity of recessions, but recessions will always be a part of life.

The statement is also probably anachronistic. The idea of smoothing out the business cycle came out of Keynes’ work during the Great Depression. That sort of thinking was probably not widespread in 1913.

Most importantly, it’s just not true. This is from Wikipedia:

The primary motivation for creating the Federal Reserve System was to address banking panics. Other purposes are stated in the Federal Reserve Act, such as “to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes”.


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Comment by Housing Analyst
2013-10-25 17:47:49


Comment by Ben Jones
2013-10-25 10:56:20

‘St. Petersburg, Florida– Thanks to new flood insurance legislation, the watch word in real estate is “panic.” Panic if you’re a real estate investor, agent, buyer or seller- thanks to skyrocketing premiums. We’ve seen the Pinellas County meetings in the past few weeks packed with frightened residents.’

‘It’s a frightening time for anyone looking to buy or sell a home, and according to foreclosure expert Jim McConnell. “We do see a lot of people who’ve purchased homes in the past couple of years that may restart a new short sale or foreclosure crisis,” said McConnell. And as FEMA re-draws the flood zones, few people will be able to afford the higher premiums that come with them, and that is already having crippling effects.’

“The phones have basically stopped ringing on anything that has to do with waterfront or anything that’s even perceived as waterfront,” McConnell said.’

Comment by Ben Jones
2013-10-25 11:42:33

‘Mayor Michael Bloomberg on Friday confirmed what New Yorkers weather beaten by Sandy have known for a year: the cost of owning a home in a flood zone is going up. But even the mayor has not addressed the full extent of the costs and its implications for the city’s coastal redevelopment.’

‘Mr. Bloomberg announced the results of a city-commissioned study from the Rand Corp. showing that the annual cost for flood insurance will go up to between $5,000 and $10,000 from $430.’

‘Not included in the mayor’s report, however, is the fact that companies offering homeowners insurance, among them State Farm and AllState, are quietly withdrawing from flood prone areas.’

‘Staten Island resident Staci Memmesheimer was paying $462 on a policy for her home a stone’s throw from the beach, and is bracing for annual costs that have already shot up to as much as $9,500 annually for some of her neighbors, who she said have followed all the rules for living in the coastal area.’

“That’s absurd,” Ms. Memmesheimer said. “It’s punishing hard-working people who did the right thing, and it’s just not fair.”

‘Some of Ms. Memmesheimer’s neighbors have already stopped paying their mortgages in lieu of the insurance premiums, she said.’

On this:

‘was paying $462 on a policy for her home a stone’s throw from the beach’

I pay more than this for commercial insurance on the 18 year old 4WD that’s parked in my garage and gets driven once or twice a month. Boo hoo Staci! Squeal!

Comment by Taxpayers
2013-10-25 12:16:52

why should there be fed funded flood insurance- ?

Comment by Bluestar
2013-10-25 11:51:09

So far they have just been going after selected coastal areas but if they applied the same rules to everywhere then we will see some real price adjustments. Once every 30 years the Texas hill country gets flooded when a hurricane or tropical storm stalls over the area and dumps a over a foot of rain in 48 hours yet you can still get flood insurance for a fraction of what it costs on the coast.

Jack Smith, AKA Bluestar

Comment by Ben Jones
2013-10-25 11:29:29

‘With stocks sitting near record highs, one Wall Street veteran is sounding the alarm. “There are signs of speculation out there, and that makes me worried,” said Blackstone Vice Chairman Byron Wien.’

‘Wien has maintained a cautious tone all year, warning that the market would be dragged down in second half of 2013 by disappointing earnings. But the idea of a frothy market is something new for the strategist, and he blames investors as well as the Federal Reserve’s easy money stance.’

“Right now investors think monetary policy will remain accommodative indefinitely,” Wien said. “When you have a feeling you can’t get into trouble you’re likely to take some chances you won’t already take.”

‘Wein added: “The feeling is that we’re OK for a while and everyone thinks they’re smart enough to know when the music is going to stop.”

Comment by Bill, just south of Irvine, CA
2013-10-25 20:27:44

“There are signs of speculation out there, and that makes me worried,” said Blackstone Vice Chairman Byron Wien.

Yes I would think there are signs of speculation, but at least in my former company I have seen three years of increases in revenue and EPS.

Don’t tell me the books are being cooked. Surely the printing press is inflating stocks, but there are real earnings out there and it’s not just my former company. Not just the staffing industry. Just check any week on yahoo finance and you will see the companies for the week posting their earnings.

IBD’s William O’Neill’s favorite criteria include consecutive quarters of increasing earnings and year over year quarterly comparison increases in earnings and revenue. That is not speculation. That is technique that he used for years.

Comment by Ben Jones
2013-10-25 20:48:22

Then you should sell that gold and go all in. If you are so sure.

Comment by Ben Jones
2013-10-25 15:28:04

‘How buyers act at open houses can indicate the future of the housing market, said a local real estate agent. Dee Marie Fisher, Realtor at Windermere Homes & Estates, said she knew the market was changing in June 2005 and then again in December 2011. Fisher sells homes in the coastal areas of Encinitas, Del Mar, Cardiff-by-the-Sea, La Costa and Solana Beach.’

“I saw the buyers coming in in June 2005 — it was like, what is going on with these buyers? They’re very different. And they’re not jumping; they’re not moving forward as fast; they don’t seem anxious about getting a home,” Fisher said.’

‘About six to nine months later, she started to read negative news in the media.’

“And then in December 2011 it seemed like the buyers were starting to say, ‘I’m ready to buy, I’m ready to buy.’ And in 2012 they started,” Fisher said. “Now, did I expect the prices to increase in 2013 like they did? No. There was no Realtor out there that I know of that expected that. That was unbelievable how fast it jumped.”

‘Open houses have been slow in recent months, but Fisher said it’s too soon to say it’s a trend. “I think prices have stabilized, but don’t hold me to it,” Fisher said. “I think they’re going to continue to go up in increments.”

‘Encinitas has about four months of inventory — a normal market has six months. Most markets have experienced an increase in inventory, Fisher said, but it’s still down from last year. “They saw the prices have gone up. They’re ready to move on and move up; they’re able to get out from underneath. They weren’t willing to sell at a low price,” Fisher said. “That’s one big, huge reason why we’ve gotten an increase in inventory finally.”

‘Fisher said the market typically slows down in the fall when kids start school. The government shutdown caused two of Fisher’s buyers to delay putting offers on homes.’

“It usually starts picking up in the third or fourth week of September, but we had some issues with the government and everyone was concerned with Oct. 1 coming along,” Fisher said. “We had a great increase in prices and I think we’re just having a pull back, too.”

‘Fisher has also seen the homeownership rate change over the years. “We still have the American Dream, yet it seems to be decreasing a bit,” Fisher said, attributing the change to the high cost of living in California, the ease of renting and a society that is increasingly mobile. “A lot of people don’t want to buy because they’ll be moving in three to four years.”

Comment by Doom
2013-10-25 15:53:39

Interest rates are down not up, the southwest buying season is Jan to May, spring for everyone else. Buy now folks don’t listen to the glass half full crowd.

These same people last spring said the summer and fall market would collaspe. Many people sold their homes the last several months, don’t listen to the negative crowd, you will be always waiting for the right time.

No two people are alike, and no two situations are alike, look at what is best for you and the right opportunity, don’t worry about Fla if you live in Nev. for example. I own a very nice conv. do I care I can’t sell it Alaska?

Comment by Housing Analyst
2013-10-25 16:06:54

Grossly inflated housing prices falling to dramatically lower and more affordable levels is gloom and doom?

Nonsense…. Falling housing prices is positively bullish.

Comment by Ben Jones
2013-10-25 17:57:33

‘Donald Trump was accused of operating a racket by a California businessman who signed up for real estate programs at Trump University, which he alleges didn’t deliver on the promise of teaching Trump’s secrets.’

Trump was accused of violations of the U.S. Racketeering Influenced and Corrupt Organizations Act in an Oct. 18 complaint filed in federal court in San Diego. The plaintiff, Art Cohen, who said he spent $1,495 on a three-day program and another $34,995 on a “Gold Elite” program, seeks to represent other buyers of the programs in a class-action lawsuit.’

“Trump did not fulfill the promises he made to student-victims around the country,” Cohen said in the complaint. “He did not teach students his coveted real estate investing ‘secrets’ at the live events, he did not contribute in any meaningful way to the curriculum for the live events, and he did not handpick the live event seminar instructors and mentors.”

‘$1,495 on a three-day program and another $34,995 on a “Gold Elite” program’

Squeal Art Cohen!


Comment by scdave
2013-10-26 08:34:53

I agree…Squeal Art Cohen…For $1495. you thought you were going to get the “secrets” that would make you fabulously wealthy…Just ignorant..

Comment by AnonyRuss
2013-10-26 23:29:12

From the Arizona/California article:

“A Realtor for 25 years, Scott said he is hoping the current breather represents a return to the healthier “stair-step” price action of the pre-boom era.

“We would see prices go up, level off for several months, then go up again,” he said. “We could be in one of those leveling periods.”

New jobs in Phoenix are poised to multiply in the first half of next year, said Scott, who sees home price gains accelerating again, possibly by mid-January.”

—I wonder what Realtor Scott was advising in Phoenix in 2005.

“On financing, he said that in the last six months, banks have reduced the waiting period for borrowing among would-be buyers with a past foreclosure or short sale on their credit report.

“For a while it was three years. Now they’re down to two.”

—Thank goodness, how dare they force them to wait three whole years post-foreclosure.

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