The Housing Bubble

In the UK in the 1980’s and 1990’s the number of people claiming invalidity in the UK ballooned as people struggled to regain well paid jobs and politicians wanted to reduce the unemployment numbers. I wonder if the same thing is happening in the USA?

Look at your neighborhood grocery store parking lots. At any random time, how many card are parked there? How many spaces are those for handicapped?

This nation has become wussified.

This nation has become wussified.

Nah—it is more than when jobs are unavailable, people will look for anything that keeps an income-stream rolling in. When UE runs out, and there are no good jobs available, they are very motivated to qualify as “disabled”, whether they actually are or no.

Some of these are probably outright fraud. Some are likely people who are legitimately disabled but capable of working and would prefer to work if jobs were available; with jobs not available, they fall back on what they can get.

That’s another double-edged sword, as impoverished residents drive out residential demand from non-impoverished households.

Section 8 scum destroyed my parents’ neighborhood in California in the late 70s. That is what made me decide as a teenager I hated the Democrat nanny statists and would never ever vote for any Democrat. And I kept this same oath.

Section 8 was a response to the failure of the projects of the late 60s. Would we be better off with cardboard shack slums like India? I think every major city has homeless encampments. Or should we just throw them all in jail?

Bill, it is entirely possible that your parents’ neighborhood would have declined even without Section 8.

Section 8 accelerated the decline though. But I would have probably not turned out to be as radically individualist if the deterioration happened after I left the nest.

If they print money and use it to create jobs that will increase GDP and drive down unemployment. We haven’t tried the later.

So you’re saying that what we need is a new CCC, then?

I haven’t been to Moses Lake but have probably flown over it a few times on different trips to Seattle or Pullman. My overall impression of eastern WA is that development is amazingly sparse. For that matter, the same comment applies to about 90% of the U.S. land area west of Nebraska, including CA!

You might enjoy this clip:

“Mystery of the Megaflood”
http://www.youtube.com/watch?v=_unTs1vIah8

“I can see blocked stuff through my American cell phone…”

Anglo European sims for sale? $$

I doubt selfies and videos from around the world (but none from your friends) are worth paying a foreign bill every month for?

To respond to your first paragraph, yes.

As for the second paragraph, I refer to the 1%ers. $4,000,000 is a tiny fraction of their wealth. They have the resources to move on. Their other investments more than make up for selling costs. An income of $500,000 per year will quickly cover the loss.

I just balanced my Ally checking account last night, and I received $12.31 interest last month.

It’s like complaining because you bought an ice-cream cone on a hot day, and now it’s gonna melt if you don’t hurry up and eat it.

You can begin a self-directed IRA through the same kind of trustee that administers mutual fund and stock and bond investments. Google it - one name seems to come up all the time. You can use a self-directed IRA to invest in real estate, for example.

It’s the truth.

But don’t take my word for it…check out what happened to interest rates, then stocks, in 1987,

the only one buying bonds is the FED cause they can print money to buy them. Got equity?

I said I wasn’t sure about stocks, not that they would be a winner as rates rise. Bonds are a sure loser, stocks are questionable. Rates are supposed to rise because we’re having inflation, which, in theory, should lift the price of stocks. In theory…

In this kind of environment, stocks are a better buy than bonds (IMHO, of course). However, cash might be a better buy than both of them!

“IMHO, of course”

Obviously it’s not only your opinion. In fact, one thing you or anyone else currently going long in stocks should worry over is whether the current herd movement into stocks will result in overshooting on the upside of valuations, followed by eventual mean reversion to trend. I guess what I am saying is that it is good to avoid buying too much when asset prices are above their long-term trend line (but I don’t claim to know whether stocks are there yet!).

“If you believe a house is an “investment” and is actually worth something, you better get selling today because todays price is your best price for decades to come.”

Yep. It’s a long way down from here.

…. right up until the last buyer leaves the auction.

you really are starting to understand , quite impressive.

If Janet Yellen “will not let” rates rise, how come rates rose last year? Is she planning to follow a different game plan than Bernanke’s?

Yes, she is planning on more pumping. Bernanke is a head fake.

Nope

1. Rising interest rates bankrupt gov.
2. Rising interest rates crush housing and market.
3. Stocks can’t adjust for inflation because consumers can’t adjust. If companies raise prices consumers who have no extra cash and no way to earn extra cash, and no way to borrow enough extra cash will stop buying.
4. Technology still isn’t done crushing jobs. Nor is globalization.

Schilling says 5 years
I say 15 years.

Wake me up when take home pay after taxes and insurance rises anywhere around the globe. Even China is going to see a decline as the world stops buying junk.

“Wake me up when take home pay after taxes and insurance rises anywhere around the globe.”

Not gonna happen. That’s why prices are stuck in a deflationary spiral.

Down we go.

“Nope”

I’m relieved to not be the only poster here who doubts all the stories about the big near-term increases in long-term Treasury bond yields still to come.

Whether they do or don’t isn’t going to matter in terms of the housing price declines that has resumed. Higher rates might accelerate the decline but lower rates won’t stop them.

I’m relieved to not be the only poster here who doubts all the stories about the big near-term increases in long-term Treasury bond yields still to come.

The markets suggest that there are many who similarly doubt this story; if everyone believed it, yields would move up immediately as everyone adjusted their holding to avoid the ensuing losses.

The fact that yields have not moved precipitously suggests that you are in good company with your skepticism.

“…if everyone believed it, yields would move up immediately as everyone adjusted their holding to avoid the ensuing losses.”

According to the Expectations Hypothesis of the term structure of interest rates, I should be able to either buy a 30-year Treasury to yield 3.8% (at least currently) or equivalently roll over a series of short-term (e.g. 1-year) Treasury bill purchases every year for thirty years (i.e. buy a one-year T-bill then roll over the investment proceeds in a new one each of the next 29 years) without doing any better by either strategy. For instance, if investors ‘knew’ they could do better by the 1-year T-bill rollover strategy, they would avoid buying 30-year Treasurys in favor of buying 1-year T-bills to pursue the reinvestment approach.

Since 1-year T-bills are currently yielding 0.12% versus 3.80% on the 30-year T-bond, the Expectations Hypothesis suggests that short-term yields will have to rise a lot in the future to make up for the huge current yield gap along the curve from short to long.

The wild card in this discussion is the degree to which the Fed’s monetary policy to keep short-term rates near zero coupled with QE3 to purchase long-term T-bonds may have distorted the Treasury bond yield curve from where fundamental considerations (reflected in the Expectations Hypothesis) would otherwise move them.

“The libtards are declaring victory”

Who is declaring victory? Over what - unemployment? Unemployment is still way too high. That is why Congressional Democrats are proposing to extend unemployment benefits.

The economy is doing better than when Obama took office. It could hardly do worse. The situation in January 2009 was dire. Recognizing these facts is a far cry from declaring victory.

We have to keep building in order to keep borrowing and we have to keep borrowing if we are to keep spending and we have to keep spending else the terrorists will win.

When you build a house you are “creating wealth” and when you create wealth you are creating buying power and when you create buying power you can help save the economy from itself IF you take this buying power and convert it into some sort of money and actually spend it.

One way to convert buying power into money is to BORROW against this buying power, aka cashing out one’s equity - a very American thing to do, a very patriotic thing to do (unlike hoarders who care nothing at all about the country and decide to do an old school Ben Franklin type thing and save the stuff rather than spend it.)

When we build a house and sell it, it represents profit. When the end user moves into it, it represents debt.

Every house you see, every house you pass, think DEBT.

Besides, this video shows a crime worse than anything I’ve ever seen, and the perpetrator is beige: http://www.cnn.com/video/data/2.0/video/us/2014/01/10/mxp-vo-dog-steals-chicken-nuggets-caught-on-camera.hln.html

Yo Fed…..I know i sound like a broken record but i’ll bet you 90+% do not have the English skills you do.

Why is everyone avoiding this issue. You cant solve the race/stupidity/pregnancy issues without first having some proper English skills.

Hey dj:

Where do ebonics come from? How can black kids go to the same school as white kids, but still come out speaking a different a language? I think they are functionally segregated, and partially on purpose. Maybe the war on ebonics should start with schools putting buddy systems in place, such that kids of the same ethnicity don’t automatically become friends with only one another. Just a thought. I have no idea if it would actually work.

There is no way on earth a cat would get food out of a toaster oven the way that dog did. A cat would be smart enough to train its owner to provide its favorite type of canned tuna as food. The owner would do all the work to get the tuna out of the can and put it into the cat’s food bowl. The owner would even be trained to kiss the cat’s arse to get it to eat. (This all happened to my MIL.)

“I vote ‘bulldozed’, as it would create jobs and prop up prices of investor-owned homes.”

A friend said that this is exactly what happened in Alaska years ago when he was in the military.

“A friend said that this is exactly what happened in Alaska years ago when he was in the military.”

Wealth destruction on this order would be criminal if a private individual did it. However, I expect the government can pull it off with little fanfare aside from a bit of propaganda cover in the MSM.

Yeah I vote bulldozed. And Prime is right. The banks have been propped up and taxpayers are holding the bag. It is stuff like this that raises my blood pressure. Thuck fugernment.

“Nope—if bulldozed, the taxpayers will bear the burden.”

Propaganda will be used to hide the losses to taxpayers which are laundered from bulldozed houses into higher prices for non-bulldozed houses. This is financial engineering at its worst.

Blighted Cities Prefer Razing to Rebuilding
Gabriella Demczuk/The New York Times
Destroying in Order to Build: As the populations of many former industrial cities dwindle, buildings are being razed rather than raised to better position the cities for growth.
By TIMOTHY WILLIAMS
Published: November 12, 2013

BALTIMORE — Shivihah Smith’s East Baltimore neighborhood, where he lives with his mother and grandmother, is disappearing. The block one over is gone. A dozen rowhouses on an adjacent block were removed one afternoon last year. And on the corner a few weeks ago, a pair of houses that were damaged by fire collapsed. The city bulldozed those and two others, leaving scavengers to pick through the debris for bits of metal and copper wire.

“The city doesn’t want these old houses,” lamented Mr. Smith, 36.

For the Smiths, the bulldozing of city blocks is a source of anguish. But for Baltimore, as for a number of American cities in the Northeast and Midwest that have lost big chunks of their population, it is increasingly regarded as a path to salvation. Because despite the well-publicized embrace by young professionals of once-struggling city centers in New York, Seattle and Los Angeles, for many cities urban planning has often become a form of creative destruction.

“It is not the house itself that has value, it is the land the house stands on,” said Sandra Pianalto, the president and chief executive of the Federal Reserve Bank of Cleveland. “This led us to the counterintuitive concept that the best policy to stabilize neighborhoods may not always be rehabilitation. It may be demolition.”

Large-scale destruction is well known in Detroit, but it is also underway in Baltimore, Philadelphia, Cleveland, Cincinnati, Buffalo and others at a total cost of more than $250 million. Officials are tearing down tens of thousands of vacant buildings, many habitable, as they seek to stimulate economic growth, reduce crime and blight, and increase environmental sustainability.

A recent Brookings Institution study found that from 2000 to 2010 the number of vacant housing units nationally had increased by 4.5 million, or 44 percent. And a report by the University of California, Berkeley, determined that over the past 15 years, 130 cities, most with relatively small populations, have dissolved themselves, more than half the total ever recorded in the United States.

The continuing struggles of former manufacturing centers have fundamentally altered urban planning, traditionally a discipline based on growth and expansion.

Today, it is also about disinvestment patterns to help determine which depopulated neighborhoods are worth saving; what blocks should be torn down and rebuilt; and based on economic activity, transportation options, infrastructure and population density, where people might best be relocated. Some even focus on returning abandoned urban areas into forests and meadows.

“It’s like a whole new field,” said Margaret Dewar, a professor of urban and regional planning at the University of Michigan, who helped plan for a land bank in Detroit to oversee that city’s vacant properties.

In all, more than half of the nation’s 20 largest cities in 1950 have lost at least one-third of their populations. And since 2000, a number of cities, including Baltimore, St. Louis, Pittsburgh, Cincinnati and Buffalo, have lost around 10 percent; Cleveland has lost more than 17 percent; and more than 25 percent of residents have left Detroit, whose bankruptcy declaration this summer has heightened anxiety in other postindustrial cities.

The result of this shrinkage, also called “ungrowth” and “right sizing,” has been compressed tax bases, increased crime and unemployment, tight municipal budgets and abandoned neighborhoods. The question is what to do with the urban ghost towns unlikely to be repopulated because of continued suburbanization and deindustrialization.

“In the past, cities would look at buildings individually, determine there was a problem, tear them down and then quickly find another use for the land,” said Justin B. Hollander, an urban planning professor at Tufts University. “Now they’re looking at the whole DNA of the city and saying, ‘There are just too many structures for the population we have.’ ”

Cleveland, whose population has shrunk by about 80,000 during the past decade to 395,000, has spent $50 million over the past six years to raze houses, which cost $10,000 each to destroy, compared with $27,000 annually to maintain.

Some neighborhoods have lost two-thirds of their residents since 2000. There are so many vacant lots that the city, now home to more than 200 community gardens and farms, zones for urban farms and allows people to keep pigs, sheep and goats in residential areas. A vineyard has popped up as well.

Two miles northwest of the Gateway Arch in St. Louis, which has at least 6,000 vacant buildings, is an uninhabited deciduous forest where a sprawling 74-acre housing development once stood before the city demolished it because so few people lived there.

Philadelphia, which has 40,000 vacant lots, has promoted the benefits of lower-density living by allowing people in largely vacant neighborhoods to spread out to the lot next door — where a neighbor’s home once was. The city has been studying a plan to sell $500 leases to urban farmers. One such farm, Greensgrow, which was built on a former Superfund site, sold $1 million in produce in 2012.

Baltimore has begun to turn over vacant lots to groups of amateur farmers. Boone Street Farm, boxed in by abandoned rowhouses on an eighth of an acre, is completing its third season of growing tomatoes, spinach, sweet potatoes and other fruits and vegetables in the city’s Midway neighborhood. It sells produce to restaurants, has a table at a local farmers market and delivers $10 boxes of produce weekly to members of its community-supported agriculture program.

But even as they bulldoze thousands of vacant houses, Baltimore and other shrinking cities have continued to seek new people.

“I’m trying to grow the city, not get smaller,” said Stephanie Rawlings-Blake, Baltimore’s mayor, about the notion that the city could be fine with between 500,000 and 600,000 people. “I’m not the first to say that a city that’s not growing is dying.”

Baltimore lost nearly 110,000 jobs from 1990 to 2010, about 23 percent, and has seen its population drop from 950,000 in 1950 to 621,000 today. The city has 20,000 vacant buildings and lots, and more than one house in eight is vacant.
…

“In the past, cities would look at buildings individually, determine there was a problem, tear them down and then quickly find another use for the land,” said Justin B. Hollander, an urban planning professor at Tufts University. “Now they’re looking at the whole DNA of the city and saying, ‘There are just too many structures for the population we have.’ ”

The solution is simple and does not require a bulldozer. Let the price adjust downwards to a level the market will bear, and a private buyer who can make the best possible use of the structure will magically appear. Also enforce laws which clarify the ownership of vacant structures and require corporate entities (e.g. banks) to honestly account for their losses on them.

What was the movie Will Smith was in? Was he the last surviving human in NYC and he had to build up weapons to use for big game hunting, as mountain lions and deer roamed Manhattan. Something like that.

So who owns the houses that are destroyed. Fannie Mae, banks, people. Are there gov programs to buy these houses. Federal State or Local??

“So who owns the houses that are destroyed.”

Could the Fed’s $40 bn a month in MBS purchases offer a clue?

The solution is simple and does not require a bulldozer. Let the price adjust downwards to a level the market will bear, and a private buyer who can make the best possible use of the structure will magically appear.

+infinity. This is the flip-side of the creative-destruction coin.

By taking part in price-fixing (to avoid letting the market discover the price of these structures), they are avoiding re-birth as well.

Ironic, isn’t it? Out of a desire to avoid having their city die, they are engaging in activities that guarantee that it continues dying.

Just sell them for $1. If nobody can pay that much, legally require the owner to accept a loss (e.g. pay bulldozer fees to clean up the lot).

Why should everyone else share the owner’s bad gambling debt?

legally require the owner to accept a loss (e.g. pay bulldozer fees to clean up the lot).
Good idea. Just how could that be done? Has it ever been done anywhere? AFAICT, the local government winds up getting stuck with the expense of razing an abandoned property, probably because some individual is the one responsible for the abandonment.

It was done in NYC in the 70s. Many buildings were torn down, many were sold for a dollar to people who had to get them back up to code. It’s part of the reason that NYC has had such a rennaissance.

And the rennaissance will give way to decline like it always does.

Remember… NYC rental rates have been falling for 4 months straight.

Comment by Whac-A-Bubble™

2014-01-11 13:17:02

Just sell them for $1. If nobody can pay that much, legally require the owner to accept a loss (e.g. pay bulldozer fees to clean up the lot).
————————————————————————-

There are at least two problems with your suggestion.

1. Often, the city owns the house.

2. They have sold houses for a dollar in the past and investors have “snapped them up” and then sat on them while the taxes and fines pile up. Then when the city snatches the house back (which takes years because they really don’t want it) the investor shows up at the next auction and buys it back for a dollar with a new clean slate.

So the state got wise and said investors must put 60-80 thousand in escrow for 3 years in order to buy one of these “abandominiums” for 1 dollar.

Guess what?

No takers.

Wait a minute, there is actually a 3rd problem and its the biggest one:

Bastard sons of single moms; that one destroys not only houses, but entire populations and possibly civilizations.

Don’t believe me?

Look at mine.

‘2. They have sold houses for a dollar in the past and investors have “snapped them up” and then sat on them while the taxes and fines pile up.’

Laws could be passed and enforced to avoid this scenario.

What are they paying?

The demographics of it is that fewer and fewer people have the income to qualify for any decent housing. So wouldn’t you conclude that with fewer and fewer borrowers, the collapse cannot be prevented?

It seems like the PTB favor higher housing prices and fewer houses to lower housing prices and market-based adjustment which allows for their habitation at affordable price levels for lower-income populations. Look no further than swelling ranks of homeless populations in a city near you, coupled with central planners’ designs to bulldoze houses which are deemed in excess of needs, at current price-fixed valuations.

Homeless in San Diego
December 12, 2013 by theusdvista Leave a Comment
By Jack Kelly
CONTRIBUTOR

Although you can’t tell by the incessant beautiful weather, the holiday season is upon us. As USD students we have plenty to be grateful for as we come close to going home to our families for the winter intersession.
…
Being third in the nation to only Los Angeles and New York City, it’s hard not to notice the massive homeless population in the city of San Diego. To be exact, 10,000 of the 1.3 million residents are homeless, many of which are veterans.
…

I have had a situation in L.A. where my one bedroom apartment rent went down substantially. In Phoenix the rent has steadily crept up 2% per year.

I have been forced to invest internationally to offset the declining income in tech fields here in the U.S. I might as well take part in the profits caused by outsourcing. Another mutual fund statement arrived in the mail and my emerging Asian stock fund (Roth IRA) earned nearly 5% in gains and dividends in December. Of course reinvested. That itself covers my rent increase in Phoenix.

To each their own. Yes I have been to Hawaii. Even a liberal California surfer admits he does not like Hawaii because they are racist against whites. Well I have not really seen the racism myself. Maybe it’s the surfers from California that are hated. Hawaiians of all colors welcome you as a tourist for sure, but not as a resident.

I will return there many many times, but I like being back home in Phoenix where I am allowed to take responsibility for my own actions. I can own all sorts of guns and ammo. I could ride a motorcycle without a helmet. And the income taxe are lower.

“I will return there many many times, but I like being back home in Phoenix where I am allowed to take responsibility for my own actions.”

In Arizona an off-road cyclist can download a map depicting the layout of the service roads adjacent the irrigation canals with shaded rest areas featuring drinking water and restrooms.

In California the same service roads are off-limits, dangerous.

Beat me to it!