The Housing Bubble

You can’t populate neighborhoods with fresh off the boat Chinese who can pay $500,000 for a house ??

Thats not the dynamic at work…The market is now being influenced by a demand from outside its core driver…That is, jobs, first time buyers, move up buyers, downsizers, in migration etc….

And, it appears, the outside influence has more firepower than the typical local buyer thereby driving the price point higher…The demand/supply equation is way out of balance…

with 25 million excess empty houses, the supply/demand “equation” is indeed out of whack.

Imagine if 30 million Chinese 1) buy up American houses and 2) become U.S. citiens and vote.

They would 1) price out Americans who’ve been here for generations and 2) they would regard Democrats as libertarians relative to what the authorities in Red China are, and be permanent socialist voters.

I think that wealthy Chinese would vote Republican. China broke the “iron bowl” years ago and they would not want to pay for social programs that they never paid for in China.

Here are the Chinese tax rates, not rates that Maxine Walters or Lola would like:

http://www.worldwide-tax.com/china/china_tax.asp

Link will post soon:

China Tax Rates 2013 •The tax on an individual’s income is progressive. As at , an individual’s income is taxed progressively at 3% - 45%.
•The corporate tax rate for domestic and foreign companies is 25%.
•Small companies pay 20% corporate tax in certain cases.
•Hi-tech companies pay 15% corporate tax.

China Capital Gains •An individual’s capital gains are taxable in China at the rate of 20%.
•Capital gains tax for a Chinese company is added to the regular tax.
•A 10% deduction at source is made from the capital gains of a foreign company in China.
•On taxing capital gains from the sale of real estate, when calculating the capital gain the purchase cost is deducted from the sale price at the 20% rate

Hong Kong’s income tax is a flat 15%. Let’s see. Let’s assume for a second that California did not give me a tax credit for paying Arizona income taxes. The rate is 10%. And my federal rate is probably 28%. So a combined 38% so that we can coddle the illegal aliens and crack moms and gun grabbers and be world cop. 38% as opposed to 15%.

So I am saying its Less likely someone from Hong Kong would move to California than stay in Hong Kong.

I guess if I was paying 38% of my income in taxe in China I would still prefer the U.S. since the U.S. has just a wee bit more civil liberties than Red China. Our cops are getting to be almost as brutal as the Red Chinese though.

Thats not the dynamic at work…The market is now being influenced by a demand from outside its core driver…That is, jobs, first time buyers, move up buyers, downsizers, in migration etc….

That’s just my point. The “market” not based on fundamentals will crash. Someone has to live in neighborhoods and pay to live there. Chinese buyers ain’t gonna do that in sufficient numbers except to fool more hopeful fools by buying during low volume times.

And since the assumption is reasonable that these are wealthy Chinese, they don’t need American jobs to pay for those houses. The crash will be from businesses running out of skilled workers, as the Chinese inflate the prices on houses, causing unaffordability for the American workers. They will be moving to Texas, Florida, Arizona, Utah, Washington. And Colorado. Along with their taste for nanny state laws…but the ones left behind in California will suffer. Feudalism is on the rise in Cali for sure. It certainly is an unhealthy balance.

My argument is there are sufficient numbers of Chinese buyers to chase out generations-long Californians. Japanese rich people did not have sufficient numbers to make a notable difference in late 80s. The future of California could be Asian overlords with Hispanic illegals as the menial servants.

The generations long Californians were being chased out long before this latest Chinese wave. If you want to blame any group in CA, blame the Boomers, they raped the place and continue to do so.

“If you want to blame any group in CA, blame the Boomers, they raped the place and continue to do so.”

Don’t forget that California is home to over 33% of the nation’s welfare case load despite little more than 12% of the nation’s population. Qualifying for SSI disability in California is easier than many states too. California’s metro areas are home to huge barrio and ghetto populations. The lack of irrigation water in the central valley this year will likely push social welfare budgets to the brink requiring federal bailouts.

I know it goes against the group think about China but that is my role. But remember I am not saying that China does not have a housing bubble and its bursting, just saying that China is not going until a recession:

Growth in China’s industrial output and retail sales accelerated in May, with consumption increasing at its fastest pace since December, official data showed on Friday, in signs of renewed strength in the world’s second-largest economy.

Industrial production rose 8.8 percent year-on-year last month, the National Bureau of Statistics (NBS) said in a statement, up from 8.7 percent in April and matching the median forecast in a poll of 15 economists by the Wall Street Journal.

Retail sales, a key gauge of consumer spending, increased 12.5 percent last month from a year ago, the NBS said in a separate statement, up from a gain of 11.9 percent in April and the highest since 13.6 percent at the end of last year.

The data provided further evidence that economic activity in China is picking up as the government stepped up what economists call a “mini-stimulus” to arrest a slowdown seen earlier this year.

Friday’s numbers “signal that China’s growth momentum may soon bottom out, despite some downside risks”, economists at ANZ Bank said in a research note, also citing acceleration in export growth announced earlier this week.

China’s gross domestic product grew by 7.4 percent in the first three months of 2014, weaker than the 7.7 percent recorded in October-December and the worst pace since a similar 7.4 percent expansion in the third quarter of 2012.

Despite the bright spots in the May data, the increase in fixed-asset investment, a main measure of government spending on infrastructure projects, slowed marginally to 17.2 percent year-on-year in the January-May period from a 17.3 percent rise in the first four months of the year, extending a decelerating streak into the eighth straight month.

Cautious steps by Beijing

Beijing has introduced a number of measures to boost growth, including cuts in the amount of cash selected lenders must keep on hand in a bid to spur lending, financial support for small companies and targeted infrastructure outlays such as for railway lines and shantytown renovation.

But it has so far refrained from more aggressive steps such as interest rate cuts, citing worries about excessive credit.

“In our view, while the policy fine-tuning is not sufficient to change the trajectory of the growth profile, it will help lift the sentiment and stabilise the growth over the foreseeable future,” the ANZ economists added.

China’s leaders say they want consumer spending and other forms of private demand to propel the economy into a future of more sustainable, albeit slower, growth, and forego an over-reliance on huge and often wasteful investment projects.

“China’s policy easing has become significant from a macro perspective,” Zhang Zhiwei, a Hong Kong-based analyst with Nomura International, said in a research note.

He expects the measures to help stabilise economic growth at 7.4 percent in the second quarter and 7.5 percent for the full year, matching the government’s 2014 target.

Zhang added, however, that Nomura does not see the recovery as sustainable over the medium term.

“We continue to expect growth to slow to 6.8 percent in 2015,” he added.

AFP

‘that is my role’

That’s a strange thing to say.

So why don’t you load up on Chinese IPO’s? There are plenty of them in the US. Come to think of it, if these people are so rich, why are they flogging their tech IPO’s in the US? You’d think they would keep these diamonds in the rough for themselves.

Hell, I don’t believe our own government economic numbers much less China’s…

So why don’t you load up on Chinese IPO’s?

Actually, Chinese IPOs are doing much better than American IPOs so many well connected people are doing that I just don’t have time to monitor high tech companies. Why do they just not buy their own companies? I think they are but all rich people diversify so the companies can make more money by allowing rich people in this country buy their stocks and Chinese diversify by buying property throughout the world. However, the move to the high tech IPOs is bringing hundreds of billions of dollars into China and they would have had to sell a lot of T-shirts to make that kind of money.

I am catching up on watching tape programs today and just watched the nightly business report from yesterday. It talked about a FHA program for people that lost houses in the recession. Apparently, if you lost a house due to losing 20% of your income during the recession, you can get a FHA loan with just 3.5% down.

P.S. It is called the “back to work” program.

Hell, I don’t believe our own government economic numbers much less China’s…

Certainly, I agree with that but the consensus of outside economists seems to be that Chinese data is not much worse than the U.S. Sure you can shave 1 to 2% of the GDP off but the numbers still show strong growth and most importantly wages still seem to be growing around 10% per year and as we always say on this board it is wage growth that needs to keep up with housing prices or there is a major problem.

‘it is wage growth that needs to keep up with housing prices or there is a major problem’

‘Nov 6, 2013‘

‘Beijing prices are the steepest in the country. A 70-square-metre home costs 20 times annual household disposable income, the International Monetary Fund said in a 2011 report, four times higher than in Britain and double Japan. Shanghai’s price-to-income ratio is around 14 times.’

‘Apartments in the Gold Fragrance Town compound sold for 11,000 yuan per square meter in 2010 after developers bought the land for 4,675 yuan in 2007, public records show. Since then, prices have doubled. Apartments launched this month in the nearby Prosperous and Happy Spring estate, a joint development between Poly Real Estate and Beijing Capital Development Co Ltd are going for 23,000 yuan per square meter.’

‘In south Daxing, a retiree said she had waited since January for a good time to buy a flat for her married son. She now thinks it is futile to hold back. “It’s not possible to wait. The longer you wait, the higher prices go,” she said as she scurried between home showrooms.’

‘Beijing Municiple People’s Insurance Bureau and the Municipal Statistics Bureau yesterday announced that Beijing’s 2012 annual average wage amounted to 62,677 yuan (US$ 10,028), the average monthly wage was 5,223 yuan (US$ 836), an increase of 11.8% over the previous year.’

A 70-square-metre home costs 20 times annual household disposable income, the International Monetary Fund said in a 2011 report, four times higher than in Britain and double Japan.

So in one city it is twice the national average of Japan? Sure it is a bubble but it is not enough of a bubble to derail the entire country’s economy. My role as a contrarian is to point that out. I would rather have China’s housing prices with 10% income growth than Britain’s housing prices with that country’s flat wages.

Besides addressing the China bubble, this is an example that the best way to reduce poverty is to push supply side economics:

BEIJING, May 5 (Xinhua) — Chinese rural residents in poor regions saw their per capita net income surge 13.4 percent year on year to 5,519 yuan (about 897 U.S. dollars) in 2013, official data showed on Monday.

The rate of increase was 4.1 percentage points faster than the income growth of all rural residents, the National Bureau of Statistics (NBS) said in a statement.

The bureau attributed the rapid growth mainly to income from wages, which soared 22.7 percent from a year earlier to 2,269 yuan.

An increasing number of people in poor areas were employed outside the agricultural sector, and wage levels rose, the NBS said.

Poor areas include 592 key counties for poverty relief efforts and 14 extremely poor areas designated in a national plan for poverty alleviation from 2011 to 2020.

Last year, per capita net income of rural residents rose 9.3 percent in real terms to 8,896 yuan, while disposable income of urban residents grew 7 percent to 26,955 yuan.

Editor: Yang Yi

The elephant under the rug is that the massive credit expansion in China over the past few years accounts for just about all of its GDP.

That and they’ve built enough housing for two or three times their population.

“…what economists call a “mini-stimulus” to arrest a slowdown” LOL!

‘My role as a contrarian is to point that out’

I think you are mistaking contrarian with blindness.

‘Proof that China’s leaders are really freaked out about a housing collapse’

‘infrastructure investment growth ramped up from 22.5% in April to 28% in May—the fastest rate in nine months. That suggests China’s leaders are hitting the stimulus pedal hard—as does the fact that fiscal spending bounced last month too. May’s 25% jump in government spending (paywall) was a marked break from the 10% average monthly increase in the first four months of the year.’

‘Where’s this money coming from? The government has twice lowered capital reserve requirements for banks in recent weeks, effectively pumping more money into the system (more on how that works here). And even though the central bank is reportedly worried about inflation, it seems to be resorting to pumping more money into the system, as evidenced by the unexpected uptick in May lending.’

‘The blue and gray lines in the chart at the top tell you why China’s leaders are going whole hog. Manufacturing investment’s 11.9% increase was the slowest in a decade, notes SocGen.’

‘But an even bigger worry is real estate. Property investment growth fell to a 22-month low of 10.4% in May. Property sales fell nearly 11% last month, while housing starts shrank by around 8%. “The housing downturn is still playing out and has shown no sign of turning around,” wrote SocGen economist Wei Yao.’

All bubbles collapse. There isn’t any stopping it.

As to the health of the Chinese economy, if there was this thriving growth, there wouldn’t be any room for expensive bullet trains to empty cities. There would be real demand and no time or money to be wasted. There wouldn’t be one ghost street, much less several ghost cities. You keep falling back on these hoards of peasants that are going to walk in the door with a basket of money and buy these houses. These rich peasants don’t exist. Go ahead and give them the houses; where will they work? Where will the food come from? At this stage, with people fleeing by the thousands, and FB’s being created by the thousands everyday, your denial is astounding.

Honestly Ben only time will tell, but I bet Chinese growth both this year and next will be 7% despite the weakness in housing.

P.S. I think the MSM China bashing is a deliberate attempt by the PTB to prevent the U.S. from losing its reserve currency status. The weaker they can make China appear and the stronger they can make the U.S. appear the longer they can prevent that from occurring. However, everyone knows it is inevitable.

I know it goes against the group think…….but that is my role.

Yep. That’s your “role”. What’s your other “role”? Why do you have this “role” and who gave you this role?

“They say that the only reason some people reject their supposed findings is political correctness.”

How they present BLACKS as stupid people.

http://worldpoliticalsecret.blogspot.com.br/2012/06/how-they-present-blacks-as-stupid.html

An attempt is being made once again to sell Americans an old idea that has had terrible consequences: the allegation that black people are supposedly inferior to whites.
The salespeople involved in this campaign deny that they are propagandists for racism. They are just trying to popularize the findings of science, they claim. Modern science has discovered, they allege, that many commonly held beliefs about race in general and the black ‘race’ in particular are accurate. They say that the only reason some people reject their supposed findings is political correctness.

“…just saying that China is not going until a recession…”

It’s more like an increasingly rapid ascent to stall speed, after which a devastating crash is certain to follow.

China’s Imports Crash to Near Zero
Jun. 10, 2014, 1:11 AM

The growth rate for the value of goods that a country imports is a good indicator of the relative health of the nation’s economy. If the year over year growth rate of imports is positive, it generally tells us that the country’s economy is expanding. If it’s negative, it tells us that the nation’s economy is likely contracting. And if it’s near zero, it tells us that the importing nation’s economy has stalled out.

With that in mind, in April 2014, China’s economy appears to have largely stalled out:

The data in this chart is based on data published by the U.S. Census Bureau, which measures the value of goods exported by the U.S. to other nations and also the value of goods imported into the U.S. As such, this data is generally considered to be considered to be of higher quality than that published by China’s government.

Speaking of which, it would appear that the data that the Chinese are reporting for the value of goods imported into China fell in May 2014.

So if the year over year growth rate of China’s imports/economy was at near zero levels in April 2014, and then continued to fall in May, that suggests that China’s economy is experiencing recessionary conditions, at the least, or an outright recession, at worst.

We’ll have to wait a month to see what the Census Bureau reports for May 2014 to confirm which scenario applies.
…

“I think you are mistaking contrarian with blindness.”

The way AZDan’s posts appear to me is that either he or someone who employs him has a lot of skin invested in keeping the China growth illusion intact.

“However, everyone knows it is inevitable.”

You mean a massive crash of the China economy analogous to the one that devastated Japan’s economy from roughly 1990 to the present, right?

Why shouldn’t it be income for flippers? ReSold within 4 yrs or less, tax as income?

Since when have the rules applied during a time of crisis?

Since when do rules apply at all anymore?

“we may not quite contemplate yet…”

like a collapse in price.

How does one expect to profit from this insight into China’s future Dan?

A couple of executive orders should be able to take care of that minor hurdle these days, wouldn’t you think, Mr. Banker?

You guys are good.

“Why just ask for the metadata?”

+1 My thought too.

What that family of 4 making 25K needs is a $500,000 starter home!

What that family of 4 making 25K needs is a $500,000 starter home!

+1 And a zero interest full-sized SUV in the driveway.

I wasn’t saying you are a simpleton, I was referring to these so-called “right wing” talking heads. Neocons are not right or left. If you insist on looking at it like that, they are more left than right. As I’ve proven, they are for amnesty and universal health care. They are comfortable with the Clinton’s and the Bush’s. As long as we’re bombing some one they don’t like.

Obama did want to stay in Iraq. I don’t have time to dig up all the history, but you can find it if you look. Check the timing; they pulled out just before their immunity ran out.

Here’s what we are up against in all this; there are people who love this idea of a “war on terror”. Because it means they can do whatever they want. It’s the ultimate power; kill anyone, anywhere. No checks and balances, never-ending. Even if it means killing our own citizens. War is the health of the state, it was once said. Obama is, as he said, good at killing people. So he has embraced this view.

Obama is, as he said, good at killing people. So he has embraced this view.

Obama is a disappointment in many ways and I’m glad he can’t run again. Although less than Repubs imo, he is too much a neocon for me and way too much in with Banks and Wall Street.

Lola… Prove that anyone here called you fag. The fact that you make the false allegation merely cements what you really are. You’re a liar. Whether you’re a fag or not is beside the point.

“Because it means they can do whatever they want. It’s the ultimate power;…”

It is only over the period since I started reading and posting here that it finally dawned on me why politicians are so fond of wars and crises: Under situations of extreme political duress, the leaders can flagrantly disregard the rules and do whatever they wish under the open pretext that it was necessary to save the populace from the enemy or the crisis.