How Much Of The Boom Is Based On Cheap Debt?
Readers suggested a topic on housing and recovery. “This should be the weekend discussion: ‘No wonder a CBS News/New York Times poll showed that 69 percent of Americans believe the economy is in bad shape, and 66 percent believe it isn’t getting any better. We often say that the recovery is fake, and it is.’”
“We see most of the trucking companies coming to our docks almost empty. The drivers say the economy has picked up a bit. Another one remarked that he lost 12K in salary last year as the company requested he should take time off. It’s hit or miss a common expression among drivers. Week to week or day by day is another expression used regularly. Trucking is usually a leading indicator of the state of the economy. What do other HBB’s see in their work, businesses or towns?”
One said, “Can the PTB clarify what exactly is meant by ‘affordable’ when it comes to housing? I was recently trying to parse the new head of HUD’s statements on the housing market. He crowed about government policies which have boosted house prices (’added trillions in equity’) yet said affordable housing was a goal as well. Contradictory goals it would seem.”
“Just trying to move away from the Alice In Wonderland nature of government real estate agency pronouncements: ‘I don’t know what you mean by ‘glory,’ Alice said. Humpty Dumpty smiled contemptuously. ‘Of course you don’t—till I tell you. I meant ‘there’s a nice knock-down argument for you!’”
“‘But ‘glory’ doesn’t mean ‘a nice knock-down argument’, Alice objected. ‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean—neither more nor less.’ ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’”
The Denver Post. “The average sale price for a single-family detached home in metro Denver hit an all-time record of $371,650 in May, but zooming prices aren’t keeping buyers out of the market, Metrolist CEO Kirby Slunaker said. The previous record of $369,000 was hit in May 2007, seven months before the official start of the Great Recession.”
“‘I”ve never seen it like this, ever,’ said Jim Carroll, who has sold real estate for 30 years. Carroll cautioned that ‘we are getting close to where people are paying too much.’”
The Arizona Republic. “Before the Great Recession, most of America might have looked at Arizona’s job growth with envy. Now, in some ways, it’s Arizonans who look longingly. Through April, Arizona has replaced 57 percent of the 298,000 jobs lost by February 2010. Nationally, many potential new Arizonans haven’t been able to sell their houses to move here. They also aren’t seeing the kind of job opportunities here that once seemed plentiful.”
“‘I think the big issue is we’re struggling to ignite a real housing recovery, and what’s driving that is the slow recovery in net migration into the state,’ said George Hammond, director of the Economic and Business Research Center in the Eller College of Management at the University of Arizona. ‘That’s connected to the lack of mobility in the U.S.’”
Mortgage Broker News. “Home prices are at an all-time high and mortgage rates are at an all-time low, leading many pundits to wonder what, if anything, the Canadian government will do to rein in the industry. ‘There are limits to what you can do with regulations and we have a tendency to go to change legislation when there’s a problem,’ said Layth Matthews of RateMiser Mortgage Advisors. ‘What we need government to do now is provide models and education for sustainable lifestyles, not try to predict house prices and enforce interest rates.’”
“According to Matthews, a prevailing desire to own more than is required is one reason for the exorbitant house prices and smarter saving and spending habits will lead to a higher degree of financial literacy among Canadians. ‘There is just a tremendous amount of pressure to buy things and to consume and one of the key truths to financial success is just deferred consumption,’ Matthews said. ‘You will actually have a lot more money and a better life if you don’t spend beyond your means.’”
“It’s a stance the OECD agrees with, with its latest economic survey pointing to high debt levels as a warning sign that could negatively impact the Canadian economy. ‘Regardless of whether or not a housing price bubble exists, very high household debt levels represent a major vulnerability,’ the report states. ‘Household debt began trending upwards in the mid-1980s from a level of 60 per cent of disposable income to reach a record high of 166 per cent in mid-2013.’”
The Spectator. “Mark Carney’s hefty hint that interest rates could rise sooner than markets anticipate is politically awkward but important, as until they do so, we shall have very little idea of how much of the recovery is based simply on cheap debt and how much of it is real. The car industry and house sales, for instance, benefit from ultra-low interest rates, and while they appear to be booming, it’s not clear how much of that boom is pushed by the bellows of cheap debt.”
“What’s more, the current situation punishes those who are doing exactly what the government wants them to do. When he announced the ‘savings revolution’ in this year’s Budget, George Osborne strangely neglected to mention that even though you can now drop £15,000 into an ISA in one year, you’re still better off paying off a mortgage than saving up a nest egg because of the poor returns that savings accounts offer in an era of low interest rates.”
From Bloomberg. “China’s home buyers are being offered no-money-down purchases in an echo of the subprime lending that triggered a U.S. economic meltdown and the global financial crisis. Poly Real Estate Group Co. is letting buyers delay full down payments at its Central Park development in southeastern Nanjing city, the official China News Service reported. A Poly investor relations officer who gave only his surname, Song, said the arrangement shouldn’t be described as ‘zero down payment.’ ‘Home prices are actually pretty high,’ Song said. ‘We are helping out those college grads to buy properties as they might not be able to put down a big sum all at once.’”
“In Beijing, at a Beijing Pearl River Real Estate Development Co. project called Season Joy City, on the southern outskirts of the city, property company SouFun Holdings Ltd. is offering loans to cover up to 50 percent of the purchase price of apartments. On a hot summer morning, a couple with a toddler were the only prospective buyers, looking at models of apartment blocks in a showroom. Promotional signs said property prices ‘will never fall.’”
‘The previous record of $369,000 was hit in May 2007, seven months before the official start of the Great Recession’
Two things; with these high prices, why aren’t we seeing record prosperity? Could it be that the high prices were related to the recession?
Net in-migration is the only real factor re-inflating the Denver echo bubble.
There is no job base to support $369,000 asking prices.
Denver is a back-office flyover.
You mean higher and higher prices consuming more and more disposable income doesn’t make people wealthier? You don’t say!
“How much of the boom is based on cheap debt.”
My favorite term: “cheap debt”.
Bahahahahahahahahahahahahaha
“Cheap debt” allows one to commit to buying what one cannot afford.
“Cheap debt” allows a buyer to pay me large chunks of his income to me each and every month for months on end, years on end, decades on end - for forever if I can swing it.
AND …
(ta da)
“Cheap debt” often results in whatever the unaffordable item is that is being bought (notice the present tense of the term “being bought”) gets to be repossessed by me - the lender, the rightful owner - because this so-called “cheap debt” ALLOWS the buyer to overcommit himself and to overcommit his finances.
A lesson that should be learned by schmucks but (snort) rarely is.
Bahahahahahahahahahahahahahahahahahahahahahahahahaha
I remember when crack cocaine hit the streets it was called a “cheap drug”.
Bhahahahahahahhahaahahahahahaha
This so-called “cheap drug” would usually end up costing the user everything the user had - EVERYTHING he had.
His money, his car, his house, his marriage, his job, his health - EVERYTHING!
Mr. Banker it’s glorious - the consumer voluntarily takes on this debt.
However - there are enticements as well. Government wades into necessities to boost prices - food, education, health care, housing. All under the guise of helping some group, be it farmers (like Con Agra) or the poor. The net result is prices are driven up for the rest of the population. Who are then offered government-guaranteed (i.e. taxpayer guaranteed) debt to buy these essential items.
Politicians stay in office, Wall Street gets richer, and the standard of living declines further.
And no one’s the wiser.
Diabolically brilliant.
“Diabolically brilliant.”
Thank you. It took a while to condition the masses but well-conditioned they now are.
Thankfully Ben Franklin is finally dead.
Mr. Banker, I’m starting to suspect that the well-being of the banks is at odds with the well-being of society.
Banks do best when the populace is maxed out on debt. But the populace doesn’t do so well. Debt for the wider economy is like a python constricting, as debt claims more and more money, constricting flows to other parts of the economy.
Yet central bankers are the primary drivers of economic policy. And politicians are paid handsomely by Wall Street
“Mr. Banker, I’m starting to suspect that the well-being of the banks is at odds with the well-being of society.”
This statement of yours gets me to thinking that the well-being of a tapeworm is at odds with the well-being of the host. Thankfully there is absolutely no comparison that can be made between bankers and tapeworms.
“Banks do best when the populace is maxed out on debt. But the populace doesn’t do so well. Debt for the wider economy is like a python constricting, as debt claims more and more money, constricting flows to other parts of the economy.”
The efficient tapeworm does not kill the host. The efficient tapeworm has an interest in keeping the host well fed.
This does not necessarily mean the tapeworm has an interest in keeping the host happy, only in keeping the host well-fed. Happiness is something that is reserved for the tapeworm, and the most happiness is reserved for the most efficient tapeworm.
The wonderful part of this debt-thingy is a critical mass - a tipping point - has been reached and has been surpassed.
If just a few schmucks were to delve into the market and push up prices by spending money that they do not have then the market could absorb their acts of insanity. But when the vast multitudes of schmucks go insane AND these insane schmucks are able to somehow get lots of money then the market cannot absorb the insanity and thus the market reflects this insanity by having prices rise up to insane levels.
And after this happens the only way for a sane person can cope is either to drop out of the market altogether or surrender to the insanity and become insane himself and join the insane herd of insane schmucks.
And when he does this - when he become insane - then he allows a chunk of is money to be forwarded each and every month to the lender, the enabler, which is me.
Mr. Banker. I have not laughed this good in a long time. Thanks for explaining this so humorously. I wish I could pay you back by going into debt myself.
“And after this happens the only way for a sane person can cope is either to drop out of the market altogether or surrender to the insanity and become insane himself and join the insane herd of insane schmucks.”
Luckily this form of mass insanity is perfectly socially acceptable.
25 MILLION excess, empty and defaulted houses CHECK
Housing demand at 19 year lows and falling CHECK
Housing prices inflated by 250% CHECK
Household formation at multi decade lows CHECK
Rampant housing fraud CHECK
Public denial formed and supported by a corrupt media CHECK
Population growth the lowest in US history CHECK
Immigration flat to slightly negative CHECK
Oh my word……
‘California’s dream is shrinking inexorably…Compared with previous economic expansions, fewer state residents and communities are benefiting from this recovery, which has largely been restricted to the small coastal zone surrounding the Bay Area, as well as certain parts of western Los Angeles, Orange and San Diego counties. ‘
‘As the economy has strengthened, what is called a “boom” in the mainstream media is really a story of one region. Some 300,000 jobs have been created as the recovery has strengthened over the past 15 months,but three-quarters of them have been concentrated along the coast, mostly in the San Francisco-San Jose corridor.’
‘In contrast, much of the interior of the state, from the Inland Empire, where the poverty rate has doubled since 1990, to the Central Valley, is doing far less well. Unemployment has dropped to near 5 percent in the Bay Area, but remains above 8 percent in the Inland Empire, and above 10 percent in many interior communities, from Fresno and Modesto to Bakersfield. Viewed in the national media as some sort of permanent basket case, the inland region, booming a decade ago, was recently compared by a UCLA economist to Appalachia.’
‘Many wealthier coastal residents can afford housing close to major job centers and, for that matter, more expensive gasoline. But the same pump prices are a dagger aimed at the finances of many middle- and working-class people who live in the interior and have to commute to employment. The gentry retort – that such people should move to the city – ignores the fact that most middle- and working-class people can’t afford to live decently in places like Los Angeles, much less San Francisco, given current prices.’
‘Dreams, green or otherwise, take money, but our bifurcated economy relies increasingly on the fortunes of the few. California’s top 1 percent of earners paid 50 percent of state income taxes in 2012, up from 40 percent the year earlier. This is not surprising since so much of the state is either impoverished or stagnating. Once aspirational regions, proud contributors to the Golden State’s economic diversity, increasingly resemble dependent countries in the Third World.’
‘Right now, the state is evolving into something of a neofeudalist society, consisting of an affluent few, concentrated in the coastal belt, a large and expanding poverty class and a struggling, shrinking middle class. There’s the California of the oligarchs with 111 billionaires, by far the most of any state, with personally held assets worth $485 billion. Together, they own more than the GDP of all but 24 countries in the world. At the other end of the scale is a state with the nation’s highest poverty rate (adjusted for housing costs) – above 23 percent – and roughly one-third of the nation’s welfare recipients. ‘
‘This condition has been aptly labeled by one Central Valley writer as “liberal apartheid.”The well-heeled, largely white and Asian coastal denizens live in an economically inaccessible bubble – due to extremely high housing prices – while the largely poor, working class, heavily Latino communities eke out a meager existence in the state’s eastern interior.’
‘Meanwhile, the middle class, the social and economic linchpin of the state, continues to decline, with a far more dramatic drop in state households earning $35,000 to $75,000, according to research from the California Lutheran University forecast project, than the national average. As late as the 1980s, the Golden State was about as egalitarian as the rest of the country, and roughly 60 percent of its population was middle class. But now, for the first time in decades, the middle class is a minority in California.’
‘To be sure, many forces beyond Sacramento’s control – globalization, immigration, the asset-oriented nature of the recovery – have contributed to this growing wealth gap. But gentry-led pubic policies have exacerbated the refeudalization. Young Californians, notes one study, already are now less likely to graduate from college than were their parents.’
‘Right now, the state is evolving into something of a neofeudalist society, consisting of an affluent few, concentrated in the coastal belt, a large and expanding poverty class and a struggling, shrinking middle class. There’s the California of the oligarchs with 111 billionaires, by far the most of any state, with personally held assets worth $485 billion. Together, they own more than the GDP of all but 24 countries in the world. At the other end of the scale is a state with the nation’s highest poverty rate (adjusted for housing costs) – above 23 percent – and roughly one-third of the nation’s welfare recipients.‘
This is what “the future belongs to Lucky Ducky” means
The most populous state with nearly 40 million people has a poverty rate of almost 25%, a lot of which has to do with high housing prices coupled with shrinking jobs and wages, and yet the government is intentionally trying it’s hardest to inflate housing prices. Sounds like something from The Onion. Has anyone called Obama out on this in public? Are there any TV reporters left who have a soul?
“Has anyone called Obama out on this in public?”
Romney made a move in this direction, but then he wimped out.
And lost my vote.
Whimp out and lost your vote ( brillant statement based on what) ? So you voted for Obama who is not a whimp and has a full grasp of the office???
“So you voted for Obama who is not a whimp and has a full grasp of the office???”
I never said I voted for Obama. Did you fail college logic?
Logic? A whimp doesn’t tell you the hard facts, Romney told voters to let GM sink, Putin should dealt with as a adversity, and the borders get shut down, now where was your logic he was a whimp?
I just meant that it is illogical to assume that not voting for Romney implies voting for Obama, as there are other alternatives (not voting at all, voting for other candidates).
In short, you don’t know whether or for whom I voted for, so why not STFU?
Everybody I meet now says they never voted for him???
Don’t think I
I decided not to go any further, have a great dad’s day, oh my, I’m sorry, don’t know if you have children? there I go again.
Four lovely children, thank you.
Excellent!
‘California’s dream is shrinking inexorably…Compared with previous economic expansions, fewer state residents and communities are benefiting from this recovery, which has largely been restricted to the small coastal zone surrounding the Bay Area, as well as certain parts of western Los Angeles, Orange and San Diego counties.’
This is what happens when you have the biggest bottom up wealth transfer in history.
Cal nearly 40 million people, what do you expect CA. to be, Maybeery RFD?
‘what do you expect CA. to be’
With poverty like that, certainly not $300k houses.
Ben, if CA. would build let’s say affordable houses 100k for example, then another 40 million would want to move there, to keep the inmates out it has to be unafforable.
CA. is just fine with being the whipping boy of everything, they really can’t deal with any more humans.
‘another 40 million would want to move there’
Sure. I work a lot right on the Arizona, Nevada, California border. Somehow, this sun-baked sticker infested land becomes magical when one steps into California. And it’s sun-baked and sticker infested all the way to the coast. Yet Arizona and Nevada don’t have $300k houses nor the poverty that California has. Maybe there’s a correlation?
With tens of millions of empty acres in that God foresaken state, the population could double there and still not run out of space.
Statements like “God foresaken “are quite strong, what has CA. done to you, what is or was your beef?
‘As the economy has strengthened, what is called a “boom” in the mainstream media is really a story of one region. Some 300,000 jobs have been created as the recovery has strengthened over the past 15 months,but three-quarters of them have been concentrated along the coast, mostly in the San Francisco-San Jose corridor.’
A visit to the area makes this completely obvious.
A visit to the area makes this completely obvious ??
Yep…
‘In contrast, much of the interior of the state, from the Inland Empire, where the poverty rate has doubled since 1990, to the Central Valley, is doing far less well. … Viewed in the national media as some sort of permanent basket case, the inland region, booming a decade ago, was recently compared by a UCLA economist to Appalachia.’
I hear this is a great area in which to snap up a mini-Trump rental property empire.
‘As late as the 1980s, the Golden State was about as egalitarian as the rest of the country, and roughly 60 percent of its population was middle class. But now, for the first time in decades, the middle class is a minority in California.’
The fruits of decades of inanely libruhl policies are ripening by the hour.
To be sure, many forces beyond Sacramento’s control – globalization, immigration, the asset-oriented nature of the recovery – have contributed to this growing wealth gap.
I don’t disagree with the conclusion, but what is the nuts and bolts of the theory that the mainstream GOP and Chamber of Commerce types want shamnesty? If it is for cheaper labor, isn’t it going to cost more to hire a legal person than an illegal? Is it that the flood of millions of newly legal laborers will drive the cost of labor down to rock bottom min wage? Won’t it drive the costs up in other areas like construction where illegals are already working?
“Unemployment has dropped to near 5 percent in the Bay Area, but remains above 8 percent in the Inland Empire, and above 10 percent in many interior communities, from Fresno and Modesto to Bakersfield.”
The unemployment only counts people out of work for six months or less. The labor force participation rate should be used to describe California’s interior. That said, real unemployment in Stanislaus county, think Modesto, is upward of 17%, and that’s on the good side of town. And without irrigation water for farming unemployment has to steadily climbing.
Spot on…
There are a lot of factors at work effecting the inland empire…I have been here awhile so I have witnessed lots of changes…many of the small towns are in a death spiral or are already dead…The local grocery store ?? Forget about it…Now extrapolate that out with every competitive big box operation…How many shuttered gas stations do you see in these little towns ?? How many little mom & pop restaurants ?? You don’t go to Joe’s hardware store you go to Home Depot…
The fact is there are to many people in this State that the employment opportunities cannot support…So, we have poverty mainly supported by a underground economy and government transfers..Not a climate that builds a strong middle class…
And you have resale housing prices inflated 300% higher than construction cost.
Never forget that.
“Can the PTB clarify what exactly is meant by ‘affordable’ when it comes to housing? I was recently trying to parse the new head of HUD’s statements on the housing market. He crowed about government policies which have boosted house prices (’added trillions in equity’) yet said affordable housing was a goal as well. Contradictory goals it would seem.”
Rising prices create trillions in equity.
Falling prices improve affordability.
Plateauing prices lead to housing market normalcy.
No matter what happens, government housing policy worked to make all Americans better off.
Oh yes there are jobs in Arizona alright. But I am still better off working in California at the pay and compensation I am getting and renting two apartments than to rent only one place in Arizona at lower pay. Still looking longingly to have a decent income in Phoenix with one address…my firearms freedom is the only reason to still have an Arizona address. Plus I have a CCW in Arizona.
Did you see what happened to the guy at Walmart who had a concealed carry permit and thought he would play hero? He’s dirt napping. I’ll leave the law enforcement to law enforcement. I remember well what a criminal law professor in college told me:
“As policemen, we were required to carry off duty as well, but I never did. I’m like the next person, the last thing I want to do is get in a gunfight at 7-11 while grabbing some ice cream one evening.”
I agree. Even to try to protect a stranger’s life from a thug, all other ways to do so should be tried before using a lethal weapon.
And a massive surge in a adrenaline and shooting straight don’t often go hand in hand. People who shoot for a living have to be trained often in simulators in order to reduce that automatic autonomic reaction. Even long-term SWAT guys once they’ve stopped training don’t do well in pressured situations. People who think they’d be a hero in a tense, armed situation are quite delusional.
When I think back on my life, my proudest moment as a human was the time I “stood my ground” and scared off a would-be rapist by yelling at the top of my lungs for help. I had no weapon and I guess he could have shot me and killed me or kicked my ass, but in the heat of the moment I was unwilling to watch a 200 lb. man drag a college coed into the bushes to rape her (something that was apparently in progress when I walked past).
The guy cut and ran when I started to yell.
The most interesting part of your story was that you survived to tell the tale.
Wow—amazing, PB. Well done; you have a right to be proud. In that moment, you made a dramatic change in the course of someone else’s life.
“China’s home buyers are being offered no-money-down purchases in an echo of the subprime lending that triggered a U.S. economic meltdown and the global financial crisis. … ‘Home prices are actually pretty high,’ Song said. ‘We are helping out those college grads to buy properties as they might not be able to put down a big sum all at once.’”
“In Beijing, at a Beijing Pearl River Real Estate Development Co. project called Season Joy City, on the southern outskirts of the city, property company SouFun Holdings Ltd. is offering loans to cover up to 50 percent of the purchase price of apartments. On a hot summer morning, a couple with a toddler were the only prospective buyers, looking at models of apartment blocks in a showroom. Promotional signs said property prices ‘will never fall.’”
A lot of young Chinese families are soon to get some Joshua Tree schooling in the folly of buying a home at peak bubble levels.
“California Most Impoverish State In The US”
http://en.wikipedia.org/wiki/List_of_U.S._states_by_poverty_rate
(geography adjusted)
DC actually tops the list but that particular nest of corruption isn’t a state…. thank God.
CA. Just about everything there is ten times more bad then good or vice versa. A state that big you expect huge numbers, or do you have a grip that more of anything thing means just that, more of?
“…more of anything thing means just that, more of?”
Misses the point that there are a few super rich folks and millions of impoverished households, with a shrinking middle class between them. I.e. California looks more like a third world country by the day.
Ever been to the deep South, now that is poverty everywhere and that ain’t no CA.( i.e) I rather wake up in poverty in CA. then Miss. or Alabama don’t you think.
Ever been to the deep South, now that is poverty everywhere ?
Spot on….Remember the visuals after Katrina ?? This California bashing gets Humorous…
‘This California bashing gets Humorous’
I’m sure it’s very funny to the millions of poor people. And it’s largely housing that keeps them poor. Why is that? What is it about California that makes a house so expensive? Because everybody wants to live in Manteca?
A mania lives in the minds of individuals. It isn’t in the air or the water or the dirt.
to the millions of poor people ??
There are many millions of poor people Ben…They are not all located in California…Using California as a “poster boy” is just misleading and humorous when its non-stop…
What is it about California that makes a house so expensive ?
Demand…
Because everybody wants to live in Manteca ?
Some choose to for what ever reason…I just did a quick search in Manteca…1470 square foot house in nice condition for $223,000…Now it will depend on your prospective on wether you think that is affordable but if you can muster up the downpayment the monthly payment is $1090. per month…Add another $300. for taxes & insurance for $1390.
Demand?
Year Over Year Housing Demand Craters In 53 Of 58 California Counties
http://www.zillow.com/local-info/CA-home-value/r_9/#metric=mt%3D30%26dt%3D1%26tp%3D5%26rt%3D4%26r%3D9%252C3101%252C1286%252C2841%26el%3D0
‘Using California as a “poster boy”
That was a professor at Chapman that wrote this editorial.
When I moved to Sedona, I got to know several people. I soon discovered that about half of them were from California, and had move from there in the past few years. Many had left because of house prices; either they had cashed out or were priced out. I also discovered some of them had brought their notions of what houses and land were worth with them. And the prices in Sedona were skyrocketing to California type levels; coincidence?
Once a transplanted UHS from Santa Barbara drove me out south of Sedona to show me a plot of land. It was about 8 acres. He wanted me to go in on it with him. They were asking something like $750,000. I looked at that scrub covered dry red dirt and told him he was crazy. Something just like that in Texas would be 30-40k tops. So he starts to tell me how I’m not able to see it; I’ve no vision, because in a few years this land is going to double in value.
My experience is that Californians have an unusually high percentage of people that gamble in real estate. I don’t know why that is. And I also have seen that they take this gambling habit with them when they leave California.
This is relevant to this topic; that some or all of the “recovery” is fake. And California is a good example, because it’s house prices have “recovered” more than most places, yet I would suggest the higher prices haven’t helped overall and when they fall, there go more jobs.
“My experience is that Californians have an unusually high percentage of people that gamble in real estate. I don’t know why that is.”
That seems consistent with my experience, and I believe it is cultural. People I meet who have lived here far longer than I have a shared in the ‘real estate always goes up’ meme that borders on religion. I have met people from all walks of life, including close colleagues at work, who speculate in real estate as a sideline, something I can’t recall in my personal associations over the course of several decades living outside California. Of course I have lived through the mania years out here in California; it’s entirely possible that bubble-era thinking was contagious, spilling out of California to infect the rest of the country.
A couple of years ago, when visiting LA, my then 10 year old daughter stated, “it seems like everybody is either really poor or really rich here.”
I’d bet it hasn’t always been this way. And it can change. When I was growing up in Texas, most of us thought oil was driving everything. But even then, one of the best jobs in the oil biz was “land man”. Then when I got college aged I caught onto real estate. I lived near Dallas, which at the time I started studying RE in college had been the hottest RE market in the world for the past 4 years. Boy, I had the fever! I was going to become a developer and be rich. I never ever heard anyone say there was a bubble in Texas. After it crashed, everybody knew it. Humble pie was consumed by the masses, and we didn’t go crazy for real estate for decades.
And it’s going to be a mighty painful lesson for the Californicators.
“After it crashed, everybody knew it. Humble pie was consumed by the masses, and we didn’t go crazy for real estate for decades.”
We definitely saw it in the mid-1990s, when our new neighbors thought we were making a big mistake buying a California condo.
I can’t wait for reality to sink in again out here!
Year Over Year Housing Demand Craters In 53 Of 58 California Counties
http://www.zillow.com/local-info/CA-home-value/r_9/#metric=mt%3D30%26dt%3D1%26tp%3D5%26rt%3D4%26r%3D9%252C3101%252C1286%252C2841%26el%3D0
Devastating!
What’s more, unless my eye is somehow missing it, only two counties (Trinity and Tulare) saw MoM increases, and only one (Trinity) saw a quarterly increase.
Will investors race to the exits or will they hang on to their falling knife investments forever? I guess only time will tell.
“When 51 condos in the 36-story sail-shaped skyscraper sold at deep discount — some of them at half-price — one auctioneer burst with joy: “Who said Florida’s in trouble?”
Now, four years later, some of those buyers happily agree. This year, condos there are selling at a median price of 70 percent higher than in 2010. One condo next door to a $199,000 auctioned unit just sold for $450,000 in cash.”
http://www.tampabay.com/news/business/realestate/luxury-condos-go-from-recession-doom-to-boom/2184331
They never learn.
http://seattletimes.com/html/businesstechnology/2023842656_eastsidehomebuyingxml.html
“Bidding wars, cash heat up Eastside’s real-estate market
Would-be buyers in Bellevue and other Eastside communities are going above list prices, waiving inspection and writing flowery letters to sellers.”
I wonder if they promise to feed the squirrels?
I live in this area and prices have recently eclipsed the last peak - just down the street from me is a new 3800SF house-that-Ikea-built (seriously, with its plain features and brown finishes, that’s exactly what it looks like), accessible only via the northbound lanes of a busy arterial that has two hours of bumper-to-bumper Microsoft traffic on it every afternoon. Asking price? $1.33M
Of course, for somebody down in the SF bay area, that would be a steal!
And not a buyer in sight.
My last Seattle-Redmond commute was in 2008. These days I sometimes go on 520 or 405 around 2 pm and it is worse than it used to be at 5:30.
Friday around 3 pm I was in Queen Anne and Mercer was backed up all the way there from I-5.
I don’t see how these people don’t all go on strike to demand telecommuting. They must have 90+ minute commutes each way every day. Insane.
The perfect symbiosis is where the parasite never kills its host. The tipping point, however, is never known…not unlike the onset of diabetes.
b>Falling housing prices to dramatically lower and more affordable levels is the definition of a housing recovery.
So hard to keep the code straight when you’re posting while drinking.
‘There were 312 homes sold in Frederick County in May, according to RealEstate Business Intelligence, up from 260 in April. RealtyTrac reported 111 foreclosures in the county last month, down from 117 in April.’
“There continues to be concerns about the most recent activity,” said Hugh Gordon, loan officer with Fitzgerald Financial. “Most people I have spoken to of late are forecasting July will yield weak numbers if activity doesn’t pick up soon.”
‘Price is always a factor, said Wayne Six, an appraiser. “You can talk to four different sellers who have their homes listed and get four completely different answers when you ask how the market is doing,” Six said.’
‘Six said lower-priced homes are picking up in appreciation, but higher-priced ones are remaining flat. Houses less than $250,000 are selling quickly; those between $250,000 and $400,000 relatively briskly, and it’s much slower for the $400,000 to $600,000 range, Six said.’
“And houses over $600,000 in price are struggling as there is a lot of inventory in this price range and substantially fewer buyers,” Six said.’
Is Frederick County out in the middle of East Jesus, or does it just look that way on the map?
I’m also curious if the 75 miles from DC is considered “commute distance” out in that part of the country.
Meanwhile, the Hopebuilders Index is signalling rough waters ahead for the home construction industry:
This Wayne Six man, he has good take on what is happening not only local, but this goes for the US markert as a whole.
Happy Father’s Day to all the dads.
Sorry, but way too cliche. Just because you spawned offspring does not mean you deserve to be honored.
that’s why i said “dads”. a dad is the guy that cares about his kids and is there for them. if you had a “dad”, he is someone who is a big part of who you become and deserves credit for the sacrifices he made. nothing cliche about that. i feel sorry for people who had to grow up without a “dad”. i’m very thankful for mine and wanted to extend a simple acknowledgement of the “dads” out there. my comment wasn’t directed towards men who simply succeeded in impregnating a female.
Housing prices are staggering in Canada, although some markets are goofy. Industry, too, is staggering anywhere in Canada.
We do not seem to have a solid direction forward although opportunities for growth are abundant.
The biggest Moose in the room are interest rates. Yellen cannot continue cutting Ten B a month without hurting something - and probably all at once.
‘Stephen Moore is the chief economist for The Heritage Foundation, a former writer for The Wall Street Journal and co-author of the recently published book “An Inquiry into the Nature and Causes of the Wealth of States.” He spoke to the Trib regarding the risks of current Federal Reserve Board policies.’
‘Q: Do you consider the Federal Reserve Board’s loose monetary policies misguided?’
‘A: Well, you cannot create prosperity by printing money. If it were that simple, Mexico and Argentina and Bolivia would be the richest countries in the world.’
‘That’s been the strategy of the Fed for five or six years — just revving up the printing press, just keeping interest rates as low as possible, purchasing a lot of mortgages and Treasury securities. When the Fed purchased these assets, it flushed new money into the economy.’
‘Q: What do you see happening if the mission continues unabated?’
‘A: That’s a very difficult question to answer, because these are uncharted waters. Everyone is hoping we don’t crash-land, but we could. I don’t remember a nation ever doing this before, putting this kind of money in and setting interest rates this low and for this long a sustained time period.’
‘But it’s pretty clear that the flush of money in the mid-2000s, a lot of that excess money, went into real estate, and what did we have? We had the real estate bubble that popped and it really caused incredible disruptions to the economy. Let’s hope we are not building up another bubble with easy money right now.’
‘I am one who believes that rules are better than discretion. We ought to have some set of rules and announce what those rules are so we’re not having this wizard behind the curtain — in this case, (Federal Reserve Board Chair) Janet Yellen — pulling levers and everybody trying to guess what she’s doing back there.’
‘Why not be open? Why not have transparency? Why not let everybody in the world know what the Fed is doing so you don’t get all this trading on the Fed minutes, reports and things like that? Markets don’t like risk and uncertainty, right? The Fed’s policies have added risk and uncertainty to the financial marketplace and that’s less than ideal.’
‘ If it were that simple, Mexico and Argentina and Bolivia would be the richest countries in the world.’
Don’t forget Zimbabwe.
To Lionel who posted his ten year old daughter saw nothing but rich and poor in CA. When I played ball many years ago and traveled mostly to small and midsize towns there was always the one street or two streets of the “you know who lives there people.”
Tell your daughter in America per say there is always rich and poor, the middle class is a holding station, if you make a mistake you are poor, if you get lucky you can be rich, it is not a CA.thing
Wow of all people I can’t believe I’m defending the Golden State, my wife is having a laugh about it. When we ran away from there (and yes we mad a lot of money in real estate) for that I will never bash CA.
I just want it understood in my opinion, CA. from all angles is a diverse not well defined place of the good, the bad, and the ugly,
Sorry folks, CA. can’t be Boston,NY,Chicago etc. it was a land of new opportunity without the relatives and friends snooping and telling what to do with your life.
It was a freedom to express, invest, win some, lose some, and do it all with a diverse climate from border to border.
Notice I’m posting in the past tense, today the beauty of CA. and what God gave to us will never go away, what went away was the dream for most of the good life, it never really happened at all, it was a mirage.
We like many got tired of waiting and left, our good life was just a short distance from CA. we wish CA. had come through for us, but it didn’t, now it only sees foreigners as its salvation, don’t think it will work out in the future, these folks will also see CA. as a mirage?
Like we said… it’s the internet. Foisting BS is just an old trick for you.
As far as the impoverished hell hole CA is, what can be said beside that?
69 percent of Americans believe the economy is in bad shape
Sounds like a good contrarian indicator.