The Market Feels A Bit Surreal Again
It’s Friday desk clearing time for this blogger. “Only 95 African-American couples or families applied for home-purchase mortgages in all of Multnomah County in 2012, a paltry 1.5 percent of the total, according to federal data. Six years earlier, before the housing bubble popped, 575 black families or individuals applied for home-purchase loans in the county. African-American families are losing a time-tested way to stabilize their finances while building assets for retirement or economic and social advancement, says Tom Cusack, a retired federal housing official. ‘What are you going to do to accumulate wealth?’ Cusack wonders. ‘You’re not going to get rich or pass along money by putting money into a 1 percent CD.’”
“As Inland home prices move closer to unaffordable levels for many working Janes and Joes, homeowners and shoppers are clamoring for a timeout moment, like the one you get just before a roller coaster car crests the hill. Dennis Kolbeck, an Inland-area home shopper, called last week to say something’s got to give because the market feels a bit surreal again. ‘I was ready to pounce on a house, but the prices got the best of me,’ he said.”
“In the Phoenix-Scottsdale, Arizona market, the summer market is drowsy. ‘We seem to have sluggish demand,’ said Floyd Scott, owner of Century 21 Arizona Foothills. In the luxury market of $1 million and above, supply is more like 18 to 24 months, he said. Scott noted the number of transactions has been ‘trending down’ for three years. Buyers are taking longer to decide on their purchases, shopping around more. ‘We’re not seeing multiple offers on any of our properties,’ he said.”
“‘Sales are lower this year than they were last summer,’ said Bonnie Roberts-Burke, president of the District of Columbia Association of Realtors. ‘Buyers are worried that they’re over-paying. They’re pickier than I’ve seen in the last few years,’ she said. ‘More deals seem to be falling apart than in the past.’”
“The foreclosures in Frederick County, according to RealtyTrac, jumped from 109 in June to 199 in July. Hugh Gordon, a mortgage loan officer with Fitzgerald Financial, said there are mortgagors barely hanging on. Some of those walking away from the house, even though a foreclosure means a loss of credit standing, are doing so because of the condition of the house, Gordon said. ‘What do you do with a town home in a group of town homes that no one wants because of its condition?’ Gordon said. ‘I also continue to see far too many buyers entering the market thinking prices are as negotiable as they were during the recession.’”
“The Austin housing market is overvalued, according to the latest Trulia Bubble Watch report. At the end of an alley off East 11th Street is a one bedroom, one bath, 780 square foot home. It’s described by realtors as a likely ‘tear down.’ The asking price is $310,000. Cathy Conley and her husband bought their first home in the 80s. Then Austin’s biggest bubble, burst. ‘We watched the investment in our home dwindle before our eyes,’ said Conley. They were able to wait it out until the 1980s housing market recovered. But, many weren’t so lucky. ‘Austin was booming at the time and everyone was investing in new homes and life was great and then the rug was pulled out from under most people in Austin.’”
“What makes Countrywide special isn’t just that they gave out a lot of bad loans, it’s that they sold those bad loans to others while keeping the good ones for themselves. In a 2005 email, the Countrywide Financial Corporation’s chairman—not named in the statement, but it was Angelo Mozilo—wrote that he was ‘increasingly concerned’ about a certain adjustable rate loan. He feared that the average borrower was not ’sufficiently sophisticated to truly understand the consequences’ of their mortgage, making them increasingly likely to default. He wrote: ‘…the bank will be dealing with foreclosure in potentially a deflated real estate market. This would be both a financial and reputational catastrophe.’”
“According to the CMHC survey, ‘about half’ of condo investors in Toronto and Vancouver currently rent out their last purchased unit. However, one glaring omission from the survey are foreign investors, as it only included condo owners who reside inside their CMAs. And, as several brokers have pointed out, the survey assumes all participants truthfully filled out their paperwork at time of funding.”
“‘I believe that this report is based on a survey or condo owners and is also based on what was reported at the time of funding; So in reality we have no idea how accurate these numbers are,’ commenter M. Robertson said. ‘From experience as a lender I can tell you that a lot of brokers will put owner occupied on an application so that they can get it approved. A lot of lender underwriters also turn a blind eye.’”
“Weekly advertised rents have fallen 3.6 per cent in Docklands and 6.4 per cent in Southbank over the past 12 months while they have stayed still in the central business district, RP Data figures show. Over the past five years, rents in Docklands have fallen 8.6 per cent. In Sydney, Hugh Eriksson tells a similar story. The marketing executive, who owns a townhouse in Neutral Bay, says he has bent over backwards to keep rents near to stable and has even allowed pets. ‘There might be low vacancy in the inner city but renters are still in a position where they can choose,’ he says.”
“Jason Plevras paid $600,000 for a two-bedroom apartment in Melbourne’s Southbank last May. The real estate agent assured him he would have no trouble finding a tenant, Plevras says. ‘I remember when I was signing the contract to buy, I made clear that I was worried we won’t be able to rent it,’ the 33 year old says. ‘They said ‘renting will never be a problem. You’ll always have tenants,’ His starting price was $600 a week, but that went down to $525 before it rented. It’s been a ‘yo-yo’ of tenants coming and going ever since, Plevras says. ‘Because it’s so competitive, we’re almost putting anyone we can in.’”
“More wealthy Chinese are moving their money out of China to invest in Australia’s property market as a corruption crackdown in the world’s second-largest economy gathers momentum, according to property consultants and lawyers. Chinese citizens received approvals to invest nearly $5.58 billion into the sector, up 41 percent from a year ago. ‘They are worried, so they are looking for a safe place,’ said a Sydney-based immigration lawyer, who is advising on setting up a new fund exclusively for Chinese investors and regularly travels to Beijing and Shanghai. ‘They don’t want returns, not necessarily. They want a safe place to park their funds.’”
“At a new luxury apartment project called International City Park, a salesperson said sales have slowed sharply since the start of the anticorruption drive. Kaili is the capital of Qiandongman prefecture and the home of many government officials, who used to be big customers. ‘Government officials here have two or three apartments,’ according to the salesperson. They aren’t looking to buy more. ‘They are secretly trying to sell them,’ she said.”
“A group of students from a Communist Party school in Kaili, for instance, recently toured the prison and received a ‘vivid warning’ of the dangers of succumbing to corruption. The climax of the show: songs and dances performed by the prisoners about their crimes and their feelings of remorse. The performers were dressed in prison gray-and-white striped uniforms. ‘We are all party officials,’ said one of the attendees. ‘We all have had similar experiences. Now they have to spend their lives in jail.’”
Funny how the local government reacts to not being paid back:
‘The city of Springfield has accepted deeds in lieu of foreclosure on two homes on East Cecil Street that were remodeled and sold as part of the $8.5 million Neighborhood Stabilization Programs.’
‘The city served as a lender for residents who couldn’t otherwise qualify for a home loan in both phases of the stabilization program, which the federal government created and paid for to fight the effects of foreclosures in neighborhoods at the height of the Great Recession.’
‘Commissioner Kevin O’Neill believes the former homeowners should receive a hit on their credit scores. O’Neill voted in favor of accepting the deeds because it’s the simplest way to remedy a complex situation.’
“It’s done every day in the private sector,” he said. “That’s not the problem. The problem I had with this is the reportability and how the people who made a commitment to the city of Springfield were being dealt with.”
‘The former owners have to be accountable for their commitment, O’Neill said, so he wants the action to go on their credit reports. “If you’re not going to be accountable, there has to be consequences,” he said.’
Well you’re just a mean old scrounge, expecting people to pay their bills. BTW, welcome to the real world.
‘Foreclosure activity in metro Toledo increased 23 percent in July from the same month a year earlier. Glennis Przymierski, a foreclosure real estate specialist with the Danberry Co. in Toledo, said the inventory of foreclosed properties she works with is down. But generally, foreclosure activity hasn’t dropped as much over the past few years as local real estate industry officials had hoped.’
“My numbers are down, my inventory is down. And we’ve seen a little bit of a drop,” Ms. Przymierski said. “But there’s an awful lot of [homes] that haven’t made it through the sheriff’s office yet.”
‘Local real estate agents were looking for a drop in foreclosure activity a few years ago when the housing market began to recover. “But we really haven’t seen that,” Ms. Przymierski said.
“People that went through loan modifications a few years ago were helped. But those modifications only last a certain amount of time,” she said. “As those modifications have come to an end, many are finding they still may not be able to afford their homes.”
Los Angeles, CA Housing Demand Plunges 13% YoY; Sinks To 4-Year Low
http://picpaste.com/pics/48be120ad200da2049816d34b3aecde6.1408667935.png
http://files.zillowstatic.com/research/public/City/City_Turnover_AllHomes.csv
‘As the city pushes to increase the number of owner-occupied homes, the recent development of more subsized senior housing downtown has some local landlords worried that they can’t compete.’
‘At places such the Gerald Hotel Senior Housing in Fairfield, Gilman Place in Waterville, and now the St. Francis Apartments on Elm Street, subsidies and tax incentive programs allow non-profit groups and developers to invest thousands of dollars more in construction or renovation of rental units, which are then offered for lease at below-market rates.’
‘Eleven percent of housing units are vacant in the city, which means that there is no need to build more housing, according to Lindsey Burrill, president of the Central Maine Apartment Owners Association, a landlords’ group.’
“There is no lack of housing in Waterville. If we were in need of housing, all our units would be full, people would be fighting over them and prices would be going up,” said Burrill, whose family owns about 300 rental properties in Fairfield, Oakland and Waterville through its company, Brown House Properties.’
‘Sales volume in Northeast Philadelphia was down; that was also the case in Center City and Northwest Philadelphia zip codes. Average prices rose in the Northeast and Northwest; Center City prices were flat. Christopher J. Artur, of Artur Realty in Mayfair, said that after the winter the Northeast had nowhere to go but up. Still, activity is below 2013 levels.’
‘Prices also fell, Artur said, attributing that to “investors being out in strong force. Cash is king.”
‘Carol McCann, of Re/Max Millennium in Somerton, has seen more investors too, but she said first-time buyers benefiting from loosened mortgage rules and incentive programs turned out. “I’ve had at least 10 people who have come to me to rent a home, and I was able to get them qualified to purchase with little money down,” she said.’
‘Despite expectations for a robust summer selling season, home sales dropped statewide by 3.4 percent, according to a news release from the Maryland Association of Realtors.’
‘For the fourth month in a row, both average and median price decreased or remained flat. Average price declined by $11,000 or 3.3 percent and median price fell by $8,000 or 2.8 percent.’
‘The number of homes for sale in the Baltimore metro region climbed to the highest level in nearly three years last month, but closed sales failed to follow suit, a mismatch that reflects weakness in the housing market, analysts said.’
‘Encouraged that the market may be recovering, sellers began listing their homes in greater numbers — new listings have shown year-over-year gains for 16 consecutive months. But buyer demand this year has remained weaker than many had hoped.’
“Our expectation was just way overstated,” said Brian Hill, 37, who listed his family’s Annapolis home in February in order to move closer to his wife’s job as a financial analyst in Baltimore.’
‘The Hills already had waited a few years hoping for a market recovery. Despite well-attended open houses, they didn’t close with a buyer until last month — after switching brokers and agreeing to take about $25,000 less than the initial asking price.’
“It just wasn’t where we needed it to be and we finally felt as though early this spring it was,” said Hill, who worked with Orso on the sale. “We had expected a much quicker sale at a price at or closer to what we were listing for.”
“Buyers have gotten a lot pickier,” Wright said. “There’s very little sense of urgency in the market.”
‘Economist Daraius Irani, director of Towson University’s Regional Economic Studies Institute, said he expects to see the housing market improve slowly, as the economy grows stronger. But sellers shouldn’t expect to see the kind of price appreciation that occurred before the bust.’
“The challenge really is to get yourself out of the mindset of the pre-recession housing prices growth,” Irani said. “Last year was artificial because of the shortage in inventory. … This year is a reaction to that. Next year, it’s probably going to oscillate up and down until a nice equilibrium is realized, but I don’t think you’re going to see a hot, hot market.”
Isn’t it interesting that all these shortages have magically started to go away at the same time as prices stopped going up? It’s almost like these people were waiting to get the maximum buck for their shack.
“What makes Countrywide special isn’t just that they gave out a lot of bad loans, it’s that they sold those bad loans to others while keeping the good ones for themselves.”
And they should have perhaps sold the good loans to others while keeping the bad loans for themselves?
“In a 2005 email, the Countrywide Financial Corporation’s chairman—not named in the statement, but it was Angelo Mozilo—wrote that he was ‘increasingly concerned’ about a certain adjustable rate loan. He feared that the average borrower was not ’sufficiently sophisticated to truly understand the consequences’ of their mortgage, making them increasingly likely to default. He wrote: ‘…the bank will be dealing with foreclosure in potentially a deflated real estate market. This would be both a financial and reputational catastrophe.’”
But as long as the music was playing Angelo had to keep dancing.
My favorite part:
“He feared that the average borrower was not ’sufficiently sophisticated to truly understand the consequences’ of their mortgage, making them increasingly likely to default.”
That word “adjustable” in the loan documents that these ignorant pukes WILLINGLY signed didn’t seem to mean a thing to them when they signed the dotted line.
How many of you pukes on this message board will willingly commit yourselves to buying something that you have no idea of what the final price will be? An adjustable rate mortgage is just such a thing.
“How many of you pukes on this message board will willingly commit yourselves to buying something that you have no idea of what the final price will be?”
Most don’t perform the honest math necessary to understand the final price whether paying cash or financing. Nor do they understand the value of what they’re buying hence we have millions paying 200%-400% premiums for depreciating assets.
Sandra Rowland retains a beauty, regal and reserved, but Harrisburg has broken her, she says. She was - once - a force in the community, a real estate agent who also invested herself in a vision to improve Allison Hill.’
‘This is the story of Sandra Rowland’s fall from grace and - by extension - how a block of housing on Berryhill has slowly started to crumble. When PennLive contacted Sandra Rowland, she said we needed to talk to the bank: she hadn’t had anything to do with the Berryhill property in years - and under the terms of her mortgage, the bank could take it if she missed three payments, and indeed the bank had said, years ago, they were taking it.’
‘But court records show they didn’t.’
‘We wanted to know why Rowland walked away in the first place. Reluctantly, she agreed to talk. Today, Sandra Rowland gets by, barely. She doesn’t inhabit as much as she haunts a stately old home in the 8th ward. A museum piece of her former life, it will be taken from her soon, foreclosed.’
“I’ve lost everything,” she said.’
‘Members of Springfield No One Leaves said foreclosures are a still a serious issue for Springfield residents, five years after the subprime mortgage crisis.’
“When you walk through our neighborhoods in Springfield you see vacant homes and those vacant homes are owned by Fannie Mae and Freddie Mac,” said Roberto Ceballos-Garcia, a community organizer with No One Leaves. “That doesn’t help our community, that actually affects the living conditions of anyone around it.”
‘Ceballos-Garcia said they want FHFA-owned properties to be turned into a housing trust fund, for the land to be permanently owned by the government and housing on the land available for rent. “It would create more affordable housing for people who need it,” Ceballos-Garcia said. “We believe that everyone deserves a home.”
“We intend to pressure anyone we can, at their homes, events, and offices across the country, until (Federal Housing Finance Agency) Director (Mel) Watt changes these insufferable policies and stops evicting families, said Providence organizer Christopher Samih-Rotondo. “Because Director Watt has called our proposals ‘too demanding,’ and cited the alleged difficulty of changing policies at FHFA, we intend to bring the fight from our homes to theirs, hoping to infuse a bit of urgency to their ‘study’ of these changes.”
‘A Pound Ridge home will be auctioned September 10 to recover a more than $1.3 million mortgage default plus interest and costs. The five-bedroom house is owned by Jaison Joseph, who defaulted on his loan in 2009.’
‘Westchester County land records show that Joseph bought the house in a foreclosure auction in 2006 for $906,000.’
^ The definition of dumb money right there.
When seeking underpriced assets, why would you overpay 700%?
‘The Oregon housing market will be slower to recover due to a large number of foreclosure filings that have yet to be resolved. Foreclosure filings in 24 counties tracked by distressed real estate buyer Gorilla Capital increased in July, reaching 594.’
“Foreclosure filings are coming back from summer vacation,” said John Helmick, Gorilla Capital’s CEO. “As we get closer to school starting, lenders are more and more aggressive with foreclosure filings. Filings from months ago are finally through the state mandatory pre-foreclosure timeframes and borrowers are through the state-mandated processes.”
‘Blighted properties in Providence are getting a face lift thanks to a new program aimed at addressing the foreclosure crisis. The receivership pilot program will help turn vacant-problem properties into a place buyers and tenants can again call home.’
“It sends the message that this is a neighborhood to invest in and will be a great place for people to live and raise their kids,” said Jeffrey Padwa, City Solicitor.’
‘Here is how it works: a court appointed receiver takes control of the property. They fix it up and then are either paid back by the owner, or the property is sold. Frank Shea, Executive Director of the Olnyville Housing Corporation says the threat of losing their property makes owners more accountable.’
“Property owners who are not holding up their end of their responsibilities now knowing this tool is available to the city I think will be brought to bear to be more responsible,” he said.’
‘The Pleasant Street home was the source of crime in the Mount Pleasant Neighborhood. On top of that it had been in housing court for at least 7 year, and had a number of code violations. Neighbors hope the transformation will bring up property values.’
‘There are about 300 vacant properties in the Capitol City. 6 of them are currently being restored, and plans for more across the city are in the works.’
And the math that they should perform is associated with buying an item that could financially break them if their math is wrong.
And even if you bothered to do the math, how could you do good math if there is some sort of unknown and unpredictable variable stuck right in the middle of your figures?
“He feared that the average borrower was not ’sufficiently sophisticated to truly understand the consequences’ of their mortgage, making them increasingly likely to default.”
I must not be an average borrower, as I remember a Realtor® trying her hardest to convince us to buy a home back in 2004 with an interest-only option ARM. Since I could read the handwriting on the wall, we politely declined the offer.
we politely declined the offer
You mean like this?
https://www.youtube.com/watch?v=nxXEPk3dzFg
“How many of you pukes on this message board will willingly commit yourselves to buying something that you have no idea of what the final price will be?”
This kind of offer is most attractive to people with a very short-term financial outlook. Those who are focused on long-term household financial stability will naturally avoid an offer of near-term affordability in exchange for long-term financial uncertainty with a high probability of financial ruin.
Adjustable rates have their place. Only if you can easily afford the rates going up by 10 points. You pay a premium for fixing your rate, which over the long-term costs you more money.
The problem is that people were not using ARMs because they were cheaper over the long term. They were using them because they couldn’t afford the couple point premium to borrow at a fixed rate.
“They were using them because they
couldn’twere unwilling to buy a home that was sufficiently inexpensive to enable them to afford the couple point premium to borrow at a fixed rate.”Thats better.
It dawned on me during the subprime craze that buyers faced a choice of drinking the subprime koolaide to buy a home they otherwise couldn’t afford, using prudent financing to buy a less expensive home than the maximum crazy loans would have enabled them to buy but still overpaying thanks to everyone who drank fully of the subprime koolaide, or wisely choosing to rent while everyone else overpaid at peak pre-crash bubble prices. In short, subprime lending artificially inflated the bid, leaving anyone who borrowed to buy at peak bubble prices holding the bag on an excessive amount of principle owed relative to the value of the underlying.
‘”For sale” signs are popping up across Greater Boston and other parts of the state, with a significant uptick in homes hitting the market, says Peter Ruffini, president of the Massachusetts Association of Realtors.’
‘Certain communities, like Plymouth, seen above, are particularly seeing a pick-up in listings. Several dozen additional homes have hit the market in Plymouth this summer, providing a significant boost to the market, notes Ruffini, a regional vice president at Jack Conway & Co. in Hanover.’
‘That’s significant given the coastal town is often a bellwether for the South Shore real estate market, he says. “The good news is that there are fewer (sellers) sitting on the sidelines than there were earlier this year,” Ruffini says.’
‘Overall, June saw 8,418 homes hit the market across the state, a 13 percent jump over the same period in 2013, MAR numbers show.’
Mean ol’ mister supply and demand:
‘Troy Boston, the city’s latest luxury apartment development still under construction in the South End, has posted a giant banner on the building advertising for tenants — five months before phase one of the 378-unit development even opens.’
‘And it’s no wonder. Competition for luxury renters in Boston is fierce these days, with at least seven prominent developments currently to choose from.’
‘Carl Valeri, president and COO of The Hamilton Co., the Boston company that manages more than 5,200 mid-priced apartments in Greater Boston, said with the exception of the Kensington, the rest of the apartment communities are likely to be disappointed.’
“At most, it should take between six and nine months to lease a building. A year to lease up is outrageous. Either the product works or it doesn’t,” he said. “Kensington is exactly where they should be, but all the others seem to be lagging. I think it indicates that demand is not a deep as developers were hoping.”
‘Homebuyers from China, attracted by the Bay State’s internationally renowned universities and colleges, are driving up luxury real estate sales in Massachusetts.’
‘This high rate of international investment is helping Massachusetts outpace the rest of the nation in terms of luxury home sales, according to a recent study. “The RE/MAX Collection Luxury Housing Report” finds year-over-year luxury home sales – properties priced at $1 million and above – are up 14.6 percent in Massachusetts compared to last year. Meanwhile, the national rate of luxury sales is up by only 4 percent.’
‘Paul Shao, a RE/MAX Sales Associate who specializes in Asian real estate markets, says the Commonwealth’s reputation as an education mecca is clearly a strong draw for Chinese buyers. “[They] buy in California, New York, and in Boston. We have the name-brand schools such as Harvard, MIT, and BU. They’re well known in [China].”
‘Financial security is another reason for the rise in Massachusetts investment. “In China, they’re concerned with [economic] instability,” says Shao. “One of the driving factors is that they’re trying to get their money out of China and into a more secure place.”
‘The Cape Cod Young Professionals group, with the help of the Dukakis Center for Urban & Regional Policy, recently published a survey and study that found the region’s young people are leaving in alarmingly high numbers. Those in the 25 to 44 age range declined by 27 percent in the 2000 to 2010 period.’
“The 27 percent decline represents a net loss of nearly 15,000 young adult residents,” the report noted. Like Maine, the 45-year-old to 64-year-old age group is growing; on the Cape, it grew by 20 percent. What does that mean?’
‘Sadly, the prospects for an immediate turn-around of the youth out-migration are slim—47 percent of respondents had seriously considered moving off-Cape, and a third was “very likely or somewhat likely” to do so in the future.’
‘The causes of the youth exodus were clear, and, given our state’s struggles with the issue, not surprising.
‘Only 34 percent agreed that salaries and wages provided a living wage. Only 35 percent thought there were “enough opportunities for promotion and advancement in their chosen field.” Fewer than 37 percent believe there are enough jobs that match their education and experience. Fewer than 39 percent said there were enough jobs in their chosen career.’
‘The second dagger driving young people off the Cape is the cost of housing. While 58 percent of respondents said they owned their own home, 70 percent paid monthly mortgages of $1,251 to $2,500. Half of respondents were paying more than 35 percent of their gross income on mortgages. Half of renters were spending at least 30 percent of their gross income on rent.’
‘Financial experts say that those proportions mean “at least half of all the survey respondents are ‘housing cost burdened,’ forced to spend more on housing than is recommended.”
This isn’t hard, but presently the only way this kind of social cost can be understood by our culture is if it’s quantified in dollars.
I’m especially sad at how little 2008 changed the thinking of anyone in a position of political, economic, or social leadership. Money remains the most important thing, but now it’s being printed and loaned at ZIRP to financiers, which has amplified the total moral bankruptcy the country is experiencing. Probably time for another war.
From one corrupt People’s Republic to another.
Bahstin defies gravity
ever drive there?
We have a visitor at work whose home is NH, and who used to work in Boston. I heard yesterday that the number of homes for sale in her immediate neighborhood has been steadily increasing for months with no end to the trend in sight.
Moorpark, CA Housing Prices Crater 11% YoY As Housing Demand Plummets
http://www.movoto.com/moorpark-ca/market-trends/
Costa Mesa Housing Prices Sink At Height Of Selling Season; Inventory Balloons 86% As Housing Demand Collapses Statewide
http://www.movoto.com/costa-mesa-ca/market-trends/
This house is across the street from the home that I grew up in. It sold for over $700,000.00 earlier this year.
http://www.zillow.com/homedetails/1704-Labrador-Dr-Costa-Mesa-CA-92626/25246666_zpid/
Like it or not both the housing “market” and the Stock “markets” are now pretty much back to where they were before the crash 5 years ago. I do understand that the policies put in place to make this happen will eventually end in economic collapse.
However, over the last few years one only had a couple of options for their cash. Follow the new paradigm (riding housing and stock bubbles) and bring in revenue or chose to ignore the fake economics being fueled by FED intervention and slowly lose the value of one’s savings through ZIRP along with 5 years of steady dollar debasement.
It’s a shame that this is where we are now as a Country.
“the housing “market” and the Stock “markets” are now pretty much back to where they were before the crash 5 years ago.”
Ehhhhhhhh no. Demand is no where near where it was 5 years ago.
Again…. You can ask $50k for you 11 year old Honda but where is the buyer at that price?
‘The number of unoccupied houses throughout Japan keeps growing and is now estimated to have reached a record 8.2 million — or roughly one in every seven houses in this country. With the aging of Japanese society and the decline of its population, the number of such houses — including abandoned properties that pose safety hazards to local communities — is expected to rise further.’
‘Of the 8.2 million vacant properties nationwide as of last October, about 5 million are either up for rent, waiting to be sold or are kept as second house by owners who live elsewhere. The remaining 3.2 million include properties whose occupants have been absent for a long time and those waiting to be demolished, according to the Internal Affairs and Communications Ministry’s latest survey.’
‘The number of vacant houses has doubled over the past 25 years. Some estimates show that one in every four or five houses in Japan will be unoccupied by around 2030.’
This points out the problems of having a closed society. If Japan had a reasonable immigration policy the vitality of their economy would improve.
Not really J._Fraud. That’s about misallocation of capital resulting in massive overbuilding. Just like here in the US. Speaking of which… the situation is far worse here as we have 25 million excess empty houses and another 35 million just beginning to empty.
By the way… you have a few excess, empty depreciating houses. Dump them now rather than later.
stocks and homes have become away for the money people to get more money into the system.
A company can do an ipo and sell a bunch of pieces of paper(stock certificates) and exchange them for other pieces of paper called currency.
they sell 1000 shares at 10 bucks each. They get 10000 n currency. The stock goes up to 20 there is now 10000 more dollars created out of thin air. It works as long as the stock keeps going up. Same thing applies to housing.
Through QE the FED prints currency and buys bonds.
Through rising stock and home prices new currency created.
Through fractional reserve banking new currency created.
We have an imbalance of currency and actual goods and services.
Most people have quit saving and now rely on their home to do the saving.
Sounds like a house of electronic cards.
Poet… Houses don’t save. They spend.
That’s possible, although it’s also possible that immigrants wouldn’t be accepted. I have never been there, and would like to hear from someone who has, but I get the sense that Japanese culture is very difficult to assimilate into.
Japan overbuilt when their economy was riding high in the 80s. One could argue that GDP, as an economic measure is misleading, since the building frenzy in Japan obviously contributed to the economic might of the country. The same way it is happening in China.
IMO, Japan had better success at mitigating the fallout because of their culture. The bad part of the economic stagnation is that their youth are disenchanted, with little or no full-time job opportunities, they make do with help from their parents and with little part-time work. These are youth with 3 year and 4 year degrees.
So, these youth with little or no prospects for decent paying jobs are not in a position to buy those empty dilapidated houses. The places in Tokyo and greater Tokyo metro area can be rented because that is where the meager paying jobs are. The rents have been very stable over the last 5-6 years and in some places falling even.
For these youth that move from one part-time job to another, the Japanese have a name フリーター ”freeter” . I am not sure, but it seems that the word was a substitute for freelancer.
I’ve read some interesting things — that young adults are disinterested in sex and relationships, that young men in particular have little motivation and are called “grass eaters,” and that sales of adult diapers in Japan are exceeding the sales of baby diapers.
It is a myth that Japanese companies were adherents to life-long employment. Once the bubble burst in Japan more than two decades ago, to stay competitive jobs were cut. The older employees were hit the hardest. The Japanese, masters of subtlety that they are, put those in the redundant jobs literally in offices without windows and without phones. This was supposed to be a strong hint that the worker was not needed. People left, but could not find jobs that paid the same amount. There are a lot of homeless seniors in Japan, especially in Tokyo. You can research this info online.
IMO, every society will see this as globalization takes hold even in Asian countries. With the prospects of earning a living wage decreasing due to various circumstances the old will be hard hit. Look at the hidden stuff in Japan and we can expect the same happening in the USA in next two decades, except that some things are worse off - like medical insurance and savings.
A logical outgrowth of globalization would be euthanasia for the “economically non-viable” i.e. the elderly, the infirm, and those with mental or physical defects. Euthanasia would be more merciful than life on the streets as a societal throwaway.
Buena Park, CA Housing Prices Crater 9% YoY As Sellers Slash Prices; Inventory Surges 80%
http://www.movoto.com/buena-park-ca/market-trends/
Tustin, CA Housing Prices Head South At Peak Of Season; Inventory Explodes 101% As New Listings Flood Market
http://www.movoto.com/tustin-ca/market-trends/
‘Two new reports show inventories of Valley homes growing and sales volumes shrinking. That includes the high-end home market in Scottsdale, Paradise Valley and Arcadia, according a new analysis by Walt Danley Realty.’
‘There were 2,248 homes list for sale for $500,000 or more in July in the northeast Valley, according to Danley. That is 27 percent higher than the 1,773 expensive home listings a year ago, according to the real estate firm.’
‘Home sales were down 17 percent in Phoenix during the first two quarters of 2014 versus the same time frame in 2013, according to Long. The inventory of homes for sales in the Valley was up 54 percent at the end of the second quarter compared to 2013.’
‘Long’s analysis shows there are 26 percent more homes for sale in the Valley for $800,000 or more than their were in 2013.’
‘Beyond the exodus of investor sales, the local housing market continues to wrestle with limited population and job growth, tougher mortgage standards and a healthy contingent of younger buyers or foreclosures victims either unable or uninterested in home ownership.’
‘Question: We recently signed a contract to purchase a home to be built within a year on a lot in a beautiful community in north Mesa. Although we love our lot, the day after we signed the purchase contract, we realized that, because both of us work in downtown Phoenix, the daily commute would be too difficult from north Mesa.’
‘Inasmuch as we believed we had a seven-day right of rescission after purchasing this lot, we immediately asked for our $10,000 earnest money back from the developer. The developer said we did not have a seven-day right to rescission and has refused to return our earnest money.’
‘Does a buyer have a right of rescission after buying a lot from a developer?’
‘Answer: The seven-day right of rescission applies only if the lot is in a subdivision and the lot is an “unimproved lot.” Although the lot you purchased was probably in a subdivision, your lot under Arizona law was not an unimproved lot but an “improved lot.”
‘Despite no physical improvements yet on your lot, it is an improved lot under Arizona law because there is a contract with the developer to build a home on the lot within two years. ‘
‘Therefore, you do not have a seven-day right of rescission, and the developer is entitled to your $10,000 earnest money if you refuse to perform under your purchase contract.’
hat includes the high-end home market in Scottsdale, Paradise Valley and Arcadia, according a new analysis by Walt Danley Realty.’ ??
Ben…You know the Arizona market pretty well…Isn’t this typically the slow time of the year for home sales ?? For us, its starts in October and goes through Febuary…
I don’t think that Metro Phoenix is all that different in the spring and summer months in terms of housing activity than most of the USA. It’s kind of hard to get a crystal clear picture in the last 10 years because of the bubble/bust/re-bubble/re-bust conditions producing more or less inventory.
Still, the heat of desert summers does not change the fact that most with children want/need to move between school years. I don’t think that the winter buying of visitors/part-year residents can really put a dent in the core residents’ house-buying (or not buying) times of year, late Spring through Summer.
‘Hong Kong billionaire Henry Cheng blasted away a Henderson mountaintop during the real estate bubble, with plans for mansions overlooking the valley from street names such as Heavens Edge, Stonecutter and Epic View.’
‘He tabled the project after the economy collapsed, leaving dozens of cake-layered pads carved into the mountain without a single house. But now, with the economy on the mend, he wants to finish the job.’
‘The revived sales efforts come as other builders push ahead with plans for luxury housing tracts. In Summerlin, for instance, Howard Hughes Corp. and Discovery Land Co. are planning a 555-acre high-end community, with sales of lots and homes starting next year.’
‘But luxury-home sales are slowing valleywide, and real estate pros are split on whether buyers will step up at Ascaya. Robyn Yates, owner of Windermere Prestige Properties, said she’s happy to hear Ascaya is back in business. But with the economy fragile, she is surprised the developers want to sell now.’
‘There are plenty of lots available where people can build their own mansions, according to Yates. “It doesn’t seem like there’s strong demand right now,” she said.’
‘Developers might sell eight or 10 lots at Ascaya, but not 300, said architect Bob Fielden, of RAFI Architecture in Henderson. “I don’t think so. Not until things really turn around,” he said.’
‘A slowdown in housing sales and new construction activity has pushed Sudbeck Homes to the limit — the Omaha city limits, that is, and beyond. The local homebuilder has had better luck finding affordable land to build on in bedroom communities such as Yutan and Louisville, said spokesman Rick Kanne, which, in turn, has helped put newly constructed homes within easier reach of young families like Nick and Elizabeth Bullington.’
‘Buying less expensive lots in small towns still within a reasonable drive to big city jobs is one way Sudbeck Homes and its CBSHome agent, Kanne, have kept busy despite the 6 percent drop in the overall number of new and existing metro-area homes signed to a contract this July compared with last.’
‘Others in the real estate industry are offering workshops or loan programs to better prepare and woo first-time homebuyers, a segment entering the market at low rates. In the Cass County town of Louisville, city leaders have turned to rebates and discounts to coax newcomers into building there. Constructing an 1,800-square-foot home, for instance, can reap about $4,000 in savings for a new resident.’
‘The Realtors, bankers and community leaders are confronting a sluggish market challenged by a shortage of for-sale houses to pick from, as well as tighter mortgage and insurance rules that especially hamper younger families with student loan debt and shorter job histories.’
“The market is suffering from a lack of inventory,” said Mike Riedmann, president of residential sales for NP Dodge Real Estate. “That’s the No. 1 issue.”
‘The Omaha Area Board of Realtors reports that the number of homes on the market is down 9 percent compared with a year ago. “People aren’t moving up because first-time buyers aren’t coming into the market to buy their properties,” said Joe Valenti, president and CEO of CBSHome.’
‘Marc Stodola of Charleston Homes, who also is president of the Metro Omaha Builders Association, said lot prices have gone up $10,000 to $20,000 or more in the last few years. Builders subsequently are focusing more on higher-end homes starting at $300,000, he said, to make it worth their while.’
‘Talk to real estate experts around Asheville and they’ll agree on one thing: the market is moving in the right direction after the Great Recession and years of sluggish sales during our not-so-great recovery.’
‘How well the real estate market is doing always depends on whether you’re a buyer or a seller. Buyers are always hoping to find a bargain on the house of their dreams while sellers dream of appreciating values and ever-rising prices to finance their next move.’
‘But Asheville seems to be splitting into two markets. There’s the high-end luxury market where you can take your pick if you have a champagne budget. Then there are the buyers who can only hope for a home at a Budweiser price point.’
‘The average job in Buncombe County pays only $37,440 a year, lagging behind state and national averages. Add a mortgage, and home prices can quickly get out of reach for many people, especially first-time buyers or lower income workers.’
‘The average asking price for all homes in Asheville and Buncombe County is back to the pre-recession, housing boom highs — $473,000.’
“We need much more housing stock,” said Mike Figura, of Mosaic Community Lifestyle Realty. “The idea of a healthy housing market is always subjective, but I wish we had a more balanced market where it’s easier for all buyers to find homes. That means more gradual growth.”
‘Meanwhile, many would-be homeowners are facing a dual dilemma: Where can you afford to live in Asheville and where can you work to afford your mortgage?’
This is the two-tiered economy that is coming to the rest of America soon, this is the Lucky Ducky future…
I saw the Lucky Ducky future at a funeral earlier this week. Mourners at the funeral I attended were all formally dressed. The funeral was held at a large funeral home. Besides our group, there were a few others there that afternoon. And I saw them file into the other viewing rooms.
All of them were dressed very informally. Shabby, worn jeans; baggy wrinkled shorts, T shirts, sneakers, etc. In some cases they looked like “People of Walmart”. I know that as a society we have become very informal, but I think that most people know how one should dress for a funeral. So I was left wondering: did they not care enough to wear some khakis and a dress shirt with a tie? Or do they not even have that in their closet?
A few years ago I was in traffic court, wearing coat and tie for the occasion, and was amazed at how most other people had chosen to dress — sports team gear, flip-flops, trashy low-cut tops, oversized jean shorts, baseball hats, you get the picture. Attending police officers were in full uniform and looked crisp, as did the judge and court staff.
I also had similar experience. Our dogs didn’t have their tags on, and they managed to sneak out and get caught by animal control. So in addition to paying off animal control I also had a court date.
Same story. I was dressed business casual and everyone else, some who were in some serious trouble (like at risk of losing their driver’s licenses) were dressed like People of Walmart.
A few years ago my son jumped over the fence into an old crank’s backyard to retrieve a Frisbee. The guy called the cops and my son was charged with some sort of “mischief” charge and had a court date. We went with him and made sure he dressed up. He was dismissed with a warning to not do that again, plus court fees, about $40, IIRC.
“Meanwhile, many would-be homeowners are facing a dual dilemma: Where can you afford to live in Asheville and where can you work to afford your mortgage?”
+1 Indeed, my former digs:
San Luis Obispo County, California
-median home sales price: $415,000
-median household income: $58,630
‘Asking prices have fallen steeply this summer as sellers slash their expectations in the face of dampening demand for new homes. The price tag on the average UK property coming to market dropped by 2.9pc in the first half of August, the biggest summer fall ever recorded by the UK’s largest property website, Rightmove.’
‘Vendors, who have been trying to cash in on record high values, are now discounting to attract buyers who have been deterred by talk of interest rate rises and the eradication of cheap mortgages.’
‘A glut of sellers coming to the market - there has been an 8pc increase in the number of homes up for sale compared with August last year - and a drop in buyer demand has driven down asking prices and tipped the UK into a buyers’ market.’
‘All regions in the UK, apart from the north, saw a reduction in asking prices, but London was hit hardest with a 5.9pc fall. Sale prices fell in the capital for the third consecutive month as a wave of new sellers registered with estate agents but buyers walked away from over-inflated asking prices.’
‘Miles Shipside, Rightmove director, warned that asking price falls could also lead to a fall in actual completion prices which could shock British homeowners who have become accustomed to rising property prices.’
‘The 2008 bust in the credit and housing bubble changed a lot of commonly accepted rules of buying a home. Some of the tried-and-true rules and myths became busted, such as the idea that buying a house is a great investment. It turned out to be an albatross for homeowners who found themselves upside down in their mortgages.’
“There still are a number of people who are upside down since the bubble burst,” says realtor Michael Weaster. “They’re still out there. A lot of people did modifications with their loan but they’re still in trouble. The statistics are that probably 50 to 60% of the loans are still in trouble.”
‘MUMBAI: Stating that home prices are high, Reserve Bank deputy governor S S Mundra today said there is a need for price correction, especially given the high inventory levels with developers.’
“I believe there is enough scope for home prices to come down from the higher perch because of huge inventory pile-up in several markets,” he said addressing a gathering of realty players in the financial capital.’
“In a country where over 60 per cent of the population lives with less than USD 2 a day, the cost of houses are still pretty high,” he said, pointing to an RBI report which said there was a huge shortage of dwelling units.’
‘The central banker also spoke out strongly against the practice of loans for a second and third house, saying bank credit must be used for “productive purposes” and not for “speculation”.
“You must realise that at the current stage of development of our country, we need bank credit more for creation of productive assets and less for speculative activities. We would not like to create a situation where bank finance is being used by a selected few for buying several houses as an investment and thereby creating artificial demand bubble,” he said.’
I guess greed is universal. At least it is refreshing that someone is their central bank is speaking out, however, what actions they might take is a different issue. I, for one would like to see that a central bank actually deflate a bubble such that the speculators get their dues.
Anecdotal evidence from a bunch of friends and coworkers from India, points out that the builders are the only ones making out like bandits. Apparently, these flashy types drive the latest Audis, Mercs…
I really do not know where this will end.
‘It took six years to get there, but Sonoma County’s median home price has climbed once more above a half-million dollars. Most of the price increase has occurred within the past two years. In July 2012, the median home price was $348,500 — 14 percent above the low point of the crash. The county median went above $400,000 almost a year later in April 2013 and took 16 more months to reach the half-million-dollar mark.’
‘In the Mission this past year, at least four large mixed use developments have opened their glittering modern doors for amenity-rich housing to those who can afford it (and, in the case of about 50 out of 270 households, those who got lucky in an affordable housing lottery).’
‘In almost every case, before a building has even finished construction, the market-rate residential units get scooped up quick—units at the 3500 19th Street development sold for a record breaking rate of $1400 a square foot. But to say these buildings are at full capacity omits a glaring on-the-ground truth: the street level commercial spaces frequently remain vacant – for months or even a year or more.’
‘The same goes for the 3500 19th Street project on a prominent Valencia Street corner. Its steeply priced 17 condominiums sold steadily after going on the market in October of 2013. But for nine months the cosmetics retailer The Balm has been a lone outpost on the ground floor where three other glass walled vacancies have endured. For passersby, the spaces are an arresting emptiness in a corridor known for its vibrant street life and lively shopping scene.’
‘Zillow’s figures echo a recent study by UCLA’s Ziman Center for Real Estate, which also pegged Los Angeles County as the least-affordable market in the country, and said that the rent crunch here has spread up the income ladder, to affect more middle-class households.’
‘Even for professionals with good incomes, buying a house in Southern California is a heavy lift, as Natalie Lohrenz sees every day.’
‘As the director of counseling at the Consumer Credit Counseling Service of Orange County, she works regularly with first-time buyers trying to purchase a home in a place where the median house cost $600,000 in July, according to CoreLogic DataQuick. Last week, Lohrenz said, she met a registered nurse with a six-figure income who was struggling to buy a two-bedroom townhouse in Irvine.’
“In the majority of the country, she’d have no problem at all,” Lohrenz said.’
‘One reason California is so unaffordable, said Gudell, may ironically be that it got hit harder in the housing bust than high-cost East Coast markets. Prices crashed. Investors scooped up homes cheap. Then as the market recovered, the price of what was left surged.’
“They almost overshot,” Gudell said. “These California markets have these extremely high home values now, but incomes haven’t kept up.”
“Most of the price increase has occurred within the past two years.”
It sounds as though the Fed’s housing price reflation program was a great success, at least for underwater Sonoma County homeowners.
yep it is so far….I live in Sonoma Co. and it was basically hopeless trying to buy with a mortgage in 2011/2012 due to competition w/ 100% cash flippers and specuvestors. Buying made sense for me financially then but no longer does
We’re pretty much in similar circumstances. Prices never really bottomed out in the nicer parts of North San Diego County in the wake of the Great Recession before the onset of Fed QE3 mortgage stimulus in early 2012. And at this point, I no longer care, as even if prices do come down after QE3 is unwound, we are no longer at a point in our life cycle when buying would make sense. From here on out, it is about saving up to help our kids out with a downpayment, assuming mania pricing has finally subsided by the time they are eventually at the point of buying homes.
‘Networks of loan guarantees that used to be a creative method for small private firms to get financing have turned into mires of financial havoc in the Yangtze River Delta, a growth engine of China, which is now also a main source of bad debts.’
‘Many firms in East China’s Zhejiang Province have gone bankrupt after participating in networks of credit guarantees in which loans have turned sour, a problem that has become prevalent in Zhejiang and adjacent Jiangsu Province, Zhou Dewen, president of Zhejiang Federation of Private Enterprise Investment, told the Global Times.’
‘Massive bankruptcies among private firms will disrupt production and cause unemployment, undermining economic stability, he noted.’
‘About 80 percent of bad debts in Zhejiang in the first half of the year involved firms that were in networks of guarantee, Shanghai Securities News reported citing industry insiders.’
‘A loan guarantee network often involves two to five companies that guarantee loans taken out by each other. In case of default by one firm, its guarantors will be responsible for repaying the promised amount of debt. “I have heard too many such cases [of healthy firms collapsed by a chain reaction when a firm goes bankrupt],” Chen Zhihua, chairman of Wenzhou Titan International Trading Co, told the Global Times.’
‘The government’s extremely loose monetary policy, initiated after the global financial crisis, is to blame for this debt problem, Chen said. Companies were encouraged to expand aggressively during a lending spree brought on by a massive 4 trillion yuan ($650 billion) stimulus package during the 2009-10 period.’
‘The chill in the property market has cooled developers’ interest in acquiring new sites, pushing local governments’ land sale revenue down sharply. According to brokerage Centaline Property Agency Ltd’s market research, 20 major developers have spent 182.5 billion yuan ($29.7 billion) so far this year to purchase sites, down 38 percent year-on-year.’
“Worsening property sales have undercut the willingness of developers to buy land. Their focus now is on raising cash from the sales of what they’ve already built. Few are in the mood to buy more land,” said Zhang Dawei, director of the market research team.’
‘Even in the hottest land markets, such as Beijing, where any available plot has always been snapped up by an eager developer, the market significantly cooled. When land was auctioned in late July, two sites did not draw any bids. The last time that happened was three years ago.’
‘The working-class grassroots people who are living in the urban underground have to prohibitively face the high real estate price. To achieve the home ownership, recently, Chinese civil people initiated the occupancy movement. In mid-August, Beijing constitutional scholar Chen Yongmiao, Hong Kong Pacific Magazine editor Ou Yangjin, Mr. Ji in Beijing, Ningbo SHE Zhentao and Shangdong Qiao Xiaofei, Xu Ningkang launched its first occupancy movement at the ghost town facing the Fushan police station in Yantai.’
‘Chen Yongmiao: lots of people still become mortgage slaves even though they have been working a lifetime for their house. So if the social revolutionary movement outbreaks in the future, it might be still house-centered. I think we should prepare in advance. Plus in China, lots of urbanized farmers and tribes need houses after having migrated to the city.’
‘However, those working-class and poor people in the basement and urban underground wells are still prohibitive in facing high house prices. The wealthy and powerful people have been hoarding many idle properties for a long time. Chen Yongmiao said the occupancy movement is the remedy to underlying public interests.’
‘One of Hong Kong’s independent research institution founder’s Tulloch has pointed out that the development zones are invested in because of each government’s promotion, are full of empty office buildings and houses. These include Zheng Dong New Area in Henan Province and a new town in Ordos in the Inner Mongolia. These buildings are almost sold to the middle class, but they find it difficult to sell. In China, such purchased but unoccupied new cities will continue to increase by 12 to 24 per year.’
‘On the other hand, the underclass cannot afford housing and become homeless or accept a small flat by conceding their own houses to cooperate with the authorities on urbanization. Chen Yongmiao pointed out that even if tens of millions of underclass want to own their own property as soon as possible, they still cannot afford it.’
‘Chen Yongmiao: The government actually pay the bill for real estate. It is an actual contract to show that it’s fair or unfair. So we need a social movement to correct such social controversy and the property predatory behavior.’
How ironic would it be if China’s crony-capitalist caricature of a “People’s Republic” spawns a Maoist revolutionary upsurge among the workers and peasants who face bleak futures under the current regime?
‘Stocks, bonds and housing might all be getting too expensive, economist Robert Shiller said Tuesday. “We’ve had negative TIP rates recently, so what’s going on here? How can it be that 30-year TIPS were negative in 2012? How can it be that people think that we can get a return, a riskless return in real terms for 30 years? There’s something bizarre,” he said. “That looks a little like a bubble, as well. So, the whole thing might correct down, both bonds and stocks.”
‘As if overvaluations in bonds and stocks weren’t enough, Shiller also said that housing could be getting lofty.’
“I’ve been kind of surprised by the housing market. It bottomed out in 2012. It’s up something like 25 percent, in some cities much more than that,” he said. “So, we are seeing a sort of boom in the housing market.”
“So, you know, we’ve got stocks and bonds highly priced, and now we’re starting to see housing maybe going in the same direction. It’s like everything, everything is pricey.”
“That looks a little like a bubble, as well. So, the whole thing might correct down, both bonds and stocks.”
I’ll believe that when I see it.
More likely scenario: Stock market crash accompanied by flight to quality into U.S. Treasurys and gold (see Black Monday October 1987 for a relevant historical episode).
A lot of bizarre and surprising things happen with ZIRP and QE and manipulated markets that ignore moral hazard. But what’s really bizarre and surprising is that this highly-educated, Nobel-winning economist can’t make the connection.
“I’ve been kind of surprised by the housing market. It bottomed out in 2012. It’s up something like 25 percent, in some cities much more than that,” he said. “So, we are seeing a sort of boom in the housing market.”
Recommended reading for academic financial economists
Shiller et al are not stupid. They know exactly whats going on. But their comments have the potential to move markets so they provide these silly comments.
Any one paying attention can read between the lines.
I wonder whether big name academic economists systematically avoid ever mentioning the role of “the institution which must not be named” in moving asset prices due to fear of reduced future FOMC employment prospects.
“How can it be that 30-year TIPS were negative in 2012?”
I recently went over my dad’s investment portfolio with him. He must have had an adviser in the early 2000s who was either very lucky or very smart, as Dad’s holdings include $100K+ in TIPS he bought in the early 2000s with a significantly non-negative rate of return.
‘I have a major interest in classic cars. I have a pretty encyclopaedic knowledge of 1960s onwards sporty cars. Until about two years ago the price of those cars (late 1980s Porsches) had hovered about £10-15,000 for years with very good / perfect ones getting maybe £20,000 (far more than I could afford now). However, over the last two years prices have gone up massively so that all but the worst are now above £20,000 often more like 25,000 to 30,000. This is not merely a phenomenon of 1980s Porsches. All classic cars have gone up markedly in price. The BBC are noting a Ferrari sold for $35 million.’
‘Objectively this is a bit difficult to understand. An old car is practically always less good than the one that replaced it (think 1980s Ford Fiesta to a current one). Older cars are slower, less comfortable, less safe, less reliable and less economical. As such they should appeal only to those with a hobby / enthusiast interest. Logically the number of enthusiasts should stay pretty constant. Clearly there has recently been an increase in interest in retro things but still that cannot really account for the increase in prices.’
‘Furthermore the classic car press which unsurprisingly always mentioned price now talks a great deal of rising prices and the potential for prices to rise further. Adverts talk of the potential of the purchased vehicle to rise further in value.’
‘As I said above the rise in such car prices in interesting to compare to house prices. Houses are centrally places to live in but during the boom they became less places to live than commodities the value of which could supposedly only rise. The same arguments about price were used as are now used about classic cars: they were not building enough houses versus in classic cars they are not making them anymore. In cars it is even sillier as to maximise the increase in value of the “investment” it is necessary to avoid driving it and so increasing the mileage – yet the primary purpose of a car is to be able to drive it.’
‘There are now television programmes devoted to classic cars almost always about increasing their value and making money from restoring them etc. much as there were once (and still are, albeit fewer) about making money from houses.’
‘The experts in the classic car market all talk about continued rise or plateauing of values. All again very reminiscent of the house price boom where we were told there would be a “soft landing” and a crash was inconceivable. There are other parallels in terms of investment. House prices far outstripped interest rates and stock market yields suggesting that the best way to make money was houses. Again currently the prices of these cars are going up faster than practically any other commodity (even including London house prices).’
‘I suppose if there is any moral it is that it is not only in Northern Ireland and the RoI that sensible people think that such bubbles cannot burst. At least ours was about what is most of the time an appreciating asset: a house, unlike in the case of cars what is normally a depreciating asset (a car); or a thing of almost negligible worth, a bulb. Maybe I will stick to the Saab which will never be a classic being basically a posh Vauxhall from a company that went out of business.’
Clearly there has recently been an increase in interest in retro things but still that cannot really account for the increase in prices
I guess someone is trying to corner the market for “classic” Ford Pintos. They aren’t making those anymore, you know?
Which reminds me of a joke:
Q: Why was the Yugo sold in the US?
A: So Ford Pinto owners could pull up next to one and say: “I have a better car than you do!”
‘There’s a golden thread that weaves its way through all that’s happened to us and will happen to us. It boils down to one word: bubbles. Yet one economist and analyst after the next are announcing that there is NO bubble… or at least not yet. And they give their reasons (none of which make any sense).’
‘Even Janet Yellen, the Fed chairman, is of the opinion that we’re not in any kind of bubble. Here’s the thing…That is exactly what happens when bubbles form.’
‘People from all backgrounds — the smart and dumb, the educated and the educators — deny the existence of that bubble. I can understand why they do it. Most of them benefit from the free ride they’re enjoying as a result of the bubble, they don’t want it to end.’
‘What they fail to realize, in their delusional states, is that bubbles don’t correct. They burst. And the aftermath is brutally painful.’
‘The fact that so many people are defending the Fed’s policies and arguing why we’re not in a bubble is the best sign that it is in fact a bubble.’
‘I see ludicrous people who candidly pin their faith on the belief that the Turkish economy is sanctified with a charm of eternal immunity from crises as long as the Justice and Development Party (AK Party) members warm the Cabinet seats. Their belief is an unfounded fallacy, which will be proven in no uncertain terms sooner or later.’
‘I am not a soothsayer, nor am I a doomster, but there is a crisis looming like dark clouds over the horizon. When the village is in sight, you don’t need a guide.’
‘People tend to call a correction a crisis because they look at its consequences, which are dire for the majority in the short term. However, a crisis is a product of accumulated anomalies in an economy like structural mishaps, improvident policies, loose regulations, shortsighted politicians, greedy investors, bubbly assets and aggregated irrational decisions by the economy’s agents, from mere consumers to complex conglomerates. A crisis is therefore an amalgamation of some or all of these serious glitches, but people tend to believe that it is an evil raining down on an economy from out of nowhere. They tend to believe that a crisis is like Satan, which in their false perception, is the cursed cause of evil and due to every fault human beings commit.’
‘I will omit a detailed description of the ominous peril of a housing bubble, our overreliance on the construction sector and problems that will certainly arise while looking for funds to finance multibillion mega-projects amid worsening liquidity conditions. One might expect me to spare another section for a discussion of the final steps the US Federal Reserve (Fed) will soon be taking to unwind its loose monetary policy, or Quantitative Easing, and start hiking up its interest rates, which will undoubtedly hit the Turkish economy before this year is over, but I will skip that, too.’
‘And any analysis of how and when the crisis will break out in Turkey would be lacking without a particular mention of the implications of the government’s assiduous struggle to sink a private bank out of its animosity toward a social group with ties to the bank. The persistent political tensions, the 2015 general elections, the rise of an authoritarian regime and the dangers it promises for the free market economy, the emergence of crony capitalism, the spreading corruption economy, and most importantly, the fatally wounded rule-of-law would require a particular emphasis in any discussion on the economic crisis in Turkey. But I will not be spitting out words on them either. A piece of good news is not news at all, but we are passing through such a terrible time that even these adversities and anomalies are no longer news, they have become our new normal.’
‘All I want to say today is that this rumble of distant drums doesn’t sound like it is coming from a parade. It may instead be the footsteps of an impending crisis, like an army waiting in the wings to invade.’
‘Since the economic crisis of 2008-2009, the Federal Reserve – America’s central bank – has expanded the money supply in the banking system by over $4 trillion, and has manipulated key interest rates to keep them so artificially low that when adjusted for price inflation, several of them have been actually negative. We should not be surprised if this is setting the stage for another serious economic crisis down the road.’
‘Virtually all commentaries about the Fed’s announced policies focus on whether it is too soon for the Federal Reserve to raise interest rates given the state of the economy, or whether the Fed should already be raising interest rates to prevent future price inflation.’
‘What is being ignored is the more fundamental question of whether the Fed should be attempting to set or influence interest rates in the market. The presumption is that it is both legitimate and desirable for central banks to manipulate a market price, in this case the price of borrowing and lending. The only disagreements among the analysts and commentators are over whether the central banks should keep interest rates low or nudge them up and if so by how much.’
‘In the free market, interest rates perform the same functions as all other prices: to provide information to market participants; to serve as an incentive mechanism for buyers and sellers; and to bring market supply and demand into balance. Market prices convey information about what goods consumers want and what it would cost for producers to bring those goods to the market. Market prices serve as an incentive for producers to supply more of a good when the price goes up and to supply less when the price goes down; similarly, a lower or higher price influences consumers to buy more or less of a good. And, finally, the movement of a market price, by stimulating more or less demand and supply, tends to bring the two sides of the market into balance.’
‘In contrast, in the market for borrowing and lending the Federal Reserve pushes interest rates below the point at which the market would have set them by increasing the supply of money on the loan market. Even though savers are not willing to supply more of their income for investors to borrow, the central bank provides the required funds by creating them out of thin air and making them available to banks for loans to investors. Investment spending now exceeds the amount of savings available to support the projects undertaken.’
‘Investors who borrow the newly created money spend it to hire or purchase more resources, and their extra spending eventually starts putting upward pressure on prices. At the same time, more resources and workers are attracted to these new investment projects and away from other market activities.’
‘The twin result of the Federal Reserve’s increase in the money supply, which pushes interest rates below that market-balancing point, is an emerging price inflation and an initial investment boom, both of which are unsustainable in the long run. Price inflation is unsustainable because it inescapably reduces the value of the money in everyone’s pockets, and threatens over time to undermine trust in the monetary system.’
‘The boom is unsustainable because the imbalance between savings and investment will eventually necessitate a market correction when it is discovered that the resources available are not enough to produce all the consumer goods people want to buy, as well as all the investment projects borrowers have begun.’
‘What was the Federal Reserve’s response in the face of the busted bubbles its own policies helped to create? Between September 2008 and June 2014, the monetary base (currency in circulation and reserves in the banking system) has been increased by over 440 percent, from $905 billion to more than $4 trillion. At the same time, M-2 (currency in circulation plus demand and a variety of savings and time deposits) grew by 35 percent during this time period.’
‘At the heart of the problem is that fact that the Federal Reserve’s manipulation of the money supply prevents interest rates from telling the truth: How much are people really choosing to save out of income, and therefore how much of the society’s resources – land, labor, capital – are really available to support sustainable investment activities in the longer run? What is the real cost of borrowing, independent of Fed distortions of interest rates, so businessmen could make realistic and fair estimates about which investment projects might be truly profitable, without the unnecessary risk of being drawn into unsustainable bubble ventures?’
‘Unfortunately, as long as there are central banks, we will be the victims of the monetary central planners who have the monopoly power to control the amount of money and credit in the economy; manipulate interest rates by expanding or contracting bank reserves used for lending purposes; threaten the rollercoaster of business cycle booms and busts; and undermine the soundness of the monetary system through debasement of the currency and price inflation.’
Great article. Let’s be clear on this though. Invoking the word “inflation” and using it to describe what FedScum is doing is a way to obfuscate providing cover for FedScum, intentional or not. FedScum is deliberately distorting wide sectors of the economy via price fixing and bottlenecking creating artificial floors and ceilings that are completely detached from supply/demand fundamentals. That’s not inflation. Regardless, this is uncharted territory and the real tragedy is those who were/are dumb enough to play are going to pay dearly.
Maintain a defensive posture. Debt will always be a moral failing no matter what FedScum does.
‘Since the economic crisis of 2008-2009, the Federal Reserve – America’s central bank – has expanded the money supply in the banking system by over $4 trillion, and has manipulated key interest rates to keep them so artificially low that when adjusted for price inflation, several of them have been actually negative. We should not be surprised if this is setting the stage for another serious economic crisis down the road.’
Why bother worrying about it until when and if it happens.
And even if it does, the Fed’s PR department can spin away the blame, so in particular, the Fed engineers of QE policy have nothing to worry about.
Well, Tom, there’s at least two options:
1. Get people without money into houses they can’t afford as quickly as possible so they can get on the real estate gravy train, or
2. Stop f’ing up the money system so that one can get more than
1 percent0.1 percent interest.You, sir, are an idiot.
I think their goal is for houses to cost 1 million+ in flyover towns like Topeka, KS or Akron, OH.
“African-American families are losing a time-tested way to stabilize their finances while building assets for retirement or economic and social advancement, says Tom Cusack, a retired federal housing official.”
If you shut your eyes and stick your fingers in your ears, you may be able to successfully ignore all the African-American families whose household wealth was destroyed by purchasing a home with a subprime mortgage loan before the Housing Bubble popped, only to find them perpetually underwater almost seven years after the onset of the Great Recession in December 2007.
I suppose living permanently underwater is a form of stability.
“‘What are you going to do to accumulate wealth?’ Cusack wonders. ‘You’re not going to get rich or pass along money by putting money into a 1 percent CD.’”
Would it be better to accept a 1% rate of return on a CD, along with Fed-engineered 2% inflation plus federal and state taxes rendering the real return negative, or to purchase an overpriced home and your hard-earned wealth into principle payments on a physically depreciating asset, plus interest payments, taxes, insurance, HOA, Mello-Roos, maintenance, etc etc etc?
P.S. Bonus question:
Which Federal Reserve chair engineered the organization of the Federal Housing Administration?
A. Marriner Stoddard Eccles
Over just the past few days, I found out one of my wife’s direct ancestors was a business manager with close ties to David Eccles, who was Marriner’s father.
I’m holding out hope that one of my kids inherited enough business aptitude to support us in our old age.
African-American families are losing a time-tested way to stabilize their finances
Nothing says stability like a sub-prime, variable rate mortgage.
95% of African-American voters backed Obama. You reap what you sow. Suffer, bitches.
Nothings quite as intoxicating as freedom from debt!
The intoxication is temporary, though—I can’t get too excited about it anymore, because it has been so long that I can’t remember what debt feels like. I imagine it must feel like a weighty burden, though!
Nothings quite as intoxicating as freedom from debt!
+1 Approaching three years of debt freedom. Never again.
Janet Yellen is an insult to Americans.
http://www.theautomaticearth.com/debt-rattle-aug-22-2014-janet-yellen-is-an-insult-to-americans/
The intro is classic:
“If you’re a girl and you’re old and you’re grey and you’re the size of a hobbit, who’s going to get angry at you? If your predecessor had all the qualities anyone could look for in a garden gnome, and his predecessor was known mainly as a forward drooling incoherent oracle, how bad could it get? Think maybe they select Fed heads on purpose for how well they would fit into the Shire?”
‘They are secretly trying to sell them,’
Can’t be much of a deep, dark secret if we are reading all about it right here on the HBB.
Why do people chase pieces of paper? Isn’t it interesting.
If I gave you 100 monopoly bill you would laugh at me.
It’s not about the virtual paper — rather it’s about what you can trade it for:
- food
- shelter
- educational services
- medical care
- entertainment and recreational activities
- transportation
- alcohol, firearms and tobacco
- gold, silver, collectibles, financial assets
etc etc etc
Dollars can be used to buy all of the above; not so much monopoly money.
exactly
But over history they seem to print too much of it and at some point people dont want it. U think it cant happen again?
You don’t want your paper currency Poet? Throw it out then.
This is the reason why it is always a good idea in a fiat currency system to have at least some of your financial wealth allocated to inflation hedges.
China May Consider a Nationwide Property Tax
Aug. 25 (Bloomberg) –- Bloomberg’s John Dawson reports on China possibly implementing a nationwide property tax as early as next year. He speaks to Angie Lau on “Asia Edge.” (Source: Bloomberg)