We’re Seeing A Lot Of Stress
A report from Bloomberg. “The spike in borrowing costs in response to President-elect Donald Trump’s pro-growth agenda is causing some heartburn in America’s housing industry. San Diego mortgage broker Shanne Sleder said a third of his clients, many of whom were already stretching budgets to buy homes in pricey southern California, are having to reconsider what they can afford as rates soar. ‘With a number of the people we were in the middle of pre-approving, as rates are going up, it’s getting tighter and tighter qualifying them,’ Sleder said. He’s urging them to lock in rates. ‘In some cases, the higher rates are making it so they are not as comfortable with the payment.’”
“Larry Seay, who retired in March as chief financial officer of builder Meritage Homes Corp., said rising rates will also limit the ability of developers to raise prices, pinching margins. Buyers will look for smaller, cheaper homes and builders will probably look for opportunities to accommodate them, he said. ‘It’s going to be incumbent on builders to manage cost better because they won’t be able to pass on the cost increases with higher home prices,’ Seay said.”
“Many buyers ‘are already stretching to begin with,’ said Sleder, the San Diego broker, who works at West Coast Mortgage. ‘If it continues in this direction, it’s going to push more and more people out of the market. Eventually, if rates go up to where people are not putting offers in any more, sellers are going to lower their market price,’ he said.”
The Wall Street Journal. “Defaults are rising in a key corner of the commercial real-estate debt market just as borrowing costs are set to jump, raising the likelihood of a slowdown of the $11 trillion U.S. commercial property sector in 2017. A financial crisis-era regulation is about to take effect that is expected to make some commercial real-estate borrowing more expensive and complicated, analysts said.”
“At the same time, interest rates have increased since the election of Donald Trump as the nation’s 45th president last week and seem poised for a sustained rise from recent historic lows, which would further squeeze an industry built on borrowed money. ‘I can paint a picture that it could be disastrous, with runaway inflation and high interest rates,’ said Charlie Bendit, co-chief executive of Taconic Investment Partners LLC, at a New York industry luncheon.”
“Already, landlords are battling a slowdown in sales and rising vacancy rates of multifamily housing units across the U.S. and of office space in Houston, Washington, D.C., and other big markets. Now defaults are on the rise as well. More than 5.6% of some $390 billion worth of commercial property mortgages that have been packaged into securities was more than 60 days late in payment in September, according to Moody’s Investors Service. That was up from a 4.6% delinquency rate earlier this year.”
“The culprit: loose lending before the financial crisis. Ten-year loans issued in 2006 and 2007 are now coming due, and many borrowers aren’t able to pay them off despite rising property values. In all, Morningstar Credit Ratings LLC predicts borrowers won’t be able to pay off roughly 40% of the commercial mortgage-backed securities loans coming due next year. Suburban office properties and shopping centers are being hit particularly hard, said Edward Dittmer, a Morningstar vice president.”
“‘We’re seeing a lot of stress,’ Mr. Dittmer said.”
“There are other problems flaring up as well. Regulators earlier this year warned that vacancy has been growing in the rental apartment market, and that higher interest rates in the next two years could damp price growth there. ‘They’re flashing a yellow light over the market,’ said Ely Razin, CEO of CrediFi.”
From Curbed Miami on Florida. “The Miami condo market looks to be heading down an ugly road, appearing ‘to be in the early stages of a distressed preconstruction condo market,’ according to StatFunding Founder Andrew Stearns in his November update, saying the next two years ‘will likely further see the distress continue and increase.’ Inventory is soaring as underwater sales continue while developers have pumped the brakes on several planned South Florida developments.”
“Over the last six months, 43 percent of new pre-construction condos sold for a loss (20 of 47), per the report, which represents over six times the amount of sales for a loss (3 sales) in the six months prior. With over 10,000 units already in the construction pipeline and set to be completed within the next two years, if the sales rates continue there will be over a 468-month supply of resale units. ‘The overall Miami condo market also appears to be in trouble,’ Stearns writes.”
The New Canaan News on Connecticut. “Political uncertainty typically doesn’t bode well for business. As the weather grows colder and holidays near, real estate sales slow down. But an extra factor some real estate experts believe played a role in Greenwich’s market this year was the presidential election. The impact of this attitude is difficult to quantify, said Joann Erb, executive director of Halstead Property’s Greenwich Office, but it’s more likely that stances taken by state and town legislators rather than the president will affect the Greenwich housing market.”
“The contentious election didn’t seem to affect the number of single-family home sales in October, with almost 40 recorded, according to town records. That number is off only a few from a year ago, according to Erb. The real story lies in the significant drop in median sale price and number of days houses sat on the market. The median price dropped half a million dollars and homes stayed on the market around 55 days longer when compared to statistics from last year, Erb said.”
“‘Buyers aren’t jumping on anything,’ Erb said. ‘Sellers still aren’t understanding that we’re in a status quo market. Prices aren’t going up. People think they should see a 10 to 15 percent increase in a few years, but we’re not. That’s reality.’”
‘Morningstar Credit Ratings LLC predicts borrowers won’t be able to pay off roughly 40% of the commercial mortgage-backed securities loans coming due next year’
Huh? But there’s no subprime. There’s no fraud. Everything is rosy.
‘Over the last six months, 43 percent of new pre-construction condos sold for a loss (20 of 47), per the report, which represents over six times the amount of sales for a loss (3 sales) in the six months prior. With over 10,000 units already in the construction pipeline and set to be completed within the next two years, if the sales rates continue there will be over a 468-month supply of resale units. ‘The overall Miami condo market also appears to be in trouble’
Well you know, I used my calculator and posted there was a problem when it hit 150 months. But I’m just a blogger with a calculator.
Well you know, I used my calculator and posted there was a problem when it hit 150 months. But I’m just a blogger with a calculator.
The only sort of people who report the truth in modern America. Thank god for the internet, honestly.
It benefits the ((money changers)) to have a nation of clueless triggly puffs. Easy to take their money, tell them what to think, how to live, etc. That wet sensation on your head is rain, honest
“468-month supply of resale units”
I take it they are only talking about yet unfinished condos for sale by flippers. Spectacular.
468 months is what–about 39 years or so?
Houston, we have a problem.
And here’s the lively little blog from Greenwich. You have to scroll down through the political stuff and there’s some interesting info on the housing stock there. Although I do like his lead post with the images of pigs at the trough.
https://christopherfountain.com/
Here’s a post on a recent listing, made me laugh:
https://christopherfountain.com/2016/11/14/its-probably-good-thing-that-smoking-dope-is-quasi-legal-these-days/
In less than a week after being elected, everything that happens in America has transformed into being Donald Trump’s fault. All these folks should be happy he was elected. Otherwise, who would they have to blame everything on? Might they actually have to look around and see the truth about our bubble economy?
Trump said over a year ago it was a big fat bubble and blamed the Federal Reserve for perpetuating it to get the Democrats re-elected. What we have here is a huge failure of policymakers to do their jobs. It was December 2015 when Mel Watt went “pedal to the metal” on housing loans. Who even thinks that way? The Fed writes these little pointless papers: “oh farm’s could be shaky, commercial real estate is frothy”. Do something you idiots! How do we get to a point where 40% of commercial loans could default when the recession hasn’t even started much? There are oceans of supply coming all over the US and the world.
And here we are. They did it all to keep the populist movement away from their “independent” central bank, and it was all for nothing.
Yoko Ono, on behalf of the establishment, responsds:
https://twitter.com/yokoono/status/797187458505080834/video/1
SR 1345 – Anti-Trump Protesters Paid $35 Per Hour
https://www.youtube.com/watch?v=QpeSacBp3Jo&feature=youtu.be
“I was there for the anti-war protests of the early 1970’s. No one had to be paid… it was a big happening and everyone wanted to be there… we would have paid to be there, certainly no one had to pay us.”
“Incitement to riot is a federal class III felony, and George Soros is a naturalized US citizen.”
Does it say who is supposedly paying them?
While I have no doubt some are being paid, a video of a line of buses isn’t exactly proof of it. Narratives, narratives…
I have SJW friends. SJW’s, especially retirees, *loooove* to “advocate.” If anything, they are donating to the organizations; that is, they are paying, not being paid.
“Incitement to riot is a federal class III felony, and George Soros is a naturalized US citizen.”
The .1% are literally above the law.
That should be handled by the states. There’s no need to for the feds to get involved.
“keep the populist movement away”
Like the other branches of our Globalist biased government, they ignored us. They ignored the future. They are just plain ignorant.
yes, they are ignorant for ignoring us.
populism is dangerous, but it turns out it was the only way to break the establishment.
The blame game upon inauguration will be immense. If houses start to drop and defaults rise by summer, only an idiot would blame Trump. But so far there are 60+ million idiots that voted for Hillary, so obviously the media will go gangbusters on some bad economic news. “What do you mean we’ve only added bartenders?!?! Trumps plan for growth is garbage!!”
Blame game:
http://www.dailymail.co.uk/news/article-3935800/Days-losing-election-Hillary-Bill-Clinton-sceaming-match-blame-flagging-campaign-ex-president-angry-threw-phone-roof-Arkansas-penthouse.html
As (reluctantly) reported by real journalists:
https://www.washingtonpost.com/graphics/opinions/trump-supporters-why-vote/?hpid=hp_no-name_opinion-card-c%3Ahomepage%2Fstory
A person should never underestimate the effect they can have on others. When I supported Trump early on, it was immigration that got my attention. Then things evolved, his stance moderated and I reacted with butt-hurt thumb-sucking and bed-wetting. Let Hillary have it, I said cynically, she’ll bring this whole creep show to a spectacular end, I’m just gonna take all my marbles, go home and vote Gary Johnson or something.
And then Ben stepped in and gave me a figurative slap upside the head. I know I’ve harped on this a bit since the election, but it’s important. In one of the best posts I’ve ever read on this blog, I was informed firmly and politely that this election wasn’t about me. (lol, and my first reaction was “Wut? Whaddya mean it isn’t about me?”)
It was about a chance to end the bombing and bloodshed and maybe save some lives. I don’t remember the exact quote, it was something to the effect of what does it matter if the country gets overrun by Juan and his family, so what? If we have a chance at stopping the bleeding, that’s the important thing.
That was the moment I decided to vote for Trump no matter what, because if I did, maybe some little kid in Syria or Yemen or some other place (even here, if we avoided WW3) might have a chance to grow up. Maybe the wars would stop. Maybe there’d be a chance at peace of some sort. I decided I had to suck it up and take that chance, even if he amnestied everyone from here to Tierra del Fuego.
Not only did Ben convince me, by demonstrating what was really at stake, but he convinced a buddy of mine who read the post and said “I guess he told you”. So that was two votes. And there might have been a few more, because I discussed this theme with others. Funny how the democrat Russian-blaming backfired. People I spoke with got real quiet when faced with a very real possibility of WW3.
I really wish Trump turns out to be the peacenik he has marketed himself as, but when warmongers like Rudy Giuliani and John Bolton (John Bolton!!) are in play for the post as Secretary of State, it looks like Trump in reality is a bigger war-monger than even Hillary Clinton.
That’s just BS. Clinton pushed the Syria war that has killed over 400,000 people already insisting on regime change. Trump reiterated this week he’ll stop funding the jihadists and doesn’t want to see a vacuum in Assads place. And he’ll work with Russia to beat ISIS.
Roger Stone says the John Bolton thing is BS. He further said that some of these neo-con Bushies are leaking their own names to the press, under the guise of “transition insiders”. He also said something to the effect that they’re like weasels emerging from their holes, saying stuff like “I was always with you” which they hold out their hand.
Plus Clinton had already picked sec of defense and he is a lunatic neocon who talked about killing Russians just a couple of months ago. The choice couldn’t have been clearer.
Also, look at the people around Trump during his campaign. So far, with Priebus and Bannon, he seems to be going with his campaign supporters/advisors. My guess is those are the people who get the plum spots first, unless they screwed up, like Christie. So, yeah, even though I may not like it, Mnuchin is believable at Treasury. He did well with meager resources for Trump during the campaign, so he’ll be given a chance.
Rudy, Jeff Sessions, Mike Flynn, Sheriff Clarke, Ben Carson will all be in some sort of position or another. And Kellyanne, too. There were three guys who popped up on a Reddit AMA as Trump advisors: “Hello Reddit, this is General Bert Mizusawa, Peter Navarro and Oz Sultan; National Security, Economic and Counterterrorism Advisors to Donald Trump. Let’s Get out the Vote! AMA”
I saw Navarro’s Death by China film. Very impressive. Don’t know about the other two.
“lunatic neocon”
Morrell? Sheesh, that guy was so creepy, every hair on my body stood up as if I’d had a close call with a lightning bolt. Even the normally sleepy looking Charlie Rose looked stunned during the interview.
Clear for me. It has been mostly clear for me since Vietnam.
I didn’t know. That must’ve been rough. Anything you’d like to say? I, for one, would like to hear it. My father (WW2) used to scream when he heard reports on radio and TV “they’re in a war they’re not allowed to win!”
LOL. My dad was a Marine on Iwo. Back in the 60s, the TV didn’t broadcast until 6AM. They’d play the National Anthem and then go to cartoons. One morning I turned the TV on and sat waiting. When the Anthem came on my dad was on his feet saluting in an instant, still asleep. I suppose I had the volume up too high.
I didn’t fight in Nam. I wrote a letter to Nixon explaining why it was wrong for us to be over there killing people. Three pages, mostly scripture. He answered by taking away my student deferment and calling me up. I was on the last bus to the NJ induction center before the draft ended. I was headed for jail. I didn’t run away. I heard they would lock you up for 5 years if you didn’t take the oath. My dad didn’t agree with me entirely but he respected my decision.
After the physical, the line of guys stood at a doorway. There was a Sargent at an oak desk and another door beyond. When it was my turn I walked up to the desk, laid my papers down and said “Good morning Sir”. He paused and looked up at me, asked me if I was anxious to enlist since I was the only person all day to even say something to him on his birthday. I stuck my hand out and wished him happy birthday. “No, I definitely didn’t want to be here.” He opened the bottom drawer, stamped my papers and threw them in there. “Go home. You’ll get your 4F notice in the mail. Have a nice day.”
Sometimes it pays to be polite to people who aren’t responsible for putting you in a tough spot.
Great story, thanks for telling it.
Didn’t mind. Filed under unlikely outcome. Don’t often think about things from 45+ years ago. Well, there are a couple of women that come to mind every so often.
Blue, fantastic poignant story. Thanks for sharing.
I was way too young to be at risk of drafted to fight in Vietnam, but my older sister’s boyfriends weren’t. They lived to tell their stories.
I had a relative whose career as a college professor was impacted by the Red Scare in the 1950s. To see the Democratic Party invoking Russia at every turn was like the ending of Animal Farm.
What will Mel Watt be doing in six months? I have yet to see anyone on the left suggest that enthusiasm for the Democratic Party may have been affected by policies that encouraged the elimination of affordable rental housing.
Well, as long as the general population that voted for him has the same libertarian streak as those here, that should be the case. My concern, based on what I’ve seen posted from his supporters in my circle, is that isn’t the case. Outside of 2 or 3 (who voted for GJ), most are supportive of “securing” the ME and the “make the military stronger” rhetoric.
I voted for Johnson for basically the same reasons you state. I may have done differently if I lived in a battleground state or the popular vote decided elections.
I think if DT focuses on trade (which, along with health insurance competition, no one else was even addressing) while reducing our footprint in the ME, it’s (probably more than) half the battle.
I’m sorry I don’t understand how a really intelligent guy like Ben or like you for that matter can believe that.
I don’t know what to expect but everything is up in the air now.
“It was about a chance to end the bombing and bloodshed and maybe save some lives.”
I most sincerely hope that you guys turn out to be right on this. It seems like a straightforward way to Make America Great Again could be to stop blowing so much of our national wealth on an endless, pointless, futile series of foreign wars.
Drain the swamp.
I suppose questioning what that means is evidence that you live in a swamp?
“they are not as comfortable with the payment”
A tiny little tick up in mortgage rates over just the past week and it’s a panic.
At 6, 8 or 9 times income, how could you be comfortable with the payment at any interest rate?
The thing is, when interest rates rise, housing prices come down. That’s how it used to be, anyway.
Realtors are liars.
‘Morningstar Credit Ratings LLC predicts borrowers won’t be able to pay off roughly 40% of the commercial mortgage-backed securities loans coming due next year’
Similarly, rents have only begun to fall. Heck we still have hundreds of thousands of apartments and condos on the way. 40%? Morningstar that’s a catastrophe.
What is a “10-year loan?” It doesn’t sound like a regular 10-year mortgage. Maybe more like an I/O with a balloon at year 10? The only way to pay it off is to appreciate and sell. And 40% didn’t get the appreciation that they needed.
The terms are often 10-years, with some amortization (20-30 year amortization schedule–usually 25 of 30, but I’ve seen 20), with a repayment requirement at the end of 10 years.
So you usually pay off less than the original principal balance…on a 30-year amortization schedule, the principal balance is (depending on the interest rate) ~15%-20% less than the original loan. There is less principal if you have a shorter amortization schedule.
The problem with the loans that were made in 2007 was that they:
1. Were at a higher loan to value–instead of the 65-70% LTV of today, they were 80-85%.
2. Rents and values were cyclically high at that point (especially for retail, which hadn’t borne the full brunt of internet retailing, and office, which wasn’t yet as effected by the “WeWork” effect).
I don’t know how Morningstar defines their “not able to pay off the debt”, but there are two ways to look at it:
1. The borrower is underwater…no equity, selling won’t get the lender whole;
2. The borrower can’t replace the loan with a new loan…65% of today’s value is less than the outstanding balance on the loan.
We are seeing some opportunities that we are seeing in the above categories where a property has high vacancy, and capital is needed to provide tenant improvements to lower the vacancy. HOWEVER, the CMBS loan won’t let them put a second on the property. So, they either need to sell the high vacancy asset at a market clearing price (and there is an opportunity for a new owner to recapitalize the asset and fix the problem), or they need to bring in fresh capital in form of equity.
And this:
“A tiny little tick up in mortgage rates over just the past week and it’s a panic.”
This “panic” business seems to be a theme across all different phenomena: finance, real estate, academia, tech, media, social movements, etc.
How do people even live like that?
Remember the days we all used to get 5 - 6% on our savings accounts? I can barely remember either!
Being debt free I pine for those days.
Funny thing is the nominal tick up in rates won’t drastically change anyone’s monthly payment. I wonder if buyers are really backing out of the market for reasons other than rates.
$100/mo is a lot for a debt donkey. They might not even have that much “surplus” in their budget.
“nominal tick up in rates won’t drastically change anyone’s monthly payment.”
Maybe not in the short term, but with each tick up comes another $100. Just like on the way down. The beauty and the payoff of it is, all else held equal, prices will adjust accordingly.
How to techies that work for never-profitable startups even sleep at night?
Once the angel-investor-sprinkled QE yellenbucks (Hey, that’s a great name for a fictional bigwig: Q.E. Yellenbucks) stop falling, Dot Bomb 2.0 will be upon us . . . with entirely predictable results in the housing sector in those locales.
They’re accustomed to job hopping every year or so.
I’m not even sure I would call the majority of the people that work at start-ups as techies. I’m sure a few are very good, but a lot strike me as so-so or even mediocre and just chasing a lottery ticket (or just a simple paycheck, if youre desperate you go where the sun is shining to make hay). I’m a techie and while I havent worked at any start-ups, I have worked with a number of people who did and I’ve interviewed many more of those types and thats my impression from all the stories. I used to get cold called daily/weekly during the dot com 1.0 days but I knew it was a bubble; I was in San Diego and no way was I going to move to the bay area - the weather sucks to me, the people more so.
How’re things in MSFT-land? Or should we call it H1B-land?
Trump articulated the dilemma about H1-B. He said that he wants to get rid of H1-B but he understand that companies need the cheap labor. He’s used H1-B himself.
Easy solution: let the workers come, but leave the parents and wives at home. If the H1-B wants to stay, his only option is to convince his employer to sponsor him, full freight. No anchor babies to get a foot in the immigration door.
That’s an easy solution if anchor babies are the problem. That’s not a solution if the problem is downward pressure on salaries in the relevant industries.
Things are still booming in and around the Microsoft Reality Distortion Field (as we old-timers like to call it).
They just opened up a new Costco in Redmond last Friday (yes, grand opening day on Veteran’s Day). We went on Sunday, and if somebody blindfolded you and plopped you inside, you’d swear that you were in Bombay, India.
Virtually every property sold in my neighborhood is being bought by, how shall we say, an extremely diverse population.
I just bought a ladder (Craigslist, 1/3 of new price) from a middle-aged couple east of Redmond last night. They are selling and moving to Montana. 3BR nice house with detached shop on 3 acres, sold immediately for $750K, with annual property taxes (after our new transit measure ST3 which just passed) of around $10K.
My dream of having a shop will never become reality at these prices. And even if prices drop, the property taxes will still be insanely high.
With the way prices are cratering all over WA and in the Seattle area, you won’t have to wait long.
Kenmore, WA Housing Prices Collapse 11% YoY
http://www.zillow.com/kenmore-wa/home-values/
Dream on, Housing Analyst. No price collapses around these parts.
Now that the Chinese are shying away from buying up in BC, they are cranking up their efforts to buy in our area (which is still cheap relative to BC).
The data is the data my good friend.
“My dream of having a shop will never become reality at these prices.”
I looked at a property with a smaller house than we currently have, but it had a nice insulated shop with a heated slab. In the end I chickened-out not wanting to be “house-poor.”
“but it’s more likely that stances taken by state and town legislators rather than the president will affect the Greenwich housing market.”
And when I went to school in Greenwich many moons ago, I had a history/civics teacher who stressed the importance of local politics over national. “They can zone you out of house and home” was the mantra.
http://www.foxnews.com/politics/2014/03/20/seized-property-sits-vacant-nine-years-after-landmark-eminent-domain-case.html
Drudge link: Nuke threat reduced to defcon 5 (safest level) since election.
http://www.express.co.uk/news/world/732135/donald-trump-election-defcon-reduced-level-5-safest-level
I like that.
Narrative derailed
Lots of people ice reductions in my area on SFR. Seems more like the bubble is popping every single day.
‘predicts borrowers won’t be able to pay off roughly 40% of the commercial mortgage-backed securities loans coming due next year. Suburban office properties and shopping centers are being hit particularly hard, said Edward Dittmer, a Morningstar vice president.’
‘We’re seeing a lot of stress,’ Mr. Dittmer said.’
‘There are other problems flaring up as well. Regulators earlier this year warned that vacancy has been growing in the rental apartment market, and that higher interest rates in the next two years could damp price growth there. ‘They’re flashing a yellow light over the market,’
Looks like those loans won’t be “probably OK” after all Rentalwatch.
And here I thought we’d be going negative on the rates. How things change.
It looks like the window of opportunity to exit the housing market with some skin left is rapidly closing, or has already closed.
Many people are going to be trapped.
Rising interest rates. Massive supply glut. Not good for prices.
No… Those things are good for housing prices.
Remember….. Nothing accelerates the economy and creates jobs like falling prices to dramatically lower and more affordable levels. Nothing.
The loans coming due in 2017 were made in 2007.
This is the long tail of legacy 10-year CMBS loans, not new loans.
Jan 20, housing markets collapse, stocks drop, unemployment gets reported correctly (adds the 95 million). MSNBC, CNN, NBC headlines “DONALD TRUMP FAILS AT SWEAR IN, COMPLETELY RACIST BUFFOONERY” Haha, mark my words. Maybe not on Inauguration Day, but by Spring, the real economy will show its teeth by the powers that be and the liberal blame game will be out in full force. Obama will be holed up in his cozy historic mansion lease in DC, or maybe swinging the clubs in Hawaii.
Ape in heels.
That’s Michelle.
Who benefits by higher interest rates? And how? It very much seems like a very large ‘give and take’ for the average Joe.
Uhhhh….savers?
And they more than lose that ’savings’ in other ways. Ex. Make 1% on savings & pay 5% on mortgage. That equals a ‘loss’. But, I do that the advantages for 401k’s long term etc. I’m hoping for a ‘bubble burst’ and low rates. Can it happen? That allows for profits for those in cash. But, it looks like inflation and higher rates are in line. But, who profits with inflation?
But, who profits with inflation?
in the short run, a few speculators. in the long run, no one.
Provided a bout of meaningful inflation is short lived (not measured in decades, but measured in years)…
Anyone who has significant capital invested in their business, low marginal costs of production, and an ability to increase revenues with inflation, will benefit long-term.
In the short/medium term, any increase in their earnings will be offset somewhat by lower valuations, higher interest costs, etc.
However, in the long-term, if inflation comes back down, they still own their capital assets at a very low historic cost, they have the benefit of the higher revenues, and more significant barriers to entry for any new competitor, who would need to pay a lot more for their base capital needs.
i was using the word ‘inflation’ the way most people understand it. but the common understanding of inflation is wrong.
we commonly look at things in a distorted way that causes most of us to make bad financial or investment decisions. it causes us to attack the wrong causes, like ‘money printing’ and a host of other so-called ’causes’.
it’s necessary but not sufficient to just understand economics. other things are important too.
for instance, when you think of inflation i’m sure you’re thinking strictly of ‘prices’. that’s the way most people think of it. but it’s wrong to look at only prices. it gives a very inaccurate view. and an inaccurate view will lead to making bad decisions..
Our friends don’t understand what inflation is TJ.
Nor do they understand what is at the end of inflation’s rope.
Everyone benefits from dramatically higher borrowing rates. Everyone.
Well, I don’t have a mortgage, sad panda. Just cash in the bank.
Karen when will you buy?
You assume we are all debt donkeys, like you
The entire economy benefits when supply and demand is allowed to function. By suppressing interest rates for years, the central banks have distorted a wide range of markets. This is the price of money. It causes things to get built when it shouldn’t have. It encourages risk when there should be caution.
‘People think they should see a 10 to 15 percent increase in a few years, but we’re not’
Prices should never go up this fast, but here they are expecting it after a multi-year boom. Turn on a TV, you’ll see a house flipping show before long. This is how you get several years of sales of airbox inventory in Miami. And the price per square foot is something like 40% higher than 2005.
I benefit from higher rates. As stated earlier when rates go up, prices come down. Renting all these years has allowed me to save money and when I buy eventually I want to pay it off. I have no desire to join the price per month club nor do I want to pay a nickel more in interest than I have to.
If it was 1981 all over with 16% INT RATES, i would retire to Belize and live the beach life.
Two fold. Higher rates bring sale prices and more interest for my cash.
Cash is ALWAYS win-win.
Debt is ALWAYS a lose-lose proposition.
The banks benefit from higher interest rates!
Greed
ambition
swampy
Rage
A person that buys real estate now could be ‘underwater’ for the rest of his life if values drop. BUT…not locking in these interest rates could cost an extra $25,000 (and more on an ‘average home’) per year as rates rise. Over a 30 year period that is a huge amount of money for most.
$25,000 per year? huh? lets see the math.
You’re right, the math doesn’t work.
For a $1.2M house with 3.5% down:
3.88%: PI = $5450
6.00%: PI = $6943
That’s only $18K per year, and that’s with a very expensive house and a huge overnight jump in rates.
Don’t add in the principal.
Interest at 3.88% is $44,930 per annum.
Interest at 6.0% is $69,480 per annum.
That’s more than an $18k difference in interest cost.
However, at 3.88%, the principal balance goes down faster, and so the interest cost is reduced faster.
AND, $1.2MM is hardly an average house.
Don’t forget the crushing losses to depreciation of $3/sqft per year.
And just a note…. there isn’t a house on the planet that can’t be built for $200k.
Try a normal situation like a $400-500k house with 5-10% down. Uber fuzzy math.
And just a note…. there isn’t a house on the planet that can’t be built for $200k.
What if I NEED granite! lol at lola!
Your RageCage is waiting.
Is your assumption that prices will continue to rise along with rates?
Now what? Trump’s team is full of lobbyists, Wall Streeters, and the kind of people he actually ran against.
You’re hoping he’ll fail.
I like these ideas:
term limits
lowers taxes
less gov
cheaper health insurance
better roads and airports
better schools
kick out all the muslims and chinese
create high paying jobs in the USA
cut the debt
end the Bush Wars
no more corp mooching and bailouts
end cronyism
tort reform
clean air and water
God speed!
I’m seeing the same thing. Methinks this could have been the Globalists’ plan all along - to throw some fresh meat to the red-state deplorables, placating them for a bit, making them think that they have ‘won’ something, while in DC it’s business as usual.
No matter who wins the presidency, the globalist agenda will be advanced.
Forward!
One week in and everyone already wants regime change. Jees.
Hillary was the one who destablized the Middle East.
Middle East
Mission Accomplished? was that HRC??
I’ve read somebody, not on the left, whose theory is that Trump is Obama for the white working class. A presidency which begins with a lot of excitement, but ends with little substantive change. We’ll see.
“In a video address to supporters, NRA CEO Wayne LaPierre said that gun rights activists were responsible for carrying Trump to victory.
“Hillary Clinton made her hatred for the Second Amendment a central issue of this campaign,” LaPierre said.
“And as a result of that fatal mistake, she’s on permanent political vacation.”
http://www.thehill.com/blogs/blog-briefing-room/news/306130-nra-chief-celebrates-clintons-permanent-political-vacation
Que the “Simpsons” chubby boy …”ha ha”.
Helpful advice for the special snowflakes, bedwetters, thumbsuckers, safe space dwellers, victim olympics competitors, certificate of participation awardees, Correct The Record employees, and all those suffering from election butthurt:
http://www.businessinsider.com/election-grief-trump-clinton-psychology-sad-2016-11
“Supporters of Hillary Clinton mourn the election of Donald Trump during the World Climate Change Conference in Morocco.”
And yet…
https://www.youtube.com/watch?v=B1wOK9yGUYM
Trump: We Will Cancel ‘Global Warming Payments’ To The UN
MICHAEL BASTASCH
2:33 PM 11/02/2016
“We will also cancel billions in global warming payments to the United Nations, and use that money to support America’s vital environmental infrastructure and natural resources,” Trump told supporters Wednesday.
Read more: http://dailycaller.com/2016/11/02/trump-we-will-cancel-global-warming-payments-to-the-un/#ixzz4Q7xOhqwK
House Speaker Paul Ryan Renominated For Top House Post.
What has he done for America? Can we please drain the swamp?
What has he done for America? Can we please drain the swamp?
He brings rational discussions about taxes and spending that are based on math and reason, not polling numbers.
Try reading through the transcript of his commentary during the healthcare town hall meeting, where he was clearly frustrating Obama with all his pesky “facts” and “numbers” about the accounting gimmicks inherent in the ACA talking points.
Candidly, I am rather happy that he is still the House Speaker in light of Trump’s legislative control of both the House and Senate. I will be unpleasantly surprised if tax reform ends up ballooning the deficit.
Of course the deficit goes up. Reagan tripled it and the GOP still applauds.
you cant cut taxes and increase spending on wars, walls, deportations and lawsuits. we all know this.
You may have missed this story from 2012:
Ryan’s Mystery Meat Budget
I am weary of mystery meat. The latest serving was dished out today by House Budget Committee Chairman Paul Ryan (R-WI), who released a fiscal plan that airily promises both trillions of dollars in tax cuts and a nearly balanced budget within a decade, but never says how he’d get there.
Ryan isn’t saying that his budget implies cuts of $4.6 trillion in popular tax deductions, credits, and exclusions over 10 years, according to new estimates by the Tax Policy Center. And that ignores the $5.4 trillion in revenue lost from permanently extending the 2001/2003 tax cuts.
Ryan proposes big, specific spending reductions such as cutting Medicaid in half and slashing other federal spending (except for Social Security, Medicare, and Medicaid) by nearly 75 percent from current levels by 2050. But his budget still can’t add up without eliminating or sharply scaling back those popular tax preferences. Which ones, it seems, remain a state secret.
http://www.taxpolicycenter.org/taxvox/ryans-mystery-meat-budget
It goes on from there. Other parts of his plan were to turn Medicare into an underfunded voucher system. The plan also made an assumption that unemployment would fall below 3%, a level last seen during the Korean War.
“Keep in mind that TPC did not model the actual Ryan plan, since it is not specific enough to estimate. Instead, we looked at a plan with the elements of his proposal.”
The budget is a political document…as we have been told over and over again, not a specific plan.
I suggest you read the Simpson Bowles Plan–which went into great detail, and then read Woodward’s “the Price of Politics” specifically about what went on behind the scenes with that plan, and Paul Ryan’s involvement (and his desire to get something done akin to that plan).
Also note that the Simpson Bowles Plan is something that was supported by HRC–privately of course, since she couldn’t possibly give her real opinion publicly.
Ryan’s rationale for voting against SB was entirely based on flawed assumptions about what would happen to employer paid medical insurance if/when the business deduction was eliminated (the plan underestimated how many people would be dumped into the ACA–thus ballooning the cost of the ACA).
The prospect of fixing the Simpson Bowles plan all went to hell when Obama’s staff invited P Ryan to a speech at GW in April of 2011 (without Obama knowing), and Obama proceeded to crap all over P Ryan with him in the audience–making it politically impossible for them to work together to fix Simpson Bowles.
Here is the transcript of the speech:
https://www.whitehouse.gov/the-press-office/2011/04/13/remarks-president-fiscal-policy
Ryan thought that given who else was in the audience, Obama was going to describe how they were going to try to work together and fix the flaws that he saw in Simpson Bowles.
As I said before, Obama didn’t know Ryan was in the audience–but said later that he would have toned it down had he known.
The good stuff happens when Obama starts to say things like:
“Now, to their credit, one vision has been presented and championed by Republicans in the House of Representatives and embraced by several of their party’s presidential candidates.”
“But the way this plan achieves those goals would lead to a fundamentally different America than the one we’ve known certainly in my lifetime. In fact, I think it would be fundamentally different than what we’ve known throughout our history.”
“These are the kinds of cuts that tell us we can’t afford the America that I believe in and I think you believe in.
I believe it paints a vision of our future that is deeply pessimistic. It’s a vision that says if our roads crumble and our bridges collapse, we can’t afford to fix them. If there are bright young Americans who have the drive and the will but not the money to go to college, we can’t afford to send them.”
“It’s a vision that says up to 50 million Americans have to lose their health insurance in order for us to reduce the deficit. Who are these 50 million Americans? Many are somebody’s grandparents….Many are poor children….children with autism or Down’s syndrome.”
“To meet our fiscal challenge, we will need to make reforms. We will all need to make sacrifices. But we do not have to sacrifice the America we believe in. And as long as I’m President, we won’t.”
————-
My hope is that a plan like Simpson Bowles emerges again, with Ryan putting it together…since he understood its flaws the first time around.
From what I recall, the committee didn’t even endorse the plan. More importantly, it leaned heavily on limiting the growth of Social Security and Medicare, which would probably hit low-income senior citizens. Obama’s big mistake was to appoint Erskine Bowles, a banker from Morgan Stanley, to represent what is supposed to the party of working people.
Lena Dunham’s alma mater Oberlin to become a sanctuary campus:
http://www.cleveland.com/metro/index.ssf/2016/11/oberlin_college_seeks_to_creat.html#incart_river_mobileshort_home
For ugly wymin?
Ouch!
The irony here is that the Obama Administration has deported more people than any other presidential administration.
I’m in cash with 5 separate checks coming in for income every month. But, I still want to be able to profit on that cash and not accept 1%. So, although my 5 separate checks ‘may’ increase if interest rates rise…my ability to ’speculate’ seems to be decreased on the cash that I am holding. And I currently am out of all real estate for now.
Then accept the losses that are surely coming your way.
crushing.housing.losses.
I don’t trust polls…
POLL: 70% voters do not believe media honest and truthful…
Whats the over/under on Huma getting a pardon? Hillary is a sure bet. Also wondering if the entire Dem establishment will get pardoned since it seems there was some insider trading going on as well as likely bribery and maybe even RICO charges. It must be like Hitler’s bunker at the white house right now, lol!
And the head shlub Ozero is on his last failure tour in Greece, another failure of globalization. Too ironic, surprised he isnt stopping in Venezuela though.
to protect himself, obama will have to pardon both elphaba clinton and huma. maybe on his last day. maybe jarret too. and there might be a few others. it should be quite a spectacle.
CNN continues with the rhetoric , newest phrase> “a knife fight”. 4 more years of the media telling the people Trump won by accident, a fluke, we will guide you till the next polling for 2020 which will again be all wrong?
What kind of idiots are still tuning in to CNN?
Oakton, VA Housing Prices Crater 11% YoY
http://www.zillow.com/oakton-va/home-values/
Break even in 7 months
Does that include the commission when you sell?
Falling prices my friend. Falling prices.
I think what most buyers miss is that a house you live in is cash flow negative. Even if you’re going to flip and move, unless your next stop is Oil City, you’re looking at the rest of the houses being more expensive in tandem with yours.
Then, there’s not fully appreciating the carrying costs. Articles like the one below, “Salary required to purchase in city X”, only show the mortgage payment - the P and the I of the PITI-UMF. They ignore the Taxes, Insurance, Utilities, Maintenance and Fees.
http://www.cnbc.com/2016/11/15/the-income-you-need-to-afford-a-home-in-15-of-the-largest-us-cities.html
President Obama said today we have to be on guard against any rise in “crude nationalism,” identity politics, and tribalism. Seems rather ironic, since his globalist, neoliberal policies that favor the .1% at the expense of everyone else have played a central role in the current fraying of the social fabric and “us and them” mentality that has taken root.
https://www.youtube.com/watch?v=WJ7_M7t0TIA
Like “fundamental transformation” didn’t sow the seeds of a populist-nationalist backlash against globalism.
https://www.washingtonpost.com/news/post-politics/wp/2016/11/15/in-athens-obama-warns-against-a-crude-sort-of-nationalism-or-tribalism-taking-root-in-the-u-s/
his globalist, neoliberal policies that favor the .1% at the expense of everyone else have played a central role in the current fraying of the social fabric and “us and them” mentality that has taken root.
I’ve seen that theory around the internet recently, but there’s not a lot of evidence to support it. There was less inequality in the ’60s, but there was also the furious supporters of Goldwater in ‘64 and the famous Hard Hat Riot in NYC at the end of the decade, not to mention the Generation Gap.
Irrelevant.
Yes, I know. You’re not interested in evidence or its absence.
This might be the most ironic thing I read all day. Paul Krugman, Keynesian lunatic and avid Hillary supporter and apologist for the crony capitalist status quo, claims that Trump will make us a kleptocracy akin to Russia. Like we aren’t already an oligarchy?
http://www.businessinsider.com/krugman-trump-kleptocracy-russia-2016-11
The architect of Obamacare, Jonathon Gruber, gets raked over the coals by Maria Bartiromo for claiming this scam on consumers isn’t costing jobs.
http://newsbusters.org/blogs/nb/pj-gladnick/2016/11/15/maria-bartiromo-brutally-schools-jonathan-gruber-obamacare-job-loss
Rake, rake, rake but nothing changes…. Blue Cross still wins.
“BARTIROMO: So we’re stupid and that’s why you were able to pass this legislation through?”
“GRUBER: Maria, I deeply regret those comments which were taken out of context.”
“BARTIROMO: What’s out of context? We just heard you say it? What is out of context about what you said?”
We’re stupid if we don’t make the POS pay back the $400k
Did Jonathan Gruber earn ‘almost $400,000′ from the Obama administration?
By Glenn Kessler November 14, 2014
The first four months of the contract could not be found on the FedBizOpp.gov Web site, but in June 2009, HHS renewed the contract for eight months, with a value of $297,600. Gruber in an e-mail confirmed that the first part of the contract was for $95,000.
That adds up to $392,600 — or “almost $400,000.”
In one especially fishy circumstance, Nancy-Ann DeParle, at the time director of the White House Office of Health Reform, wrote about Gruber’s work on the White House blog on Nov. 29, 2009. “MIT Economist Confirms Senate Health Reform Bill Reduces Costs and Improves Coverage” was the headline on the post.
https://www.washingtonpost.com/news/fact-checker/wp/2014/11/14/did-jonathan-gruber-earn-almost-400000-from-the-obama-administration/
“MIT Economist Confirms Senate Health Reform Bill Reduces Costs and Improves Coverage” was the headline on the post.
But…but…if an MIT Economist said it, it must be true!
GMU admissions director: You’re a ‘piece of worthless trash’ if you hold (conservative) beliefs
COLLEGE FIX STAFF •NOVEMBER 13, 2016
The admissions director at George Mason University said that if you believe what groups like the conservative National Organization for Marriage do, you’re a “piece of worthless trash.”
According to the Media Research Center, Andrew Bunting asked his followers in a post-election Facebook rant to read an article about the NOM, noting the group is “not representative of the key pillars of American society.”
He added, “If you agree with them then that is your opinion. Just know that to the rest of us, you are a piece of worthless trash.”
http://www.thecollegefix.com/post/29934/
I don’t know what’s richer: the YouTube videos of wailing precious snowflakes, or Hillary’s meltdown upon learning victory had been snatched away from her, notwithstanding the votes of millions of illegal aliens and dead people.
http://www.breitbart.com/big-government/2016/11/15/hillary-clinton-screaming-obscenities-and-throwing-objects-in-election-night-meltdown/
This is funny, a big foreign property buying dog + pony show going on in China. Everyone is begging them to come buy houses in their countries, and sneak the money out any way they can.
http://www.bloomberg.com/news/articles/2016-11-14/world-s-biggest-real-estate-binge-is-coming-to-a-city-near-you
“New offshore targets include Texas, Thailand and Malaysia”
“But here at the city’s biggest international property fair — a frenetic gathering of brokers, developers and other real estate professionals all jockeying for the attention of Chinese buyers — the quintet of wannabe Texans fits right in. As they promote Houston townhouses (“Yours for as little as $350,000!”), a Portugal contingent touts its Golden Visa program and the Australian delegation lures passersby with stuffed kangaroos.”
Sorry to reply to myself, but I didn’t catch this the first time around. Looks like Hong Kong followed in Vancouver’s footsteps. From the article:
“In Hong Kong, the government enacted a 30 percent tax on foreign property owners this month after Chinese demand pushed home values toward record highs.”
They are still buying heavily in the Seattle area:
http://www.seattletimes.com/business/real-estate/foreign-investors-pouring-billions-into-seattle-commercial-real-estate/
dumb.borrowed.money.
That is crazy in Seattle.
I had been reading some older articles earlier today showing how over 30% of all property transactions in California in recent years were from the Chinese.
It reminds me of back in the 80’s when the Japanese were buying up everything, and the radio stations were playing this old song a bunch:
https://www.youtube.com/watch?v=IWWwM2wwMww
They need to make a new version of that.