Fear Of An Overheated Market Hitting The Wall
A report from the Winthrop Transcript in Massachusetts. “The real estate market showed median home sale prices go up anywhere from 8-21 percent in the Revere, Winthrop, Chelsea, East Boston, Everett and Lynn. Jim Polino of Highland Real Estate in Winthrop agreed that East Boston is hot. The public is coming around to realize that East Boston is part of the city. The spillover to Winthrop and Revere is part of the Boston boom. ‘The millennial are buying heavily,’ Polino said. ‘High income and low downpayment. It’s all a function of the economy.’”
The Boston Globe in Massachusetts. “The apartment building boom looks to be taking a break in the Boston suburbs. After a surge of construction earlier this decade, the number of permits issued for multifamily housing in the cities and towns that ring Boston dropped off steeply in 2016. In the 29 municipalities that ring Boston, permits for multifamily buildings — those with at least five units — dropped an estimated 53 percent in 2016 over the previous year, according to an analysis of US Census data by the Boston Foundation. Most cities and towns in and around the Route 128 corridor, where demand is greatest, experienced significant decreases, compared to 2015.”
“‘I’m not quite sure I’d call it a downturn quite yet,’ said Marc Draisen, executive director of the Metropolitan Area Planning Council. ‘Our production numbers are not bad; our permit numbers are not bad, historically, but I’m worried that we’re at the top [of the market] and we’re going to start slowing down production before we have met demand.’”
The Tennessean. “The pace of commercial development in Nashville has been challenging to keep up with. Some worry the pace of development has outrun the momentum of demand. There is fear of an overheated real estate market hitting the wall as Nashville becomes overbuilt. The number of new apartments built or being built in Nashville is stunning. As of late last year, there were some 12,000 apartment units under construction both in the urban core and in suburban areas. With that many units set to be delivered in a compact time frame, we can’t avoid some level of temporary oversupply. That will lead to some short-term softness in the market.”
“We’re already seeing this play out as some newly constructed apartment projects are offering concessions like three months free rent to attract new residents. I don’t believe our real estate market is at the bubble stage getting ready to burst. It’s more likely to gently contract.”
The Washington City Paper. “In a competitive housing market like D.C.’s, lease incentives such as one month’s free rent or a reduced security deposit can entice potential tenants to commit to a building. But at a new 45-unit, light-filled development in Trinidad, the owner is offering different kinds of carrots: $1,000 to a tenant’s charity of choice—plus a complimentary trip to Cuba—when a person signs a lease. Until March 1 and while apartments are available, that is.”
“Ditto Residential officially opened Hendrix, a multifamily project filled mostly with two bedrooms earlier this month. As of Wednesday, according to a spokeswoman for the firm, four leases had been executed at the property. Prices range from $1,515 a month for a studio to more than $3,315 a month for a three bedroom. Nicola Y. Whiteman, senior vice president of government affairs at the Apartment and Building Association of Metropolitan Washington, says the swath of luxury real estate in the District is leading developers to be creative. ‘We are likely to see more of these offers surrounding the amenity-rich housing to which millennials are attracted, and this is the same demographic that so many developers are competing for,’ Whiteman continues.”
The News Review in Oregon. “Driving through Roseburg’s Mill-Pine District, it seems like every other house has boarded-up windows, lawns overrun with weeds and sinking roofs layered with moss. The historic Mill-Pine District is nestled between downtown Roseburg and the South Umpqua River. Most of its homes were built in the early 1900s and are distinctively American Craftsman: low-pitched gable roofs, spacious porches, tapered columns. The types of homes people in Portland are scrambling to snatch up for hundreds of thousands of dollars, cash in hand.”
“Abandoned properties, sometimes called ‘zombie homes,’ make the Mill-Pine District less appealing. They sit vacant for months, sometimes years. These abandoned homes and many others peppered around the county and state are lingering ghosts of the nation’s 2007 financial crisis. ‘At one point, in about 2010, there were so many that (banks) started withholding some homes from the market,’ said Victoria Hawks, a Roseburg Realtor. ‘And that’s why we ended up with problems further down the road.’”
“Douglas County is not alone in the vacant and abandoned home issue. Portland City Council decided to speed up the foreclosure process for five homes last year, after it voted to use eminent domain to foreclose on them, reads an Associated Press article from June 2016. The mayor has his eye on another 25 to 30 houses.”
“Hawks, who was a Roseburg city councilor until last month, said there might be some unintended consequences if Roseburg used a similar tactic. ‘I don’t think they would want us to flood the market again with less desirable homes at cheaper prices, which then turn around and make other homes worth less,’ she said.”
“The county’s abandoned homes, no matter how derelict they become, will eventually get on the market and they will get multiple offers, she said. That’s because the housing market is tight, even in rural Douglas County. ‘They aren’t just left forever, it just feels like forever those first few years,’ Hawks said.”
‘The millennial are buying heavily,’ Polino said. ‘High income and low downpayment. It’s all a function of the economy.’
Yeah, let’s shoehorn these young people into a loan with little down. Why the markets only up 20%. What could go wrong?
‘Most cities and towns in and around the Route 128 corridor, where demand is greatest, experienced significant decreases, compared to 2015′
Let me guess: the most expensive markets are falling the most?
Yeah, let’s over leverage millennials some more. They’re used to it with high student loan debt anyways!
The experienced lion in the grass patiently waits until it has identified the youngest and slowest member of the herd.
‘Banks are getting more picky about which consumers they’re approving for loans as borrowers with spottier credit histories struggle to keep up with payments.’
‘Joe LaVorgna, Deutsche Bank’s chief economist, says banks are being more cautious with credit cards in part because of low interest rates that have crimped profit margins. He expects standards to ease as rates rise.’
‘The number of subprime auto loans (those requiring a FICO score of 600 or lower) that were at least 90 days late hit the highest level since 2010 in the third quarter at 6 million, according to the New York Fed. The bulk of the bad loans were by auto finance companies rather than banks.’
‘The share of delinquent personal loans and credit card debts also edged up in the third quarter to 3.53% and 1.33% respectively, according to TransUnion and UBS.’
‘Also worrisome: 18% of consumers surveyed by UBS in December expected to default on a loan payment in the next 12 months, up from 12% in September. Much of the pain is being felt by lower-income Americans. Two-thirds of households who earn less than $40,000 say income is falling short of, or just barely covering, expenses, and 36% of that group say their financial conditions worsened over the past six months.’
‘So far, housing has been insulated from the troubles. The portion of nonperforming mortgages is low and has been falling. But Matthew Mish, head of global credit strategy for UBS says non-bank lenders have been approving mortgages for risky borrowers that are backed by the Federal Housing Administration.’
‘A new study by Trinity University economist David Macpherson for Emergency Warning System, a research firm. shows that in 29 states home prices have risen more rapidly than rents since 2012, up from 14 states two years ago. Such data typically augurs a housing bubble and a significant increase in delinquencies in three to four years, Macpherson says.’
that were at least 90 days late hit the highest level since 2010 in the third quarter at 6 million,
Rentalpeek and Jigglyballs said the lending’s been very tough since 09.
I’ve never commented on auto loans…from what I’ve read, the practices in that realm are atrocious…since it’s easy to repossess a car.
I’ve been focusing on real estate and related debt.
Have you ever had a tenant miss a payment because of an auto break down? I have. In my experience they will pay for the car first because without that they can’t get to work, etc.
Which is precisely why lenders are employing such predatory practices.
Auto loans frequently go bad, but the recovery rate and resale of the vehicles is very high… in the mid 90%tl. Most debtors easily fold admitting a divorce or job loss, and they surrender their keys when the bank’s associate knocks on the door. Almost all of the repo business is exclusive to the barrio and ghetto neighborhoods.
I wonder how many car loans were given to this kind of guy?
“I’m struggling like crazy and have another kid on the way to boot! I want out of this car badly but I feel completely stuck.”
http://jalopnik.com/my-tdi-payments-are-too-high-but-i-dont-want-to-lose-ou-1792294188
Man, it feels like everyone is running some kind of racket.
I was looking for a Defibrillator video to go with (those requiring a FICO score of 600 or lower) but this was much more interesting especially since it happened to a girl who 2 weeks before was on a mountain in Honduras.
Teen’s cardiac arrest & life saving resuce caught on video
https://www.youtube.com/watch?v=dgYeUyIOzhk
Arlington, VA Rental Rates Plummet 8% YoY
http://www.zillow.com/ballston-virginia-square-arlington-va/home-values/
Zillow has Arlington +2.7% next year
They haven’t change predictions since the human tornado touched down
Lazy ,like the oil patch,they just ignore events
‘The slowdown in job growth in the fourth quarter of 2016 isn’t the only sign that something is changing in the city’s economy. Almost a third of January apartment leases in Manhattan involved concessions from the landlords, according to the latest report from Douglas Elliman.’
‘10%. Venture capital investments in New York declined that much in 2016, the first drop since 2009, according to the quarterly report from City Comptroller Scott Stringer. The final three months of the year marked the third consecutive quarterly drop.’
‘5. In five of the last six quarters, commercial leasing activity in the city has declined, according to the comptroller. 2.9%. Ridership on subways and buses in the city fell almost 3% in October and November compared with the same months in 2015, and Metro-North saw a decline as well, according to the comptroller’s report. ‘
‘Not one of these statistics says that New York is entering a downturn, but together they do signal a significant slowdown.’
Oh dear. Office space in NYC has peaked and is now plummeting.
http://wolfstreet.com/2017/02/13/new-york-office-sector-not-in-collapse-but-gradual-decline/
Airplanes can have gradual declines until they turn into a steep dive and render the flight controls useless.
Sounds like an aviation wing-icing event.
There’s always a rebound just around the corner.
http://www.mercurynews.com/2017/02/07/silicon-valley-commercial-real-estate-rebound-forecast/
Yeah, I posted that the other day. The Calgary of the west:
‘At present, about 11.8 million square feet of office buildings are completed shells or are scheduled for completion in 2017 in Santa Clara County. Companies have agreed to rent or buy 6.1 million square feet, or slightly over half of that total. That’s well ahead of the 1.3 million square feet of space that, at the beginning of 2016, had commitments for occupancy.’
‘But in a sign of a possible bubble for commercial real estate — and overbuilding — about 5.7 million square feet of Santa Clara County office buildings that are completed shells or are under construction are not leased and have no commitments from occupants. A year ago, that uncommitted figure was 1.7 million square feet.’
about 5.7 million square feet of Santa Clara County office buildings that are completed shells or are under construction are not leased and have no commitments from occupants ??
I know Ben…I shake my head also but one needs to drill down deeper to try and get a better understanding of what the hell is going on…Many if not all of these owners are real deep pockets…They don’t borrow money to do these deals…They are equity financed…The Irvine Company is just one example…George Marcus is another…I just assume they take a long term view of things…I don’t know about other locations but I do have a decent pulse on my own…I get this information from some people that are close enough to the transactions that I believe their information is credible…
“They are equity financed…”
Again….. borrowed money.
Again….. borrowed money ??
Your Bull Chit is old dude…Why don’t you try and offer some substance one time…Irvine Cos. does not borrow money…
“The Irvine Company, Orange County’s biggest landlord, recently took out $1.16 billion in mortgages on 19 apartment buildings it owns in the county, Silicon Valley and San Diego, a Freddie Mac apartment financing unit announced recently.”
“In all, the 19 complexes, ranging from 14- to 41-years-old, have a total appraised value of $1.8 billion, meaning he mortgages amount to 63 percent of the total value.”
http://www.ocregister.com/articles/irvine-717002-loans-san.html
Refi dude. Purchase at a 5% CAP and borrow long term at 3%. IRR probably close to 7%.
Dumb borrowed money. LOL. Owner of the Irvine Company;
Forbes, in its 2015 edition of, “The 400 Richest Americans”, ranked Bren as the wealthiest real estate developer in the US and 30th “Richest American” with an estimated net worth of $15.2 billion.
And insider trading Steven Cohen is worth $13 billion.
Don Bren made his money over multiple real estate cycles starting in the late 50’s. Effectively Mr. Orange County….he built Mission Viejo, and held onto lots of assets over time.
Trump is worth something like $4-$5MM, and says he is worth what, $10B? He got a head start from dad’s inheritance.
Bren is worth more and started from nothing–he likes to keep a low profile.
Sorry, should be $4-5B for DJT…
“Bren is worth more and started from nothing”
Baloney.
“Bren grew up in the sullen California ghettos known as Beverly Hills and Bel-Air. His father was a wealthy Hollywood film mogul. His stepmother was an Oscar-winning actress.”
http://www.ocweekly.com/news/donald-bren-the-real-legacy-6416501
Sounds like a sketchy dude running a sketchy outfit.
Went to public schools, paid his own way through college, served 3 years in the Marine Corp before striking out on his own.
Didn’t grow up poor, but didn’t get handed a trust fund to start his business life.
You made the claim they don’t borrow money. So then why do they need a loan backed by the taxpayers?
The Irvine Co. received a $1.2 billion mortgage for this and 18 other apartment complexes last month. Freddie Mac, which is guaranteeing the loans under a program called “K certificates” is bundling the mortgages into $1.04 billion worth of securities being sold to investors.
http://www.ocregister.com/articles/irvine-717002-loans-san.html
You made the claim he started from nothing. That is false.
My first comment above about the Freddie Mac loan was directed to scdave.
RW:
Not only was Bren’s father a Hollywood producer he was a real estate mogul.
,”Bren is the oldest son of the late Milton Bren, a Hollywood movie producer and real estate mogul. Bren’s mother, Marion, married steel distribution magnate Earle M. Jorgensen.”
http://articles.latimes.com/1998/may/14/local/me-49656
Beverly Hills High School
Paid for college partially with an athletic scholarship:
Alpine Skiing
And then got a loan for $10,000 from Bank of America when he was 25
In 1957 would any 25 year old have been able to get a $10,000 loan? Those that came from nothing?
“I was hoping he might get answers to some of the same questions I’d have for Bren: After being worth around $1 billion for several decades, what caused your worth to jump nearly tenfold during the past decade?”
http://www.ocweekly.com/news/donald-bren-the-real-legacy-6416501
In 1957 would any 25 year old have been able to get a $10,000 loan? Those that came from nothing?
$10k then is about $85k now. That’s not very much to lend to anyone.
It’s telling that no matter who his dad was, he didn’t borrow it from his dad.
Guys like Bren always used big amounts of leverage. It’s an important ingredient for the modern day alchemist busy turning dirt into gold.
$10K is more than 85K today and it was a lot to loan anybody in the old days, especially a 25 year old.
With $10,000.00 in 1957 one could buy a Ferrari and have change (3K) left over or the most expensive Caddy or Lincoln Conti and have a lot of change left over. An average, very nice, home in most parts of America could be had for around $9,000.00.
Gas was about 25 cents a gallon and a very nice dinner would set one back about $3.00. It was also more money than a well paid person could make in a year.
Sidney Poitier’s character, a Police detective in Philly, when asked how much he makes per week (in 1967 not 57) in “The Heat of the Night”:
Gillespie: How much they pay you to do their police work?
Tibbs: A hundred and sixty-two dollars, and thirty-nine cents per week.
Gillespie: A hundred and sixty-two dollars and thirty-nine cents a week? Well boy! Sam, you take him outside but treat him nice, because a man that makes a hundred and sixty-two dollars and thirty-nine cents a week, we do not want to ruffle him!
This was referenced in the movie to show that Poitier’s character was making a very nice income vs the White Police Chief in the movie.
Luckily, I grew up in Orange County back before Bren and the Segerstroms screwed it all up with asphalt, concrete and a bunch of soulless structures.
The Segerstroms used to take their employees from the Crystal Court offices to the last remaining piece of farm land just off of Fairview Road in the 1980s for lunch. They would gather in the red farmhouse and dine among workers and family in an attempt to prove that they still had some kind of honorable connection to the land.
And his promise is the Empty Pocket Guarantee.
The challenge though is the ripple effect through the rest of the market. There are plenty of “B” office buildings in places like Sunnyvale that have traded hands to smaller investors who were hoping to raise rents to $2.50NNN+ when the current occupants who were paying $1.50NNN left.
If they overpaid, and used debt, they will be caught in the wake of falling rents and be completely hosed.
I agree RW….
More:
“Fitch Ratings expects mortgages on a pair of offices towers owned by Irvine Co. around La Jolla to go into default, not meeting terms of what appears to be $206 million in initial mortgages debt.”
“La Jolla Executive Tower…wrote of the $106 million Irvine Co. mortgage on the tower”
“The Irvine Co, bought it for a what was a reported $130 million was in 2007″
“10.5-year fixed-rate purchase loan (5.6%); interest-only payments; matures October 2017; appraised at $133 million, as of 2007; $11.45 million second mortgage on the building, too.”
http://www.ocregister.com/lansner/http-443018-irvine-href.html
Sounds like they’re real good at spending other peoples money and not having any expertise on board.
Isn’t Fitch one of those companies that gave AAA ratings to dogsh*t CDO-squared’s?
That article is originally from September 2009.
The Irvine Company’s comment:
““As a diverse, private real estate company, we have the unique advantage of being able to take a different approach to our portfolio. We are a long-term owner with a very strong track record that demonstrates that we have successfully navigated difficult economic cycles in the past, and will continue to do so in the future. The Irvine Company has never returned a property in its 145-year history, and we see signs that the San Diego market is stabilizing from a tenant and rent perspective. We remain confident about our future, the future of the San Diego market and the long term viability of all of our San Diego holdings.””
They still own the building, so who was right, Fitch? Or the Irvine Company?
The reason I posted the article was to show that Irvine co. in fact does borrow money. scdave made the false claim they don’t borrow money to fund these deals.
RW
“Isn’t Fitch one of those companies that gave AAA ratings to dogsh*t CDO-squared’”
Probably. But far from the only and not the worst.
“Both Moody’s and Standard & Poor’s employees described complex/exotic new financial products like CDOs and SIVs as “cash cows,” and behind closed doors, executives talked openly about the financial pressure to give scientifically unfounded analysis to products the banks wanted to sell.”
http://www.rollingstone.com/politics/news/the-last-mystery-of-the-financial-crisis-20130619
Nice way to try and discredit the article though.
Nice way to try and discredit the article though.
The article was discredited on it’s own with the passage of time.
You claimed he “started from nothing” which is a flat out lie.
I posted the article in response to scdave, not you. It is not discredited in the fact that it contradicts the claim that Irvine co DOES NOT BORROW MONEY.
As does the article I posted above about Irvine’s Freddie Mac backed loans.
It seems you ignored that and tried to draw attention away from the the facts that discredit that bogus claim.
MB, apologies, my post sounds like it was directed at you being right below it, instead of RW.
I got pulled in (above), because it was claimed so adamantly that they didn’t borrow money which was a load of manure. lol
When you pull back the curtain, Irvine co/Bren are not all that their cheerleaders claim.
https://www.youtube.com/watch?v=miXMWJyOdgw
South Park is awesome!
Boston, MA Housing Demand Plummets 33% YoY As US Housing Demand Craters
http://files.zillowstatic.com/research/public/Metro/Metro_Turnover_AllHomes.csv
Another Chinaman disappears in Hong Kong, presumed kidnapped by Chinese authorities for financial crimes:
http://www.msn.com/en-us/news/world/mystery-deepens-over-apparent-abduction-of-chinese-billionaire-in-hong-kong/ar-AAmTZzs?li=BBnb7Kz
All these hours later and no one has commented on that last link? You guys really don’t pay much attention anymore, do you?
You guys really don’t pay much attention anymore, do you?
Perhaps people are a bit more concerned with trying to make sense of, I don’t know, the coming apocalypse? It sure seems more and more like a non-zero possibility, LOL.
There are more serious things afoot than housing.
‘the coming apocalypse’
Oh, well, I had no idea. Carry on then. I’m sure your last few hours of peace are best spent arguing with strangers on the internet.
Calling one’s congressmen and getting active is a better use of one’s time than arguing disastrous choices with willfully blind.
Weston, CT Housing Prices Crater 11% YoY
http://www.zillow.com/weston-ct/home-values/
You’re right, NYC - the housing bubble is merely a symptom of far deeper financial issues.
You mean this stuff here?
“The county’s abandoned homes, no matter how derelict they become, will eventually get on the market and they will get multiple offers, she said. That’s because the housing market is tight, even in rural Douglas County. ‘They aren’t just left forever, it just feels like forever those first few years,’ Hawks said.”
Yeah, I was paying attention. A couple of times I looked at that multiple offers bs, but I was peeking at it while doing some work.
OK, what would you like me to say that hasn’t been said before? It’s deja vu all over again and again and again.
I remember the days of the RTC (early 1990s). Banks and financial institutions had to clear their crap off the books, dispose of “zombie” properties, etc. Whatever happened to that?
Here’s the deal: until the rule of law is restored in the US and restrictions on foreign purchases instituted, along with the end of the FED, this is it. This is our life. Will the price of housing go down? Yeah, somewhat, just like it did between 2008 and 2011, which in my opinion was not enough. It was certainly not enough to end this horrible housing situation. And then it’ll go up again. All that building that’s being done? Guess what, it’s going to sit there and rot and probably be plowed under.
that was a mear 400 billion
What was? The RTC or 2008-2011?
Some serious air needs to be let, and that’s just not happening. Used to be, a downturn in housing prices was an opportunity for someone prudent with a down payment to get into a decent house cheap. With a few rare exceptions, not anymore. Not when you’ve got investment companies and foreign buyers scarfing things up in bulk from the banks.
What exists now is a lost cause. They won’t let you have a deal. Not now, not ever. They’ll sooner plow under perfectly fine houses than let the market go to where it should.
I see it differently. This is an outrageous admission. It reveals this supply and demand talk is bunk. To me it suggests these people flooding open houses with multiple offers over asking might just be overpaying, especially in light of the “non-bank entities” getting goofy with the low down loans. Over the years I have posted multiple statements about this market manipulation (this might be the most egregious), so where is the media? All these web sites dedicated to housing: am I the only person who can see these things? I doubt it. So why the hush? Where is the NYT dialing up this UHS asking WTF have she and the banks been up to? LA Times? WSJ?
“so where is the media? All these web sites dedicated to housing: am I the only person who can see these things? I doubt it. So why the hush? Where is the NYT dialing up this UHS asking WTF have she and the banks been up to? LA Times? WSJ?”
Where is the media? Where is the media? Jeebus, I wish I had a nickel every time I saw this question asked, not just here, but in other places dealing with other issues, like immigration.
They’ve checked out, in case you haven’t noticed. They don’t give a rat’s patootie about ANYTHING that is not globalist propaganda anymore. It’s all fake news, manufactured consent. You know that by now. Why are you even asking?
I’m asking them.
Did Oregon ever unwind their foreclosure legislation from 2012? Oregon was non-judicial, and then passed a law requiring “foreclosure avoidance measures” before a bank could complete a non-judicial foreclosure.
Did the Feds ever put their regulation requiring banks to dispose of foreclosures in a timely manner back in place? I would think that regulation had a purpose and seeing as how we have “recovered” so well, there wouldn’t be any harm in reinstating that regulation.
Zombie foreclosures are bad. That is undisputed. At least with slow, but occupied foreclosures, the homes still serve someone’s need for shelter.
But are there enough zombie foreclosures to really make a difference?
http://www.realtytrac.com/news/foreclosure-trends/q3-2016-residential-property-vacancy-zombie-foreclosure-report/
From the RealtyTrac report:
“The report shows that as of the end of the third quarter, 18,304 U.S. residential properties actively in the foreclosure process were vacant (zombie foreclosures), representing 4.7 percent of all residential properties in foreclosure. The number of zombie foreclosures decreased 5 percent from the previous quarter and decreased 9 percent from Q3 2015.
Meanwhile there were 46,604 vacant bank-owned (REO) residential properties as of the end of the third quarter, an increase of 7 percent from the previous quarter and up 67 percent from Q3 2015.”
Zombie foreclosures are a blip, and declining…MUCH more interesting are the vacant REO, which are greater in number than Zombies and RISING…why aren’t those going back to the market?
“States with the most vacant REO properties as of the end of the third quarter were Florida (5,880), Michigan (4,661), Ohio (3,585), Illinois (2,652), and Georgia (2,626).
Among 148 metropolitan statistical areas with at least 100,000 residential properties analyzed for the report, those with the most vacant REOs were Detroit (2,386), Chicago (2,379), Miami (1,880), Philadelphia (1,737) and New York (1,668).
Other metro areas in the top 10 for most vacant REOs were Baltimore (1,649), Atlanta (1,573), Tampa (1,310), Cleveland (1,106) and Flint, Michigan (1,091).”
Even from the article you posted:
“Portland City Council decided to speed up the foreclosure process for five homes last year, after it voted to use eminent domain to foreclose on them, reads an Associated Press article from June 2016. The mayor has his eye on another 25 to 30 houses.”
Wait, they don’t have their eye on hundreds and hundreds of these homes? Biggest city in Oregon has their eye on a couple of dozen?
The Feds blew it (redundantly) by juicing up the price of houses again. All that foaming the runway wasted. Perfect setup for the next round of defaults.
Did the Feds ever put their regulation requiring banks to dispose of foreclosures in a timely manner back in place? I would think that regulation had a purpose and seeing as how we have “recovered” so well, there wouldn’t be any harm in reinstating that regulation.
Not as far as I know, but when I’ve looked at the FDIC backed banks’ balance sheets, the problem doesn’t appear to be with banks. My guess the issue is with non-bank lenders–and I’m not sure the Feds have any jurisdiction.
Over the years I have posted multiple statements about this market manipulation (this might be the most egregious), so where is the media?
Who is left in the media that understands that market manipulation is bad, rather than normal or even good? Or in society as a whole? How can people jump on a story if they don’t understand why it should be a story?
All that foaming the runway wasted.
Oh I wouldn’t say it was wasted…it paid a lot of bonuses over the years.
Wait, they don’t have their eye on hundreds and hundreds of these homes? Biggest city in Oregon has their eye on a couple of dozen?
It’s called market manipulation. Welcome to the game, son.
Did the Feds ever put their regulation requiring banks to dispose of foreclosures in a timely manner back in place?
I think it would be more effective to take away FSAB #87(?) whatever rule, that allows banks to keep those zombie houses on the books at 2006 prices. If they had to book at an honest appraisal level, they’d dispose of the foreclosures themselves.
It’s called market manipulation. Welcome to the game, son.
Or, there just aren’t that many….Occam’s Razor.
RealtyTrac notes a total of 18,304 zombie foreclosures nationwide, all but 6,505 are concentrated in 5 states (NY, NJ, FL, IL, OH).
The 6,505 are spread out over states that represent total population of more than 240MM. Oregon’s population is about 4MM.
If the 6,505 are spread over the rest of the 45 states relative to population, that means that Oregon would have about 100 such zombie foreclosures. Portland MSA is home to about 50% of the population of Oregon–do the math. There may only be 50 such zombies in the entire MSA.
Double it, no, triple it, so Oregon has 3 times their share…and it’s only 300 statewide, 150 in the Portland MSA.
Yawn.
The problem is Realtytrac excludes the millions of excess empty and defaulted houses held up by foreclosure moratoriums.
I think it would be more effective to take away FSAB #87(?) whatever rule, that allows banks to keep those zombie houses on the books at 2006 prices. If they had to book at an honest appraisal level, they’d dispose of the foreclosures themselves.
As I’ve said before and I’ll say again, the mark-to-market rule change does not apply to single family homes. Homes are easy to value, there are plenty of market transactions to use to evaluate the value of the REO.
It only applies to assets that are very thinly traded and difficult to value based on market inputs (like the c-trance of a CDO squared).
By the way, the 5th most number of Zombie foreclosures are in Ohio at 999.
Ohio has a population of about 12 million.
So, if Oregon DID have 300 zombie foreclosures, it would be on-par with Ohio.
Your problem is you sit at a desk and let the REIC tell you how many are out there. Everywhere I’ve gone with a camera I found bunches.
“Your problem is you sit at a desk and let the REIC tell you how many are out there. Everywhere I’ve gone with a camera I found bunches.”
But how do you extrapolate what you see to the whole country? And how do you know the true legal status of boarded up homes that you see?
There is a boarded up home behind a cyclone fence right near my house. Lots of auction notices stuck to the fence. The problem is that without looking at legal records, you can’t possibly know the true status of the home.
The truth is that it’s not a zombie foreclosure–even though it looks like it. The truth is that it’s a property tax action, and just before the auction, the owner filed BK. Very strange, especially given the value of the land relative to the paltry sum of the back taxes…but it’s not a zombie foreclosure.
My point is that anecdotes and “on the ground” information are great, but you need to take great care when extrapolating that information to broad trends.
If they are understating the numbers everywhere I look, it is a good bet they are all off generally. You know, we are dealing with a really dishonest industry here, right? With a media that gets paid to tell half truths or lies? With a government committed to driving prices higher and covering up for bad actors? These people were willing to foam the runway with millions of families - for banks! What aren’t they capable of?
“you can’t possibly know”
That’s very curious from a guy who posts statistics out to three significant digits.
That’s very curious from a guy who posts statistics out to three significant digits.
lol.
I created a guesstimate from someone else’s number and then tripled it, and still came up with a yawn number…you call that “three significant digits”?
If they are understating the numbers everywhere I look, it is a good bet they are all off generally. You know, we are dealing with a really dishonest industry here, right? With a media that gets paid to tell half truths or lies? With a government committed to driving prices higher and covering up for bad actors? These people were willing to foam the runway with millions of families - for banks! What aren’t they capable of?
If that’s your perspective, then no data is worth any time reviewing–from either a positive or negative perspective.
Again, I took someone else’s calculated number, applied logic to attribute a reasonable share to the Portland MSA, and then TRIPLED the number. Inherent in my analysis was an assumption that they could easily be understating the number.
I recall pre-crash, that much of the concern came from our collective analysis of the same kind of data I’m looking at today (Census: housing starts and vacancy data, Case Shiller price data, etc.). We disagreed with the MSM consensus that everything was fine–but we were looking at the same data they were.
Today, rather than disagreeing with the interpretation of the data, it seems like it is necessary to disagree with the data itself to come to the most pessimistic conclusions–and that tells me that the bear case today has weaker evidence than the bear case in 2005-2007.
‘we were looking at the same data they were’
I don’t look at any of that stuff anymore. Case is old, the foreclosure tracking companies have become cheer leaders. Dataquick is gone. The UHS have long been a joke. (Remember when they double counted sales for years, then revealed their error when it could make new numbers look up?)
Did you know the median price in Houston is still going up? Hands up anyone that thinks house prices are up in Houston.
I’m not the one bending myself into pretzels to explain how less than 30% of people in California can afford a shack, but somehow that isn’t gonna pop. I’m not interested in making horses drink. Believe what you want.
I’m not interested in making horses drink. Believe what you want.
Fair enough.
I’ll certainly let you know when I generally become bearish (as opposed to bearish on certain product types in certain locations).
In the meantime, I appreciate the healthy debate. I find it either convinces me to change my mind…or strengthens my current beliefs.
^LOL.
Enjoy the reading here.
Here’s an example of the games they play:
‘A new report from real estate firm CoreLogic shows an unbroken 62-month streak of falling national foreclosure numbers, but Florida still ranks at the top of the list for completed foreclosures in 2016.’
‘The housing market seems poised to continue on a mostly upward trajectory – CoreLogic says the number of homeowners rated “seriously delinquent” in their payments is at its lowest level since June of 2007, well before the housing market crash of 2010.’
‘But Florida also ranks first in the highest number of completed foreclosures in the past year. Analysts say Florida’s rate of finished foreclosures stayed high largely because of its long foreclosure process.’
The crash of 2010? What about the shadow inventory the state reported recently, Is that seriously delinquent? Long foreclosure process? What about the rocket dockets? Oh, they caved to political pressure. I wonder if the UHS had anything to do with that?
Notice this is a “real estate firm.”
‘If you’re buying or selling a home in Redmond in 2017, prepare for a booming seller’s market with properties in high demand.’
‘Real estate website Zillow estimates that the median-price of a home in Redmond has increased by 14.2 percent over the past 12 months and the median price is estimated to rise another 6.1 percent over the next 12 months. Current housing prices in Redmond are above the peak of the housing boom in 2007.’
‘A pre-approval shows sellers that your offer is backed up by a trusted mortgage professional and that you’re qualified for a loan at the offer level. This is key in multiple bid situations and gives you as the homebuyer an offer ceiling as prices go above asking during a bidding war.’
‘Finally, regulations on what are called conforming loan limits changed in 2016. Previously, homebuyers purchasing a property for more than $540,500 were required to obtain a jumbo mortgage loan. A jumbo loan generally requires a higher credit score and a larger down payment than traditional mortgage products. The conforming loan limit for one unit properties is now up to $592,250 in King County, Snohomish County and Pierce County, providing more opportunities for homebuyers to qualify for more home with less down payment.’
Well isn’t that special?
No, it’s not a “real estate firm” who made the comment about the crash of 2010. It’s this woman:
https://www.wmfe.org/author/ncreston
Don’t read the article about the CoreLogic report, which will be interpreted as the author sees fit, read the actual CoreLogic report. The author is clearly trying to paint the best picture possible of Florida from the report, and it’s a stretch.
The serious delinquency rate of 2.6% NATIONALLY CoreLogic notes is the lowest since June 2007.
The foreclosure rate at 0.8% NATIONALLY is also the lowest since June 2007.
But then they go into state-by-state detail, showing the following states with high foreclosure rates: NJ at 2.8%, NY at 2.7%, and Florida at 1.4%…almost 2x the national average.
And they note the Florida had the highest number of completed foreclosures during the past 12 months…50% more than the next closest (Michigan). The only reason FL is at 1.4% and not higher is that they are actually foreclosing…NY and NJ, despite being populous states with lots of homes in the foreclosure process didn’t even break the top 5 in terms of completed foreclosures over the last 12 months.
And they note Florida has a serious delinquency rate of 3.7%…way more than the national average.
And they then go into a little regional details…Miami with a 2% foreclosure rate, and 5.1% serious delinquency rate.
Florida is certainly working to clear foreclosures, but they still have a way to go–at least based on the actual CoreLogic report.
“That’s because the housing market is tight”
I paid attention.
‘North Portland zombie house transformed, now for sale at $600,000′
”Evicted’ strikes chord as Portland’s housing crisis comes to a head (Q&A with author Matthew Desmond)’
I just sent this email to the writers of these two reports:
Greetings,
I’m writing to see if you may be interested in some comments to an article I posted at my blog today:
http://thehousingbubbleblog.com/?p=9996
The News Review in Oregon. “Driving through Roseburg’s Mill-Pine District, it seems like every other house has boarded-up windows, lawns overrun with weeds and sinking roofs layered with moss. The historic Mill-Pine District is nestled between downtown Roseburg and the South Umpqua River. Most of its homes were built in the early 1900s and are distinctively American Craftsman: low-pitched gable roofs, spacious porches, tapered columns. The types of homes people in Portland are scrambling to snatch up for hundreds of thousands of dollars, cash in hand.”
“Abandoned properties, sometimes called ‘zombie homes,’ make the Mill-Pine District less appealing. They sit vacant for months, sometimes years. These abandoned homes and many others peppered around the county and state are lingering ghosts of the nation’s 2007 financial crisis. ‘At one point, in about 2010, there were so many that (banks) started withholding some homes from the market,’ said Victoria Hawks, a Roseburg Realtor. ‘And that’s why we ended up with problems further down the road.’”
“Douglas County is not alone in the vacant and abandoned home issue. Portland City Council decided to speed up the foreclosure process for five homes last year, after it voted to use eminent domain to foreclose on them, reads an Associated Press article from June 2016. The mayor has his eye on another 25 to 30 houses.”
“Hawks, who was a Roseburg city councilor until last month, said there might be some unintended consequences if Roseburg used a similar tactic. ‘I don’t think they would want us to flood the market again with less desirable homes at cheaper prices, which then turn around and make other homes worth less,’ she said.”
“The county’s abandoned homes, no matter how derelict they become, will eventually get on the market and they will get multiple offers, she said. That’s because the housing market is tight, even in rural Douglas County. ‘They aren’t just left forever, it just feels like forever those first few years,’ Hawks said.”
Sincerely,
Ben Jones
“North Portland zombie house transformed, now for sale at $600,000″
Before I could make an offer on that house (I would have offered $165k), it was “snapped up” for $336k. This was common in Housing Bubble, Part A. Find a house to rehab, pay twice what you should have to pay, still make money on the deal. A clearly disjointed market.
I used to live not far from there. 10 years ago it was in the middle of gangbanger-ville. Now it’s multiple offers on a $600k rehab. Disjointed.
Is it just me, or does the Tampa Bay Times have a real estate article almost every day? And the articles are almost all positive, too.
ha-ha, yes, snake, right on. The Tampa Bay Times is a joke.
Everything’s awesome here in Tampa Bay! It’s gonna be the San Diego of the east coast, lol.
Ben, I got to it just now. You are probably thinking about this quote
‘I don’t think they would want us to flood the market again with less desirable homes at cheaper prices, which then turn around and make other homes worth less,’ she said.”
Yup, that’s an astounding admission, from the city council no less.
In a strong economy, the middle class can sustain itself with a decent standard of living on goods and services. In a weak economy, the middle class can sustain its standard of living only with debt and asset bubbles. The American economy is weak… SO weak that the middle class cannot afford to lose any asset value. They have become so dependent on their homes retaining value that they are actively pushing the low-income almost onto the street, just to save themselves.
That’s how bifurcated the country has become. You can’t survive on live and let live. Now it’s eat or be eaten.
that’s an astounding admission, from the city council no less.
The city council is worried about their base, specifically about their property tax base, and also about displeasing the owners of RE, who do not want to see any haircuts on the values of their houses. Next generation of buyers be damned.
‘worried about their base’
If gas stations got caught manipulating prices, there would be hell to pay.
There is no law which would oblige an owner of a depressed property to put it on the market at an unacceptable (to him) price, is there?
^Another someones got a stake.
There is no law which would oblige an owner of a depressed property to put it on the market at an unacceptable (to him) price, is there?
Yes, but if the Federal Government is supporting the lending institution, isn’t there a public policy issue with a government-propped bank using their government support/security to manipulate a market?
We experienced this firsthand…a bank was negotiating a discount on a loan (to help clean up their balance sheet) until the Federal Government stepped in to prop them up. All of a sudden, no more negotiation.
Government intervention impacted the cleaning up of the bank’s balance sheet.
FASB standards evaporated in March 2009 at exactly the same time that the “great recession” just happened to turn around.
“Flexibility”
BALTIMORE, April 2 /PRNewswire-USNewswire/ — Former House Speaker Newt Gingrich released the following statement praising the Financial Accounting Standards Board’s (FASB) recommendation to use more flexibility in applying mark-to-market to value illiquid assets in an inactive market.
http://www.prnewswire.com/news-releases/gingrich-praises-fasb-recommendation-on-mark-to-market-accounting-61705487.html
value illiquid assets in an inactive market.
Homes are “illiquid”, but not in an inactive market. Housing markets are plenty active..
These mark-to-market rules do not apply to REO housing.
From your link:
“Companies have seen their assets, such as mortgaged back securities, drop in value overnight. Forced to raise more credit, many companies have faced insolvency.”
And
“Today, April 2, 2009, FASB issued a recommendation that when the market is not functioning properly, firms may use more flexibility in applying mark to market to value their assets.”
“flexibility” can only be used when a market is not functioning properly.
Housing markets are functioning just fine…thus, no flexibility.
“These mark-to-market rules do not apply to REO housing.”
If mark-to-market rules do not apply to REO housing then they can be marked any way the bank likes, as in mark-to-Unicorn.
The same for MBS securities issued by Fannie and Freddie. Those can all be marked-to-fantasy.
No, the suspension of mark-to-market is only for illiquid assets where the markets are not functioning.
NOT housing REO. Banks must mark REO to market.
Perhaps there is a comprehension issue. If Mark-to-market rules are suspended, that means to me that nothing needs to be marked-to-market. What does it mean to you?
Anyway, the part of the game I saw up close was not REO at all, it was delayed foreclosure. The shack I picked up cheap was not foreclosed, after six years in default. So all the bank owned was the paper on the house. What incentive could the bank have to postpone foreclosure if they weren’t marking to fantasy?
We discussed this ad nauseum years ago.
If gas stations got caught manipulating prices, there would be hell to pay.
Not so fast, one of the Shell stations in the same town as the News Review article is owned by one of the County Commissioners. He has been charging up to and over a dollar more per gallon than the rest of the stations in town, including other Shell stations. The only time his pricing was close to competitive was the few months he was actively running for office. Price went back up after he was elected. gas buddy link
No comprehension issue.
Mark to market means that banks needed to mark the value of their assets to the most recent market-based value, no matter how absurd it was.
So, if there were no recent trades for an highly complex asset that was valued at $100 on the books of a bank, but one person bid $1, the bank would need to mark the asset to $1 (even if it might have paid $1 in interest over the prior 3 months).
And if that asset was part of a pool that supported borrowing, well, you get margin calls, forced sales of assets at absurdly low prices, etc.
So, FASB, under certain conditions, allowed the banks to suspend that rule. The bank was no longer required to mark the asset formerly valued at $100 to $1. It could base their valuation on an internal model. Thus the name mark to model, or mark to myth. The fair value might have been $50, but this allowed them to come up with some BS model and keep it at $80…complete BS.
But it also didn’t force them to mark it to $1.
So, assets that meet two criteria could have the requirement to be marked to market suspended (ie. they don’t need to do it), but that requires 2 things to be true:
1. The asset is illiquid;
2. The market for said asset is inactive.
For a CDO-squared, this happened. Banks couldn’t sell them, no one wanted them, very few trades happened. $100 would become $1 if forced to be marked to market.
A home owned by the bank meets the first criteria, sure. But it doesn’t meet the second criteria. A market was set for home prices at every courthouse in America. Plenty of homes sold. The market for housing was far from inactive…even at its worst.
Banks were never able to suspend marking REO to market.
” it’s eat or be eaten”
Ironically, by becoming a debt donkey, one accomplishes both.
“SO weak that the middle class cannot afford to lose any asset value.”
Yet prices fall anyways.
“The American economy is weak… SO weak that the middle class cannot afford to lose any asset value. They have become so dependent on their homes retaining value…”
I just re-read “Greenspan’s Bubbles.” The above was effectively Fleckenstein’s takeaway at the conclusion of the book…which didn’t include the current RE situation.
Rotting piles of lumber, occupied by homeless people and vermin, must really bring up those home values, eh?
Shortsighted.
N VA yoy .5% vs 2 last year so we are on the down-slope and the HUMAN Tornado is in the house !
Burn baby burn….. NoVA Inferno!!!!
Burn baby burn…..Burn that mother down!
OH, DEAR! It seems some folks don’t wanna talk about housing. Just for a little refresher, look at the title of the blog. Oh my goodness, it’s called the HOUSING BUBBLE BLOG! Hello? Hello?
That’s right, the HOUSING BUBBLE BLOG! NOT the “Putin is a bad person” blog. NOT the “China Shall Overcome” blog. NOT the “Nanny, nanny, I’m correcting you” blog.
Don’t like it? Move the eff on. There are PLENTY of other places on the internet to comment and blat your brains out about the ills of the planet.
Just add to the top a picture of three monkeys, “see no evil, hear no evil, speak no evil”.
It won’t work, of course, just as playing an ostrich never worked elsewhere - ignoring “politics” doesn’t mean they will stop to affect economy and daily lives - but one can sure try, right?
The election is over my good friend. There are no politics until the next election.
“Just add to the top a picture of three monkeys, “see no evil, hear no evil, speak no evil”.
I asked you, politely, to put my posts on ignore. Don’t read, don’t respond and we’ll both feel better.
Why not just block Natasha?
I asked you, politely, to put my posts on ignore. Don’t read, don’t respond and we’ll both feel better.
Said the guy who bragged about reveling in self-proclaimed nastiness of bullying and political trolling, and participated in running posters off the board.
But you can’t handle the heat of disagreement, when rudeness doesn’t work?
You can always ignore inconvenient posts and go back to reading about pizzagate. Peace.
“Said the guy who bragged about reveling in self-proclaimed nastiness of bullying and political trolling, and participated in running posters off the board.”
There. You just described yourself. Big time. And you lie like a rug. When you’re not chewing it.
Are you implying I’m a lesbian? You’re mistaken. Which is not surprising, as you’re wrong about pretty much everything these days.
Lay off the pipe, clean up your act, and return to the land of the living from troll-lands of Mordor. Best wishes.
“Are you implying I’m a lesbian? You’re mistaken. Which is not surprising, as you’re wrong about pretty much everything these days.”
No, I’m not. Chewing (or gnawing) the rug is an old school term for someone who goes nuts and spews vitriol all over the place for no good reason, like many of the sjws these days.
You’re wrong, wronger than wrong. I don’t even know how you manage to exist.
Housing my good friend. Housing!
NJ Housing Demand Plummets 36% YoY
http://files.zillowstatic.com/research/public/State/State_Turnover_AllHomes.csv
“go back to reading about pizzagate.”
Pizzagate is real and in fact they’re rolling up the human and child trafficking arrests and investigations. Isn’t it interesting that the media isn’t reporting much on these operations? And how about that Jeff Sandusky? The apple didn’t fall far from that tree. They’re going after the procurers right now, and the big players are not far away.
Yes, I read about it. And more importantly, why aren’t you? It’s the main, underlying filth of globalization, the trafficking of children. That’s when a society is on the way out, when widespread, institutionalized abuse of children takes place.
And now, back to housing.
Before you get back to housing, I have heard palmetto’s definition of “chewing the rug” now I would be interested in knowing what NYchk’s is.
You might be waiting a while.
“You might be waiting a while.”
Tee-hee. Well, in her absence, I must oblige my old chum jeff.
NYchk’s confusion is excusable, although I do feel her mind was in the gutter. If this is not too indelicate, the term “carpet muncher” has been used in recent times as a pejorative to refer to those of the lesbian persuasion, most recently during the election, where it was applied to Hillary and her sidekick Huma.
I should have used the term “gnaw the rug”, rather than “chew”, because that is the more accurate old school term for someone who is having an unreasonable fit of apoplexy.
Gnawing or chewing the rug is what the MSM seems to be engaged in at the present time, and ever since June of 2015.
Thanks palm dawg
I understood the term I just wanted her to splain it.
Just so this post does not cause any confusion.
dawg
See also: DAWG
Noun
(slang) Dude, bud, pal. used to address a close male friend.
Sup, dawg.
https://en.wiktionary.org/wiki/dawg
“Sup, dawg.”
I’m having a ball, dawg.
Ya gotta be so careful these days when yer an old timer because terms that used to have a certain meaning at one time, sound like terms that have another meaning these days.
For example, Cotton Mather. The old time hellfire and brimstone preacher, who I learned about in American History. A most colorful character. When I mentioned his name in another forum years ago, the board exploded with accusations of racism and the most over the top excoriation you’ve ever read and calls for banning. When I explained it and posted the link, I got all these butthurt responses that I should have said who he was before I posted his name. Wut?
“Never argue with an idiot. They will only bring you down to their level and beat you with experience.”
― George Carlin
palmetto
When it happens, I will let you know about that back home sale.
On another note, I am currently fighting with myself about selling the house I purchased in 2012 down here in SE Region IV.
Until one of these things happens I have no DBLL to bit@h about, I don’t need a price drop to buy a house and unlike 2004 - 2005 I don’t feel the need to sell a place I have owned for 20 years because my family had outgrown it and look for something to rent until the bubble popped.
So until something changes I will continue to read these blog, sometimes laugh, sometimes shake my head post the odd youtube video and continue to respect the wishes of our gracious host.
On a personal note palmetto
Here’s to those who wish you well, and those who don’t can go to a Realtor’s office.
Thanks, phony. Shoot me an email via Ben if you wish. My thoughts are with you.
Has the criminal become the cop?
Sisters, OR Housing Prices Crater 10% YoY
http://www.zillow.com/sisters-or/home-values/
Sisters OR. A town with pretty views but lotz of OLD retired peeps.
“Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” Yellen said, according to prepared remarks of her semiannual report on monetary policy to the Senate.’
Recessions are caused by bad investments (and the related debts) which then have to be liquidated and result in job loss, etc. Bad investments like too much office space or apartments and condos nobody can afford.
And $2 trillion in toxic non-performing mortgages….
That’s how they can claim there is no foreclosure problem. Just dump it off on the Fed and voila….. see? No defaults.
‘Treasury yields jumped on Tuesday after Federal Reserve Chairwoman Janet Yellen left the door open to an interest-rate increase at the central bank’s coming March policy meeting. ..Yellen said that Fed officials will consider raising interest rates “at our upcoming meetings,” a decidedly more hawkish message than the central bank’s latest policy outlook.’
Bring peace and prosperity in our time. END THE FED!
“bad investments”
It’s not the next recession that is a bad thing, it’s all the willful waste that has led to it.
And destroyed lives(financial losses) in an effort to avoid it.
Recessions are always bad things, sometimes very bad.
Recessions are always bad things, sometimes very bad.
Depressions are even worse.
In the early days of the Great Recession, like many here, I used to call for proverbial pitchforks and torches for the banks.
But seeing the destruction of economy and people’s lives up close, I came to appreciate the compromise of saving our financial system, in order to avoid an irreparable damage and much worse widespread suffering for all.
http://www.usdebtclock.org/
Record high joblessness is your solution. Gotcha.
Labor Force Participation Rate Plummets To 30 Year Low
https://data.bls.gov/timeseries/LNS11300000
In the early days of the Great Recession, like many here, I used to call for proverbial pitchforks and torches for the banks.
But seeing the destruction of economy and people’s lives up close, I came to appreciate the compromise of saving our financial system, in order to avoid an irreparable damage and much worse widespread suffering for all.
Let’s see if you change your mind when we finally pay the price of that compromise. The savers have been silently suffering for quite a while. The rest will pay eventually. With interest.
But seeing the destruction of economy and people’s lives up close, I came to appreciate the compromise of saving our financial system
…in New York City, the financial capital of the world. ♥♥Well imagine my shock.♥♥
Were you up close to see the destruction of the economy and people’s lives in Pennsylvania, Michigan, Ohio, Kentucky, or Indiana?
The savers have been silently suffering for quite a while. The rest will pay eventually. With interest.
All true. However, in our desire for justice and for the imbalances’ overhaul, it’s important not to throw the baby out with the bathwater.
Recessions are fine, as long as they are tolerated like a relatively light, non-lethal fever, which helps the organism to fight off a deeper rooted illness. But chopping off aching limbs or blowing up one’s brain to treat a headache is not a viable solution.
It’s much better to compromise and work out excesses gradually than let economy collapse. A dead patient will not benefit from us telling him, “we told you so”. And neither will we.
“The past situation was bad, and Obama did not do enough, but regulations did restrict risk-taking by the big banks, somewhat.”
How precisely?
Risk retention was completely neutered, and the Volcker Rule was effectively written by the banks, since politicians were unwilling to do so.
IMHO, Obama went in the wrong direction completely. It’s not that he didn’t do enough, it’s that he did too much in the wrong direction.
Recessions are fine, as long as they are tolerated like a relatively light, non-lethal fever, which helps the organism to fight off a deeper rooted illness. But chopping off aching limbs or blowing up one’s brain to treat a headache is not a viable solution.
That would have made sense a long time ago back when a light fever might have been enough to solve the problem. Now chopping off a limb to get out from under the unstable boulder we’re pinned under might be the best case scenario.
I think chopping off Wall Street would be just.
“Recessions are fine, as long as they are tolerated like a relatively light, non-lethal fever, which helps the organism to fight off a deeper rooted illness. But chopping off aching limbs or blowing up one’s brain to treat a headache is not a viable solution.”
“It’s much better to compromise and work out excesses gradually than let economy collapse. A dead patient will not benefit from us telling him, “we told you so”. And neither will we.”
You can rearrange the cards all you want but eventually the house still comes down. There is no foundation. No pain no gain.
That’s where you are so wrong, Mikey.
They are a good thing, as they restore balance to the economy. Bubbles need to be popped, and manias stopped, periodically.
If our economy was truly based on something tangible instead of on unicorn emissions and reflective surfaces, then we would all be better off.
But the globalists outsourced the engine of our economy (manufacturing) to third-world countries, leaving us uber-dependent and all atwitter, with our face in a book, eating an apple while reading through our google-eyed glasses, floating down the Amazon river. Got sock puppet?
They are a good thing, as they restore balance to the economy.
The significant increases in unemployment that accompany recessions causes increases in a number of societal maladies, such as alcoholism, domestic violence, homelessness, suicide and so forth.
I have to guess that you don’t think that any such problems will befall you or your family.
It makes me wonder where this notion of recession as a healing processes comes from. Businesses may like the idea of frequent recession as a means of occasionally pushing down wages and keep workers frightened.
uber-dependent and all atwitter, with our face in a book, eating an apple while reading through our google-eyed glasses, floating down the Amazon river.
I am so stealing that.
It makes me wonder where this notion of recession as a healing processes comes from. Businesses may like the idea of frequent recession as a means of occasionally pushing down wages and keep workers frightened.
“Like” has nothing to do with it. When we make bad choices as a society the piper gets paid one way or another. The bad choices were made on the way up or trying to hold onto an unsustainable top for too long. In addition to the endless cronyism.
It does seem that often the beneficiaries of those bad choices are not the ones who suffer the consequences.
“Like” has nothing to do with it. When we make bad choices as a society the piper gets paid one way or another.
Like has a lot to do with it. Go ask people standing on line applying for unemployment who recently lost good jobs. Then talk to business owners or the independently wealthy enjoying lower prices and wages. One group will tout the wonders of recession. The other group certainly will not.
Though what you’re talking with the piper is a slightly separate matter. Some people like to think of economics as a morality play. Good habits are not practice and a price has to be paid, as if the Creator set up laws which govern economics.
Though if In Colorado is correct, there ought to be a concern that some people actually suffer for the sins committed by others.
“Businesses may like the idea of frequent recession…”
No. They hate it. It exposes all the stupid things they did during the preceding boom.
Bubble jobs are not “good jobs”. The shame is that they were ever created. It’s a distraction from actually contributing to the future of society, and it’s a drain on the wealth of the community. Because easy credit.
Think of recessions as a healing process. The “bad” is the injury requiring a recession.
No, recessions are not bad. They’re a necessary part of a healthy, functioning economy and business cycle. Uncomfortable things may happen during recessions such as job losses, families moving, etc. but these are not “bad”. In fact, they are good in the long run for production of a stable, growing environment.
What’s interesting is the last recession created the opposite response to potential benefits listed below (inflationary monetary policy, increased regulations). Wonder if that’s contributed to the ho-hum “recovery” and significant asset bubbles that are sure to unleash a host of problems when central planning can no longer assert power over the economy.
http://www.cbfa.org/Penn.pdf
“Problem Number One: A product (good or service) that is no longer generating the value it once did for consumers is usually one of the first to feel the effects of a recession.
Benefit Number One: ACCELERATED EXAMINATION OF PRODUCTS TO CREATE MORE VALUE to the Consumer is a product of recessions which force companies to work harder to attract the consumer’s dollar either by lowering prices, improving service, or improving product quality.
Problem Number Two: Increasing Indebtedness across all sectors of the economy (households,businesses, government).
Benefit Number Two: Reminder of the Importance of KEEPING ACCOUNTS CURRENT and KEEPING SPENDING AND SAVING in the PROPER BALANCE: The recession reminds individuals of the necessity of keeping accounts current and of keeping spending and saving in proper balance.
Problem Number Three: A fall in overall productivity that has caused costs to increase to the point where the seller is no longer cost competitive.
Benefit Number Three: REEXAMINATION OF THE PRODUCTION PROCESS and the IMPROVEMENT OF PRODUCTIVITY:
Problem Number Five: An artificial inflating of the economy by macroeconomic policies, which have “run their course.” This artificial inflating may occur for political reasons or because of
good intentions of the FED and other government officials.
Benefit Number Five: WARNING AGAINST ARTIFICIAL METHODS OF INFLATING SPENDING which have negative unforeseen consequences: This benefit has repercussions for households, corporations, and even governments.
Problem Number Seven: Increasing Burdens to U.S. business of regulations, which reduce their global competitiveness.
Benefit Number Seven: REDUCTION OF THE BURDEN OF U.S. REGULATIONS and INCREASING OF U.S. COMPETITIVENESS in International Markets: Recessions act to encourage U.S. corporations to become more competitive in international markets. “
Uncomfortable things may happen during recessions such as job losses, families moving, etc. but these are not “bad”.
Job losses are bad for people who lose their jobs. They’re generally much worse than uncomfortable.
What I find amazing is Yellen apparently doesn’t know econ 101. Heck this is what they told us the first day after role call.
You get your financial advice from the Christian Business Faculty Association? That’s pretty funny. What is their position on money changers and grand jubilees?
Yeah, there’s a lot of nonsense there, like “ARTIFICIAL METHODS OF INFLATING SPENDING”. So these people think there are natural and artificial methods of something or other. It makes you wonder if inflating spending is supposed to be the same as increasing spending.
You get your financial advice from the Christian Business Faculty Association? That’s pretty funny. What is their position on money changers and grand jubilees?
I read somewhere that prior to the Reformation that Christians were not allowed to charge interest on a loan. I think it might have been Hillaire Belloc who said that.
Not everything is binary. Having job != “good” just as losing a job != “bad”. Ask Bloomberg how life’s been since being fired. Same with Steve Jobs, before his PNET killed him when holistic medicine and unindicated liver transplant failed. If one has saved at least 6 months of expenses, losing a job can be freeing and comfortable.
Regarding the source, does being a christian negate the economic statements presented? Would these arguments from an atheist seem more credible?
Since no one read the link,just what I pasted, I’ll give you the remainder of his “artificial methods of inflated spending” problem.
“Problem Number Five: An artificial inflating of the economy by macroeconomic policies, which have “run their course.” This artificial inflating may occur for political reasons or because of good intentions of the FED and other government officials. The inflation is not limited to monetary policy but would also include government spending such as agricultural price supports. The problem is that the artificial effect is only temporary and will automatically trigger forces to bring about an adjustment (for example the expansion in the later 1990’s followed by the recession of 2001). A thorough investigation of the proper involvement of the federal
government in recessions is a topic for books and is too great for us to handle here.
Benefit Number Five: WARNING AGAINST ARTIFICIAL METHODS OF INFLATING SPENDING which have negative unforeseen consequences: This benefit has repercussions for
households, corporations, and even governments. The sooner these three institutions realize that income (receipts) should be saved (invested) as well as spent and that financial planning is important at all levels, the quicker society’s resources will be more efficiently allocated. In
addition, prices will more accurately serve as indicators of consumer satisfaction and economic efficiency.”
In this context “artificial” means non-efficient or inappropriate allocation of capital, usually due to untoward policies such as ZIRP, NIRP, make-work projects, cash for clunkers, etc. that are arbitrary and made without regard to the particular needs for the situation, but instead to benefit a certain group at that time. That’s why he notes the negative and unforeseen consequences of such actions (moral hazard, moving sales of cars forward a year and increasing the cost of used cars for everyone else, etc).
No, when there are massive job losses in a recession the vast majority of affected people suffer. The very fact that there’s a recession going on makes it more difficult to find new jobs for millions of unemployed. Stories about Michael Bloomberg are completely irrelevant to the 99.9999% of the population who don’t happen to have his billions.
The notion that there’s a benefit in a warning that makes it all OK is absurd. Very few serious economists use terms like artificial to describe bad investments.
In the time you’ve wasted on this subject here you could have read a few chapters in econ 101 and resolved this. If you don’t believe anybody, just stop arguing.
“Stories about Michael Bloomberg are completely irrelevant to the 99.9999% of the population who don’t happen to have his billions.”
Yet the fed had to build a floor under home prices because they couldn’t have all those mortgages going bad despite the fact that home prices were pushed upward due to a bubble. The reality is that the paper contracts have priority over people’s employment. The banks must persist.
Not as bad for ants. Very bad for Grasshoppers.
train F1 visa workers( students) because Americans don’t want to be trained.
OK that’s a new one for me. Complete alternative truth but whatever.
No it is true the H1b is much easier to teach the difficult concept
Work the long hours needed to acheive the complex task
There’s only one thing that prices ever do.
Go. Straight. Up.
They never go down, not for very long anyway.
It’s become an absurdity.
Remember……. Nothing accelerates the economy and creates jobs like falling prices to dramatically lower and more affordable levels. Nothing.
Lake Mary, FL Housing Prices Crater 10% YoY
http://www.zillow.com/lake-mary-fl/home-values/
I dunno, man. I used to think that if prices cratered the expected 50-75%, it would be great! Like — yay, houses are on sale again, we can all go back to being normal.
Last time, they saved it with the QEs, but more and more I’m thinking the next time, it will be something much worse. Something like invalidating the currency, or an attempt at overthrowing the government, or a huge war, or all of the above. I would have never even considered stuff like that, but this election cycle …. things have changed.
I don’t think a cratering in prices of 75% is going to be some kind of picnic that creates a bunch of jobs and ushers in a new promised land of economic stability.
Falling prices back to long term trend equals WW3?
LOL.
Not at all. It equals an accelerating economy and job creation.
The county governments will do whatever it takes to artificially reduce supply or increase demand for housing in order to preserve their tax revenues. If it means keeping zombie houses off the market or goosing the market with more subprime, it doesn’t matter. Whatever it takes.
The county governments will do whatever it takes to artificially reduce supply or increase demand for housing in order to preserve their tax revenues.
True, but who’s going to stop them? Their voters are happy.
Even though it means the owners are getting fleeced via property taxes, they seek price appreciation, and will not reward those who bring the values down.
Which simply collapses demand.
Remember…… I can ask $50k for my run down 10 year old Chevy pickup but where is the buyer at that price?
So it is with all depreciating assets like houses.
The mentality of our country is very degraded also.
If people don’t get what they want, they destroy things.
Like in the last downturn, in so many of the foreclosures, the people tore up their houses to “stick it to the man” or whatever. Or like the political rioters, they didn’t get what they wanted so they destroy things instead.
If you don’t get what you want, light a match and burn it all down. That’s what we’ve come to as a country.
And now we have a ravaged economy as a result collapsing demand due to grossly inflated and rigged prices just to save to save a bunch of empty pocketed degenerate gamblers.
They destroyed an entire economy.
If you don’t get what you want, light a match and burn it all down. That’s what we’ve come to as a country.
Extremism is dangerous. Centrism and looking for compromise may be boring, but it’s far less likely to end in catastrophe.
I don’t think it is extremism. It’s the default way people are now.
In the last downturn, I personally knew a number of families that got underwater, and they still had their jobs and had no problems paying their mortgages — but they still walked away and stiffed the lenders, because “stick it to the man”. They proudly boasted of it as if it were a virtue.
Amazingly, they all got new mortgages and bought new houses just a couple years later. It didn’t negatively affect their ability to take out more debt at all.
The lesson is that there are no consequences in life anymore. If anything bad ever happens, either stick it to the man, destroy things — or both.
And who covers those banks? Uhg….the taxpayer again.
I think this mentality goes all the way to the top. To the 1%’ers and the people in government. The people in power.
If anything bad happens to *them*, their version of “sticking it to the man” is sticking it to *all of us*. And when they decide to light a match and burn it all down because they didn’t get what they wanted…
Well, 100 million people die.
Amazingly, they all got new mortgages and bought new houses just a couple years later. It didn’t negatively affect their ability to take out more debt at all.’
I saw that in the early 1990’s so knew it would happen again , why bank CEO’s didn’t IDK ? Stupid and they got saved.
The Gov’t has put a ban on consequences.
“In the last downturn, I personally knew a number of families that got underwater, and they still had their jobs and had no problems paying their mortgages — but they still walked away and stiffed the lenders, because “stick it to the man”. They proudly boasted of it as if it were a virtue.”
Did any of them say that they were victims of Robo signing and claim they were owed a free house?
I’m sorry, you said “they still had their jobs and had no problems paying their mortgages”.
I was asking about people who lived in their houses for years while not paying their mortgages while saying they were owed a free house because of Robo signing,
Exactly. And here is just one end result of burning down the house.
US Housing Demand Plummets To 20 Year Low
http://1.bp.blogspot.com/-0q8fIAsczFk/VUANHEhSbnI/AAAAAAAAjRs/oANwXOUviGw/s1600/MBAApr292015.PNG
Kirkland, WA Housing Prices Crater 26% YoY
http://www.movoto.com/kirkland-wa/market-trends/
Why doesn’t anyone comment on these post about prices going down. Isnt that what we are here for. I saw one for my community and was relieved i may be able to buy soon because prices are coming down after years of reading this blog. Am i the only one who likes these posts?
most of them are bs.
Yes, Housing Analyst likes to make a provably false statement, and then provide a bogus link to back it up.
Kirkland real estate prices are the highest right now that they have ever been in recorded history. Ignore HA’s lies.
‘Kirkland real estate prices are the highest right now that they have ever been in recorded history’
Nothing bad will happen though, I’m sure.
Lotsa comments getting deleted still. Focus or else.
Ben, I am NOT saying that prices won’t fall.
But HA is just plain wrong at this time.
Seattle is usually late to the party.
Are you sure?
Seattle, WA Housing Prices Crater 15% YoY
http://www.zillow.com/seattle-wa-98105/home-values/
Yes HA, my realtor just closed on a teardown in Bellevue that went for $214K OVER asking.
Prices are not down at all - in fact, they are at record-high levels.
Post a link. Prove it.
They are what they are: individual data points. All throughout the bubble, even during its frothiest periods, you can find data points like these. Take them for what they’re worth.
It has been a while since I’ve seen actual sale price in these “data”.
It wasn’t a coincidence that they stopped reporting sales data right when prices began falling in entire states.
“In Debt They Trust”
https://www.city-journal.org/html/debt-they-trust-14953.html
“The financial crisis would have caused lots of pain no matter what governments did in response. But leaders took what may turn out to have been the worst course of all—and one that could ultimately cause even more pain: trying to solve a debt crisis by creating yet more debt. In doing so, they have, at best, suppressed and, at worst, destroyed the vital signals that financial markets send about excesses and scarcities, risks and rewards.”
The markets were manipulates. The signals that they sent were not reliable.
Huntington Park, CA Housing Prices Crater 11% YoY
http://www.zillow.com/huntington-park-ca/home-values/
‘Amityville Horror’ House Sells For $605,000; Seller Paid $950,00 In 2010
http://www.newsday.com/classifieds/real-estate/amityville-horror-house-sells-for-605-000-1.13104819
REITs are leading other sectors in 2017 — here’s how to profit from the trend.
http://finance.yahoo.com/m/c88a47b0-f5a1-3c96-ac63-ef53e09cda1c/wall-street-got-reits-wrong.html
what ??
REITs are not just for apartments or single family portfolios.
People tend to focus on dividend yield…interest rates go up, values go down…thus negativity toward REITs.
However, unlike bonds, where the coupon is fixed, rents rise over time, which can offset rises in cap rates.
My favorites are industrial in nature…playing off the move of commerce to the internet. ProLogis. Terreno (former executives at AMB–now part of PLD).
There are over $555 TRILLION in interest-rate based derivatives floating around.
Pull it, Janet. Raise rates.
BOOM!!!
Half a Quadrillion. Is that alot of money?
u all are slaves to yellen.
If she had any balls, she’d do a surprise hike.
Well, then, she’ll probably do a surprise hike.
NYT: Why falling house prices could be a good thing.
https://www.nytimes.com/2017/02/10/upshot/popping-the-housing-bubbles-in-the-american-mind.html?_r=1
I saw that. It doesn’t seem to occur to the author that the current state of things was intentionally engineered.
NYT is fake news. I wonder why they made such an example of Jayson Blair back in the day. He was truly a visionary and ahead of his time.
Unlike your posts, which are real news?
What is with you? Please read the heading on these posting boxes. They are entitled “Your Comment”. I’m just a commenter here, like everyone else. I don’t post “news”, real or fake, unless I link to something, in which case it’s someone else’s “news”.
Carroll Gardens Brooklyn, NY Housing Prices Crater 15% YoY
http://www.zillow.com/carroll-gardens-new-york-ny/home-values/
Was there a quid pro quo?
he-he, nope. None of this is what is what we hear. All is well.
Enjoy the show, though.
What is what we hear of which this is none?
The alleged quid pro quo.
Eight bells, all’s well.
If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a quid pro quack.
Lots of quid, not much pro.
Hold on tight, now.
Focus on the data my friend…
San Clemente, CA Rental Rates Crater 11% YoY
http://www.zillow.com/san-clemente-ca/home-values/
“is what is what”
Dang, I screwed up and repeated myself. It’s like the old HBB “what what the do”
“What is what we hear of which this is none?”
I was thinking this my own damn self.
Ben seems to be missing. I hope he is doing something special for Valentine’s Day. He deserves it.
If Ben were missing, our posts would not be showing up.
Really? I never knew that. Ben reviews every post? That would take a LOT of time.
Ben - I hope you are getting some loving tonight - wherever you are.
Bellevue, WA Housing Prices Crater 7% YoY On Skyrocketing Housing Inventory
http://www.zillow.com/bellevue-wa-98008/home-values/
Oh, you’re good for at least one good laugh a day, Housing Analyst!
Here is that skyrocketing inventory that you are talking about:
http://seattlebubble.com/blog/2017/02/09/around-sound-even-far-seattle-no-relief-buyers/
Inventory is at record low levels, by the way.
Fed “frets” about commercial RE bubble, while being responsible for blowing yet another unsustainable bubble with ultra-easy credit.
http://wolfstreet.com/2017/02/15/fed-frets-about-commercial-real-estate-bubble-its-2-trillion-in-loans-mostly-at-smaller-banks/
What a perfect metaphor for California.
http://www.marketwatch.com/story/the-foundations-of-our-california-dream-home-are-rotting-do-we-sell-now-or-sue-the-former-owner-2017-02-14?link=MW_latest_news
Here’s a bubble date point:
http://www.denverpost.com/2017/02/13/montbello-suburban-housing-market/
“Montbello (a Denver suburb) is nation’s hottest suburban housing market”
“Over the past three years, that area has averaged a 20.6 percent annual rate of home price appreciation.”
Montebello is an armpit and was the foreclosure epicenter in Denver when the previous bubble burst.