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In Case You Didn’t Get The Memo, The US Is In a Real Estate Depression That Is About To Get Much Worse
Yes, we are in a balance sheet based, real asset depression. If you
take a look at it from an empirical perspective there should be no
surprise in this statement, but since most derive their information from
the mainstream media media and the sell side of Wall Street (both of
whom have a preternatural proclivity for the positive spin) this may
come as a bit of a shock to a few. Let’s ponder the term “depression” as
outlined in Wikipedia with some Reggie edits:
In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturnrecession, which is seen by economists as part of the modern business cycle. than a
Well, we have had a severe downturn in real estate in much of the EU,
the middle east, the UK, Japan, and definitely the US. See “The
Inevitable Has Finally Been Admitted In Europe: The Macro Experiment
Has Ignited Inflation Without Commensurate Growth & Rates Will Spike” for a series of graphs that compare real estate markets in several of these countries. [Note: The chart below has a typo that was carried over from the Japanese CRE chart, which is down 72%.]
Depression: Considered, by some, a rare and extreme form of recession, a depression is characterized by:
its length (it’s been almost 5 years to date)…
by abnormally large increases in unemployment…
Reference Are the Effects of Unemployment About To Shoot Through the Roof?:
UNEMPLOYMENT INSURANCE DATA FOR REGULAR STATE PROGRAMS
and falls in the availability of credit—
often due to some kind of banking/financial crisis, shrinking output—as
buyers dry up and suppliers cut back on production, and investment,
large number of bankruptcies—including sovereign debt defaults, significantly reduced amounts of trade and commerce—especially international, as well as highly volatile relative currency value fluctuations—most often due to devaluations. Price deflation, financial crises and bank failures are also common elements of a depression that are not normally a part of a recession.
Referencing:
- Is Another Banking Crisis Inevitable?
- The
Coming Interest Rate Volatility, Sovereign Contagion, Geo-political
Unrest & Double-Dip Recessions: Here’s The Answer To Valuing Global
Real Estate Through This Mess - ECB
Swallows Massive Portuguese Bond Losses As It Is Clear That The Third
State Will Soon Join The Bailout Brigade – Haircuts, Here We Come!!! - The
Inevitable Has Finally Been Admitted In Europe: The Macro Experiment
Has Ignited Inflation Without Commensurate Growth & Rates Will Spike - Re: B of A – With Banks Being Forced To Admit The Inevitable Truth, How Long Will It Be Before Fundamentals Rule The Day Again?
- I Warned That Banks Will Soon Be Forced To Walk Away From Homes… Guess What!
- FASB Appears to Have Bent Over For The Final Time & Accuracy In Financial Reporting Dies An Ignominious Death!!!
- Less
Than 24 Hours After My Warning Of Extensive Legal Risk In The Banking
Industry, The Massachusetts Supreme Court Drops THE BOMB!
There is no agreed definition for a depression, though some have been proposed. In the United States the National Bureau of Economic Research[1]
Generally, periods labeled depressions are marked by a substantial and
sustained shortfall of the ability to purchase goods relative to the
amount that could be produced using current resources and technology (potential output).[2]
Another proposed definition of depression includes two general rules:
1) a decline in real GDP exceeding 10%, or 2) a recession lasting 2 or
more years. determines contractions and expansions in the business cycle, but does not declare depressions.
You tell me if these diagrams fit the depiction of the situation described above…
Subscribers, reference the Shadow Inventory Analysis model
for what I consider to be the elephant in the room. Go through the
whole model, of course, but pay attention to the first chart, “Years to
Clear Shadow Inventory Backlog’. That will be the gist of my next post
on this topic. Between that, and the inevitable spike in interest rates,
if we are in a depression now – what will you call it when we lose
another 20% of economic value???
I will be discussing this in depth on CNBC's Fast Money today between 5 pm and 6 pm. Feel free to follow me on Twitter or Subscribe for blog research.
Related:
-
When Will the Mainstream Media Be Ready To Call The NAR The Sham That It Really Is?
-
If Japan Lost Two Decades From Its Bubble Popping, How Many Decades Should The US Expect To Lose?
-
The Latest Case Shiller Index – Housing Continues Freefall In Aggressive Search For Equilibrium
-
I Warned That Banks Will Soon Be Forced To Walk Away From Homes… Guess What!
»
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Our shelter, our food, our energy are but financial playthings of the very rich. Housing policy is all about the banks. If housing was allowed to drop to levels commensurate with average incomes, in other words, if housing crash...then, and only then would households begin forming again. Until then, home builders have nothing to do.
Reggie - Fast Money cut you off - no surprise reallly - you are a realist.
Nice job with the time you had, but I suspect it went woosh by the typical watcher.
Pete
It's all in the plan CitiGroup 2005
http://www.scribd.com/doc/6674234/Citigroup-Oct-16-2005-Plutonomy-Report-Part-1
thanks reg, sad but true. i have friends and relatives who will be lost when this thing does bottom. some are already lost. they are not speaking to me because i guess they somehow see me as responsible since i tried to warn them.
i read somewhere that people die of shame. i believe there is a lot of truth to that. very hard to watch. amazing the number of people who are unable to adapt. GLTA.
Please don’t be discouraged, Reggie, cause we’ve just gotten the Bloomberg memo with the welcome pronouncement that the spinning image of Bob Rubin – Timmy Geithner -- has reached the mountain top. It’s a little hard to read with a straight face but Geithner, says the memo, has achieved Rubin status and those jokes and troubled waters finally have been calmed and all our sorrows are now behind us. Here ‘tis :
Geithner Butt of Jokes No More as Obama’s Money Man Now on Top of Economy
That kinda tells the story. If you’ve got Roger Altman’s praise who else do you need? It would only be less believable if Geithner had said it about himself.
And who else but Bloomberg to post it? One more reason Bloomberg is not necessary; we could get our information directly from the central bank’
Our finances, our livelihoods, our homes, our families are in crisis. They’ve got one thing, a manipulated stock market... and that’s all.
The "Depression of Apathy." I called a depression coming to friends and family back in the Spring of 2008. Was not believed.
Now most believe that there has been a "down turn" but things should get better soon as the economy has picked up. Not! I have been able to convince two persons to buy gold and silver and pay down debt.
Any others I talk to at meetings or family gatherings, soon change the subject to "Did you see AFV last night? Very funny show!" Or "Wow! I can't believe Justin Beaver just cut his hair!" Or "So who did you pick to win best picture this year?"
Pure apathy! That's why I have referred to this "down turn" (MSM term - not mine) as "The Depression of Apathy." The majority have not awaken yet, and those that have are throwing their arms in the air and giving up. Pure apathy.
Prime suburban real estate is about to become prime agricultural land.
Glasshouses bitches.
the "real world" depression hurts only you stupid humans. whopr, skynet, I-robot, hft9000, r2d2, robbie robocop, agent smith could give a shite.
when you see the v-bottom, buy the f'king dip, it's delicious!
puny humans! all your stuff is belong to us!
Lynnie,
Look into doing a raffle/essay where the entry price is $500 with essay on why the person would like to own the property. State how many tickets will be sold (divide your price plus costs by $500), how many tickets will be pulled to use essays (say 20) and then how the essays will be reviewed and selected as the winner. Then offer a $1,000 cash bonus to the winner.
You get some of the Animal Spirits working for you and get it moved along to the people who got a house for $500 and a few hours of writing time.
I'm sure raising the social security retirement age, cutting benefits to employees and continued reluctuance to hire will create incredible new housing demand from 20-somethings coming out of college and not being hired.
I wish I didn't have a logical brain and could be like Geithner.
Reggie: bravo, as usual. AS soon as Iget my job back, I am subscribing.
Lets get a new QE. Have Ben buy all the frigging real estate at inflated prices and give the money to the people as opposed to the frigging banks.
Just consider the pain homeowners are experiencing as a part and parcel of the bailout of Wall Street.
After all, Bernanke did buy over 2 trillion is toxic assets (at 100 cents on the par dollar, rather than the 5 cents he could have negotiated for) from his buddies at Goldman Sachs and JP Morgan (and BofA, and Citi, et al.), and Bernanke did backstop another 12 trillion in CDS exposure.
And that beautiful Federal Reserve balance sheet, full of sludge, will be yours (the taxpayers), when... theeeee price is riiiiight!!!!
So, c'mon down, you're the next contestant on 'It's Better to be TBTF'
Shazam Billy!! Bu..bu..bu..but, the IYR hasn't even touched the 50 day!!! I know Bob Pisanyou has it right cause he's on TV. The housing market is bottoming?? Am I going to buy SRS? Ya, you betcha.
reggie--
i'm not trying to be a bitch, but that first chart doesn't add up to me. the black line states that Japan is down 74% over 21 year period....the line is 'relatively flat' 80 to 120 to 70 (guesstimate by eye). the green line (the US) does show a 74% drawdown from 210 in 2006 to 50 in 2026 (e).
the only thing close to a 74% drawdown i see on this chart is the US from 2006 to 2026---i see nothing close to that on Japan's line
maybe its a misprint...or the lines are reversed
i get conflicting data on the size of Japan's bubble---please clarify
It's a typo that was carried over from the Japanese CRE chart, which is down 72%.
http://www.apeakunderthehood.blogspot.com/
Enjoy hedgers
Smoking Crack(s) in China (Real Estate)I just sold a townhouse in Connecticut that I had purchased in 2000 for 86K. Had it on the market since 2006 and every single offer failed because no one could get a mortgage. Finally a buyer with cash purchased it and I closed at the end of January. What a relief. Now I'm watching it go down even more in value. I don't think I'll ever buy again.
Obama's Housing plan: Die Quickly!
Obamas Plan: keep you to the Law of the Land, Unhook the Crooks
The Parasite Club are 'In Da (White) House'
Wake me up when they let housing prices fall so I can finally buy something appropriately priced.
I live in midtown Manhattan and prices here are still exhorbitant. I attribute it to the fact that wallstreet was bailed out so NY hasn't really felt the financial crisis/downturn as much as other places have.
Nope. It will be schadenfreude sweeter than creme brulee when some of these bankster scum get caught in a sinking real estate market vortex like the one to which they subjected the rest of us.
Sorry in advance to the decent people in nyc but you have soooo many vile jerks who've cheated the rest of us living among you.
Not sure why you said "Nope" Fred as i agree with your comments... and i've a feeling this property decline that started (again) in Sept is de ja vue for the 2006-07-08 process : proeprty first, banks follow, then the whole shooting match comes down with it...
...i think the markets past few days down is the 'Start of the End-Game' again, Credit Crunch II is just weeks from kicking off again with far worse consequences and it'll be relentless for years to come not a 2 year blip but many years of carnage
you haven't got long for NY and WS to go 'pop' (again!!) .. about a year, 2 max shoud do it..... when it does run for the hills and don't even think about coming back to freehold for at least 5 years and then factor in your property won't lift off the bottom for 10 years thereafter ...i very much doubt in 5 years, even 2, you'll have any desire to own property as the social changes coming down the pipe will alter your outlook beyond your current imagination!
Optimism reigns on the stern of the Titanic...
Those of us in stearage are getting a little wet.
Guess what's gonna happen to those shackled (with debt) to the steam piping.
Having your house under water is one thing, the nostrils yet another.
Benny was steering? ...but he said he couldn't see any icebergs (property bubble) ?!!!
..and we got icebergs!
Then Benny said he'd repair the hull but the hole (debt) in the hull got twice as big!!
Benny just isn't one for seeing a problem or solving a problem, and fuk me if Benny hasn't fuked-up again, we're short lifeboats too on Bennys Banana Boat for everyone except the top 2% of elite passengers???
+1 :)
Memo to Benny Bernank : Said you'd support US mortgages and home values. Failed.
Nb. Please note capitalism requires a buyer and a seller dickhead. You can't support one end and expect the other to play ball. Nor can you support both ends because you become a monopoly selling to yourself (ie. the market goes up your rectum). Schoolboy Economics 101 (not taught in elite-eductional establishments for grooming institutionalised idiot crones)
Yep- the standard comeback I've heard for the last few years when you try and explain to sheeple what is going on- " Well, the government will NEVER let that happen!!"
nice job reggie. Constant data manipulation by NAR, our govt and others who always choose deceit over truth, today's riches over tomorrow's and don't seem to give a damn about the next generation.
oh?
care for a deck chair?
the band is wonderful, and dont let this tilting feeling deter you from a memorable evening
this boat can never sink...it is the titanic after all, and the owners say it cant possibly go down
LOL. I just explaining our situation to someone this morning using the Titanic as an example. Making the point that the iceberg has already been hit - and the lower decks are flooding. Thus making all the jockeying on the upper decks meaningless.
Me... I'm in the deck chair. Great show so far.
.......sitting here in MICHIGAN. .......trying to sell a condo that i purchased in 2005 (before i got smart) . ........... YOU CAN'T GIVE IT AWAY ! TRUE ; my realtor is due here any minute to discuss our next strategy ............ GIVE IT AWAY ! & to think i was so stupid that i took all my inheritance & did EXACTLY WHAT I'D LISTENED TO FOR THE PAST 30 YEARS :
"ALWAYS BUY THE NICEST HOME YOU CAN AFFORD & THE CHEAPEST CAR." ......... does everyone remember that line ?
you know, after what is coming down the pike, no one, & i mean NO ONE will ever trust institutions ever again ...... we're going to collapse, the very foundation that most of us built our lives on the past 30 years are gone....it's over . I was a sheeple, I am not a sheeple anymore .......... now it's revolution , at my old age, i've had to totally rethink my entire life & it's damn scarey.
Maybe you can make a lottery and sell tickets for USD 100 each, winner takes the condo for USD 100 you get USD 100 times the number of tickets sold?
Consider it graduate school expense and write it off. Anyone who is not scared does not understand what is going on or lives in a big screen tv box already.
Never too late. As long as you are willing to learn new things the wisdom of you experience will be of value. When we cease to learn we begin to die. Good luck to you.
No blood and no lawlessness were required.""
http://seenoevilspeaknoevilhearnoevil.blogspot.com/2011/02/only-way-to-win-revolutionstarve.html
But you did finally snap out of it, and that's what counts.
But why give it away? Isn't it still at least a place to live?
I am Chumbawamba.
" isn't it still at least a place to live ?" .......... it's in MICHIGAN . it's fucking freezing cold here & i've had it with this state. i'll endure anything / lose money, i guess, if i have to to escape . so, why did i move here in the first place ? for a job that is now gone ......... what a fucking fool ; which i'm afraid once more people like me realize that we've been "fucking fool sold out " by both WASHINGTON & WALL ST. ............ revolution here we come ! .
P.S. WORD OF ADVICE TO ANYONE WHO WILL LISTEN : NEVER MOVE TO MICHIGAN UNLESS YOU WANT TO FREEZE TO DEATH WITH NO JOB . BETTER TO BE LIVING IN A WORTHLESS CONDO IN FLORIDA.
Pretty salty language Lynnybee, pretty salty language.
I sell truckloads of things into Michigan and I can tell you the only thing keeping the state from a coffin is tax dollars supporting the auto industry.
Business is off 70% from 3 years ago. For all the trillions Bernanke and Obama gifted to the Criminal Bankers, there is no money on the street.
Gosh, from the sound of it Michigan sounds like the better option because you could freeze to death in a short time, whereas in Florida you would just slowly decompose in that inhuman tropical climate.
Have you considered leaving it all behind and swimming across the Rio Grande to Mexico?
Join a union if you think the revolution is coming. I can't believe the 60's are back. Michigan... global cooling central.
'Battle lines being drawn' - Buffalo Springfield
http://www.youtube.com/watch?v=qOezOJevD6E
About 4 posts above you there's some guy with a place in FL that that you might want to talk to :)
I was thinking the same thing. Unless all of these 'don't wanters' really do want.
Not true, all RE can be sold. The seller may not like the price, but it can be sold.
all RE can be sold?
WRONGGGG G_G_G_G
3 years ago they were advertising $100 houses in detroit slums. Did they sell? I don't think so - back taxes, delapidation and scary neighbourhoods saw to it that the mayor has now approved to bulldoze a whole suburb and turn it into parkland
They are still available.
Beautiful old executive 3,000 sqft homes built in the 40's and 50's. Parts of Detroit are reverting back to natural prairie.