This Is The Housing Bubble Beneath The "Recovery"

Tyler Durden's picture

We want to 'believe', we really do; but anyone with any sense (and no skin in the game) can see through the data; the eon-like periods of foreclosure and the drastically reduced supply. No matter how 'bullish' homebuilders are, or how much they dream of a future pickup, calling the recovery (as Bob Shiller recently noted) is just a fool's errand. The truth is, for the average citizen, housing is not recovering - and the wealth effect is not creating animal spirits - and we do indeed have more to fear than fear itself. The following 79 second clip from Bloomberg TV should perhaps clarify the 'difference' in demand for housing. Primary residence 'buyers' are down remarkably, while 'investors' are up dramatically - now at pre-crisis bubble levels! Perhaps, as we noted here, Och-Ziff's stepping away from the 'flip-that-house' or 'REO-to-Rental' game is as good an indicator of exuberance as any.

 

Once again it seems the Fed's ZIRP (and QE) has done nothing but enable the elites to gather assets and front-run them, bidding prices up - as opposed to 'enable' an economic recovery

 

 

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Orly's picture

Should I cancel my ticket to the seminar from that guy on TV's flip-this-house?  His girlfriend isn't very nice anyway.

:/

DoChenRollingBearing's picture

@ Orly.  + 1  Maybe you should cancel that ticket...

Dow down 200 pts at 1:53...

 

EDIT: Even Cramer's beloved (last night anyway) Timken (TKR) is down 2%.

Winston Churchill's picture

@pm rumour.

Europe is fixed,pass it on.

redpill's picture

My data source says investor buyers are up slightly from 2011, but that cash buying is down slightly.  In other words, investors are beginning to re-leverage and using mortgage money to purchase these homes.  As long as we have ZIRP, housing prices can't fall much from here in nominal dollar terms (inflation adjusted dollars is another matter).

 

Dr. Richard Head's picture

I am not so sure about housing prices falling down much more from here.  My hood has been hovering around 20-25% of purchase value down.  Many are sitting in their homes, not paying the mortgage, and judges are ordering sale in lieu of foreclosure.  This has resulted in the first of 10% of the homes in foreclosure going to Sheriff auction.  Sale price? HALF of 2007 sale price.  Weeeeeeee!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

redpill's picture

We are obviously way off the peak (of course, the NASDAQ is still a full third off its 2000 peak even to this day), but the price trends this year show that the credit the Fed has been shoving down the market's throat for years is finally making it into home prices.

SpeakerFTD's picture

Speaking as someone who owns a residence in NY and would love a recovery, I would recommend looking at the NY mortgage deliquency data that ZH posted a week or so back.    That should  halt any nascent bullishness.

DoChenRollingBearing's picture

Updated, charts are fixed re Timken.  MS Paint, bloggerz!

 

http://tinyurl.com/8rlanuu

insanelysane's picture

Ben will see to it that we get a green finish to the day or at least get it back to only double digit losses.

QE Infinity + 1

DoChenRollingBearing's picture

Ben better get on the stick!  LOL!  Dow down 218 at 2:50 PM.

Stoploss's picture

Maybe Och-Ziff figured out you must have a JOB to pay rent??

 

Stoploss's picture

So, they soaked up a ton of overpriced foreclosures, rehabbed them. and are now stuck with a shitload of newly rehabbed rentless properties. Stop me if im wrong...

Now, who is going to buy them??  LOL!!

I will give 5 cents on the dollar per, in blocks of five. Pristeen titles only. I pick the zipcodes..

Yall have a nice day now.

kaiserhoff's picture

My thoughts exactly.  As soon as these "cash investors" get a taste of reality, they run for the exits.  Everyone wants to be a friggin middle-man, selling sand at the beach, and no one wants to work. 

Housing formation is way below retirement downsizing and assisted living.  Do the math.

mktsrmanipulated's picture

only a matter of time if that true if OBAMA gets elected again

Larry Dallas's picture

Long Carlton Sheets and Rich Dad!

Orly's picture

I still have my Carleton Sheets VHS set.  I can't seem to part with it for some reason.  Could never get into it, though, because I felt supremely guilty for cold-calling newly-widowed women and asking them to kindly give me the keys...

El Viejo's picture

"

Once again it seems the Fed's ZIRP (and QE) has done nothing but enable the elites to gather assets and front-run them, bidding prices up - as opposed to 'enable' an economic recovery"

Reasoning behind the 90% bracket !!!

Dr. Richard Head's picture

Exactly.  The DKS-like Bernanke bucks bukkake party is invitation only bitchez......

El Viejo's picture

With elites and Algos  we are 99% bystanders now.

Dr. Richard Head's picture

Will glad standby, instead of buy.

haskelslocal's picture

In my town we have low inventory. We have millionaire/billionaire enclaves. Prices go off the idiot method of "Comps". All the $2M plus inventory sits mostly stagnet as those looking for credit trickle down market and pay cash. An example home just sold after original owner died (purchased when built in 1970). Home was 1200sf. Family choice to divide inheritance called for $540k sale. Flipper came in and upgraded with $200k repairs. Retirement money came in and purchased in a bid agaist herself for $1.1M. Yes, she actually out bid the rack rate with no competition so she could make sure she got it.

Instantly, she "upgraded the upgrade" and put another $75k into it. Neighbors all sang in glee because now, based on this numbskulls buying habits, their properties are "worth" what she says it should be worth based on the Comparable RE property check. 

Days after a 2500sf house with a nature preserve in back sold at $800k with minimal repairs needed. Much bigger, much nicer.

So what's the comp now?

People will buy themselves higher so they can say they're worth it.

 

kaiserhoff's picture

Greatest fool theory.  Gotta love it.

azzhatter's picture

1200 SF for $540K?? You must live near an ocean or something. A nice 1200 SF in my neighborhood goes for $125K

Trimmed Hedge's picture

Tell that to the people who lived in Texas in the 80s...

berlinjames02's picture

I agree completely with you that the 'rich' are buying these assets, and will make out well for the most part.

One thing about real estate is that it's completely local. Sure, interest rates and other input costs (ie oil) can affect the local economies, but I believe an investor can do well and return alpha if you understand your market. The price points in that market matters too.

Currently, I own 5 investment properties in the greater DC/Baltimore  metropolitan area. They are all townhomes that are large enough for families of 4-5. I acquired for about 50% of bubble prices- mainly from Fannie and Freddie, and I've had no problem getting renters as there are a lot of families downsizing from larger homes in the $300-400k range. The cost to re-build a similar home is probably $10-20k more than the prices I paid, so the downside is pretty limited. Oh yeah, the cash flows on the properties (0% financed) are about 13%. Add some leverage (which I've done to hedge inflation risk) and the returns are easily above 15% after expenses.

As with all things, the world is grey. I imagine a lot of 'big boy' investors will get burned, and the foreclosure back log will bite the market in the ass. (I'm looking forward to the foreclosures starting back up in MD (judicial state) so I can buy some more.)  But, money can still be made.

Bloomberg has a great article the other day about the vulchers flying from Phoenix to Atlanta in search of deals. I imagine most deals are probably 'rotten rhino ass', but who knows. It all depends on the local market.

http://www.bloomberg.com/news/2012-10-17/private-equity-in-atlanta-after...

spankthebernank's picture

Housing ...Bright spot!?....stupid sheeple.  Doesn't take long anymore for the sheep to keep making the same mistakes...sad really.

lostcause's picture

 Yes, after all selling the dream is much more profitable than trying to earn it.

digitlman's picture

Heard a radio commercial last week where the ex-host of "Flip That House" (or was it "Flip This House"?) giving a seminar in my area, apparently, on how to buy up houses and re-sell them.

 

I thought, oh no, not this shit again.

 

Idiots.

 

EDIT:  I see Orly mentions the same thing.  Must be nation-wide.

Orly's picture

Texas-wide, I think...

digitlman's picture

I'm in NC....so...;-)

CvlDobd's picture

Heard the ads here in East TN a few weeks ago.

Orly's picture

East Tennessee, nice.  If I could get out of this bloody climate!

The Wizard of Oz's picture

TOO BAD THE FOOTBALL TEAM SUCKS!

 

 

FEAR THE SPUR.

Mercury's picture

The bubble pushed home ownership rates higher than their steady, long term average.  So, deleveraging should bring the homeownership rate back down.

Population growth can take care of that over time but aside from that either housing stock needs to be destroyed or some of that stock needs to be converted from single family homes to rental/income property.  It sounds like conversion is what's happening here and boosting the sales stats - but so what? Would you rather have housing prices artificially pumped back up?

Maybe all these new investors/landlords are "elites" but I don't see why you wouldn't want them to do what they're doing.  The only other alternative is to subsidize (by various means) those stressed homeowners and prevent these turnovers.

HarryHaller's picture

At last!  The 'ownershp society'.  I guess we all never asked as to who would be the owner...

fightthepower's picture

Fuck You Bernanke!

surf0766's picture

Who is selling today? Market down over 200

Odd in the land of hyper -optimism.

 

insanelysane's picture

This would be the perfect day for retail investors to get back into the market.  </sarc>

FL_Conservative's picture

Who else would be out buying SFR investment properties right now other than REITs/conduits that are trying to make a market out of thin air?  Don't worry....this will end well.

LMAOLORI's picture

 

 

If Romney wins Banana Ben is out I wonder if that is NOW being taken into consideration?

Some Smart Money is Already Exiting the Single Family Rental Landgrab

El Viejo's picture

Nice Call !!!   I do love Shilling and trust him to do his homework.

the grateful unemployed's picture

the stock market is definitely worried about Romney, (the propaganda network declared Obama the winner of D2 but the next day Romneys lead shot up to 7 points) Wall Street prefers QE to working for a living, but this risk on investment stategy has really cemented the pro investors in a corner. (the Feds reflation plan has lifted the weakest balance sheets on Wall Street). all Obama has done is piss on a toxic waste dump. four years wasted. but to answer the question, why is the smart money exiting the landlord business? it wasn't much of a business in the first place.

Stuck on Zero's picture

Are the investors using cash or leveraging?

 

Perdogg's picture

Those are some really nice looking women, btw, what did they say?

Atlantis Consigliore's picture

Quick put on Hitler Keynes Video

Mein Ben BernankFuhrer...I can Print....I can Print More,   QE 7  more.

more homes, more investors, more FHA, Print print print.

Foodstamps for mortgage payments, on the Snicker Card.

Foreclosures?/  where....their Rentals...LOL