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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Fri, 10/19/2012 - 13:48 | 2904820 Orly
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.


Fri, 10/19/2012 - 13:57 | 2904849 DoChenRollingBearing
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%.

Fri, 10/19/2012 - 13:57 | 2904861 Winston Churchill
Winston Churchill's picture

@pm rumour.

Europe is fixed,pass it on.

Fri, 10/19/2012 - 14:00 | 2904872 Dr. Richard Head
Dr. Richard Head's picture

>>>>>>>>dusts off DOW 13K hat. 

Fri, 10/19/2012 - 14:15 | 2904924 redpill
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).


Fri, 10/19/2012 - 14:18 | 2904933 Dr. Richard Head
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!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Fri, 10/19/2012 - 14:30 | 2904973 redpill
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.

Fri, 10/19/2012 - 15:00 | 2905115 SpeakerFTD
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.

Fri, 10/19/2012 - 14:00 | 2904876 DoChenRollingBearing
DoChenRollingBearing's picture

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

Fri, 10/19/2012 - 14:02 | 2904885 insanelysane
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

Fri, 10/19/2012 - 14:52 | 2905078 DoChenRollingBearing
DoChenRollingBearing's picture

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

Fri, 10/19/2012 - 14:20 | 2904942 Stoploss
Stoploss's picture

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


Fri, 10/19/2012 - 14:26 | 2904960 Stoploss
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.

Fri, 10/19/2012 - 14:43 | 2905042 kaiserhoff
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.

Fri, 10/19/2012 - 15:09 | 2905153 mktsrmanipulated
mktsrmanipulated's picture

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

Fri, 10/19/2012 - 13:47 | 2904821 Larry Dallas
Larry Dallas's picture

Long Carlton Sheets and Rich Dad!

Fri, 10/19/2012 - 13:49 | 2904829 Orly
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...

Fri, 10/19/2012 - 13:49 | 2904825 El Viejo
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 !!!

Fri, 10/19/2012 - 14:02 | 2904881 Dr. Richard Head
Dr. Richard Head's picture

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

Fri, 10/19/2012 - 14:05 | 2904899 El Viejo
El Viejo's picture

With elites and Algos  we are 99% bystanders now.

Fri, 10/19/2012 - 14:19 | 2904936 Dr. Richard Head
Dr. Richard Head's picture

Will glad standby, instead of buy.

Fri, 10/19/2012 - 14:06 | 2904898 haskelslocal
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.


Fri, 10/19/2012 - 14:45 | 2905050 kaiserhoff
kaiserhoff's picture

Greatest fool theory.  Gotta love it.

Fri, 10/19/2012 - 14:53 | 2905079 azzhatter
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

Fri, 10/19/2012 - 17:32 | 2905533 JPM Hater001
JPM Hater001's picture

Not 6 years ago...

Fri, 10/19/2012 - 20:03 | 2905795 Trimmed Hedge
Trimmed Hedge's picture

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

Fri, 10/19/2012 - 16:06 | 2905329 berlinjames02
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.

Fri, 10/19/2012 - 13:50 | 2904828 spankthebernank
spankthebernank's picture

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

Fri, 10/19/2012 - 13:51 | 2904836 lostcause
lostcause's picture

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

Fri, 10/19/2012 - 13:54 | 2904840 digitlman
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.




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

Fri, 10/19/2012 - 13:57 | 2904860 Orly
Orly's picture

Texas-wide, I think...

Fri, 10/19/2012 - 14:08 | 2904903 digitlman
digitlman's picture

I'm in;-)

Fri, 10/19/2012 - 14:10 | 2904910 CvlDobd
CvlDobd's picture

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

Fri, 10/19/2012 - 14:12 | 2904917 Orly
Orly's picture

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

Fri, 10/19/2012 - 14:21 | 2904946 The Wizard of Oz
The Wizard of Oz's picture





Fri, 10/19/2012 - 14:48 | 2904841 Mercury
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.

Fri, 10/19/2012 - 16:05 | 2905323 HarryHaller
HarryHaller's picture

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

Fri, 10/19/2012 - 13:53 | 2904842 fightthepower
fightthepower's picture

Fuck You Bernanke!

Fri, 10/19/2012 - 14:54 | 2905084 azzhatter
azzhatter's picture

I second that

Fri, 10/19/2012 - 13:54 | 2904844 surf0766
surf0766's picture

Who is selling today? Market down over 200

Odd in the land of hyper -optimism.


Fri, 10/19/2012 - 14:05 | 2904895 insanelysane
insanelysane's picture

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

Fri, 10/19/2012 - 13:55 | 2904850 FL_Conservative
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.

Fri, 10/19/2012 - 13:54 | 2904852 LMAOLORI
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

Fri, 10/19/2012 - 13:59 | 2904868 CVfriendship
CVfriendship's picture

He's out anyway.

Fri, 10/19/2012 - 14:02 | 2904879 El Viejo
El Viejo's picture

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

Fri, 10/19/2012 - 14:30 | 2904974 the grateful un...
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.

Fri, 10/19/2012 - 13:57 | 2904857 Stuck on Zero
Stuck on Zero's picture

Are the investors using cash or leveraging?


Fri, 10/19/2012 - 13:57 | 2904859 Perdogg
Perdogg's picture

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

Fri, 10/19/2012 - 13:58 | 2904867 Atlantis Consigliore
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 

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