This page has been archived and commenting is disabled.

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

 

 

 


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 10/19/2012 - 13:48 | Link to Comment 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 | Link to Comment 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 | Link to Comment Winston Churchill
Winston Churchill's picture

@pm rumour.

Europe is fixed,pass it on.

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

>>>>>>>>dusts off DOW 13K hat. 

Fri, 10/19/2012 - 14:15 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

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

 

http://tinyurl.com/8rlanuu

Fri, 10/19/2012 - 14:02 | Link to Comment 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 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

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

Fri, 10/19/2012 - 14:20 | Link to Comment Stoploss
Stoploss's picture

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

 

Fri, 10/19/2012 - 14:26 | Link to Comment 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 | Link to Comment 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 | Link to Comment mktsrmanipulated
mktsrmanipulated's picture

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

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

Long Carlton Sheets and Rich Dad!

Fri, 10/19/2012 - 13:49 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment El Viejo
El Viejo's picture

With elites and Algos  we are 99% bystanders now.

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

Will glad standby, instead of buy.

Fri, 10/19/2012 - 14:06 | Link to Comment 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 | Link to Comment kaiserhoff
kaiserhoff's picture

Greatest fool theory.  Gotta love it.

Fri, 10/19/2012 - 14:53 | Link to Comment 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 | Link to Comment JPM Hater001
JPM Hater001's picture

Not 6 years ago...

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

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

Fri, 10/19/2012 - 16:06 | Link to Comment 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.

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

Fri, 10/19/2012 - 13:50 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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.

 

Idiots.

 

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

Fri, 10/19/2012 - 13:57 | Link to Comment Orly
Orly's picture

Texas-wide, I think...

Fri, 10/19/2012 - 14:08 | Link to Comment digitlman
digitlman's picture

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

Fri, 10/19/2012 - 14:10 | Link to Comment CvlDobd
CvlDobd's picture

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

Fri, 10/19/2012 - 14:12 | Link to Comment Orly
Orly's picture

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

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

TOO BAD THE FOOTBALL TEAM SUCKS!

 

 

FEAR THE SPUR.

Fri, 10/19/2012 - 14:48 | Link to Comment 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 | Link to Comment 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 | Link to Comment fightthepower
fightthepower's picture

Fuck You Bernanke!

Fri, 10/19/2012 - 14:54 | Link to Comment azzhatter
azzhatter's picture

I second that

Fri, 10/19/2012 - 13:54 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment 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 | Link to Comment CVfriendship
CVfriendship's picture

He's out anyway.

Fri, 10/19/2012 - 14:02 | Link to Comment 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 | Link to Comment 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 | Link to Comment Stuck on Zero
Stuck on Zero's picture

Are the investors using cash or leveraging?

 

Fri, 10/19/2012 - 13:57 | Link to Comment Perdogg
Perdogg's picture

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

Fri, 10/19/2012 - 13:58 | Link to Comment 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 

Fri, 10/19/2012 - 14:01 | Link to Comment vast-dom
vast-dom's picture

no markets left, just front-running the fedzi.

Fri, 10/19/2012 - 14:04 | Link to Comment catacl1sm
catacl1sm's picture

He who panics first, pancis best.

Fri, 10/19/2012 - 14:04 | Link to Comment thomasincincy
thomasincincy's picture

sentiment: long dirt roads

Fri, 10/19/2012 - 14:11 | Link to Comment Squid Vicious
Squid Vicious's picture

who cares, just buy-buy-buy the homies, look how much more they can run - even if they only get back to 2005 levels... /sarc off

on a related note, Angelo Mozillo was seen shopping for a new 90-110 ft. yacht in Miami today

Fri, 10/19/2012 - 14:10 | Link to Comment orangedrinkandchips
orangedrinkandchips's picture

right on Investment props are booming.

 

STD...Standard Dev.......it swings like your car when you text and drive.....you swerve to the right....overcompensate to the left.

 

Same with housing prices....my buddy is buying condos and my first thought is HIGH BALL city....where it's cut in half but still way over valued....but....the shit he is buying....a 2 bd condo for 50-60k in Chicago....I think he cant lose on that one.

 

The other place he bought was a skeleton but zoned for a 2 flat....the catch is if you destroy it it comes back as a single fam.

165k. In a great hood too! Once again...it swings so far each way!!

 

Prices will catch up.

Fri, 10/19/2012 - 15:16 | Link to Comment Miffed Microbio...
Miffed Microbiologist's picture

Sorry but I just can't get over your avatar! Whenever I'm feeling sad about my personal situation I bring up "people of Walmart " and have a shot of Glenlivet. Never fails to have me laughing historically in no time. Your avatar is one of the best ones. Thanks for the laugh!

Miffed ;-)

Fri, 10/19/2012 - 14:11 | Link to Comment mktsrmanipulated
mktsrmanipulated's picture

where's armando mantalango when you need him...flip this dumb ass....now trying to sell seminars on how to make big money flipping homes....hey if its so easy why did you stop

Fri, 10/19/2012 - 14:14 | Link to Comment ebworthen
ebworthen's picture

Oh good, maybe some overzealous "investor" will take my ball and chain tax/maintenance/GMAC headache off my hands.

Fri, 10/19/2012 - 14:17 | Link to Comment Zymurguy
Zymurguy's picture

There's no housing recovery... I can't re-fi because the appraisal of my home has slipped far enough to disqualify me.

Fri, 10/19/2012 - 14:29 | Link to Comment razorthin
razorthin's picture

It's simple.  Create a bubble and you must let it pop.  Otherwise you get stagflation.  Since economics is not a science because there exists no laboratory to control experiments, common sense will always trump output from some esoteric model which cannot be validated.

Fri, 10/19/2012 - 14:30 | Link to Comment NEOSERF
NEOSERF's picture

Please have Bloomberg split out FHA NINJA loans vs. cash vs. 30 yr mortgages on those blue bars...my guess as a percentage of the last 61%, FHA is going through the roof...if I was a builder I certainly  shouldn't be speculation on new property and starts with the gov boiling the housing pot...also as soon as that mortgage rate ticks up even half a %, the whole refi game is over which will kill the rest of the "demand" in this industry...

Fri, 10/19/2012 - 14:39 | Link to Comment swmnguy
swmnguy's picture

It's bizarre, but I'm seeing it too.  When we moved onto our block 3 years ago, the house 2 doors down was being squatted in by the former owners.  They had a Countrywide/BofA mortgage and second and HELOC that they had maxed out and then lost a job.  Hadn't paid in a couple of years.  After another year they got evicted.  The house sat for a year, and then got bought by a flipper for $90k.  It was trashed.  Similar houses on the block (like mine) that had been fixed up more or less had sold for around $225k in 2009 (that's what I paid). 

So the flipper gutted it out to the studs and made it look nice.  Not sure if there was any serious structural stuff to do, but it looks all shiny now.  He probably spent close to $75k, so he's now got maybe $165k into it?  So he puts it on the market a month ago at $279k.  It was, quite literally, so funny I couldn't even laugh.  I'd have said it was a fair deal at $190k, in our neighborhood, right now.  You wouldn't brag if you bought it at that, but the flipper can't go too much lower and still cover his nut plus pay himself.

It's off the market now as winter sets in here in the north.  Nobody moves after Nov. 1 in Minneapolis because it's just a horrible experience and the last thing you want to do is move into a new house you can't even open the windows of for 5 months.  I'm fascinated to see what will happen to this house.  Maybe there's a fool out there willing to spend $225k+?  The question is, does the flipper think his odds are better waiting to get his price next spring/summer, or dumping it now to make less than 10% on the deal?  Rock vs. hard place, I'd say.  Now knowing if he is running the flip with cash or credit makes a big difference.  It's probably credit, so his nuts are probably quite vise-sensitive right now.

If that's what's going on across the country, we've managed in 5 short years to rebuild the bubble, but this time without the buyer sentiment to drive it.  I know why we've done it, but it's got to be one of the dumbest things I've ever seen. 

Fri, 10/19/2012 - 14:41 | Link to Comment the grateful un...
the grateful unemployed's picture

every week there are more headlines about the housing recovery, but count on two decades of declining asset prices, unless Romney gets in and he can disperse the Feds position in MBS. not sure if Bernanke would take those orders, but we'll see, he's a good bureaucrat so far.

on the physical side a lot of the housing in foreclosure is either old and substandard, or overbuilt and expensive to maintain. the solution is to bulldoze a lot of it, just like they turned over crops during the first depression. probably key to housing is immigration. and with lots of americans leaving their home soil, supply is likely to exceed demand. the problem is bernankes put raises the value of the less desirable property, just like the worst balance sheets in wall street rise during reflation.

we need housing technology (good cheap housing) not more apps for our iphone. and we probably need a Cash For Junk Homes program, which consumer too much energy, and are filled with mold and asbestos in some cases.

not sure if Romney has any of these things in mind, but investors should see the writing on the wall. get out of housing while you can.

Fri, 10/19/2012 - 14:54 | Link to Comment Vince Clortho
Vince Clortho's picture

And as we write, there has been NO serious attempt to deal with the housing crisis since the bubble burst.  If the banks had not been flooded with tidal waves of cash and the entire inventory of housing had been left on the market, we would now be in the early stages of a housing recovery.  Of course that would have involved some very big banks absorbing very significant losses ...

we all know how that scenario plays out. 

Fri, 10/19/2012 - 14:56 | Link to Comment azzhatter
azzhatter's picture

Vince- the voice of reason

Fri, 10/19/2012 - 14:55 | Link to Comment j0nx
j0nx's picture

To the cellar, buy up on the cheap and rent to Barack's homeys in the section 8 program. Run up the price enough to keep average buyers on the sidelines but not enough to allow underwater homeowners stuck in the newly created section 8 hoods to sell their homes and get the hell out. Sound about right? Does to me from where I sit.

Fri, 10/19/2012 - 15:10 | Link to Comment EscapingProgress
EscapingProgress's picture

Real estate gains brought about by government subsidies and spending on infrastructure and loose Fed monetary policy are how the rich clawback taxes. This is why the real estate bubble will persist.

Ricardo's Law ~ The Great Tax Clawback Scam: http://www.youtube.com/watch?v=6ZkfmY1PMng

Fri, 10/19/2012 - 15:43 | Link to Comment Miffed Microbio...
Miffed Microbiologist's picture

I've got 2 savvy friends who recently have made forays in the San Diego market. The first is a contractor that has cash to invest in fixer that he could pick up cheap and with his expertise upgrade himself. He found nothing even remotely close to reality in our area. Everyone was fixated that their home was worth 300k-400k when they were clearly worth 150k to 200k. In 6 months he gave up and remodeled his own home. The 2nd had 400k in an inheritance and was looking to find one or two rental homes. The last few weeks have been insanely funny. She finally found something that was in her budget in a good neighborhood. When the real estate agent met her at the house he refused to enter the home with her. When she went in there were 17 middle eastern men living there, sleeping bags everywhere and no furniture in a 1200 square foot home. One room they refused to let her enter. So everything she looked at was a feces laden nightmare or a potential sleeper cel. She's trying to buy the sleeper cel but must wait a minimum of 6 months to get them out. Anyone venturing into real-estate in,at least, my area is crazy insane. Of course I told them If I had that kind of cash I'd buy gold....I think they thought I was crazy.

Miffed:-)

Fri, 10/19/2012 - 16:13 | Link to Comment mmanvil74
mmanvil74's picture

The difference today is that the 'investors' in 2005 were taxi cab drivers, college grads, and real estate agents with no investment knowledge, who were 'investing' with no money down loans hoping to flip them in six months for a big gain even while rent to house price ratios were at record lows.  Today's 'investors' in housing are mainly all cash buyers who are looking to hold 3-5 years, who understand that rental yields are at all time highs and house prices at all time lows in real terms.  I'd put my money on today's 'investors' who were part of this survey, vs. the 'investors' of 2005, who are now underwater taxi cab drivers, college grads, and real estate agents.  There is a big difference between smart money investors and dumb money investors but apparently no distinction was made for the purposes of this survey.  I noticed how Tyler Durden's perma-claim of 'no bottom' in housing has been a little different of late, with the odd reference toward 'housing bubble 2.0'.  Which one is it Tyler? I still think 2010-2012 will be looked upon as a no-brainer opportunity to build wealth in US housing by purchasing foreclosed homes from banks in key states of FL, AZ, NV and CA with 30 year fixed mortgage rates.  Phoenix Metro up over 30% y-o-y just as one example.

Fri, 10/19/2012 - 16:48 | Link to Comment PAWNMAN
PAWNMAN's picture

All bets will be off if interest rates rise even close to their historical average.

Sat, 10/20/2012 - 06:13 | Link to Comment andrewp111
andrewp111's picture

I wouldn't hold my breath waiting for this one. Depressions tend to last a very LONG time.

Fri, 10/19/2012 - 17:43 | Link to Comment geekgrrl
geekgrrl's picture

At the end of the day, it's the ratio of the price to income that matters for affordability, just as Henry Ford said. So how can house prices go up when incomes are stagnant or going down? Obviously there is a lot of bank obfuscation going on: mark to unicorn, shadow inventory, lost paperwork, "pending foreclosures," etc, so as to obscure the fact that there are millions of vacant homes. At the same time, every fundamental that goes into the denominator, income, is stagnant or declining. Labor participation rate down, temp jobs up, people dropping off unemployment, kids saddled with massive student loan debts, savers screwed by ZIRP, etc.. As I mentioned the other day, in my county the ratio of average house price to average income is almost 7:1. Thanks, but no thanks. Clearly the goal of the Fed is to make housing unaffordable (apart from their public pronouncements, which, based on G. Edward Griffin's work, are diametrically opposite to their real goals).

I had a discussion with a colleague after QE2 discussing most of these points, and he had an interesting perspective. He's a bit older than me, and was newly married in the '70s when interest rates were double-digit. He said he held off buying a house for a few years, thinking the rates had to come down. He said he eventually had to get on with his life, and just bit the bullet and bought into a pretty crazy arrangement mainly because that's what everyone else was doing (I think this is what they are counting on). He was able to refinance later, so it all turned out fine, but contrast the situation in the '70s to now. Now, there's nowhere to go as mortgage rates are already rock bottom, and folks don't even get the nice juicy mortgage interest deductions like back in the '70s. Moreover, compared to the '70s, employment security in the private sector is almost entirely gone, making long-term financial commitments high risk for many people, especially households with a single earner. We're still operating in the "everyone else is doing it" mode, but I'm going to sit this one out. My bet is that entropy is going to give insolvent banks,  absentee landlords, and flippers a run for their money. In these parts, a house left for a winter unattended is very likely going to have water damage, mold, or unwanted guests (both 2 and 4 legged), so it isn't going to take very long before all these "assets" literally become worthless.

Fri, 10/19/2012 - 17:43 | Link to Comment billsykes
billsykes's picture

Skin in the game- what a bullshit saying- it doesnt even mean what we think it does.

 

http://en.wikipedia.org/wiki/Skin_in_the_game_%28Clich%C3%A9%29

 

Stupid buffet.

 

 

 

Sun, 10/21/2012 - 12:01 | Link to Comment unununium
unununium's picture

That has to be the worst Wikipedia article I have ever seen.

Exactly how is having skin in the game supposed to INCREASE the problem of front-running?  The truth is the opposite.  Managers are tempted to front-run by buying assets before the fund does, if they are not participants in the fund.

 

Fri, 10/19/2012 - 17:44 | Link to Comment ceedub
ceedub's picture

What kind of interest rates are people being offered by banks to refinance/home equity loan?

 

Was quoted 3.8% for 5 year loan or 4.02% for a 10 year loan from US Bank in populated midwestern city.

Sat, 10/20/2012 - 04:41 | Link to Comment NidStyles
NidStyles's picture

That's about the norm across the board. Here in AZ I've seen as low as 3.3% though.

Sat, 10/20/2012 - 08:52 | Link to Comment ltsgt1
ltsgt1's picture

I got 3.625% for a 30 years refinance in NYC.

Sat, 10/20/2012 - 08:48 | Link to Comment ella
ella'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"  I thought that was the point.  Since Greenspan, it has been the policy of the FED to bail out the elites.  Why would anyone expect something different now? 

Sat, 10/20/2012 - 09:16 | Link to Comment toomanyfakecons...
toomanyfakeconservatives's picture

The "investors" are trying to corner the rental market... in a housing market that can't afford jacked-up rents.

Sat, 10/20/2012 - 11:19 | Link to Comment steve from virginia
steve from virginia's picture

 

 

 

Funny how all this '(rental) real estate recovery' nonsense is emerging now, right before the election.

 

Just like the 'US is energy independent' nonsense is emerging now right before the election ... how the finance markets are recovering ... how the banks have been bailed out again ... how the auto industry sales are increasing ... right before the election.

 

A whole lot of shilling going on! Those putting cash into speculations are no different from Chinese putting their cash into vacant towers ... in vacant cities. There must be a 'greater fool' someone who is more successfully greedy, who is better positioned to borrow. The end is when a tipping point is reached, when enough of the market is made up of borrowers then the rationale for the loans vanishes ...

 

At that point even 10- 15% annual yield does not cover the risks, principal loss is of the order of 50% or more. The cash is wiped out and the speculators are completely ruined. It's all a sucker game ... 3 Card Monte ... just like Times Square ... in the Good Ol' Days.

 

///

Do NOT follow this link or you will be banned from the site!