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Guest Post: What Is Normal?

Tyler Durden's picture




 

Submitted by Ramsey Su via Acting-Man blog,

Is a $400,000 house with NINJA loan normal?

How about a $200,000 REO with missing appliances, a dead yard, a long list of maintenance and no financing?

Maybe normal is a $300,000 flip after the flipper fixed everything and colored up the yard, and did some upgrades to the interior. 

Some may suggest that normal is more like a $300,000 sale with a 5.5% fixed rate and 20% down.

Then again, it may be more normal if this $300,000 sale is financed with a 3.5% down FHA loan at 4%.

Of course, all of the above is actually referring to the same house.

So what is normal? Analysts and economists have long accepted household formation, population and job creation as the basis for housing supply and demand. There was a study (I can't seem to locate) that showed that there is no correlation whatsoever. I am going to borrow a chart from my cyber friend Calculated Risk as an illustration:

 


 

housing starts

Housing starts, total and one unit structures – click to enlarge.

 

I think I am going to leave it to the Wharton grads to explain how population and employment fit into the above erratic housing starts chart. In fact, if you use employment as a factor, then we should be tearing down a few million houses since we have lost about 6-7 million jobs since the great recession. If population is a factor, then I suggest you invest in Cairo where the population is definitely growing much faster than that of Silicon Valley.

Is it normal that Wall Street is buying up all these houses? Wall Street OPM ('other people's money') is not only buying up all existing homes, now it is  squeezing out the buyers for new homes as well. The numbers work exactly the same way for new and existing homes. The builders would far prefer a no-contingency cash offer with no commissions, no lender fees and no marginal buyers that they have to coach into qualifying. In other words, builders can take a lower offer from Wall Street and still be as profitable as when they are selling to mom and pop.

Is this good housing policy? Of course not.  Where are the policy makers? Just like Greenspan during the sub-prime era, Bernanke is like a deer frozen in the headlights. He is busy with his QEs and claiming there is a housing recovery, while he should actually be busy writing his memoirs entitled: "I did not see it coming."

So what is normal? Logically, the past is only relevant if conditions in the future are expected to be similar. We know that with aging baby boomers, housing demand will be substantially different than when the same boomers were at the peak of their productive years. Should the demand rather be for duplex type constructions or grannie flats, as the boomers try to juggle taking care of elderly parents and boomerang kids?

Current economic conditions should also present a different outlook. For example, with youth unemployment so high, with student loans in the trillions, there is no reason why first time home purchases should not be delayed. It seems to me the worst thing policy makers can do is to give this group even more credit, especially long term credit like a 30 year mortgage that will entrap them forever.

However, I believe the new normal is going to be intervention. Here is a recent speech by Fed Governor Elizabeth Duke, entitled "A View from the Federal Reserve Board: The Mortgage Market and Housing Conditions"

This speech is significant because Duke usually labels herself as the Federal Reserve's main voice on housing.

Since joining the Board in 2008 amid a crisis centered on mortgage lending, I have focused much of my attention on housing and mortgage markets, issues surrounding foreclosures, and neighborhood stabilization.

For those who follow the housing market, I believe this speech is a must read. It provides insight into the data that the Fed is looking at and the Fed's understanding, or misunderstanding, of the real estate market. They seem to be overly concerned about lending to borrowers with low credit scores (emphasis mine):

“The drop in originations has been most pronounced among borrowers with lower credit scores. For example, between 2007 and 2012, originations of prime purchase mortgages fell about 30 percent for borrowers with credit scores greater than 780, compared with a drop of about 90 percent for borrowers with credit scores between 620 and 680 (figure 6).5 Originations are virtually nonexistent for borrowers with credit scores below 620

 

[….]

 

At the Federal Reserve, we continue to foster more accommodative financial conditions and, in particular, lower mortgage rates through our monetary policy actions. We also continue to monitor mortgage credit conditions and consider the implications of our rule makings for credit availability. For your part, I urge you to continue to develop new and more sustainable business models for lending to lower-credit-score borrowers that lead to better outcomes for borrowers, communities, and the financial system than we have experienced over the past few years.”

Governor Duke has completely forgotten about the sub-prime disaster. A low credit score is not a given, it is earned. A borrower must carry some balance, miss a few payments or even default on a few loans before they can garner a 620 or lower credit score.  The last thing that sub-prime borrowers need is more debt,  something that they have proven they cannot manage.

At the moment, we know prices are going up in certain markets, and so are sales. Mortgage rates are higher now than when QE3 started in September 2012. Investors are gobbling up everything in sight in their favored target markets. As an example, they are buying 30% of the houses in Southern California, 38% in Phoenix and 53% in Vegas. First time buyers do not stand a chance, especially if their credit score is an iffy <620, making their contingency offer most unattractive to a seller. The percentage of home ownership is declining. Are policy makers happy with these results? Are these intended or unintended consequences of public policies? What are policy makers going to do – more QE, more HARP, principal reduction or something even more creative?

In my opinion, there will definitely be more intervention. Intervention is the new normal.

 

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Sun, 05/19/2013 - 15:58 | 3578219 williambanzai7
williambanzai7's picture

But consumer sentiment is up, because the Dow is up and real estate is up!

LV, Bulgari and Lambo are going like gangbusters!

VINTAGE ANTI BERNANKE STICKER

Sun, 05/19/2013 - 16:04 | 3578228 resurger
resurger's picture

this is normal.

Mon, 05/20/2013 - 00:56 | 3579427 Buck Johnson
Buck Johnson's picture

I truly hope that the market implodes before Bernanke leaves office including Obama. 

Sun, 05/19/2013 - 15:59 | 3578220 QQQBall
QQQBall's picture

Lets reflate Subprime.

Signed,

Lizzie Duke

 

 

Sun, 05/19/2013 - 16:35 | 3578274 max2205
max2205's picture

Honestly lots of jobs lost came from 2 income households that didnt max it out.  Hence the flaw to some degree

Sun, 05/19/2013 - 17:39 | 3578362 Freddie
Freddie's picture

If I could just have one good flip this year for $150,000 - life would be sweet.

Sun, 05/19/2013 - 16:01 | 3578222 PiltdownMan
PiltdownMan's picture

This guy nailed where we are at: gov't controlling all mortgage lending. And gov't won't back down.

http://confoundedinterest.wordpress.com/2013/05/19/regulation-the-demise-of-the-sl-industry-and-the-rise-of-shadow-banking-regulatory-surge/

Sun, 05/19/2013 - 16:02 | 3578223 0b1knob
0b1knob's picture

Is a one dollar condo no one wants normal?

 

http://abclocal.go.com/kabc/story?id=8926353

 

The entire price discovery mechanism of capitalism is broken by endless QE to infinity and beyond.    The entire economy has entered  an undefined division by zero (interest rate) blue screen of death error.

Sun, 05/19/2013 - 16:04 | 3578229 tango
tango's picture

!!!!!!  Please find out how that last paragraph can somehow be read by out forlorn president. 

Sun, 05/19/2013 - 18:52 | 3578519 Pure Evil
Pure Evil's picture

Unless its displayed on a teleprompter, he'll never know it exists.

Sun, 05/19/2013 - 19:37 | 3578678 RafterManFMJ
RafterManFMJ's picture

Someone told me long ago
There's a calm before the storm,
I know; it's been comin' for some time.
When it's over, so they say,
It'll rain a sunny day,
I know; shinin' down like water.

Sun, 05/19/2013 - 16:04 | 3578224 Yen Cross
Yen Cross's picture

 

            Donkey KongBitchez...

Sun, 05/19/2013 - 16:44 | 3578289 FreeMktFisherMN
FreeMktFisherMN's picture

classic games. I was just playing Mario Golf for N64. 

Sun, 05/19/2013 - 16:48 | 3578295 FreeMktFisherMN
FreeMktFisherMN's picture

although Nintendo's stock doesn't look too good, so so much for all the yen printing. 

Sun, 05/19/2013 - 16:51 | 3578302 Yen Cross
Yen Cross's picture

     You guys will love these links.

   Sony | Raspberry Pi   

  how do i use raspberry pi - Google Search

Sun, 05/19/2013 - 18:32 | 3578453 noless
noless's picture

I can't remember the name but another company with a similar unit for like $50 just entered the market, in my opinion these guys(or companies like them) could take out apple eventually. Cheap as fuck, can totally change the market for pc's. I mean fuck, i want one, once my current comp finally kicks it that's the route I'm going.

Sun, 05/19/2013 - 19:42 | 3578691 RafterManFMJ
RafterManFMJ's picture

Yea I read about that on another site and as soon as I cannot afford state of the art and am living in a paper box under the viaduct I'll trade some teeth for your way cool system and crowdsource my way to the freshest dumpsters.

Sun, 05/19/2013 - 16:03 | 3578226 tango
tango's picture

Rates may be a tad higher but it is still possible to get a second at places like Fifth Third for 1.99%!   In fact, the lady there told me some folks had done this, invested in the market and made a decent return.  Talk about psychology and risky behavior.  I doubt we will seea retur to \ "traditional" buying  (20-25% down, fixed market-based rates, only sold to those who can afford it) anytime soon.

As usual, Congress and the FED have screwed up.  They want it both ways - greatly increased regulations to prevent loans going to those who can't repay then (on the other hand) griping because banks aren't granting more loans with these regulations. Round and round we go,

Sun, 05/19/2013 - 19:45 | 3578704 RafterManFMJ
RafterManFMJ's picture

Damn you! Why didn't you post earlier!?

I sold a kidney and a lung and bought silver; I'm counting on the singularity to make me whole but damn, it's hard to time these things.

Sun, 05/19/2013 - 16:04 | 3578230 Rustysilver
Rustysilver's picture

What I don't understand, everything being equal, why would anybody buy a house that's being "flipped". The information is there in town / city tax records. The repairs are superficial at best.  Unoccupied house for more then two years is shit.

Sun, 05/19/2013 - 16:39 | 3578283 max2205
max2205's picture

Like people out of work for 2 year.  HR wont even call them back

Sun, 05/19/2013 - 16:55 | 3578305 nidaar
nidaar's picture

Because they think there is even a "greater fool" out there and most of the time there is; until not.

Sun, 05/19/2013 - 18:01 | 3578381 Umh
Umh's picture

Because the flipper bought it before they did and has "dressed " it up a bit. People are free to buy it from someone else and if they have the knowledge and skill to fix it up more power to them. On the other hand if they guess wrong about the repairs needed they will end up selling it to a flipper; probably at a loss when there expenses are taken into account.

Sun, 05/19/2013 - 18:39 | 3578472 noless
noless's picture

I would love to buy a run down piece of shit house and fix it, no doubt in my mind i could repair/build anything on a residential home, the problem is there aren't any, so fuck the whole game.

 

 

Edit: in the market where i live, at a reasonable price, because flippers.

Sun, 05/19/2013 - 19:47 | 3578706 RafterManFMJ
RafterManFMJ's picture

Rule of thumb - if you don't know what you're doing on home repair consuming 4 IPAs will make you into an expert.

Sun, 05/19/2013 - 22:24 | 3579174 greatbeard
greatbeard's picture

>> the problem is there aren't any,

Check into homepath dot com.  Governmnet resales, owner occuants get first dibs. Some good deals and some overpriced garbage, but they are there.  I almost bought a couple of them but ended up with a Wells Farge short sale.

 

Sun, 05/19/2013 - 16:16 | 3578235 The Heart
The Heart's picture

"In my opinion, there will definitely be more intervention. Intervention is the new normal."

Boy howdy, eh!

Sumbody has definitely intervened in Syria. Maybe it is the God of goodness and love. Maybe it is that the people of the world have had enough of the banksters wars for world domination, and population reduction. Maybe the goodness in everyones heart is rising above the dark sleep they have been induced into. Maybe the truth is coming out in greater ways to heal the nations of this evil that keeps on keeping on. Maybe it is time to stop it all?

http://www.globalresearch.ca/syrian-forces-inflict-heavy-losses-on-us-sp...

 

Sun, 05/19/2013 - 18:40 | 3578464 Henry Hub
Henry Hub's picture

In regards to Syria, Obama didn't know what to do. He didn't know who to back because the Israelis hadn't made a decision on who was the lesser of two evils: Assad or the rebels. The Israelis had decided on Assad. So now Obama has his marching orders from his masters. He will no longer support the rebels. Real power is having the President of the United States as your flunky.

http://www.haaretz.com/news/diplomacy-defense/israeli-official-assad-pre...

Sun, 05/19/2013 - 18:59 | 3578550 Pure Evil
Pure Evil's picture

Probably Assad cried uncle and agreed to allow Qatar to build it's pipline through Syria into Turkey up into Europe to bypass the Russians, who are gonna be pissed.

Mystery Sponsor Of Weapons And Money To Syrian Mercenary "Rebels" Revealed

Sun, 05/19/2013 - 16:10 | 3578237 Cheeseus Sonofdog
Cheeseus Sonofdog's picture

The only REO's coming on the market are from Fannie, Freddie and HUD. They get to decide how many they release(so far keeping the majority in the shadow). They get to set ridiculous prices(like 100% above comps). Owner occupants are left to pay the prices because it is the only way they can get a home with 3.5% down and in some cases free money for their down payment(like Florida Assist program that can give you up to $7,500). The poor suckers buying at the crazy prices makes the median sales price go up. That makes investors think the market is organically moving higher and bid them all up. A disgusting cycle.

Sun, 05/19/2013 - 16:17 | 3578246 over45
over45's picture

did you know that if you buy 10 properties from Fannie/Freddie you get them at half price?

that has alot to do with the equity firms buying... they pay half.

Sun, 05/19/2013 - 16:52 | 3578301 hmmtellmemore
hmmtellmemore's picture

If that is true, that is an astoundingly good investment for firms able to buy 10+ homes.

Sun, 05/19/2013 - 19:05 | 3578571 Pure Evil
Pure Evil's picture

Depends on the condition of the house. Houses in the deep south left vacant for a number of years will start rotting on the inside if the A/C has been turned off the whole time.

With no A/C or heating, the heat and humidity will allow mold to grow in the plaster boards. Termites can take root, and if there is a pool it generally becomes a festering slime pond for mosquitoes.

Sun, 05/19/2013 - 16:24 | 3578260 CrashisOptimistic
CrashisOptimistic's picture

Here we are again:

http://research.stlouisfed.org/fredgraph.png?g=7iv

 

That's the housing recovery.  With 50 million more people and mortgage rates far below where they were in the . . . yes, 1960s, and the 1960s trough, not peak.

It's all bullshit.

Sun, 05/19/2013 - 16:25 | 3578262 GrinandBearit
GrinandBearit's picture

However anyone wants to spin it, it's just a dead cat bounce precipitated by more cheap funny money... that is all. 

It's not going to last.  Be patient.

Sun, 05/19/2013 - 19:10 | 3578589 Pure Evil
Pure Evil's picture

Well, if they pass amnesty, and approximately 30 to 50 million actually crawl out of the woodwork, instead of the 11 million that's being touted, that's a shit load of people that can apply for NINJA loans from the Feds.

Sun, 05/19/2013 - 16:27 | 3578263 Yen Cross
Yen Cross's picture

     The, {buy/save}, quimsical liberals are out today.  I guess they're noticing 'Chair Satans' hidden inflation?

Sun, 05/19/2013 - 16:34 | 3578271 TrustWho
TrustWho's picture

Daddy Bernanke believe the rich 1% needs to get richer quicker!

Richard Fisher states: The latter outcome (tragic in Shakespearean speak) posits that the wealth effect is limited, for two possible reasons. One is that our continued purchases of Treasuries are having decreasing effects on private borrowing costs, given how low long-term Treasury rates already are. Another is that the uncertainty resulting from fiscal tomfoolery is a serious obstacle to restoring full employment. Until job creators are properly incentivized by fiscal and regulatory policy to harness the cheap and abundant money we at the Fed have engineered, these funds will predominantly benefit those with the means to speculate, tilling the fields of finance for returns that are enabled by historically low rates but do not readily result in job expansion. Cheap capital inures to the benefit of the Warren Buffetts, who can discount lower hurdle rates to achieve their investors’ expectations, accumulating holdings without necessarily expanding employment or the wealth of the overall economy.

Samething is happenning in Housing market

Sun, 05/19/2013 - 16:38 | 3578282 mrdenis
mrdenis's picture

Normal would be Corzine in the cell next to Madoff 

Mon, 05/20/2013 - 08:00 | 3579693 yellowsub
yellowsub's picture

Obama took the cue from the same playbook feigning clueless.

This is Obama's transparent gov't, which is obviously transparent to us.

Sun, 05/19/2013 - 16:45 | 3578290 greatbeard
greatbeard's picture

Who's new normal?  I can only decide my new normal.  New normal for me was a little place on five acres a few miles out of town.  Yeah, it was a short sale, but it was so hammered as to disuade most buyers.  Anyway, I got it for a song, $58K, cash, no survey, no inspection, no insurance.  Fuck each and every one of them, thank you very  much.  Not for everybody, but I know what I'm looking at.

Anyway, make your own normal, screw theirs.  Their normal is for their benefit, not  yours.

I just got done canning 36 pints of green beans from my garden.  First picking of several I hope.  Oh yeah, organic green beans, fuck you Monsanto and company.  I've got 78 tomato plants comming along very nice, mostly heirloom.  If things go right that should give me all I can can and a few to sell.  That's my new normal.

Sun, 05/19/2013 - 17:04 | 3578317 Magnum
Magnum's picture

5 acres is so nice.  Consider putting some animals on it?  The way I see it, and I have acreage just like you, there will probably always be some people selling canned plants like beans and tomatoes, etc.  Any Tom Dick or Harry can get a garden growing.  But animals especially beef, this requires "Acreage" that few people have.  It takes practice to figure out how to deal with them too. Animals seem to do well in most weather, unlike plants which will give you up and down harvests.  Animals are low cost if you have your own well.  I prefer 20% garden and 60% animals and 20% residential enjoyment.

Sun, 05/19/2013 - 17:21 | 3578336 greatbeard
greatbeard's picture

>> Consider putting some animals on it?

I've thought long and hard about that, and still do.  Goats was the first choice, but they require herd dogs and I've already got two dogs I'm very attached to.  Unfortunately, they are not coyote fighting kinda dogs, more pretty boy dogs that make my heart happy.  My favorite is laying in the bed with me right now as I type this.  No pigs, but maybe a few cows.   Problem is I can buy a side of beef for $1K, top quality, butchered and shrink wrapped.  I don't eat that much meat anymore so the I've still got plenty of the side I bought a year ago.  I might do something odd like emus or alpaccas.

The most likely thing I'll do with my extra three acres is plant pines.  My house/garden/orchard sit on the back of the lot, so planting pines will give me a good bit of privacy from the highway I'm on and my next door neighbor.  Plus planted pines are good for an ag tax exemptions and attract wild life. 

One thing I do know, even though I've got a nice JD tractor and 6' Bush Hog finish mower, I don't like mowing the field, just because. 

Sun, 05/19/2013 - 17:46 | 3578360 jbvtme
jbvtme's picture

instead of canning (which kills the enzymes) try fermenting vegitables.  "wild fermentation" sandor katz.  "nourishing traditions" sally fallon  "you can farm" joel salatin.   oh, by the way, fuck you to all you malcontented fratboys who down arrowed me on my last post...

Sun, 05/19/2013 - 18:39 | 3578477 greatbeard
greatbeard's picture

>> instead of canning

Thanks bro, I'll look into that.  I don't just can, I blanch/vaccu pack and freeze and I dry it.  On occasion I'll even eat the veggies fresh. 

The fermented thing brings up visions of tempeh.  I love the stuff, but it don't love me.  The first time I ate it I felt queezy but figured it was just my imagination.  Ditto the second time.  The third time I got hammered.  I had just bought my first remote shack and was living in my RV trying to make the place liveable.   This place was really remote and a bit spookie for me, a life long city slicker.  Nobody had lived in it for five years, it was gutted with an old original cracker house that was gradually giving way to the termites.  There were numerous country folks style dumps in the woods, plus the cracker house was waist deep in years of refuse.  The weeds were about 4' deep on the way in.  I mean this place would give you the heebie jeebies, but it was an adventure.   Anyway, I don't do the puking thing very well.  I have to be really really sick to pull it off.  But here I was, 3:00 AM, in the middle of nowhere, puking my guts out rolling in the weeds.  I didn't figure out until a little while later just how safe this place was, but from the looks of it someone could come out and cut yer throat and then move on.

Long story I know, but fermented vegetable brings that all back.  Live is an adventure, if you live it right. 

And pay junks no mind.

Sun, 05/19/2013 - 17:42 | 3578365 Magnum
Magnum's picture

I've got a similar setup.  Cows are nice.  People love grass fed beef, so you can sell it I think.  Natural beef is really healthy.  I don't care much for goats but that's just me.

Sun, 05/19/2013 - 22:01 | 3579112 toadold
toadold's picture

Out in sheep country they've been using Llamas to protect flocks.  A llama will do a major hat dance on a coyote that threatens its flock. I don't know if anybody has tried it with goats.  To me sheep are just too high maintenance to deal with. Depending on what kind of climate and terrain you have of course the average acreage minimum for growing cattle is about 60 acres.  When you get out into the dry lands you have to start figuring head per square mile. If you could afford to purchase some Wagu beef stock you might get away with a micro-ranch  if you are close enough to a market that will pay the premium you'd need for it. Rabbits are too short of of fat and vitamins unless you eat the organ meats and brains. If the market for fur ever comes back it might be worth it. One part timer said what he needed was a rabbit that could lay eggs or a furry chicken. 

Sun, 05/19/2013 - 17:37 | 3578357 QQQBall
QQQBall's picture

78 plants will be a bumper crop of tomatos.  We did that when I was married (like 30-40 tomoato plants)  and my ex made spaghetti sauce, chilequiles, enchiladas, chili, mole, and on and on... and best of all - TASTES GREAT

Sun, 05/19/2013 - 18:51 | 3578517 greatbeard
greatbeard's picture

>> 78 plants will be a bumper crop of tomatos.

Yeah, I know, I've way overdone it.  But I have the time and the land and the desire.  If you love tomatoes there's a great gardening group with a focus on tomatoes, tomatoville.com. 

I initially started out with a row of Romas (18 plants) and a row of Rutgers for making sauce.  Then I added a row of Atkinsons.  Then I was at the farmers market and bought an assorted variety pack of heirlooms.  Unfortunately my propagation was wildly sucessful so I ended up with another 24 plants and just didn't have the heart to not plant them.  I'm thinking everybody gets "Greatbeard's Sun Dried Tomatoes" for Christmas this year.  Nice thing about dried stuff is the shipping is cheap.

Sun, 05/19/2013 - 16:48 | 3578298 the grateful un...
the grateful unemployed's picture

who knew the homeownership society meant shares of a REIT ETF in your 401K, which you borrow against just like a home equity line of credit (ATM)?

Sun, 05/19/2013 - 16:54 | 3578304 Peter Pan
Peter Pan's picture

What a sick society we have become. The only redeeming feature might be young people but even for them I fear given the crappy education, the crappy job prospects and the crappy political system they are inheriting.

Sun, 05/19/2013 - 17:35 | 3578353 FreeMktFisherMN
FreeMktFisherMN's picture

many of them willfully asked for this. They vote for marxists and believe in all the do-gooder and PC and social justice garbage. Many have no concept of or morality to recognize the 'un'-intended consequences of what they promulgate. 

Sun, 05/19/2013 - 16:58 | 3578309 Magnum
Magnum's picture

I paid $300k cash on a duplex post bubble pop, it's been occupied full time, and considering various benefits I am getting about 8% return on my money.  Two years ago it looked like I made a bad buy because had I sold it the price would be quite a bit lower than $300k.  However, home prices especially for a property like the one I bought, they are improving.  If at some point it can be assessed at $400k (not too far in the future) I will probably take a $100k loan and invest that money or use it for some extended holiday travels.  So yeah RE is not a bad return.  I would like to buy more but my wife is not in favor of it.

Sun, 05/19/2013 - 17:06 | 3578320 Yen Cross
Yen Cross's picture

 Deuce Bigalow #3

Sun, 05/19/2013 - 18:07 | 3578383 Kasperfx
Kasperfx's picture

improving for one reason Government intervention ! better kiss your wife as she's going to save you from the train wreck in RE to come soon. if it's not organic be very very carefully as the intervention has given sheeple a false sense of stability.. remember you can't fool mother nature and neither can the fed/gov

Sun, 05/19/2013 - 18:18 | 3578402 Magnum
Magnum's picture

KASPER -- I think RE is a terrible investment if one borrows heavily to buy, but with cash, banks pay less than .2% this is an INSULT and an indication of a poorly-managed economy.  So no arguments there.  But if one has saved $300k what do you suggest is a good place to park it?  Don't say PMs I had my bases covered there before it got lost tragically in a boating accident.  

A $300k duplex gets us about $2k per month in income.  There is no debt.  What kind of "train wreck" do you speak of that will ruin my investment?  We have decent tenants and it's a great building to own.  If there is some mad wreck I can move into half if it myself and rent the other half.  The only thing I don't care for is the neighborhood, it's getting worse each year with more crime, and there are not many WHITE PEOPLE therefore what do you think that means in terms of well-swept sidewalks, clean porches, mowed lawns?  Call me a racist then.

Lately I want to buy another house with 20% down and financing the rest but my wife says it's not a good idea so we are sitting this out for now.  I don't have enough cash to buy another outright but if I did, I would!

Sun, 05/19/2013 - 17:05 | 3578318 Seasmoke
Seasmoke's picture

I am working on buying 20 houses. No money down. Renting for below rent rates.

You can figure out the rest of the plan.

Sun, 05/19/2013 - 17:26 | 3578344 dark pools of soros
dark pools of soros's picture

do you work for Amazon?

Sun, 05/19/2013 - 17:55 | 3578373 CrashisOptimistic
CrashisOptimistic's picture

You didn't understand.  He's going to collect 20 rents for 6 mos while he's paying nothing on the mortgages.

20 X 1500 X 6 =180K

Then walk with that cash and let the bank have them back, tenants and all.

 

Pretty hard to get rentals for 0 down tho.

Sun, 05/19/2013 - 17:07 | 3578322 debtor of last ...
debtor of last resort's picture

Just tell the lunatic his straitjacket is his new pyama's. He'll sleep like a baby.

Sun, 05/19/2013 - 17:16 | 3578329 Yen Cross
Yen Cross's picture

  Back at "RealityRanch". http://www.fxstreet.com/rates-charts/currency-rates/   Got my ISP/NSA?   

Sun, 05/19/2013 - 17:19 | 3578333 toadold
toadold's picture

It is amazing that their are still "figures of authority" selling the idea that since middle class people with good credit own houses then getting lower class people with bad credit into a house will magically transform them into middle class people with good credit. Good gravy the the whole 2007 bubble pop of bad loan housing derivatives should have put paid to that idea.  

Incompetance and stupidity are quite apparent but after 6 years of futile efforts you have to think malice and theft are behind the continued efforts to sponser those who can least afford it and will be the most damaged in they are put into a house they will loose if they loose a months work and go into a debt cascade. 

I have the feeling the buzzards are circling over the REIT's just waitning to swoop down on them.

Sun, 05/19/2013 - 18:12 | 3578388 Umh
Umh's picture

Barne Franke and associates.

Sun, 05/19/2013 - 17:21 | 3578335 Headbanger
Headbanger's picture

Normal is as normal does.

Sun, 05/19/2013 - 17:25 | 3578339 dark pools of soros
dark pools of soros's picture

I bought my house early '09 after the crash.. got the $8,000 credit check, and hardly put anything down..  refi'ed the next year to 4.25 and can claim interest, pmi & property taxes for a nice return

don't hate the player, hate the game

 and I just heard that PMI's now on FHA are really long..  some the life of the loan.  Mine is over in 2 years i think

 

 

Sun, 05/19/2013 - 17:26 | 3578343 MFLTucson
MFLTucson's picture

Good article but, stay away from the FICO scores because the credit agencies are bullshit, pure and simple.  That whole situation is an outrages fraud!

Sun, 05/19/2013 - 17:29 | 3578349 Dieselclam
Dieselclam's picture

Currently moving out of the house I sold last August to pay bills due to 2 1/2 years unemployed. There is no work within 25 miles at least and the only rental I can find is $850/month and would be immediately condemned if it were within ANY city limits, including detroit. Filthy beyond words, faulty wiring hanging everywhere including ground rods thrown on the ground, not even tyvek on the weathered 2 story OSB exterior, notoriously "thefty" neighborhood, next door literally looks like the aftermath of a large explosion followed by semi-bulldozed landfill, etc. My wife says she would rather live in our beat up cargo trailer. Really cheerful times we live in.

Sun, 05/19/2013 - 17:41 | 3578364 FreeMktFisherMN
FreeMktFisherMN's picture

as many freeloaders just 'walk away' from their mortgages and squat in 'their' houses for years without any payment. As Peter Pan said above, what a sick society this has become. The reality check cannot come soon enough. You're not alone, Dieselclam. God will have His vengeance for what has been going on and the lack of repenting. The meek shall inherit the Earth. Just trust in Him and I wish you and your wife well. 

Sun, 05/19/2013 - 19:00 | 3578560 Dieselclam
Dieselclam's picture

FreeMktFisherMN- "He's got the whole world, in his hands, he's got the whole world in his hands." Nothing to doubt- his faithfulness is as consistent as the morning sun and the air we breathe. We'll keep plodding along the path he provides. Thanks for the kind words.

Freddie- jobs in my field of expertise are 2,700 miles from our neighborhood. I kinda burned those bridges when I told the Federal DOT that the 787 had issues that should ground it...a couple years ago. Well whadda ya know, looks like I was right, huh? It doesn't pay to be a whistle blower, but I sure sleep poorly.

Sun, 05/19/2013 - 19:18 | 3578618 Freddie
Freddie's picture

Hang in there.   It may not be a lot of consolation but maybe you saved someone's life with the 787.

Sun, 05/19/2013 - 19:53 | 3578725 Max Cynical
Max Cynical's picture

Me doesn't think the 787 battery issue is over...they're using batteries that have an inherently unstable chemistry and the proposed "fixes" are really bandaids. I won't be flying on a 787 anytime soon.

Sun, 05/19/2013 - 17:55 | 3578376 Freddie
Freddie's picture

Try to move to some place where the chances for work are better if possible.

Sun, 05/19/2013 - 17:33 | 3578351 q99x2
q99x2's picture

Cool then when I go to get funding for my masters degree I'm buying a house.

Sun, 05/19/2013 - 17:42 | 3578366 QQQBall
QQQBall's picture

My free advice is buy small MFD; live in one and rent the others. I have NEVER bought a SFR to live in, only as investments. 4 DU and under and you get 30/30 FR mortgage.  Let the tenants pay it off for you and take the IR deduction, depreciation and write-offs everytime you swing by HD or Lowes

Sun, 05/19/2013 - 17:43 | 3578367 Hannibal
Hannibal's picture

"The new normal?".....FUCK HOME OWNERSHIP!

Sun, 05/19/2013 - 18:13 | 3578390 observer007
observer007's picture

Bilderberg becomes Google-Berg

 

The secretive Bilderberg Group is currently undergoing a major transformation that will see it and other high profile networks merge under the banner of Google as the elite accelerates its plan to consolidate its technocratic agenda.

Real alternative News:

http://homment.com/googleberg

 

Sun, 05/19/2013 - 18:13 | 3578391 Bastiat
Bastiat's picture

What's normal?  Silver getting flash crashed around 10% a few minutes ago.

 

Sun, 05/19/2013 - 18:31 | 3578448 blindman
blindman's picture

what is normal? central planning with a blood money system
that is based on nothing more than the power to control
creation and distribution of credit money advantages, disadvantages,
surpluses and shortages with related property seizure rights.
.
normal is climbing up to the top of the base
and then jumping off with a well set up parachute.
abnormal is climbing up and jumping without a functioning
parachute.
when it is clear there are too few parachutes it would
be sensible that less people jump. the central planners
don't see it like that, they need more to jump ,
even without a parachute to sustain their own dopamine high.
they didn't name it "dopamine" for nothing.
.
Interview #5 Celestine Akpobari from Ogoniland Niger Delta
http://maxkeiser.com/2013/05/19/interview-5-celestine-akpobari-from-ogon...
.
re.. dopamine and base jumping.
http://www.youtube.com/watch?v=0mlOiHutxlc
.
the new normal? no parachute, what a rush!

Sun, 05/19/2013 - 18:34 | 3578461 Going Loco
Going Loco's picture

"Silver getting flash crashed around 10% a few minutes ago"

More like 6% on my screen. Gold down 1%. I had a feeling it would be worth sitting up to watch the Far East fiddle on Kitco's screens. Silver not yet down 10% but it looks absolutely bidless.

I am NOT a conspiracy nut and I saw the decline in gold and silver coming but I just cannot square the decline in precious metals with the ramp in high-end real estate in London and NY. It just does not make sense... or does it?

My prediction for gold is [(1923-681)/2]+681 = 1302 within 2 weeks.

Sun, 05/19/2013 - 18:56 | 3578540 blindman
blindman's picture

price suppression, if it be, will end when the physical
is distributed the way the manipulators of price want.
it is a buying opportunity. that the dysfunctional
futures market pricing mechanism is fouled and failing
serves buyers right now, strong hands I guess they call it?
.
19 May 2013
Sunday Afternoon Listening - These Are the Words I Would Say
http://jessescrossroadscafe.blogspot.com/
.
I wonder what the taxes are on that high end real estate
and how the owners expect to pay those taxes? more dopamine
will be needed.

Sun, 05/19/2013 - 18:40 | 3578480 GMadScientist
GMadScientist's picture

When they said "Ownership Society" you thought they meant you?

Sun, 05/19/2013 - 19:02 | 3578565 blindman
blindman's picture

exactly, the banks own you.

Sun, 05/19/2013 - 18:49 | 3578508 orangegeek
orangegeek's picture

Search ZH using the words foreclosure inventory.

 

There's a Smithsonian of "the housing market is fucked" articles primarily because consumers are broke, can't get financing and our beloved banks are taking inventory off the street by hanging them in foreclosure process.

 

What a gongshow!!!

 

S&P500 up 15% so far in 2013.  Let's see if we can squeeze another 2% this week, shall we.

 

Hey Ben, hey Barry - more shit storm please.

Sun, 05/19/2013 - 19:21 | 3578622 lynnybee
lynnybee's picture

it's just all so sad, so not normal.    normal used to be silver coins in the pocket & 15 year mortgages paid off in 10 years.  normal was going to work everyday, working hard + being happy to work for overtime & saving for future family-oriented plans.   normal was building a small empire that could be passed on to your children in the form of an inheritance, something to strive for & be proud of.   i remember that normal, my parents lived that normal (honest) life.     so sad, so sad, so outrageously wrong what is today's normal.   today's normal is destroying our precious young people & harming our dear elderly population.   (s.o.b. bankers ! )

Sun, 05/19/2013 - 19:53 | 3578730 besnook
besnook's picture

this is shrub's ownership society. the society is owned by the banksters. you are the new share croppers. you owe your life to the comapany store. welcome to 21st century feudalism, wireless 4g in hd.

Sun, 05/19/2013 - 22:57 | 3579256 glenlloyd
glenlloyd's picture

Fed policy in support of housing was not just for the sake of reflating that 'good times' bubble.

If prices fell then tax coffers would suffer as well as new lower sale values established new assessments. Neighboring properties would argue for lower assessments based on the recent sale and the downward spiral continues.

If you look at the online RE sites that list sales prices for properties you can pick out the foreclosure cash purchases easy, the sales prices are very low relative to other properties on regular sale, and although they're often lacking in some ways it hints at what housing is worth when the credit (mortgage) is taken out of the equation.

Excessive credit causes inflation in everything...most new cars are worthless unless you lend someone the money to buy it. People have blown it all...and then some.

Mon, 05/20/2013 - 02:14 | 3579493 knowshitsurelock
knowshitsurelock's picture

And who are all these investors buying up all these houses in depressed markets, like Las Vegas and Phoenix, going to sell or rent to?

I thought investors were in the business of making money, not becoming bagholders.

Mon, 05/20/2013 - 02:23 | 3579505 Debugas
Debugas's picture

for me normal house price is when i can afford to repay mortage in 5 years on a locked fixed interest rate. Yeah that may involve 50%+ downpayment right away and that is ok with me

Mon, 05/20/2013 - 13:53 | 3581023 mh505
mh505's picture

Clearly, what is needed here is the "Economy Doctor"  ::))

http://esocap.com/uploads/files/EconomyDoctor.pdf

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