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Existing Home Sales Plunge At Fastest Pace In 15 Month As Affordability Drops To 5 Year Low
Thanks to a considerable downward revision of the magical NAR numbers, the existing home sales MoM 'beat' expectations for September but the two-month average shows the largest drop in sales since June 2012. From the "cylical peak" in July, of course extrapolated by any and all apologists as confirming the voyage to the moon, it seems, just as we noted, that "affordability" - long shunned by the bulls (because, like you know, interest rates are still low compare to the 1970s...) - has collapsed to five-year lows; worse, in fact, than we expected. With 33% of all transactions cash, it is little surprise that affordability has fallen to a five-year low as home price increases easily outpaced income growth.
From the NAR statement:
Affordability has fallen to a five-year low as home price increases easily outpaced income growth
...
Expected rising mortgage interest rates will further lower affordability in upcoming months. Next month we may see some delays associated with the government shutdown.”
It also means that a buyer who could previously afford a $506K house with a $2,000 monthly budget at an interest rate of 2.5% will be able to afford only $316K if and when the average 30 Year fixed hits 6.5%: a 40% drop in affordability based on just a 4% increase in interest rates!
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Thank you "mark to fantasy".
yes, but:
on.ft.com/1azIVz0
What? The cash buyers run out of cash?
That's the beauty of Bubble 2.0 for the banks. They made tons on interest and fees during the first Bubble, but they were stuck with the "assets" when things folded. Now Bernanke's Super Mega Credit Bubble Ultra edition has all the properties being bought for cash in a mania/panic and what few mortgages exist going directlt to FHQA/Fannie/Freddie! Banks get to unload the assets at inflated prices to clear their balance sheets AND the REIC still get's those sweet commisions!
The only losers will be the REITs that bust and the foreign oligarchs wishing they bought gold instead of a pile of sticks.
Fix the error..I think you meant to say 4.5%...."an interest rate of 2.5% will be able to afford only $316K"
Bubbles in farmland?!? Shocker...Iowa farmland up over 400% over last decade.
http://www.marketwatch.com/story/farmland-bubble-10-year-rise-raises-red-flags-2013-10-21
"From the "cylical peak" in July, of course extrapolated by any and all apologists as confirming the voyage to the moon, it seems, just as we noted, that "affordability" - long shunned by the bulls (because, like you know, interest rates are still low compare to the 1970s...) - has collapsed to five-year lows"
Damn you Asian Durden
BooYah, Bitchez.
We should like raise the minimum wage to like you know $40 per hour and everything would be fixed
The sheeple approve!
Hammer meet nail - Average Obamabot theory nailed.
How about $1400 per hour? No need stopping at $40, that wouldn't generate enough votes.
With Seimans firing 15,000, Merck Firing over 8,500 (after about 7,500 previously) and on and on...it's amazing anyone is left who can buy [or wants to buy] and overpriced Bubble House...even with near zero down.
Remember, there's rising property taxes [to pay for that shiny new city hall bldg and enhanced school security], steep HOA fees, maintenance, soaring insurance costs, and so on.
Oh yeah, and there soaring health insurance costs....
Somethings got to give....and we may be beginning to see it this Fall/Winter.
ok, I have a not so savvy question. A certain bank's stock price in Portugal has gone to zero cents today (0.009 to be price) - is this insolvency?
anyone? thanks.
Depends on their books, but getting hammered like that is either a smackdown or the investers know whats on the books and don't like it one bit.
this bank was bailed out in January of this year. Bad sign, right?
thats how you know comapanies are strong....when their stock is worthless...buy it all...how can you go wrong....
Here's a not so savvy answer. Stock price and solvency aren't directly linked. Insolvency means an inability to meet financial obligations. Now, being nearly worthless as a company may imply insolvency, but it does not necessarily equate to insolvency. If I have butchered this, someone more savvy will step up. Have a look at this:
http://www.investopedia.com/terms/i/insolvency.asp
I live in a hotbed of the latest real estate bubble here in Southern Cal, and I have noticed sales slowing down quite a bit.
The asking prices here are even higher than the last bubble in 2005.
I fully expect Janet Yellen to print even more wallpaper currency in order to "fix" things.
market it as an income producing asset. in other words "buy this house and you can sell the electricity produced by it back to the State for 500 bucks a month." that's one way to move the "housing product."
I suppose I will hear this spun as 'a lot of room for upside'. And hence... bullish.
throw in the all electric car for free.
Article misses the macro-economic repercussions. The commercial banks (CBs) are credit creators. The non-banks (NBs), or shadow banks, are credit transmitters. Lending & investing by the CBs is inflationary. But lending & investing by the NBs is non-inflationary - ceteris paribus (matching voluntary monetary savings with real & financial investment). Viz., for those accounting aficionados, with respect to the commercial banking system, the whole is not the sum of its parts.
Commercial bank lending/investing expands both the volume & the velocity of CB system bank deposits (where S does not equal I). Whereas lending/investing by the non-banks increases the velocity of CB system bank deposits (matching: S = I).
Fractional reserve banking, the modus operandi of commercial banking (or the creation of new money & credit), is a function of the velocity of the banking system's deposits (not the volume of their deposit liabilities).
Never are the CBs intermediaries (conduits between savers & borrowers), in the savings-investment process. From the context of the system, CBs, as contrasted to financial intermediaries: never loan out, & can’t loan out, existing deposits (saved or otherwise) including existing transaction deposits, or time/savings deposits, or the owner’s equity, or any liability item (the CBs collectively, simply pay for what they already own).
The lending capacity of the CBs is determined by domestic monetary policy objectives, & not by the savings practices of the public. The CBs could continue to lend even if the non-bank public ceased to save altogether. I.e., with very minor exceptions, the source of all time/savings deposits to the CB system is other CB system held customer bank deposits (directly via the CB’s undivided profits accounts, or indirectly, albeit temporarily, via the currency route).
Whether the non-bank public saves, dis-saves, or chooses to hold its voluntary savings in the CBs, or to invest them directly, or indirectly, through the NBs, etc., (viz., the use or non-use of savings), does not determine the lending capacity of the CBs.
Monetary savings are not put to work (do not change ownership,) until they are spent or invested. The non-banks (e.g., investment banks - but not bank holding companies), find investment outlets for the voluntary savings which are transferred thru them by their owners. With the non-banks, investment follows savings. Savings transferred thru these intermediaries activates (finds an outlet for), existing money or voluntary savings.
I.e., monetary savings are impounded within the CBs (they are lost to any type of investment or expenditure), & unspent savings represent a leakage (non-use), in Keynesian National Income Accounting.
If savings do not exchange hands (are a leakage), they exert a dampening, contractionary, or net deflationary impact on prices, production, employment, incomes, & in consumer & business confidence.
Allowing the CBs to buy their liquidity (liability management), as opposed to following the old fashioned practice of storing their liquidity, redistributes the excess reserves (& the money stock), within the CB system (but does not alter their total volume – unless currency is hoarded).
Net changes in Reserve Bank Credit since the Treasury-Reserve Accord of March 1951 are determined by monetary policy objectives. Paying interest to capture deposits (or giving away toasters), is virtually tantamount to redlining or redistricting (monopolistic price practices by the oligarchs). Laissez faire economics obviously does not apply (e.g., Greenspan’s signature TBTF endorsement).
Bankrupt you Bernanke’s “IOeR policy” allows the CBs to out bid the NBs (the true intermediaries between savers & borrowers), for both loan-funds & collateral. I.e., virtually all the FRB-NY's LSAPs purchases (QE operations), were transacted with the CBs (as evidenced by excess reserves growing pari passu with POMOs - & not the money stock – i.e, required reserves did not expand commensurately).
With all the FRB-NY’s “trading desk” counterparties, or primary dealers (PDs), being CBs; this should come as no surprise. Thus, the CBs (because of the .25% remuneration rate exceeded all money market rates), forced a contraction in the size of the NBs, & created liquidity problems in the process, by outbidding the NBs for the non-bank public’s voluntary savings (wholesale money-market funding is differentiated by it’s position on the short-end segment of the yield curve), in the borrow-short to lend-long business-model. I.e., Bankrupt you Bernanke destroyed NB lending/investing (destroyed the financial intermediaries. I.e., the CBs are paid not to lend/invest by our Federal Gov’t (read: the public’s purse).
This process is called “dis-intermediation” (an economist’s word for going broke). The reverse of this operation cannot exist. Transferring saved deposits through the NBs cannot reduce the size of the CB system. Deposits are simply transferred from the saver, to the NB, to the borrower, etc.
I.e., CB liabilities are simultaneously monetarily liquid for its customers as a whole (principally because the liquidity of the CBs (esp. during the Great Recession) was backstopped by several credit & liquidity programs (specialized discount windows); & partly because of the circuit velocity of deposits within the commercial banking (payment & settlement), system.
Bankrupt you Bernanke’s “IOeR policy” induced dis-intermediation within the NBs (where the size of the NBs have shrunk (c. -$6 billion), but the size of the commercial banking (CB) system remains unaffected (c. + $3.6 billion)). I.e., the FOMC must offset the decline in lending/investing by the NBs (follow an easier monetary policy), by forcing the CBs to invest in Treasury’s (as opposed to perhaps hedging with stop-loss credit default swap insurance).
This is exactly the same paradigm as the 1966 S&L crisis where the CBs out bid the thrifts (i.e., where an increase in Reg Q ceilings exclusively for the benefit of the CBs was actually a tax on the CB system’s earnings - because the NBs had no ceilings whatsoever prior to 1966, i.e., the NBs were unregulated – not deregulated)).
The CBs pay for what they already own (interest on their customer's savings). All studies show that the lower the ratio of time (savings deposits) to demand deposits (within the member CB system), the higher the ratio of profits to the net worth of banks, irrespective of the size of the bank.
Keynes’ perversion (“optical illusion), is that savings flowing through the NBs never leaves the CB system (as anybody who has applied double-entry bookkeeping on a national scale knows). The implicit & false idea is that the NBs compete with the CBs for savings. The NBs are the CB's customers.
To wit: (1) “These measures should help the banking sector attract liquid funds in competition with non-bank institutions & direct market investments by businesses” [sic] - Testimony of Treasury in response to the Financial Services Regulatory Relief Act of 2006 (the Emergency Economic Stabilization Act of 2008 accelerated these provisions).
It is the NB's outflow of funds, or negative cash flow, which forced the Fed to intervene (via $700b TARP, a tsunami of stock purchases despite the 1929 precedent, the multiple expansion of the FRB’s balance sheet, zero maturity money, the Faustian put’s squared of interest rate transmission targets, the $6t conservatureship of Freddie Mac & Fannie Mae, ZIRP,& food stamps, disability claims, & indeed the welfare state, along with enabling the “faux prosperity” of FIRE, investment bank casinos, AIG’s zero sum game, etc.), & thus counteract the recessionary current in the economy. I.e., the welfare of the CBs is dependent upon the welfare of the NBs (where S=I).
Whereas dis-intermediation (not de-leveraging per se), for the CBs has not been predicated on interest rates ever since 1933, dis-intermediation for the NBs is almost exclusively dependent on the flow of voluntary savings placed at their disposal. The 1990 S&L crisis was precipitated largely because deposit ceilings were deregulated before the NBs longer term assets (read mortgages), could be restructured (i.e., on top of the foray of excessive housing speculation). See also: Barron’s May 22, 1978 “One Crunch Too Many”.
And any time the Fed follows a contractionary monetary policy [where the rate-of-change (roc), in money flows (MVt), is less than 2-3 percent relative to the roc in real-output], output can’t be sold, hiring is curtailed, & jobs will be lost (i.e., there is not sufficient upward & downward price flexibility within our domestic economy).
E.g., (2) both Vasco Curdia & Michael Woodford claim the CBs are intermediaries between savers & borrowers (our impacted indoctrination). From a system’s viewpoint, when the commercial banks (DFIs), as contrasted to financial intermediaries (NBs), grant loans to, or purchase securities from, the non-bank public, they acquire title to earning assets by initially the creation of an equal volume of new money- demand deposits - somewhere in the banking system. I.e., commercial bank deposits are the result of lending, - & not the other way around.
I.e., the Friedman rule (http://www.nber.org/papers/w16208.pdf), & Keynes’s liquidity preference curve (demand for money) are both false doctrines.
See: Dr. Leland James Pritchard (MS, statistics - Syracuse, Ph.D, Economics - Chicago, 1933) described stagflation 1958 Money & Banking Houghton Mifflin,
“Profit or Loss from Time Deposit Banking” -- Banking & Monetary Studies, Comptroller of the Currency, United States Treasury Department, Irwin, 1963, pp. 369-386.
Seriously...your comment is like 20X longer than the entire article? Go start your own financial site with your cut and paste stuff.
What? Average Joe doesnt have 25% down-payment for a $800K shack somewhere in California?
Does anybody track where the source of the down payments come from? I'm pretty sure a good chunk of those DP are coming from 30-day withdrawals against a 401K, etc.. After they close, they take out financing and replace the 401k funds. Just curious
no, but the banks, chinks and hedgies have 100% down...
No one ever went broke/lost their asses following hedge fund OPM or Chinese "investors."
Slam Dunk investment, bitchez. Dick Fuld & Alan Greenspan approve.
-1 for posting some BS nobody here will waste their time reading. WTF?
Whatever it's copied & pasted from- it doesn't use complete sentences and represents a view of banking that even BB and Alan Greenshit would call terribly "dated", and that's if you accept banker b.s. at face value...
One idiot here did waste his time reading it.
All you needed to say was "Restore Glass-Steagall".
Or Detroit.
or The Bill of Rights
Well tell us how your paper did in your Econ 101 class?
Really if your job prospects suck why would you want to commit to 30 years of bondage. Affordability my ass, housing IS and always HAS been a secondary economic metric. If you don't have a good job with rising prospects for advancement, so that you can keep up with housing inflation, why would you do anything but rent. TPTB want you to buy a house so they can leach off your income through both mortgage and taxation. Banksters and politicians burn the lot of them for witchcraft for all I care.
>> want you to buy a house so they can leach off your income through both mortgage and taxation.
When you rent you are servicing a mortgage, just not your own. And, as far as taxation, you generally are paying taxes at a higher rate than a homeowner resident. If done wisely, buying a house is a no brainer. I bought my place last year for $58K and since put $30K into renovations. So I've got about $90K invested. Similar homes rent for $1,000 to $1,200 in my area, without the renovations and upper end appliances. Taxes run me $700 a year, so my monthly nut is about $70. That gives me a return of close to 15% a year, plus I get the appreciation, if there is any. Again, if done wisely, there is almost always appreciation. In just a little over a year I conservatively figure I've accumulated $40K in sweat equity.
To each his own, but for me owning has been much better. Of course, I'm a guy that can lose a bundle on stocks in a flash, so we've all got our strengths.
"If done wisely, buying a house is a no brainer."
That's entirely dependent upon the market where you're buying a home. Plus, also depending upon that market, you are stuck in one place if you can't sell the home resulting in much lower mobility than renting.
"I bought my place last year for $58K and since put $30K into renovations."
You couldn't buy a trailer where I live for that little.
>> You couldn't buy a trailer where I live for that little.
It's not easy to do here, either. But, like I've said, with a little due diligence, buying is a much better option than renting. Do you really think landlords buy places to take a loss so your monthly nut it less? No, landlords buy properties ot make a profit. A profit that adds to the renters monthly nut.
It matters not what the property values are in your area, if done wisely, buying trumps renting as far as monthly expense and accrual of assets. Certainly mobility suffers but that wasn't the subject.
Over time your expenses will NOT be $70/month and you will have times of vacancy and collection losses (evitions),,,roughing 6x to 7,5x PGI which is OK. you are it it at
>> your expenses will NOT be $70/month and you will have times of vacancy and collection losses
Re-read it with comprehension in mind. If there is a vacancy my estate can deal with the consequences. Same for collections, I live here.
I was comparing the cost of resident/ownership vs cost of renting.
the number of armchair analysts that know everything but reality is staggering.
FACT: there is no way you can come out ahead RENTING. If you rent, you are paying RETAIL for your housing. You are paying the landlord's mortgage, his taxes, his everything PLUS A PROFIT. I put my money where my mouth is and I'm making passive income every month while armchair analysts blather.
There is actually one major mistake you can make buying a house , and that is paying too much for it. If you can buy it and rent it out for a 15-20% cash on cash return, you are not making a mistake. Where else would you put your money- in the bank for 1%, or in the stock market where it could be cut in half the day BB announces no more printing. No thanks.
That's great if the numbers crunch and actually work. In lots of places across the country, they do not.
By renting you avoid an obligation and remain much more liquid and mobile which is a small cost compared to owning a house in a declining neighborhood where taxes are usually much much higher than $700 a year. In WNY you can bet on a few hundred a month to cover just the taxes on real estate. In the new normal being mobile and able to move where the work currently is will be worth the rental cost premium.
Today is a great day to kick a lying, cheating realtor in the balls.
Question: Isn't every day a great day to do that?
Answer: "There's never been a better time to kick a lying, cheating realtor in the balls!"
And their Title company that charges you $1,500 for copying a page, one phone call, and an email.
Squatters rights bitchez...
What happened to your long, rambling diatribes? I found them interesting, if difficult, to read. The new "three word comment" is much more fight club.
and title insurance
My sister is a realtor, buyer's agent. She is NOT financially savvy at all. She voted for Obama just cuz. I shake my head...I've tried to educate her, but she's nearly a total loss. I've tried to warn her about the coming top in real estate. "Save your money for a rainy day because rates will go up, houses will become unaffordable, people will stop buying", etc. She didn't learn her lesson when the bubble popped the first time 5 years ago, and she will be surprised when it happens again.
My point is: Not all realtors are lying, cheating...some are just as clueless as the sheep buying the houses.
lol..........i'm sure your sister is a sweet girl, actually most sisters are, but the fact that she is a "Real"ter, and the fact that shes been doing it for so long, really deserves maybe a soft kick in the balls, or even a 2 x 4 up side the head. (the previous statement made as humorous sarcasm for the dimwitted).
i had a similar conversation with a seasoned successful agent who kept repeating, you have to buy before rates go up. Even after i explained that their is an inverse relationship between price and interest rates. He looked at me like i had 2 heads
i was driving around yesterday for some open houses, i went to the first house for 650k...it was ok but not worth the asking price. 2 blocks away i was in another zip code and a similar house was priced for 950k, i started to ask the agent about an before i could say anything she said isn't this side like night and day from the other area....2 blocks....
Next on the Violence Channel: an all new episode of Ow! My balls.
Speaking of Idiocracy (a disturbingly accurate depiction of the stupification of the human race), at least President Comacho could kick ass.
Most realtors are brainwashed sheeple rather than liars and cheaters, IMO. My realtor has been telling all his clients to exit their real estate position since June. There are some good ones out there.
Prices on the low end market hear in SoCal have doubled. I've been in the market for the past couple years. I wanted to buy a house so I could grow my own food and be more self sustainable. 3 years ago you could buy a property out in the desert around Lancaster/Palmdale for $75,000, (3 bedroom, 2 bath). Now you're looking at $150,000+. Condos in Torrance were $150,000-$200,000, now they're $250,000-$300,000 (1bed, 1bath). It's not worth the prices in town, compared to renting, or the commute, out of town. I'll stay in my apartment.
"Here" and Fuck You Bernanke!
Why buy a house when you can rent a caravan from Carlyle?
We're all Gypsies now.
Private property is simply not fair. So now it's un-ownable unless you are part of the elite.
A popped bubble is hard to inflate.
I blame the sequester. Everything was humming along swimmingly until those damn dirty homo hating tea party people demanded a little bit of fiscal responsiblity. Damn racist terrorists! They only oppose Obama because he is half black!
i hear Ted Cruz's approval ratings are 90% in Texas.
>> Ted Cruz's approval ratings are 90% in Texas.
So were George Bush's.
And now ObaMao's approval rating is about the same as Bushs dismal 38% too which the media crowed about daily....I'm no supposrter of either of them, just pointing out the hypocrisy.
>> .I'm no supposrter of either of them,
Not that it makes any difference, but they both have a 0% approval rating from me. So will the next shitbag, who ever that happens to be.
the red and blues
are nothing but a ruse
They are over 100% right here in this room. Hope he doesn't crap out ala Herman Cain, David Petraues, or Michael Hastings. I imagine th effort to co-opt is feverish right now. Then they get ugly.
Unfortunately part of my own family thinks this way, it is fucking maddening. My wife's cousin is living large on the federal tit. Top notch health care, retirement, weeks of vacation, sabbaticals, educational stipends, multiple job choices, prestige, and little financial worry. This of course all provided by Uncle Sam.
Yet I had to listen last night how the sequester had been such a huge burden on him. I mean he had to take a trip because his office was shut down, what was he to do? I kid you not they were yammering on about what a victim this guy is because of the evil sequester.
The day may come when interest rates on home loans may reach zero as banks desperately try to get rid of houses they cannot sell just so they can avoid property taxes, repairs and vandalism.
The root cause of most of the ills is that nothing in society will gain traction without enough WELL PAYING jobs becoming available. Until then demographics will worsen and corporate profits will slide once cost cutting reaches its end point.
robots means fewer jobs which means central bank planning which means the .00001% become richer as SPX and housing prices in financial centers goes parabolic. This will continue until China ties the yuan to gold and replaces the dollar as the world's reserve currency.
Who would have thought you couldn't print jobs.
All of us except Bernanke.
Bernank knows damn good and well that 'QE' doesn't create jobs, all that is just smokescreen while they hollow out the USA corpse.
It's crazy how these articles bounce back and forth. This one, and the other this morning saying 10-12% MoM increases.
I guess it's bad news for landlords. I know my properties always do the opposite of what is in the news.
Who pays mortgages? Why should you pay when supply is constrained to prevent wage to income pricing.. Rates play very little effect after first year due to welfare housing subsidies. (yes housing bubble finance distorted market)... Insanity is doing the same thing twice..
The rich continue to consider things wonderful, I see gentrification proceeding on the old parts of Santa Monica that were more or less preserved in the 1980s by the People's Republic rules there.
Those $75k properties in Lancaster were highly distressed, they originally sold for $400,000. And you might still find them that cheap, go a little further into nowhere, like Hesperia.
the problem in that lancaster palmdale area, like las vegas is that land is still readily available. santa monica is another story, the wealth disparity gap is only going to acerbate the problem, why would a nuevo millionaire buy in LV? he wants prime land in SM, and the rich will use the various policies, zoning laws, and gentrification, to get what they want, and they dont want any more sand, which is abundant and cheap.
Cue Hitler Video: a house aint a home, its an investment, giggle giggle, forward by shoot my realtor, schtup me in the rear....
Tried to warn my nickel-and-diming neighbors back in April what was coming. They had a contract in hand for the modestly updated 25-year-old house they were trying to sell to a young couple with kids. Of course the inspection turned up dopey stuff for them to spend money on -- and they refused. House is still on the market, haven't dropped the price a penny. So in otherwords the effective price has only gone up.
llisten ducklings this is how economic policy works. 1) government wants to create jobs by subsidizing the new housing industry 2) bernanke lowers interest rates, which applies equally to all housing 3) in order to gain an advantage for new versus existing housing, they prop up asset values on existing homes, through their various monetary devices, juicing the stock market, and promoting the wealth effect. 4) joe average gets a higher bill from his insurance company, (wealth effect, used be called the housing refi ATM, but that bird has flown)
his cost to rebuild is inflated, but if he owns a mortgage he can't very well tell the insurance co to lower his coverage. bank won't allow it. 5) joe a. calls his real estate agent, says my house is insured for xxx, can i sell it for that, and buy something newer, (and cheaper) because there's a housing project on the edge of town. new home builders have economy of scale, and they can sell their product at a fair market price, and still make a profit. 6) joes re agent says you must be kidding, your house is really only worth half the insured value. you want to move it will be a wash probably. 7) government promotes infrastructure, new highways (leading to the outskirts of town) and redevelopment agencies, which provides capital for corporate franchises which follow these new home developments to exurbia. there is seldom any dough left over for fire, police, or schools, and so those lower home prices are laced with covenants, and higher taxes down the road. 8) once joe a. buys a new home, like a new car, the value goes down the moment he moves in. his new home becomes existing housing, and the squeeze starts all over again. in order to keep the buyers moving, the government creates a housing cash for clunkers program, this is usually done at the local level, where neighborhoods are declared blighted, then condemned by emminent domain and gentrified. when wall street gets involved you know the process is getting to the frothy stage. 9) smart buyers looking at that 25 year old house, consider the neighborhood, and consider this expensive home in need of repair, and wisely note that it may be headed for the government wrecking ball. they buy a new condo instead. 10) the media misleads the public by promoting all sorts of house fixing shows, existing homes are like stocks, you don't want to get stuck with that hot potato when the market dives.
FHA is the new Fannie, they'll subsidize low (Bernanke approved) interest rates. FHA needed a bailout recently. at the height of the 2008 crisis my son and his wife bought a home, with an FHA mortgage, they've since done a couple refis. the mortgage industry won't slow down housing, the problem is obamacare. if i clear $2000 a month without health insurance, and i now have to pay $500 that changes my mortgage payment. if the Rethugs want to stop Obamacare they should mandate that all mortgage applicants have ENOUGH healthcare to meet the mortgage payments in the event of illness, not just a high deductible policy which is only one step to bankruptcy and the state medicaid office. previously a loan orginator did not vette the applicants for hc insurance, just the usual homeowners policy which is usually rolled into the mortgage payment. now roll another policy in there, obamacare.
I am not certain you understand how insurance works.
when i am mandated to buy something i didn't have last month, i have less money to spend on other things this month, do you understand how a budget works?
The United States has lost its edge as a free and capitalistic safe haven. Yes granted we are very secure here, no doubt, however that is more because we are surrounded by two large countries and 2 very large oceans, geographically the rest of the world could go down and we would be fine. My Dad immigrated here 60 years ago and was looking for a country where faith and optimism was a realistic dream, now, i have told him Amerika is no longer that place and that the rules here work against the commoner and all the aspirations that one may have. This is not about affordable housing, this is far larger, this is about the breakdown of the very basic fabric of society. The United States promotes greed and power and individual success, it does not cultivate collaborative societal success, in fact it does the opposite, it shuns it. Now after 50 years of stealing from the future, the time has come where Amerika's decline accelerates and all the excess gets purged. I welcome it, I welcome new highs in the stock market, I welcome all the new tear downs in my city and the fact that there are more millionaires than ever before, why do I welcome it, because this type of acceleration means we are very close to change and the last gasp hope by the FED selling out and devaluing by $85bln a month is gigantic, in an economy of $16Trn GDP that amounts to nearly a monthly inflation rate of .05% monetary and an equal .05% deflation in the standard of living. So for all of us here who know the FED and our Government are as corrupt as all hell, take comfort in knowing their demise is upon us and a new beginning is coming. All I can say is GOLD will be the last man standing, fiat always fails and this time will be no different.
obama bailed out the auto industry, while bernanke bailed out housing, it was a real team effort, housing is bigger, and if bernanke had suggested obama should retire, it would have made more sense.
(because, like you know, interest rates are still low compare to the 1970s...)
This is the type of nonsense I hear from my parents and all of their friends (babyboomers) who continue to believe that home prices always go up (granted for most of their lives, this was true). The fact that a home that sells for $1,000,000 today was probably valued at $50,000-$100,000 in the 1970s, far outpacing comprehensive inflation, eludes them. The power of positive thinking.
according to some efficient market thinkers, the value metric on housing is fixed, if interest rates go up, housing prices will go down, value remains the same. there are other metrics too, labor, and land values, and of course the size of the adjusted monetary base. the anthema to any free market is price controls, which is what QE has accomplished. my parents are wealthier today than they were in the 70s because they are frugal as hell. nobody lives that way, even our neighbor who rents and lives at bankruptcies door, has a higher discretionary spending to income ratio. somehow people got fooled into thinking this is a bad thing.
Spending money can (liquidity) can be fixed with the click of a button as money can be created in an instant from thin air.
Unfortunately, the calories required to actually do anything can not be created in an instant from thin air.
interesting, i wonder how many fewer calories it takes a build a home today than it did twenty years ago. if you ever worked a 16 ounce hammer all day, as opposed to a nail gun
Come to Melbourne Australia where home prices have increased by 9% in 90 days......
the MSM tells us it is all ok.....
and the banks declare 'There is no bubble....
keep borrowing'.....
In higher price environments both Bankers and Realtors want you to buy more. It makes the parasites rich.
What kind of crap statement is this!!!
It also means that a buyer who could previously afford a $506K house with a $2,000 monthly budget at an interest rate of 2.5% will be able to afford only $316K if and when the average 30 Year fixed hits 6.5%: a 40% drop in affordability based on just a 4% increase in interest rates!
If rates go up, the cost of a house go DOWN!!! Plus, if you amortize over 30 yrs, you would find that a cheaper house with a higher rate is less overall than a more expensive home at a lower rate... does anyone really think that the forces of supply and demand and money, will not effect the overall price and therefore reduction of said house when rates go up? Higher rates are a GOOD thing... unless you already own a home...
Measurement of "affordability" is a bit of a red herring.
Plainly, if prospects cannot buy, prices will fall to produce more affordable supply. If prices don't fall, there is -- by definition -- adequate supply at established (actual sold) price levels.
If supply is being diminished by an influx of cash buyers, then surely it's accurate to say those cash buyers are not faced with an "affordability" challenge. If they persist, they will continue to support market prices. They will also have to commit infinite money for an infinite period of time to permanently affect that market. Else they will eventually be sated and markets will adjust to their declining participation.
When someone else can no longer finance (not "buy") a half-million-dollar home and must make do with one costing only a third of a million, it will surely reduce their standard of living, but only to the extent the previous higher standard of living was richly subsidized.
The concept of "living within your means" was the quaint norm before the banking system was turned into a casino by too much easy money. It has led to an assumption that living beyond your means is a de facto entitlement.
Come talk to me about this when interest rates actually hit 6.5%
There is no long term historical evidence to show inflation-adjusted house prices have typically fallen with rising interest rates:
http://www.calculatedriskblog.com/2013/06/house-prices-and-mortgage-rate...