Guest Post: The Warped, Distorted, Manipulated, Flipped, Housing Market

Tyler Durden's picture

Submitted by Jim Quinn of The Burning Platform blog,

The report from RealtyTrac last week proves beyond the shadow of a doubt the supposed housing market recovery is a complete and utter fraud. The corporate mainstream media did their usual spin job on the report by focusing on the fact foreclosure starts in 2013 were the lowest since 2007. Focusing on this meaningless fact (because the Too Big To Trust Wall Street Criminal Banks have delayed foreclosure starts as part of their conspiracy to keep prices rising) is supposed to convince the willfully ignorant masses the housing market is back to normal. It’s always the best time to buy!!!

The talking heads reading their teleprompter propaganda machines failed to mention that distressed sales (short sales & foreclosure sales) rose to a three year high of 16.2% of all U.S. residential sales, up from 14.5% in 2012. The economy has been supposedly advancing for over four years and sales of distressed homes are at 16.2% and rising. The bubble headed bimbos on CNBC don’t find it worthwhile to mention that prior to 2007 the normal percentage of distressed home sales was less than 3%. Yeah, we’re back to normal alright. We are five years into a supposed economic recovery and distressed home sales account for 1 out of 6 all home sales and is still 500% higher than normal.

The distressed sales aren’t even close to the biggest distortion of this housing market. The RealtyTrac report reveals that all-cash purchases accounted for 42% of all U.S. residential sales in December, up from 38% in November, and up from 18% in December 2012. Does that sound like a trend of normalization? There were five states where all-cash transactions accounted for more than 50% of sales in December – Florida (62.5%), Wisconsin (59.8%), Alabama (55.7%), South Carolina (51.3%), and Georgia (51.3%). In the pre-crisis days before 2008, all-cash sales NEVER accounted for more than 10% of all home sales. NEVER. This is all being driven by hot Wall Street money, aided and abetted by Bernanke, Yellen and the rest of the Fed fiat heroine dealers.

The fact that Wall Street is running this housing show is borne out by mortgage applications languishing at 1997 levels, down 65% from the 2005 highs. Real people in the real world need a mortgage to buy a house. If mortgage applications are near 16 year lows, how could home prices be ascending as if there is a frenzy of demand? Besides enriching the financial class, the contrived elevation of home prices and the QE induced mortgage rate increase has driven housing affordability into the ground. First time home buyers account for a record low percentage of 27%. In a normal non-manipulated market, first time home buyers account for 40% of home purchases.     

Price increases that rival the peak insanity of 2005 have been manufactured by Wall Street shysters and the Federal Reserve commissars. Doctor Housing Bubble sums up the absurdity of this housing market quite well.

The all-cash segment of buyers has typically been a tiny portion of the overall sales pool.  The fact that so many sales are occurring off the typical radar suggests that the Fed’s easy money eco-system has created a ravenous hunger with investors to buy up real estate.  Why?  The rentier class is chasing yields in every nook and cranny of the economy.  This helps to explain why we have such a twisted system where home ownership is declining yet prices are soaring.  What do we expect when nearly half of sales are going to investors?  The all-cash locusts flood is still ravaging the housing market.

The Case-Shiller Index has shown price surges over the last two years that exceed the Fed induced bubble years of 2001 through 2006. Does that make sense, when new homes sales are at levels seen during recessions over the last 50 years, and down 70% from the 2005 highs? Even with this Fed/Wall Street induced levitation, existing home sales are at 1999 levels and down 30% from the 2005 highs. So how and why have national home prices skyrocketed by 14% in 2013 after a 9% rise in 2012? Why are the former bubble markets of Las Vegas, Los Angeles, San Diego, San Francisco and Phoenix seeing 17% to 27% one year price increases? How could the bankrupt paradise of Detroit see a 17.3% increase in prices in one year? In a normal free market where individuals buy houses from other individuals, this does not happen. Over the long term, home prices rise at the rate of inflation. According to the government drones at the BLS, inflation has risen by 3.6% over the last two years. Looks like we have a slight disconnect.

This entire contrived episode has been designed to lure dupes back into the market, artificially inflate the insolvent balance sheets of the Too Big To Trust banks, enrich the feudal overlords who have easy preferred access to the Federal Reserve easy money, and provide the propaganda peddling legacy media with a recovery storyline to flog to the willingly ignorant public. The masses desperately want a feel good story they can believe. The ruling class has a thorough understanding of Edward Bernays’ propaganda techniques.

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of.”

Ben Bernanke increased his balance sheet by $3.2 trillion (450%) since 2008, and it had to go somewhere. We know it didn’t trickle down to the 99%. It was placed in the firm clutches of the .1% billionaire club. Bernanke sold his QE schemes as methods to benefit Main Street Americans, when his true purpose was to benefit Wall Street crooks. 30 year mortgage rates were 4.25% before QE2. 30 year mortgage rates were 3.5% before QE3. Today they stand at 4.5%. QE has not benefited average Americans. They are getting 0% on their savings, mortgage rates are higher, and their real household income has fallen and continues to fall.

But you’ll be happy to know banking profits are at all-time highs, Blackrock and the rest of the Wall Street Fed front running crowd have made a killing in the buy and rent ruse, and record bonuses are being doled out to the men who have wrecked our financial system in their gluttonous plundering of the once prosperous nation. Their felonious machinations have added zero value to society, while impoverishing a wide swath of America. Bernanke, Yellen and their owners have used their control of the currency, interest rates, and regulatory agencies to create the widest wealth disparity between the haves and have-nots in world history. Their depraved actions on behalf of the .1% will mean blood.


Just as Greenspan’s easy money policies of the early 2000’s created a housing bubble, inspiring low IQ wannabes to play flip that house, Bernanke’s mal-investment inducing QEternity has lured the get rich quick crowd back into the flipping business. The re-propagation of Flip that House shows on cable is like a rerun of the pre-bubble bursting frenzy in 2005. RealtyTrac’s recent report details the disturbing lemming like trend among greedy institutions and dullard brother-in-laws across the land.

  • 156,862 single family home flips — where a home is purchased and subsequently sold again within six months — in 2013, up 16% from 2012 and up 114% from 2011.
  • Homes flipped in 2013 accounted for 4.6% of all U.S. single family home sales during the year, up from 4.2% in 2012 and up from 2.6% in 2011     

The easy profits just keep flowing when the Fed provides the easy money. What could possibly go wrong? Home prices never fall. A brilliant Ivy League economist said so in 2005. The easy profits have been reaped by the early players. Wall Street hedge funds don’t really want to be landlords. Flippers need to make a quick buck or their creditors pull the plug. Home prices peaked in mid-2013. They have begun to fall. The 35% increase in mortgage rates has removed the punchbowl from the party. Anyone who claims housing will improve in 2014 is either talking their book, owns a boatload of vacant rental properties, teaches at Princeton, or gets paid to peddle the Wall Street propaganda on CNBC.


Reality will reassert itself in 2014, with lemmings, flippers, and hedgies getting slaughtered as the housing market comes back to earth with a thud. The continued tapering by the Fed will remove the marginal dollars used by Wall Street to fund this housing Ponzi. The Wall Street lemmings all follow the same MBA created financial models. They will all attempt to exit the market simultaneously when their models all say sell. If the economy improves, interest rates will rise and kill the housing market. If the economy tanks, the stock market will plunge, creating fear and killing the housing market. Once it becomes clear that prices have begun to fall, the flippers will panic and start dumping, exacerbating the price declines. This scenario never grows old.

Real household income continues to fall and nearly 25% of all households with a mortgage are still underwater. Young people are saddled with $1 trillion of government peddled student loan debt and will not be buying homes in the foreseeable future. Dodd-Frank rules will result in fewer people qualifying for mortgages. Mortgage insurance is increasing. Obamacare premium increases are sucking the life out of potential middle class home buyers. Retailers have begun firing thousands. The financial class had a good run. They were able to re-inflate the bubble for two years, but the third year won’t be a charm. In a normal housing market 85% of home sales would be between individuals using a mortgage, 10% would be all cash transactions, less than 5% of sales would be distressed, and 40% would be first time buyers. In this warped market only 40% of home sales are between individuals using a mortgage, 42% are all cash transactions, 16% are distressed sales, 5% are flipped, and only 27% are first time buyers. The return to normalcy will be painful for shysters, gamblers, believers, paid off economists, Larry Yun, and CNBC bimbos.

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Dr. Richard Head's picture

I was just looking at the Sheriff sales in my county, as my neighbor's house just sold at foreclosure auction (right back to the bank), and the number of listings are starting to look like 2009-2010 again.  Opps. 

Forcelosure stuffing - it's what's for recovery.

Winston Churchill's picture

The bank can bid upto the judgement amount without paying a

penny out of pocket.

Very rarely do properties come up worth more than the judgement figure.

Kasperfx's picture

BuT, But , But wait it's all due to the weather !! and "it's a great time to buy" "real estate will never  go down" and "get in now befor your priced out" o yea i forgot the newest one " Your home is now worth 1 million dollors" 

AllThatGlitters's picture

Come to Poppa you House.

Seasmoke's picture

I have seen price drops of 30,000+ since fall 2013 and still not a house has sold around town....the house of cards is coming down !!

CheapBastard's picture

Most new home builders in my area now have only 1 sales person in the office and on ly three days a week ... when in the "good ole' days" of zero down, no job, no  assets mortgages they used to have 2-3.

The collpase this time is slow but inevitable. It's all part of the unavoidable RE Cycle my Ivy League MBA professor/neighbor down the block tells me.

quartshort's picture

Export some of that my way, please!

Caveman93's picture

My Boss sent me and my other part-time co-worker home early today to help in the recovery.

He said, "Boys, you look tired. Take the rest of the day off if you want to." I shit you not.

We smiled and went. Doing our part to help keep our taxable income nice and low for Uncle Sugar! All 3 of us read and are well aware of the crap that is the USSA now. Today was another of what I predict to many more .."Going Galt" days to come for us. 

God bless.

Rainman's picture

I told the woman to knock off her chores early today too ...The benevolent Rainman nailed Seahawks + 2.5 !

kaiserhoff's picture

I remember passing on a deal in Williamsburg, Virginia in 1978.  The house was a two story colonial, great shape, asking $42,000.  Interest rate 7.25%  An equivalent house now in that area would go for 5-600,000. 

Shows how far things can fall once this gets rolling.

Hulk's picture

From the far out of left field arena:

Did you ever catch the educational series out of colonial Williamsburg ???

Here is the gunsmith show

Well worth the watch

We return you now to centerfield...

kaiserhoff's picture

Great stuff.

My kids preferred the farriers (horse shoes) and the ox cart rides.

Harbanger's picture

"Shows how far things can fall once this gets rolling."

That house is not going from 500k to 42k, xcept maybe in the new devalued currency, unless of course you believe in King dollar.  What really happens is the guy who has paper investments is left with nothing, the house gets revalued in the new money.

jeff montanye's picture

prime ocean front long island mansions in 1929 sold for $million.  $25,000 in 1942.  

though you're probably right.  the fed would take more than a snaky lick of hyperinflation before it lets something like that transpire.  got gold?  

gwar5's picture

Greenspan distorted the market and more houses were built than there were buyers. They were Ghost Houses.


So many houses were being were being built 2005-2006 I wondered where all the buyers were going to come from. If it was that obvious to me, how smart could those central bankers fucker really be?  They knew. Didn't care. I know.

Harbanger's picture

I think was obvious to them also, what's not obvious to most is how they can manufacture and burst bubbles at will.  The power of the $ printer, supportive legislaltion and reserve status is amazing until it breaks.  Next in line to be monkey hammered at will are the EM's.   The king dollar will be saved at all costs until they simply can't.  btw- bankers are not spec home builders, they're financial drug dealers.  The spec builders may have lost their shirt, I know a few.

FecundaGoat's picture

Why are all cash investors buying housing??  Do they expect housing values to decrease??  Are they stupid??

juicemoney's picture

It seems like more of a scramble to get out of currencies... I think larger investors are also playing their part in the "pump and dump" game.


I never believed that housing sales are a good economic indicator... this isn't necesarily good production. McMansions don't provide any real contribution to positive economic activity. I guess when offshoring has gutted North American productive capacity there isn't much else to measure.

kaiserhoff's picture

When I was in DC, the most expensive houses in the area, at that time Potomac Maryland, had the highest turnover in the region.  Surprise, surprise.

Harbanger's picture

If you hit the lottery tomorrow and won say 5 milllion dollars in one lump sum, what would you do with the cash?  Bank account? no; mattress? no; stocks? no; real assets? yes

Hulk's picture

hookers and blow man, hookers and blow !!!

Harbanger's picture

Lol! There's a reason most people that win the Lottery are broke again within a few years after payout.  Not necessarily coke and bj's.

o2sd's picture

They aren't buying housing, they are buying land, with money that will be inflated away in the coming decade. They are swapping worthless currency for valuable land.

FredFlintstone's picture

What is so valuable about 1/10 acre parcel in a gangbanger hood? Maybe they just have no better place for all their cash.

Harbanger's picture

I know of a few old gangbanger hoods in the US that are now hipstervilles.  Maybe they knew something you didn't?  If you had a copy of their plans you could have gotten in on it also.  When the free market is obsolete and gov is all powerful, they make and break anything they want.

o2sd's picture

What is valuable about it is that it is on dry land, not salt water ocean. Regardless of what happens, we are always going to use the available land for something in the future. That land in the gangbanger hood will be turned into a Wackenhut prison for all the soon to be arriving new inmates.


greatbeard's picture

>> all cash investors buying housing?

Those all cash investors aren't paying retail like most people have to.  They are getting very good deals at a fraction of the market value.  In turn, they are either renting them out or attempting to flip them at 50% to 75% quick profits.  The poor schleps that the realtors are feeding this shit to are going to be left holding the bag, again.

ebworthen's picture

Not to mention the cities and municipalities ramping up property taxes, utilities, sewage, water, garbage fees.

More IRA's and 401K's being cashed out, more taxes to .gov, more middle class blood-letting.


Hulk's picture

Its just wrong that we get taxed for pooping. wrong, wrong, wrong...

akak's picture

You could always join AnAnonymous in his tax-free roadside squatting, alas, alas, three times irregular alas.  He'll be happy to give you a (dung)hand.

akak's picture

Ah, the monoextremum of unicity of Chinese public poopism is indeed the mattering thing.  Blobbing-up the monolizing of the Chinese middle class (which is the king class) excretory means.

Just have to bare with it.

10mm's picture

I feel sooo sorry for those pictures of cheese ball types who are "Top Producers". Racket, the thing


FinalCollapse's picture

The RE market was prevented from properly resetting by Obama's 'geniuses'. It will eventually and it will be much more painfull. The average price still needs to half at the minimum so young people can afford creating their household.


NOZZLE's picture

I was looking at houses in Boca Raton (that's Boca Babe for all you normal people) and it was apparent that what was available had been purchased in early 2013, cleaned up, staged and re-offered at $300k markup mainly by individual idiots from NYC.  I hope you bastards choke on your bricks and enjoy paying $15k a year in property taxes until you are forced to sell at what you paid or less.

Really wanted to live in St. Pete Beach anyway since I hate the pretentious A-holes on the East Coast.

Darksky's picture

Got an offer in on a little beach house on the Emerald Coast. People bought it at the top for $575k. Our offer to the bank is $300k. We grew up there, vacation there three weeks a year, and have been spending shitloads renting other peoples houses. Looks like if we get 50% occupancy for weekly rentals over the summer we will break even when you account for how much we have wasted on other peoples rentals over last 5 years. House can sit empty rest of year and friends/family can use it for all we care. If we get a snowbird to rent it over the winter we would make a little money. Plan on retiring in the house and could pay cash for it, but might as well keep some cash in reserve for other shiny opportunities that i could lose while fishing the flats for redfish.

Quadten's picture

when does ZH get bullish? 2025-ish or never?  Happen to be long $SDS $GLD $FAZ myself...

syntaxterror's picture

We're bullish when there's blood in the streets, not when AMZN trades at 1400 P/E.

kaiserhoff's picture

At the trough in the seventies, Ford was selling for 25% of its short term net assets, after all debt coverage.  You were getting four dollars of cash equivalents for each dollar invested.  Good time to go looooong.

o2sd's picture

As long as you believe the book value will hold, buying stock when it is trading at a discount to NAV is an excellent strategy. Not many of those opportunities in a lifetime though.


syntaxterror's picture

Especially since Ford pegged a dollar risk value to every little person killed in their Pinto.

starman's picture

My 13 year plus realtor friend of mine bought a 900k fixer I wished her good luck.

yogibear's picture

LOL. It's housing bubble 2.0. Wait until all the heggies get choked up with all the vacant and non-performing properties. The local taxing governments are going to suck the financial life out of them.

The local governments want their pension revenues. Down these REIT heggies go. 

syntaxterror's picture

Yep. Where they gonna get those revenues if stawks aren't yielding the 8% that their models demand?

LibertyBear's picture

My wife and I are millenials. We pay too much for rent and want to buy a house with a lower mortgage payment. Any suggestions?

quartshort's picture

Shack up w/ another couple. Wait for it. Get your $$$ ready... then wait some more. I have been waiting since 2007. They will buldoze 'em before you will get a deal. They will be bundled and sold for pennies to a REIT and rented back tranched up for someone else's pleasure/profit.

Even when prices "dropped" around here there was very few decent houses in a normal price range. Most were sold in minutes to, you guessed it, Realtors with an inside track.

I am really thinking a container house in a county w/ no building permits required is my only shot at "ownership". Gen "Y" myself. Should be neck deep in debt but refuse to comply w/ orders...

greatbeard's picture

>> Any suggestions?

I guess it would depend on the market you're looking in.  I'm looking to relocate and I pay cash.  After several hard month of looking and watching my opinion is to stand aside.  There is way too much froth in the market and only insiders are getting anything like a reasonable buy.  Most of what's available to the retail public is priced to perfection or fatally flawed in some way.

Now I'm shopping on the Florida West Coast, from Tampa to Ft Myers.  Other markets could be very different.  Plus I may not be looking in the same nitch as you.

But, even though I'm highly motivated to make a move, I'm 99% certain I'm going to step aside and let this market settle out.  Best of luck to you whatever you do.