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How Healthy Is The Real Estate Market?

Tyler Durden's picture




 

Submitted by Ramsey Su via The Acting-Man blog,

The strength of the real estate market should not be measured by price appreciation, or the number of new and existing home sales. It should be measured by the support of underlying fundamentals and whether they can help to withstand economic cycles without policy makers having to go hog wild just to avoid a total collapse.

How healthy is the real estate market today?

 

The Subprime Majority.   Recently, I came across a report by the Corporation for Enterprise Development (CFED) titled Assets and Opportunity Scorecard.  Some of their findings are quite interesting.  According to the CFED Scorecard, 56% of all consumers have sub-prime credit.  Sub-prime is "earned". A consumer has to miss a few payments, or default on a loan or two to earn that status.  These 56% cannot, or should not, be taking on more debt, especially a large debt like a mortgage.  They may also be struggling with a mortgage that they should not have taken out in the first place.  

Liquid Asset Poor.  CFED found that 44% of households in America are Liquid Asset Poor, defined as having saved less than three months of expenses.  As one would expect, 78% of the lowest income households are asset poor, but 25% of middle class ($56k to $91k) households also have less than three months of expenses saved.  Pertaining to real estate, the report suggests that there are little savings to buy and a small cushion for changes, such as job loss.

Income Inequality.  The Center for Household Financial Stability of the St. Louis Fed recently released a study titled Inequality, the Great Recession, and Slow Recovery.  Skip the 43 pages of academic mumbo jumbo and you will find half a dozen of very simple and informative charts, such as the two below.   I will leave the inequality debate to others.  With regard to a real estate stress test, it appears that households are not exactly well prepared to weather even minor economic setbacks. 

 

 


 

debt-income ratios

Debt-income ratios by income groups – click to enlarge.

 


 

Net-worth-to-disposable income

Net worth to disposable income by net worth groups – click to enlarge.

 


The Federal Reserve is Spent.  QE1, 2 and 3 all involved the purchase of agency MBS.  In January 2014, the FOMC announced that it will decrease debt purchases by another $10 billion, from the original $85 billion to $65 billion per month, $30 billion of which is supposed to be for agency MBS.  That appears to be all talk.  For the first 6 weeks of 2014, the Fed has already purchased $74.7 billion, or $54 billion per month.  They are not only continuing the QE3 purchases, they are still replenishing the prepaid holdings from QE1 and QE2.  Mortgage rates are not responding anymore.  Though somewhat stabilized, the current rate (30yr) is still a full percent above the low recorded before QE3 (see the table below from Mortgage News Daily).  

 


 

latest rates



Mortgage rates from MND's daily survey – click to enlarge.

 


 

Furthermore, Fed members are only kidding themselves if they think they can ever tighten monetary policy.  The national debt is at $17.3 trillion and growing at about $700 billion this year.  The cost of financing this debt, per the Treasury, was $415.7 billion in 2013, crudely estimated at an average rate of about 2.5%.  At the moment, the 3 months bill is at less than 0.2% interest, while the 10 year note is only at 2.75%.  If the cost of financing this debt were to increase by just 1%, it would cost the Treasury $173 billion more a year.  There is no way that the dovish Fed chair Yellen would even dream of doing that.

Therefore, the risk of monetary policy is not whether the Fed will tighten, but rather what it can do to repeat a 2008 style bailout. In other words, the Fed as a safety net is full of holes that re big enough for an elephant to pass through.

Exhausted Government Intervention.  The FHFA just announced that HARP has reached the three million mark.  We are no closer to reforming Freddie and Fannie than when they were put under conservatorship over five years ago.  Numerous State and Local Governments have deployed their own foreclosure prevention laws and ordinances.  The Consumer Finance Protection Bureau has created a mountain of bureaucratic red tape, adding compliance costs to the mortgage industry while providing questionable benefits to the consumer.  The  FHA is now pushing for lending to borrowers with credit scores as low as 580  only one year after major financial catastrophes such as foreclosure.

In conclusion, the reason I remain bearish on real estate is that when the noise is filtered out, the market has only survived by means of an unprecedented amount of intervention.  This dependency is not only unhealthy, its stimulating effect is now fading.  If real estate prices cease to appreciate, the market will suffer, same as it did when the sub-prime bubble burst in 2006/2007.  The Fed has already gone all in and there is little left it can do.  Washington can always create a new set of laws to further erode private property rights as we knew them.  Ironically, price appreciation is also not the answer, as it will just widen the income equality gap, turning would-be home owners into rent slaves of Wall Street's fat cats.  It may be best for the market to freeze for an extended period and let consumers catch their breath.

 

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Mon, 02/17/2014 - 11:30 | 4444833 unrulian
unrulian's picture

Canadian Condos...get 'em while they're hot

Mon, 02/17/2014 - 12:38 | 4444976 rqb1
rqb1's picture

that's pretty good

Mon, 02/17/2014 - 15:05 | 4445326 Raymond K Hessel
Raymond K Hessel's picture

I get a hair across my ass when people use a salary range for middle class.  Middle class is a subculture.  What it is not is a family that makes $56-$91 thousand a year.  That's just stupid.  People making a salary in that range is not middle class.  This is working class.  

 

Poor class then working class, then upper class.  

 

Middle class is a way of life at all income spectrums.   

Mon, 02/17/2014 - 15:28 | 4445385 Oracle of Kypseli
Oracle of Kypseli's picture

Agreed. In many European countries, clearly class has nothing to do with income but breeding, manners and way of life just like you describe. 

Mon, 02/17/2014 - 17:24 | 4445702 MisterMousePotato
MisterMousePotato's picture

What do you mean, "In European countries?" Same is true in America and everywhere else.

Everyone should read the book, "Class," by Paul or Ira Fussell (I forget which). Informative and funny as hell.

Mon, 02/17/2014 - 18:48 | 4445990 Bananamerican
Bananamerican's picture

"It may be best for the market to freeze for an extended period and let consumers catch their breath."

let it burn. (a renter)

Mon, 02/17/2014 - 16:35 | 4445551 Kirk2NCC1701
Kirk2NCC1701's picture

Nothing wrong with them when you buy low, sell high.  Same with ANY asset, even BTC and PM.

I once bought a foreclosed condo and got 35% off.  Rented it, then sold it eventually.

Mon, 02/17/2014 - 11:32 | 4444841 AustrianJim
AustrianJim's picture

Very good analysis. I do think that the Fed will prove creative in coming up with new ways to screw things up, though.

Mon, 02/17/2014 - 12:19 | 4444929 DavidC
DavidC's picture

Unfortunately. A bunch of academic wonks who've never had proper jobs and don't understand (or don't care or are not willing to acknowledge) the effects of inflation on the average person.

DavidC

Mon, 02/17/2014 - 13:50 | 4445126 johnQpublic
johnQpublic's picture

the market is broken for sure

my home was refied by the previous owner at 389k

short sale to me 3 years later at 299500

i put 75k in upgrades and improvements over the last 6 years

i have a current offer at 310k

75 days ago i accepted an offer at 337500 but their financing fell thru

over the last 6 months the market has been re-tanking and thats a fact

 

a friend just purchased a forclosed home in thuis same area for less than the price of an unbuilt lot

yet smaller new homes are being built and sell at 350k+

seriously, what in the fuck

 

i cannot wait to sell this white elephant so i can move to the place we are building

672 sq ft plus a loft bedroom

14 acres of apple and pear trees with a stream and delicious well water

only bill will be electric and taxes, and chainsaw fuel

Mon, 02/17/2014 - 19:00 | 4446021 Bananamerican
Bananamerican's picture

electric? get one of these and build out w extra batteries and panels...

http://www.goalzero.com/yeti1250.html

Are you building a "Tiny House™"?

Mon, 02/17/2014 - 11:36 | 4444849 derek_vineyard
derek_vineyard's picture

zirp knows no boundries

Mon, 02/17/2014 - 15:23 | 4445367 Professorlocknload
Professorlocknload's picture

Yup, it's a closed loop. The Fed is the economy. It owns, creates and controls the medium of the worlds exchange.

 

Mon, 02/17/2014 - 11:37 | 4444853 Colonel Klink
Colonel Klink's picture

Funny how the whole MERS thing and broken MBS pool status were just swept under the rug.

Mon, 02/17/2014 - 11:43 | 4444866 AynRandFan
AynRandFan's picture

Eric Holder has been getting his pound of flesh from it.  Of course, the fact that the Fed bought every MBS pretty much smoothed out the mortgage market.

Mon, 02/17/2014 - 11:59 | 4444889 LMAOLORI
LMAOLORI's picture

 

 

Fines are bribes paid to the government to stop imprisonment. That is not the kind of punishment I view as a pound of flesh. Any fines that REALLY are paid are paid by shareholders anyway. Show me some imprisonment for what this has cost the common man or woman who would and do go to jail for a lot less.

 

In the meantime something else the government lies about inflation....

Food prices soar as incomes stand still

 

Mon, 02/17/2014 - 12:16 | 4444917 max2205
max2205's picture

Housing will double in the next 10 years....so peeps will have to buy a 1000 sq ft house...so what

Mon, 02/17/2014 - 13:53 | 4445133 johnQpublic
johnQpublic's picture

are you defining the doubling of housing as renting out your basement to your 36 year old son?

or turning single family homes into duplexes?

or are you saying the dollar will lose half its value over the next ten years?

or 99% of its value with a doubling in the cost of a home?

Mon, 02/17/2014 - 15:16 | 4445346 jerry_theking_lawler
jerry_theking_lawler's picture

I think he is right on his analysis. The only problem is that food will increase by 200% and energy will go up by 400%....so 100% increase in housing seems right on.

Mon, 02/17/2014 - 15:40 | 4445417 j0nx
j0nx's picture

Yeah but your salary will remain flat to falling just as it has for the past decade.

Mon, 02/17/2014 - 17:23 | 4445703 Chuck Knoblauch
Chuck Knoblauch's picture

Sell one of your organs to the smiling Chinaman living next door to keep that roof over your head. Adopt some kids, start a business.

Mon, 02/17/2014 - 14:56 | 4445297 dontknowcrapabo...
dontknowcrapabouteconomy's picture

You're right. Housing will double. There will be twice as many new empty houses ready to be stripped away leaving nothing but a 1000 sf ghostly frame.

They'll call it a handyman special.

Mon, 02/17/2014 - 15:54 | 4445444 Professorlocknload
Professorlocknload's picture

50% + or - devaluation will hold the wolves at bay for another election cycle. It's all the two legged chair knows. It will monetize until it's objective is achieved, PERIOD!

Reset in progress, and if one is left standing when the tunes stop without at least one house to sit in, it's gonna be hard, unless one can get Section 8, the real reason institutions are gaga on RE. After all, it sets a floor under returns and is inflation adjusted with yearly rent increase allowances.

Deflation? Yeah, sure, in our dreams.

Mon, 02/17/2014 - 16:06 | 4445471 TheGoldMyth
TheGoldMyth's picture

Professorlocknload, and foreclosed hoses are simply locked up like gold and taken out of circulation. Ok, maybe it is harder to do with houses due to maintenance issues, but the buyer of last resort principal being the banking system only knows the perfection of its increasingly obvious parasitism.
I wonder if they get charged an annual property tax on foreclosed houses on their books??

Mon, 02/17/2014 - 16:57 | 4445598 Panafrican Funk...
Panafrican Funktron Robot's picture

"I wonder if they get charged an annual property tax on foreclosed houses on their books??"

It depends on the state.  In some states, the tax is against the property.  In other states, the tax is against the owner, and if the bank doesn't pay the tax, they are essentially not acknowledging ownership of the property, and the local govts. can go after the last known owner via a tax warrant.  In some states, you can also be sued if some kids break in your foreclosed property and injure themselves, for example, and if you didn't maintain the liability insurance on the property, you are up shit creek.  And, of course, if you have a recourse loan on the house (you live in a recourse state or have a home equity loan), the bank can still go after you for the money, even if they sell the foreclosed house.

Gives new meaning to "the borrower is slave to the lender".  

Mon, 02/17/2014 - 17:20 | 4445696 Chuck Knoblauch
Chuck Knoblauch's picture

I wonder if foreclosed properties are being used as drop sites for illegal drug trafficing? Hmmm!

Mon, 02/17/2014 - 17:08 | 4445649 Chuck Knoblauch
Chuck Knoblauch's picture

Fine paid without having to admit any wrongdoing, i.e. an apology at the very least. An apology is not an admission of guilt.

Mon, 02/17/2014 - 11:48 | 4444876 Cognitive Dissonance
Cognitive Dissonance's picture

Like it never even happened.

Mon, 02/17/2014 - 12:09 | 4444909 Winston Churchill
Winston Churchill's picture

Just wait until the CMBS blow up.

Mon, 02/17/2014 - 12:22 | 4444940 Ban KKiller
Ban KKiller's picture

Great new win in New Mexico! ROMERO v. Bank of New York. New Mexico Supreme Court case THIS month. Banksters? This decision is a shot to the head of the Banksters. Find the case and pass on to other foreclosure fighters. It is huge.

Mon, 02/17/2014 - 13:11 | 4445046 Blankenstein
Blankenstein's picture

Irresponsible buyers shouldn't be saved either.  This is just another screwing of taxpayers and those who didn't participate in the  real estate ponzi.  They can go rent like a lot of other people do.  Everyone involved in the process - bankers, mortgage brokers, realtors, underwriters, rating agencies, those who created the tranches and sold MBS - are all responsible and should face foreclosure, fines, jail time, etc. depending on their level of involvement in the whole debacle.  Curious post coming from a realtor.

Mon, 02/17/2014 - 13:48 | 4445123 LMAOLORI
LMAOLORI's picture

 

I agree with that so +1 from me but at the same time it really seems far more egregious to me that taxpayers are on the hook for banks who also enter into these sub-prime loans. The banks have all the expertise money can buy (and unfortunately politicians in their pockets who allow them to get away with it).

Mon, 02/17/2014 - 14:04 | 4445166 Blankenstein
Blankenstein's picture

I didn't write it out explicitly, but the jail time was for those most deeply involved; like Mozillo (Countrywide), the squid (for designing the MBS tranches to fail, betting against them and then selling them as investments to clients), and those involved in other types of fraud. -  http://www.bloomberg.com/news/2011-06-30/ex-taylor-bean-chairman-farkas-...

Mon, 02/17/2014 - 14:32 | 4445248 LMAOLORI
LMAOLORI's picture

 

 

If you read that article the keywords are for OTHER TYPES OF FRAUD what he was prosecuted for was securities fraud for fake mortgage mortgage assets or crimes against other banks that he sold them too lol.

I'm happy to see fraud punished but he wasn't punished for for the misdeeds I was talking about (against the taxpayers).

Mon, 02/17/2014 - 13:37 | 4445105 Tortuga
Tortuga's picture

I read the the appeals court ruling on the district courts ruling that the Romero's lost. How's that a shot to the banksters head? Seems too me the Romeros made some bad decisions and were looking to affirmative action their mistakes onto somebody else. That's my read.

Mon, 02/17/2014 - 11:37 | 4444854 Doubleguns
Doubleguns's picture

When hell freezes over. These banker slugs can not help thier thieving ways and they would never call a cease fire on the sheeple they fleece. It shall remain game on till we do something about the corrupt bankers. 

Mon, 02/17/2014 - 11:46 | 4444874 Headbanger
Headbanger's picture

But first do something about corrupt politicians who allowed the banksters to fleece the sheeple by repealing Glass-Steagall !

And that something will probably be a very ugly revolt in this country that ruins it for everybody.

 

Mon, 02/17/2014 - 12:03 | 4444895 LMAOLORI
LMAOLORI's picture

 

 

 

This tells you what you need to know sbout the likelihood of that happening look where Old Yeller is now...

 

"Yellen served in President Bill Clinton's White House, which oversaw an aggressive period of financial industry deregulation."

 

http://www.cnbc.com/id/101104170

Mon, 02/17/2014 - 12:17 | 4444920 Doubleguns
Doubleguns's picture

I rest my case.

Mon, 02/17/2014 - 12:08 | 4444907 InTheLandOfTheBlind
InTheLandOfTheBlind's picture

Jim leach

Mon, 02/17/2014 - 11:40 | 4444861 AynRandFan
AynRandFan's picture

My family and friends in Texas waited 20 years for the real estate boom, and it is happening.  The local press says 100 move to Austin every day.  I believe it.  Real estate is going up at double digit rates.  My nephew bought a home a year ago for $216k and just sold it for $260k with no improvements.  There was a bidding war.  My sister's house in the Woodlands seemed like it would never appreciate, then in a couple of years it went from about $225k to at least $325k.  Most likely, the reason is the booming oil biz, although I can say out in West Texas it hasn't hit the recreation property market yet.  One reason may be the way real estate is taxed.  If you qualify for an agricultural exemption (i.e., valuation), you pay very low taxes, but otherwise you pay very high taxes.  I have 62 acres in a fairly remote area of the hill country and my taxes were about $6k with a crappy doublewide trailer.

I have property outside of Denver and it has done fairly well, but the market seems very thin (few buyers).  No doubt the residential market is still driven by the few folks who can get financing.  There are still a lot of cash sales.

Mon, 02/17/2014 - 12:15 | 4444915 Obama_4_Dictator
Obama_4_Dictator's picture

Austin is a nightmare.  I moved here from San Deigo.  The prices are just as high, the weather sucks there are more libs here, traffic is worse, taxes on property are higher.  Absolute nightmare. I can see why original Austintes are moving to Idaho.  

Mon, 02/17/2014 - 12:18 | 4444923 Obama_4_Dictator
Obama_4_Dictator's picture

Not to mention the water issue.  I think the infrastructure here is going to collapse under all this influx of people.

Mon, 02/17/2014 - 13:41 | 4445097 Tortuga
Tortuga's picture

Water has been an issue in Texas since we moved here in 1955 and if you read a little history, way before that. It will either rain again, or not. The lawns will all die or go xeriscaping, which in some areas of Texas, ain't much difference from dying. Hey, the infrastructure in all our cities is full, even the day after it is expanded. Name me a city that can handle 10000 people a month moving there. It takes 30 days for new concrete highway to dry for crying out loud. The burbs is where you should be looking.

Mon, 02/17/2014 - 13:48 | 4445124 Obama_4_Dictator
Obama_4_Dictator's picture

LOL, I did do my research.  I live like 30 miles in a differnet county - I almost never go to Austin.

Mon, 02/17/2014 - 14:00 | 4445152 Obama_4_Dictator
Obama_4_Dictator's picture

I can't imagine communting into Austin from anywhere.  I'm thankful I have my own business and that my Wife works North.

Mon, 02/17/2014 - 15:43 | 4445423 Son of Loki
Son of Loki's picture

The crime rate in Austin is out of control. the once wonderful 6th Street is now roamed by small groups of extremely violent Yutes ... the side streets a real nightmare. Turn on the radio in the morning and you now hear 1) crime report who was murdered/beaten, 2) the polltion alerts, and 3) the traffic congestion.

It was paradise before about 2002 then masses of people moved in. They can have it. I moved out a while back to much smaller town, a real paradise.

Mon, 02/17/2014 - 16:01 | 4445457 Obama_4_Dictator
Obama_4_Dictator's picture

I hear you.  I'm thinking of moving to Taylor or something along those lines.  Even where I live it's far too busy.

Mon, 02/17/2014 - 13:31 | 4445091 Tortuga
Tortuga's picture

Well why the heck did you move to Austin? Didn't you do any research before you made your bed in the libtard, chooming, sanctuary city state of Austin?

And, if you haven't noticed, there are several other cities in Texas but do a little research first, cause hint hint, it's the burbs you want to head for.

Mon, 02/17/2014 - 15:47 | 4445429 j0nx
j0nx's picture

As Austin goes so does Texas. Just a matter of time before the liberals in charge there start forcing their ideals into communist laws for the state. We were going to move to Austin this year from NoVa which too has already fallen to the liberals and communists and illegal mexicans but all the anecdotal research I've done is telling me the move would be like going from the pot to the pan. It's starting to get to the point where there's no place left to run.

Mon, 02/17/2014 - 16:03 | 4445462 Obama_4_Dictator
Obama_4_Dictator's picture

Dude, Texas is great.  Feel free to move down here, the more people like you here the better. I meet people like myself everyday here.  I meet hard core conservatives that moved here from Cali. We are grealy overwhelming the libs moving here.  Don't let anyone fool you, it's going to be red for a long time.

Mon, 02/17/2014 - 16:47 | 4445578 Blood Spattered...
Blood Spattered Banner's picture

STFU with this Red vs. Blue shit.

Texas is by and large a shithole.  Houston is becoming one of the dirtiest cities around, and the Gulf of Mexico is one of the dirtiest bodies of water.

 

 

Mon, 02/17/2014 - 17:05 | 4445634 Obama_4_Dictator
Obama_4_Dictator's picture

LOL. I think you mean major Texas cities are shitholes, I would agree and argue that, most, if not all major US cities are shitholes.  Texas is very nice if you get out of the cities.  I'm an Idenpendant, but it still matters to me that a state is "red" or not.  Enjoy your "Blue" paradise.  Republicans are scum, but Democrates are even worse than scum.

Mon, 02/17/2014 - 19:34 | 4446110 Chuck Knoblauch
Chuck Knoblauch's picture

Texas has a pretty good Interstate highway system. They do drive fast so you'll have to adjust if you're not used to it. It rains a lot in the Winter, and you'll bake in the Summer. Pollution is a big problem, so location is key. Houston will flood during a Hurricane, so avoid if possible.

Mon, 02/17/2014 - 17:08 | 4445648 Panafrican Funk...
Panafrican Funktron Robot's picture

Why move there vs. (pick a Mountain West state of your choice)?

Mon, 02/17/2014 - 17:18 | 4445662 Obama_4_Dictator
Obama_4_Dictator's picture

Because there are jobs here. Because energy is cheaper here.  Because it has it's own independant grid.  Because it could secede. Because Ron Paul is from here.  Because you can rent a house for a resonable amount.  Because there is no state income tax. Because there are less libs here.  Because Texas has an awesome gun culture. Because it's business friendly.   

Mon, 02/17/2014 - 12:50 | 4445003 toady
toady's picture

It's all in timing. My uncles shithole, 2 bedroom, on the end of the Phoenix Sky Harbor runway that he bought for nothing way back when went for nearly 400K at the peak.

Mon, 02/17/2014 - 13:16 | 4445060 Blankenstein
Blankenstein's picture

It's just part of the reinflation of the housing bubble due to the massive Fed intervention.  This is the case in many parts of the Country.

Mon, 02/17/2014 - 13:31 | 4445092 LMAOLORI
LMAOLORI's picture

 

 

Real estate is and always has been location, location, location so some areas experiencing a boom because of jobs, etc. is to be expected even in really tough times, but the investor's who bought a lot of the foreclosures that's another story of fleecing IMO. 

 

 

A Huge Housing Bargain -- but Not for You
Mon, 02/17/2014 - 13:47 | 4445117 Blankenstein
Blankenstein's picture

It traditionally was, but not when the Fed pulls out all of the stops to keep housing prices up.  This affects prices everywhere.  

Mon, 02/17/2014 - 15:45 | 4445424 Son of Loki
Son of Loki's picture

The housing market is almost completely propped up by teh Fed's zirp. Once that ends, and all things come to an end, house prices will correct substantially.

Mon, 02/17/2014 - 11:40 | 4444862 22winmag
22winmag's picture

The National Association of Realtors would like you to believe "now is the time to buy" and "it's the hottest market in 5 years".

 

I have more respect for a street pimp than these real estate pimps. At least the street pimp is an honest promoter.

Mon, 02/17/2014 - 12:07 | 4444897 Pool Shark
Pool Shark's picture

 

 

"It's a great time to buy or sell a house"

http://vancouvercondo.info/wp-content/uploads/2012/04/nar.gif

What would you say to your stock broker if he told you: "Now is a great time to buy or sell Facebook stock."?

 

Mon, 02/17/2014 - 12:13 | 4444913 Spastica Rex
Spastica Rex's picture

If I was an American raised on Big Gulps and reality TV, I would say:

"where do I sign?!"

Mon, 02/17/2014 - 19:00 | 4446022 Chuck Knoblauch
Chuck Knoblauch's picture

The government is Facebook's largest customer. Without QE, Facebook, and other NSA/CIA front companies, are toast.

Mon, 02/17/2014 - 21:21 | 4446393 22winmag
22winmag's picture

That's "fundamentally sound".

Tue, 02/18/2014 - 07:09 | 4447305 dreadnaught
dreadnaught's picture

ask your "Realtor" about the # of NPL and "Channel Stuffing"  Then watch his antidepresssant suddenly stop working

Mon, 02/17/2014 - 11:43 | 4444867 FieldingMellish
FieldingMellish's picture

Japan, as always, is the model.

Mon, 02/17/2014 - 11:52 | 4444878 adr
adr's picture

In many areas of the country even if you do find a buyer for your depreciated home, they will reject it if there is a paint chip. Most owners are forced into paying thousands of dollars to make unnecessary repairs and then the buyer still pulls out because they change thier mind. A casualty of the near all cash market.

People buying investment properties want everything to pass a HUD inspection before they buy it, after being burned buying $1000 homes and putting $80k into it so it will rent to section 8.

Mon, 02/17/2014 - 11:53 | 4444879 pachanguero
pachanguero's picture

IN Thailand there is a HUGE bubble.  The Russians are getting harrmered in their currency and the are the drivers for most of the boom.  Thailand this month only grew % 0.6  When this baby pops it's going to be tears at bedtime!

For me it's good cheaper whores and more fun! I get to hang out more with Mark Faber!

Mon, 02/17/2014 - 11:55 | 4444882 q99x2
q99x2's picture

When the King is crooked the country falls to ruin.

Mon, 02/17/2014 - 11:59 | 4444887 Dollarmedes
Dollarmedes's picture

"...the Fed has already purchased $74.7 billion, or $54 billion per month.  They are not only continuing the QE3 purchases, they are still replenishing the prepaid holdings from QE1 and QE2..."

 

Wow. So now the Fed is blatantly lying? I mean, I know they always "fudged" the truth...but if they're explictly doing the opposite of what they say, that's impeachable. That's lying to Congress.

Not to mention the loss of all credibility will destroy the impact of forward guidance.

 

Mon, 02/17/2014 - 12:25 | 4444954 LMAOLORI
LMAOLORI's picture

 

 

We have over $1.5 Trillion in MBS's on the Fed's books that with an accounting trick can be transferred to the treasury (taxpayers) this was a back door bailout for the banks by way of Fannie/Freddie and Congress knows all about it flashbacks...

 

Unlimited credit for GSEs seen as backdoor bailout 

 

Is Fannie bailing out the banks?

 

Accounting tweak could save Fed from losses

 

 

Mon, 02/17/2014 - 12:52 | 4445002 rqb1
rqb1's picture

there is no 30y mortgage w/o fannie.

 

Mon, 02/17/2014 - 12:55 | 4445019 Dollarmedes
Dollarmedes's picture

Fine.

That doesn't mean they have to underwrite sub-prime loans by eliminating credit standards.

Fannie seemed to work fine for many decades, then the system exploded. What changed? Their credit standards.

Mon, 02/17/2014 - 13:02 | 4445032 bagehot99
bagehot99's picture

Bill Clinton. That's what happened. 

He eliminated racism by forcing the lenders to make loans to non-creditworthy individuals. Genius.

America's First Black President.

Mon, 02/17/2014 - 13:56 | 4445101 LMAOLORI
LMAOLORI's picture

 

 

Both parties had a hand in this

 

Bush seeks to increase minority homeownership

snip

In a bid to boost minority homeownership, President Bush will ask Congress for authority to eliminate the down-payment requirement for Federal Housing Administration loans.

In announcing the plan Monday at a home builders show in Las Vegas, Federal Housing Commissioner John Weicher called the proposal the "most significant FHA initiative in more than a decade." It would lead to 150,000 first-time owners annually, he said.

Nothing-down options are available on the private mortgage market, but, in general, they require the borrower to have pristine credit. Bush's proposed change would extend the nothing-down option to borrowers with blemished credit.

The FHA isn't a direct lender, but guarantees loan payments for mortgages on moderately priced owner-occupied property. The FHA guarantee now permits private lenders to finance as much as 97% of the purchase price of a home for millions of low- and middle-income borrowers.

In the proposal soon to be delivered to Congress, Bush would allow the FHA to guarantee loans for the full purchase price of the home, plus down-payment costs. As a practical matter, the FHA would guarantee mortgages as high as 103% of the value of the underlying property.

Weicher says the change is aimed at potential home buyers whose credit excludes them from the private mortgage market.

Mon, 02/17/2014 - 18:01 | 4445848 MisterMousePotato
MisterMousePotato's picture

Actually, it started with Carter, although some student of history will probably get on here and trace it back to the Treaty of Versailles or something. The Magna Carta?

Mon, 02/17/2014 - 19:12 | 4446044 Bananamerican
Bananamerican's picture

"forcing the lenders to make loans to non-creditworthy individuals."

Bull SHIT!

It was the bankersters securitizing sub-prime...THEY'RE your enablers

Mon, 02/17/2014 - 13:13 | 4445050 LMAOLORI
LMAOLORI's picture

 

 

The GSE's are 90% of the market according to IBD but people werent getting loans hence a new sub-prime crime wave begins anew with Wells Fargo going back into sub-prime. The fact that Crony Capitalist Buffet's bank is doing it again shows those who claim the banks are forced to make those loans are full of sh*t no one has a gun to buffet's banks head.

Mon, 02/17/2014 - 13:52 | 4445130 Dollarmedes
Dollarmedes's picture

What is Buffett's bank going to do to earn a profit if they don't reenter the sub-prime market?

That should be an easy question for you to answer.

Mon, 02/17/2014 - 14:12 | 4445178 LMAOLORI
LMAOLORI's picture

 

 

The same thing other businesses do that aren't privy to being bailed out. Real capitalists find other things to invest in and if not they FAIL. CRONY CAPITALISM on the other hand is DESPICABLE.

Berkshire Hathaway just bought into the pipeline so we will probably see the pipeline approved soon.

 

Mon, 02/17/2014 - 17:15 | 4445675 marathonman
marathonman's picture

Warren already made a killing buying railroads to ship Canadian crude while the Obamavic's sat on the Keystone XL.  Now its time to sell the railroads and rotate into pipelines.  Good ol' Uncle Warren!  I think you're right that the Keystone XL is a shoe in now.  Who coulda know'd?

Tue, 02/18/2014 - 00:24 | 4446911 Milestones
Milestones's picture

deleted

Mon, 02/17/2014 - 12:05 | 4444901 Atomizer
Mon, 02/17/2014 - 12:09 | 4444910 q99x2
q99x2's picture

Will there be a knock on the White House door as the crackdown on African gays widens.

Mon, 02/17/2014 - 12:16 | 4444918 ArkansasAngie
ArkansasAngie's picture

It has frozen here.  

Mon, 02/17/2014 - 12:17 | 4444922 Dollarmedes
Dollarmedes's picture

"...56% of all consumers have sub-prime credit."

Which explains Wells Fargo's dip back into that segment. The problem for them is, consumers have no disposable income anymore. Even if consumers get sub-prime loans, how are they going to make payments? Extend the terms to 1000 years? And even if they get loans and can make (very small) payments, they are not able to handle ANY financial shocks...NONE. So at the first downturn, they will start defaulting. 

 

"The FHFA just announced that HARP has reached the three million mark.  We are no closer to reforming Freddie and Fannie than when they were put under conservatorship over five years ago."

In fact, we've moved in the opposite direction. Part of the original problem was Fannie and Freddie's underwriting of bad loans. Not only haven't we wound those institutions down, but by buying up MBS's the Fed is now acting as a THIRD source of underwriting.

Mon, 02/17/2014 - 13:55 | 4445136 Chuck Knoblauch
Chuck Knoblauch's picture

The downside of supply-side economics. It's a bitch trying to make a return on an asset without real demand fueling growth that gives that asset its value. I guess Milton Friedman would be a strong advocate for continued QE forever to replace the dead consumer.

Mon, 02/17/2014 - 12:20 | 4444926 Never One Roach
Never One Roach's picture

I think most of the houses recently bought in my area for cashola were by Iranians and Chinese. I guess they simply wire a few million here and buy a house [or two] and at least one BMW and perhaps a Mercedes for the wife. The handful of white folk [Americans] get whopper loans with almost nada down and become debt slaves for life.

Lots of vacant store fronts in both old and new strip malls.

Obviously, a very healthy RE market.

Mon, 02/17/2014 - 13:45 | 4445115 Chuck Knoblauch
Chuck Knoblauch's picture

Learn Mandarin and maybe a wealthy Asian will give you a tip for cleaning the wax out of his hairy ears.

Mon, 02/17/2014 - 15:57 | 4445445 Never One Roach
Never One Roach's picture

Hey, don't complain about them. They're the type of "diversity" that adds to my neighborhood; they're mostly highly trained professionals, mow their lawns, take super care of their houses and in general are friendly, quiet neighbors.

Plus, I don't have to worry about my hub caps being stolen at night.

Mon, 02/17/2014 - 16:06 | 4445469 akak
akak's picture

Just be careful when walking the nearby sidewalks.

Mon, 02/17/2014 - 16:32 | 4445539 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

Just be careful when walking the nearby sidewalks.

...and keep a close watch over your pets, lest you find that your dog has been wokked.

Mon, 02/17/2014 - 17:08 | 4445651 akak
akak's picture

Alas, alas, three roadside stoolagmites alas, just have to bear with the cat in the shat.

Tue, 02/18/2014 - 07:04 | 4447302 dreadnaught
dreadnaught's picture

gives new meaning to the term "Wokking the dog/cat"

Mon, 02/17/2014 - 16:59 | 4445609 Chuck Knoblauch
Chuck Knoblauch's picture

You don't garage your car on the estate?

Mon, 02/17/2014 - 19:16 | 4446054 Bananamerican
Bananamerican's picture

I used to feel the same way about asians as you NOR, but the Yellow horde that's invaded my son's "blue-ribbon" elementary school the last 2 years are nasty, stand-offish, arrogant pricks

Mon, 02/17/2014 - 12:20 | 4444932 squid427
squid427's picture

Astonishing how short the memories of murikans are. They don't even have to dust off the playbook, its the same shit. Lather rinse and repeat.

Mon, 02/17/2014 - 12:51 | 4445007 Dollarmedes
Dollarmedes's picture

You make it sound like Americans are making bad choices of their own free will.

Instead, what's happening is that the government and its appendages have restricted the choices that anyone can reasonably make. This ends up corraling market participants into the only remaining choice(s).

 

That is what Obama has been doing vis-a-vis the expansion of Medicare. All other choices are being removed until only one system remains. That "choice" will become, by default, single-payer.

 

To take Wells Fargo as an example, what are they supposed to do?

If they stay with safe investments, these may hold most of their value in a crisis...but who knows when that will happen? In the meantime, they are guaranteed to earn a return less than inflation, so they will be slowly bleeding out.

The only "choice" they have is between a guaranteed slow bleed-out, and risky investments.

Mon, 02/17/2014 - 13:28 | 4445074 Blankenstein
Blankenstein's picture

You are not forced to buy.  You can rent like I and many others do, or stay in the current home you have.

Mon, 02/17/2014 - 13:38 | 4445107 Dollarmedes
Dollarmedes's picture

I'm not talking about individual consumers' choices. I'm talking about the banks' decisions to start up the sub-prime treadmill again.

Mon, 02/17/2014 - 19:55 | 4446147 RaceToTheBottom
RaceToTheBottom's picture

If that bank paid for its poor decisions, then fine, but no banks paid for any poor loan decisions they made.  Grandchildren will pay for that, not banksters.

They should be riskless utilities and their CEOs paid as such or should split their companies into the riskless side and the IBank side.

Mon, 02/17/2014 - 13:42 | 4445111 Blankenstein
Blankenstein's picture

I agree with your point about government restricting choices, but I had to down arrow you for your first sentence.  The 'mericans were voluntarily lining up to buy houses during the housing mania.  Those who tried warning people were either treated with contempt or were laughed at. The herd was standing in line to buy condos that weren't even built, writing letters to sellers to convince them that they were they special one that deserved to buy the house, quiting good jobs to flip houses full-time,  and NO ONE was forcing them to do this.  

Mon, 02/17/2014 - 14:02 | 4445156 Dollarmedes
Dollarmedes's picture

I agree, that's what people were doing in 2007.

Now, the middle-class is $5000/year poorer and their situation is precarious. And that's for the ones who still have a job!

By recent metrics, disposable income is gone. Who's flipping houses now?

I don't think it's the "small investor."

Mon, 02/17/2014 - 14:36 | 4445103 Chuck Knoblauch
Chuck Knoblauch's picture

You must be talking to the financial institutions and the FED? They lead, right? I'd love to open up my own FED bank and create money out of thin air and compete with other FED banks, but that's not how it works.

 

There is no underlying growth engine, except for the war industry (our best export). It's a race to the bottom, and the only obstacle is QE to prevent catastrophy.

 

It really does suck. It's not my imagination. I'm not sleeping, am I? Wake me up, PLEASE!

Mon, 02/17/2014 - 12:25 | 4444953 Sardonicus
Sardonicus's picture

Finding Nemo is trending on Twitter with the 20-something crowd right now.

They are going to buy houses?  They are watching Disney movies instead of working!

Mon, 02/17/2014 - 12:29 | 4444959 starman
starman's picture

California  foreclosures jump 57% in January. Who said theres a shortage of houses for sale?

 

Mon, 02/17/2014 - 12:59 | 4445024 GFORCE
GFORCE's picture

According to a prominent cycle analyst, US real estate is in a downward trend to 2032... This is the dead cat bounce which could last another year or so.

Mon, 02/17/2014 - 13:16 | 4445061 Atlantis Consigliore
Atlantis Consigliore's picture

Zu Bee Doo Be, Amerikanzke dummie, as we launder euro to dollars, ahead of bank collapses, in EU Cypress effect,

buy million dollar homes all cashkee  in Miami,  turn into Odessa, 

taxes?  ve dont pay no stinkin taxes,  1:2 homes all cashkee,

RE Miami,  is  my personal Bank, sell to next Rooskie comin out of Suchi, Soshi, or Scamski.

wife buy closthes return on monday,  lol, 

Amerikanski? Suckers . 

Mon, 02/17/2014 - 13:29 | 4445086 mccvilb
mccvilb's picture

Repugnantcans are hoping for a dead 'crat bounce.

Mon, 02/17/2014 - 13:29 | 4445089 Laura S.
Laura S.'s picture

I think it would be interesting for the readers to also see that in Canada, we have already overcome the major crisis that hit our real estate markets in 2012. Right now, prices are steadily increasing and everything points to a balanced market, with some good and some bad buy. It is generally about knowing your realtor, about talking to him, and searching for the best buy that suits your needs (and also banking account). I want to point out that all the doom prophets were wrong about Canada, but I do believe US market is in way worse condition, with all this crazy foreclosuring without any reason to do so.

Mon, 02/17/2014 - 13:57 | 4445143 Tortuga
Tortuga's picture

" this crazy foreclosuring without any reason to do so."

Laura all the foreclosuring in the USA is being driven now by unemployment combined with unwinding of  the liar/unqualified being ok'ed for mortgage loans at the point of a government gun or the government lawyers would be making it hard on you. The gangs of both our parties facilitated this mess and put the money in their and their pimps pockets.

Mon, 02/17/2014 - 14:20 | 4445189 Chuck Knoblauch
Chuck Knoblauch's picture

The U.S. government is too busy building underground forts to protect them from the People they serve to really confront this unemployment problem with real solutions. We can start by using the tax code to limit deductions and tax all worldwide income of multi-national coprporations HQ'd in the U.S. (no Subpart F loophole crap). That would shake things up a bit. There are lots of creative ways to work the problem, but there is no will to act in Washington without making them run down Constitution Ave. for their lives.

Mon, 02/17/2014 - 16:08 | 4445476 mccvilb
mccvilb's picture

LOL, had to laugh. Watching Spacey's tv political drama series House of Cards and kept seeing this beautiful impressive curved front granite columned facade of a DC building I didn't recognize. I looked it up. It's the William Jefferson Clinton Federal Building the EPA now uses. It was built in the '30's in what was called Murder Bay along Pennsylvania Avenue, no lie, and renamed and rededicated last year. Originally it was called the Rios Building, after a federal agent who was killed in the line of duty. They renamed a wading pool for him to make it up to the Ariel Rios family.

Mon, 02/17/2014 - 14:35 | 4445254 Blankenstein
Blankenstein's picture

Your link is written by a realtor.  If you want an accurate view of the market, a realtor is the last person you should consult.

Mon, 02/17/2014 - 13:36 | 4445093 squid427
squid427's picture

@ Dollarmedes

I agree totally about gov coersion/entrapment, but there is always another option. I would hope that more people would wake up to the game being played with our lives and stop playing. That is really the only option other than revolt.

Mon, 02/17/2014 - 13:43 | 4445113 Dollarmedes
Dollarmedes's picture

I would like that too, but I don't think it's going to happen. Most people are too locked into "the game."

Mon, 02/17/2014 - 13:58 | 4445147 squid427
squid427's picture

Something I've noticed; from an evolutionary piont of view humans follow the path of least resistance. In my life whenever I've got a life choice to make the right choice is the most difficult of the options that are availible to me. This creates a conundrum, naturally I want to follow the path of least resistance but the right thing to do is never that option. Any thoughts?

Mon, 02/17/2014 - 14:05 | 4445169 Chuck Knoblauch
Chuck Knoblauch's picture

Is one of the choices more difficult because it's illegal or immoral?

Mon, 02/17/2014 - 14:26 | 4445197 Dollarmedes
Dollarmedes's picture

It isn't just humans. All constructs, ANIMATE AND INANIMATE, follow the path of least energy.

This is why soap bubbles are spheres; cubes require more energy. And that's not trying to be glib. Increased energy consumption decreases efficiency, which decreases the chance for "survival," however you want to define that.

For living creatures, this results in the "success" paradox: When successful, creatures continue the behavior that led to the success, usually not realizing when this behavior is no longer appropriate. Examples: eating to excess, over-exploitation of resources, etc.

So too much success can be bad for you. The key part is complacency; that you don't re-examine your assumptions. Success breeds a false sense of security.

 

IMO, this is the fundamental problem with all human societies and is the reason they eventually fall.

 

*edit* Secondarily is the problem of scope: scope of time, scope of whom you're talking about. What's good now may not be good in the future. What's good for the individual may not be good for society.

 

I love this second one especially. If one woman foregoes having children to concentrate on her career (or whatever), that's good for her. If EVERY woman does that, society collapses.

Mon, 02/17/2014 - 15:27 | 4445381 mccvilb
mccvilb's picture

As mature adults we do what we need to do for self-preservation - acquiring food, water, and shelter. Our need for safety and security follow. Whether Maslow was correct or not he pretty much nailed humanity on this. Only after those two areas are fulfilled would we even consider what's "right" or beneficial for the common good. When we talk to young people, invariably they will say that to them the most important thing in life is finding happiness. Why? Because they have never experienced their own instinctual need for survival or discovered what they were capable of resorting to had they had to make difficult life-changing life-or-death choices... yet.

Happiness to them is almost always dependent on the actions of others, whether its getting recognition from a boss, winning the attentions of a lover or satisfying our parents, but the young lack the personal experience or logical sequent linking them together. Approach them again in a few years and they will have a totally different perspective, and contentment, or a yearning for feeling at peace with themselves will in many cases have replaced their search for happiness. Of course, normal humans can at times also be insanely irrational too; emotions like love and hate can cause us to ignore placing ourselves in dangerous situations.

I don't think we necessarily choose the path of least resistance. There's a constant battle going on inside of us between what we think is possible and what we think we can achieve without hurting ourselves or others, unless of course we have sociopathic tendencies. Sometimes we make the easier choices when we become mentally exhausted from refereeing the two combatants.

Mon, 02/17/2014 - 14:13 | 4445184 squid427
squid427's picture

Not at all, the right thing to do is usually the most difficult choice. Be it having an uncomfortable conversation with some one or myself, or making a change in my life for the better.

Mon, 02/17/2014 - 14:29 | 4445237 Bunga Bunga
Bunga Bunga's picture

Net worth is a bogus metric. There is no worth when there is no debt.

Mon, 02/17/2014 - 16:45 | 4445569 Chuck Knoblauch
Chuck Knoblauch's picture

Spoken like a true FED whore.

Mon, 02/17/2014 - 14:38 | 4445263 Paracelsus
Paracelsus's picture

Here in So Cal I shop at a local Vons in an attractive shopping complex.

Very disturbing to find the righthandside shop (largish) to the entry of the foodstore to be empty and windows soaped over.Just looks tacky and third worldish.

The shopping mall owners must adapt to the new "economy",lower rents significantly to spur growth,and get those shops rented.No more plywood with "COMING SOON" posters...

For the mall owners,"Better half a loaf,than none...".

Also,the overhead costs will certainly be concentrated on the remaining tenants who are justifiably going to start screaming about their rates.

There is no easy solution,but this VACANCY problem could easily get out of hand....

Mon, 02/17/2014 - 14:57 | 4445301 the grateful un...
the grateful unemployed's picture

this is just half of it, we just finished a cycle, in which there was redevelopment money for creating downtown shopping areas, which attracted businesses who could pay the higher rent, and left the older malls for bottom end shop owners, nail salons, dry cleaners, and taco shops. now that redevelopment is over, private finance may see the value in these older malls and rebuild them. we have a car dealership, closed and empty since the crash. (the city also subsidized a new dealership downtown using redevelopment money)

it used to be that these commercial projects picked up during a recession, because that was the good time to put money to work. government economic policy crowded out these projects, (its really a form of socialism isn't it, not personal but business-centric) now the real question is will private enterprise ever come back, or will they start up the redevelopment money if the economy doesn't start to recover soon enough. the vacant stores should be a good thing in one way because they should provide opportunity for startups, but in reality i don't think it works that way.

Mon, 02/17/2014 - 14:44 | 4445278 squid427
squid427's picture

@Dollarmedes

I enjoyed the conversation and ideas shared, thanks

Mon, 02/17/2014 - 15:07 | 4445331 Dollarmedes
Dollarmedes's picture

No problem.

Mon, 02/17/2014 - 14:44 | 4445279 the grateful un...
the grateful unemployed's picture

my mothers MD (in soca) bought a new home. he was proud. now when she asks hows the new house, he says its a money pit. the problem is across all incomes, homes cost money after you buy them. all of the utilities are more expensive, including and esp water. want a nice lawn, get out the checkbook. sewer rates go up parabollically. and everything has those rider fees attached. when you buy a gallon of paint they charge you a disposal fee. all houses are money pits, especially the way they build them, with complicated roof sconces. not every home can handle solar and NG is not everywhere. the net net of all this is that people are being economically squeezed into urban high rises, condos, and apartments, where the HOA fees eat into your monthlies. its no win really, the country is more expensive because the availability of basic services makes all these things more expensive. you can go off the grid and live anywhere, but most people want to be close to their MD, cable service, grocery shopping and police and fire.

forget the asset price reflation gimmick, this is real inflation, and look over the things i mention and see if they show up in CPI.

Mon, 02/17/2014 - 15:04 | 4445322 Dollarmedes
Dollarmedes's picture

Exactly. CPI is supposed to be based on a "representative basket of consumer goods," and yet excludes many of the things most consumers find important.

Shit, why don't we just base the CPI on a "representative basket of caviar consumption?"

I think they exclude items like energy because they are "too volatile." WHAT F'ING DIFFERENCE DOES THAT MAKE?!? If these items are volatile for the index, aren't they also volatile for the consumer?

The only thing that matters is whether they represent the average consumer's basket or not.

Mon, 02/17/2014 - 16:33 | 4445543 Blankenstein
Blankenstein's picture

And this is exactly why home prices have to fall.  People are being eaten alive by the property taxes, upkeep, maintenance, etc.  I worry about the nation's housing stock because people paid so much to get into the houses, they will not have enough left over to maintain the homes properly.

Mon, 02/17/2014 - 18:02 | 4445852 mendolover
mendolover's picture

Smells a bit like Agenda 21.

Mon, 02/17/2014 - 15:16 | 4445347 seek
seek's picture

AZ here -- there's a sea of for sales signs outside my front door -- more than there were in 2008. Prices started falling a year ago.

It's not crash-level pricing, but it's definitely crash-level inventory for sale. And that's not counting REOs the banks are still holding.

Mon, 02/17/2014 - 20:02 | 4446173 RaceToTheBottom
RaceToTheBottom's picture

AZ?  In an area where the WS realestate firms came through and vacuumed up all the houses?

Any signs they will come through again?

Maybe they can get another bailout for that ....

Mon, 02/17/2014 - 16:14 | 4445495 TheGoldMyth
TheGoldMyth's picture

In Australia, the same is happening in my immediate area. I wonder if the banks pay a property tax or council rates? My instinct tells me no.

Mon, 02/17/2014 - 21:00 | 4446083 earl swagger
earl swagger's picture

Identify the Victim.

The Victim of foreclosure is the borrower that purchased a home with equity IN, & pays his / her mortgage on time via the terms of the Note (debt instrument) & DOT (title instrument.)

In the event of default, one standard need apply. Terms of Note & DOT.

The uneven recovery is a function of an inability to foreclose timely & efficiently. REO taking years to foreclose & Agency selling REO w/marketing time in days drives down pices.

In balance is 6 mos inventory.

Eliminate equity out to 80 LTV/CLTV (see TX model) & foreclosure disposition start to finish to 6 mos (one standard) & we'll see an efficient market emerge with a balanced supply of inventory.

Demand then becomes normal market drivers.

Default servicing & cash " fire sale" dumping of inventory should not be part of the industry, provided the integrity of the first lien position and terms of Debt and Title instrument remain in tact.

Foreclose early & often sounds harsh, but must happen to support a balanced supply of inventory.

The rent is still due America.

Mon, 02/17/2014 - 19:42 | 4446125 Pinefox
Pinefox's picture

Every where i drive around Seattle and especially in downtown Seattle there are construction cranes.  According to a June 2013 Downtown Seattle Association report, there are more individual development projects under construction today than any time since 2005. 14 residential projects broke ground since the beginning of 2013; 14 others have been completed. FORTY commercial and residential are currently under construction in addition to 2 transportation and 2 public projects. There are 26 apartment projects under construction in downtown.  There are TRIPLE the # of apartments under construction now compared to the height of the previous cycle in 2007.  Even in the neighborhoods a glut of projects are under construction.  Seattle added 12,638 people to the city in 2013 and the city is 83.9 square miles in size.  I look at all this construction and I see future slums of America.  it is just mind boggling.  Cheap money and the bankers knowledge that they can finance construction even if there is no demand because they have the taxpayer to bail them out has fueled this mess.  It is like channel stuffing in the auto industry, only here they are doing it with buildings.  The day of reckoning is surely to come and the sooner the better. 

Mon, 02/17/2014 - 20:04 | 4446181 RaceToTheBottom
RaceToTheBottom's picture

I think Seattle is counting on the Chinese to bail them out with all the buyers/immigrants that wanted to get into Canada but were recently stopped.

May not work....

Mon, 02/17/2014 - 21:30 | 4446407 earl swagger
earl swagger's picture

Well said. Back to balance of inventory. Regulators & fed are running bank CRE residential lending, not Community Banks under their thumb.

Residential PUD's deemed bad,based on excess supply......7 yrs ago.

No CRE lending: No PUD development = no contiguous lots to support demand for new 2.5 person household formations.

Macro drivers housing demand & fundamental feasibility analytics are not part of the core competence current gen regulator managing risk. The only individuals in the chain with a higher level of incompetence are local politicians.

Feasibility analytics are based on today's inflated rent at 97% absorption.

Fed considers RATE as demand driver. Equilibrium, not so much.

Tue, 02/18/2014 - 06:55 | 4447299 dreadnaught
dreadnaught's picture

what i really hate is where they are ripping down lovely restored, historic, unique houses, buildings, to put up punched-out-of-styrofoam condos   en masse . Notice 'of intent to change zoning on a property' are put up a week after the comment closing period has passed-or else on tiny yellow 2'x3' large metal signs on prongs in the dirt.  MANY large historic mansions have been torn down here to build pure crap. 

Mon, 02/17/2014 - 23:02 | 4446689 AdvancingTime
AdvancingTime's picture

I have owned an apartment complex for many years and we are currently experiencing the largest number of vacancies we have ever had. Many houses in the area are empty or under leased. In 2005 and 2006 prior to the housing collapse many people were looking at second homes, for investments or as a vacation getaway.

Today many have doubled up with family or friends reducing the need for housing. We are pushing on a string and calling it demand when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. We have a shortage of "qualified" buyers and renters. More on this and why super low interest rates are hurting housing in the article below.

http://brucewilds.blogspot.com/2013/12/super-low-interest-rates-disservi...

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