Stick A Fork In The "Housing Recovery" (Spoiler Alert: Blame Record Student Debt)

Tyler Durden's picture

The chart below from Bank of America - showing the progression of first-time US homebuyers in recent months - should scare everyone who still believes that there is some sort of "housing recovery" in the US.

What this chart tells us is that an increasingly greater amount of existing homes is being sold not to people who want to live in them, but speculators who are merely seeking to flip to a greater fool, or worse, to Chinese and Russian olilgarchs who are simply seeking a place where to park hot money or simply launder other ill-gotten cash.

The NAR essentially confirmed this (something Zero Hedge readers have known for nearly a year), when it reported that "all-cash sales comprised 35 percent of transactions in February, up from 33 percent in January and 32 percent in February 2013. Individual investors, who account for many cash sales, purchased 21 percent of homes in February, compared with 20 percent in January; they were 22 percent in February 2013. Seventy-three percent of investors paid cash in February.

Read that last sentence again: 73% of investors, i.e. speculators who now account for a greater portion of total purchasers than first time home buyers, paid cash!

So what explains this collapse in the traditional housing pathway, where people buy houses to live in them? Simple. Record debt. Only not the credit card debt variety which historically was the biggest impediment to large purchases and was among the reasons for the 2007 credit bubble pop. This time it is all student debt.

NAR President Steve Brown, co-owner of Irongate, Inc., Realtors in Dayton, Ohio, said student debt appears to be a factor in the weak level of first-time buyers. "The biggest problems for first-time buyers are tight credit and limited inventory in the lower price ranges," he said. "However, 20 percent of buyers under the age of 33, the prime group of first-time buyers, delayed their purchase because of outstanding debt. In our recent consumer survey, 56 percent of younger buyers who took longer to save for a downpayment identified student debt as the biggest obstacle."


Brown notes the survey results are for recent homebuyers. "It’s clear there are other people who would like to buy a home that are not in the market because of debt issues, so we can expect a lingering impact of delayed home buying," Brown added.

As a reminder, in Q4 student debt rose to a record $1.08 trillion, and continues to rise at a breakneck pace.

But... but... what happened to the whole "the US consumer has deleveraged and can't wait to go on a spending spree" fable again?

Source: Bank of America, NAR

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Mercury's picture

73% Wow.

They may not be speculators so much as the new, permanent landlord class.

Spawn of Cagliostro's picture

In layman's terms, there are no real buyers. 

101 years and counting's picture

how long before the Fed needs to start buying up all student loan debt since all those loans will soon be going into default.  same as MBS.  hey america, you will be paying for everyone that has taken online courses and bought new iPads every year with their student loans.  what a great country.  

NotApplicable's picture

Question is, will Yellen let this bubble finally pop? Or will this be used as the excuse for QE squared?

Or both, timed for maximum wealth transfer to club members?

Hmm... answered my own questions, huh?

VD's picture

confluence of debt vs free Fed money ... serfdom ....  more debt-slaves than overlordz, more taxpayerz than IRS agentz..... numberz game......but the debt-slaves can't do arithmetic ergo they enslaved...

NoDebt's picture

Agenda 21, proceeding splendidly and ahead of schedule.

BKbroiler's picture

God forbid they just let house prices fall.  They might not have a choice soon.  Even at 0% interest a bad deal is a bad deal.

Vampyroteuthis infernalis's picture

I am so sick about hearing how the "student debt" problem is killing the housing market and decreasing the number of children being born. Fess up MSN, it is a lack of JOBS!!!'s picture

Isn't it QE cubed at this point?

joeknows's picture

The federal government technically already owns them since they are backed by the federal government.  This is when the real revolution happens.  This is when pensions get destroyed.  When these kids get into political power and turn the system on its head.  Or maybe they'll just keep handing out free money as they have been trained by their parents.

Mercury's picture

There are real buyers but it looks like those buyers aren't the target demo that half a century of US housing policy/programs have been targeting.

US homeownership rates should be plummeting here.

Who was a good, up-to-date, long-term chart on cash RRE transactions?


Bay of Pigs's picture

My buddy has been in the mortgage biz for 20 years in Seattle. He says its totally dead now. No qualified buyers left. He is on the verge of shutting down.

NotApplicable's picture

I've got a cousin in Vegas who is a RE agent. While business dropped substainally a few years back, he keeps pretty busy these days handling bank-owned properties.

Jumbotron's picture

Got a family member in Florida who has gone from doing mortgages for private banks to JP Morgan down to freelance.

Things are WAY slow in Florida now.  He's hurting bad.

Mercury's picture

Actually Tyler, I don't see how it can be the case that Institutional landlord, cash buyers are the lion's share of RRE transactions but also the case that the US homeownership rate is still around its historic average:   p.5

It's down from the bubble years sure, and it may be heading lower but this story doesn't appear to be reflected here so far.

I suppose it could be the case that most homeowners are staying put (not selling out or trading up – low transactions) so that’s keeping the homeownership rate relatively stable but institutional and second home cash buyers are trading like crazy amongst themselves (driving up total transaction volume) while younger, would-be first time buyers are staying out altogether.

disabledvet's picture

Houses are being abandoned...or bought for a buck "and still used for an ATM" (reverse mortgages.)

At some point there is no more fiat here.
CEO's have shown up to talk to the folks in DC...I see ZH is now "all missing airplane all the time" too.

dogbreath's picture



Alberta priemier Allison Redford just  resigned.  Alberta produces 4 million barrels a day.   An article on this would be appreciated.

forwardho's picture

Our town has changed it's name to Potterville.

Cheyenne's picture

73% sounds right. I just sold a condo in Chicago after getting 4 bids on it. Three were cash. The one borrowing bidder was also the lowest. Sign of the times.

The condo is in a real nice part of the city (Old Town) and has a large rooftop deck. The winning bidder bought it for her kids. Best of luck, I say. I couldn't stop smiling as I GTFO of there in the moving truck.

"They may not be speculators so much as the new, permanent landlord class."

This is correct, imo. In Chicago's loop, many remaining tenants in class B office spaces (middle class workers in, well, mostly non-larcenous businesses) are being evicted as landlords sell their buildings to hotel chains. It struck me as odd because about 15 years ago, Chicago made a push to erect a theater district downtown, which included a lot of hotels back then. That more hotels are going up now, in this economic climate, and displacing the few workplaces that are left is a sign of the times as well.

In both instances, it appears that the elite are filling the void left by the bankster-run economy that kills good middle class jobs with such ruthless efficiency.

Hal n back's picture

I have not been downtown Chicago in a long time,  so I cannot speak to hotels, however, whats the big property tax increase, needed to pay pensions, going to do to the housing market and office and hotel market. Whats the city sale tax rate--12%? and hotel statys charge more?


If say taxes go up just 3k a year on a unit, thats a lot of mortgage payment-like 75k worth of mortgage payment. Does a 600k unit/house immediately revalue to 525k based on buyers having only so much to make payments? And thats already been pushed.


Politicians have not yet figured out the more you raise prices (taxes) the less you sell, and free markets and taxing authorities have the same problem.



nope-1004's picture

But Bernanke quit right in the middle of the housing recovery?  And his tenure was soooo transparent too?  Hmmm....


Bay of Pigs's picture

Pretty incredible this bullshit still has legs isn't it?

BullyBearish's picture

Mmmmmmmmm...rising interest rates, stagnant to diminishing wages, job uncertainty, substantial debt...what are you waiting for first time buyer?  Go now and grab the American dream!

Stormtower's picture

Don't forget about Obummercare, we're all on Medicaid now!

wallstreetaposteriori's picture

Don't forget that the US governement ended the private market for student loans in the Obamacare bill..... No more refinancing of the debt, no competition.  Just OBAMA bending everyone over and going deep..... 

RichardParker's picture

Yep, and its perfectly legal to confiscicate the wealth of a medicaid recipient to recovery expenses via "medicaid estate recovery".

libertus's picture

Student debt is killing us. See for a solution. Also look at "Blowing the Last Bubble" It is from four years ago and really shows that this guy saw it comming...

Higher ed is going to already is. Look for other business models that are not dependent on student loans. 


Mercury's picture

Personal debt = slavery

but otherwise it's just leverage with other people's money.

GrinandBearit's picture

It's the weather... it's the WEATHER!




sarc off

_ConanTheLibertarian_'s picture

And the music already stopped in China. Oh shit...

AmericasCicero's picture

I hate it when these types of graphs don't start from zero.  Almost thought first-timers were COMPLETELY extinct.

SWCroaker's picture

Exactly, amen, me2.   But presuming that nothing happens by accident, what is BofA's motivation for coming out with an alarming chart, and surrounding it with dire analysis....?

SeattleBruce's picture

To try to distract blame from themselves - blame they richly deserve, as do all the other FED owning TBTF bankstas.

Yancey Ward's picture

Oh, please!  Everyone knows that people don't buy first homes when the weather is bad, and this particular Winter has been brutal with the cold spell starting in May 2012.

Ecclesia Militans's picture

How is it even possible that home prices are still at outrageous increases from the early '00s in places like NJ and Connecticut given the property taxes and the massive outflux of the tax base from those states?  Do some of these homeowners, deep underwater as they may be, seriously expect to sell a house that they paid almost 50% to much for in the first place, for anything near what they paid for it?  Is everyone doing bong hits with their real estate agent when setting the listing price? 

ParkAveFlasher's picture

If they had done bong hits first, they wouldn't be in that predicament.

babylon15's picture

I live in NJ with one of my divorced parents.  Everything here is completely fucked up.  Next door are two third grade school teachers making $94,000 and $96,000 (I looked up their salaries online, all NJ public employees have their salaries listed online).  They paid $525,000 for their house in about 2007, got an offer for $495,000 in 2010/2011 and rejected it because they didn't want to take a loss.  Also next door is a state college professor making $125,000 a year that doesn't speak one word of english.

My other neighbors consist of two single females, living in two separate houses, each over 3000 square feet, by themselves.  By themselves!  They're both too old to have kids now, and with mass exodus in NJ who will they sell their houses to?

Not me.  I'm 30 and unemployed so I won't be having kids soon, or ever.  I went to a top 20 university, graduated with a science degree with honors, and my first job was for $15,000.  I quit, moved back home, and have been unemployed since 2009.

Best yet - my cousin just got accepted to a private college where the average SAT score is below the national average.  Tuition + Room and Board is $45,000.  I try to explain it to people, they don't listen.  Nobody listens.

Yeah, this shit is unreal.  All the people here just watch the stock market all day long.  They own the dumbest stocks, all the companies they own are losing money.  Tesla for example.


When does it all collapse???



SeattleBruce's picture

" I try to explain it to people, they don't listen.  Nobody listens."

Yes, one of the biggest reasons for our current mess - ignorance and apathy.  When does it collapse is the $64,000 question - but you know it will - even if in semi-slow motion, although we're doing to see some CRAZY stuff during the collapse - that you can be sure of.  Prepare accordingly.

GooseShtepping Moron's picture

Thank you for sharing that story, Babylon. We need more people to start speaking out.

Burnbright's picture

Hey Babylon  you should checkout being a fisherman. I live in Northern California and have recently spoke with a couple at bars. You work 6 months out of the year and make 100k take the rest of the year off and collect unemployment.  At least that is what I hear it makes around here. Just got to work hard on a boat, I hear turnover is high cause some fisherman are basically high functioning meth heads.


Good luck out their and keep looking. At least you have no anchor to tie you down, go follow the money.

kurt's picture

Shifting decks, equipment sliding, ropes and winches, a heavy sea and my bandy crew of meth heads, one of whom thinks I'm out to kill him...the water doesn't feel cold anymore and they're not coming back for me...what was that tug... saltwater burns...sleep.

libertysghost's picture

Good post babylon.  I am, of all things, an instructor (Media History) and 'academic adviser' at a research university in the midwest.  (please don't throw things at me...I throw them at myself:-)

Really none of the people I meet 'considering' college won't listen.  I mix in the benefits and costs of college in to every conversation I have with potential students and their about how college by and large shouldn't be considered an "investment" but rather an expensive hobby because 90% of the degrees will likely cost more than the "return" on them at this point.  I'm not trying to scare them away (and it never does's a romanticized version in their head already no matter what I say), I just try to reinforce to them that if they are going to do this they better be committed and plan to work their asses off if they want to at least break even in the long run. I could add so much more here...ugh.  My family won't even believe me when I tell them about the debt their kids will suffer from so whataya do?

Then I am surrounded by so-called "experts" and "academics" who do next to nothing all week long and make around six-figures in 9-months of work!  It's frikin insane (only the pre-genXers really make the cash though...they 've had to "cut back" of course with new hires over the last decade).  They are 99% "progressives" (so violent people who claim to be for peace, right?) who have mastered cognitive dissonance...always claim they "just don't understand economics" but of course "we need to raise taxes" to bailout this states bankrupt public pension system (I love it when people admit they don't know anything about a subject but are hard core for policies related to that VERY SUBJECT!).  That last little tidbit about the pension system probably gave away that I am in Illinois, huh?  lol

I am still paying student loan debt...and I am 42...and I will pay as little as possible until I die.  I know...I am "taking advantage of the system! meeting my obligations!"  Whatever...go fuck everyone who claims that.  People here know that what I have already paid was more than what I ever borrowed with a reasonable profit for the GOVT/Banks.  Smart students who have any interest...I've figured out ways they can do what they want and have next to no student loan debt and be done in three years.  The kids coming in...they have very little way of knowing any better and from K-PhD our educational system is set up to benefit the adults in the system...not the kids they "care so much about" that they put a gun to everyone's head to pay for with raising taxes and no choice.  What a racket...I hope the state goes bankrupt and none of these old "educators" get any pension anymore.  What they did was immoral...and they know it deep down inside because when you bring up to them they freak out and won't talk about it. 



starman's picture

Hey its a balmy 79 degrees here in socal, the hell wants to go buy a house in this weather!

Obama_4_Dictator's picture

Oh no, the humanity. Say it ain't so!!!

q99x2's picture

Well that was the idea. Sell off America to the Enemies and get their money into the West. Then the globalists would have more control over those nations that the hot money came from because their own wealthy class would sway things in the bankster/globalists favor.

Another fucked up globalist idea gone haywire.

yogibear's picture

See banksters you can't have both like you thought you could.

Charles Evans, Jenet Yellen, William Dudley thought they could debt infinitely on peoples backs.

Knew this would happen. It may be decades until student loans are paid. It means less purchasing power in general. Pull up demand from the future is a problem eventually.

That eventually is now.

eclectic syncretist's picture

One thing a lot of very smart people, even those involved at the very heart of this mess, don't seem to realize is that the debtors could refuse to pay forever, and the banksters would still want to lend to them.  This is because the Federal Reserve has created and persisted with a situation where it costs the banksters next to nothing to lend, while they make their money via skimming interest on loans

SeattleBruce's picture

Right, but when enough defaults happen, even that 'business plan' is gunna fail.  And that will be the ultimate crash of this house of cards.

semperfi's picture



A one-time loan from the US Treasury for your entire lifecycle - cars, college, house, wedding, funeral.

60 year term

Paycheck auto deduction.