Schadenfreude: Economists "Stunned" By Housing Fade

Tyler Durden's picture

Submitted by Lance Roberts of STA Wealth Management,


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SmilinJoeFizzion's picture

Where I live the inventory is very lite- Someone is buying, or should I say, bought 

Boris Alatovkrap's picture

Stupid large ego economist fail to learn causality... Price of goods (house, gold, food, fuel) is INDICATOR of economic reality, not is DRIVER of economic future. Now, let us to break some Keynesian face and stimulate local economy.

Unknown Poster's picture

Is that Krugman,s broken fce theory?

Groundhog Day's picture

So if we all got together and beat the living daylights out of all economists (like Krugman), bankers(too many to name), politicians (soo many worldwide) crooked ceo's and cfo's(hiding behind bullshit GAAP/NoN GAAP trickery) then we would have a true economic recovery.   look at all the work that would be created.....

1)companies that make bandages would see growth

2)companies that make self defense gear and equipment would see growth

3)medical doctors, surgeons and plastic surgeons would get work

4)lawyers would get work

5)hospitals would get even more work

6)Clothing industry might get some new business

7)nurses would get work

8) all the beat up scums of the earth would be out of commission for a while so unemployment would go down for real as new people would have to replace the beaten...which means HR dept's would be busy.....DAMN THE LIST GOES ON AND ON



813kml's picture

I'm guessing that you are in the DC area, and that the inventory you are referring to is politicians.

Seer's picture

"Where I live the inventory is very lite"

Did you catch the part where banks are sitting on a lot of yet-to-hit-the-market-repos (or properties that would otherwise be in the repo process if it weren't for the fact that listing too many as repos tends to make the books look bad)?  That and people who are just plain underwater and who would otherwise be wanting to sell?

FL_Conservative's picture

What is this "market" for housing that you speak of?  I haven't seen one for some time now.   Same with the stock "market".

813kml's picture

Economists "stunned" to find that water is wet.

Groundhog Day's picture

Maybe some ivy league university should get some free grants from the taxpayer's, i mean government to do a stdy to confirm that

CrashisOptimistic's picture

There is NO more filled with bullshit industry than real estate.

Up the street I saw a house put up for sale last summer.  It sold last day of August.  People moved out.

No one moved in.  I waited to see construction people preparing it for flipping.  They never showed up.  I waited to see For Rent signs in front of it.  Never showed up.

Got nosey and started looking around the back as I drove past it.  There's an RV and a boat back there, been there for years, owned by the previous owner.

Checked the county records.  The place sold for 40,000 under list (and that list price was competitive for this area).  In addition to selling under list, the boat and RV was thrown in (because, you see, this doesn't cut the price (and real estate agent commissions).

The place is still empty.  The owners have the grass mowed and shut off water in the winter months so the pipes didn't freeze.  I guess they hope to sell at a profit some day, but as of now they are paying taxes for something no one lives in.  It's been over 6 months.  Very puzzling.

Oh, clarification, I don't think the owners who sold in Aug had a mortgage.  Very long term owners.

Seer's picture

And after nearlly three years my neighbor's nearly 300 acres (with home) still is for sale.  Maybe some day I can buy it...

Way down the county road one place I saw evacuated, the, apparently, renters were pulling everyhing down (buch of animals and stuff) and burning stuff.  There sits, after MANY months, a couple of boats, sans trailers, and, I'm pretty sure, a ton of crap in the outbuildings.  Upstairs windows had been boarded up a long time before the renters had even vacated: I think they call this "deferred maintenance," something that after all the years since I'd first heard this term still makes me chuckle.  The property is now listed as bank-owned.  No obvious signs to clean up or otherwise attempt to sell this place.

A fair number of for-sale around, but sales don't seem to be happening.

Groundhog Day's picture

But every RE agent i speak to (because i am in the market for an upgrade) tells me their is no inventory, yet i see empty bank owned properties everywhere

Seer's picture

I suppose that "inventory" is dependent on type/location.  For/to you it might be that there isn't much of a selection, yet for others perhaps?

For sure, though, there's some sort of disconnect going on, at the very least it sure all ain't even in the ballpark of what it was a while back, AND, it seems like a good bet it never will be again.

ebworthen's picture

You mean the 16+ year FED driven see-saw housing bubble(s) is going to pop again?

You mean to tell me that declining income and employment affects the ability to pay a mortgage?

Quick, someone tell the FED they do nothing but inflate prices and crush employment!


Winston Churchill's picture

Go back a little further.
I remember the S + L bust.

813kml's picture

I realize the 'L' stands for loan, but can't remember what the 'S' means.

Ying-Yang's picture


I believe it was the Savings and Loan bust.

When the RTC was created to bail out the failing S&Ls

The savings and loan crisis of the 1980s and 1990s (commonly dubbed the S&L crisis) was the failure of 1,043 out of the 3,234 savings and loan associations in the United States from 1986 to 1995: FSLIC closed or otherwise resolved 296 institutions from 1986-1989 and the RTC closed or otherwise resolved 747 institutions from 1989-1995.

The US almost went tits up over this.

VegasBob's picture

And Bush the Smarter even put 3,000 bankers in jail for the S&L crisis in 89-91.

How many have gone to jail under the Obumbler?

Seer's picture

"Sucker" (was "Subprime" in the lexicon back then?)

ebworthen's picture


The 1933 Banking Act of Glass-Steagall was repealed in 1999, but the shenanigans started before that.

Those who remembered the mistakes of the Great Depression were out of power/influence by the late 1960's.

Ignatius's picture

I live in the Pacific Northwest.

If weather were really the issue they'd still only be dragging logs down skid road in Seattle and Portland.

Boris Alatovkrap's picture

You are forget also hooker importance of Seattle economy.

Ignatius's picture

My informal survey suggests it's a universal geographic phenomenom.

Michael Parenti was visiting Russia back when it was the Soviet Union.  A state guide informed him proudly that there was no prostitution in the Soviet Union.  "Oh, really" he said "that's interesting because they're doing a bang-up business down in this hotel's lobby."

motorollin's picture

Blackrock ended their home purchasing program. Anyone that knew that shouldn't be stunned.

_SILENCER's picture

Buying a house is rayciss.

Smegley Wanxalot's picture

And these are the same guys 100% of whom say "there is no stopping the economic growth now! No way no how!!  Whoyagonna believe?  Me or your lying eyes?"

Seer's picture

Spoilsport!  Pretending can be so much fun! </sarc>

NOTW777's picture

someone tell seeking alpo - they are extoling the boom in housing today

Yen Cross's picture

    Blame the slowdown on an expected series of heatwaves during June-Sept. across North America. </sarc>

dashingdwl's picture

Another factor and a HUGE Problem (IMO) is the massive amount of student loan debt accumulated by the younger generation.  Huge problems ahead for the badly needed "fresh entrants" and growth in "household formation". Those folks will not be consuming discretionary items to any large degree any time over the next twenty years.  $1 trillion of non-dischargeable student loan debt and rising... 

Dr. Richard Head's picture

Someone please explain this to me...

My neighbor is renting the 3,500 sq/ft home next door to me.  The previous owner, who moved out to Utah, has been renting this house in Ohio out for years and decided to stop paying on it.  The rentor followed suit once he realized it was going to go into foreclosure.  Prior to the auction the rentor contacted the bank holding the lien wanting to offer to buy the house and they refused to talk to him.  THe house appraised for $190K.  At auction, the rentor bid on the house, but every bid was upped by the bank currently holding the lien.  He stopped bidding at $235 and bank raise it to $240.  Again, the rentor contacted the bank to offer to buy the house for $240.  The said he would have to move out before he could even bid on the house again.  The house was auctioned off in early January and yet, there he still sits in the home with his family and for 2.5 years now he has not paid anyone anything. 

Why the funk would the bank not take any offers and outbid him for the house?  I'm so confused.  

dashingdwl's picture

Because the bank can hold the loan, mark it at par, and not have to worry about it again for years...

If they sell it below par, they have to mark the loss.

Boris Alatovkrap's picture

Maybe Dr. Paul Krugman is financial advisor to bank board of director? Maybe Mr. Nancy Pelosi is major shareholder? WTF?

Winston Churchill's picture

Because its levered a minimum ten times in various RMBS
trusts, and the bank is on the hook for paying all ten income streams.Foreclosure stops that liability, a sale doesn't.
A sale means all ten trusts need paying off at once.
This is the major reason reo is staying off the market,
the bank charges the trusts for upkeep, but doesn't want to sell to not recognize the true loss.
So the house is really worth $2m plus to the bank.
When the FedRes has bought out the entire RMBS market, all those houses will flood the market, because the FedRes is never going to demand an accounting from their shareholders.

TN Jed's picture

Great explanation thanks.  Dastardly.  That is a lot of debt to swallow.  I mean credit.  I mean ahh I don't know what it is anymore.  I know I couldn't live in a place too long under those circumstances.  Home is sanctuary and at some point perpetually living on eggshells would take its toll on me.  I'm sure they are fully aware of the psychological effects.

Dr. Richard Head's picture

Yeah, he has a new place all lined up and is about to close on it, so he really doesn't seem to care one way or the other. 

I also appreciate WC's reasoning behing the bank's actions.  I completely forgot about rehypothication of RMBS....So much to take in any more as it relates to this Fraudconomy.

Groundhog Day's picture

My neighbor made the crucial mistake of upgrading his house to sell it and move into a bigger house.  During the downturn he thought he could pick up the 800k house for 650k and sell his for 500k.  He buys the 650k and can't get anything close to his 500k number and decides to wait.....2 years later he had no choice but to rent out his original house just to ease the pain of the 2 notes.  Some people just don't get it

Singelguy's picture

It is very simple. The bank probably has the mortgage on its books at par value which is no where near the actual market value. If the bank sells the house, it will no longer be able to mark the mortgage to some fantasy number, and will be forced to realize the actual loss. Multiply your neighbor's house by several million and it would be enough to sink a few of the big banks so they keep the fantasy going hoping to earn enough profit in other areas of the bank before the proverbial shit hits the fan.

hangemhigh77's picture

Probably because they hold a 500k note on it and if they sell for less they take a hit. Then they don't get bonuses. Plus eventually the government will bail the house out at 500k. And he's living there cutting the lawn. Perfect in this criminal convoluted bankster world.

Dr. Richard Head's picture

No lawn cutting or tending to any of the outside of the house.  I wouldn't either in his shoes.

besnook's picture

the bank is flipping the house to itself. interestingly, the market is bifurcated between the foreclosure market and the traditional market. it is no longer true that foreclosed homes affect the local real estate market because the foreclosure market is virtually closed to the traditional home buyer. it is strictly an investment market. two things are happening. as the fed clears the books of the banks by buying mortgage backed securities that are worth zero but are held on the banks' books for fantasy value the banks are able to clear their fantasy book with a more reality based book because the fed is paying 100% on the dollar. on the one hand i see a tight group of investors with inside ties to the banks that are either representing other peoples' money or their own. the banks seem have taken two strategies. they either unload the properties for whatever they can get because it has become "found money" or, in a few cases, the banks have recognized the unlocked value of these homes and are selling them on the retail market for a lot more money, like a merchant bank.

the only other reason i can think of is the guy is talking to the wrong people in the bank. one hand may not know what the other hand is doing. tell him to ask for the real estate owned(reo) guy next time he is in the bank or find the local fha office if the loan was .gov gauranteed

VegasBob's picture

Bankers are good at deception, theft and fraud.  Outside those areas, they are not so smart.

over45's picture

I sold a house 25 years ago for 147k.  It's tax assessment now is 315k, but it's on the market for $139.5k - less than what I sold it for 25 years ago.   Taxes have more than tripled.  What goes up - must come down.  This is a foreclosure but it drags down pricing on other properties by taking buyers out of the market.  Areas with good, sustainable jobs are doing o.k., as are desireable retirement areas... but otherwise watchout below.

kchrisc's picture

Interesting, the rent to the local thieves has tripled while the inflation adjusted price has declined by more than twice making the inflation adjusted rent to the local thieves 6 times or more than 25 years ago.


"'s good to be the king!"

Seer's picture

Suppliers of unicorn dust are to blame!

NEOSERF's picture

Housing formation declines are likely tied to what is being seen in Japan re; sex, marriage, even dating...can't be bothered.  The drivers of this is the virtual world brought to you and I by the internet.  There is ALWAYS something more interesting on your phone than the person sitting next to you...

starman's picture

What is a economist???? Modern day palm reader?

813kml's picture

An economist could only hope to be that accurate.

Seer's picture

And they're afraid of sweaty palms...