Submitted by Charles Hugh-Smith of OfTwoMinds blog,
There is nothing remotely "normal" about the echo-bubble's rise, and we can anticipate that its deflation will be equally abnormal.
Conventional wisdom on the resurgence of the housing markets takes one of two paths:
1. Housing is not in a bubble, it is merely returning to "normal"
2. Housing is bubbly in some markets, but prices will continue to rise
Here's an alternative view: housing is in an echo-bubble that's popping. Courtesy of the excellent Market Daily Briefing, here are some charts that make the case that the housing echo-bubble was just another Federal Reserve-induced speculative asset bubble that's popping, like every other speculative bubble in recorded history.
First up: home prices, as measured by the Case-Shiller Price Index. Note the near-perfect symmetry of the echo-bubble: it has taken roughly the same time-span to inflate and reach a top as the first housing bubble from January 2004 to its peak 2+ years later.
The echo-bubble has topped out at about 50% of the decline from the primary bubble top to the trough in 2012.
The distorted fundamentals of the echo-bubble are revealed in this chart of mortgage debt to wages. Current levels of mortgage debt are double historic levels, and 35% above the level of 2001, when the primary housing bubble lifted off.
The third charts tells us the echo-bubble is popping. Note that housing sales lead price by about six months: sales started falling in late 2005, and prices rolled over in mid-2006.
Housing sales rolled over in December 2013, and sure enough, prices are starting to weaken in many markets.
The echo-bubble doesn't pass the sniff test as a "normal" housing recovery. Exhibit #1: who's buying and who's not buying:
1. Marginal buyers using 3% down-payment FHA/VA loans who wouldn't qualify for conventional mortgages. The risk of marginal borrowers defaulting is high, a reality reflected in FHA's default rate:
When lending sources dried up during the financial crisis, the FHA propped up the housing market by insuring the lenders it works with against losses and enticing them back into the market. But the FHA’s default rate shot up as its loan volume expanded, depleting its cash reserves to levels below what is required by law. In September 2013, the FHA tapped taxpayer money to cover its losses for the first time in the agency’s 80-year history.
3. The dominance of all-cash buyers--generally investors (those close to the money spigots of the Fed's free money for financiers) and foreign buyers.
Note the difference between mortgage credit expansion, which has lagged price gains. This suggests many of the sales (about 35% in many hot markets) were all-cash purchases that did not require a mortgage
Take away the Fed's zero-interest rate policy (ZIRP), its free money for financiersand foreign buyers seeking a safe haven for their hot money, and what's left of the supposedly "normal" housing recovery? Not much.
There is nothing remotely "normal" about the echo-bubble's rise, and we can anticipate that its deflation will be equally abnormal.
How do we know when an asset class is in a bubble? When everyone who stands to benefit from the continuation of the expansion declares it can't be a bubble.
If it was in a bubble before, and is now priced significantly higher how can it not be a "bubble"...
Because it is now called a super balloon. That's how.
Hot air baloon.
Because most of the gains are in high and holy fucking shit high price properties. These people are richer than at any time in history and there doesn't seem to be any change coming. Bullish rich cocks & cunts.
This r/e market is definitely having it's last breaths... time to find your chair quickly because the (rapp) music is about to end. "Wickie wickie wickie ______"
"Bullish rich cocks & cunts." - so, same as it ever was...
Eactly ! Here in Calif, Chinese only want a "mansion" all-cash, and means OVER $500K
An american "mansion" must look like a "super" mansion to them because they're generally smaller people... from what I'm told.
$500K in many places isn't even a mansion. In some place, that won't even get you a crack-shack.
No doubt R/E is screwed. Nothing same "game over" quite like it.
Go read Dr. Housing Bubble where he points out a couple 2 bedroom shitholes in Culver City for 700k & 800k. Ain't no mansions there at that price.
Look at the charts again LOP. Prices are still lower than the previous peak. Charles is really straining to make his point with these charts. I expect prices to decline because wages haven't risen but the reasons given in this article are not convincing.
its a noise
Indded. Kind of a wet, sloppy farting noise at that, as the air slowly exits the balloon (knot) .
Like many bubbles, we are seeing the winners get out early. The rest will not get through the small exit door in time.
I usually find fault with CH-S pieces but this one is flawless. Starting to see some extreme asking-price cuts on mid level florida beach front properties. The difference between deadbeats and non-deadbeats is clear. Deadbeats quit paying the minute things go wrong. The overextended non-deadbeats are dying the death of a thousand cuts.
I'm on cut 825.
Ouch.
You are most definately not alone. And Wall Street knows it.
May I offer you a $band-aid...?
Its been 4 years now - ZH has been sayin the same thing and this bubble never bursts. Dont fight the FED. It'll get bigger & bigger for next 2 decades. Every one buy homes lot of them !!
note: pic only showing 500 homes
https://missywpp.files.wordpress.com/2014/05/marcohfs.jpg
1269 available
I'm waiting for a house on Caxabmas Ct. To become available.
True, buzzsaw. My son-in-law & daughter are moving this weekend to FL. Rentals are over the top: $1650/mo for a 3 bd/2 bth - which is a lot for the south. They could buy for lesser per month, but don't have the downpayment money. If you look at Naples, Tampa, other places, you can see the zip codes with the greatest 'about-to-pop' pricing. Some ocean-front already coming down fast in some places. The missus and I have been watching for the last two years thinking we might head that way for retirement. The desirable zip codes (safest ones) have significantly higher property taxes than some other less desirable ones.
I saw a dozen condos on the marco beach for around $200K the other day. There wasn't a single listing under $600K six months ago. I haven't seen prices like that since 2009. The "market" is rolling over and will get much worse imo. The five year property tax nonpayment repossesssion and auction sales are going to be elevated for the next ten years imo.
My bro and one of my sisters live in Naples - frequent Marco for fun. They've told me the same thing. I suspect a good time to buy will be Jan - June '15.
I regularly attend the tax auctions here and I can say, without a shadow of a doubt, that there are better deals elsewhere (and it takes approximately 5 years between when a property goes delinquent and when it is sold at auction - most folks are just waiting to pay taxes and will redeem the property when it's about to be auctioned... the additional fees generally don't amount to a hill of beans)... The smart money is in cozying up to the local banks' repo men, lawyer trustees on preforeclosures, and FHA foreclosures... sometimes you can hit a pretty solid jackpot on a court auction, but not usually (bank bids amount owed and walks). If it's not a forced sale, then there is zero chance of there being a remotely reasonable asking price.
That said, even if you purchase many properties at the rosiest of market value, you can still pull 8%+ pretty easily out of a return... [These are the properties that granny bought because she didn't like CD rates and figured out that being a landlord wasn't all it's cracked up to be].
i'm not looking for a flip. thinking about moving there actually. in 2009 houses on the canal, with an enclosed pool, were listed at ~ $200K. List prices on those have more than tripled but not much is selling. I am in no hurry but I watch that market closely and have for many years. Plan to buy something cheap enough I don't need insurance so that even if it gets wiped out by a hurricane and nothing is left but the lot it won't hurt that much.
If you're planning on living in your flip, you might consider this if you haven't already: http://www.irs.gov/taxtopics/tc701.html
I know quite a few people that do it... I've got so much equity in my house, I'll have to sell it to exclude the gains rather than rent it (and lose the exclusion if rented long enough)... buy low, sell high, and do it as often as you can. Obviously if you run into a deal that's too good to pass up, then who cares about paying uncle sam, but if you can avoid paying tax on the gain, then we're all well advised to do so. Good luck on your speculation.
Vomit!
It's always a good time to buy stocks and real estate!
Pleaes Raki, buy as many as you can right now! Don't be afraid to bid up too, as prices will only go up! Btw, the NAR say today is the BEST day to buy real estate!!!
Only in the US is the national championship of a game of sports played by few other countries in the world, called the "world championship". It might be wise to bear in mind that, despite what the Fed would have you believe, and what the majority of Americans by the looks of things believe, there are markets (yes, markets) that exist outside the US, and those markets (yes, markets) have a will of their own, and are not going to accept their ruin by the US's madness. Suffer, yes. Ruin, no.
AMERICA, FUCK YEAH!!!!!!
If you ever get to be old and ugly like me. You will get to see as many fools like you,
that I laugh at your stupidity.
I've made and lost fortunes multiple times. Just see if you can hold onto yours.
Keeping it, not making it, is the only important thing, you finally learn.
The only way to win,is not to play the paper game.
Share your feelings Winston. Have done the same. Building last empire now...plan to hold on to it if I can. Gonna be hard given the storm clouds on the horison.
Let them eat houses!!
The market has been supported by hedge fund and private equity money disguised as thousands of faceless LLC's.
The all cash purchase volumes is a dead give away.
They have apparently had their fill and eying the exits.
bullish!
The question is as simple as ever: is the Fed going to continue to "manage" asset prices or not?
If it is politically tenable, yes. And since this is Very Much a 'Political Economy' and the 'continuity of government' is Paramount, the odds-on favorite is - by any other euphemism, Yes.
"How do we know when an asset class is in a bubble? When everyone who stands to benefit from the continuation of the expansion declares it can't be a bubble."
Like the current stock market?
I don't think its a bubble, it has to do with the vaule of the dollar.
Some bubbling with a declining dollar all 'round. Sounds like a freaking weather forecast.
Only in part. It is a number of things... fraud for one, of course. You can thank Wall Street for that... enabled by Washington and the Fed.
But, this is a global shit storm. And the US has the most open and deep markets despite all the corruption. International capital flows are part of the equation.
There is also a flight from public debt and even fiat itself. Hard assets that are less likely to be taken away. I am reminded here of that movie (too lazy to look it up - pretty sad because I am on a computer - ha ha) about Wall Street collapsing where one of the main guys is advised that gold is already some absurd price, and he replies something along the lines of "by tomorrow morning that will be cheap."
What is happening is something that nobody has ever seen. Historical references short of the collapse of Rome are inadequate... even then it is stretch.
I met an American guy back in 2010 that was living in Europe. He said "San Francisco real estate is cheap for a Pacific Rim city. It should be a world class city like Sinagapore, but it's not"
Maybe we make too little money here.
I think the movie is called "Rollover"
https://www.youtube.com/watch?v=7gqebF6EIJs
All I know is when it pops and the gov passes the Static Home Price Act of 2015, I will be a loser for waiting it out renting and my banker brother who bought a house in Sept of last year will be sparred from having to deal with a consequence of a poor choice.
let's say you print 30 dollars for each 1 dollar.
and assume 10 pct of the population is holding 90pct of the dollars.
so the mass of the printed money is really in the hands of the 10 pct rich.
and they put their money as before into housing, stocks and other values.
so its not really a bubble, but a result of inflation.
so no way that all bubbles will burst, they control it.
if they start selling stocks, someone is buying just at a lower price,
so if a rich passes is wealth from stocks to dollars he has to buy something else.
gold ?? housing ? bonds ? just shifting in bubbles.
one day the inflation will hit also the 90pct non rich.
Most money isn't really "printed", but is created as debt. The cash must also always be held by someone. But if that cash is in bank accounts above 250K (or in non-bank banks), it can evaporate into nothing when banks fail. So, the real question is - is there a plausible scenario that will bring down banks when the bubbles burst?
That inflation is hitting the 90% thru the back door. Wage deflation(real income) and limited access to credit.
I can't speak for the rest of the country but if you look at California there are some market conditions that are clearly evident. Where there are jobs, the housing market is strong. The SF/Bay Area with the tech industry has been out of control but is coming back down to earth. Parts of the LA Area have been strong as have parts of San Diego. The areas that have done well are the higher end neighborhoods with affluent populations. In the SF area as you go north toward Vallejo (historically a ower middle class market) they are still in stall mode. In the LA area, cities that were hit hard in 08' are still feeling the pain: Riverside, Torrance and more - but if you look at high end neighborhoods like Manhattan Beach and Pacific Paiisaldes they are as strong as ever. San Diego is no different. ougher underwriting criteria have limited the number of buyers. Likewise, common sense has had a strong impact on the number of buyers as they do not have confidence that the Fed's ZIRP policy will last and/or benefit them in the log run, especially by investing in a home. So what does all this mean? The Fed is propping up the system with low rates, but the confidence in the system has not returned and thus the economy is not recovering. This is not a sustainable model. I can't say when it will start imploding or how bad it will get, but I do believe we will see some major market corrections in the next two years.
Agree 100% This Fed manufactured "tide" is not floating all boats.
I'm in prime socal beach town, houses, excuse me shacks around 6 to 800k started the "new price" crap, dropping 15 - 75k in sale price to entice buyers.
As I noted above, Dr. Housing Bubble had a post about a couple 2 bedroom shacks in Culver City that were listed for 700k & 800k. Un-freaking-believable. Have a friend that lives in Santa Monica, she says housing still really bonkers around there.
Heard an add on the radio yesterday that floored me. They were telling people to get a second to pay for their daughter's marriage. Maybe these commercials never went away, but didn't we learn ANYTHING?
After the crash zillow.com asked buyers if they would buy again if they could get a loan.
a whopping 80% said YES!
I continue to assert that I am a good barometer of US housing.
I live in upstate NY and have been living in a foreclosed (inherited) home for over five years. Dad died in July '09, BofA (via Cuntrywide) foreclosed in March 2010. Since then, crickets, though they got the taxes current and continue paying them. Thanks.
Still, they will not more on the foreclosure. Why? I have them by the short hairs and they know it. Fraud (I filed a separate fraud suit last June, just under the SOL, and it sits.), from the loan origination to the bogus (robo-signed) assignment. They're stuck. So stuck, they don't even ry to make me an offer. Do I care? No. enjoying the free ride and saving money, headed for retirement - 16 months and counting.
My point is, until they do something substantive with the foreclosure, this RE market is still dead, the past five years have been a mirage, funded by the Fed's funny money. Now, that is coming to an end and the Fed is still stuck with all those toxic MBS, which they have on their books at par, but are maybe worth only 30-40 cents on the dollar.
Essentially, the Fed is upside down. They can try to unload those MBS, or, which is probably the case, ride them out at a loss (of which you and I will never know). The other option is to sell them at a loss, but that would collapse the whole system. I may be wrong on this, but I think I'm right. The Fed is stuck and they're stuck at ZIRP for a long, long time. They'd love to get back to a discount rate of 3-4%, but the global economy would absolutely implode.
Thus, US housing, the bedrock of the financial universe and where the global collapse began, cannot readily appreciate in a dead economy. We are in the middle of a long depression. I'd sit tight and wait some more for buying any RE. When they kick me out of here (if ever, because I will fight them in the courts, tooth and nail, or wait until the SOL runs out, or, wait ten years - 2019 - and claim adverse possession, or, file a quiet title action - I have lots of options), that will be the sign of things changing. Until then, wait for another downturn, because it's coming, and may be the bottom. I'm thinking late next year or 2016 or maybe even further out, but, RE market is turning down again. The fraud can only work so long.
Also, there are still many, many vacant houses around here that are bank-owned and not moving. The banks won't put them on the market because they'll spook everyone. There are bargains around. Be patient. Be vigilant. This isn't over. Not by a long shot.
This:
wait ten years - 2019 - and claim adverse possession
I don't know how it works in your state, but, you need to be paying the taxes on the property to claim adverse possession. Since the bank is paying the taxes I doubt you can win an adverse possession claim.
I think it's likely universal among the 50 states. Although, you may not necessarily have to pay property taxes on the subject property if you own adjoining land and pay property tax on the adjoining land...
Further, adverse possession cannot arise through permissive use. Presumably, OP got permission to live in the house via the estate (maybe he even has letters testamentary/is the personal representative of the estate)... OP may simply be filling in the shoes of the estate, not himself individually. We don't know enough from his comment. Further, you cannot commit a conspiracy to adversely possess a property, i.e. you cannot enter into an agreement with a mortgagor (the estate) to live in a property for the requisite period unbeknownst to the mortgagee (the bank). After all, adverse possession does have to be adverse (e.g. open)...
It's also curious why the statute of limitations would be running... The mortgagee needs to counterclaim on the mortgage and the note (in the alternative) to at least preserve its claims. If he wants to sit on his case, then they can sit on theirs... although, they'll be eating the taxes in the interim (which are just being paid from the gains on the derivative/sale of the note anyway). The banks could easily fix the mess with declaratory actions between all the possible real parties in interest. The court would then determine the holder of the note/mortgage, which would likely be incontestable by the property owner... but since the collateral is dwarfed by the securities issued on the collateral, it'll never happen.
I have to say your story makes me smile. Fuck em. Stick it to those mother fuckers for as long as you can.
I keep waiting for the other shoe to drop and then I am looking to pay cash for several rental properties. I drool every day waiting....
Then scammers like the guy above will move in, stop paying rent, file for bankruptcy, sue because he fell down the unsafe steps and is now disabled, demand you give him $10K to move or he will stay, not pay rent and trash the place when he moves out for parts unknown.
After all, he will see you as a greedy slumlord, and he's just trying to get back at the system and make it in this unfair world [sniff].
He's just a scammer complaining about another scammer.
I'm no fan of banks, but I'm also no fan of moochers/opportunists. If you "inherited" a house which was already in foreclosure (or close to it), then you didn't actually inherit an asset, you inherited a liability, AKA mortgage payment. And if you choose not to make the payment, then you have no right to live there. Go ahead and file your lawsuits, we are all paying for your shenanigans.
the only way to keep this going is to bring back the no doc liar loans.
It's weird, the market is bifurcated or trifurcated or something.
We just had a few days of Monsoon rain in the dry, dusty Arizona desert and my backyard is full of green shoots! I'm pretty sure that if I just let these shoots grow, I'll have a backyard full of beautiful, fruitful and economically rewarding trees - maybe some orange, apple and pear trees, or maybe even some vegetables & herbs will sprout up. Dammit, I might even get a few oaks or tall timber pines from these little green shooters, so I can add a new wing to my house, build a boat or maybe even there will be enough wood to start a new homes construction biz. Thank you Bernanke and Yeller for teaching me about green shoots! Its good to be rich! Wait, hold on. My 4 year old son is saying something. Can't quite understand him since I'm drunk with green shoots punch. "They're what?" I have to yell at him because the little sucker is insistent that I look a little closer at all these 'lil shooters. He's saying they're all weeds. I don't believe him. Yes its true that we don't have oaks and timber in the desert - but things are a changin' aren't they with all that global climate change warming stuff. Maybe there really is a forest popping up in my back yard! WHO THE HELL ARE YOU TO TELL ME THAT MY DREAM PLANTS DON'T GROW IN THE DESERT? Anyway, even if they are only weeds as my 4 year old figured out, I'm sure I can get rich off those too - after all, they are green shoots...and green shoots equal real recovery, then growth, then not-so-excessive exuberance, then bank-silly riches. Where is that little shit anyway - time for him to shut up and take a nap.
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Quite bogarting that thing, and stay away from the bloody keyboard!
You're embarrassing yerselfs.
•J–<
V-V
Fuck the boomers. I hope they choke on their house. They totally brain washed the younger people.
They're the original 'TV-brainwashed generation', themselves. How could they be responsible?