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'Pin' Meet 'Housing Bubble 2.0'
Submitted by Jim Quinn via The Burning Platform blog,
Housing bubble 2.0 just met Pin 2.0
The 30 Year U.S. Treasury bond yield hit 2.35% yesterday. That is the lowest rate in U.S. history for the 30 Year Treasury. During the deepest darkest depths of the recession in March 2009, after the stock market had fallen over 50%, the yield was 3.5%. One year ago it was yielding 4.0%. Long term interest rates are not controlled by Yellen. They reflect the economic prospects of the country. When they are rising it means the economy is doing well. When they are plummeting to all time lows, the economy is either in recession or headed into recession. Take your pick. No amount of government data manipulation, feel good propaganda spewed by the captured mainstream media, or Ivy League educated Wall Street economist doublespeak, can change the fact this economy is in the dumper and headed much lower. The Greater Depression is resuming its downward march toward inevitable war.

- KBH SEES 1Q BOTTOM LINE ABOUT BREAK-EVEN (against expectations of a 17c rise!)
- KB HOME CFO SAYS FIRST-QUARTER MARGINS EXPECTED TO BE DOWN
- KB HOME PULLED OUT OF `COUPLE’ HOUSTON LAND DEALS, CEO SAYS
- LENNAR CFO SAYS MARGINS ARE POISED TO NARROW ON LESS PRICING POWER
- LENNAR GROSS MARGIN DECLINED & SALES INCENTIVES GREW
- LENNAR CEO SAYS “ACROSS THE BOARD, WE’RE SEEING INTENSIFIED COMPETITION AS BUILDERS GO OUT AND CHASE VOLUME”
KB Home had revenues of $2.4 billion in 2014. They are one of the largest home builders in the country. It’s stock has dropped 30% in the last few days. It’s down 40% from its February 2014 high. It’s down 85% from its 2005 high. It had $9 billion of revenues and delivered 60,000 homes in 2005. Then Pin 1.0 popped the first bubble. Revenues collapsed to $1.3 billion and they lost hundreds of millions from 2007 through 2012.
Lennar had revenues of $7.0 billion in 2014. They are the largest home builder in the country. It’s stock has dropped 9% this week. It had been trading at a seven year high, but is still trading 33% below its 2005 bubble high. It had $14 billion of revenues and delivered 42,000 homes in 2005. Then Pin 1.0 popped their bubble. Revenues imploded to $3 billion and they also lost hundreds of millions from 2007 through 2012.
Their admissions earlier this week are proof Bubble 2.0 has met Pin 2.0. KB Home’s 85% increase in revenue and Lennar’s 130% increase in revenue since 2011 have been nothing but a Federal Reserve/Wall Street/U.S. Treasury engineered scheme to repair the balance sheets of the insolvent Too Big To Trust Wall Street banks. The financial industry oligarchs and their servile lackey puppet politicians decided an easy money, Wall Street created scheme to boost home prices would benefit the .1% and restore some of their fraudulently acquired wealth. It isn’t a coincidence home prices rose in parallel with the Fed’s QE programs. And it isn’t a coincidence the bubble is rapidly deflating now that QE3 is over.
The fraudulent nature of the supposed housing recovery can be deciphered by analyzing a few pertinent data points. 30 year mortgage rates were in the 5% to 6% range during the first bubble. Mortgage rates have been consistently below 4% for the last three years. In a healthy market driven economy, these low rates should have brought in first time home buyers and led to a sustainable long-term recovery.

Instead, the number of homes bought by first time buyers has languished at record low levels. The majority of homes sold in 2011 and 2012 were distressed foreclosures and short sales, and the vast majority of sales in the last two years have been to Federal Reserve financed Wall Street investors, Chinese billionaires and fast buck flippers. New home sales of just above 400,000 five years into an economic recovery are at previous recession lows, despite record low mortgage rates. They languish 65% below 2005 levels, when KB Home and Lennar were minting money. Existing home sales of 5 million are back at 1999 levels and 30% below the 2005 highs. This pitiful result is after $3.5 trillion of QE, extremely low mortgage rates, and tremendous hype from the NAR and the corporate MSM (It’s always the best time to buy).
The falsity of the housing recovery storyline can be seen in the fact that mortgage applications linger at 1995 levels, even though mortgage rates are 400 basis points lower than they were in 1995. A critical thinking individual might ask how home prices could rise by 20% since 2012 even though mortgage purchase applications are 20% lower than they were in 2012 and 65% below 2005 levels. The answer is they couldn’t have risen by 20% without massive monetary manipulation and insider deals between Wall Street banks, Wall Street hedge funds, FNMA, Freddie Mac, The Fed, and the U.S. Treasury.

You see, average Americans buy houses not as an investment, but as a place to live. They save enough for a down payment by spending less than they earn, and then make monthly payments for 30 years from their rising household income. Of course, that was the old days. Real median household income is exactly where it was in 1995. It is currently below the level of 1989. Average Americans have made no headway in 20 years. The median price of a home in 1995, according to the Census Bureau, was $128,000. The median price of a home today is $281,000. When prices go up 120% and your real income remains stagnant, even record low mortgage rates is just pushing on a string. With real wages continuing to fall, young people saddled with a trillion dollars of student loan debt, the full impact of the Obamacare neutron bomb (kills small business, doctors and jobs, but not insurance conglomerates or government bureaucracy) just detonating, and an economy clearly going into the tank, there is absolutely no possibility of a real housing recovery in the foreseeable future.

The Too Big To Trust banks have consistently accounted for 35% to 55% of all mortgage originations in the U.S. over the last four years. Wells Fargo is the undisputed leader. All of these banks have reported dreadful financial results this week, with plunging revenues and profits, even with accounting shenanigans like relieving loan loss reserves and marking their balance sheets to fantasy rather than true market values. In the midst of a supposed housing recovery, with mortgage rates at historic lows, the largest mortgage originator in the world, saw their mortgage originations FALL by 12% over last year. They are down 65% from two years ago. JP Morgan and Citigroup also saw their mortgage businesses contracting. These banks have been firing thousands of people in their mortgage divisions. This is surely a sign of a healthy growing housing market. Right?

Essentially, the entire housing recovery storyline has revolved around the Federal Reserve providing free money to Wall Street banks, who then withheld foreclosures from the market, sold them in bulk at inflated prices to Wall Street hedge funds like Blackstone, who then created a nationwide rental business, driving prices higher. FNMA and Freddie Mac did their part by selling their bulk foreclosures to the same connected hedge funds. The average person had no opportunity to bid on foreclosed homes and reap the benefits of lower prices. Blackstone has since created a new derivative, by packaging their rental income streams into an “investment” to sell to muppets. Their rental properties are concentrated in the previous bubble markets of Arizona, California, Florida, and Nevada. What a beautiful business concept. Free money from their Federal Reserve sugar daddy, kicking people out of their homes and then renting their houses back to them, driving prices higher by restricting supply and stopping new household formations, double dipping by creating a new exotic subprime investment opportunity, and then exiting stage left before it all blows sky high again.

The areas of the country with the highest percentage of Wall Street owned rental properties have had the largest price increases over the last three years. Some people never learn. Blackstone and the rest of the Wall Street crowd stopped buying properties in 2014. They’ve achieved their objective – easy profits. They have no intention of being long-term landlords. They are seeking the greater fools to take these properties off their hands at inflated prices. The result will be rapidly falling prices, as there is no real demand for these properties.

The only thing propping up the housing market has been QE, connected Wall Street insiders, Chinese billionaires trying to get their money out of China before their collapse, and the usual flip that house morons you’ve seen on cable TV. QE has ceased. The Wall Street shysters are selling. The Chinese billionaires are only impacting the high end. The low IQ flippers are stuck holding the bag again. It’s no coincidence the Case-Shiller Index has been in a steady DECLINE since the beginning of 2014. Prices have round tripped back to 2012 levels and are headed back to 2009 levels. What a shame. Maybe they can hand out t-shirts that say:
THE FED PRINTED $3.5 TRILLION AND ALL I GOT WAS THIS STUPID T-SHIRT

Two of the biggest home builders in the country have already warned that 2015 is going to be bad. And they are surely painting a rosier picture than they will ever admit. Corporate executives aren’t known for honesty or forthrightness. A perfect storm is brewing and the second Fed induced housing bubble of this century is deflating rapidly. The plunge in oil prices is not due to over-supply. It’s due to under-demand. A global deflationary contraction is underway. What higher paying employment growth and capital investment that has occurred since 2009 was spurred by high oil prices. Texas has led the charge. Energy related companies are announcing thousands of layoffs, and the fun has just begun. Lance Roberts explains the ripple effects:
The majority of the jobs “created” since the financial crisis have been lower wage paying jobs in retail, healthcare and other service sectors of the economy. Conversely, the jobs created within the energy space are some of the highest wage paying opportunities available in engineering, technology, accounting, legal, etc. In fact, each job created in energy related areas has had a “ripple effect” of creating 2.8 jobs elsewhere in the economy from piping to coatings, trucking and transportation, restaurants and retail.
Energy companies have accounted for 25% of all S&P 500 capital expenditures. They are slashing cap-ex budgets by billions. Revenues and profits of energy companies are collapsing. Unemployment claims have already begun to rise. Retail sales growth below 3% always portends or confirms recession. People without jobs, burdened with student loan debt, and living on the same income they had in 1989, do not buy houses. Without QE and Wall Street hedge funds to prop up the market, the bubble is popped. Maybe someone should ask Ben Bernanke at one of his $300,000 lunch time speeches for Bank of America what he thinks about the housing market. He does have an Ivy league education and did save the world.
“We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.” – Ben Bernanke – July 2005
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Pin, meet the bubble full of shit... and the fan!
Shit and Fan, meet Pin. ;-)
Looney
So... basically, we're talking about the classic poop/propeller paradigm.
Robber barrons. .....the spread on 30 yr mortgage is 50% moar than the 30 yr bond.
Thats fair
Fuck you Mr Yellen
The 30 year mortgage is supposed to be pegged to the 10 year since the average life of a mortgage is 7 years. They're getting more than a 100% markup at 1.8% vs 3.8%.
I like to the hippo/dubstep paradigm better.
http://youtu.be/o74i8MNauUA
The 30 year is going under 1.5% in the next 12 months.
If you are going to lose your mind every time it drops 0.1%, I'd suggest you starting huffing kolonopin.
Or stop fighting the FED and change your fucking bet.
Don't worry, "it's contained."
Gafaw ... gafaw ... gafaw ....
My guess is the 30y Treasury Bond will hit 0% before 2020. If the EuroZone implodes, it will hit -5%, and the short term Treasuries will hit -20%.
so I should not refinance my ARM to a fixed?
They may actually be paying me soon?
My magic 8 ball says "yes".
Yeah, according to a guy named kyle your supposed to short the 30 yr after japan collapses, of course I'm just a peasant who probably won't have access to the markets at that point that will be reserved for the "institutional investors" the game is rigged
If you place a bet on the status quo failing catastropically, you won't win.
Why?
The status quo runs the casino.
They'll just give you the finger, retreat behind armed guards and close the "payoff window".
So what is your play?
I'm not buying anything that the government can artificially set value on, and that includes gold. I'm sure there will be some short term plays in almost any venue, but all of that is completely contingent on timing, something that the vast majority of us suck at. If there is a safe bet, I don't know what it would be other than situational awareness and the mental preparedness to react in our own interests, not in the herd directive of our "rulers".
PMs have no counter-party risk.
But if you've ruled PMs out, consider my grandfather's comment about the depression of the 1930s.
"Many people lost their jobs and suffered, but we did okay, because we had a farm."
and my favorite high school teacher:
"Have a real trade that people need."
When I was a kid, I asked my mom "Who are the people who own these big houses?"
Her reply, "They are [fill in the blank] and in the depression, they had gold.
Hope that helps.
You've got to be joking (or are part of the 'status quo'---in which case woe to you). It is more likely you will see countless lifeless bodies hanging from lampposts, tree branches, basketball hoops, etc. if they try such a thing. Count on it. The 'numbers' just don't support your claim.
You missed the part about the armed guards.
Why the timidity?
I don't know about under 1.5%, but I predicted on another blog that the 30-year would fall below 2% during 2015.
Bunch of folks with whom I'm acquainted who own rental property for a living out here in the Land of Fruit and Nuts, are in the process of liquidation everything they own.
2 reasons
1. General economic downturn, they've got profits in Central Valley, SF/San Jose properties picked up last time around, cheap.
2. CA is still in a drought, not had piss for rains, problem has been moved to the back burner as global events taken place, etc. Lots of their places are in the Central Valley Ag areas. No rain, no crops. No crops, no jobs. No jobs, no rent. No rents, no cash flows. No cash flows... well, y'all get the gist.
3. SF/SJ property prices through the roofs, generally
They're smart money, and they're sellers. A couple have almost liquidated out.
they have to be smart because they won't get bailouts like the maggots do
The futures so bright I gots to where...welders goggles.
My old college roommate just sold his two rentals in the Houston area. He sees a long-term recession there and doesn't want to deal with evictions, etc. One problem with RE is it's illiquid as heck 99.9% of the time as shown by history. Once the mad rush to the exit beggins it may be extremely difficult to dump that rental.
I see two home sellers in my area with houses originally listed for >$600k back in September. Price has been reduced three times on both of them and zero buyers. One complaind almost no one even comes to look at it. Selling a house really sucks fo those non-flipper, non-realtor people; namely, your average person.
Put some pontoons on those things!
5000 Sq foot McHouse Boats!
Let's start "moving the living space." Go long piers and stowage!
A $600K house in Texas is insanity. The property taxes would be at least $15K, insurance would be $5K, and the utilities for cooling the home would be $1K/mo from May-Oct.
I got a good sized house at 2700sf for $175K in McKinney back during the housing crash. It sits on about half an acre with a nice little creek off the backyard. Why the hell would anyone pay over 4250K for a house is beyond me. I put it on Zillow for sale at $230K just for kicks and have had about 50 people contact me by email. LOL
The shit pissing me off with the "value" of the home rising is my property taxes have gone from $4,200 when I first bought it to $5K now.
The down side of relying on property taxes rather than income. We Texans have a target on our back that is tough to shed. Renting would seem the better choice until you realize that in a sustainable situation, those taxes will be paid through your rent. Living south of Dallas, my property taxes are over $25k, and I feel lucky for if I lived in your neck of the woods, they would be double. A past employee purchased ten acres two hours west of Dallas and pays $70.00 a year in property taxes. The problem is getting out, selling without losing your ass, which is exactly the plan. They know that few will be willing to sacrifice so much for freedom, which is really what we are talking about. To have a decent income most are forced to live near or in metro areas. A captive market where we demand schools, roads and protection that due to waste and corruption will never be affordable. The key component is our indoctrinated concept of what it is we need to be happy or fulfilled.
"I felt a disturbance in the force, as if a million almond trees cried out in thirst and were suddenly silenced. We must go to central California".
which text are you referencing if I may ask ?
Obi Wan
I live in the SF East Bay and believe it or not there isn't much inventory.As far as rain we got a bunch and now nothing,still a few months to go.
Yorp. Them Dotcommies keep buyin up the stuff. A doctor bud of mine just moved there and refuses to buy. Renting for the time being and he's had a pretty good nose with RE.
OT but here is my take on the Swiss peg cut.
They are gearing up for U.S.D support. Watch the Swiss balance sheet go Belgium in the coming months. They got their orders from the Seppo's. Stop the Euro peg, its time for you to buy dollars.
... Seppo's?
The only times the Seppo-chat is bubblin'-up, a Malaysian plane is about to go down somewhere. ;-)
Looney
Time to call a spade a spade
seppo Slang for Americans - as septic tank rhymes with yank, but Americans are also full of shit like septic tanks "This seppo would not shut TF up about NFL last week"You may be right, but I think it smacks of desperation if so.
Seems to me we have a perfect(derivatives) storm brewing between the swissy revaluation,
and the oil complex, just the swissy may have already screwed some counterparty in either
chain.Next week could get very interesting.
Having similar thoughts, Winston.
This would be a great time for Greece, or anyone else, to go apey;)
If all you have is desperation that's what you go with and since people are too busy trying to survive to buy real estate you can't make the loan bribes big enough. Somebody is going to wind up holding the shitty end of the stick.....
Yeah, they screwed the PM oppressors:
20% increase in CH relative to USD is like the price of PM dropping 20% from present level. That's like Au dropping from $1260 to $1000.
Buy only for buyers using the CHF. Who could that be, I wonder?
Beep, beep, beep...
Finally a not completely implausible theory to consider.
Kudos!
Think it'll be bad in the US? That's nothing like what Canada has coming, with far more debt per person, way higher average house prices, and an economy running on nothing now that all commodities have crashed.
And yet Canadian banks are still near all time highs, though now falling. Wanna make a bundle shorting? Think Canadian banks.
Royal Bank of Canada is a Fed primary dealer.
All the big Canadian banks got under-cover bailouts from the Fed liquidity lines last time as per Bloomberg freedom of information request:
http://www.bloomberg.com/data-visualization/federal-reserve-emergency-le...
Let's go ahead and kill this lie about Canadian banks' "health" right now, shall we? Canadian banks received a fat bailout in '08, because of the housing panic, SAME as all other 'western' banks. But this hurts Canadian pride, so they've lied about it in subsequent years to the point that the population believe their own press.
Roughly $186 Billion they got, but really, it was just to "lend to small businesses", so the timing was purely coincidental, and was definitely NOT needed by the banksters even though that's who got the funds... anyone who believes in Canadian banks deserves to lose their money, since such investors have no bullshit filter at all, and obviously no aptitude for due diligence.
From my files:
http://mises.ca/posts/blog/the-canadian-bank-bailout
https://www.policyalternatives.ca/newsroom/updates/study-reveals-secret-...
http://business.financialpost.com/2012/04/30/did-canadian-banks-receive-...
http://www.macleans.ca/economy/business/the-real-canadian-bank-bailout
http://www.wellingtonfund.com/blog/2010/12/02/canadian-bank-bailout-tota...
http://behindthenumbers.ca/2012/04/30/canadas-secret-bank-bailout
http://rabble.ca/columnists/2011/11/bailed-out-any-other-name-canadian-b...
http://www.huffingtonpost.ca/2012/04/30/canada-bank-bailout-cost-ccpa_n_...
I include the useless HuffPo link only to quote its "update" of the bankster lie: "UPDATE: The Canadian Bankers' Association has responded to the CCPA's report, telling The Huffington Post that no Canadian banks were in danger of failing during the financial crisis, contradicting a claim in the CCPA's report. “They seem to be implying that liquidity support is the same as a bank bailout and this is not the case,” CBA spokeswoman Rachel Swiednicki said in an email. “These funding measures were put in place to ensure that credit was available to lend to businesses and consumers to help the economy through the recession. These funding measures were not put in place because banks were in financial difficulty.” More of the CBA’s response to the report can be found at the bottom of this article."
And by the way, Canadian banks are among the WORST capitalised in the world:
http://www.zerohedge.com/news/2014-09-03/presenting-worst-capitalized-ce...
http://mises.ca/posts/articles/canadas-banking-system-exposed
This, of course, is the savvy country that unloaded 100% (give or take a tonne or two) of its gold reserves to stack up worthless US paper. This reset is going to expose this country as completely broke, and I can't think of one who deserves it more richly. Even the US has more financial integrity, and as for the population, well, you can't fix stupid. The population is the best example I know, of a fool and his money: braindead, subservient workerbees who know their place and that's about it. But Canadians have been fools about money for a very long time. They've been paying negative interest here (parm me, "bank fees") since before it was cool. They worship their big banksters: take stupid pride in the fact that their country is run by a handful of banks.
When their country is exposed as completely insolvent in the reset that's coming, Canadians will probably blame whoever the White House tells them to blame, just before they're officially subsumed into the new North American Federation of United States. (Unofficially, this happened quite some time ago.) This will be a step up for most of the population, since at least that will make them countrymen with Americans, some of whom understand what a real country is. Canada, a country of spineless lackeys, never grew out of being the Queen's fucking footstool.
You're on a roll today!
You sound bitter enough to be a Canadian who has become aware...
Well said. The oil patch will be the first to crack (happening now) and it will take the whole Canadian RE market right down the shitter. The valuations are totally insane. They need a 50% retracement to even get back to something even close to resembling reality.
+1 im thinking a fibonocci .6018 :)
CIBC and RBC are already down about 12% in the last 2 weeks.
the yield of the 30 year t bill at its lowest in history means that the demand for t-bills is at an all time high. yields are the inverse of price meaning that in my opinion de leveredgeing of the currency traders, they have to buy t-bills to cover their margins.
now is the time to buy some puts on tbills about a year out. this buying cannot be sustained and when it subsides the price will go down.
just my .02 cents worth, but i am going to put some frn where my mouth is. for what its worth, by .02 cents and frn, lol
Really?? The 30 year trend in the 30 year is down, down, down. There are wiggles upward, but the trend is remarkably linear (see top graph). Linear means predictable - just draw a line. I don't think this trend will or can reverse until the 30 y bond hits 0%, or lower. And if the EuroZone implodes, the flood of flight capital from Europe could drive the 30y bond very negative. If that happens, it will be the sign of the end of the trend.
If the 30 yr goes negative it will be the end of economics and finance and maybe everything.
You know, these last five decades have been a great time to be alive! Lot's of interesting shit going down.
I think I've seen everything except human cannibalism, and we're sure not done yet.
i agree. i don't follow politics either...
JGB 30 is still above 1% after 25 years of BOJ ZIRP, so the US 30 will take a looong time to get there.
That can easily go on for 3, 4 more years. Especially if the US manages to kill off (read: sacrifice) some other currencies to stabilize theirs.
I doubt it. Maybe 2-3 more cycles but the rhythm is accelerating rapido now.
Housing Bubble 2.0? You ain't seen nothing yet.
See that 30 year treasury? Sub 2.8% on the yield? Mortgages are still 3.8%. 100 BP spread.
If the ECB follows through on QE, it's a rush back into dollars and anything that pays a yield. That spread will collapse and you'll see 2.9% for a mortgage. Housing and everything else is in the US is going much much higher. Bullish everything. It's a reimportation of inflation.
And M&A is coming back. Big time. Every European major needs US exposure. To anything.
That mortgage will work just fine for the wealthy and upper class who can get it. Lower and middle classes will be squeezed out again like in 2009/10.
Mixed bag. Maybe some people will refinance, but most who could already did in the low-mid 3's, so high 2's would not be worth the lending fees.
I'm not talking about refis. I'm talking about capital flight out of Europe and China.
You're a little late to that party, Sparky-
The foreign serious money is already here- ain't been that tough to figure out for them.
The more interesting moment will be when that "safe" money sees their property value drop 20%-
Whoops.
The "safe" money in Europe just took that 20% eat when the Swiss bank just fucked them. That was the "safest" trade going.
It has been musical chairs since 2009, with the music stopping at intervals and everybody scrambling. Something tells me the last chair is gonna be shiny and yellow colored. Oh, and grey, very dense, and suitable for high-speed propulsion through a steel tube with grooves designed to make it spin
cat... agreed. when rates go down to the low threes(currently 3 3/4) we will see buyers come out of the wood work. like fall of '12- 3 percent 30 yr.. 3.0 percent will start the chain at the first time buyers. subsidies aside at that point in time rent will be unattractive. this will free up sellers to move up. up here in mn there is hardly any good homes for sale and they sell fast. i am not seeing what i just read. we have very low unemployment. the hot markets that crashed -redux and the trend will be localized. no housing crash with rates dropping back to all time lows again...
bubble markets have been doing this for years, cally, houston and no word from fl as boomers flood to buy the last on the deals left over...
at 3 percent that is 421 for 100k loan 842 for 200k
rents? ha...
didn't i read an article simular to this 6 months ago and wow, where is the crash? now rates are lower and going lower and another article saying the sky is falling. oh, shit an acorn hit my head, fucken eh the sky fell and i survived. fucken joke, fear monger bull shit to whip a shitty for arm chair computer wizzes that are clueless. rates go down sales go up-wtf...
watch existing to trend back up in stable markets.
Same here in the Dallas area. Houses are still relatively "cheap" compared to the rest of the country. I live in the wealthiest city in the wealthiest county in Texas, and the average higher end new construction home is going for around $350K for 3000sf. There is a development nearby with $600K homes. Those are 5000sf mcmansions though. The same homes in SD/LA/SF would cost over $3 million. We don't get that much price increase in TX due to high property taxes and endless land. New developments popping up like mushrooms, so why buy an older home and put in $50K to remodel?
No doubt, but even the NY and SF housing markets are hitting peak, if not slightly (very slightly) declining. They are certainly slowing down in terms of numbers of sales.
I'm not sure how much more capital is going to flee to an increasingly anti-capitalist USA, especially in light of the encroaching police state.
More likely people are going to shift their assets toward Singapore (as packed as it already is), Malaysia and Thailand. Not everyone all the time, but it will be an increasing trend. I can also see India and even Myanmar start to become more business friendly in order to take advantage of the global shift to Southeast Asia.
If there's Capital Flight from Europe and Asia into the US, then those countries will have to De-Dollarize and opt for the "Every Lifeboat for itself policy".
Some are trying to get onto the Titanic, others are trying to get off.
jumping on a ponzi near the end is hazardous to your wealth
Dup
All this begs the question, Why is IYR (US Real Estate ETF) at an all time high? It has been on a rising streak in January! Any revelations out there?
Because deflated baloons don't pop.
Interest rates are dropping like a lead balloon.
KB and Lennar might be plummeting, but I work in the private custom home building sector. I don't think we've touched new construction under 1.2 mil or anything under 3k square feet (with 5-8k sq.ft. being typical though it does go up from there). More than half of what we build is on the water and in a very pricy water-oriented county. Just some subs, but my company pays me well vs. my age and experience (and boy do we make some beautiful stuff; nothing like quality, the cookie-cutter/corner-cutter companies can stuff it up their permit holes).
Yep, rich getting richer and there's no sign of a slowdown in custom waterfront homes; all this while the middle class gets foreclosed upon, and the poor in turn are getting squeezed out of rents.
This has been a for a while, too.
Since WWII the Feds created an epic "fail" of inland real estate as folks built their camps on far more practical lakes and waterways.
Where I live most people have ditched the primary and moved to the camp.
The second lien MBS bubble in 2008 truly was one for the ages.
This is very valuable real estate in my view though.
And to say there is a lot of it in the USA is an understatement.
With a lot still available too.
37... i'm 65 and building a one bedroom 600sf house (not a home) with "artistic" finishes from recycled building materials: redwood, glass doors, stone floors...might cost $50sf. what i don't spend on bathrooms and bedrooms, i'll spend on trees and shrubs. the future in housing is small with a view of the garden.
Obviously you have no wife.
LOL, but not really LOL...
Just had my renters try to bug out and not pay the last months rent. But while moving out they had so much junk the boxes covered up the heat vents. Pipes burst on second floor bath. Water damage all the way to basement. They leave everything behind mostly junk. Cost me a grand just to fill up a 40 cubic ft dumpster labor and all.. 650 a month house. property tax is about 750. 20 grand from insurance co. House is worth about 80k now. Was 110k about 07 . No way I am going to spend much on it . Clean it up put it on the market. You just can't rent to this current level of people . Ps I just wrote the check for the clean up. Only to find someone hit my suburban at Wally and drove off while my was in the store.when I came home. You just can't have something nice anymore. Rant over
Youre a slave to your possessions.
For ten grand I know a guy who knows a guy who can...
Ten grand is reasonable, though you can certainly get the job done for less.
But then you're liable to end up on the evening news....
I am acquainted with a couple landlords, no close friends but I always ask these guys how the business is out of general curiosity and they are happy to tell.
The hardest part for them is to find someone who isn't a dirtbag, but who also isn't quite ready to buy a home yet is on track, responsible, and can hold down a job and not destroy things. The gist I'm getting is that it's an incredibly fine line.
Lets face it, we can only blame so much on the fed reserve and the jews for this country's problems (which is a lot); a lot of people out there are just loser dirtbags.
For the record I'm pro renting. I'm also pro home ownership.
I take a neutral stance. Do what's best for YOU and for YOUR Family.
i've been renting for six years. there is a freedom that comes from not owning a house and being beholden to town taxation and neighbors judging the length of your grass or the dirt on your license plate. keep the noise down and you're just part of the backround scenery.
"The hardest part for them is to find someone who isn't a dirtbag, but who also isn't quite ready to buy a home yet is on track, responsible, and can hold down a job and not destroy things."
One Mexican family paid 2 months of rent and then stopped paying. Then he brought in 5 others to live in the house.
It's what happens now. Everyone is learning to play the system and be a deadbeat.
quantitative sleezing?
People cannot witness a wholesale defiance of law and morality at the highest levels without consequence and not expect it to metastasize throughout society.
Like it or not, society is guided by our actions, not by legislation or laws.
hope this year goes better for you.
Well right after I posted I got a emergency call from the county jail , sewer flooding. Turns out the women didn't like the pototos and flushed them with anything else they could find. I shit you not. After hrs sat night took me awhile thats a 450$ call . On a lighter note sitting here with some burbon downloading my trail cam vids I got a nice vid if a raccoon making kissy face with the camera. God it's funny. The almighty provides
+1000 racoon making kissy face
:)
stant...just finished "the secret life of plants". might have your name on it.
I think "Caveat Emptor" still applies.
You're in the wrong market. My current crop of renters are a dentist, an ortho surgeon, and a petro engineer. The house I built in '95 has only had 4 different renters, hasn't been vacant for a single month, looks like new, and I've spent approximately nothing on upkeep. One of my tenants has a cleaning service that comes in once a week. Another one who had lived in the house for 8 years gave me a bottle of '61 Mouton Rothschild when she moved out.
Housing is too expensive. The numb-nuts in the bankiing system are too stupid to understand that. Free markets adjust wages and costs, centrally planned economies fail.
It's amazing to read an article about housing and mortgages that completely ignores the impact of tight underwriting standards and onerous new regulations. And institutional home buying by wall street never exceeded the low teens as a percentage of home buying and was concentrated in low end distressed properties that might still be on bank balance sheets. The author should probably write about a topic he's more familiar with.
Oh and the case shiller chart shows a slower rate of growth NOT a decline. Smh
Tight standards? As in they make sure you have a job and can afford to pay the mortgage? Oooh, the horrors!!!
My wife is a realtor and yes, it is much harder to get a deal to closing, and more expensive. Interest rates were always a component, but what really drove the bubble before was appraisers who worked for the banks. We never saw an appraisal come in under selling price. Now, it is a real battle to get the appraisal to come in AT selling price, much less above. We are seeing multiple bidders on many homes none the less, but even then, getting the deal to the closing table is hard. Everyone is getting pre-qualified on weak data and then when the full credit check comes up, all kind of crap comes out of the closet. Crap that ten years ago would have been ignored if even looked at.
The reality is that a great deal of consumption is based on credit, not on need or the ability to actually pay. Few give a shit if a new pickup is $60k, as long as they can qualify and drive off the lot. When the "rent" comes due is a different set of priorities completely.
Many home builders have circumvented this process by providing their own path to finance. Its not the same for pre-owned homes.
Expect the unexpected.
This week European QE will come up short. Which means the Euro rebounds. Which means the dollar falls. Which means gold in dollar terms will rise.
Which all means that the stock markets will drop, drop, drop.
For a while anyway.
Just waiting for that real sharp drop early-ish this year, forcing Yellen to talk up plans for QE4... Market goes up a bit, crashes again. QE4 commences, market goes up for about a week then it all goes to deep shit.
I haven't thought up what happens after that.
No way Draghi's QE can live up to the hype. Euro will sell on the news no matter what.
Stock market is so gun shy now, with commodities crashing, FX whipping around and Treasuries setting new records, it's set up for the zombie apocalypse.
Must be time to BTFD.
Which means the Euro rebounds
Fantastic forecast.
Will it rebound to $1.16? Or did you imply all the way back over $1.20, or even further back up?
Let me rephrase that, your's is an almost entirely content-free comment.
The Euro will not bounce back to $1.20 any time soon, and especially not because of the lack of an ECB QE.
Real Estate is a local phenomenon...PERIOD. Yes, it is affected by macro-government intervention, but in the end, it's local and it's location, location, location. The selling boom here in coastal South Carolina has not abated this winter...which is unusual to say the least. If you live where other people want to actually live and work, then you'll always experience a healthy and sustainable real estate market.
Yeah, but not every state is buildling new car plants....
Oh wait- those plants are gonna be laying off when credit pukes again-
Enjoy while you can.
Free tip: Buy low, Sell High.
Lawrence? Lawrence Yun? is that you?
new yorks westchester county has a lot of million dollar homes. The buyers, are missing because all the ones that could buy million dollar homes did. so who do they sell to? so real estate offices have -new price- on all the displayed homes. rough. I dont live there, I just did a lot of work there this year.
oh, some of the hedge fund buyers of million dollar homes are actually buying the homes of connected elites. you can understand the arrangement.
If the math doesn't work, the prices will go down PERIOD. No matter how badly people want to buy a house, they still have to be able to pay the mortgage. That's something the bubble deniers couldn't get through their heads in 2007. As long as there are buyers who want and can afford the higher mortgage payments, then the prices will be stable or go up. Any hiccup in the system, like a recession or higher rates, then prices will drop. Do you really think that if rates go to 6.25% that prices on the SC coast won't go down? That's an extra $400/mo on a $300K home. I don't care where the location is, prices will go down.
i always dreamed of owning a house.
i'm still dreaming of owning a house.
i think when i wake up tomorrow i will have had a dream of owning a house.
but like the article says, when .gov burys you under 300k of student loan debt and then decides the going rate of pay for your profession is 500/week because socialistic obamacare must be passed before it is even read, well i guess maybe i should dream of owning a card board figgin box.
if the united socialist states of america is going to charge socialist prices for education and parent us with socialist child support payments dictated by socialist judges so women can leave the court house casino with a smile on their face they can at least pay us a good enough socialist wage so we can pay their socialist usary.
don't you think?
I always dreamed of owning a home. Then I bought one. Then I paid it off. Now I get ever increasing tax bills to support the local fucks at the city hall that's as big as some people's rent payments.
There's no such thing as owning a home.
Furthermore once you do own it I discovered it's nothing more than an asset that can be stripped away during any mishap you may encounter. I encountered a lawsuit several years ago one of the fist questions asked: Do you own a home? What other assets do you have?
I don't suggest renting either.
If I weren't married i'd be living in my rv and fuck everyone else. And when those start getting 2k a year tax bills there's always my wheelchair van.
Fantastic rant. That needs to be the voice-over on one of those bubble-era NAR "buy-a-home" commercials. So much truth. And most don't figure it out until it is too late. That really needs to be required reading before signing a mortgage.
There is a right way to do it, but it doesn't involve a mortgage or a big expensive McMansion.
While I Support the notion of property rights, I also accept that is an illusion. The "right" to my property ownership exists as long as I can defend it, or in our case pay for government "defense". Citizens demanded things that people who sought power were more than happy to provide. Once endentured to these "protectors" our protection payments have grown. Inflation perhaps?
I used to pay $9K/yr to rent a decent 2/2 apartment. Now I pay $5K/yr for property taxes on top of my mortgage and insurance.
So daddy gov forced you to take on that 300k in student debt? And what degree costs that much? I'm sure you looked into salaries in your chosen profession before you agreed to all of that money...
For $300k has to be a doctor. I do blame the government for driving up college tuition costs with easy money student loans and grants. If not for those, the colleges would be 75% empty.
Please explain how the government buried you under 300K of debt.
And, for the record, could you state how you managed to spend all that money on "education" when everything you wrote above indicates a fundamental lack of knowlege of spelling, capitalization and sentence structure?
If your defense is that you were drinking, please just be honest and say, "I were drinking."
hic.
If you owe 300k and are earning $500/week, it might have been prudent for you to delay starting a family. I'm guessing that no-one put a gun to your head and demanded your sperm.
Also, if you owe 300k and are earning $500/week, I doubt that you are paying very much at all in child support. More than you wish to, no doubt, more than is fair, perhaps, but certainly not enough money to put a smile on the face of anyone on the receiving end, unless you impregnated and owe offspring-support to a hamster.
I feel a "Fuck Ben" is in order here.
You know, I live about 100 miles from St. Louis. Was there visiting my daughter, son-in-law and kids this weekend. Went to a Cub Scout Pinewood Derby. Place was filled with thrity-40 something folks who didn't appear to have a worry in the world. My son-in-law looking at 3 year contract job with St. Louis Fed.....Restaurants full. New SUV's and cars everywhere.....all the homies wearing gold and wearing $ 200.00 shoes and NFL gear......and I'm a Doomer? W T F. Maybe I need an attitude adjustment...cause no one I saw was of my mindset.
db51,
They never see it coming.
I have the same conversation with many. Most listen, but don't want to believe. (Until its too late.)
The only thing they see are lower gas prices. What happens to "consumer confidence" when gas prices increase?
LOL- working for the Government will do that for you....
Too bad about your son-in-law- perhaps he'll get off the public dole someday and still produce something before he gets too messed up.
Things don't fall apart cause everyone knows it's coming. Guessing the net positive equity of most of the people you see everyday is not bueno. Most live in the faux world we have created with debt to buy perceived happiness and stature. The mindless of the masses only supports what we fear. And seems inevitable at this point.
As my dingbat 52 yo wife told me the other day; (and I fucking quote!!! + "&").....
" all I really want out life is what everyone else has"
Of all the dumb shit that has exited her pie hole over the last 32 years we have been joined in marital bliss, that one takes the prize.
Now, She Will NOT See It Coming.... Period.
LOL, that is funny. Well, my husband wants us to get back into the stock market. Now. Because I was wrong for the past several years (fair enough), and "the market always goes up in the long run."
I don't think my husband is going to see it coming, any more than your wife is, but I guess I won't see it coming either.
the stock market and real estate are the least of this planet's worries. jeb, hillary, nancy, soros, israel, fuku...that's the shit that gives me hives.
Remember... Noah was considered an idiot until the second day of rain.
nopension...stopped listening years ago. i'm long head phones...
Housing is underpinned by secure and well paying jobs as well as affordability. If these three factors are absent then housing as an investment, but more importantly as a home is damaged and by extension so is the family unit and the social fabric.
If the slide in the economy continues not only will housing prices suffer further but so will the houses themselves as fewer and fewer people are able to maintain them.
Good time to sell or default on your house. Property values declined for 25 years in Japan. Then they became radioactive. In a few years they are going to be bombed in WWIII.
Dump em now or never.
"Good time to sell or default on your house. Property values declined for 25 years in Japan. "
Exactly.
Tick tock bitchez!
No, the economy is not entering a recession. The economy is suffering a downturn within the eternal depression created by decades of criminal abuse by central bankers and government.
New game. Put 3% down on a FHA loan and then stop paying. The Foreclosure process will take 2 to 3 years. Live rent free for at least a couple of years.
Everyone is playing the system. The Banks and Wall Street are the largest fraudsters.
Pretty soon, all hell is going to break loose.
It HAS too.
The grenade pin may have already been pulled by the SNB the other day, we'll see.
When it does, a lot of scores will need to be settled. One of the largest will be about shacks. Never in the history of the world have human beings gone so absolutely insane about something as basic as shelter. People have become so obsessed with the tremendously harmful idea of shacks as "investments" and ever-appreciating "wealth generators"...that the enormous sums wasted on creating and peddling these anathemas have so warped and debilitated our national minds about value, as to have paralyzed us into economic and social ruin.
We have become as sick about shacks as an addict is about dope. There is absolutely NO difference.
Any obsession this intense in an individual would require treatment.
In a nation, it requires an economic crash sufficient to put folks in the woods under tarps, if that's what it finally takes to get our collective minds right about needs and wants...and social responsibility.
Think of the money that has been wasted to preserve this mere symbol of wealth that could have been spent on national infrastructure and scientific R&D.
Think of the deficits, and now extra debt, that could have been avoided if the government-induced shack mania had never infected Wall Street, thereby creating tremendous financial harm that drove the inordinately expensive bailouts.
Think of the economic hardship created by rising costs of living in areas where this object of obsession artificially appreciated in value, for no other reason than a shack's addictive and fast buck-flipping appeal. The painful inflation these anathemas create hurt many, but benefit a relative few.
Think of the social injustice and warping inequities these overpriced, cheap boxes caused our country, as so many struggling without had to put up with funding tax credits, shack owner bailouts, expensive legal actions, and lost property taxes, without themselves receiving a single dime of the proceeds of a flipped shack.
Talk about opportunity costs...
...and STILL, as this squib points out, we're obsessing about shacks.
We have never needed a reaming like the one on it's way.
m
In a system where the currency is created exclusively by debt, and 90% private debt, at that; large purchases such as homes, cars and high price school loans are pushed on the sheeple like crack.
People have evolved to the point where they think shelter and food are automatic, to be provided by some unseen hand, and simply by virtue of their existance they shall be entitled.
This mo fo needs to crash, just to yank the sheeple back to a point where they appreciate what blessings they have.
I recall seeing a couple on HGTV a few years ago that stuck with me. They were childless, in their early 50's and probably weighed 450 to 500 lbs total. They were building a 5,000 sf, million dollar plus "dream home". I did not get the sense that they were made of money, just moderately successful, middle manger corporate types that were splurging a little.
*pop*
Have a look at production charts, it clearly is over production, running into a multi-year global macro slide, that's finally going recessionary in this year. i.e. it's both.
I'm buying puts on HB's. They just hit new highs about 10 days ago and then got hit hard by kbh's and len's margin warnings. More to come and only downhill from here, for them. Proud owner of RYL puts and will add more in PHM.
I went to the bank the other day to see about buying a house. They have made it almost an impossible task. The nice (and very attractive) lady who I was asking questions to explained a few things to me and I will spell out the two main points she made:
1: They won't even consider selling unless you have 20% down. So in this market here in Denver that's a bare minimum of 20-25k. Basically, an entire year of salary saved, in cash, assuming you make the median salary in the USSA.
2: If you have a co-signer OR co-buyer with you (including a spouse) they will only count the lower of the two credit scores. And it has to be at least 700 to be considered. So if you are married to someone with bad credit, or haven't established a stupid amount of credit (DEBT), you're fucked.
That is all.