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The Mystery Of The "Missing Inflation" Solved, And Why The US Housing Crisis Is About To Get Much Worse
Over the past few months (not to mention last 7 years), the topic of America's "missing inflation" has gained major prominence, because while supposedly every other aspect of the economy is humming along (which really just means that record numbers of waiters, bartenders and temp workers are hired and collect minimum wage salaries), CPI remains so low it (together with China to a lesser extent) was used as justification by the Fed to not hike rates for 55th consecutive FOMC meeting, even though 75% of polled economists said, after 9 years of ZIRP, Fed lift off would take place last week.
One problem with the Fed's measures of inflation, as we have documented in the past, is that they are wrong, if not with malicious intent, then purely due to definitional purposes. Recall our July comparison between CPI and PCE and our warning that "With The Spread Between CPI And PCE Blowing Out The Most Since 2009, Is The Fed Making A Big Mistake" in which we warned that "with a rate hike, as small as [25 bps] the Fed can and will almost certainly start a chain of events that results in the "ghost of 1937" waking up. We don't know if, like during the first Great Depression, it leads to a 50% plunge in stocks, but for those long risk here, it hardly makes sense to stick around and find out."
The Fed did not hike.
But a bigger problem for the the Fed's measures of how the overall economy is doing (and/or overheating) is that the Fed telling the vast majority of Americans that inflation is negligible, leads to riotous laughter.
The reason for this is a simple, if dramatic, one: the U.S. transformation from a homeownership society, to one of renters.
We hinted at the key features of this unprecedented conversion in June, when we wrote the following:
... by now everyone knows that the artificially suppressed, "hedonically-modified" and seasonally-adjusted inflationary readings is what has permitted the Fed to not only grow its balance sheet to $4.5 trillion but to keep rates at 0% for 8 years. Because "how will the economy recover if there is no broad inflation", the Keynesian brains in the ivory tower scream, demanding more, more, more easing just to push inflation higher.
There is only one problem with this: it is all a lie - just ask any average American whose cost of living has soared in the past decade.
Still, with reality diverging so massively from the government's official data, reality just had to be wrong somehow.
Turns out reality was right all along, as revealed by the latest "State of the Nation's Housing" report released by the Center for Housing Studies at Harvard, which showed that while inflation among most products and services may indeed be roughly as the Fed and BLS represent it, when it comes to rent - that most fundamental of staple costs - things have never been worse.
According to the report, for American renters 2013 marked another year with a record-high number of cost burdened households - those paying more than 30 percent of income for housing. In the United States, 20.7 million renter households (49.0 percent) were cost burdened in 2013.
It gets worse: a whopping 11.2 million, or more than a quarter of all renter households, had "severe cost burdens, paying more than half of income for housing." The median US renter household earned $32,700 in 2013 and spent $900 per month on housing costs. Renter housing costs are gross rents, which include contract rents and utilities.
At this point we should perhaps remind readers that according to the latest census data, the US homeownership rate tumbled to 63.4%, the lowest reading since the first quarter of 1967: the lowest in 48 years!
Peeking behind the headline number, an even uglier truth is revealed: the only reason the homeownership rate is as "high" as it is, is due to homeowners in the 65 and over age group. For everyone else, homewonership rates are now the lowest in history!
And with housing increasingly unaffordable for most, or mortgage lending standards so stringer the vast majority simply do no qualify, it means that record number of households are forced to chose less capital-burdensome rent as a form of shelter.
And since there is an unprecedented demand for rental units across the US (as the "owning" alternative has become inaccessible), the median asking rent not only soared at an annual rate of over 6%, it has never been higher, with the Census Department recently reporting that the Median US asking just hit an all time high $803.
What is odd is that according to the BLS, rent inflation is far less: at just 3% in the most recent print. One wonders what seasonal adjustments American renters should use to make their monthly paycheck smaller, the way the BLS perceives it. Still, at 3.6% this is the highest annual rent inflation since 2008.
And herein lies the rub: because it is not so much what the real, honest inflation growth rate of rent is, it is what the offsetting income growth. Unfortunately, while the BLS can seasonally adjust rent payments to make them as low as a bunch of bureaucrats want, the bigger problem is that US household income is not only not keeping up with rent inflation, it is far below it. In fact, as reported last week, real income is now back at 1989 levels!
Which brings us to the latest, just released joint white paper by Harvard's Center for Housing Studies in conjunction with the Enterprise Resource Center, in which we read that the US rental crisis is about to get far worse. In fact, in an optimistic scenario in which rental inflation rises by 3% annually (it is currently far higher at 3.6%), while annual income growth is rising at a speed 2.0% (it is currently far lower in real terms) the number of severely cost burdened households - those who spend over half of their income on rent - will rise by over 25% over the next decade, from 11.8 million to a record 14.8 million households!
Which means that is using at least somewhat realistic assumptions, the real number of households who spend more than half of their income on rent will likely be in the upper teens if not 20s of millions by 2025.
From the report:
if current trends where rent gains outpace incomes continue, we find that for each 0.25 percentage point gain in rents relative to incomes, the number of severely cost-burdened renters will increase by about 400,000. Under the worst-case scenario of real rent gains of 1 percentage point higher than real income gains per year over the decade, the number of severely cost-burdened renters would reach 14.8 million by 2025, an increase of 25 percent above today’s levels.
More depressing details about the state of the US housing rental market:
At the time of the decennial census in 2000, one in five renters were severely cost burdened, paying more than half of their gross income for rent and utilities (Figure 2). Meanwhile, another 18 percent faced moderate cost burdens, spending between 30 and 50 percent of their income on housing costs, exceeding the widely accepted standard that housing should not command more than 30 percent of a household budget.3 This represented a slight improvement over the shares burdened in 1990 as income gains outpaced growth in rents.
And here is the punchline: "in the years following 2000, gains in typical monthly rental costs exceeded the overall inflation rate, while median income among renters fell further and further behind (Figure 3). As a result, the share of renter households facing severe cost burdens grew dramatically, reaching a new record high of 28 percent in 2011 before edging down to 26.5 percent in 2013. Adding in those with moderate burdens, just under half of all renters were cost burdened in 2013. These rates are substantially higher than a decade ago and roughly twice what they were in 1960."
Here the white paper confirms what, as a result of the above dynamics clear to everyone but the Fed, we already know.
At the same time that the share of renters facing cost burdens was rising, so too was the share of households opting to rent. Over the last decade, the share of renter households in the United States has increased significantly as homeownership rates have fallen from a high of 69.2 percent in the second quarter of 2004 to 63.4 percent in the second quarter of 2015, the lowest level since 1967. We are now seeing more renters than at any other time in U.S. history.
Furthermore, rent inflation isn't going anywhere - in fact, it will only get worse: "as of 2013, the median rent of a newly constructed unit of $1,290 was equal to about half the median renter’s monthly household income, underscoring the urgent need for policy makers to consider enhanced levels of support for rental housing particularly for lowest income households but across a range of income levels."
Even the pinnacle of status quo thought, Harvard itself, is now mocking the 'recovery' propaganda:
While reports on the state of the economy have become more optimistic in recent years, the number of renters with severe cost burdens is not expected to slow. Even if trends in incomes and rents turn more favorable, a variety of demographic forces will exert continued upward pressure on the number of rent-burdened households. Rapid growth of the minority population is one key factor, driven by past and predicted high levels of immigration. By 2050, the U.S. is expected to have a majority-minority population, meaning a greater share of the population will be non-white racial and ethnic minorities. The Hispanic population in particular is projected to continue its fast growth, reaching 106 million (or doubling) by 2050.
With that said, racial and ethnic minority households are disproportionately burdened by housing costs, regardless of tenure. According to the Center for Housing Policy’s Housing Landscape 2015, working households that are headed by non-white individuals have a significantly higher rate of severe housing cost burden than white-headed households. According to this analysis, one-quarter of both African-American and Hispanic households were severely housing-cost burdened in 2013, compared to less than 20 percent of white households.
Sorry Europe, the US has its own refugee, pardon immigrant, crisis and it is getting worse by the day.
Finally, tying it all together, here is the reason why the biggest US generation by number of participants - the Millennials, at 82 million strong - and the one generation that was supposed to be the dynamo that pushes the US out of its post-crisis funk is, simply said, crushed.
Millennials are also expected to continue experiencing rent burdens as they age. Having entered the labor market during and following the Great Recession, those in the millennial generation have received lower wages and experienced higher rates of unemployment and underemployment than their older counterparts at this point in their lives. As a result, millennials have less wealth accumulated, have delayed forming new households, and are less likely to become owners at the age that older generations had previously. In combination, we are likely to see additional household formation by millennials over the next decade and expect a relatively higher share to remain renters during that period.
Bottom line: far from confirming the "bullish thesis" that Millennials will eventually move out of their parents basement and buy (or rent) their own housing while starting new households, just the opposite is taking place:
In 2015, 15.1 percent of 25 to 34 year olds were living with their parents, a fourth straight annual increase, according to an analysis of new Census Bureau data by the Population Reference Bureau in Washington. The proportion is the highest since at least 1960, according to demographer Mark Mather, associate vice president with PRB. "The phenomenon of young adults, facing their own financial challenges, forced to squeeze in the homes of their parents. And new data show the trend is getting worse, not better."
As Bloomberg redundantly adds, "It takes young people longer these days to find jobs with decent wages," Mather said. "Young adults need to spend more time getting the necessary education and skills before they can become self-sufficient. The recession likely exacerbated this trend."
The latest Census data show just 3.1 percent of Americans from 25 to 29 relocated in the last year between states, just half the share of 2002. While moves between counties in the same state — less likely to be for jobs — have increased some, they too remain below pre-recession levels, according to PRB's analysis.
For some like Goldman, there is hope: "There is a silver lining to the trend. Presumably, all the adult children will one day leave their parents' basements, and that household formation will prove to be a huge boost to a subpar housing recovery. There is already evidence this is occurring to some degree."
Actually, no. And as the Harvard report suggests, Millennials are not only not leaving their "parents basements", but even if they were, their financial situation would be even worse! At least for the time being, their parents cover the rental costs. Should tens of millions of millennials suddenly see their "disposable" income be crushed once the real world presents itself, that will be the end of the upswing in US consumer spending.
In conclusion, nowhere is the mystery of the "missing" inflation more obvious than in the following interactive map showing that in virtually all major seaboard metro areas, including the major cities in California, New York, and Florida, the number of households with a cost burden is 50% or higher.
All of this could have been avoided if only the Fed has observed the "missing" and soaring rental inflation that was right in front of its nose all the time, and which it did everything in its power to ignore just so the 1% can keep their ZIRP (and soon NIRP)and QE, and become even wealthier on the back of the middle class and the 80 million of 25-34 year old Americans who have found out the hard way that not only is the American Dream of owning a home officially dead, it has been replaced with the American nightmare of completely unffordable renting.
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You see, the owners of this country know the truth. It's called the American dream. Cause ya have to be asleep to believe it.
Welcome to RENT A LIFE....................as you cannot afford a REAL LIFE
Long tent manufacturers.
Housing and healthcare are severely under reported on inflation. How healthcare can triple and not set off flashing red lights on inflation is unreal.
I don't know how seniors who relied on SS benefits to survive are living when their COLA has been 0.01% the past several years despite soaring food, health costs, utinilites, etc.
obama shipping in 100000 new low iq migrants will fix things.
"Change you can believe in" is right!
Still yet another reason,
to flush the illegals.
The map of affordability looks to me like a map of the solidly Democratic areas.
What's up with young adults today?
1 in 5 men under 35 are living in their moms basement? FFS, talk about missing the best years of your life.
Not for all the tea in China would I have spent my 20's living with my folks. That's the kind of regret that really burns you when you hit 70.
I'm not yet 60 and I can barely remember my 20s, let alone regret them.
I'm in my late 40's and can barley remember my 30's let alone what I did when I was in my 20's.
into the night- of third world riots and conflicts...
such is the -mares reality they have agendized for us sheeples everywhere,
complete with boots and camps.
Many of us feel like foreigners in the countries where we were born with the massive influx of people from third world countries who don't assimilate.
http://www.telegraph.co.uk/news/uknews/immigration/9831912/I-feel-like-a...
Ugh. All she did was make excuses for people to discriminate against her in that article.
There's living and there's surviving.
Most young adults are in survival mode.
F them. They voted for hopey changey now they get to live with it. Zero empathy here. Enjoy your new third world hipsters.
Do you really think things would be any different if Romney was president?
Romney slams quantitative easing policy: “biggest contributor” to income inequality
Read more at http://rare.us/story/romney-slams-quantitative-easing-policy-biggest-con...
It's so cute when people still believe elections are legitimate and bring about change.
We all can't live a life of immorality and std's like you.
Right...
Try being a young person today, just try it.
1) No path to a career without going to college.
2) No college without crippling debt in most cases.
3) No home ownership, and likely no good transportation ownership without a good job/career.
3a) If you do manage to buy a home as a young person, be prepared to spend 400% or more of your yearly income on the property when you're done, unlike people from the 70s/80s who could find decent homes for <100% of their yearly take-home pay.
4) No Jobs available once you graduate.
5) No manufacturing as a fallback industry.
Fuck old people, they have no fucking clue the absolute shit they've dumped on the young. I'm not even young but I'm not so ignorant as you to recognize how fucking awful most under 35 have it at this point compared to those 55+.
Just the other day, I was at the bar, a really nice quiet bar. I got into a conversation with an old timer, who must be in his 70s. He started a discussion with the phrase, "Well, I've been retired for 40 years now..."
I nearly spit out my drink. That guy has no fucking clue in the world how lucky he is, to get 40 years of no need to work... most people under 35 today will be lucky if they see even 5 years off work before they die.
Fuck the ignorant old, they have no fucking clue how hard life is for the young people now.
WTF are you talking about? Free community college, $15 minimum wage jobs, plus myRA.
1) There's no such thing as free community college anymore, that was something that existed for boomers only.
2) $15 minimum wage, and there's still no apartment/house that you can afford to live in by yourself, unlike 30 years ago.
3) myRA? really? you think that money will be there when we're old? fucking old people, they just assume things will work out while they take, take, take, take, take....
Beg to differ about the higher housing cost. When my parents bought their first house in the '60s, it was $22000 and Dad made $8K/yr. When they bought their second house in the '70s, it was $70K (over 3X increase in price!) and Dad's salary was only up to $15K so Mom had to find work too. When I bought my first house in the '90s, it was $200K (another 3X increase) and my salary was in the low 50K range, but my wife also worked so we could afford the payments. So over this 40-year span, housing has always cost 3-4X the annual salary of the average homeowner.
Sad to have to inform you young-ins. You are going to have to arm up and clean house on Washington dc if you ever want to see the light of day, economically. You will have to muster up an armed rebellion and millions of Americans will have to kill millions of Americans. There is no way out.
You have youth in your favor. Technology is in your favor. And, tho you may not suspect it, your parents and grandparents will happily supply you with billions of dollars of funding once they see you organizing for war against the sociopaths destroying this nation. It's just the way it is.
Graduated 1977, when I got home from GradNight there was a stack of suitcases on my bed. I took the hint and worked to leave. Enlisted in Marines and had knee injuries that put me out (no disability) in April 1978. Nursed knees for a couple weeks then took a job at Disneyland and lived in a van on the employee's parking lot, right in front of Space Mountain. It was summer, and I worked graveyard.
Disney offered me a permanent position at Disney World, paid my way there and put me up in a motel for a week. Got promoted three levels and took a nickle an hour pay cut. (I went from Baker's Assistant to Lead Baker.)
Friends came to visit one day at my parent's house. They were amazed that I had managed to move away. I've been on my own since 17.
I've said this before - legals/illegals - it's irrelevant. What is relevant is cultural acceptance within and contribution to the community.
Otherwise they're just barbarians and social outcasts.
Treat all as such, regardless of their "papers".
Once the Chinese Government shuts down the massive flow of illegal and embezzled money out of their country, house prices and sales in USA, Canada, NZ and Australia will begin to normalize. Legitimate buyers, ok, but not the money launderers with millions, if not billions in Loot. We do not want their corrupt gubmint officials --- we have enough of our own!
Flush the worker visa programs as well.
Encourage post HS training that is economically oriented. Remove social engineering from schools
Needs to be more vocational programs in the Trades and Healthcare...
"We crisised some folks"
And ISISed some folks.
we rentiered some folks
Oldie but goodie.
http://dailycaller.com/2014/06/30/11-things-you-didnt-know-you-could-buy...
"Change you can believe in" is right!
That's because all that is left is "change"!
> 100000 new low iq migrants
They are the best consumers and debtors ever.
"I don't know how seniors who relied on SS benefits to survive are living when their COLA has been 0.01% the past several years despite soaring food, health costs, utinilites, etc."
Pre 2008, refi's. Post 2008. reverse mortgages. This will guarantee that the poor stay renters forever. Hey, at least, Fred Thompson gets to invoke Ronald Reagan's name relentlessly on the boob tube. Fred basically says, 'Wasn't Ronny great?' He gave you a way to live beyond your means AND screw your children in the process. What could be more American than that?' Aw, shucks!
New construction companies have a great scam to bury seniors in new homes using reverse mortgages. The FHA gets to eat the losses!!!
The American Scam-O-Meter is at the highest level it's been at in my lifetime.
Naw, pretty sure the US invaded some countires on fake and bullshit evidence before.
I could name Iraq, but I would have to say it twice to be accurate.
They have two words for that: smaller government.
I think you might be on to something. I'm a clerk in a law firm--thats all I will say about that. I've noticed a couple of our clients have reverse mortgages . Pre 2008, as you say, I did not see any of our clients have reverse mortgages.
Screw the kids. Every retiree deserves to live a decent existence. If they have to borrow from their homes that is completely within their rights.
"I don't know how seniors who relied on SS benefits to survive are living when their COLA has been 0.01% "
Simple: many still work while collecting SS. Some have part-time jobs (aka Wallmart) others maintained thier full time jobs. If you look at the employment chart, Employment for those 55 and older has risen considerably. I believe employment for the 70+ group has also increased.
However, for many 65+, The have a lower cost of living. (ie no mortgage payments, no college loans, lower healthcare -on Medicare, etc). They can afford to take on one part time job to meet ends since they have SS.
Dang. Can you imagine working 50 years and you have to ‘rely’ on Social Security. Might as well blow yourself up at the mall.
You were never supposed to 'rely' on Social Security. It was a program to keep you out of abject poverty and the poorhouse - it was NEVER supposed to be a full retirement program.
When it was started not many people lived for long after they stopped working (and many never stopped working). It was the norm for old parents to live with children or grandchildren after America industrialized. Prior to that when most lived on farms, people kept their farm until they died or stayed in place with a son or sons taking over the work.
Where inflation is REALLY killing people is the devaluing of savings and retirement funds - TRILLIONS have been stolen from people who 'did the right thing' and saved for their retirement.
People were not supposed to rely upon SS, correct.
However the tax rate was not supposed to be greater than 1.5% on employer and employee.
That total takeout has been greater than 10% for a long time, now up to 12.5%.
If those individuals had been allowed to actually save that cash they would not have to rely upon SS.
All a part of the Democrat plan to increase govt. dependency.
Good comments. It's clearer to me now. But even with SS + part-time job, few expected food and some other essentials to rise by more then 12%/year while COLA and any part-time wages remained stagnant.
There's lots of other unexpected matters that have bashed even the most frugal workers/savers who don't rely on SS. For example, most seniors figured a return of at least 4% on their savings. The joke is on them! No one figured the hardest war fought by the government would be war against the nation's own middle class by forcing savings yield to zero for years and years.
That's why Trump has so much support; people hate the present screw-job and want a real change to make this country great again with a strong middle class backbone!
I hate to say it but we're unlikely to get the change we deserve regardless who is elected.
SS was suppossed to be there for INSURANCE. To keep the old retired folks off the street and allow them to have some dignity after retiring.
- If those individuals had been allowed to actually save that cash they would not have to rely upon SS.
This is, however, very not true. People tend to spend what they have on hand and justify it to themselves why they are not saving instead. It needs to be means tested, standardized payouts not based on the amount of pay-in, and no upper caps. Upon retirement, you should be expected to exhaust your own savings first, and if you are then destitute, you can turn to INSURANCE to keep you going. You could reduce the pay-in quite a bit while keeping in the spirit of the law as it was intended. What happened was all the companies ditched their pensions, turned them into bullshit 401ks (at best) and everyone now turns to SS as if it's some sort of pension fund that it was never intended to be in the first place.Yes, it is our weakness, but an economy, a society centered on consumption as the holy grail has no other alternative. Even today the constant theme is spend. Spend for the good of the economy. Spend what you don't have nor may never have...for the good of the economy. In a world focused on NOW, on our emotional happiness of instant gratification, there is no way a future exists for many at all. Those that would attempt to save for their future and financial security will be robbed to pay for those who will not...all part of a new form of economic justice.
We are fucked....we are fucking ourselves. We have become a bunch of monkeys masturbating in our cages as our only means of personal satisfaction.
What they do is have their 15 deatbeat children move in with them so they can ruin everyone elses life and make endsmeat at the same time. They ruin the neighbor hood with their shitty offspring and just like a typical asshole american, they just don't give a FUCK!!
This is what #winning looks like today.
Glad I don't live in your neighborhood.
But O'Bama said, "Americans are not Deadbeats."
Stupid, poor and obese, yes, he said they are ... but not Deadbeats.
Yep. Like those guys on the train in France?
https://youtu.be/R-W5iVj3b_w
Think these are deadbeats?
Six down votes, I must have pissed off some of you with your DEADBEAT fucked up offspring.
SS was never meant to be a complete retirement plan. It was there to keep seniors out of absolute, abject poverty, nothing more.
They stole everything else:
https://youtu.be/0gVLv5eg4Xg?t=5093
I don't know how seniors who relied on SS benefits to survive are living when their COLA has been 0.01% the past several years despite soaring food, health costs, utinilites, etc.
Utility costs down for those on NG. Gasoline sure is cheaper. Healthcare is Medicare - not much soaring there. Food costs have been pretty stable, particularly if they can cook. If they own a home they are probably not much worse off on a cash flow basis. Increased housing values make their finances look a bit better. Probem is going to be increased property taxes.In 1993 president Clinton implemented the Boskin Commission whose stated mission was to figure out how to lie about COLA inputs so that the gov't didn't have to raise SS, military and gov't retirements. The gov't has seen this coming for quite some time and anyone foolish enough to not pay attention to what they are doing is getting fucked, as planned.
Hey NeverOne: re "I don't know how seniors who relied on SS benefits to survive are living when their COLA has been 0.01% the past several years despite soaring food, health costs, utinilites, etc." I will tell you how: just google "reverse mortgage". Seniors are being looted by these crooks, so they can afford food and healthcare. That's how.
Health insurance costs have risen 200% in just the time Obama hijacked the system.
That one piece of the inflation pie, divided thru the 7 years that asshole has been President, represents about 30% inflation per year. 600 a month for one adult is not insurance- it is theft.
This fucking country completely left the rails along with that jackass court that legislates from the bench.
Obama hijacked nothing, son, Look at who authored the bill: health insurance industry lobbyists, and big drug company lobbyists. If you've been reading ZH long enough, you'd know that. The politicians are the puppets, not the other way around.
lol...
A drug company bought the rights to a 62 year old drug, and raised the price for dosages from $13.50 to $750.
Reaction from the crony left:
Reaction from the crony right: "Time to build a factory to make that drug in India!"
I've been here a little longer than you son and the whole project was sheperded thru by the democrats without one GOP vote. Other than that, you should try hairstyling if you are itching to split hairs.
long gulags
Fun camp for everybody......
"Pack your bags,
You're going to the Gulag..."
I'm working on the rest of the lyrics....
+1....Thanks for the laugh.
Long large cardboard boxes ..........
Your comment reminded me of this:
https://www.youtube.com/watch?v=1BNgRpRuWGs
those living in their parents basement are gonna just wait for them to die so they can move upstairs
Some may want to hasten the dying process.
Parents? Really?
My parents are both early 80's and doing fine, I am near 50, my kids are both 20+
Bar a disaster, my kids will be 60+ before I go anywhere.
Waiting for mom and dad to die ain't going to work, you need to kill them /sarc
Rentier capitalism is a Marxist term currently used to describe the belief in economic practices of monopolization of access to any (physical, financial, intellectual, etc.) kind of property, and gaining significant amounts of profit without contribution to society.[1][2][3][4] The origins of the term are unclear; it is often said to be used in Marxism, yet the very combination of words rentier and capitalism was never used by Karl Marx himself.
A rentier class who earns their income from 'renting out' property lives off the return on its capital - accumulating even more. Without inheritance taxes, more and more wealth is accummulated and passed on withing the rentier class. European nobility got richer and richer at the expense of all others. Look at the Irish Famine - the 'landlords' would rather evict people for non-payment of rent on small plots of land and put the land to use growing grain for export because it was more profitable. There was more than enough other forms of food besides the potato but the grain grown was for profit - not feeding the tennants.
"the U.S. transformation from a homeownership society, to one of renters."
The European Model. Control the masses through wages and rents.
Not hard to see the housing bubble as a planned event with the banks and other "financial companies" converting larger and larger shares of their portfolios to real estate owned and rented out.
And now....with the advent of "REVERSE MORTGAGES", that line in the chart showing the 65+ homeowners will tank down a lot in the future. The VERY near future.
Fred Thompson for Reverse Mortgages
https://www.youtube.com/watch?v=-5Bw3gB7o9E
Reverse mortgages only work if you don't have any kids...that way you can travel the world with all the equity and then torch the house when you're about to croak so the bank doesn't get shit. Probably doesn't really work like that but it's a fun thought.
Made me smile. Adding it to my list of happy thoughts.
Anytime you put "torch" and "bank" in the same sentence, you get a greenie out of me.
A better plan might be to deed your house to someone you trust or maybe even your children if you desire and then get a ton of credit cards, all of which are unsecured debt.
Then use them to travel the globe and not worry too much about the balance. I met several people from Cali who did that. They lived high on the hog, then moved to Florida which is also known as "Debtors Paradise."
Why Florida? Better bankruptcy protection?
Probably doesn't really work like that but it's a fun thought.
You're right, it doesn't work that way. A reverse takes into account manditory excrow & insurance fees. House gets torched means the bank that underwrites the reverse gets the insurance to build a new house. It actually works out better for the bank in most cases if the house is an older one.
It doesn't work out better for them if you take aout a fresh mortgage and buy yourself a decent boat and just leave right before it burns up.
Yes, Florida has the best bankruptcy protections in the country. That's one main reason crooks from NYC retire there. You wil notice they buy as big a house as they can afford; namely, throw all thier loot into the bankruptcy-protected house and a nice handful of assets -- expensive paintings, etc. They get to keep it all!
When I worked for a lawfirm in Texas back in the 1990's Cali people were doing that like crazy; selling their house in Cali + maxing their credit cards. Back then you could take your entire credit limit out in cash so you could take that $20,000 or whatever in cash---all unsecured credit.
They would buy an expensive place in Texas and homestead it, then declare bankruptcy and lift their middle finger at their many unsecured creditors.
Now cc companies limit what you can take in cash to a much smaller amount.
In Florida no court action or decree can take your primary residence from you.
Which is why O.J. bought a house after he killed his wife, but before he went to jail.
Simpson bought the 4,334-square-foot house, which also has a swimming pool, in 2000 for $575,000, but was financially destroyed by court orders related to his acquittal for the murders of his ex-wife Nicole Brown and her friend Ronald Goldman in 1997.
While he was found not guilty, he was found liable and a Los Angeles judge ordered him to pay $33.5 million for the wrongful death of Goldman. The families are still trying to collect the money.
After the ruling, he moved to Florida and bought the home as the state's laws protected a primary residence from being seized to pay off a civil judgment
You can't lose your primary home to bankruptcy in FL....that's why.
Yes, Florida is a debtors paradise. Look into it.
But don't look for anything to do there if you are accustomed to anything resembling culture.
He invokes Reagan in this one. It's got to be great, Ronny signed in to law to help you.
https://www.youtube.com/watch?v=ggxTJhIQEiw
Remember what Ronny said about that, Fred? I'm from the gov. and I'm here to help?
https://www.youtube.com/watch?v=xhYJS80MgYA
I think reverse mortgages can be great for some people. Why use resources to preserve the illusion of 'ownership' of a home your kids will most likely NOT want to live in, and will almost certainly be a hard sell in the years to come? And they get to pay the property taxes to boot.
Have the bank send you a check every month, and use the money to buy something your kids will want and need, something they can keep out of government's hands. And trickle it to them while you are still alive, so when you die you leave as little as possible to be seized as inheritance tax.
Die a happy pauper, and leave the bank with the house and the government with the property taxes and let them hash it out while your heirs move on with their inheritance intact...
Have the bank send you a check every month, and use the money to buy something your kids will want and need, something they can keep out of government's hands.
Brilliant! Here's your monthly worthless-fiat-for-physical-PM's check, kids. Love you!
If you do a reverse mortgage...DO NOT go with one of those reverse mortgage companies. They will ASS RAPE you in fees. Fees which are a partial hedge in case by the time they are stuck with the residence the market is completely wasted.
Better to simply set it up directly between you and the kid or kids and let them pay you directly. You could have the interest rate be as low as 2% give or take according to local or state regs.
You get the cash....the kids then own the property. Hell....the kids are still in the basement anyway. Might as well make them pay. No job or shitty job ? No problem. Just crib their Earned Income Tax Credit and make them pay for your groceries on their Food Stamps.
Then send them a post card from Vegas.
Blah, blah, blah . . .
Another 'finance & economics' box article.
It ain't about that.
No more than it was in Al Capone's Chicago.
But just keep drawing 'charts' and reporting 'statistics' - that keeps you in the box.
Place i am renting in Colorado Springs for 1250, two years ago rented for 1050. Twenty percent increase in 2 years. Resisted the urge to buy, waiting on the crash.
Rents will keep going until that crash happens.
I'm doing the same for 2+ years now. So far no crash and frankly I don't think there will be another as the FED is propping up all RE and if it crashes then the nation dies and they know it. Just like higher rates will never happen. I've come to the conclusion that I missed the boat on buying a cheap house. The time for that was in 2008. I've got a very cheap rental now but the house is nasty as shit and I am getting what I'm paying for. The wife has had it and pretty soon I'm going to have to make a decision on buying a house or getting divorced...
"real" real estate values probably are somewhere nearer to 1990 levels than 2010 levels.
However, Fed.Gov will literally do ANYTHING to keep those levels from being hit. Were that to happen, most federal debt would come due immmediately. Real Estate is the only collateral remaining in the USA-especially since the energy markets detonated this spring.
Real estate blows out-so does the municipal bond market as property tax revenues pay that interest. Means cities detonate.
the pigs honestly though they could sell debt as collateral to the rest of the world forever
George Carlin should get the 78 likes :-)
He is. In absentia.
I think that smart guy, Thomas Jefferson, was prescient: "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."
Best wake up peeps.
Yet all the mainstream news deals with is people buying multi-million dollar apartments and condos.
We live our lives by the exception, not the rule. Stock market is up, mega mansions and condos are up, so should be the rest of the world!
You gotta wonder how those secure, upscale condos will be priced in SDRs.
Someone is buying homes.....Las Vegas Homes are selling briskly - August 2015 - 2855 SFR homes sold * median price $220,000
www.ViewLasVegasRealEstate.com
The Chinese...
Or anybody looking to either hedge or launder money.
Today....there isn't that much difference.
They have screwed the Auckland, New Zealand property market too, same in Australia. What a generation of moronic politicians worldwide who didn't care about their own people.
They're going to build a high speed train between LA and Vegas. That should solve everybody's problem.
People who don't drink water
Which reminds me of this, Youtube is loaded with more.
http://www.youtube.com/watch?v=v3kEcTBarRE
And all those affordable Vegas homes go to $0 when Lake Mead runs dry...
Odds on, Vegas will always have water, even if it has to run a pipeline up Portland's ass.
I'm thinkin' drawing water from the Columbia River downstream of Hanford may cure all of Vegas's problems.
If they charge LV the ridiculous prices they charge us in PDX, LV may find it cheaper to recycle their own pee NASA style.
Mr. Harless, I'm flattered that you copied my avatar, but don't you think this is going to be a bit confusing???
On the Harvard link with the gray areas, is that all Federal land? I know the spots in my state and the neighbors is National Forest. Just wondering about other states. If that is true then holy shit they own more land in this country than I thought.
The Federal Government own most of the Western US.
That's the stuff of BLM wars here in the Northwest and West.
Teddy Roosevelt had something to do with that.
I've been to a good chunk of those grey spots in CA: Modoc, Six Rivers, Shasta-Trinity, Lassen, Mendocino, Plumas, most of the Sierra Nevadas going down all the way to Death Valley. There's a shitload of national park or forest land all over the country.
I knew there was a lot but damn that is a lot. Appreciate the response from you,roadhazard and robd. It was good to hear from Rob some is farm land. I know the chunks in my state are national forest along with the neighboring state. I guess thats how much collateral the Fed wants when Fort Knox went bye bye. Lets not forget our lovely birth certificate which shows ownership to someone.
Illegals grow pot in most of the national parks in Northern California.
Some of them actually get caught:
http://www.breitbart.com/california/2015/01/29/illegal-immigrant-pleads-...
In most of NorCal nobody cares if youre growing pot because the economies depend on it. Law enforcement is not the threat, the IRS is.
I'm guessing the gray areas are no data areas. For instance one of the gray areas in northern California is Glenn county. I was born and raised there and there is almost no federal land in the county. It is mostly farm land.
Not a problem at all. Just start issuing zero percent 100 year mortgages! Voila, problem solved.
A mortgage is rent by another name. Rent to the Bank.
And once your done, you pay rent for the rest of your life to the State. It's called PROPERTY TAX.
Limit property tax increases to no more than the CPI.
HA!
The Fed has blown "target inflation" out of the water according to my local property assessor.
"zero percent 100 year mortgages" still would not work.
You'll need to add "zero-down" since the miniskirt realtor down the block said buyers do not even have the 3.5% anymore. She said they groan when you mention they need even as little as $500!!! She said she often forks out that $500 bucks herself just o close the deal and get the fat commission which easily covers her $500.
Can these people afford the house? "Hell no!" she said but who cares, "the loan is not my problem" she giggles.
Example of the exceptional culture we live in today in merica.
Ah, to live to see the day when a realtor earns money the honest way, by bending over.
Her job is to get the people in the house, not be their financial advisor and mommy.
One assumes that if you are buying a house then you have put your big boy pants on already and done your financial due diligence about what you can realistically can afford.
Better yet, abolish property tax and eliminate serfdom.
Rent with a noose around your next waiting for state or local government to kick the box out from under your feet. Renting is a measure of liberty. Your still paying the taxes but only until you choose to leave.
If that poorly-constructed shack, you just HAD to have, lasts that long.
No other warped segment of our dead economy deserves to be flushed for good like the banal shack racket.
Absolutely disgusting already...
m
Right. These articles are always misleading.
https://espnfivethirtyeight.files.wordpress.com/2014/12/chalabi-datalab-...
https://espnfivethirtyeight.files.wordpress.com/2014/12/chalabi-datalab-...
http://fivethirtyeight.com/datalab/how-many-homeowners-have-paid-off-the...
A newspaper article about the massive increases in my town's property tax directed attention toward the vast number of "for sale" signs. My townleaders were quoted as saying they were establishing a committee to explore possible solutions. To also include resident input.
After a few weeks, I tried to learn when such meeting might be scheduled since it was not posted on any agenda schedule. I was told to utilize the "contact us" format on the town website. I did and got a "403 ERROR CODE". I brought it to the attention of the town offices and they expressed suprise saying the website had just been upgraded and it must be a glich. Also assured me that it would be promptly corrected.
A couple of weeks later and the same thing. I sent a barely civil letter to the town administrator who said he got the same error message and apologized profusely saying he'd find out who did not respond to my info and correct the website issue as promised.
Gee, I wonder if & when an meeting might be held actually addressing property taxes?
Doesn't matter, more than likely. Here in central Virginistan, they regularly hold these meetings regarding what to do (raise or not raise) our property taxes. Knowing that a vast majority of the taxpayers are against raising such rates, and in most cases support reducing them....they make sure to flood such meetings with plenty of teachers and on/off-duty cops, who all vigorously advocate for raising property tax rates.....because the chilrenz edumakayshun and our cops are paid less than the next county over and gosh we wont be safe. I attended several of these, and in one instance a concerned citizen came equipped with a shizzleton of actual figures and numbers from the county's own public records/stats, which CLEARLY supported the case for a reduction in the property tax rate. Excellent presentation, thunderous applause from the majority of us seated in the chamber (minus the cops and teachers, of course).
Result? Our taxes were raised anyway. Why? Because fuck you, taxpayers.......that's why.
Next up....stormwater runoff fees. Gosh, how much should we tax the peasants for the rain-water draining out of their roof-gutters? Cuz you know, that stuff is totally killing the Chesapeake Bay. We have special scienceism papers that say so, and obviously the solution to that is additional tax/fees.
This shit won't stop until the blowback gets physical.
That is what Japan did. Multi-generational low rate mortgages. Probrem NOT solved - probrem much worse now :(
"The reason for this is a simple, if dramatic one: the U.S. transformation from a homeownership society, to one of renters."
All well & good in the context of officialdom's lies and deceit, but there's just a ~tiny~ bit of clarification needed here...
Home 'ownership' is a misnomer, and just a plain bald-faced Falsehood in reality. You don't 'own' ~anything~ until that last mortgage payment is made - assuming you're not a $cash buyer. And even then, try skipping a property tax payment... And didn't we just find out a few years back, the real meaning of 'home ownership' to the ball & chain tied schlub paying (or not) his mortgage...?
The Landlord is surely nicking you for his/her COLA every year. And the Landlord will pass on the property tax COLA for them as well.
If most people are renting, then who pays the property taxes? The landlord can only raise rent to where people will choose to move in. But there is a LOT of residential property out there, and it is vacant. Eventually landlords will have to start enticing tenants by lowering the rents to keep their properties occupied....
But those cities and towns are going to want more and more from the fewer actual owners of property in their jurisdictions. The rents cannot possibly be raised high enough, and even landlords will start walking away.
First the homeowners, then the landlords. What will all those greedy little local governments do when their sheep take off for greener pastures?
The millenials love their city services. They vote for them because they want the services and think they aren't paying for them through property taxes because they rent. Landlords are usually charged more on property taxes because they are not the primary dwelling for the landlord. The millenials are paying for it with inflation as well as avaricously voting for more "free" services that increases their own rent. They're all suckers in more than one sense of the word.
Oh thats easy- the counties and cities will confiscate the houses and rent them out themselves.
That wouldn't come near to replacing all that tax revenue...someone is going to have to get a pink slip, and someone is gonna lose a pension...
And being a landlord carries some hefty costs. If that is their plan, they might want to go over it one more time before implementation...
Many landlords are stuck with deadbeat tenants, who do not pay. Then they have to go to court to get an eviction order, etc., while losing three months rent.
Here in the UK being a Landlord has mostly zero costs. I pay the Interest only on a 25 year mortgage, come in about £150 per month, Rent = £525pm. The only other fixed cost is buildings insurance at about £175 a year. That gives me £4320 per year, I have 6 properties, £26,000 per year. I get tax relief on the interests and all costs for repairs etc. At the end of 25 Years (another 5 to go or so) I have a property worth 4-5 times purchase price (a couple are altready 8 x purchase) so I sell 2 and the rest give me a base income for life.
Tenants pay ALL bills and taxes, simplez.
Fuckin A ,just paid my shcool tax on my paid off home. 2359.00 come january I make the property tax payment 2260.00 then I own my Home for amother year.
THERE is NO INFLATION.
The Government Said It. I Believe It. That Settles It.
Now, that doesn't mean that "stuff" doesn't cost more. That has nothing to do with inflation. Inflation means things cost more but higher prices have nothing to do with inflation.
My Television Said It. I Believe It. That Settles It.
Now my rent went up twice, the electric costs more and my health insurance premium went up but that is because my Standard of Living has improved. Not. Because. Of. Inflation.
There is NO INFLATION. Inflation makes Baby Jesus Cry!
AMERICA! Jesus' Favorite Country! ©