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Housing - There's No Way Out
Submitted by Lee Adler via The Wall Street Examiner,
The Fed has created permanent housing crisis from which there is no escape.
Total US housing starts peaked in 1972. This chart shows actual (not seasonally manipulated) total starts, multifamily starts, and single family starts for each September since then.
I have 3 observations.
- The recovery in total starts since 2010 has regained less than the post 1972 average.
- Multifamily starts are near the peak levels of the 1978-87 decade, which is to say, nearing “as good as it gets,” and unlikely to be additionally accretive for the US economy.
- There is no single family housing market. It has recovered only to 1982 recession levels. Prior to the 2008-2012 housing depression, that was the worst housing market in the US since single family starts reporting began in 1959. The single family housing industry in the US is still in a depression.
This can only leave us to wonder what would happen if mortgage rates were to actually materially rise. You can bet that the Fed is wondering the same thing.
If rates did start rising, the housing industry might be stimulated a little at first as buyers and multifamily developers who were on the fence jump into the market to beat rising rates. But once that reluctant pool of fence sitters is exhausted, there would be no more buyers. The next step would be collapse.
The Fed’s only option would then seem to be more QE. We know that economies develop a greater and greater tolerance that drug over time. Japan and Europe are perfect cases in point. They are the walking dead. By keeping rates at zero the Fed has left itself, and us, no way out.
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It's for the Children and their future- Dumb ass parents in the USSA. So fucking inbred
You can get a 35 year mortgage in Tokyo for 1.5% .............. 10 and 20 year mortgages approach 1%
http://japanpropertycentral.com/tag/japan-mortgages/
"I wanna name her Dottie after my wife. She's a vicious life-sucking bitch from which there is no escape."
Where is the free shit Army going to live if they don't start build them houses? Trust me, they are home making more babies.
It is a slow-motion trainwreck, keep your eyes open and look to what is ignored and reviled by Western culture for stability. Don't be afraid to close the book on one life and start a new one.
Americans are so broke I doubt many are thinking about buying a house, even at zero-down, no doc levels. They are still about 200% overpriced in many locations esp West and East coasts.
The annual survey of 851 working Americans at least 40 years old and 400 retired Americans found the median savings of working Americans ages 60 and older was $50,000 toward a retirement savings goal of $300,000. In comparison, working Americans ages 55-59 had $150,000 saved for a retirement goal of $500,000.
http://finance.yahoo.com/news/americans-caught-unprepared-when-forced-to...
Of course there is no way out. Rates have hit the coffin corner. Can't go down as to keep up appearances (insanely negative rates tend to bankrupt the bankers and we can't have that) and if rates rise, housing bubble 2.0 pops.
So here we sit, like a corpse on the bottom, waiting for the inevitable gas expansion to bring our bloated, putrid corpse back to the surface.
pods
Serious questions about modern housing definitions: Assuming that a container is a multi-family unit which are each of the following, single or multi-family?
1) Carboard boxes,
2) Packing crates,
3) Tents,
4) Subway grates.
Hey...you forgot to specify that appliance boxes yield more rent than regular boxes....
And unfortunately you forgot pine boxes...the ones designed designed for a nice long nap...
And the metal boxes that hold the cre-mains....
And all of those are single family except the tent, as you will need to sleep in shifts!
concrete shoes...every one knows that...
Just worked on a house yesterday that is appraised at $131,000. Needs $50,000 in repairs. Worth maybe $75,000. Crazy. Houston market.
Rabbi Cohen,
Do you perform circumcisions? I recently adopted a baby from Somalia and he is unclean. Also note that my partner and I are a transgendered LGBT-UIJKEL 2.0 couple.
Prefer teeth method. Please respond.
"my partner and I are a transgendered"
I don't believe it. You are probably really untransgendered like most people in the world.
In spite of all the wonderful progress Obama has made in our societal acceptance of weird and wonderful stuff having to do with genitalia, I would keep some of that shit to my self.
Seeing as most folks consider it unnatural, it would not take much for some new president to come in and undo (or in your cases redo or just 'do') all of this progress.
So mums the word until you are sure that 10,000 years of human prejudice has been eradicated.
That isn't really prejudice. That's actually intilligent thought.
No problem, there are plenty of shipping containers not being used...Ta Da! Instant ghetto.....
Don't be talking about my middle class neighborhood like that...and right on the water too!
screw you...it is for the Wall Street Bonuses.
Was this written by the NAR? Of course there's a way out. Mark to market, firesale that zombie shit off the books for pennies on the dollar.
Dear Oligarchs, which is worse: losing money on your MBS investments and taking a little comeupins, or pushing people to the brink with insane housing costs until they pitchfork you in the face. The only way to save "housing" is to kill it. This article isn't about saving housing, it's about bailing out bad investments. fuck that noise.
You're right, and they all know it. Just none of them are willing to be the first to do it.
I'm sorry that dumb ass people voted you down for their apparent lack of assessing sarcasm.
It's for the Children and their future- Dumb ass parents in the USSA. So fucking inbred
Just don't Buy..
God only knows what comes NEXT
How long this Fucking BS goes on..
God only knows... What housing and mortgage rates would be without QE
https://www.youtube.com/watch?v=AOMyS78o5YI - The Beach Boys 'God Only Knows'
Unless it's with cash. Turning in your valueless cash for a real asset isn't a bad idea at this juncture.
Unless that real asset is in the middle of a large city = killing zone.
yeah--and all those holders of that pricless RE can't wait to get their hands on your worthless cash---something like that--
Yeah, and you end up with taxes that are more than your mortgage - a phenomenon that is actually occurring in my area.
Anybody who still clings to the fallacy that you can OWN real property in the USSA has gone full retard. We RENT from the state, and the RENTs (taxes) are arbitrary.
I'm about as rural as one can get. Housing has become a joke here because municipalities are spending like there is no depression going on, and property taxes are right through the roof.
Our housing market is continually nurtured by people (suckers with lots of money) from "away" that come here looking to escape the urban and suburban nightmare that is unfolding all across the country. These poor dimwits get sucked in on our housing, because in comparison to the costs associated with urban and suburban housing, our market looks cheap and affordable. Think again.
Our labor market is so depressed there's no work for those looking to become employees, unless they'll accept minimum wage, part time jobs. LoL. And because I'm way up on the northern Maine border with Canada, the heating and maintenance logistics of home ownership are completely different from somewhere in say, Massachusetts or New Jersey. These, what are commonly referred to as "Massholes" typically come up here and buy an old sprawling farmhouse with some acreage without realizing these structures are impossible to heat, and that our harsh, wet and snowy winters are really rough on wood-frame structures over time.
In the town I live in, about one in five homes are vacant due to foreclosure/abandonment, and many more don't even come up to that standard and are simply melting back into the topsoil never again to be inhabited. I have one house within eye-sight that has been sold and foreclosed on four times in the last ten years. It's vacant, and for sale again right now. The banks here won't finance anything other than their foreclosure properties. So come with cash and expect to leave all of it behind when you are driven out by the elements.
There's an entirely serparate cash market for housing that runs a little less than half the cost of a bank-financed foreclosure property.
But these properties have little liquidity, because every year there are fewer and fewer cash buyers making their way north to get sucked in by the dream of owning some acreage and a big sprawling old farmhouse.
I don't know what the solution is for a small family. But trust me, it's not here in northern Maine.
I think, if that's you, dreaming of moving to Maine I am talking about, what you want to do is, work hard where you are. Save as much money as you can. And then, if you really want to move north and rural, come up and rent a place so you have time to figure out exactly what is going on here. Because, honestly, a move to northern Maine couldn't be any less of a system shock than moving to someplace like Uzbekistan.
It's very easy to be taken in by the local hustlers here, and end up flat broke and drifting back south with lifelong wounds that will never heal. I've been up here twenty-six years. And I've seen lots of people come and go. They typically last less than a few years before the culture shock wears them down and they flee, horrified and destitute.
What do you mean by culture shock? Most of your comment is about the housing market in particular. What about the culture is different up there?
The culture shock aspect is the most surprising thing about northern Maine, or any rural American community. People from "away" are generally talked about behind their backs by the locals, who typically describe the newcomers as "the rich guy," or, "the rich people." You are a target. You may think of yourself as an American, like the next guy, but you're still from "away," and you pretty much get treated as if you were painted blue and came from another galaxy where everyone drips money as they perambulate. The reason is, you have been preceeded by a great many other people from "away" that were painted blue and dripped money, the vast majority of which were also rich "Massholes" without so much as an ounce of common sense and little in the way of church-going acumen.
Into a sea of generational local depression newcomers arrive utterly ecstatic about their new environs in the place they buy. They mow about five acres of lawn, fix up an old house, (or worse still build a new one a couple of hundred yards off the highway for "privacy") and settle in thinking they're going to live forever like kings up here. LoL
In northern Maine the snow drifts deep for weeks-on-end after a storm, even a small storm. Building a place further than a couple-hundred feet off the road is going to guarantee the homeowner will be completely snowed-in for days on end, even an hour after the guy with the snow plow comes by and clears out their driveway at $40 a whack. But, hey! If that's your plan, no one here is going to make the mistake of trying to tell you what-to or what-not-to do! The locals know the newcomers look at them as if they were stupid. And the locals cheer every time they see some newcomer do something stupid like that. And it happens all the time. "Did you see how far he's building that monstrosity of a house off the road???" "Yeah, I saw. Well, he's got lots of money..."
And these towns are small towns. Their schools are small. And the children of newcomers have to measure up to the local kids. They do so without a clue about the local pecking order, and end up associating with children of the low-lifes in town. And of course, your kids get the "from away" treatment in the local schools, where all the honors go to the children of well-established higher-echelon local families, just as they have for generations, being taught by teachers who were born into one of those local higher-echelon families. You want reputable people teaching your kids, right? Well, it's not like when there's an opening at the local school for an English teacher, that there are fifty applicants. Nope, there's generally one homely, awkward girl from an upper echelon family who's come home from college to live with mom and dad while looking for a mate. And she's awarded the position based on her degree, and of course, the standing of her family in the community.
The naivete of newcomers exposed like babes in small communities is what gets them into trouble. There's no social mobility in a small rural community. These communities survive, and that is all. What goes on here is a race for survival. Just because some "Masshole" comes up here with lots of money, a good-looking wife and smart kids, he shouldn't expect the race for survival here isn't going to be fraught with common prejudice and parochial favoritisms. LoL.
Nope. You want to be one of the betters, well, first you have to learn how to survive, which requires knowing who your betters are. LoL!
Yup. That slack-jawed local in cover-alls is your better, and always will be while you live here. After all, he has a place cut out for him in the local cemetery! And don't you ever forget he's your better, because his son and his brother are both employees of the police department. And his niece is the gossipy local librarian.
(I'm slapping my knee, and laughing to myself at my spot-on description of small town America. I've been here too long -I guess.)
Wow. And you are the people who make fun of us Californians for being snooty and elitist. Nobody out here cares if you're painted blue and have three heads as long as you do you fucking job and merge competently on the freeway.
We also sort of care if you brandish a weapon, mostly if it's pointed in our direction, and if you drive the speed limit in the diamond lane, when traffic is actually moving (8PM to 5 AM)...but we definitely do not care if you have decapitated yourself in a car wreck, or if the popo are giving you a beat-down, as long as we can watch or look, and GoPro it for upload to Youtube!
That really is a perfect description of life in any small town, probably anywhere in the world. When we moved to a similar location because my spouse wanted to be a real country doc, one of the patients was described by the nurse as "that Chicago woman." Turns out she moved from Chicago to that small town over 40 YEARS AGO.
Where we live now, many come here to retire or just dream of living out their lives in paradise -- but on average, they're gone within two years due to lack of professional services, friends & family, or not being able to fit in. Unless the transplant is willing to marry a local or work like a local, they will likely never fit in.
Great commentary. I just moved from suburban Rochester, NY (Irondequoit), a place quickly becoming a rental ghetto due to foreclosures and an aging population that's moving out, to a rural area about 30 miles eest (Sodus).
Your description of rural, small town America is spot on. A guy on my road told me that everybody knows what you're doing before you do, and, it's somewhat true. I paid 14K for 5.7 acres and plunked down a motorhome I bought for $500 (best deal I think I've ever made - the thing is from 1984, was $78K new, and everything works except the motor, which isn't a problem, since I don't plan on going anywhere).
Anyhow, my point is that everybody I talked ot knew how much I paid and every last one of them said I paid too much. To which I replied, "I'd been looking for the right property for 3 years on a slim budget. This had arable land, woods and a stream, so I considered it perfect. I could have dickered, but I knew what I wanted and the price was reasonable."
I intend to develop the property to a degree, to grow my own and live a quiet, happy life. I oculd have paid maybe $12k or even less, but it really didn't matter to me much. A couple thousand over the course of many years isn't going to add up to a hill of beans. I'm happy, the taxes aren't too bad, and I love the serenity of the place. I've been here six months and am about as happy as a person can get. Beats the hell out of the suburbs or the city. They can burn for all I care, and, yes, prices for property are absurdly high.
Thanks for the update. I drove to Caribou once. Sadness within the great USA.
Northern Maine is a lot like the Upper Peninsula of Michigan from what I hear. Lake Superior does a darn good imitation of the ocean at times.
Unless you know what to expect, these places are hard to adjust to. That is unless you like hard winters along with hard liquor. And forget about selling anything as far as real estate.
Where the men are men and the sheep run nervous.
I grew up in Michigan, Bloomfield Hills, till I was sixteen. I went to Birmingham schools. It's a wasteland now.
I was going to say, there's no ocean in northern Maine. That's a common misconception. As the crow (or raven) flies, I'm 250 miles northeast of Montreal, Quebec, Canada. Get out a map.
As often gets said, that's the other Maine you're thinking of that has an ocean.
That's INSANE! Prices are at a TOP ! (California) this is advice for dumb money
Anecdotal but...I was in Sanoma County last week, in a basic wood framed stucco apartment block of about 10 buildings far from town, and there were three late 30s, early forties adults, unmarried and unrelated to each other, sharing a one bedroom apartment because thats all they could afford. Was then in SF and a 30 something couple were renting out the spare bedroom to a another couple, while the wife's brother and fiancee rented out the office / spare room and had an air mattress on the floor. 6 working adults living in a 700 square foot small 2 bedroom apartment. So yes, I'd say CA real estate is at a hyperbolic top, but noway sustainable.
Its called hyperinflation, there is no top. Laws will be past to control rents next. Everyone at this stage believes that prices must come down but they never do, then the panic buying begins.
You had better know how to protect your unalienable right to property, or it won't matter one bit (property taxes?).
Meanwhile, rents are going through the roof and more and more people are caught between the hammer and the anvil. This BS cannot go on much longer. The disenfranchised are getting squeezed more all the time and they are showing signs of fatigue. I will be surprised if we make it to 2017 without a major upheaval...
There is a special place in hell reserved for the rentiers of the world.
;-D
good thing I'm not-but---If I was renting in SF and had to move out for lack of funds I'd just load up the old shopping cart and torch the place on the way out---
Uh huh. Then you would find yourself washing Lamar's socks in the sink of your new place while your rectum seeps blood.
Messy - So am I the bad guy for cashing in my retirement savings to build rental units?
Your're not a rentier. Look it up. (P.S.Upvote the screenname).
Nope. Just stay hard on the numbers. It's all about the math.
"The Fed’s only option would then seem to be more QE. "
Both Peter Schiff and Richard Duncan have been saying that for over a year.
Ever larger amounts of QE. Just like a drug addict needs higher and higher doses until they die.
Live by QE, die by QE.
you're negative. everything is awesome! i'm offended by this article
"Live by QE, die by QE"... That's the PG version - "Usurp by QE, starve them all to death by QE"...That's what the demons at the Fed really practice
Well, when the Robin Masters Estate in Hawaii goes on the block for about 1/3 of what it fetched last Nov, I'm all in.
Esp if the red Ferrari conveys. And Higgins too. And "the Lads". I'll evict Magnum.
Thats fucked up evicting Magnum.
OK. If Magnum can still pull in the chicks on a trim hunt, he can stay.
But only if he can still pull the chicks.... Sturm-Ruger will handle any security needs.
And if that wuss Orville Rick Wrong steps anywhere near the property, Sturm-Ruger is
going to get a notch on the handle.
Ah, those fantasy escapes where we get to rule the world.
Just my little corner of it....
Aging population with declining incomes doesn't need new homes. Replacement of old stock is the only thing going on from this point forward.
Obama's plan is to bring in several hundred middle eastern refugees and give them welfare, free phones, section 8 housing, medical care and EBTs.
More renters thanks to Obamas, mass immigration.
hundred thousands...fixed it for you
What do we do with those savages when they start blwoing shit up in 16 months.
I wish the neocon fags actually had the balls to nuke Mecca. That would entail an end to our ridiculous adventures in the ME, though. Couldn't have that. Too many people to please ("allies" in the region, the MIC, etc.) and our druggy slut of a military would get pissy too. Welfare fucks, all of em.
"when they start blwoing shit up in 16 months."
Since "we" blew up their homeland, it only seems fair for them to return the favor.
Add 'End of gold standard + Advent of welfare state + Abortion + Financialization of everything = Death by many cuts"
Actually, Johnson used the welfare state to end the gold standard but your point is good - they don't work together.
Been saying it for a while now, here's one more time. Sustainable development, not growth, is the way forward (your "replacement"), especially in housing. Who really things adding more inventory (growth) to a market that's already flooded with inventory is a good idea?
The creative destruction process must be allowed to happen, in the housing market as well as the others. The losses need to be taken.
growth is necessary for service of debt (usery)-- so get rid of that and sustainability becomes an option--until then not so much--
+a quadrillion
The reason the constant growth meme must be pushed is usery.
Shouldn't we be against usery?
There is no flood of inventory in southern California.
There's hundreds of thousands of available homes in southern California according to NAR. And that doesn't include the foreclosures the banks are still sitting on.
I think you're right, but that doesn't mean "Migra" is wrong. The apparent inventory is being very aggressively managed. Capitalism requires the creation of scarcity, even in the midst of oversupply. You can't buy the house that isn't for sale, even if it's just sitting there vacant.
And "The Housing Market" has almost nothing to do with the buying and selling of houses. It's about the buying and selling of loans, meaning of course debt, which in our system is money. The house at the center of the activity is just the McGuffin, like the Maltese Falcon. Which, as I recall, was a worthless clay statue of a bird in the end.
Exactly. And look for messages coming from the central planners to "have more babies" so the consumer base doesn't shrink any further. We all got used to the Baby Boomer bubble of people consuming away stuff in the 60s through the 90s. Now we have all this excess capacity and the millenialtards just want to play video games, text each other, hook up, and each potato chips.
The productive people do need to start having babies and have many of them. To bad the game is rigged against them. Both Men and Women are told to be anything other than normal Men and Women these days. I look forward to the great reset. The Liba-Femma-Nazis will disappear as they are only able to exist in a society with extreme excesses. They are parasites.
When parasites multiply so much that they control the host, then they begin to believe they ARE the host.
say what you will about the millenialtards - but given their supposed job prospects, i don't think having more babies is the thing to be doing right now.
The Millennials I run across are mostly very smart and aware individuals. They just have different expectations of themselves and everyone around them than I do, as someone born in 1966.
Being born in that year, Madison Avenue never really figured out what to call my age cohort, nor how to sell us stuff. I grew up with Watergate and the tail end of the Vietnam War, the demise of the job-for-life, the end of someone with just a highschool diploma's being able to support a family even in modest fashion with a fulltime job, etc. By the time I was an adult, Finance had begun the process of changing from being a highly valuable tool for business, accounting for maybe 5% of economic activity, to its status today as the be-all and end-all in itself, superseding all other business, and making up over 40% of all economic activity (and rising).
As a result, as I reached adulthood, all my elders (Baby Boomers and the last of the working "Greatest Generation" people) called me lazy and entitled. I shrugged that off, realizing that they were offering me the same types of deals and opportunities that had been offered to them and were confused by my not being enthused about it. The world I had grown up seeing and absorbing wasn't the same as their world, so what they thought was so great I saw as obvious dead-ends.
I think the same thing is going on wiith the Millennials. They don't see why they should be in an office cubicle from 8:00 AM - 5:00 PM, since all they're doing is working on connected computers and talking on phones. A lot of the things I've had to learn to adjust to, they have just absorbed, as it was part of the deal they've been presented with all along, in their lives.
Come to think of it, I'm sitting at my dining room table right now, in sweatpants and a "Cthulhu For President; Why Support The Lesser Evil?" t-shirt, myself, talking to clients from no less than 4 Fortune 500 clients so far this morning. Indeed, why be in a cubicle farm? Hell, why wear pants to work?
Of course, the advice I got from my Grandfather, born in 1912, still holds true today. Show up early, ready to work. Eat a good breakfast, and pack your own lunch. Figure out the necessary thing that nobody else wants to do, and get good at it. Figure out as much as you can about the finances of your employer's business, so you can tell what it really costs him to keep you around, how much value your work really creates. That way you can know whether or not you're being paid fairly, and how to progress in a direction so you eventually will be paid fairly; either by your current employer or the next one. Don't buy anything on credit unless you know with a certainty that it will provide you with the money to pay back the loan. If it won't, save your money to buy it cash. Stuff like that.
Having more babies is most definitely not the thing to be doing now. Wait until you and your co-creator have gotten through your 20s and figured out who you are as people, and have built up some leeway in various aspects of your life. Money and security would be good things in that regard, but not absolutely necessary. Knowing where you fit in your surroundings is far more important. Your job as a parent is to explain stuff to the ultimate fish-out-of-water, a newborn. You can't explain the local terrain if you haven't yet figured it out for yourself.
Whole lot of basis shfiting going on.
Very much so. I don't think it's anything new, though. Different each time for everyone, of course. But I don't think new.
I'm also from your generation and followed a similar path. Spot-on assessment IMO - particularly about doing something else that nobody else wants to do and get good at it.
Thanks. That's one of the points I got from my Grandfather, so I'll call that one something that has always been true and always will be.
Of course, figuring out what necessary task nobody else wants to do and getting good at it requires the ability to transcend one's own immediate point of view. That's another thing most people have never been very good at.
Your grandfather was wrong about one thing; don't work for other people. Work for yourself.
Or, alternatively, we could expect more single family housing starts as there isn't enough housing.
Of course, that discounts affordability, and lack of jobs, and lack of wage growth.
Fact is, housing continues to be overpriced. This is due to the FED's keeping rates low, which encourages higher prices. It is also due to the fact that the original low rates spurred the housing bubble, and people can't/won't sell for a loss. Keeping prices high. Oh, and there is a shortage of good housing. Go on. See if you can find something that isn't a complete dump, or astronomically high priced. There's no reasonable $200k starter home out there that isn't a POS in need of $200k in work.
$200k "starter home"? Surely you jest.
I'm not that old, and my first house was a 1,000 sq ft 2 bed, 1 bath with detached garage, fenced in yard, VA owned foreclosure that was dirt cheap. Mortgage, taxes, insurance, everything was under $600/month. We completely redid the inside over 4 weeks while living in my father in law's basement. It was small, and we had two kids there before going to our next house. We always look back fondly; it was easier and less stress back then. Allowed us to save up and we still have it as a rental property. THAT is a starter home.
And our second house, new construction, 4 bed, 3 bath ~2,200 sq ft was less than $200k! It is relative to geography as the area was not San Fran, New York, etc., so there is some context.
With 71% of people making less than $50k per year I don't see how a single head of household can afford more than $125k homes. Middle class has been getting reamed, so both adults have to work.
Sidebar: a councilman in the town where our first home was located told me that the average time on the market for homes was three weeks. It is because most houses are in the $100k range and it has become sort of a starter town. People like me gobble those houses up, stay for 3-5 years, then move on. The RE market is very robust due to the cheap prices, availability and turnover.
Here in the Northeast, a decrepit ranch in a lousy section of town is over 200K.
It's a big part of why the NE is losing citizens, and illegals are moving in. People can't afford to live here.
"People can't afford to live here."
Boomers are trying to drop costs. Move to a place where taxes and the cost of living is less.
It's not the boomers. It's the young folks. There is a migration of young out of the region. NH has a negative immigration rate for the youth.
I live in Minneapolis. In 1996, my wife and I bought a house with 875 sq. ft. finished (1 story, with a full unfinished basement that didn't count toward finished sq. ft.) for $49,500. That was the same price the previous owner had paid in 1976. The house was in good shape, but hadn't had any maintenance done since 1976, so I re-roofed it, we scraped off wallpaper, pulled carpet, had the maple floors thus revealed sanded and refinished, etc.
We sold that house in 2009 for $139,900. We paid off a car and an old debt, put $100,000 down on the next house (2,400 sq. ft. with an 1100 sq. ft. unfinished basement; $226,000). We've put on a steel roof and done a variety of other maintenance and upgrades on this one too, and by now have the balance on the mortgage under $100,000.
We got completely dumb-lucky on all ends of those deals. We originally bought about 30 seconds before the housing market went bananas here. We sold during the crises, but here the price of that second home was the price-point that was getting slaughtered; the starter home market had gone up but was hitting the ceiling you describe. Nobody who wants a starter home can afford much more than $125k, no matter what lenders and the NAR has to say about it.
Of course miniscule interest rates set that sale price. It's the monthly nut that matters. People bought and sold houses just fine in 1980, despite 18% rates. They just had to adjust the principal price downward to get the monthly payment to what people could pay. Rates go down; prices can go up, and vice versa.
The key is to have the equity to work with, on both sides of the deal.
prices go down then property tax revenue goes down - can't have that - that's a huge reason rates don't rise - govt loses in yet another big way
That's a good point, too. I haven't gotten smeared on property taxes, but I know some who have. Mine has always worked out to be about 1.5% of assessed value, annually.
RE being all local, it can be hard to see the trends until you zoom out so far the individual data points are kind of meaningless. But I know a few people who have the nicest house on their otherwise-average block, or the cheapest house on a very nice block, who are paying property taxes way out of proportion to the actual value of their property, at least as I perceive it. Then of course you get into all the games that are played with assessed value as opposed to actual or probable market value, etc.
There's no reasonable $200k starter home out there that isn't a POS in need of $200k in work.
Where do you live that a starter home starts at 200K. Holy crap batman, starters here near cincinnati but in the country start at 45k. 100k would be more than a starter home.
Starter homes where I live cost a minium of 450k and need 30k in work the day you move in. But don't fret becuase you get to choose one of the many that sit on the market for months without ever being sold. Their is no comp to be had for the past 1.5 years.
ya but cincinatti is in the rust belt, opportunity for jobs where the houses are 45k are slim.
Rust belt here too, within about a half hour of Detroit.
Only 5 houses for sale in my town under $150K; they are 2 bedroom/1 bath, old, need work, no basement, on a dirt road or a busy road or the wrong side of the highway.
Very cheapest is $84K.
For $45K here you would be looking at a mobile home in a trailer park.
OT: Morons on line....
http://chicago.cbslocal.com/2015/10/21/sneaker-fans-lining-up-ahead-of-opening-of-michael-jordan-store-this-weekend/
No jobs so they have plenty of time to wait for the expensive stuff to show off.
I'll always remember the sharp radio host listening to one of them complaining how they couldn't afford a computer and were very very poor. The host had one reply, "Do you have a pair of sneakers?". end of conversation.
http://chicago.cbslocal.com/2015/10/19/3-dead-19-wounded-in-chicago-week... (Typical weekend in Chicago, NY, LA, SF & Etc.)
Where on the chart is the vibrancy of 60 million immigrants?
they live in the low income government housing that isn't represented on those charts.
Multifamily starts today are the ghetto projects of tommorow
Section 8's. More and more on the government tit.
Abolish private home ownership plank...almost there..forward global communism..aka 2030
No Way Out? Sean Young was awesome in the limo.
QE roach motel.
They are building thousands of units here in NJ...of course no one is stupid enough to move here other than illegals...50% of 30 and under live in their parents basement!
They're moving the scum of the earth into this country and they will build housing and move them in, next to us of course. No area is safe from this group of parasites.
You sound like a stark raving mad patriotic nativist isolationist nationalist.
Let have a bourbon sometime!
TONS of multi-unit housing going up in Atlanta too. That's what happens when you let in 30 million illegals.
Same is true of Houston, but no one can afford it.
Who can buy a house when a pickup truck is 80k?
I present to you the $80,000 F150:
http://www.autotrader.com/cars-for-sale/vehicledetails.xhtml?zip=30097&e...
Bwhahaha "Black Ops" and it doesn't even have a gun rack!
But you can get 7 year car loans now!!
You get $1500 Cash Back!
yes, the new Ford Erection.
Well, gee whiz, not quite $80k, but close enough. I remember buying a 1980 Z28 off the showroom floor, sticker was only about $8,000. Built my first house myself two years later for about $15k.
It's official, Im effin' old, everything's too expensive, too far away or too heavy.
It sucks being 54 (espicially after "texting woman" hit me head on a couple years ago). Fortunately, she had "state minumun" coverage on her insurance and no assets other than the van which she still owed 9 years of payments on which was totalled too..
Then my wife divorced me. "I don't want to be married to a cripple." Took everything.
I'M STILL HERE YOU FUCKERS.
tired of rising rents and closing on a single family home, had to pay over list and closing costs to close the deal, it was an estate sale, most all houses I looked at were flippers for a quick buck.
Every one of those loans were necessary to enable the existence of enough commercial paper (dollar currency produced in the banking system) to roll-over the Debt backing the base money.
Loan standards dropped because they had to in order to preseve the system.
And subsequent to their failure...every single one of those loans had to be bought by the Fed to ensure that backing of base money did not 'undo' through debt-deflation.
I am not justifying saving a system that is immeasurably corrupt. But we have to acknowledge that the insanity was the only path to saving that system...temporarily.
One of the main problems is that people still insist making assumptions in their analyses that are appropriate only to a hard currency... such as the idea that any particular interest rate, whether raised or lowered from current, will have only a limited effect on the monetary base.
That was so when currencies were significantly backed by commodities that cannot go 'poof' and disappear during default.
But credit and debt CAN go 'poof' and simply disappear entirely upon default. A higher interest rate than the market can bear will do that to the entire currency's debt-backing.
Moreover, because debt compounds exponentially, and because the currency is only ever equal to the face value of the debt backing it, the real economy is doomed in this system to be ever-more encumbered with debt...until the choice is bankrupcy or curtailment of operations and capital investment. When that happens, any interest rate at all is too much...because their existing debt service still requires cash, and they cannot generate more without expanded capital investment to enable exapanded operations...and at the same time they can't get there with the current debt load. That is a debt-death spiral.
And that is where the international economy has been since 2008.
The economy DIED. It is only kept walking through ever-greater infusions of Zombie blood (unsterilized monetary inflation).
But zombies do not reproduce. They only consume the living. (And that also follows...because the monetary inflation is funneled through Central Bank Cronies, who spend the money before it bids up prices, drawing resources away from real productive needs and uses).
There is no way out, either with a deflationary/inflationary collapse or without, until the monetary system is replaced with one that is sane.
Quite so. People make a mistake thinking it had anything to do with the trade in houses. The only reason houses had anything to do with it at all is that most people need them, either by purchase or rental, so there's market activity. It's the market activity that is being preyed upon. Could be narcotics, food, tobacco, education, healthcare, or tulip bulbs for all the Finance sector cares.
$75 trillion in cash on the planet and $175 trillion in debt. This doesn't even include derivaties.
first of all, the main reason why you all think "the housing market" is so important, is on account of the unconscienceable "skim" that everybody takes upon the transactions ... the so called closing costs, which really amount to sam, Joe, and everybody horing in on the action, each taking a little bit of flesh out of the sellers and the buyers, without actually adding any value ...those people are all rentiers, damaging our economy.
second of all, its been estimated that the USA now has available enough housing space for about 130% of the population. Given such a glut, it should not be terribly surprising that its difficult to make a profit by building more of it .... even though the banks, the courts, and others do their very best to keep a percentage of the available housing vacant and off the market ...
but the main point is that it all costs far too much for people to be able to afford ... most especially expensive is housing located nearby to employment centers, so not only is housing too expensive but transportatiion also becomes too expensive ...this is a deliberate result of decades of bad zoning practices, bad planning and development practices, making terribly inefficient use of the available land ... its a stupid, stupid system set up to screw the common people over and over and over again,
At one point in our lives my wife and I were independently dirt poor - with college educations. I was living in a trailer in Central Florida in the middle of an orange grove. My wife was sleeping on the floor of her best friends living room outside NYC. We both changed our careers. After a particularly bad winter we left NYC and moved to South Florida. We rented for two years. Both working we saved and purchased a pre-construction townhouse for $63K - cash. We lived in that townhouse and saved tons. A few years later we purchased our first house - $179K - cash. A few years later my employer asked us to move to Texas. They bought the house in Florida and picked up all the closing costs in Texas. The house in Texas cost us about $350K and we paid cash. Three years later we decided we missed the beach and moved ourselves back to Florida. Took us 3 days to sell the house in Texas. We bought a house on a canal with no fixed bridges. $450K and we paid cash. In 2005 our house was listed for $1.5 million - no takers. In 2012 we ultimately sold the house for about $900K - but we had put on a new roof and replaced all the windows and doors with impact glass. Moved to Mexico and purchased a nice house for about half what we sold the house for in the States - for cash.
Unfortunately, the only way out of virtually all of the problems caused by the Fed (and let's not forget the role of our elected representatives in this fiasco) will have to come by way of either serial or parallel collapses. I think everyone agrees housing is in a bubble. Get rates back to historic norms and prices will collapse, but left to its own devices, the housing market will find an equilibrium. Yeah, people will suffer short term, but that's going to eventually happen anyway. The longer the bubble goes unpopped, the deeper the pain will be when it does, in fact, pop.
The key to getting out of all these boxes is to accept the pain now and let the market come to an equilibrium, then don't screw with it. The market is a wonderful mechanism that, when left to its own devices, self corrects over time.
drink the coolaid--there will be no market till gov't is gone. The gov't picks winners and losers--the gov't takes from some and gives to others---the gov't makes arbritray rules/laws the inforcers and sycophants use as an excuse to steal ---half or better of the population of any country anywhere get some kind of gov't larges--with gov't there is no market,only gov't----just saying---
There is no such thing as man without some form of government. Power, control and corruption (i.e. the need to be dominate over others) is inherit in our nature. Nature is something you cannot change on your own. Look at mans history if you need proof or you could be honest with yourself and find further proof.
No offense, but it will not come to an equilibrium, because there is no real collateral in the currency system itself.
A huge portion of the existing currency, both central-bank base money, and so-called 'commercial paper' is tied up in mortgages.
How much?
Too much!!!!!
You need to understand how the dollar - and all other currencies - are currently made.
They are 'made, printed, created' like this (US $ as example, and 1% coupon for simplicity):
1) Government issues a debt for $100 and provides to Federal Reserve.
2) Federal Reserve adds the $100 to 'Asset' column of the balance sheet.
3) Federal Reserve creates a $100 entry in the 'Liability' column of their balance sheet. Voila! $100 just came into existence!
4) First interest payment is due; government taxes $1, then pays $1 in interest; 'POOF!!!' $1 just went out of existence, leaving only $99 of circulating currency to pay the original debt of $100
5) Government issues debt for $1 (simplified...they would actually wait until the debt is near maturity and then write the new debt to be equal to $100 plus accumulated interest).
6) Federal Reserve does as before...creating $1 so that the original $100 debt is payable (but now there is a new, larger debt replacing it).
That Federal-Reserve produced money is called 'base money'.
But that's not the only source of dollars.
The government is going to spend that $100 it got from the Federal Reserve. When it does, a government contractor or employee is going to receive it. They will deposit it or spend it. Either way it will be deposited.
The deposit forms a reserve. In the US the Lawful 'Reserve Ratio' is 10%.
So the bank can loan out $90 of that money, and keep $10 as reserve. OR they could loan out $900 and keep all $100 as reserve.
In either case both the recipient(s) of the loan, and the original depositor are guaranteed 100% access to the money...which is (obviously) as impossible as two separate car-buyers driving the exact same car off the lot at the same time, each thinking he owns it.
By this method, the monetary base expands after the deposit by $90 to $900. EXCEPT that loaned-out money is also going to be deposited. The process will be repeated until the denominations are too small to loan. All of this is called 'commercial paper'. It is money in every sense. Except it exists only due to an accounting entry.
Because the largest consumer loans are mortgages, and the economy is 70% consumer, a HUGE PORTION OF THE CIRCULATING monetary base are tied up in mortgages.
When the mortgage defaults, it does not default only to its face value. It defaults to its value plus accumulated interest. This means that a $100K 30-year fixed loan only creates a $100K of cash at initiation. Just like the Central Bank does with Government debts.
Again this amount does not include the interest.
So, the value of that loan is actually $193,255.78. And that is the amount that will be sold to someone.
What does this mean?
It means that when a loan is created it only creates the face-value of the loan.
But when it defaults it destroys the face-value-plus interest of the loan.
The difference, $93,255.78 in this example, is money brought from the future to the present. When it disappears (POOF!) in default, that is $93,255.78 less money in the monetary base, that someone else requires to make the payment on THEIR loan.
That is why we have the term 'debt contagion'. It is because in a debt-based monetary system like ours, a SINGLE DEFAULT CAN CAUSE...not just encourage, but CAUSE, another loan to default.
Get it?
Each loan defaulting acts like a dominoe, knocking down the next loan....and so on, and so on, until all commercial paper is gone...and actually in deficit.
And then what?
Why, then there's not enough currency left for the government to make interest payments on its debts...and the contagion spreads through the Central Bank, until there are zero dollars in existence anywhere...but still a sizeable debt in dollars.
Get it?
It will not reach equilibrium, because we have no physical collateral backstopping the value of the currency.
If we did have such collateral, then once the collapsing commercial paper could not be paid, the bank would go bankrupt and the remaining balance of the loan would simply be written off. It could only ever collapse the currency to its percentage of commodity backing...traditionally 40% in the US. After that, the government pays in specie, which can't be discounted because it is a physical element easily authenticated, and not a promise.
The "Flexible Currency" in general, and the Federal Reserve in particular were created SPECIFICALLY TO TRANSFER THAT RISK OF DEFLATIONARY COLLAPSE FROM THE LARGEST BANKS TO THE CURRENCY ITSELF.
So, no it will not reach any equilibrium. It will collapse the currency.
Bravo gcjohns.
OK, so we're at the exciting part of the story when the fiat currency collapses because it has no collateral. If it is still the world currency, can't the US just raise the debt limit some moar and keep printing? Can .gov use the new prints to pay its obligations and the fee shit army stuff?
OT: Can anyone see a way to profit from massive numbers of zombies raoming the land?
The answer to your question as asked:
Q: " ...can't the US just raise the debt limit some moar and keep printing"
A: Maybe. The fundamental problem with the economy is that its free cash flow is not enough to cover A) Debt Service B) Operations and C) Capital Reinvestment.
Since only A results in immediate bankruptcy, businesses across the real economy are engaging in reducing funding of B & C. That leads to declining cash flow...and even more problems with A. Today, that is the status largely across industries. The process of printing money, even with QE is that it makes 'A' get bigger, faster. And even though ZIRP exists... it means that the financiers can borrow at Zero...but the process of providing it to businesses still requires overhead...and that presumes that the people getting ZIRP loan it out rather than spend it on luxury items for themselves.
So how much further can that string be pushed??
If it could be pushed much further I don't think the Fed would be having this public argument about 'Damned the currency, full rate ahead!'. A lot of their thinking only follows if you assume there is a substantial commodity backstop to the currency that does not exist at many multples of the current gold price. I suspect they do it from historical reflex, because at the official price, less than 1% of the Dollar has any kind of non-credit backing.
And please note that the growth of accumulated interest in the composition of the currency-backing debt is growing exponentially, while the currency created from it only linearly...meaning they will have to accelerate the size of their QE to get the same effects even temporarily.
Q: Can .gov use the new prints to pay its obligations and the fee shit army stuff?
A: Not for much longer. Because they will have to exponentially accellerate the QE...which won't help business, leading to continued falling real commercial production...and we all know what happens when you have more money chasing less product.
So how much further can that string be pushed??
Lets have a look at Japan.
The dollar will collapse as soon as we run out of zeros.
Nope,
Japan stays afloat due to capital inflows in response to an export-driven economy.
The world's biggest importer, and Reserve Currency can't do that.
Nothing works without stable, middle class income.
There is NO legitimate middle class income WITHOUT manufacturing/production.
You CANNOT give away the store for forty years, replace it with nothing but anesthetizing credit, lousy jobs, lousy incomes, and expect to fund an American standard of living. Absolutely IMPOSSIBLE.
When debt--ANY debt, and for whatever purpose--meets 2nd or 3rd world incomes, it is impossible to recover. Just can't happen.
EVERYTHING comes down, ultimately, to discretionary consumer INCOME.
EVERYTHING.
We WILL NOT recover until the current debt-based, Fed-manipulated, Wall Street crony-driven machine is smashed, plowed asunder, and a completely new economy rises on its bones...period.
If we expect to consume without debt we can't service, we must produce something beside debt.
We simply cannot rationalize or financially-engineer our way to prosperity.
The longer it takes for US to act...the less likely that new future will be to happen.
End of story.
m
We live in "Surreal-World"; things like you described never happen.
Is there a figure for "Housing reduction"?
Here in the UK we knock the old 60's tower blocks down and sweep away som old terrace housing everynow and then.
They are replaced with "Insta-houses", taking almost a month to build, and they are sooo luxurious.
Background music: Jefferson Starship: No Way Out
According to the pimps and whores and cheerleaders at the National Association of self-promoting Realtors it's blue skies and a great time to buy.
Exceptfor NIRP.Banks will pay you to take a mortgage with endless funny money.Anything will be thrown at the wall to create hyperinflation.If the powers at be really want extreme inflation they can let the dogs out anytime they want.That's the endgame.Their philosophy will change to saying "we have more experience with inflation"
Well, maybe the end game isn't hyperinflation but allowing the system to collapse with most folks indebted. That would give the elite some leverage to steal liberties and pass even more fucked up laws.
How much have we spent insuring cheap risky loans to encourage home buying? What if we incentivized homebuilding instead? Which would actually make homes affordable in the long term to new homebuyers. And maybe if people weren't spending half of thier income on rent then the rest of the economy wouldn't be so crappy.
Please......The Democrats (Carter, Clinton) ALONG with the FED created the housing crisis.
And Obama trained didndunuffins how to shake down banks for high risk loans before he was a senator for 2 years.
this crisis has been in the making for years...everyone since Nixon had a hand in the housing crisis - not just the Dems.
Anybody mentioning two words: dem or repub needs to be hit with 2X4 over the brainless head.
It is indeed the antithesis of anything that resembles a democratic republic. The two are one. My thumbs up to you; however the 2 x 4 is almost to nice. Nail gunned perhaps; maybe to harsh??
Maybe used as a marker for where my gold is hid in the lake? Fill their pockets with gold and push them overboard with cement galoshes.
One could argue the U.S. has been in a housing crisis since 1934. The National Housing Act of 1934 is proof.
BTFD!
I don't understand all these numbery-charty things, but just tell me this - will this hurt football season?
Sincerely - Joe Public
I found an 8-acre island in Canada’s bush country for cheap. Build a few houses on this and flip.
$75,000, Private Island For Sale
http://detroit.backpage.com/LandForSale/75000-private-island-for-sale/18...
According to Zillow 50% of the homes in my neigborhood are for sale the other half are in foreclosure. Good luck trying to sell a home in that enviroment.
Too big to fail = everyone else fails.
The problem with the US is that you're not allowed to own a house without oweing somebody something. It's never yours. Another mirage in the American dream.
So what you are saying is that you "rent" from the government.
You pay "ransom" to the government, or they will send armed thugs out to steal your house.
What are the loan rates like for nice used RV?