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The Fed Never Solved The Mystery Of The "Missing Inflation", And Now It Has A Big Problem
Back in June, this website first "solved" the "mystery" behind America's missing inflation, when we showed that a record number of US renters are unable to afford housing, suggesting that record amounts of "disposable income" were being diverted for use as a shelter "tax" instead of being spent on true discretionary goods and services, leading (together with the Obamacare tax) to the broad and distressing decline in not only traditional retail sales and moribund consumer spending, and the "secular" economic slowdown observed over the past several years.
We followed this in September with another expose titled "The Mystery Of The "Missing Inflation" Solved, And Why The US Housing Crisis Is About To Get Much Worse" explaining why the Fed is about to make a historic mistake and unleash an even more acute housing crisis if it hikes into an economy where the only core inflationary "impulse" if that from rent inflation, at a time when median real household incomes have tumbled to levels last seen in 1989.
As we explained in July, one major problem is that the Fed's measures of inflation are wrong, if not with malicious intent, then purely due to definitional purposes. 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.
In fact, the only age group that has seen an increase in homeownership in the "New Normal" are those aged 65 and over!
Showcasing the plight of renters was the "State of the Nation's Housing" report from the Center for Housing Studies, according to which 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.
As more Americans are forced into a limited number of rental units, prices have exploded at a far greater pace than what is officially reported in the shelter or core CPI metric, for all - but especially for those in the lower income buckets: as seen in the lower right chart, the rental "cost burden" of households making under $30,000 is the higest ever, at well over 70%.
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.
But the punchline is that, as noted above, all this was taking place in the years following 2000, when gains in typical monthly rental costs exceeded the overall inflation rate, while median income among renters fell further and further behind. As a result, the share of renter households facing severe cost burdens grew dramatically, reaching a new record high of 28 percent in 2011, and if 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.
As we explained three months ago, the implications for not just the US economy, but for US demographics and society as a result of this "stagflationary" rental environment are profound. They are also 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.
In fact, 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 was found to be 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 added, "It takes young people longer these days to find jobs with decent wages. 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."
Perhaps the best visual summary of the "mystery of the missing inflation" was 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.
This is how we concluded in September:
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 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.
So why do we bring up this very critical topic today? One reason: as Deutsche Bank's Dominic Konstam wrote out over the weekend, not only is it still "all about the rental inflation", but it is this "mystery" of missing inflation, which we exposed not once but twice over the past 6 months, that has so stumped and confused the Fed, it is now piling policy mistake upon policy mistake.
As a reminder, in the last CPI print before the Fed's rate hike announcement, even as headline inflation barely rose from the year ago period pushed lower by the ongoing collapse in energy prices, it was core inflation that printed at 2.0% and give the Fed the green light it had been so eagerly anticipating, to hike.
Only there is one problem.
Here is what Konstam said about the prospects for US benign inflation, why the German bank "remains strongly opposed to a view that inflation will shock to the upside", and how rental inflation is at the core of everything.
From a theoretical perspective we have a bigger problem with a bearish inflation outlook in that core inflation ex housing remains extremely weak on both a PCE and CPI basis. OER/rental inflation is therefore the main “culprit” for the Fed in achieving its inflation “target”.
Define irony: the one thing that is crushing millions of Americans and more than a quarter of all US renting households - those who can barely afford to rent even as their real median incomes continue to slide - is what the Fed interpreted as a green light to hike!
Konstam continues:
The trouble is that rents are running high not because house prices are booming and/or construction is sawing but because structurally new entrants to the housing market are renters not owners. This is reflected in the very low first time homebuyer rate, less than 30 percent.
Now, prepare to be amazed: remember how we said above core inflation rose 2.0% in November from a year ago. Well, if you strip out housing, core inflation was just barely above 1%. Worse, on a Core PCE basis, if one excludes housing inflation, one gets the lowest inflationary print since the financial crisis!
And here is absolute punchline which if one ignores everything we have said above, is a must read:
Rent is however a “tax”. In this instance it is not something that represents real growth or discretionary consumption. If OER was soaring on the back of house prices and housing construction that allowed for wealth extraction, i.e. prior to the crisis, the outlook would be very different. As we have highlighted before, the stagflation concept in housing is a negative for structural demand and therefore pricing power.
If only every economist would read these 68 short words, there would be no confusion why there is no economic recovery, why retail sales are foundering, why wage growth is non-existent, and why corporate CEOs are the most bearish they have been since 2012. In short: everyone would know why not only the Fed failed with its ZIRP policies, but why it is compounding this failure with another failure by hiking rates.
So what does all of this mean? Well, the US economy is now one where "taxes" define growth.
- On the one hand, there is the Supreme Court mandated "tax" that is Obamacare, which quarter after quarter is the biggest source of GDP growth as it forces US consumers to spend billions on (soaring) health insurance, in the process giving the impression of healthy Personal Consumption Expenditures and a growing US economy. Don't feel like paying this tax? Sorry - it's the law.
- On the other hand, there is the "tax" that is rent: a tax which has soared in recent years, vastly outpacing median incomes (which have been declining) as landlords can hike asking rents to whatever levels they choose: after all owning a new home has become virtually impossible for what little is left of the US middle class. Don't feel like paying this tax? Fine, just prepare to live under a bridge or in a tent.
Combined, these two taxes are draining hundreds of billions in disposable income from American households, and leading to the secular stagnation that so many supposedly intelligent economists are observing every day unfold before their very eyes, and yet which so very few can explain even though the reasoning is so simple a 10 year old without a formal economic education can understand that when one pays the bulk of one's disposable income on the two core essentials, housing and health - whose prices keep soaring with every passing day - there is virtually no money left for everything else.
No wonder then that the Fed will not grasp any of this before it is far too late.
And the biggest irony: for the Fed these two largest economic "taxes" which force "spending" and which push up "inflation" are precisely the catalysts that served as the basis for the Fed's decision to hike rates in a desperate attempt to give the impression that the US economy is recovering, when in reality the Fed has been looking at the economy's fundamental deterioration in the face, and reached the absolutely wrong conclusion, convincing itself it now has the "green light" to proceed with a rate hike!
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As long as the bankers have money who cares? More porn will take care of them.
Who are the owners, then?
banks...
The New Silk Road Increases the Strategic Importance of Kareliaby Sakari Linden
http://thesaker.is/the-new-silk-road-increases-the-strategic-importance-...
When the rates get low, only the elite get financed.
Well, since the vast majority of the major corporations in North America and Europe (maybe elsewhere, I admit I haven't checked every corp. on the planet) are the Vanguard Group, BlackRock, State Street and Fidelity (FMR LLC), that would make the major investors through those four the OWNERS, the Big Cheese, the OLIGARCHS, the Money Masters . . . .
Or the Target, if you will.
"No wonder then that the Fed will not grasp any of this before it is far too late."
Aaaahhh, I'm sure the highest echelon of the Fed understands this, just as when those of us who repeatedly urged them to perform studies (Yes --- the public can submit study suggestions to The Fed) on how the offshoring of jobs while importing foreign visa replacement workers, they refused repeatedly over the past 30 years!
They are simply the front office of the banking cartel.
From the Wall Street 17 (circa the 1940s, the time of the TNEC study) to today, and the Big Four (the aforementioned Vanguard, BlackRock, State Street and Fidelity) super-concentration has only advanced!
Two things, Mr Chairmanwoman Yellerin (along with her cronies) is an idiot. The oracle of eccles is desperate to extract herself from the corner, and bless my soul she can't do it.
No matter who tries to rewrite history there can be no doubt that the Fed itself caused the decline and fall of the middle class through idiotic policies, models and divination over the bones of some dead bird.
Second, I am not paying that Obamacare tax no way no how, you can fine me all you want but as I understand it you can't come after it, you have to take it out of paid in tax in excess and I'm not paying in any excess, so suck it.
Nothing a little ninja loan can't fix...
the slippery slope of hope. and who did you vote for? lol...
White millenials were more likely than any other major demographic to vote independent. Also, they went Romney over Obama in 2012.
This millenial / obama myth is getting out of hand. The only reason the entire age bracket went the other way is because we have more minorities than any prior generation (and I suspect other trends with the generation have a similar root cause).
http://www.cnn.com/election/2012/results/race/president/#exit-polls
Good jobs have gone away and have been replaced with bar tenders and servers. This generation is soft.
What are some examples of good jobs? Finance has "good jobs," but I don't think that's what you mean.
I don't think the USA is ever going to bring back millions of factory jobs, so what say you philosopher king? What should we peons be doing?
There are no new smelters, steel workers, dock workers, or engineers that don't sit in front of a computer all day on facebook.
If this country ended up in a war, it would lose simply because it would likely be at war with the countries that make everything for it.
The disarmament of the US happened when the factories were packed up and moved elsewhere.
Indeed, and millions of young people who did what their parents and "the system" told them was the right thing are graduating with unreal levels of debt with degrees that pay nothing. Those who didn't buy into the dream and follow everyone's directions are either incarcerated, unemployed or Barely employed because at NO point in our education did someone take any time to explain the trades, and tell us that this route is not a dead end for losers, but rather a highly lucrative, fulfilling, and NECESSARY job in society
Whether good or bad, war has grown more reliant on tech than iron
I'd rather send out a sortie of drones than F-15s
Finance doesnt even have that many good jobs. Not everyone at Ivys/targets are placing these days, let alone the bulk of the graduates.
No, the generation that sat by while neocon scum sold out this country's middle class is SOFT. My generation, in all likelihood, will be the one who pays for your weakness and is forced to either revolt or submit to bankster serfdom. Fuck you very much.
NH it was many generations that sold their children out. First a little, then a lot, going back to 1913.
Indeed, shouldn't put it all on my parents gen, it's been a long time in the works, as you said...
"I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." -Woodrow Wilson, after signing the Federal Reserve into existe
Oh thank god, I was afraid Millenials weren't going to be blamed for our nations ills. After all Millenials have been voting since the early to mid 1970's and were largely responsible for not only all electoral outcomes the past 40 years, but also business decisions that out sourced all the good paying jobs.
Also their income, rent and tuition is all vastly better than say the Boomers on a real terms basis. Yep, clearly we can blame Millenials on this one. I mean it's certainly not the one group who is still living the American dream and apparently the one age group still buying houses. Nope, it's the young kids' fault!
Look, if you want to blame the globalists go for it, but you might as well go to the maternity ward in your local hospital and blame one of the newborns there as blame Millenials. They've voted in only one less presidential election and they are about equally represented in congress and executive board rooms across the country.
If we are assigning blame based on age it's boomers all the way. I'm a gen X-er btw.
Since when did voting change anything. Do you seriously believe any age group of voters has EVER had any influence whatsoever over fed policy? Fed policy has one goal, and one goal only: remove as much wealth from the population as possible, and place it in as few hands as possible. It's called concentration of wealth/power, and tptb wouldn't have it any other way.
Yellin in that photo has the same look a cow has when the bolt gun gets put to the forehead in a slaughterhouse.
" Why me ? What did I do to deserve this ? "
Well, sweetie, you are a member of the Special Club, and they need a fall guy type person.
To focus muppet anger upon, after The Fall.
It's like dark matter... or in the research of Flakmeister, The God Particle.
ZH, I appreciate you upholding the right to free speech and allowing me (sometimes feeling too good and with a need for glasses as my eyes are getting a bit old, but I alway heard it made scotch and wine better), downvote the perp who keeps downvoting everyone else, especially WB7. I would like to wish Flakmeister a Merry Christmas and if I get a lump of coal again this year, I will gladly keep it. If Santa (or a genie) could give me a wish, It would be allowing me to downvote more than once on the same item.... Happy Holidays everyone and lets get past all this shit.
john
My Dad once told me that, for his generation, owning a home by 25 was a benchmark for personal development and progress. Now, at the age of 27, the idea buying a home is juSt completely out of the question. Not even on the table(which I bought from Craigslist).
Stand tall and be proud - I've bought a lot of great (and very inexpensive) items off of Craigslist too! As far as your comment about not being able to buy a house. Maybe that's for the best. I have my own home and believe me, owning a home is way more than just a simple mortgage payment every month - downright pain in the ass some times. I never did believe that everyone should own a house - a whole lot of people do just fine living in an apartment - I did for many years. Anyways - Merry Christmas!!
Thank you for that, a Merry Christmas to you as well!
http://www.bizjournals.com/houston/blog/drilling-down/2015/12/another-ho...
" Yes we can! "
zoning, building and environmental regs are restricting the supply of housing, which increases the value of homes owned by homeowners, who comprise slightly more than half of all citizens.
It will only get worse until there are more renters than homeowners.
Plus, mass immigration is driving demand for housing.
zoning, building and environmental regs are restricting the supply of housing, which increases the value of homes owned by homeowners...
FOREIGN MONEY LAUNDERING, FED MALFEASANCE AND WALL STREET MANIPULATION are restricting the supply of housing, which increases the value of homes owned by homeowners.
FIFY
Hot Money is half the problem. The other half is invasive government.
Remember the easy gov back-stopped loans in years past meant to give anyone with a pulse the ability to get a house loan (until that blew up horribly, but not before it helped to ramp up prices). Add in zoning/environmental regs and that in total, pretty much excludes the bulk of the population from now being a home owner.
Bad as the zoning/environmental/section 8 or even property taxes are, my real beef is with the easy money/credit available to the insiders that they then pour into housing. They are using RENTAL,INVESTMENT housing as a wealth preserve , or worse, pre-meditated wealth appreciation vehicle (I just made up a new term to describe our reality).
It is killing the majority who need an affordable roof over their head.
missing inflation found under "Boskin Comission" file.
from the fed's point of view those are all positive developments.
Insanity at its finest.
Da Fed, she is not hiking, she is letting up on the suppression.
So make yer points about rents, but it's mostly unrelated to crushing the life out of the millennials, totally different topics.
If there is any solace at all in any of this it's that listening to Hilary cackling about how much better the economy is under democrats should be blown to bits by the middle of next year if not sooner.
Basically all of the Fed's money printing and QE went strait to the .1% to buy stocks with. Virtually nothing went to Main Street. That's why we don't see inflation.
I know, the boxes at the stores are gitting bigger!!!!
I moved, but rent for the place I was renting went up 50% inside of ten years.
I'm a landlord, real estate investor as well as a real estate agent in Michigan and the crazy thing is that not many people buy 1000 sqft homes anymore. All of the 1970 and older homes, especially 1950s and older, have been and are being converted into nothing but rentals. I live in 2004 1900 sqft ranch and i don't need it. Tried to talk my wife into selling but nooooo. Ridiculous gas and electric bills taxes, etc. We bought in 2010 and now have 100k in equity.
People are buying only 2000+ sqft newer homes these days. Told the wife, let's go find a foreclosure, remodel it however we want, and pay cash and be done. But her answer is "i like this house". Lol. Luckily we earn a good wage and can afford it, but in my opinion we are wasting money.
Its been my experience that if the bank is willing to loan someone 400k for a house, that person is going to buy a 400k house. Nobody ever buys less house than a bank will let them buy.
Looking at listings, it is rare to find conventional sales. They are usually either cash (investor) or FHA (taxpayer backed high risk). Things are still very messed up, and subsidies are masking it.
In my area, people are willing to rent 2x what they could get a conventional mortgage for. I want to say this is a bubble, but i think people are really that jammed up and underpaid. They have to live somewhere and can't afford to save anything. This is all probably going to get worse.
"They have to live somewhere and can't afford to save anything."
This is the key. I saw an article from the UK that said to save up for a down payment went from an average of 5 years to 25 years. By the time you get a job and save money, you're thinking at that point in your life, it's not worth it. The only people who will own homes are the wealthy and they'll eventually age out and dump a ton of inventory on the market. That's when it'll get messy.
Edit: Meant to say that the only people who will own are the wealthy and people who biught twenty years ago. Those are the people who will age out and there won't be the wages to support those prices.
25 years, that's insane. That's OK, the banks are back to lending you a 2nd mortgage to cover that down payment, so its all ok.
What constitutes wealthy? I am in the 96th percentile of earners i believe, i don't have nice cards, have a nice house but nothing amazing (cookie cutter spec home worth about 240k), make about 100k, no credit card debt, no car payment, but yet feel like I'm not wealthy. Don't feel poor but don't feel wealthy. I mean, what isv wealthy? Is my status the definition of wealthy for the average person? Because if it is that's crazy.
In my line of work my salary is the same for this position that it was in 2000, but it went much further back then (i wasn't in this position back then).
Here...let me show you rich. My daughter's brother-in-law in Chicago area...Dermatologist 2nd year out of Med School.....$ 750K starting salary with 250K signing bonus. and his doctor wife 550K starting salary. Buying an 8,500 sq ft home in St. Charles area of Chicago no kids and one dog. lmao. There....that shouild pretty much sum it up for you. BTW....that Dr. racket sure has gotten shitty since Obummercare. You know...all those doctors leaving the profession. lmfao. and this guy pops pimples and injects botox for nearly a $ 1M salary.....and a 4 day work weekl
RENT EXTRACTION is behind the strategy of M&A. The Obama Justice Department will approve - no limits.
The price increases of everything will take your breath away in 2017
So the shmucks are going broke and we can prove it. Excellent, the plan is working.
A picture is worth a thousand words and that pic of Mr. Yellen never gets old.
And don't get me started on home insurance. My premium went up 10.2% for 2016. Never filed a claim, no reason on my end. My agent said the winter vortex and flooding last year resulted in millions in claims, so insurance is recouping that lost profit. Nice, and insurance has law backing it. What a racket.
And don't forget property taxes. Mine are set to rise 37% in 2016. JHFC.
You just depressed me lol
Not a housing crisis in Ireland.
Its a purchasing power / distribution crisis.
I imagine its the same for the states but possibly less intense.
Never fall for the Feds trap.
To describe the monetary reality / problem as the true physical reality.
It s not.
I had to read this article several times before I was convinced there wasn't some part of it I didn't get at first glance. To make it worse, it apparently was written by one of the Tylers.
Note to Tyler who wrote this, put on the dunce cap and go stand in the corner.
Rents are rising because Real Estate is a vehicle for the upper income to park wealth.
And not just U.S. upper income folk, rather upper income from around the world.
Seriously, do I have to spell it out for you.
What are the main stream vehicles to park wealth? Stocks,Bonds,Real Estate.
With central banks creating so much credit & "money" in the recent past, is it any wonder that the big 3 have sky rocketed. That wealth has to go somewhere.
I know of many wealthy folk who have multiple real estate investments scattered about. All that activity drives up prices. All the while the 80-90% have stagnating or declining income.
Honestly Tyler, if you found yourself with a few hundred thousand or more surplus (digital) fraction reserve notes, where would you park them these days for maximum appreciation versus minimum risk? In a HFT driven, overvalued stock market? A bond market over valued on pervasive QE? Or, houses/rentals in someplace like San Francisco (or Vancouver or Sydney Australia)? Stocks & Bonds are paper, at least with Real Estate in a very desirable area you have something tangible that people will want no matter what happens (short of the end of the world).
Last I knew they aren't making any more Real Estate, and the world population keeps rising.
If you put wealth into something that isn't really worth that much, haven't you just been robbed?
Thought experiment: you inherited some money and wish to invest it.
Let's see, Your choices:
PMs .... which apparently have been targeted for annihilation,
Stocks & bonds which are dependent on continued easy credit, now ending (sort of),
or real estate in a very nice area. (Ever spent time in the nice water side areas of S.F. or Sydney? I have).
I'd move there or invest there in a heartbeat if I had the funds. There will ALWAYS be a minimum floor on real estate investments in such places, not so much Stocks & Bonds.
You're picking out the choicest places, and even admit you can't buy them anyway. Great thought experiment.
Those with less funds available invest in less desirable places.
Appreciation (or even equivalency is less sure in those lessor markets)
Fortune (unfortunately) seems to favor those who are the recipients of CB cronyism
"Fortune (unfortunately) seems to favor those who are the recipients of CB cronyism"
True, but I think what you fail to see is that the recipients are a generation. People who acquired assets in the 80s and 90s. There is no next generation recipients of CB cronyism to come up from below and pick up the slack. That should be the takeaway from this article. There is no one to buy what the boomers will be selling.
Oh, pulling the victim card are you?
Let me tell you who's a real victim. That would those who were forced to pay into Social Security all their adult working life and then, just when they are eligible to get some of that back, get told by gov ....oops, sorry, there seems to be a problem, while there's funds for Israel to get billions each year, funds for Syrian refugees, funds for droning folk, funds for spying on citizens, funds for the CIA to underwrite ISIS, ... sorry, there's NO funds to continue paying S.S.
I'm not playing the victim, I'm better off than most people. I'm saying that when you all go to sell, there will be no young families to buy those houses. They will have spent all of their money on rent and have saved no money for a downpayment. The fact that the majority of boomers who bought their homes twenty years ago could never afford them now at current prices with their wages should indicate to you that there is a problem. All of you will look around for buyers and discover that there are none. Maybe you can trade?
Funny how it works out, I was in the process of editing my post, and then you came back in response and I got the "access denied" ZH page (which means, for those who are unaware, that someone has replied to your post).
I was editing my post because I realized I wasn't really addressing what you posted (and dammit, I lost what I had written when I went to post and got the ZH "access denied"page).
Oh well, such is life.
Let's address what you have posted. Essentially it's the Harry Dent line of reasoning.
Boomer generation, bla,bla,bla. I thought that way too once.
30 years ago I thought: "man, this isn't sustainable. No way RE can keep climbing" Yet it did.
Do you want to spend your whole life on the side lines waiting for the dip so as to swoop in and pick up assets for pennies on the dollar? In my experience what happens is that the PowersThatBe make adjustments, bend the "rules" even more so as to favor themselves.
If there's a crash then the PowersThatBe will do everything to position themselves accordingly. Demographics be dammed. There's plenty of Muslims being lined up for importation into EU/UK/USA. They breed like rabbits too. And if not Muslims, then Chinese.
Go and watch the dystopian (but very well crafted) Blade Runner movie. What's the year there, 2030? or something. It's downtown L.A, and yet the streets are mostly filled with people of Chinese descent. And the bulk of the movie deals with genetic modification, a few rich upper caste lording over the (literally) lowly serfs and trans-human beings then coming on line. Hello, earth to 'mericans. There's a message there.
The PTB will find a way to make them debt serfs ("them" being remaining older term native population, or the newly imported) , thus taking the usury baton from the previous generation of debt serfs.
Which gets back to my original post. Post SHTF (not talking Mad Max here, if Mad Max occurs then everything is moot), but post next big "systemic event", what would you rather have, a digital "certificate" (be it stock/bond/share in ETF, paper gold, whatever) .... or a house/apartment in a very nice location? Even if you don't choose to inhabit such place, someone else likely will, and they will pay in the currency de jure for that privilege.
Oh, final point, regarding "currency de jure".
Someone pays you rent in currency that gets adjusted for the CURRENT times.
Be it new Shit Dollar, SDR, Yuan, BitCoin .... (or Bitcoins successor
"MasterCoin" ...named after it's founder, Blythe Masters), the "Phoenix".... or (gasp!) in gold/silver
Nicely said essence.
There will be buyers. Im on the negative side of things but there are definitely buyers out there. I'm not cherrypicking houses either. And yes i afford them by using other people's money. You can buy in good areas in SE michigan (not detroit) all day long. California is not a place for rentals but Michigan and ohio are. Not every strategy works in every market
I still say real estate is far safer than owning paper assets.
Then it's obvious (or should be) that the result of that is lease-to-own or owner-carry-mortgages. Either one puts a younger person in the driver seat yet the money flows rather than one lump sum.
A collateral second market will be little financial corporations that buy those owner-carry mortgages for a 75 cents on the dollar. Same companies that buy annuities and structured legal settlements today.
There are ALWAYS buyers. If price ain't negotiable, then terms will be.
One of the wonderful things about real estate is that it is real. Unlike gold, which is real but you can't do much else with it, real estate can be bought cheap and value added by restoration. Investors put floors under real estate. The smart investors were buying houses as fast as they could in 2010+ and now all of those guys tripled their equity plus all thatr cash flow from tenants.
The other really nice thing, is real estate offers the ability to retain control and let the bank take all the risk. Its all about other peoples money. Example: buy a foreclosure for 50k, rehab it for 20k, and now it values at 100k. You can then go to the bank after 6 months seasoning and do a 75% cash out refi. You can cash out 5k more than you ever put into the deal. So now you have a remodeled performing asset paying you 400+ after PITI that you have 100% control of, and the bank has 100% of the risk.
Can't do that with any other asset. Buy stocks, bonds, you give up all control and take enormous risk. Been there, done that, won't ever do that again. Better off just saving your money. Save 10k for 30 years, have 300k at the end, that is likely where you will end up investing in the stock market anyway.
Yes, I remember all of this distinctly from 2006.
Smart investors were buying deals that fit this equation, and didn't get killed in the collapse. Real estate cycles like everything else, but if you buy at hysteria moments like 2006 then you got killed.
It will happen again, only a matter of time. But if you paid 50k fit a house that in a couple years is worth 150k, then collapses, your risk is low. Again, you have no money in the house, the tenant is paying the mortgage and paying you a substantial profit every month.
If there suddenly is a loss of available tenants, then they are buying, values go up. Rent never goes down. Buy right, that's the key. Real estate is a safe bet.
Worst case, you foreclose on a c rental, lose no money but take a credit hit. Which would you rather lose? A repairable credit rating, or 50-100k in cash? Ill take the credit loss.
Last I knew they aren't making any more Real Estate, and the world population keeps rising.
Incredibly naive argument. If the population growth is accompanied by low wage serf jobs then the value of your asset will drop. Your Ponzi Scheme view of RE value is all to prevalent. Sitting on an "asset" that requires maintenance and has a historically pathetic cap rate doesn't protect wealth, it destroys it. All it takes is a small event (say a meager 1% interest rate rise) to turn market psychology and your wealth is drained by deflation.
You have effectively said "Real Estate only goes up" which as 2008 (and regionally 1991, 1982, etc) showed us is a very dangerous proposition. The one thing you get right is that Central Bank manipulation is the cause of it all. Luckily history has shown us such manipulations cannot last.
You mis read my words Zero.
I am not an advocate for the upper income crowd nor am I one of them.
Here's what I'm saying, if there's deflation coming down the pike, then paper will be more subject to losses than something tangible & desirable (think, young,pretty woman level desirable).
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My post was directed at one of the Tylers ( and douche bank) wild misinterpretation of what's happening with 80-90% of the population getting priced out of housing.
They're getting priced out because of CB policies favoring the rich.
That's what happens when a CB is itself, owned by those very rich (and a vehicle to increase their wealth).
If money/credit wasn't raining down on insiders like manna from heaven then there wouldn't be this dramatic increase in RE prices.
"Here's what I'm saying, if there's deflation coming down the pike, then paper will be more subject to losses than something tangible & desirable"
Tangible and desirable do not necessarily make a good store of value. At some point residential RE has to have a cap rate that makes sense based upon fundamentals. Hot money can buy 10 Picasso's and look at them all in the same room. That's tangible, if mispriced, value. Hot money guy can't effectively live in 10 homes at once, and if he has that much money he's not living in the SFHs we're discussing. So it comes down to rental income or selling the property to realize value. In the absence of bubble price momentum, he's going to take a loss as the working class offer him less and less of a return. Now in a true Broad inflationary environment that included WAGE INFLATION your argument works. But www are nowhere near any type of wage inflation for most people.
Why must Americans go hat in hand, begging banks for land that is theirs by right?
Remember they could have given the mortgage holders ownership and redirect deposits into a post bank or something
They did not of course.
The holy mission of the monetary priesthood. is to maintain or increase capitalistic costs via interest , taxes or inflation.
What we have typically seen in the UK and Ireland is a reduction of residential energy inputs (UK 2014 residential energy reductions were unprecedented.) and a increase in transport inputs as people desperately run around seek purchasing power or fleeing costs
Funny how all these articles and comments afterwards, seem to never mention the real estates taxes, that constantly skyrocket in most communities to pay for more and more government......
Add tax inflation to your rent calculations........
this is wrong...rents are not high because people are forced to rent. people cant be forced to pay high rent like getting a 'free' mortgage. when rent gets high, renters co-habitate. rent is high because a FUCKING HUGE PERCENTAGE OF UNITS ARE SUBSIDIZED SECTION 8 HOUSING. anytime a price is high it is because the government is driving the price up....period.
yeah section 8 is a big part of rent inflation...
"rent is high because a FUCKING HUGE PERCENTAGE OF UNITS ARE SUBSIDIZED SECTION 8 HOUSING."
Could you explain this to me please?
the gov sets the price they will pay for sec8 housing. it isnt $45 a month it is $3500 a month rent subsidy. the gov supports higher prices. same as housing prices. without fed res.gov support of higher prices by having easy loans and no foreclosures.
added: if you want to see an example, go to san francisco and check out a nice new condo in soma. since the gov will pay a much higher subsidy it makes all the rent in the building higher than it should be.....and you get to live with dindo's while you bought your unit.
One of the new "Tylers" needs to take a writing course.
Writem good him not.
I have a 1,400 sq ft rent house on a farm I own. Been vacant for 12 years. Taxes 1K annual.....I use it for a storage unit. Plenty of renters looking....usually 19-20 something single moms with 4 illigit kids and 2 meth head drunk ass unemployed boyfriends looking for a party shack and a place to breed more govt welfare checks...and if they don't blow it up in a meth lab accident....rent goes unpaid and it takes an Act of Congress to move them out. Fuck this country. We are so fucked up.
If you aren't able to make a profit on that property, I'm sure that there are a hundred people who could. Excuses about meth heads don't pay the bills. But then, it sounds like you don't have any problems paying the bills and are just holding things off the market, driving prices up further.
It's people like you, you who participate in this serfdom scheme, that are the enablers of the piss poor situation we are in.
Enabler? lmfao. Having this house sitting on the frontage of a 160 piece of prime farmland....no way am I selling it so some fucktard can rent it out to some losers or end up with cars on blocks and shit laying all over the place. I'd rather bulldoze it. You can't get enough rent around this part of the country to put up with the shit renters that are out there. Ths piss poor situation we're in is caused by the Obama welfare state and EBT cards.
db51 - hahaha.....if you want to ever demolish the house just rent it out to sec8...LOL. within 6 months they will have destroyed the property. you are right...never get in the welfare game. i have seen house literally unlivable after a year of nigerian refugees and 14 foster kids......$50k in damages....LOL
Most tenants are good tenants. Most rent is paid on time and there are tons of qualified tenants out there. If you can only find meth addicts you must be in a warzone or in a very undesirable location.
Knock on wood i havent had any tenants even late on their rent in the 5 years ive been a landlord. But then again, my wife screens and rescreens people! I buy sob stories, she does not, which is why im not permitted to attend screenings lol.
It's a war zone.....Probably 40% unemployment if you count the freeloaders who have never had a job, welfare moms and those on permanent disability aka beer drinking scam artists.....OUr streets look like "The People of Walmart" on steroids.
I've owned a few db's... Aston Martin's
Are 86% of Real Estate listings still owned by Wells Fargo and Bank of America? There's your problem.
Want to see deflation for once on the lower end?
Remove all illegal aliens - all 10+ mil of them. OR make it illegal for a landlord to rent to anyone who is not 1) an American citizen, or 2) has a valid visa/green card to be here. In the latter case, the rental agreement ENDS at the very latest when said visa/green card expires.
Illegals (of all races) do not live on the streets, they rent mostly lower end housing. Additionally, this enables the owners of these buildings to become essentially slumlords - you think illegals are going to complain to authorities about substandard housing?
So much time is spent arguing that more low end housing is needed. When you allow illegal immigrants to take over a huge percentage of low end housing in many cities it makes it more expensive for actual American citizens who are lower income as well.
Of course, doing this would vacate whole areas of some cities. In the conditions they are in likely would not be rented - let the landlords fix them up or go belly up - either way someone will purchase them and rent them out to American citizens from all nationalities.
Amazingly, a lot of jobs will now open up which were formerly done by neighborhood teenagers 30-40 years ago but now are not (who now do nothing but play video games in their parents basement) --> mowing lawns, pool care, gardening etc.
Thats why I bought a house. $800 / month includes taxes and insurance. I can find a shit hole to rent for less than that, but I wont have a 2 bay garage, a large basement, large bedrooms, computer room, dining room, trees, and privacy. 15 year mortgage. If I find a better job elsewhere, I'll rent my house out for $1200 and call a handy man if anything ever goes wrong and then eventually sell it. Anyone who thinks renting from joe schmuck or a bank is a better option than buying and renting to your municipality is mistaken. Not only is it cheaper these days, but a house can be profitable in other ways than flipping it. If you take care of it and add a bit of craftsmanship, you're just about guaranteed to eventually sell it for a profit. What does one have after renting for 15 years at $1200 a month?
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Is there a metric out there that somehow tracks the quality of jobs, with good pay?
I'm betting that since we used to have a balance of trade with China that was +$6 million, and now it's - $350 billion, the jobs that are left in this country are lower pay and less stable, especially with all the manufacturing jobs that have disappeared.
And we wonder why this is happening?
Just wait until VR, Autonomous Vehicles, 3D printing and Robotics really hits, right around 2024.
We're toast.
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V-V
That may be an excuse for the baby boomers, but that's shouldn't be the excuse for gen x and millennials, that train left the station 30 years ago. It seems as though the baby boomers are the ones with the houses. Its a responsibility most younger people don't choose to have. I bet there is some chart porn somewhere that could track the decline in housing with the decline in marriages and increase in divorces. Family is becoming taboo, and so is home ownership.
The reason why rents are soaring is because the rich can borrow 100% of a properties purchase price at 0% and then continuously ramp up rent prices to the maximum level possible.
As for "the Law", fuck the Law. The Law only exists for the Rich to put the screws to everyone else. Fuck the Rich and fuck their Law.
This will sound raycist.. Negro Stone -rentals.
The liberals won... We have an "lemur" running the show.