The Biggest Obstacle: Record Shadow Housing Inventory, And How Obama May Have Just Popped The Consumer Spending Bubble

Tyler Durden's picture

While today's foreclosure settlement deal is by some accounts expected to help the housing market, as the foreclosure pipeline is once again unclogged, it is unclear what this will actually do for price discovery and clearing levels when one considers the already untenable shadow housing inventory, which can be summarized simply as follows - excess supply. It is this overhang that has to clear before there is any hope for incremental demand interest. And since mortgage rates are already at record low levels, and only an MBS QE could do much to stimulate even lower rates (which has its own set of adverse consequences), it is now obvious that from a purely psychological standpoint as long as people expect rates to decline in the future, they will not commit to a new home loan today. What makes it even worse is that the excess inventory has to be literally burned to the ground for regular market clearing to resume. Unfortunately, as the following chart from JPM shows very vividly, the burning will have a long way to go: the most recent shadow housing inventory is now at an all time high. Think today's action will do anything to help the housing market? Think again - if anything it will simply see the number of foreclosed properties explode. Rather, what it will do, is finally redirect discretionary spending from all the squatters who have lived mortgage free in their houses for years back into mandatory spending such as rent and mortgage bills. For those unclear, recall this post quantifying the benefit of the squatter economy (i.e., non paid rental/mortgage payments going into discretionary spending) - kiss that $50 billion inflow into GDP goodbye. Paradoxically, by trying to fix housing, Obama may have just popped the consumer discretionary bubble, of which the biggest beneficiary is that one certain fruit-shaped company...

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nope-1004's picture

Obama nothing but a liar.  From Dave in Denver:

It turns out that Wall Street is attacking the new CFTC limits on speculative positions - and thereby fighting limits on their ability to manipulate the gold and silver markets - using none other than Eugene Scalia as their lead attorney.  For those of you don't recognize that last name, Eugene is the son of Supreme Court judge Anthonin "I hunt with Dick Cheney for favors" Scalia  LINK.    Now,  of whom in hell do you think the justice system is going to rule in favor?  Quite frankly, on Federal litigation matters there should be absolutely no connection between any of the legal representation and the judicial system.  This particular connection is absurd.  How many of you actually would believe that there won't be influence pedalled here?  Then again, I guess mob organizations like Wall Street are best served by hiring mob attorneys like Scalia...

And then again,  it turns out that the facts belie the rhetorical garbage spewing from Obama's mouth:  Obama Prosecuting Fewer Financial Crimes Than Under Reagan or Either Bush  LINK
LawsofPhysics's picture

Prosecutions is one thing, what do the conviction numbers look like?  That is all that matters.  my guess is worse, but it would be great if someone had the data.

Troll Magnet's picture

in order to get convictions, obamarama would have to actually prosecute somebody.  other than whistleblowers, of course.  and PM owners.

swani's picture

Nothing will change unless the people change it and the first step towards that is turning off the corporate media.

mendolover's picture

Well said.  Ding ding!

jeff montanye's picture

however obama is not just a liar: he is a thief (of hopes and dreams, of a nation of laws not men, of tax revenues and bond payments for the crony capitalist too big to fail) and a murderer as well (of first responders and funeral attendees, among many, many others).

LawsofPhysics's picture

Wrong.  During the 70's they prosecuted all kinds of people and got few convictions.  During the 80's S&L crisis, regulators actually did their homework, focused on a the important cases and had a very high conviction rate with the net result of putting many banksters in jail. 

Thomas's picture

I have slowly come to the conclusion that the landscape is so totally littered with miscreants and criminals that there is no mechanism by which authorities could sort through the debris to get convictions. Nuremberg defenses would proliferate. All we would get would be the pawns thrown into the court system. I see only one solution:collapse. The good news is that this solution looks fairly probable.

Diogenes's picture

Throw 3 big names in prison each year and everyone else will behave themselves.

sun tzu's picture

Nuremburg defense didn't work then and under a fair system, it would not work now. The problem is that the regulators refuse to prosecute anyone. 

macholatte's picture


clone this guy, give him a few mil budget, some authority and step aside....... but that won't happen.

William K. Black


The Best Way to Rob a Bank is to Own One


Ned Zeppelin's picture

Anyone with even a marginally functionally temporal lobe has to understand that Obama is the best friend Wall Street ever had.

john39's picture

best friend?  i was thinking more like a pimp/whore relationship. 

Mr Lennon Hendrix's picture

Banking Houses:  You're my #1 Obama.

Obama:  I love you Banking Houses!

Banking Houses:  Shut up and get back to work!


Troll Magnet's picture

if i were unlawfully foreclosed upon and obama cuts me a check for $2,000, i'd put that cash all into PMs, hold on to it for a couple of years and then buy back the house with it.  

Silverdes's picture

Hell, at the rate we're going, you might be able to just buy the bank that foreclosed on you...

bigdumbnugly's picture

banker booty calls to the white house?


i don't even wanna know...

Spastica Rex's picture

I don't care for your analogy; kind of makes him look like a victim.

Dick Gazinia's picture

That rules out 80% of America.

PulpCutter's picture

Hate to bust up the 24/7 Obama hate-a-thon here, but you're way off the facts.

It's the GOP who led the charge to get this done.  Obama originally vetoed the bill (HR 3808), which had passed both House and Senate, and made it stick.  The House GOP voted 169 for, 5 against, in unsucessfully trying to force the bill past the veto.  You're blaming the wrong branch of govt.

I'm not saying the Democrats aren't corrupt as well, but the GOP is clearly worse.  If you ACTUALLY care about this stuff, want to change it, and live in reality rather than FoxTV-land, you will vote Democrat in 2012 (unless you're lucky enough to live in the district of someone like Ron Paul).


The Democratic party absolutely has plenty of corruption - no argument there.  But there is an obvious difference between the two parties.  The GOP is way out front, in handing over control of America to the financial 'services' industry.  Look at the vote totals, below, then explain to us how "there's no difference between the parties".

We can fix this problem in three years.  Vote out the clowns who supported the takeover.  If your two candidates were both involved, vote out the one who was the dirtiest of the two.  Politicians are nothing if not good at scenting a shift in the wind.  Do this for the 2012 and 2014 elections, and we'd have substantially different Congress.

The bankers have more lobbyists in DC than everyone else, combined.  The GOP votes virtually in a block for every bill giving the bankers more control of DC.

E.g. Senate vote tallys:

Gramm-Leech-Bliley (repealed Glass-Steagall): 54 'yes' - 53 Republicans, 1 Democrat; 44 'no' - all Democrats

Dodd-Frank (weak piece of crap, but best Americans could do - Republicans fillibustered anything stronger): 60 'yes' - 57 Democrats, 3 Republicans; 39 'no - all Republicans.

House vote tally on Gramm-Leech-Bliley: 243 yes, 57 no.  The 57 'no' votes were 50 Democrat, 7 Republican

The financial 'services' industry is donating to the Romney campaign at 5X the rate they're donating to Obama.  Guess which one they think is better for their interests? The average donation to Romney's SuperPac is $103 thousand dollars, the average to Omaba's is 55 bucks.

Chump's picture

You just used an awful lot of words to say, "my team is less shitty than yours."  Even if true, you're still voting for shit.  So by all means, enjoy your shit; you deserve it.

PulpCutter's picture

Booyah! Grunt! Belch!

Yes, I can see you're the ideal slave material that the GOP's 1-world order is looking for.  Dumber than a post.

Point is, Chump, it actually does make a difference who you vote for - and that you vote.   Politics is a messy business, like most mass human activities other than watching TV, and you are often presented with a choice of two shits.  Pick the lesser shit, and eventually your choices will improve. 

Chump's picture

Way to confirm the accuracy of my comment.  I disagree with you, therefore I support the GOP.  Go blue team, rah rah rah, etc. etc.

ETA: I can't believe you topped yourself with your edit.

Pick the lesser shit, and eventually your choices will improve.

Are you 11?  Where have you been for the past 4 decades?  What part of history are you using to arrive at this conclusion?  When you pick shit, you get shit.  And as we've all seen since forever, shit does not turn into non-shit.  In fact, politicians obviously have learned that we will pick ever shittier options, so long as they can convince us that "the other guy" is shittier.  All thanks to good little cheerleaders like yourself.

PulpCutter's picture

You evidently believe that if you choose no one, things will improve?

In fact, the last decade has marked the lowest rate of violent death, per capita, worldwide, and the highest % of people leaving severe poverty.  Hate to say it, but the world is actually getting to be a better place.

But, sorry to inject anything positive into your funk.

Chump's picture

You are officially an idiot.  "Look over here, something shiny," is not a legitimate argument.  We're talking about shitty US politicians and now you want to talk about worldwide violent death per capita over the last decade?  LOL GTFO.

ETA:  Your edit, yet again, makes your comment even dumber.

You evidently believe that if you choose no one, things will improve?

If it's so evident, quote my statement that even remotely gives that impression.

What I clearly said is that if you vote for shit, you will get shit.  That should be pretty self-evident, even for you, since this all started with you admitting that both teams are shit.  It's just that yours is less shitty, so vote Democratic in 2012!  How utterly convincing...

Spastica Rex's picture

I would love to see references for your "statistics."

Here's option 3: rebellion.

Don't get caught in the guillotine, K?

I'm personally a passivist, just sayin'.

Death and Gravity's picture

I'm curious how many of the keyboard warriors here are doing much to rebel against the system.


Throwing insults on a message board only does so much to topple the empire, y'know?

smb12321's picture

Get with it! This is NOT the place to report positive news.  Things must be dreary, evil and on the brink of collapse 24/7. Unless you hate every public official, financial insittution and all media (except FOX) then don't bother posting.  I keep waiting for any constructive alternative but have yet to hear a thing - simply guys reinforcing each others beliefs.

If we get rid of banks, Wall Street and all politicians, how will one get loans or invest in a business or repeal unnecessary legislation? Don't bother trying to discuss.  All you'll hear is, "You got shit for brains" or "Shut up, sheeple" along with semi-intelligent strings of obscenities.  Obviously, the products of American public education.

Spastica Rex's picture

I don't think you had any effect. Maybe try again?

sun tzu's picture

Obviously, the products of American public education.


The public education system that your beloved politicians created. Sorry that we didn't attend the private school that the elites like you and Malia got to attend. 

It's green shoots and the economy is booming. That's why the Fed needs QE3, the banks need to be bailed out, and we need more stimulus and deficit spending. Woohoo! Clear skies ahead.

aheady's picture

Wrong, Pulpcutter. Wrongggg.
And why did you repost this tripe further down the thread?

sun tzu's picture

Because he's a troll that is benefitting from the corrupt DC cesspool. Even in North Korea or Zimbabwe, there are those who defend the corrupt system because they are part of it. Destroying the status quo would mean that they will no longer be able to loot the public treasury.

RSloane's picture

Thank you PulpCutter for today's liberal talking points edition. You're the knuckle-dragging slave.

PulpCutter's picture

The GOP is led the charge for the mortgage fraud settlement - see the vote totals above.

Please be my guest, and try to defend the overwhelming GOP vote for the settlement.  Obama initially vetoed the HR3808, and made it stick.  As "Chump" might say, 'the shit's on YOUR shoes".

aheady's picture

I can clearly picture you holding said shit and uttering, "Look what I almost stepped in."

PulpCutter's picture

Can't summon even the beginnings of some logic or facts to present, can you?

Let me guess: Fox News viewer?

NY Daily News:

Fox News viewers less informed than those who don’t watch news at all: study

aheady's picture

There are no facts or logic in any of this, knucklehead. Wake up.

PulpCutter's picture

The enviroment seems featureless to you, does it?  Perhaps you should check to see if your head is up your ass?

sun tzu's picture

We all know your head is so deep up 0bozo's ass that we can see your inbred face everytime 0bozo is reading from his teleprompter

NumNutt's picture

Hmmm, you are claiming to back up your argument with facts...sorry but on your link I have to call bullshit. This was a poll conducted by a liberal arts college (Fairleigh Dickinson University ) out of New Jersey. Now that would be an unbiased poll wouldn't it? (sarc). Your attempt at protecting the current asshole in the white house and his den of thieves is a failure for the simple reason that people can walk out their front door, look up and down their street, and determine for themselves that things are worse now then they were 3 years ago. Obama will be tossed to the scrap heap of history on November 6, 2012.

sun tzu's picture

Not only that, but it's the typical brainless leftist attacks on Foxnews, which has no following here. There are no Hannity or O'Reilly fans here. If someone doesn't agree with you, attack the strawman Foxnews. 

They two are part of the corrupt establishment media just like MSNBC and CNN.

StychoKiller's picture

Hmm, it's so obvious, even a headless, nearly naked guy can figger it out! :>D

Roger O. Thornhill's picture

I don't think he understands that most of the people here aren't on the red or blue team. And can see clearly the BS and bias of the outlets.

Disclosure: I work in media (i.e. brainwashing/propaganda generation). Trust me, the powers that be in media think their viewers are idiots (and in most cases they are idiots like pulp mongler). Also stories are controlled from corporate - they do this by sending directives to editors, and if editors don't tow the line, they fire that editor and find a like minded one who will do as they're told.

The right left paradigm is a joke - read up on a thing called "wedge" issues and you will see how you are manipulated.

Meanwhile the biggest robbery in world history proceeds...

rosiescenario's picture

.how about Obama's latest appointment of the Monsanto lacky to the FDA? Even MoveOn is opposing it....get real Obama is worse than Bush.

sun tzu's picture

but but but...what about Foxnews?

widget's picture

Final vote on Gramm-Leach-Bliley:

Ron Paul 2012 (Voted No)

PulpCutter's picture

BTW, you may want to review what the temporal lobe does.  Try learning what the big words mean, before you use them.  May make you seem a bit less of a moron.

Watauga's picture

Sorry pulpy, but you should cut your losses here.  Shrill is not an attractive trait.

PulpCutter's picture

Watauga, you present one of the standard chatboard responses, when you have no facts to back your position.