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The Biggest Obstacle: Record Shadow Housing Inventory, And How Obama May Have Just Popped The Consumer Spending Bubble
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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houses will be 30% lower in the future so why buy now?
Why buy ever? Thanks to property taxes, even if you have your mortgage paid off, you still don't own your property. Stop paying those property taxes and the true owner (the State) will evict you with SWAT teams and reclaim THEIR property.
so where you gonna live?? under a bridge? My property taxes are $565 per year...where can you rent a farmhouse for that little?
Pay your mortgage to have the right to rent it from the state. Makes Sense.
Ok Peeta what do you propose? again a failure to answer the question. In an apartment? Are you naive enough to think the owners of that apartment don't figure in their property tax in the monthly rent they charge you? so one way or another your paying it..... Unless like I said you live under a bridge. We can take that logic even a bit further. If you rent a house or an apartment in the city, then in all likelyhood you arent' raising any of your own food. So you buy your food and most likely pay TAXES on it, whereas I raise rabbits and chickens for meat and eggs. I garden and can and freeze lots of veggies so I do very little buying of my food.
As I said, everybody has to live somewhere. I don't look at my home as an investment I look at as a place to live and raise a family and provide for them.
It's my homestead not an investment.
Pazmaker, I agree with your point regarding taxes. You will pay, one way or the other. I was merely pointing out the irony of home "ownership". Unfortunately, most people think of it as an investment, not just a homestead. Even a homeowner has to pay a rental fee (property tax) or the actual owner (state) swoops in.
Yes Peeta you are right. It sucks. as well as on any registered vehicle. and you have to ask permission to put up a structure..or at least your suppose to on your own land. I love my homestead but we have been thinking about going back to my wife's country not that it is perfect either, but you are not watched as closely and there is a big black market that functions outside of the government. I would like to to keep this place maybe get my adult daughter to live here...but she isn't into homesteading she loves the city too much...
maybe we wil stick it out I just have no hope for the future of this country and would like to live somewhere where I'm left alone.
You are lucky to pay $565. Many people pay thousands to tens of thousands each year to the county and city for the privilege of owning.
I think you're missing the point. People always say you're foolish not to buy a house because they believe the incorrect idea that property taxes are fixed. Property taxes, just like rent, always go up, and will continue to go up faster and faster the more and more the local, state, and federal governments go bankrupt.
My point to it all was that homeowners, just like renters, are in the same boat. The only difference between renting and having a mortgage is that a renter can leave whenever. Much harder to do so with a mortgage.
I got it sever, Yes if you rent you are more mobile that is the truth, but regardless of your mobility you will end up paying to live somewhere and if your renting somewhere where property taxes have gone up(which is everywhere) part of that cost will be passed on to you courtesy of your landlord.
Take a page out of the playbook of first-generation Americans who show up with nothing and tend to leapfrog us natives in one generation.
Pool assets and live together in a decent neighborhood with excellent schools. Start a business together. Share as few cars as is practical. Almost never pay to have children or seniors cared for by others. Split utilities, property tax, and most expenses.
It may be a little crowded for a decade, but that temporary sacrifice can cut expenses by 2/3 and provide a huge advantage.
They often cut out the need for bank loans, shrink footprints to the point that energy costs are irrelevant, and create children who know how to network and get into the best universities.
Shadow Housing, Shadow Banking, Shadow Energy, Shadow Employment, Shadow Markets.............................................................
Who's behind the Curtian ?
This whole world is a shadow beside itself !
Yes, everything is uncoupling. Eat your soylent green and go long black markets. Same as it ever was.
....only the Shadow knows....
The kimono opens to reveal a 240 pound lawyer with a one inch dick and covered in hair. He offers you some gum.
Would you take it?
'c'mon man...damn
OMG...thanks for the visual. Ugh.
Don't quite know why, but can't stop laughing at that.
Bailouts have become the bubble-du-jour!
One good friend is the most impulsive and impetuous person I know. He takes unending big risks with his finances, his credit, his business, his sex life, and his relationships. He spent $30,000 on his credit cards in 12 months on hair-brained speculative investment schemes, and then immediately went to credit couseling for the 2nd time in 2 years. They got him a 50% haircut on his credit card bills that he had just incurred. It's left him without a penny in savings, two ex-wives, and paying child support on 4 children. Now, he's thinking about marrying his nephew's ex-wife, who needs an American husband to avoid being deported, and she has two toddlers. "But she's soooo cute," he tells me! Sometimes I feel so disgusted with him that I have to stay away from him for awhile just to make sure his risk disregard disease doesn't "infect" me!
Why should anyone pay their bills responsibly when it is so easy to incur debt and then walk away from it? We are being rewarded for impulsive, irresponsible, destructive behavior, and we're just tranferring the risk to everyone else!
Utlimately, since Freddie and Fannie are now owned by the taxpayers, it will be the RESPONSIBLE people who will end up paying the tab for their bailouts! WE will take the losses, not the banks!
I remember reading here on ZH in 2009 when Sec. Geithner extended "infinite" taxpayer guarantees on all Fannie/Freddie liabilties -- all umpteen trillion $ of them - through at least mid-2013! It will be US that will be forced to pay the debts of all these deadbeats, NOT the banks! With every day that passes, it seems that Emperor Obama just steps harder and harder on the accelerator pedal to hell!
Don't forget the hundreds of trillions in OTC derivatives that the US taxpayer is on the hook for (after all, all the banks have to do is put a gun to their own head to insure more taxpayer funded bailouts).
Flanking maneuver - "Never a borrower nor a lender be."
We Americans are several generations removed from the days when people did not make purchases until they could afford them, even homes.
If we can someday once again separate wants from needs, the banking system will self-correct. Until then, they have us at "want".
You can't short bailouts when they have a printing press.
Today's 30yr auction results are in. Yields up 8.5% over previous month. Rates bottoming?
http://www.treasurydirect.gov/instit/annceresult/press/preanre/2012/R_20...
Rising mortgage rates will sink house prices faster and much further. Feds mandtae now is ZIRP for at least a decade...not to mention the Fed's interest on its own debt of rates start rising.
Oil will be $250 soon as Nomura predicts.
Interesting and thought provoking, as usual, but $50B of ill-gotten squatter dough still only translates into .3% of GDP...
true, but it is also tax free dough. Generally, folks pay rent with money that is post tax. This is free, post-tax rent, no? Do its affect on GDP should be greater than the face amount. BWTFDIK?
You kiddin'? They're paying for it with their food stamp money....like monopoly paper...
...yeah, didn't I just hear today on CNBC that someone made an Apple call for 665? Lol, what, that 666 was just to troubling to mark. Lol
Go ahead, bite the Big Apple, don't mind the Moral Hazard Maggots of the Suicide Vampire Squid.
digging the Stones reference
Interestingly, the graph shows that the total # of units is falling, but it is the "existing", or responsible homeowners, that are plunging in number (see the blue in the above graph). Bank-owned, foreclosed, in arrears -- all the negative ones -- are either staying the same or even increasing. This does NOT bode well for improvement when it is only the GOOD section of the graph that continues to contract!
Celebrating Bitchezz...I get to buy more gold as long as they prop up the housing market and hammer metals...
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.
http://clerk.house.gov/evs/2010/roll573.xml
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.
Please kill me with Cyanide instead of Electrocution...
The "lessor of two evils" solution has been tried for +30 years. IT HAS FAILED.
It's all divide and conquer to keep the sheeple from focussing on the real problems.
Pulp, If you think your going to persuade or convince those whose minds have been set free from this demican vs republicrat bullshit you are sadly mistaken. It's like blowing bubbles and then trying to get them back in the bottle.
The O Man is toast period.The Republicans will sweep both the Senate and the House plus the White House and all you Far-Left Dickheads will be sent the political wilderness for a generation.
Enough said.....
i doesnt matter dude - do u sincerely believe the O man is behind all this. you really believe he is the decisionmaker?
You are seriously going to argue how the dog and pony show wasn't staged like a pro wrestling match?
Fuck they make them dumb in the states. Americans should be embarrased to have you in their general population.
I hope you haven't had any kids, otherwise you might want to save them the trouble for later and put them down now.
Okay troll. You've made your point. Enough of this gibberish.
Copy and paste your spam, surely that will convince everyone!
http://thechive.files.wordpress.com/2012/01/tumblr_lqltwg4gn11qg39ewo1_500.gif
Are you a zit faced intern at Center for American Progress?
Your response is an epic fail.
I would say yes he/she is.
Why is the rate on a 30 year fixed higher than 30 year yields? Bitches should be paying me points.
"biggest beneficiary is that one certain fruit-shaped company..."
Banana Republic?
i figure it's either victoria'sSecret or those guys that sell the edible crotch-pads
Riddle me this Batman? If someone has been living for free for the past 3 years and now they have to pay a mortgage and property taxes, Where is the money going to come from? The answer is it ISN'T! Unless they outright send the deed to the millions of squatters, they have accomplished nothing. I take that back, they have actually given the mortgage industry the kiss of death. You see property values have been propped up by forgetting about these folks and pretending they don't exist. Now that they will be put into the spotlight and their home values will be reduced, you can expect everybody elses property values to be reduced in the same value. These people have been barely scraping by without paying a dime and now somehow you expect them to actually pay? LOL For those who actually make their payments the money will come out of the economy. This is only a way for the Banks to reduce the values of their toxic mortgages so when the re-fies fail, they can legally foreclose on the squatter and re-claim the property at half its current value. They know full well that a large percentage of these underwater mortgages will never be re-paid so now they have come up with a way to reduce the principal and put them back on their books at a sustainable value. Really you just need to go back and follow the path that has got us to this point. The Big Banks provided free money to anyone with a pulse so they could bundle their Mortgage up in MBS and make a fortune in investments. Meanwhile as the Junkies couldn't get enough of their synthetic MBS and CDO fixes they drove the property values up to lure everyone into their game knowing full well that these mortgages would never be able to be paid back. Once the bottom fell out and the money from the housing ponzi stopped flowing in, they crashed the market knowing they would be covered with the AIG CDS and a bailout from the Taxpayers. So here we have the criminals making 100's of Billions pumping up a market they knew would fail only to make billions more on their insurance when it did. Now they need to suck the values back down to Earth so they can once again own their investmest at face value. Here it is people, time to cut the home values in half to protect the CRIMINALS that ran the scam. The American people are nothing but suckers getting dragged to the Casino tables by the Pit Bosses that run this country. There you have it, the innocent savers that actually got caught up in the scam and paid their mortgages are about to get looted for playing by the rules, meanwhile the squatters that never had any skin in the game to begin with will be used once again as pawns to bring the housing prices back to sustainable levels only to benefit the BANKING CRIMINALS. There you have it, return to MARK TO MARKET BITCHEZ, all without missing a beat and rewarding themselves with record bonuses along the way...
i think Thomas Jefferson said the same exact thing 200 year ago......now that was a smart guy
the peeps0'mine who haven't been paying have kept current w/ their lawyers and are teeing off as i write this...
their lawyers are part of the 4-some
they are all collecting huge carbon credits for using electric carts, too!
drive4show & putt4gooooo, BiCheZ!
if golf balls weren't naturally attracted to ponds, none these guys would ever give a tinker's damn about being 'underwater'!
trust me!
Respect tahoe!
i enjoyed this read +1
exactly, from where are they going to get the money, Average Joe is broke?
The FED bought the "Toxic Assets" at Face Value (PAR)
ok, i dont want to write more am pissed .
(paste from tahoe): These people have been barely scraping by without paying a dime and now somehow you expect them to actually pay? LOL
personally, as you may be able to glean from my comments, i do not see pocketing the mortgage payments as being some kinda economic disaster for the guy w/ the pocket full0'mortgage
again. if you know anyone who is doing this, how are they doing?
why the hell would they "do this" if it wasn't a good thing for them?
one guy i KNOW had a $5000 1st + a $1800 2nd; it took them 15 months too get rid of him! assuming he paid his lawyer $15k well, you do the math...
you're not feeling too sorry for this guy to think, are you?
as far as what they owe, once the bankster takes the house back, they are gonna need 1st & last for a rental, which may be bad for "technology sales"
nobody dies, not even "theAverageJoe"
now, i also know a guy who couldn't figure out who "owned" his note and was gonna hire somebody to find out! i told him just stop paying; see what happens; might be pretty cool, owing $400K, ya know!
he didn't want to risk screwing up his credit "rating"
so, $144K later, he is still a great low-risk prospect in the banksters' eyes!
however, he is more than barely scraping by but still, he's paying nearly every dime he gets to~~~the banksters! but, he did 'buy a house', too...
but, al least he is in a strong enuf 'market', where the "value" of the property has held up very well for him, so he isn't underwater but hasn't "grown" much 'equity' either...
slewie, I know one guy who stopped paying his mortgage. he has been in the house now for 9 months without making a payment and is fulltime employed. I found out about it because he always seems to be taking weekend trips to the beach and buying new stuff for his kids. He thinks he is in heaven with all that extra money. He tells me he has saved up about $7,000.00 in these past 9 months as well. I don't feel sorry for him. I don't know what I feel to be honest with you. He had one of those countrywide linda green signed mortgages. His nasty notes come from BAC
So I'm torn...he can fully afford to pay he has a good paying job, but he says he will stay as long as they let him and when they force him to move he will to an apartment.
you should feel glad that you know him, he is a smart guy with some guts.....could use alot more people like him
of course!
and he's not gonna lose any sleep over his "taxBill" either, is he?
i think we are starting to understand that the the top criminals just give shit away
then the recipients are really fuked!
Do those "Barely scraping by" (lol) include the deluge of folks living in million dollar plus homes without paying their mortgage? At some point you have to stop screaming at evil banks and look at the idiots who bought such places knowing full-well they could not afford them. I saw that the average time for foreclosure in FL was 800 days but in CA had grown to 1000+days. There is something wrong with those who buy a home, live in it free for years then claim the moral high ground.
Great article that we already knew. Could have cut us a break with the size of your paragraph.
Mark to market? Kinda need a bid side for that shit don't we?
See any? Thought not.
One need only look to who ended up with all the money to see who really won. (It wasn't the borrowers, savers or taxpayers.)
Does Bernakass know that he is creating another stock market bubble? Only this time, he can't drop the rate when the bubble pops.
Perhaps that was the point?
Massive global conflicts breaking out at the same time that the global financial ponzi scheme of a market is collapsing and the Fed has no bullets left? The solution? A singular, centralized, one world government and currency. It will offer 100% debt forgiveness so long as countries surrender all national sovereignty and will be presented as "world peace" instead of what it truly is...Slavery.
slewienomics is indicating:
banks = REITs
as paulyWalnuts might say: wash hands after tying shoes, BiCheZ!
And who's going to buy these houses, the millions that are currenly living rent-free in their soon to be foreclosed houses?
Why would someone who found a way to have free housing be interesting in paying to own again?
Bingo !
(plus they have alot of VALID reasons (property law) on top of that to be pissed off)......i see NO WAY that this will end well
don't forget the american way: arson!
short stateFarm?
How about concrete in the plumbing and a healthy dose of rodents with some spare food?
hmmm, Jewish lightning used against the Jew bankers
Thus the need for militarized police assaults on current squatters.
Well, 'investors' haven't caught on to any consumer bubble demise yet. Look at WFM, AAPL, SBUX etc. I don't know where the incremental dollars are going to come to fuel growth on these companies (well I guess I do, the same source for everything, central bank ether), but the market sure expects it to never stop.
TD is 100% correct about this: the ONLY thing that has prevented a more drastic collapse in the housing market in the past year has been the delay in foreclosures due to the robosigning issue. If this deal clears the way for servicers to re-start the foreclosure process, house prices will begin the decline at an accelerated pace.
Also, this will encourage the "current but underwater" crowd to default en masse.
The impact of this deal will be seen by this summer.
and it ain't gonna be pretty, either. Smash and grab...
Finally clears the air about the rules. Squatters are done like the dishes and strugglers get another 12-18 to get their sh*t together, inherit money, win the lottery or prepare to riot.
My numbers are saying closer to 12-13 million
2001 thru 2008-- 16.20 miilion homes were built (according to Census B) lets not leave out homes that were swapped for bigger models, so the used home market is around 4-5 million units--you can use TDs chart and overlay. That would add another 2-3 million of inventory----9 mill+3 mill---------moving this inventory is a 10 year gig on the short side of time---20 years is more realistic.
what kind of idiots pay their mortgage? housing is a right. keeping your house is a right. let someone else pay for it. if someone bought more they could afford, or housing prices went down, it was due to the greedy bankers.
Here's the problem with liberalism: help often isn't. For some reason liberals have claimed the high ground with good intentions--they care and conservatives don't. Yet everyone knows, at some point, "help" becomes detrimental. 80 years after the New Deal and 50 years after the Great Society we all know that the help liberalism offers has failed. Look at our devastated inner cities. We also know liberal policies have failed because they continue to ask for more taxes to pay for help--that is, the prior help didn't work. We long ago passed the point at which good intentions can cover for abysmal results.
When liberals offer help, what they ask for in return is something very precious. The precious thing is a vote. The votes are monetized as consulting fees (skimming from handing out the help) or political contributions. Taking a vote from someone is the first bite at taking a soul. Liberal help takes individuality, independence, and dignity.
The obvious conclusion is that liberals do NOT care. Their help doesn't work, yet they persist. They persist to the detriment of the poor. They create dependence in order to get paid. They farm the poor no less than an antebellum plantation owner. That's right, the poor have been enslaved by liberals.
For this housing discussion, here's an example of some more liberal help: mortgage modification. Suppose you live in a $200,000 house with a $300,000 mortgage. Does it help to reduce the interest rate a few points, stop the amortization, and extend the loan for 10 years? Of course not. It is debt slavery--oops there's that word again. If someone is that upside down, they should turn in the keys and start over. (Re: the emotional attachment, a $200,000 building with $300,000 in debt is not a home, it's a house.)
As for Obama's latest proposal to simply mail everyone $2,000, it's a soul-destroyer just the same.
Here are some more factors to consider, regarding housing:
Houses are not as durable as you may think, (even more true here in the sunbelt), with problems like mold, minor storm damage which if not repaired quickly leads to massive problems like roof replacements, massive thefts of a/c units, and theft of internal structural house wiring.
This means that some of the "Shadow inventory" could take from 1k (AC Replacement) to 15K (roof + internal wiring for 1000sqft home) to get back on the market.
Some of the shadow inventory is therefore unsellable and will just sit on the banks books for a long time. There also may be an incentive for the banks to keep people in the homes just to maintain the home while waiting for market conditions to improve.
Buffy and Bama sittin in a tree..
it just pisses me off that all this shit for underwater houses screws those who paid on their homes and those who paid off early to avoid all that intest. Now I get a loss for all the dumb ass shit that the obamoids and the TBTF are doing. All I can say is, at least mine are paid for...
So move along and welcome to the reeducation center and hope you have a plesant stay with the other sheeple.
Don't worry very few if any real Americans will be helped by this program - its a bank bailout designed to give the banks a free pass on their fraudulent activities.
Get mad at the banks not some poor schmuck who lost their job and is now facing homelessness.
It s easier to blame the disenfranchised though -
But factually Wrong. Get up to speed wouldya?
cars and automobiles aren't much different. when times get tough people car-pool. now people are house-pooling stacking up three generations in one house, while lots of houses sit empty. of course we know its a good idea to car-pool? well GM doesnt' think so, and the home builders are probably just as upset with the housing problem. i think they would like one man, one house, the same thing the car makers have going for them. of course that is a waste of resources, the McMansion burns more energy, even if it does spin off a few service jobs, pool boy, lawn man, housekeeping.
now Obama talks the talk on energy wasterfulness, but he has spent all his political capital propping up the home values of the RICHEST AMERICANS. Recall the Chairman Bernanke just refinanced his home and saved a nice chunk of change, cause the man lives well. He will probably be out on the town every night, meanwhile the poor will still be stacked up like cordwood eating mac n cheese.
The solution needs to be threefold:
1. Eliminate substandard housing. Move what can be moved onto barges for shipment to places like Earthquake and poverty-ravaged Haiti, where it will be sincerely appreciated. Bulldoze the rest.
2. Stabilize the current homeowners, whether in arrears or even foreclosure. Allow for balance cramdown in Chapter 13, just as things were before 1993.
3. Increase demand. Develop realistic immigration policies for high-skilled entrepreneurial young people, and subsidize purchases by the most stable and responsible of our younger generation.
That's about all we can do without doing anything incredibly stupid.
good ideas, but how are they going to benefit the masters of the universe?
How about "subsidize purchases by the most white and currently upper middle class of our younger generation?"
That's certainly what they need and deserve.
Banks currently count the total value of loan, the late fees and the non-paid monthly mortgage payment as assets -
How has this agreement changed that? It hasn't.
It is just giving them immunity from fraud -
The mark to myth still exists and for that reason I don't think the banks will release the foreclosures - they're worth more vacant.
luv the 1 your with
Where did I see it stated that there are around 10,000 'elite globalists' against the rest of us? If you look at it that way maybe there is a chance. I think a big step would be to awaken the PDs and the military.
Ah, the Law of Unintended Consequences strikes yet again.....not only is this going to destroy $50 billion in the discretionary spending mentioned, but it is going to psychologically impact every homeowner who is borderline to underwater.In addition a new wave of foreclosures wil beget more underwater homes which shall beget more of the same.