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Guest Post: What If Housing Is Done for a Generation?
Submitted by Charles Hugh Smith from Of Two Minds
What If Housing Is Done for a Generation?
What if housing valuations are in a structural, multi-decade decline?
A strong case can be made that the fundamental supports of the housing market-- demographics, employment, creditworthiness and income--will not recover for a generation. It can even be argued that housing has lost its status as the foundation of middle class wealth, not for a generation, but for the long term.
Let's begin by noting that despite the many tax breaks lavished on housing--the mortgage interest deduction, etc.--there is nothing magical about housing as an asset. That is, its price responds in an open, transparent market to supply and demand and the cost of money and risk.
There are a number of quantifiable inputs that feed into supply and demand--new housing starts, mortgage rates and income, to name three--but there are other less quantifiable inputs as well, notably the belief (or faith) that housing will return to being a "good investment," i.e. rising in price roughly 1% above the rate of inflation.
If this faith erodes, then the other factors of demand face an insurmountable headwind, for the most fundamental support of housing is the belief that buying a house is the first step to securing middle class wealth.
Rising rates of homeownership require five conditions:
1. Favorable demographics: a cohort of potential buyers that is larger than the cohort of potential sellers.
2. Rising household formation rates: an expanding population does not necessarily translate into rising rates of household formation. If the number of people per household goes up, then the number of households can plummet even as population expands.
3. A large cohort of creditworthy potential buyers: that means buyers with savings, buyers with sufficient income to pay the mortgage and buyers with low debt loads.
4. An economy that generates rising incomes to support homeownership.
5. An unshakable belief that owning a house is a favorable and secure investment that will rise in value in the decades ahead.
If the first four conditions have eroded, then the belief in the permanence of a rising housing market will also erode.
The demographics are not favorable to housing on a number of fronts. Jim Quinn recently posted some devastating charts of U.S. demographics in his brilliant post CAUSE, EFFECT & THE FALLACY OF A RETURN TO NORMALCY (The Burning Platform).
Without going into too much detail, we can stipulate that the Baby Boom (65 million people) will be downsizing their housing, i.e. selling for the next two decades. We can also stipulate that most of the Baby Boom no longer has the wherewithal to buy second homes; rather, they will be dumping second homes to pay for living expenses as earnings, interest income and housing equity have all cratered since 2007.
Not only are there not enough younger workers to buy all these millions of homes that will be put on the market, few of those younger workers have either the creditworthiness or income to buy a house unless the Federal government gives them essentially free money and a no-down payment entry. With the Federal deficit skyrocketing, that sort of giveaway won't last long.
Labor's share of the national income has plummeted to historic lows. How can households be expected to buy a house when their real (inflation-adjusted) income declines year after year?
Labor share is the portion of output that employers spend on labor costs (wages, salaries, and benefits) valued in each year’s prices. Nonlabor share—the remaining portion of output-- includes returns to capital, such as profits, net interest, depreciation, and indirect taxes.
This chart suggests that a fundamental structural shift has taken place since the dot-com bubble popped in 2000: labor's share of the national income is in a secular long-term decline. That does not bode well for household income going forward.
Meanwhile, income has declined, especially for younger workers. Soaring Poverty Casts Spotlight on ‘Lost Decade’:
According to the Census figures, the median annual income for a male full-time, year-round worker in 2010 — $47,715 — was virtually unchanged, in 2010 dollars, from its level in 1973, when it was $49,065.
Overall, median household income adjusted for inflation declined by 2.3 percent in 2010 from the previous year, to $49,445. That was 7 percent less than the peak of $53,252 in 1999.
Notice that the only age brackets with flat or rising incomes are the over 55 cohort; everyone younger than 55 has seen their income slashed. And this is assuming "official" inflation is accurate; if it understates real inflation (loss of purchasing power), then the income declines are actually much more severe than charted here.
Part-time jobs and temp jobs do not generate enough stable income to support a mortgage. The only measure of employment that really matters in housing is fulltime employment, and that has declined to levels of 1999-2000 even as the workforce has added tens of millions of potential workers (all of whom have been deleted from the official workforce by Federal bean counters as "not in labor force" or "discouraged workers").
I don't have time to assemble the statistics for this entry, but the number of people with fulltime jobs that pay enough to support a mortgage is smaller than the number of fulltime workers. In other words, people working fulltime at or near minimum wage have a difficult time qualifying for a non-subsidized mortgage.
Household formation is also in a long-term decline. The chart depicts the housing bubble spike when marginally qualified people bought homes. Once the bubble popped, household formation plummeted and then returned to the declining trendline.
Recall that there are about 130 million housing units in the United States. About 112 million housing units are occupied: 75 million by owners and 37 million by renters. There are are about 19 million vacant dwellings: about 8.5 million second homes and vacation rentals, 2.5 million home for sale and another 8 million "vacant for other reasons" in Census-speak. (All number are approximate, drawn from 2010 Census Bureau data.)
If we subtract the 4 million second homes, that leaves about 15 million homes that could be occupied by owners or renters. With an average household size of about 2.5 people, that means we already have enough dwellings to house an additional 15 million households or 37 million people.
But this calculation overlooks the financial realities of declining income: the number of people per household is likely rising as fewer people can afford their own homes or apartments.
This oversupply of dwellings and soft demand is reflected in this chart of housing activity: despite unprecedented Federal subsidies and Federal Reserve pump-priming (buying impaired mortgages, lowering interest rates, etc.), housing has flatlined.
What few are willing to entertain is the possibility that housing is no longer the foundation of middle class wealth, and that its decline is structural, not cyclical. If we think of housing as an asset class that reflects not just demographics and income but financialization (i.e. hollowing out), then perhaps it is simply following the S-curve of financialization:
Lastly, we must consider the impact of declining employment, stagnating income and skyrocketing rates of student-loan debt on the creditworthiness of young potential buyers. If someone exits college with $100,000 in student-loan debt, how much will they have to earn to qualify for a $100,000 mortgage? How many graduates will earn that sum on a secure basis? Perhaps not as many as is generally assumed.
If the risk of default is once again priced into mortgages--that is, if the mortgage market ever ceases to be socialized and 99% guaranteed by Federal agencies--then we can also anticipate higher standards for qualification and a shrinking pool of qualified buyers.
It's easy to qualify people for a mortgage. The hard part is making sure they will have enough income and faith to service the mortgage for the next 30 years. If demand is softer than supply, prices will decline. If the belief that housing is the "best, most secure investment" fades, then so too will demand.
Declining employment, income and household formation are complex, long-term trends. If they continue trending down, so too will housing.
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do we regard our oven or washing machine as a "good long-term investment" ? ...Niet
that's because it deteriotes with use over time ..so does the bricks and mortar of a house ...so why should a rotting building increase in value?
demand for a location (ie. by a seaside) can increase the value of the ground beneath but why, when every other consumer product gets cheaper and better every new cycle, do we think a dating building has more value than a new one with all Mod' Con's
because those perverse market morons in banking and Govt have pumped silly money in by the oil tanker load and created one of the biggest fantasy theme parks in history that now lies in ruins in both America and many parts of Europe
another bloody train wreck caused by political and banker greed, not free market economics ...anyone held accountable yet or claw-backs on their mega-bonuses? ...not even a sausage
Just based on the 'I'm surely smarter than you, so no matter what I pay today, you'll pay me far more later'...all of it just the Greater Fool theory.
bankers and politicians offering sweeties should always be avoided ..you know they're both not productive and will always leave a train wreck in their paths, from pensions to housing to entire nations
Hey, with inflation and possibly hyperinflation, the prices may indeed keep going up. The value on the other hand definitely will not. I'm looking forward to purchasing property with silver one day soon.
Prices only go up if there is wage inflation at this point. Lowering interest rates has lost its effect because they are about as low as they can go. All the QE done to date has not caused wages to go up. In real terms, wages are lower than they were in 2000.
Most of the apprecitaion in real estate come from the land not the house. Location, location, location.
So this is saying that it's good to be a landlord because more people will be renting?
Its never good to be a landlord, I hated it. With wear and tear and upkeep and all that, its a miracle to come out ahead. I was never happier than when I got rid of my 'income rental properties'.
Would it better to just leave it vacant and claim the loss on taxes?
You forgot to mention renters who trash your property and then resist eviction rhough free legal help. You also forgot the hordes of vultures suing you for discrimination with the big stick of the State acting as their free lawyer. Loser pays in Ohio if you are unfortunate enough to try to litigate the case. And that means hefty legal fees to the State. Everyone is intimidated into paying up for this extortion. This is the furthest thing one can imagine from the idea of property rights and equality before the law. Property ownership is no picnic in today's fascist climate.
It means the MEW train has left the station headed down a steep hill with a sharp turn at the bottom.
its good to be a landlord when you have good tenants, its hell to be a landlord when you dont.
Its also hard to be a good landlord if your have ethics and morals ( as upkeep and so forth are a bitch)
It depends. Who owns the property you plan to rent? Do you own it, or does a bank? If you own it and the market in the area supports a rent high enough to cover your taxes and long list of other expenses, it may very well be worth being a landlord. A lot of "landlords" are actually rent collectors for banks instead. They don't own shit.
The structural "solution" will be Obama's administration re-writing the rules for banks to become landlords.
Banks like BAC and WF will be owning and collecting rents on millions of homes within a few years in order to "stabilize" the RE market.
Think about that for a second. The banks create mortgages from nothing. Encumber the debtor. Earn some level of annuity, until they don't. Foreclosure. And are now positioning themselves to own this income generating asset class from what kind of hard work again?
Think of their rate of return on this transaction. It sure beats the UST.
BAC is already cranking up a program where you deed in lieu of foreclosure on the promise you pay rent to them for the next 3 years so your kids aren't in some Tent City. That's generous.
Crack open a book on medieval serfdom economics.
We are gleefully going there with iPads and mochas in hand.
Rents are going up while income is going down.
Try taking that to a bank.
Why would they pay rent when theyre already living mortgage free in their own house?
Well maybe thats why the govt purchased half a billion rounds of .40 cal hollowpoint ammo. Blow em away right in front of the new Apple big screen TV.
one can only hope.
So they will have both the owners and the renters paying them. You forgot the part about the free taxpayer money from the FED for the last four years. Not shutting down the TBTF in 2009 will prove to be a costly mistake for the next generation.
>The structural "solution" will be Obama's administration re-writing the rules for banks to become landlords.
Banks are proxy landlords through the use of mortgages. Everyone rolls their eyes about the insanity of NINJA loans, but fail to understand that every time someone buys a house, the bank owns the house (till the mortgage is paid off) and the mortgage holder owns all the risks and is responsible for maintenance and liabilities. A mortgage is a way for a bank to rent a house like a slumlord - all money, no responsibility.
If Obama changes the rules for banks to out and out rent the homes they own, then the risk of ownership and responsibility for maintenance and tax liabilities will fall on the banks as real (rather than proxy) owners. They would have to deal with the phonecalls in the middle of the night about a boiler going down or leaky roofs or a zillion other stupid things a reputabe landlord deals with. Even if they subcontract the maintenance aspect of ownership out, just having the house unrented for a period of time would generate losses.
Translation, theres no money in it.
Au contraire. There is a TON of money in it.
The low end of the market is set by section 8 - the government cheese of renters so there is a guaranteed bottom rent - set by the banks who will be controlling how many units exists, shadow, etc.
Everyone needs a place to live. Its like SNAP, except for Obama-villes its WF shadow inventory.
They get all the tax deductions just like every other RE investor.
Think if you were a landlord. Your calculate your return based upon servicing the mortgage. Take that majority expense away and what is your return?
The banks will own the real property management companies. The folks that work there are one step above ditch diggers in the bank's eyes.
Hold the property until someone is dumb enough to take out a 40 years mortgage.
TPTB want everyone to stop owning things. More control. More debt. More enslavement.
And section 8, to also use an analogy Charles H. Smith used, is perceived to be truly "unsinkable"?
Most banks couldn't operate mortgage businesses in a compliant/lawful manner...how do you think they'd do in the landlord business?
Land, good schools & inexpensive, efficient building techniques are artificially scarce.
...and good job markets
The TSA could hire every unemployed person at monster wage rates. That would hardly improve the current state of affairs.
It would make things much worse since A) The TSA does nothing productive and B) costs a lot of money.
By making it really, really expensive to hire someone (and a major hassle) the government makes jobs much scarcer than they otherwise would be.
This article kind of ignores the fact that the national "housing" market is really an aggregation of lots of local markets. Some markets (the ones that aren't/haven't been relying on easy credit as a primary driver of RE values) are doing just fine considering.
What "housing" has going for it is that it's a hard asset with utility value - not a bad thing these days.
But it's also a highly visible, non-portable tax magnet with fairly high maintenance costs - not so good.
Funny I was going to look at two properties when I was back in the states..bank owned..I live in Colombia...I still have two properties..one a warehouse ...property taxes on that went up 51%..yes 51%..lol...the other a condo..went up 7%..in the worst depression since the great depression.....so I said no more properties....what the Government employees are going to do is just raise your fees , taxes, costs, etc to pay for their overpriced pensions and wages and benefits.....so I am out of the market..and I am a cash buyer....but yes the young generation will just live with mom and/or dad because they just want to buy new toys instead of a house...
Exactly (see above).
Similar to my experience (but not as extreme!)
Yet another road that either dead-ends or looks really dark and rocky not too far ahead.
So, you turn around and go back to gold...
but, but... aren't they gonna "fix" it for us?
Feedback loop. Lots of owners lost their homes to foreclosure during the boom and moved back into neighborhoods as renters this time which greatly deteriorates the neighborhood and in turn drops the value of the surrounding homes which in turn causes more homeowners to abandon their homes and become renters and so on and so on it goes...
it is, but life isn't fair, now is it?
'Credit card lenders gave out 1.1 million new cards to borrowers with damaged credit in December, up 12.3 percent'
Use your free credit card to make the down payment on that dream home you deserve.
Call 888 888-???? today for a 3% down Gov't backed loan. And we will pay the sheriff to remove the last forclosed on family at no extra cost.
The demographic argument is powerful, but immigration e.g. from Asia could be a major offset if policies for legit immigrants were put in place.
The idea that owning a house is no longer a favorable and secure investment that will rise in value in the decades ahead is also a powerful argument, the 1930s depression being a prime example.
fuck you fake slewie
Pathetic imposter is pathetic.
Yep... those trends are not conducive to any rebound in housing for the next 10-20 years...
Let's see, it is now 2030 and world oil production is (somewhat optimistically) about 10% less and NET exports are down another 20%.... In todays dollars, that suggests oil at about $250 a barrel or so...In other words, the perfect recipe for a new housing boom....
I'll be happy if my kids don't have to still live at home in 2030....
I fully expect my children and their families to be living with me. With the way things are looking, it's probably a good thing too. The more people capable of guard duty, the longer time we'll have to rest between shifts. har har
Notice I implied that I hoped we/they would have a choice in the living arrangement....
True that.
Eh, sorry about that. My 4 sons crack me up daily - good souls all. I'd be perfectly happy to have them around for years to come...but I do fear for what kind of world it'll be in the years to come.
I see a generation using Mcmansions as firewood and building materials for the next housing boom: tar-paper shacks.
They'll likely flock to the FEMA camps first. Two hots and a cot!
Today's Mortgage Bankers Association weekly report indicates a housing liquidity trap. Aka, the Fed is in dangerous waters trying to salvage a dead housing market.
http://confoundedinterest.wordpress.com/2012/04/11/mortgage-bankers-purchase-and-refi-applications-down-good-friday-or-housing-liquidity-trap/
Another problem for the housing market is also its salvation. For many reasons, see Jim Kuntsler for more, the suburban model is dead. Suburban homes will continue to lose value for a generation or more. If you own one, your losses will continue for the rest of your life. But there will be demand and building in urban areas, provided that the urban area is economically viable i.e. forget Detroit or Cleveland. Urban housing in economically viable areas will hold its value.
There will also be value in rural housing, provided that it supports farming that produces positive cash flow.
did you not look at the zombie map......Urban housing holding value ???????....not unless you are serving brain soup for dinner
Ahem, there's a bit of a crime problem in the urban core that makes living there much like living in Khandahar province on a bad night. And then there is also the wholly corrupt racial politics of the inner city that makes the climate inhospitable to those of a certain ethnic appearance, and self-defense is verboten. I don't see anyone heading back into that cesspool.
Not every city to be sure. For example, Detroit is out. Cities that are economically viable and liveable will do OK. There will have to be some "reformation" of some cities to achieve this goal.
I read a book awhile back called "the art of the lonvgiew" or something like that for a class I took. Basically, economics comes down to primarily predictable demographic and/or physical limiting forces in large part. As simple as it sounds, over the course of my life it appears to be correct. Now that the student loan bubble is getting mainstream attention, combined with boomers needing to downsize, and the eminently predictable post-bubble recession, the answer is crystal clear: housing will not recover in actual terms (perhaps nominally due to inflation)....for a very, very long time. This has been obvious to me for awhile (and I am not that intelligent-I went to public school) as it was to my fellow and esteemed ZH readers. The current generation is starting to swear off CARS due to costs. What do you think that portends to housing? I dealt with literally hundreds of Millenials over the last decade, and they are BROKE DICK. You can forget about "starter homes" because houses are FINALLY recognized for what they truly are: A LIABILTY. Yes, you can make a buck or two with tax write offs, nominal appreciation, and such. But subtract repairs, taxes, insurances...etc..etc..etc...you never really own your house. There is always a pit to throw money and/or your time into. And go ahead and plow into stocks long term if you dare. Remember the demographics from the boomers, and their 401k's. Remember to keep calcualtions inflation adjusted. You have been warned.
yep, yep, yep, nice post.
Children will be sold to Banks who will feed them, educate them, house them, provide medical care and all these children need to do is turn over whatever assets they inherit and pay the Interest Dues monthly. The emergence of the New Servitude Society is complete with Banks owning housing and Serfs owning nothing but an obligation to pay and service the New Banker Class.
“”It can even be argued that housing has lost its status as the foundation of middle class wealth, not for a generation, but for the long term.””
It can be argued that what is left of the Middle Class will be totally destroyed not for a generation but for the long term. A destroyed job market, education no longer a ticket to a decent job, manipulated markets that are no longer an investment vehicle, and interest rates that prevent cash from being an income producer for the future.
We ARE lost, present tense and future tense.
America is waking up. There is no reason to be house poor. There is no reason for one or two people to live in a 4K square ft home. Energy expense would have caused the changes that the mortgage crisis brought on with a jolt.
The U.S. will have more people per home and the trend toward smaller dwellings will continue. Amenities and the standard of living will remain high, but only on a less grand scale.
More U.S. families will adopt the early 20th century multi-generational structure, knocking back four of the 21st century's excessive expenses -housing, off-site child care, elderly parent care, and travel to see grandchildren.
New home designs with in-law suites allow for the savings and convenience of this traditional living arrangement, but are adapted to the modern standards of privacy and individuality.
New home designs with in-law suites allow for the savings and convenience of this traditional living arrangement, but are adapted to the modern standards of privacy and individuality.
Modern mud hut with utilities----shades of pioneer's--veg garden on the roof--hhhmmmm.
Housing is toast for several decades if not longer.
the headwinds against housing, are peak population growth (anti immigration policy is status quo, even Obama buys into it)
the cost of housing has increased; maintenance, taxes, utilities, along with the size and number of accoutrements, more square footage, pools, spas, triple garage. a house is like a car, it has a finite usage, and very few homes have any land beneath them, condos and small lots. and its not likely that land is quite as important as it was, as they found out in Las Vegas, having a piece of a subdivision doesn't mean your land is worth anything, when another million acres of desert are next door.
in the post war housing boom the units were small and the economy kept expanding, along with interest rates, and wages, so that your value appreciated. that golden age will never happen again.
and sometime soon new technology will greatly reduce building costs, which is further downward pressure on values. they will start bulldozing a lot of older homes (cash for clunkers will be cash for shacks) to keep the vermin out. how much is a 55 chevy worth to someone other than a collector?
and as long as global warming keeps working, people will be less consumed by the need for absolute shelter from the elements. and as people migrate south. (i fully expect a land rush in Mexico, a poor country of less than a 100m people, they will open up to Americans while we shut the door on them. oh well)
Cheap property in tokyo I hear.
Self warming too !
And free microwaves with every purchase!!!!
Forget Tokyo. I have beach front property for cheap!
"Outside of the gold standard there is no safe store of value"
People will continue generating wealth (even if it is the parasites generating it)
Where are they going to store their wealth? Utility of a home and second home? Stock market? Gold? Cash which can and will be devalued?
During the Depression, my grandparents rented a house in Tavares, FL for about $12/month - perhaps $300 in today's dollars? To pay the rent, they had to send my Dad and his brother off to stay on their uncle's farm in S. Ga for a year while taking in boarders to help them out. By about 1950, however, housing became an OK and then a good investment - and would become so again in 20 years or less if not for the insane efforts by the Fed and the government to keep the prices up. Indeed, real estate would be a good investment now - at the right price - probably 5-10% of the peak.
5-10%!? Thanks for the laugh.
Timing is everything so "they " say.
At the point of capitulation, which is what these smart people are indicating, the risk returned massive rewards to those in the Wiemar Republic. The window is narrow but if you dive through, you will be riding the forefront of the next wave as rates and rents rise. That said i dont think we are quite ther yet. Silver now, converted to a down payment later will be bold.
I think this is my first post btw, and im on post op drugs so who know if this makes sense.
I hope the op went well, and welcome to the fight!
Owning a house is a big gamble and a sucker's bet: besides maintenance and repairs there is no question that insurance, fees, taxes and assessments will continually increase and that mortgage deductions will decrease, thus, squeezing the owner until he defaults or gives up his i-toys and tv.
all investments are gambles and since there are very few investments and mostly speculations in todays world it is ALL a gamble.
better than 50:50 odds you're a real estate salesperson, broker or "Trump wanna be" investor where the motto never changes: "it's a great time to buy!"
for your sake I hope your speculation on my profession is not sign of speculation in other areas of your life.
I didn't think it was good time to buy at any point in the last 10 years (which was wrong). Now I see value in some markets
This post worries me because this is exactly what I have been feeling in my gut for the last 1-2 years. I have spent a mint doing up an apartment I bought in 2010 to the extent where it is now the same as if I bought it at the top of the market in 2007/8.
Stupid?
Well, maybe I could have done a little less elaborate design, but anyway it's the place where we'll will live for a few years now and it'll rent out in a heartbeat if I ever need to relocate and because its good kit, it'll last for quite a few years before needing to be replaced. Infact the only breakable part is the boiler.
If I had dumped one of my other apartments back in late 2007 (when my Wife told me to!!), I'd have been sitting on a neat profit from a place I purchased for what seems like fun money back in 1998. I can now see the damn thing trending back down to where it should naturally be had it appreciated at normal rates. I'll be lucky if my offspring even thank me for leaving it in my will...!!
they have killed the golden goose.......fucking idiots !
From an experience point of view boom markets, after they bust, stay flat for a generation. Oil & Gold peaked in 1980 and didn't revive until recently. MSFT, CSCO, INTC topped in 2000 and are still near the levels they reached then. If you look at the entire list of boom industries - gambling stocks of the 1970's, IBM from 1980 until the mid 90's or any of the once darlings of the investment panecea crowd, you find the same pattern. Boom, Bust, Flat for 10 - 20 years, then revival of a sort. Housing might be somewhat different but it is the speculator at the margin who provides proof of the greater fool theory and tops out the sector. Those caught in it are burned beyond reason and don't go back for a long time.
From an experience point of view boom markets, after they bust, stay flat for a generation. Oil & Gold peaked in 1980 and didn't revive until recently. MSFT, CSCO, INTC topped in 2000 and are still near the levels they reached then. If you look at the entire list of boom industries - gambling stocks of the 1970's, IBM from 1980 until the mid 90's or any of the once darlings of the investment panecea crowd, you find the same pattern. Boom, Bust, Flat for 10 - 20 years, then revival of a sort. Housing might be somewhat different but it is the speculator at the margin who provides proof of the greater fool theory and tops out the sector. Those caught in it are burned beyond reason and don't go back for a long time.
The housing bubble was created by governments (and their many regulations) to import debt to stimulate local economies. But like all ponzi scheme's it eventually burst when the population could no longer afford the burden of importing the ever increasing cost of housing (debt). But that doesn't mean housing is dead. Yesterdays houses were built on cheap energy that is fast dwindling out. Tomorrows houses need be more energy effecient. Bricks, concrete and mortar are out the window, only sustainable homes built of dirt and straw will be economical.
One generation is far too optimistic. This will take 40 years or longer (to allow time for the mountains of illegal shit under the rug to decompose)
Prosecution of fraud and incorporated racketeering will break the shackles that the next "generation" has to contend with in real estate sooner.
The only thing lacking is will. Throw the boomer-bums from Congress and enforce the fucking laws and the housing dilemma goes away on it's own. Today, it's free market party of none --zero.
Deflationary price suppression is the abortion of the land (literally), fucking savers and the productive with it's twin, inflation instead. Political bastardization by the finance fraud cartel (counterfeit committee) is the mechanism. Eat shit boyz.
Break up the banks (let them fail). Fuck their "business" (HA!) and hang those who broke the law high.
This will fix the systemic problems in finance and beyond.
For all the dumbshits on ZH that see housing with a "recovery" you're going to be disappointed. There has been no bottom in RE -- none. When prices break it is going to turn politics into a swelter.
The only thing that matters in economics (all of it) at the present is cover up and paper over.
After decades of owning homes - I am done. I don't think I will ever, ever, ever buy a home again (unless, maybe if I win the lotto and can purchase with cash or do an owner fi). I will never deal with a fraud-laden mortgage firm ever again.
In my lifetime (60 years) I have spent a sum total of $1350 for rent. ($50 for 18 months during law school before I bought a house, and $150 for 3 months when I moved to Florida before I bought a house.) Sometimes I paid 13% interest but I never paid rent and I never sold a house for less than I paid, after living for free after the loans were paid off. Maybe that's not as easy to do these days, but I just can't imagine living in someone else's property in fear of being kicked out in a month if I miss a payment or when the lease is up. If I miss a mortgage or tax payment (which I have never done) I have years before they can kick me out.
I talked to a Postal delivery person recently, she said pre 2008 most addresses had 1 or 2 last names (divorces). Now in the last 4 yrs it is common to see 3, 4, 5, 6 last names to a single address. This is in the KC, MO area. Curious to know about other places.
There's more to housing than just the numbers game - indepenence, security, peace of mind, family, good schooling, etc. that you may not get by renting. And the demographics argument in this article is blatantly false! Why not buy a house with 3% down payment and cheap money, especially if you believe inflation is coming, you'll be able to pay it off in 1/2 the time with even cheaper dollars in the future? What will you be doing with all your gold and silver you're hoarding after all?
The reason for buying is that the house payment remains the same. It is NOT inflation adjusted whole it has the same owner. At some point it is paid for and only has maintenance and prop taxes. Those will otherwise be billed to the renter at add on rates. It will still make sense to own, just nothing to get greedy about or to overleverage to buy.
housing was a huge fraud from the beginning with government tax sponsored favoritism....yet one more example of how government interference in markets distorts price signals and operations....
the plutocrats' greedonomics has eviscerated the economy....yes, they have all the toys now, but what a pyrhhic victory....
tax preferences for the home owner is a very real tax on the renter....it is unfair and ultimately counter productive.
In Illinois, by april 30th cutoff;
36,000 realtors were not relicensed as Brokers, and are out of industry out of 47,000
thats 65% drop out rate of homemakers, cocktrail waitresses, teachers, and maids,.....
Real estate is an investment in the future., LOL.
its a good start, nationwide 1.5 M realtors chained together flipping themselves or burgers.......
goin' ghetto
The financial worries vis a vis the housing market can be safely put aside, as bad as they are.
The real problem is this--you purchase a home with the expectation that your 45 minute commute and gargantuan price per-square-foot for your new ranch house will be worth it when your kids attend a crime-free, productive school.
Then the Federal govt moves in 10,000 Somali immigrants using your tax dollars--see Section 8 housing.
If you flee Canada, then Canadiens will be moved into your new neighborhood. And THAT is why housing is doomed for the next 20 years.
It's a good time to be renting.
I'm also in Chicago. Took my next door neighbor close to a year to sell his condo for about half of what he paid for it – a six-figure decline in roughly 5 years. More anecdotal evidence, for sure, but to assert that the Chicago market has bounced back is pretty silly.
Simple - no more "New Home Permits" for 5 years
Housing will boom very soon. Senior housing that is.
Broad based access to credit with proper collateral drove home prices to where they were a few years ago.
For an encore performance in a housing boom, this same broad based access to credit would need to resurface.
Considering the amount of debt out there, I would say that isn't likely to happen - lower priced homes should be here for a good long time - for those who can afford it.
And like housing, we should see the markets do the same - yesterday could have been the start.
http://bullandbearmash.com/index/djia/weekly/
Crushing debt, crushing tax burdens, declining incomes, declining economic opportunity, militarized police, a prevalent police-state surveillance apparatus, continuing erosion of civil liberties, ect.
The globalist elite are setting us up for a calamitous crash where they will, again, pose as the savior and further consolidate power.
The U.S. will be a third-world cesspool of landless serfs if we don't stop this.
age of community living coming near you.
This article addresses some very important issues. I too believe housing is in for a real tough time. I have 3 sons, ages 28-32, and each has bailed on the idea that a house is a good investment (and they each own one). My oldest, a CPA in Georgia, and his peers laugh at the idea that buying a house today is a good idea. His home is now an investment rental, and he rents a large horse property for 1/3 of it’s real monthly ownership cost. The other two sons have excellent jobs and are waiting until market hits the bottom, in maybe 5-8 years, before they move up, at far cheaper prices than the McMansion boom era. With attitudes like these in the ranks of the younger set who have the income & credit to move up, housing is nothing but TOAST.
Interesting article. A few thoughts to ponder. In 1925 the Florida housing boom collasped. That was a minor boom. By the 1960s, my grandmother bought a house for a $1! Nothing wrong with it. She was buying 3 houses from a guy and he was so sick of the rental market that he sold his final rental for one buck. In the 60's my dad had a professor that proved out (in his mind) that it was always better to rent than to buy. This was right before a 40 year bull market in housing started. That is what you just experienced, a 40 year (+/-) boom in housing with cyclical corrections here and there. It will take decades to unwind.
Another story. I met a guy named Thanos (greek) that lived (he died in 05) in Marble Colorado. He bought a house there for $100 in 1945. In 2004, he turned a $300K offer down because he wanted $500K. It was a FUCKING shack. He told me this as I was in 'the shack.' On that trip my father-in-law was dying to buy a property there for 60-70K an acre even though he said that the last time he had really considered a property there they were going for 1-3K an acre. As, my nephew, on the same trip in Marble, was 12 yo and wanted to be a realtor because an uncle and his WHOLE family (4 in all) sold there house and moved to Vegas to be realtors! That dream has since passed.
The world was crazy back then. All my friend talked about was how much money they were making.
I was interested in R.E. a little while ago. I have since regained my head. I came to the conclusion that the bargins are years away. Too many people still want in. When there are NO MORE articles about real estate and the supposed 'this is the year' turnaround, then the bottom with be within the decade.
My two cents.