While the memory of a financial market participant can be measured in nanoseconds, it appears that the average American has also become goldfish-like as RealtyTrac reports a total of 797,865 home equity lines of credit were originated nationwide, up 20.6% from a year ago and the highest level since 2008. As Jim Quinn so eloquently notes, after a two year Wall-Street-engineered fraudulent boost in home prices in the exact markets that led the bubble in 2003 through 2007, the delusional dolts are now acting like the increase in home equity is real: As RealtyTrac's Blomquist exudes, "this recent rise in HELOC originations indicates that an increasing number of homeowners are gaining confidence in the strength of the housing recovery."
7 In 10 Americans Believe The Crisis Is Not Over Or Worst Is Yet To Come: 52% Can't Afford Their HomesSubmitted by Tyler Durden on 06/04/2014 21:31 -0400
According to a recent survey by the MacArthur foundation, during the past three years, over half of all U.S. adults (52%) have had to make at least one sacrifice in order to cover their rent or mortgage. Such sacrifices included getting an additional job, deferring saving for retirement, cutting back on health care and healthy foods, running up credit card debt, or moving to a less safe neighborhood or one with worse schools. More disturbingly, the survey also found that while there are some indicators that the American public’s views about the housing crisis are shifting toward the positive, large proportions of the public are not feeling the relief: seven in 10 (70%) believe we are still in the middle of the crisis or that the worst is yet to come.
Confirming and continuing a trend we first described a year ago, overnight RealtyTrac reported, as part of its Q1 institutional investor and cash sales report, that the percentage of all-cash buyers has soared in the past year with "42.7% of all U.S. residential property sales in the first quarter were all-cash purchases, up from 37.8% in the previous quarter and up from 19.1% in the first quarter of 2013 to the highest level since RealtyTrac began tracking all-cash purchases in the first quarter of 2011."
Overnight, RealtyTrac released its latest home-flipping report. What it found is that while the latest housing bubble may have indeed popped, manifesting itself not only in a decline in flipping prices but also a tumble in flipping activity across the US as a percentage of all sales from 6.5% a year ago to just 3.7% in Q1, and down from 4.1% last quarter, flipping, where a home is purchased and subsequently sold again within six months, can still be massively profitable, leading to returns that would make the pimpliest 25-year-old, math PhD HFT-firm owner green with envy. Among the core findings was that the average sales price of single family homes flipped in the first quarter was $55,574 higher than the average original purchase price. That gross profit provided flippers with an unadjusted ROI (return on investment) of 30 percent of the average original purchase price averaged out across the US. The average gross profit per flip a year ago was $51,805 for an unadjusted ROI of 28 percent. However, it is the range that is notable: the flip ROI ranged from -8%, or a loss of $10k on the property, to a gain of 80%, a whopping $144K!
As the following table also by RealtyTrace confirms, the US still has an abundance of "own-to-rent" cities, where one can generate a return as high as 30% in one year, if one is willing to drive through the downtown area at 65 mph. Places like bankrupt Detroit, where the median sales price is $45K, and somehow the average market rent is $1.1K, meaning one can recoup their investment in just over 3 years! (how Detroit's residents can afford $1K on rent is another of those great mysteries of life). In other words, the housing bubble will still be raging in these 20 cities, at least until such time as the yield drops sufficiently due to soaring prices that the Blackstones of the world are forced to dump other people's money in such undervalued places as Ulan Bator and Almaty.
The whole story about how private equity firms and hedge funds have steamrolled into the residential home market to become this decade’s slumlords is a story we covered long before mainstream media even knew it was happening. We first identified the trend in January of last year in one of my most popular posts of 2013: America Meet Your New Slumlord: Wall Street. Since then, we've done my best to cover the various twists and turns in this fascinating and disturbing saga. With all that in mind, let’s now take a look at the latest article from Bloomberg, which points out that Blackstone’s home purchases have plunged 70% from their peak last year. Perhaps they overestimated the rental cash flow potential of indebted youth living in their parents’ basements?
Simple: just don't pay the mortgage. Because here is what happens next: shortly thereafter foreclosure proceedings will begin and at some point, far in the distant future, the bank will finally complete the foreclosure process, claiming the property and putting it on the block with intent to resell (or simply raze it). How far in the future? According to RealtyTrac, the average duration of the foreclosure process for zombie foreclosures is an average of a record 1,031 days. Or just shy of 3 years.
The latest foreclosure news out of RealtyTrac is out, and provides the latest proof that if there is a housing recovery somewhere, it sure isn't in the US, where the dislocations in the supply/demand for real estate are so profound that one in five homes in the foreclosure process has been vacated by the distressed homeowner. To wit: "As of the first quarter of 2014, a total of 152,033 U.S. properties in the foreclosure process (excluding bank-owned properties) had been vacated by the distressed homeowner, representing 21 percent of all properties in the foreclosure process." This means that neither the distressed homeowner or the foreclosing lender taking responsibility for maintenance and upkeep of the home, leading to a veritable army of Vacant Dead housing units that are spreading like zombies across the nation in the most improbable housing "recovery" of all time.
Just like the rental bubble whose bursting we chronicled here just last week, so the institutional bubble has just popped, which we know courtesy of RealtyTrac data reporting that institutional investors — defined as entities purchasing at least 10 properties in a calendar year — accounted for 5.2 percent of all U.S. residential property sales in January, down from 7.9 percent in December and down from 8.2 percent in January 2013. This was the biggest one month plunge in history. It gets worse: the January share of institutional investor purchases represented the lowest monthly level since March 2012 — a 22-month low.
A national average sounds an alarm: investors that drove up the housing market are bailing out
It was about a year ago when we noted a core component of the US housing non-recovery: the time to sell foreclosed homes had just hit a record of 400 days across the nation. Fast forward to today when even the last traces of the lie that sustained the housing recovery myth are being swept away, and we get the following article from Bloomberg titled "Foreclosures Surging in New York-New Jersey Market." The good news (according to some): thousands of people could live mortgage free for years until the bank delays obtaining the keys to the foreclosed property. This was money which instead of going to the mortgage owner, would instead go to buy Made in China trinkets and gizmos and otherwise keep the US retail party humming. Which brings us to the bad news: the party - retail and otherwise - is ending, as courts and banks finally catch up with inventory levels on both sides of the foreclosure pipeline, and those who lived for years without spending a dollar for the roof above their head are suddenly forced to move out and allocated the major portion of their disposable income toward rent.
Not a word about soaring prices and higher rates that have pushed median-priced homes beyond the reach of hardworking Americans
Those of our readers focused on the state of the housing market will undoubtedly remember this chart we compiled using the data from the largest mortgage originator in the US, Wells Fargo. In case there is some confusion, as a result of rising interet rates (meaning the Fed is stuck in its attempts to push rates higher), the inability of the US consumer to purchase houses at artificially investor-inflated levels (meaning housing is now merely a hot potato flipfest between institutional investors A and B), and the end of the fourth dead-cat bounce in housing (meaning, well, self-explanatory), the bank's primary business line - offering mortgages - is cratering. So what is a bank with a limited target audience for its primary product to do? Why expand the audience of course. And in a move that is very much overdue considering all the other deranged aspects of the centrally-planned New Normal, in which all the mistakes of the last credit bubble are being repeated one after another, Reuters now reports that the California bank "is tiptoeing back into subprime home loans again."
“Foreclosure Rebound Pattern”: Foreclosure Starts SUDDENLY Jump 57% in California (And Soar In Much Of The Country)Submitted by testosteronepit on 02/13/2014 19:09 -0400
Cynic in me says it must be a data problem, that the computers got hacked, or something. But that’s wishful thinking.
Reality will reassert itself in 2014, with lemmings, flippers, and hedgies getting slaughtered as the housing market comes back to earth with a thud. The continued tapering by the Fed will remove the marginal dollars used by Wall Street to fund this housing Ponzi. The Wall Street lemmings all follow the same MBA created financial models. They will all attempt to exit the market simultaneously when their models all say sell. If the economy improves, interest rates will rise and kill the housing market. If the economy tanks, the stock market will plunge, creating fear and killing the housing market. Once it becomes clear that prices have begun to fall, the flippers will panic and start dumping, exacerbating the price declines. This scenario never grows old.