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Housing market pundits are almost as bearish as bullish. Just seems right now the bears get absolutely pissed off when any slightly positive piece of news comes out. I don't quite get the obsession with cratering the market even more. Housing has always been a function of affordability, this seems the rare moment it has gotten off that peg. If it ever gets back to that peg values only go up in most cases. Unless one expects incomes to drop by 20% or more its hard to say there is great risk in any aspect of the housing market now. Doesnt mean prices will take off either, market clearly has overshot to the downside and could remain flat for some time.
You do realize that if housing prices increase by 1.8% and inflation is 2.5% then housing prices haven't increased in real value, right? They have actually decreased in value. That's basic grade school finance.
More realistically, if housing prices increase 1% per year (OMG!!! ANOTHER HOUSING BUBBLE! BUY GOLD!!!!!1) and inflation is +3% per year, then the house is decreasing in value 2% per year. If that keeps up over five years, the house loses 10% of its value.
Yep, and adjusted for inflation housing prices have remained flat for the last 100 years, with the exception of the mid 2000 bubble. Low inventory may drive prices short term and then discouraged sellers will re-enter the market and home builders will ramp up again when things improve. thus, offsetting upward pressure. Plus, some ares, like AZ still have large gluts.
Home prices in my area are still at roughly 2002 levels.
Housing market pundits are almost as bearish as bullish. Just seems right now the bears get absolutely pissed off when any slightly positive piece of news comes out. I don't quite get the obsession with cratering the market even more. Housing has always been a function of affordability, this seems the rare moment it has gotten off that peg. If it ever gets back to that peg values only go up in most cases. Unless one expects incomes to drop by 20% or more its hard to say there is great risk in any aspect of the housing market now. Doesnt mean prices will take off either, market clearly has overshot to the downside and could remain flat for some time.
Well, you've got the chronic pessimists and the "shorts" who need prices to go down and the conspiracy kooks and this is an election year! Plus, no one reads articles titled, "Nothing New to Report Today!"
We used to be the biggest creditor nation of the world, and now we are the biggest debtor nation. We have no real production anymore, so all the crooks running the country can do to keep the phony economy running is bubbles.
It is the rise and financialization of real estate that is what has gutted this country. All wage labor has higher real estate overhead in this country against the competition.
The sudden wealth has already seeped into the local economy, causing sales of high-end cars like Porches and Bentleys to soar, and penthouses to sell hundreds of thousands of dollars above listing prices.
Business at Buck’s has “always been really good,†he said, noting that “people can’t spend more at Buck’s because they can only eat so much,†but one new trend the restaurant has noticed is a recent influx in Scandinavians. From Norway and Denmark to Sweden and Finland, Europeans have been traveling to Silicon Valley in droves searching for new opportunities.
Silicon Valley real estate agent Ken DeLeon said the real estate market had been moving up earlier this year in anticipation of the Facebook IPO.
* high risk and high reward nouveau riche capitalist rise out of the masses.
* old money always wins selling real estate to people doing real work.
* Its hard to make a buck in food because people don't double what they eat, much as our system has made us fat trying to expand the market.
The few risk takers that win always see their money trickle down to the FIRE sector who essentially contribute nothing. The easy credit to drive up and enrich the FIRE sector will drive up the subsistence costs for labor who must either be paid more or be driven out of the market.
HP planning to layoff as many as 35,000 workers... with such great employment news surely it must be a fabulous time to buy a house paying inflated prices with virtually no downpayment! Sometimes the idiocy of the general populace just astonishes me.
Most of these people who barely can scrape by the 3.5% downpayment don't have anywhere NEAR a sufficient financial cushion if they lose their job.
You see, people with solid financials would pay a lot more than 3.5% down and avoid all the upfront surcharges of an FHA loan...the very fact that people opt for these loans is a cue that they don't have very much money saved up relative to the purchase price...that in itself is a huge RED flag.
While I agree with your sentiment and pretty much everyone else in this thread. I've got one question for you and others? How the hell do you expect the "average" American to pay for a house nowadays? Meaning, our ENTIRE economy from the outset is based on debt and credit. We as individuals can't even go to college without, for most people, taking out loans. How the hell is anyone supposed to save upwards of $20-$40K for a down payment on a house in the USA anymore? It's hard enough for middle class people to keep up with their bills, car payments, etc. I mean our economy is a complete double edged sword. Nobody can really AFFORD anything. Everyone lives on credit. The minute we start saving is the minute corporate profits which are all based on debt and just a numbers game start suffering. Then all of a sudden Wallstreet and our pathetic 401ks start suffering. It's a house of cards and a snowball effect. Our entire government lives on credit. Young people in this country don't even have a chance the minute they hit the workforce. How the hell is any young person able to not only get out of college debt free and get a decent paying job all the while trying to establish themselves. Are we all supposed to work like dogs paying heinous amounts of taxes and not buy our first house until we are fricking 40 years old? Are we all supposed to wait till retirement till we are 80? My god how jacked up and complete backasswards is the American ecnoomy nowadays.
My grandparents lived far and away a better lifestyle than I could ever imagine. Yeah they were fairly frugal but hell I'd love to be frugal like them if it meant a certain small percentage of my income went to affording a house, a car, college etc. The percentage of a person's income that goes to a house nowadays is ridiculous. We are all POORER and LESS WELL OFF than generations before us. Yet we all WORK just as hard oor harder and make A LOT MORE MONEY overall. The dollar has lost 70% of its value since the 70s. Young people are screwed nowadays. I make more than my grandparents EVER made. Yet I have college loans, could never afford a decent downsize payment on a $300-$400K house, and can't even think of retiring at 55 like my grandfather did. Hell why do you think most kids have to move back in with their parents. Mattresses, cooking stuff pots and pans, furniture, etc. Everything you need to live on your own nowadays costs money.
My question is where the hell has all this lost wealth and prosperity gone? People can vomit all the liberal vs. conservative crap they want. The bottomline is it doesn't matter. The same jackholes in government that have been running this country are the same jackholes in bed with the rich and elite who run the corporations, wallstreet, and the banks. They have ALL been sucking, siphoning, plundering, and pillaging, the wealth and prosperity of hardworking Americans for the last 50+ years. All in the name of "progress" and ****ty 401K plans. We as Americans have been completely duped and robbed blind! And for what? So we can say we are the most free most prosperous country in the world? Yeah right! American is one big conjob of the rich and powerful. They have robbed this country and its wealth blind in the name of freedom and democracy. American capitalism, which doesn't even exist is a big scam and a joke.
Bubbles...
If we all don't like floating on bubbles & know for a fact it will pop someday....
then why should anyone like more spending (or support any group that keeps spending OR love that idea of keep printing money)??? Money, credit or otherwise???
Bubbles...
If we all don't like floating on bubbles & know for a fact it will pop someday....
then why should anyone like more spending (or support any group that keeps spending OR love that idea of keep printing money)??? Money, credit or otherwise???
Sort of mixed topics, there.
Housing was (and for the most part still is) jacked way out of line with real world customer wants and needs, and that was the price that the banks bought in for.
The market did not (and still will not) support it. First requirement of (any) business is The Customer Must Have Money. Joe American did not have the money, at the most he had the bankers' credit. That credit became a form of money. It is gone.
When the credit was wiped out (trillions totaling in bogus Real Estate prices + trillions more in Credit Cards) a major form of currency we were operating on evaporated, as well. The printed money -- as you say -- has now still only taken a small portion of its place. The Treasury could still print Trillions more before any would be in surplus.
However, since the bankers now at least nominally "own" all that inflated Real Estate -- they are hoping to get to unload it with at least with some still inflated price. But there are years ahead in the unload. Even at current prices, they lose 10% on every short sale, and around 30% on a foreclosure. Since they lose money on every sale, they need to go slow.
Was talking with an attorney friend last night. She is a lead attorney for the bank side of REO, foreclosure and asset dumping. Says there are years ahead of even beginning to process some of the collection side, let alone the hang-time after foreclosure to unload and let the market digest the backload and surplus.
We are approaching a head-on collision between economics and politics, and the housing market is just one harbinger of the coming collision. The economics part is easy: Americans have been living beyond their means for decades--piling up massive private and public debt--and that is now completely unsustainable. The result is going to be a brutal Depression with a capital "D." Now comes the political part. The Depression can take two forms--the classic deflationary Depression, al a the US in the Great Depression; or a hyperinflationary Depression, a la Germany in the Wiemar Republic. It is the politicians who will determine which Depression we get. A deflationary Depression benefits savers, an inflationary Depression benefits debtors. Since this is a representative democracy and we are now a nation of debtors for the most part, which kind of Depression do you think the politicians will see that we'll likely get? So far, everything we've seen indicates that the US political leadership (and the Fed) is willing to do most anything to prevent a deflationary Depression, so a hyperinflationary one is going to be the likely outcome. Some people (especially if you're a debtor) might think that is OK, but the problem is that a hyperinflationary Depression usually not only destroys what is left of a productive economy, it usually leads to the destruction of the democratic political institutions of a nation. More often than not, a hyperinflationary Depression leads to a dictatorship, as the only way that a hyperinflationary Depression can be ultimately ended is by brute dictatorial governmental force. Think Hitler in 1930's Germany. Were the housing market to be allowed to function as an unmanipulated market, it would be allowed to deflate, but it's clear that the politicians and Federal Reserve are doing everything that they can to prevent that.
Did you read the article before posting your headline?
"The average FHA buyer has a 700 credit score".
yeah, that's scary.
That alone deosn't mean much. If they included debt to income perhaps that would mean something, That is the lowest level that dealerships can get a vehicle financed thru the manufactuer. Bascailly I believe anyone needing help with down payment or closig isn't ready to buy a house.
Housing was (and for the most part still is) jacked way out of line with real world customer wants and needs, and that was the price that the banks bought in for.
The market did not (and still will not) support it. First requirement of (any) business is The Customer Must Have Money. Joe American did not have the money, at the most he had the bankers' credit. That credit became a form of money. It is gone.
When the credit was wiped out (trillions totaling in bogus Real Estate prices + trillions more in Credit Cards) a major form of currency we were operating on evaporated, as well. The printed money -- as you say -- has now still only taken a small portion of its place. The Treasury could still print Trillions more before any would be in surplus.
However, since the bankers now at least nominally "own" all that inflated Real Estate -- they are hoping to get to unload it with at least with some still inflated price. But there are years ahead in the unload. Even at current prices, they lose 10% on every short sale, and around 30% on a foreclosure. Since they lose money on every sale, they need to go slow.
Was talking with an attorney friend last night. She is a lead attorney for the bank side of REO, foreclosure and asset dumping. Says there are years ahead of even beginning to process some of the collection side, let alone the hang-time after foreclosure to unload and let the market digest the backload and surplus.
Doesn't economic rent and leverage do amazing things? Worthless land is put to better use than one that is over priced, worth less than nothing. Only a Byzantine corruption can turn a plot of paradise into something worth less than nothing. The better the land, the more worth less than nothing it can become. A single, well financed speculative thought, out of thin air, that it was worth 1 million a square foot, has 1 million a square foot to fall.
Negative equity turns this
Into this:
But why question such a system given to us by Moses?
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