patrick.net

Here's why Roberta is testy this morning....

" Orr estimated that large investors bought 8 percent of the Phoenix-area homes sold last year, peaking in July and August before tapering off as prices rose. Purchases by all investors dropped to almost 32 percent of transactions in January from more than 39 percent a year earlier, he said.

So the almost half the housing market in Phoenix consisted of investors. Sorry, that’s downright terrifying.

“

Monthly leases in Phoenix’s west side, where investors bought the most rentals, fell by about $100 a month, or 10 percent, in 2012, said James Breitenstein, CEO of Landsmith, a San Francisco-based single-family rental firm that sold most of its 250 Phoenix rental houses last year."

robertoaribas says

this guy is an idiot, he has been wrong for 3 to 4 years now, but hey, he has
that cool hair, and that cool site name "zerohedge'... let's keep linking him
though nothing he says ever comes to pass.

ZH is an interesting case study. Back when the data was all or mostly negative, I read ZH as they really did have some interesting info not covered elsewhere.

That all changed around early 2009 (remember "green shoots")? Suddenly when the data became less negative, sites like Calculated Risk (much to the chagrin of the commenteriat) started saying "this data is less bad". Later, as the data actually improved, CR would come straight out and say "it has improved"

Well that transition never happened at ZH. In early 2009 they remained resolutely bearish - going to great lengths to take a massive dump on each and every possible "less worse" data point.

Even worse, as the data actually improved, they would torque, twist and contort it to come up with some possible bearish omen, no matter how implausible - and the commentariat just lapped it up. Guest authors, no matter how untrustworthy, were invited as long as they hinted at great dooooom just around the corner.

I remember at one point they had a guest post - a finance "expert" who with fancy charts and graphs "proved" we were going over a cliff in 2010. After doing some digging, a few commenters noted years before this same finance "expert" had penned articles insisting that humans used to be 20+ feet tall. When this was discovered, did ZH retract this guys post so as to save face? Nope. The ZH people just left it there, even arguing that the now discredited possibly demented author was truly "credible" this time around.

Anyway - it was at that point in early 09 that I remember thinking - oh sh*t...this ZH guy is a permabear...govt manufactured or not, he is going refuse to get back in at DJIA 7K, 8K, 10K and every point in between...he and his cheerleaders are going to sit on the sidelines in perpetuity - all the while insisting that doooooooom is right around the corner. Looks like that is pretty much what happened.

Permabears are permabears because of reality.

Even today if banks had to follow real accounting rules and had real capital requirements they would ALL be bankrupt.

Without the Fed providing people like Roberto 4% money to become a slumlord the housing market would not be up xx%

Europe is crumbling but as long as the media doesn't bring it up most people think all is well.

Reality is over 30% of Americans are dead fucking broke. 50% of Americans do not make it month to month without massive government assitance.

These realities should lead a reasonable person to question well REALITY.

All the recovery is due to BS accounting and BS easy money for those that can get it. What do both of those things do?

THEY CREATE BUBBLES IN ASSET PRICES.

We are living in another bubble. House prices, gas prices, grocery prices, stock prices, bond prices, car prices, ALL TOO HIGH!

Hell some of you actually believe all this BS. Some of you believe that everything has been fixed when in fact nothing has been fixed.

Whatevs. Its not like the central bank is monetizing 85 billions worth of dead mortgagedebt every freaking month. House prices are soaring, weeeeeeee!

I can't wait until my house goes up another 30% in value this year,,,,,so they can raise property taxes in tandem with higher payroll and income taxes, it will be so much fun paying twice for groceries and ten bucks a gallon for fuel

yup1 says

Even today if banks had to follow real accounting rules and had real capital requirements they would ALL be bankrupt.

This is where you, and a lot of people here are wrong. Banks are capitalized.

Banks, and corporations have made massive profits from low interest rates. The "investors" are taking a safe 6% rental income return on residential Real Estate. Money is being made, packaged into REITs, and resold to other investors.

Prices have gone up in the process so a lot of those bad assets are looking much better.

Banks are fine, but too big to fail.

I don't see another housing market crash here in the United States. I do see a rise in interest rates that is long passed due, and I think what happens in Europe will be the excuse to raise rates.

robertoaribas says

I have only one home on the west side, a 4 bedroom 2 bath 2 car garage on a
golf course, I bought for $60,000. Rents are under pressure there, due to the
number of rentals hitting the market...

So, I may have to rent it for $800 instead of $900... Considering my expenses
are $1500 a year on that home, I don't really know how I'm going to
survive...

Does that include property taxes, insurance, and any HOA fees for your gold course rental?

David Losh says

This is where you, and a lot of people here are wrong. Banks are capitalized.

Then why haven't they made FASB rule changes to make the banks go back to mark to market accounting? Why do they still have Trillions in excess reserves that is FAKE fed money? Why is the Fed still buying 85 Billion a month in mortgages?

David Losh says

I do see a rise in interest rates that is long passed due

You see interest rates rising? Every 1% increase sucks over 500 Billion out of the economy. That should help!

yup1 says

Permabears are permabears because of reality.

Even today if banks had to follow real accounting rules and had real capital requirements they would ALL be bankrupt.

Without the Fed providing people like Roberto 4% money to become a slumlord the housing market would not be up xx%

Europe is crumbling but as long as the media doesn't bring it up most people think all is well.

Reality is over 30% of Americans are dead fucking broke. 50% of Americans do not make it month to month without massive government assitance.

These realities should lead a reasonable person to question well REALITY.

At an intellectual level, I dont disagree with you. In fact, I would say that on an infinite timeline (like literally between now - and several thousand years from now) nearly every (now) bull on this site would agree that each and every calamity the bears cite will in fact happen.

At the most basic level, I think all of us recognize modern reality is in many ways a ponzi scheme - it will continue only so long as those who believe in it continue to believe in it.

That said, I think many came to this site because of a singular, unique event called "the housing bubble". Unlike many many many of the worries that are often repeated here - some of which started before we were born - and some of which will continue until long after we are dead, the housing bubble was novel. The housing bubble was unique. The housing bubble was one that it appeared we could in fact "wait that one out", and then move on with life.

For alot of us, that seems to have worked. Over the past decade, many of us went from Bull - to Bear - now back to Bull again. Sure there is always that constant wall of background worries, national debt, monetization, inflation, etc, etc, etc., but alas our time on this planet is finite compared to some of these multi-generational problems.

It thus now seems like there are two camps here:

(A) the patnet bulls - who range from"its now ok to get in" to say "its goin up"

versus

(B) the permabears - whose position can best be summarized as "I dont care what you say, I absolutely will not move from my overall position one single iota until each and every item on my wall of worry has been satisfied to my satisfaction - and anyone who buys now is a foolish knifecatcher"

And if thats the case, in alot of ways, there isnt a lot of point in the two camps conversing with one another. Yes some got in to early and will indeed lose. Yet there are others who got in and will be richly rewarded by recognizing the constantly changing set of rules TPTB set, and moving forward. Such is life.

It almost would have been helpful if everyone's avatar came with a label - e.g. bearish, since 199X. It would have been helpful for those of use who flip between the bear and bull camps say 5-10 times over our lifetimes, to decide which bears are worth listening to, and which ones to ignore.

robertoaribas says

Rents are under pressure there, due to the number of rentals hitting the
market...

Look something we agree about Roberto :)

yup1 says

Why do they still have Trillions in excess reserves that is FAKE fed money?

Those are real dollars that have been invested, and profited from. I don't see what's fake about that. Is it a scandal? Sure, but that is how fortunes are made.

yup1 says

Every 1% increase sucks over 500 Billion out of the economy. That should help

It depends on your perspective. This is like when corporations claim they "lose" billions of dollars. Well, the money goes some place, somebody gets the money.

You may not like the way the game is played, but you just had your best opportunity to get rid of your debt. If you don't have debt, if you have cash, that 1% increase will benefit you.

David Losh says

Those are real dollars that have been invested, and profited from. I don't
see what's fake about that. Is it a scandal? Sure, but that is how fortunes are
made.

How are excess reserves sitting on the Feds balance sheet invested and profited from?

David Losh says

It depends on your perspective. This is like when corporations claim they
"lose" billions of dollars. Well, the money goes some place, somebody gets the
money.

You may not like the way the game is played, but you just had your best
opportunity to get rid of your debt. If you don't have debt, if you have cash,
that 1% increase will benefit you.

I agree it depends on if you are a debtor or creditor. Pulling 500 billion from debtors will absolutely decrease consumer demand. We live in a consumer economy, pulling 500 billion of spending out of it will be very very painful.

yup1 says

How are excess reserves sitting on the Feds balance sheet invested and profited from?

Banks borrowed at very low, I wanted to say obscenely low interest rates, bought, and sold commodities on speculation, invested in financial instruments, and built huge cash reserves.

That was in response to you saying banks would be bankrupt. Banks have been asked to capitalize, and they did.

If you wanted to talk mark to market, there again banks have done a great job driving up prices.

When the musical chairs stop the ones holding cash will win.

Those with debt will continue to use that product, debt, no matter if interest rates go up or not. They are addicted. Again, those with cash win.

David L. - TBTF Banks are NOT solvent when you consider the massive OFF balance sheet derivative exposure they have IE: in the trillions, also....their use of mark to fantasy vs. mark to market accounting says it all. Pull away the FED punch bowl and mark to market their assets and it would be game over.

Stormtrooper says

in the trillions

You mean the quadrillion dollar derivatives market.

Cash is a different thing, and that is what we are seeing right now. We are seeing banks, and corporations hoarding cash.

The TBTF banks will be broken up, and that will sweep the whole thing under the rug.

I think the Fed will pull back, and those cash reserves will become golden. More money will be made, more people will go deeper in debt, and the whole pocess of wealth generation will start all over.

I'm more interested in Cyprus today where the government wanted to tax savings accounts in the banks.

WTF? Tax savings accounts? That ought to cause a run on the banks.

I don't mean to be cruel, but corporations go bankrupt every day, then come back swinging with a new round of concessions.

Could this be a transient ischemic attack??

SFace says

Again, WTF!!!

Read the 10-K of Citibank, BA, JPM, under notes to consolidated statements and investment to gain a better understanding of the assets. These things are audited to death and your statement is careless/uninformed.

In very spefific sitation,, in lieu of mark to market, a discounted cash flow model is used and verified by actuarial and external auditor valuations. in which case, it is more accurate than market.

If I'm a banker and borrow 1,000,000 at .25% from my bankster friend then I'm technically solvent as long as I give 2500 per year back. That means for 400 years I'm good. If I take a 500,000 bonus off the top on day one I'm still solvent for 200 years. Sweet.

yup1 says

Why is the Fed still buying 85 Billion a month in mortgages?

Because they can :O)

As long as taxes on absurdly high incomes are absurdly low the corruption will grow.

I'd rather read Zero~Hedge any day than read main street biased BULLsh*t propaganda that's touted on a daily basis

Any indication of a bubble-popping will be reflected in downward trends in rents. I'm not seeing that in the Silicon Valley at this point. Craigslist may not be the best tool for precise information on this, but it's a reasonable tool to get an inkling.

robertoaribas says

this clown has been wrong for the past two years...

I still trust www.doctorhousingbubble.com. One thing I notice is the mainstream news conveniently leaves out why the market is recovering except for mentioning low interest rates and low inventory. I think the powers that be know for a "recovery" worthy of another bubble pop, they're going to need to attract (sucker) first time buyers and move-up buyers into the market at a greater rate than they presently are.

ELC says

robertoaribas says

this clown has been wrong for the past two years...

I still trust www.doctorhousingbubble.com. One thing I notice is the mainstream news conveniently leaves out why the market is recovering except for mentioning low interest rates and low inventory. I think the powers that be know for a "recovery" worthy of another bubble pop, they're going to need to attract (sucker) first time buyers and move-up buyers into the market at a greater rate than they presently are.

Not sure what he meant with "has been wrong" anyways. ZH never made claims about a stock market or housing crash, rather it looks at the mechanisms behind market actions, fed policies etc. and makes the case that there is no sound recovery and that the noose around liberty/personal freedom has been steadily tightening, both not easily refutable claims.

ELC says

I still trust www.doctorhousingbubble.com. One thing I notice is the mainstream news conveniently leaves out why the market is recovering except for mentioning low interest rates and low inventory. I think the powers that be know for a "recovery" worthy of another bubble pop, they're going to need to attract (sucker) first time buyers and move-up buyers into the market at a greater rate than they presently are.

Dr. HB is a permabear too.. but he's starting to come around to the fact that some markets are "just different". And won't ever be affordable to whatever the census says the "median income" is for that area.

Him and Patrick both stick to the extrapolation of median income x3 should equal home price theory.

http://projects.latimes.com/mapping-la/neighborhoods/income/median/neighborhood/list/

If that were true.. then Bel-Air homes should average $600K and valley suburbs of Los Angeles like Porter Ranch and Calabasas.. should be more expensive to live than Hermosa Beach.

robertoaribas says

You and him can argue with me all day about the causes, etc. Doesn't matter to me why, what matters is being right and making money.

I don't think 3 years are substantial enough unless you are a flipper. I agree for people who have been in housing speculation that they left some money on the table by now, however for someone who wants to live in their place for the next 30 years the picture looks vastly different. Again, I don't think they make recommendations for buying/selling, in fact, there was one guy by the name 'robotrader' who posted there regularly in the early days about how stocks are just going to go up and up for now. Furthermore a lot of posts have been pro precious metals which have been fairing vey well since 2009, as well as guns and ammo. There's more ways to make a living than flipping houses. And less riskier ones for those who are not housing pros or landlords.

Roberto.....real estate is always local. ZH focuses on macro market conditions and indicators. Savvy investors always make money whether the market is going down or up. Obviously if the market still had REAL indicators.....not massively manipulated data and FED pumping, then ZH would be on point. The housing market is full of noise, pull away the punch bowl and it would collapse like a house of cards. NO one can predict what will happen when you have politics driving the market and not true organic growth. The mal-investment this perverse ZIRP & QE is causing can not be discounted. Eventually the Piper gets paid...........

Stormtrooper says

pull away the punch bowl and it would collapse like a house of cards.

Foreigners owning property free and clear and investors with good cash flow isn't exactly a house of cards.

mell says

however for someone who wants to live in their place for the next 30 years the picture looks vastly different.

Same thing for buying a car. But very few keep their houses or cars for 30 years. Two of American's largest investments are just corncobs with no lubrication.

CDon says

no matter how implausible

Rome stuck to their guns until the end of the empire when Diocletian inflated the currency to try and fix the empire's lack of profitable expansion. The rest is history. You cant solve a debt bubble with more debt. Just keynesian-feb bubbles go in cycles but at some point the rails come off. This is just monopoly with real people's lives in the balance.

robertoaribas says

You and him can argue with me all day about the causes, etc. Doesn't matter to me why, what matters is being right and making money.

So the fed can print money forever? ZIRP worked in Japan? There are no consequences to monetizing debt to support a false expansion on borrowed money?

Mick Russom says

So the fed can print money forever? ZIRP worked in Japan? There are no consequences to monetizing debt to support a false expansion on borrowed money?

The Government and the banks finally have their hooks deep into the real estate business. They may never let go.