patrick.net

Without Fed, the interest rate on US bonds will skyrocket.

A few years later, with high interest rate, you will see that Fed is LOSING money.

robertoaribas says

David Losh says

We are a great economy that is being mismanaged by our governments continued intereference. While I applaud what Obama has done, I think Bernanke needs to reign in the Fed so we can move on to resolving our debt crisis.

FED has nothing to do with the debt crisis, that is congress, president... but hey, don't let complete and utter ignorance stop you from posting your opinions! It certainly hasn't stopped you in the past!

You are mistaken here, the FED has its place in the debt crisis. It buys treasury bonds which yield interest and issues fiat money AKA federal reserve notes in return.

Here is a look at the Fed's balance before the financial crisis and just a few years after. We had deficits in the budget in 2003.
Right now the Fed's balance sheet is a bit over 3 trillion dollars and looking be north of 4 trillion next year after all the MBS purchases

The two are completely separate items.

David Losh says

We are a great economy that is being mismanaged by our governments continued intereference. While I applaud what Obama has done, I think Bernanke needs to reign in the Fed so we can move on to resolving our debt crisis.

What this thread should be about is the Debt Crisis, because I sure don't see a shortage of housing.

I never said it wasn't. The point was that you said the country doesn't need anything from anywhere else, which is complete bullshit. Mind, and as is your way, you then proceeded to say something that was basically contradictory. A bit of clarity in your argument would help.

The Professor says

Has The Fed's holdings ever spiked like this before?

David Losh says

We have two attorneys here in Seattle that have a discount Brokerage. They
have found a larger niche of people doing direct contract transactions without
the use of the Multiple.

All anyone has to do is put a for sale sign in front of the house, or mention
at a cocktail party they are thinking of selling.

Tried the FSBO sign. Did not work too well for me. Maybe you should tell me where the cocktail parties are.

But you do have a point. When people cannot afford the commission, they are forced to be creative.

robertoaribas says

The Professor says

mell says

You are mistaken here, the FED has its place in the debt crisis. It buys treasury bonds which yield interest and issues fiat money AKA federal reserve notes in return.

Yep.

Colloquially known as "Print money".

you are equating the money supply to the deficit, when in truth they have nothing to do with each other.

The FED could do what they are doing today, even if we had a balanced budget or a surplus.

Likewise, they could NOT have any Q.E, with our deficits, in fact, until 4 years ago, we had deficits with zero action by the Fed.

FED needs collateral to "print money" and government bond/note is an important class of collateral. But it is more of the government uses FED to eat up the bond/note supply and surpress the rate.

Mobi says

Tried the FSBO sign. Did not work too well for me.

There are two sales on my street without the benefit of the Multiple.

It is tough to get a deal, and have it work out when you don't have the broader exposure of the internet, which is somehting Brokerages bring.

There is however a niche of people who are teetering on the underwater mortgage marks who can afford to bring some money to the table to get out, but not the commission.

Some other people just don't want to deal with Real Estate Brokers. The information about pricing is there on the internet through sites like redfin, and Zillow, and other than that there is the mechanics of the transaction.

What I also think is getting some sellers down is the amount of work it takes to get you in that position to get multiple offers. Real Estate Brokers are telling people the house needs to look really good in order to compete. Some people don't want to spend that kind of money. The way they look at it is that they can sell direct, save the money for fixing up the house, and save the commission.

Bigsby says

David Losh says

We don't need anything from anywhere any more. We don't even need to procalim protectionism, we have the goods they need globally.

That is just complete nonsense.

Geez, we were talking about the comparison to Japan.

Our economy is much different from Japan so that argument wears on me.

As far as clarification, these are my comments on a blog that isn't mine. The only person here that is being the most clear is Logan.

David Losh says

Geez, we were talking about the comparison to Japan.

Our economy is much different from Japan so that argument wears on me.

As far as clarification, these are my comments on a blog that isn't mine. The only person here that is being the most clear is Logan.

So? How does that then lead to the comment you made?

Our economy is different. We are a big country with natural resources.

We have also been a highly protectionist country. We could, and should open our borders more with Canada, and Mexico, but we don't.

We have the capacity to be a Euro Zone type economy.

So, any of these comparisons to Japan, don't make sense to me.

In terms of the lower interest rates we can float that, and the debt, because we have great capacity to expand.

I looked at the rust belt for a long time. Detroit is a complete mystery to me. We can manufacture goods, but we don't.

We are hell on wheels coming up with financial schemes, and technology, but we aren't producing. Our infrastructure, roads, bridges, transportation are lagging.

I can easily see us increasing GDP.

Now, I'll get a lot less clear for you. I think we can have a bout of deflation that would broaden our economic base. If our consumers can pay less for goods, and services they will have more money.

Deflation would also cut our costs of production.

I just don't see why we are attempting to inflate our way out of the mess we have, when it hasn't been working.

All we are doing by getting to ZIRP is funneling more money to upper incomes.

David Losh says

What I also think is getting some sellers down is the amount of work it takes
to get you in that position to get multiple offers. Real Estate Brokers are
telling people the house needs to look really good in order to compete. Some
people don't want to spend that kind of money. The way they look at it is that
they can sell direct, save the money for fixing up the house, and save the
commission.

That's what I did back in 2007. I had a ace realtor telling me all these I needed to do to sell at a certain price. And I looked at my friend who did all those for a few thousands with a comparable house in the same neighborhood. I decided to pay a flat fee ($500) to a realtor to get into the MLS (after the FSBO failed.) It ended up we sold the house to an investor at the same price my friend sold their house. It did save me a lot of works but we were lucky to have that investor b/c pretty much no homeowner was interested in our house.

David Losh says

All we are doing by getting to ZIRP is funneling more money to upper
incomes.

Here is the answer. I believe if we pulled the plug 10, 20 years ago to let it deflate. We are probably in a very good shape now. The challengings we face nowadays is to deflate and keep the governments functional at the same time. Not a easy job but it will only get worse.

A look at the FED QE effect on the markets.
You can chart out unemployment claims to equity rise as well

Their response to the financial crisis

A recent look at our bonds and mortgage rates

I think people forget how bad it was back in 2009 and that deflation was everywhere back then. The Fed needed to inject liquidity into the system as even commodity prices were screaming deflation back then

Our economy was frozen so we needed capital to flow back on line.
Anyone can make the argument that the velocity of QE wasn't great. However, the FED isn't God, they can only do so much. Things have gotten better since 2009, which is understanable since 2009 was the bottom in terms of economic weakness here T

Unemployment claims have gotten better since 2009 as well.
Yes participation factor is big reason why the unemployment rate is dropping fast. However, looking back at the last two economic cycle peak employment came at the top both financial bubbles and then we saw jobs go away. We shouldn't try to measure success on 2 previous economic cycles that were juiced up

Social Security is not an entitlement: You pay extra for it, ON TOP OF Taxes.

When you pay today for the chance to have dinner tomorrow, that's not an entitlement.

thunderlips11 says

Social Security is not an entitlement: You pay extra for it, ON TOP OF Taxes.

When you pay today for dinner tomorrow, that's called a contract, not an entitlement.

Whatever you want to call it is fine. However, it doesn't fix the math problem of it. Simply put, Madatory payouts will exceed government revenue in 13-18 years.

Let me give you a bullish look at long term debt. Before the financial crisis even happened so this payout model is as good as it gets. Obviously it looks much different now.

However, this gives you a idea of how unrealistic our long term mandatory payout problem is

Logan, I got you. However, SS can be easily saved by cutting the DoD in half, so the USA only spends 25% of the world's military spending instead of as much as everyone else combined.

Actually, I think the age should be lowered to 60, because we desperately need more spending and more jobs. There is too much money chasing too few opportunities, the only way to create more opportunities is if more money goes into the hands of the many, where it will be mostly spent on new goods and services.

Looking at your chart, it's not S.S. or even MC payouts that's the problem, but the interest on it. This GAO assumes the budget will remain where it is.

It will get worse before it gets better, but when Grandpa Jones has to choose between getting his Soc Sec check or being able to watch more drone strikes on CNN, he'll choose the former.

Nothing makes politicians tremble than large groups of angry, old (and reliable) voters.

Even though I lose heart sometimes, in a boxing match between the AARP and the Mil-Industrial Complex, I say the AARP by TKO in 3 rounds or less.

thunderlips11 says

Actually, I think the age should be lowered to 60

That will never happen! There isn't one democrat that would propose lowering the age on S.S.

However, in terms of a long term concern Medicare has a 5 time larger payout ratio than S.S.

So S.S. can be saved with some adjustments but mind that we don't have the worker to payout ratio advantage this century

Logan Mohtashami says

However, in terms of a long term concern Medicare has a 5 time larger payout ratio than S.S.

We can fix MediCare, and MedicAid by fixing our Health Care system. That's a long debate, but there are solutions to Health Care that we are tinkering with now.

Social Security can also be tinkered with. I just don't see the long term problem if we take a more socialist approach to our safety net.

The problem is the interest payments. The problem we have is the debt.

So we need some returns on our debt to retire it. We can do that with increased production, employment, and tax revenue.

The question is where do we get the jobs that will pay the taxes we need to retire the debt?

thunderlips11 says

Looking at your chart, it's not S.S. or even MC payouts that's the problem,

The reason we will have a net interest payment problem is because S.S. and Medicare cost so much. Medicare cost are insane looking out long term. Also, this has to do with our demographics problem.

We are getting older and more fat. Then add our bloated Defense budget and we have long term problems.

We simply can't grow fast enough to off set the massive cost that are coming years 2022 and on

Not a good long term trend and their is nothing we can do about getting older

What's interesting is that you started this thread with a claim of a an inventory crisis, then it evolved into all of the reasons why perma bears think housing prices will fall.

When people talk about the scarcity of housing they only mean housing units quantified by our Multiple Listing Services. We, here in the United States, have plenty of housing, and the ability to build more.

We are so spoiled that we have this patch of grass idea about housing, but we have alternatives, and substitution.

Then we have this homeless crisis going on. All that means is we have a broken safety net where none should exist.

What you have shown in this thread is a completely manufactured economy. We make bets on what the outside influences will do.

So, for housing there is only an idea of scarcity. No one has to buy into it, people can make other living arrangements for cheaper, they can create more income for themselves, and invest in what gives the highest returns.

There is nothing in all of these charts, and graphs that show housing will give the highest returns on investment.

David Losh says

What's interesting is that you started this thread with a claim of a an inventory crisis, then it evolved into all of the reasons why perma bears think housing prices will fall.

As long as on sale inventory is this low, prices will rise.

This is basic math, in fact it's one of reason why I said home prices will rise this year because on sale inventory has collapsed.

In fact I am very sure you can't provide one data source that shows the non MLS listing that would even make a minor dent into the amount on sale inventory that is on the market place.

If you can provide any evidence of your claim please do so. Here is the latest numbers to show the trend % YOY since 2010

and this is our market place. It shows sales out pacing inventory.

David Losh says

and this is our market place. It shows sales out pacing inventory.

??? Ok.... Let me ask this question this way because right now you're the only person I know in America that is saying America doesn't have an inventory crisis.

Give me a number of homes that are non MLS listed and then ratio that out to the homes that are listed

Apples to Apples debate. What you're saying is that your grape is as important than a giant boulder

Pure numbers and you can see why that Across America Inventories have collapsed for on sale homes.

Here is a good metric to go by. If you're thesis is correct then there should be at least 50% more sales for non MLS listing now across America. That would prove that there is no inventory crisis and everyone has this wrong

Right now ann sales are trending at 5 million.. So there should be 2-2.5 million ann sales that are non MLS listed homes

Actually, this a good case point here

Give me a number of homes that are non-MLS listed across America and then we can compare that to MLS listed homes. ( On sale Inventory)

Then we can do a Apples to Apple debate to see if your thesis stands that there isn't a inventory problem here in the US.

Logan Mohtashami says

Right now ann sales are trending at 5 million.. So there should be 2-2.5 million ann sales that are non MLS listed homes

You're ignoring the 25% of sales at auction, or investor transactions.

This is really simple. Let's say that there are 10 houses on my street, and one of them is listed for sale. How many of the other people on my street would sell with acceptable price, terms, and conditions?

No one needs to buy Real Estate right now. You can't quatify demand any more than you can quantify supply.

Like I said, you've listed here in your thread all of the reasons to avoid signing up for a mortgage debt, but nothing here shows that we are in a short supply of housing units.

Oh yeah, we do have the NAR thing because they need to make some commission dollars.

I think you may have said, or some one did, that foriegners could live four to a home to get it paid off. Consumers have choices.

I can't have a debate without numbers.

I am chart guy so if you can provide me numbers to do a apple to apple then I can chart it out.

On sale inventory are homes that are on market. That number has gone down drastically since 2010.

If you believe the gap is filled by cash auction buyers and investors ( On sale homes that aren't counted) then provide an actual number and source and then let the do the math do the talking.

If your thesis is true, then it should be really easy to prove with some data because the on sale inventory numbers are out there

Remember one item

Right now there are 5.1 million homes that are either in delinquency or in foreclosure process. That's the latest numbers from LPS.

Now roughly 1.6- 1.7 Million are in the shadow inventory and the rest are still in delinquency stage. So, ratio is 2-1 on delinquency than shadow.

The distressed market just takes too long to get to market to sell. That's one of the problems with inventory. Judicial and non judicial states have a big gap on timing

http://www.census.gov/compendia/statab/2012/tables/12s0982.pdf

https://www.google.com/publicdata/explore?ds=kf7tgg1uo9ude_&met_y=population&idim=country:US&dl=en&hl=en&q=population%20of%20the%20united%20states

We have enough housing units for half the population.

How is that a crisis of supply?

I just provided you with data for my market area, and you'll find that what you rely on is the Multiple.

I would have to go to each market place to pull the number of sales, I'd be going to each assessor's office web site to pull numbers.

Do you know another way to do that?

The system of the Multiple Listing Service, and Brokerages is rigged.

David Losh says

The system of the Multiple Listing Service, and Brokerages is rigged.

Let's say I agree with this statement.

That means you believe there are more homes on sale ( Non MLS) than actual homes being reported in shadow inventory.

If not, then do you a metric of homes that would prove your argument valid

For me we would need at least 2- 2.5 million homes that are non MLS listed.

Would you agree then that your thesis means there needs to 2-2.5 million homes across the US that are listed but non-MLS listed.

We also have this which shows 19% of sales through the foreclosure process:

http://www.realtytrac.com/content/foreclosure-market-report/q3-2012-foreclosure-sales-and-short-sales-market-report-7499