patrick.net

The expiration of the $8k credit should not have any impact on higher end houses since, if you can afford that kind of house, you most likely don't qualify for the credit since your income is too high.

Yes many properties are being bought out with cash. But I think many of these all cash purchases are made by house flippers. They will be more aware that a cash offer may not be an option for the future buyer of the home they intend to flip. That may be taken into consideration when they make these cash-offers no?

Vain says

Yes many properties are being bought out with cash. But I think many of these all cash purchases are made by house flippers.

And that is what is left, flippers buying between themself without any real end users, horse trading!

warblah says

inflation will only work if your wage got inflated too….

add no job recovery to this and there is no inflation in sight.

Let me correct that HousingWatcher posted:

Meredith Whitney's Cloudy Crystal Ball

Although I'd say in her defense, as an investment advisor that spends a lot of time talking to the media, you WILL find contradictory statements at different points in time. Who doesn't change their mind, or make mistakes?

thomas.wong1986 says

Vain says

Yes many properties are being bought out with cash. But I think many of these all cash purchases are made by house flippers.

And that is what is left, flippers buying between themself without any real end users, horse trading!

Exactly. Slowly these buyer market for all cash flippers will wane and another tipping point in RE market will be the saturation of these properties ready to be flipped. Throw in the ARM resetting(especially in CA for next 2-3 years), regular mortgage going sour and strategic defaults. Happy days are ahead of California housing market. Cheers!

thomas.wong1986 says

Vain says

Yes many properties are being bought out with cash. But I think many of these all cash purchases are made by house flippers.

And that is what is left, flippers buying between themself without any real end users, horse trading!

I am seeing quite a few of these types. Cash offer, splash a new paint, bought for 350K and listed for 520K, waiting for a sucker. You gotta love the realtwhore description on those listings: "NOT A SHORT SALE OR REO, New carpet, New paint..blah..blah..as is sale"

Oh..yeah..if its as-is sale, why the hell would I buy from you, I would rather buy from bank..Happy days are ahead indeed.

HousingWatcher says

The expiration of the $8k credit should not have any impact on higher end houses since, if you can afford that kind of house, you most likely don’t qualify for the credit since your income is too high.

This likely explains why the only houses that are selling in Portland are those at the low end, less than $250K. Sure some folks with big $$ are getting great deals at the high end but very few can pull off the financing. Early on the local realtors were blaming 'folks sitting on the fence' but it seems clear to me that given our unemployment numbers and the fact that prices are still way out of whack with incomes, it's more than just folks sitting on the fence waiting for prices to drop....folks just can't afford those $300K+ homes.

HousingWatcher says

The expiration of the $8k credit should not have any impact on higher end houses since, if you can afford that kind of house, you most likely don’t qualify for the credit since your income is too high.

Another thing to mention about Portland's market though I don't think we are unique in this regard... the $8K credit would assist the 'move-up' buyer though the feeling around Portland is that those that sold aren't moving up but renting or leaving town, did I mention our crappy unemployment numbers?!

I am a landlord for 30 yrs, also real estate investor and mtg broker, I am in 100% forclosure due to govt. policies on lending and banks that dont care. If you think you have seen something with all these forclosures, just wait. Prices will go a lot LOWER as the years go on. No way out,RENT ONLY.

@warblah/sarrodda

A wage increase or increase in borrowing is not required for inflation (or rather hyperinflation) to occur, the Fed says that but it isn't true. Just look at what happened in Argentina or Zimbabwe or Weimar Germany. Inflation and/or hyperinflation can also occur if a central bank screws up its monetary policy, or decides to purposely devalue its currency in order to inflate away debt. Remember, the Fed doesn't even have to print money, only electronically sell/buy a few dozen trillion dollars worth of bonds back and forth between it and the Treasury. Tadaaa inflation!! Yes, that is an extreme example, but I would point out they are already doing essentially that with QE, just on a smaller scale. Also bear in mind that they're throwing lots of money at the GSE's, who are lending out even if the banks aren't right now.

It should be noted that while there have major deflationary forces due to large amounts of debt being defaulted on that the rate of inflation still hasn't gone negative yet. We had a drop in the rate of inflation (disinflation) for a while around the start of 2009, and the drop was to a rate that was still positive, but then it went up again.

"I am a landlord for 30 yrs, also real estate investor and mtg broker, I am in 100% forclosure due to govt. policies on lending and banks that dont care."

No, your in foreclosure because your a speculator who gambled and lost. If I lose all my money in Vegas, Barney Frank is not to blame. Nor is Goldman Sachs. I am to blame.

I'm going with stagflation.

A “correction” in bonds will look like a big spike in interest rates. I doubt that will drive real estate prices much lower since all the transactions I’m watching currently are being made with cash.

Don't think of it as real estate prices being driven lower, you have to think of real estate as a whoopee cushion in the immanent shadow of a big fat ass.

Let's get at the coalface: real estate, which is essentially a discretionary consumer good, must eventually reconcile with the reality of diminishing middle class incomes. It's either that, or the government grubstakes the house buying public forever. THERE ARE NO OTHER ANGLES YOU CAN COME AT THIS FROM.

I also see a problem with public perception. if you consider what some of these same places/parcels went for ten or fifteen years ago, the asking prices/assessments in most parts of the country are still batshit, which means the mentality on both the part of the seller AND buyers is still very much out of whack. Ten years ago, a quarter million bought you a veritable spread in most parts of the country. But it's now etched into the mindset that this is the lower end of housing. Have wages/salaries gone up in stride with that perception? NO! In a normal market, the only buyer willing to overpay by 15% (without the help of Uncle Sam) is the well-heeled architecture nut trying to buy some rare architect designed/built home.

I am a landlord for 30 yrs, also real estate investor and mtg broker, I am in 100% forclosure due to govt. policies on lending and banks that dont care. If you think you have seen something with all these forclosures, just wait. Prices will go a lot LOWER as the years go on. No way out,RENT ONLY.

Sorry to hear about your losses. What happened, exactly? Did you take out HELOCs on your properties?

These days, there are no landlords - only speculators using tenants as placeholders while they wait for their day in the sun.

20% of jumbo loans in CA are in default or foreclosure as of Feb. according to Fed numbers. Most of that spike took place in 2009. Lenders are being very slow to take back properties.

If you're bullish on mid-high end housing at this point you have your head in the sand.

I don't see anything could possibly sustain the housing price at this point. Be wise, don't buy the bubble.

http://theeconomiccollapseblog.com/archives/how-can-anyone-claim-that-the-housing-crisis-is-over-when-the-delinquency-rate-on-u-s-mortgages-continues-to-explode-at-an-exponential-rate

Many think we are following Japan's path. We may be following Argentina's. http://topdocumentaryfilms.com/argentinas-economic-collapse/

I agree. A currency crisis is coming. I think rates will skyrocket to double-digits. I don't believe that they will allow the currency to go to zero. Before then, they will probably have a new currency available. Maybe it's the new global currency they are pushing for? If they let the dollar to go to zero, everyone will be debt free. I doubt they will allow that to happen.

HousingWatcher says

The expiration of the $8k credit should not have any impact on higher end houses since, if you can afford that kind of house, you most likely don’t qualify for the credit since your income is too high.

Everyone's focused on the $8k credit expiration. The larger issue w/ Bay Area homes are the expiration of QE and MBS purchases by the Fed. That will affect financing for housing over FHA/Fannie/Freddie limits.

tts says

@warblah/sarrodda
A wage increase or increase in borrowing is not required for inflation (or rather hyperinflation) to occur, the Fed says that but it isn’t true. Just look at what happened in Argentina or Zimbabwe or Weimar Germany. Inflation and/or hyperinflation can also occur if a central bank screws up its monetary policy, or decides to purposely devalue its currency in order to inflate away debt. Remember, the Fed doesn’t even have to print money, only electronically sell/buy a few dozen trillion dollars worth of bonds back and forth between it and the Treasury. Tadaaa inflation!! Yes, that is an extreme example, but I would point out they are already doing essentially that with QE, just on a smaller scale. Also bear in mind that they’re throwing lots of money at the GSE’s, who are lending out even if the banks aren’t right now.
It should be noted that while there have major deflationary forces due to large amounts of debt being defaulted on that the rate of inflation still hasn’t gone negative yet. We had a drop in the rate of inflation (disinflation) for a while around the start of 2009, and the drop was to a rate that was still positive, but then it went up again.

Couple comments here....

The Fed will never hyperinflate because it would mean the death of the Fed. Congress may try and force them to do it but even our idiot politicians know that governments tend to fall during currency crisis.

Second, the stated inflation rates are wrong. During the run-up they were dramatically UNDER-reporting inflation because they weren't correctly factoring in housing costs. Likewise they are currently OVER-reporting inflation for the same reason.

Until all this money actually enters circulation we won't have meaningful inflation. And at the end of the day, the banks don't want to lend and people/companies don't want to borrow. So for the foreseeable future all that printed money will be sitting in bank vaults or on reserve w/ the Fed.

veryfasthand says

Buy when everyone is selling. Sell when everyone is buying. It always worked for me.

So how are your Enron and Bear Stearns shares doing? I love contrarians, they are useful to have on the other side of my trades.

grywlfbg says

tts says

@warblah/sarrodda

A wage increase or increase in borrowing is not required for inflation (or rather hyperinflation) to occur, the Fed says that but it isn’t true. Just look at what happened in Argentina or Zimbabwe or Weimar Germany. Inflation and/or hyperinflation can also occur if a central bank screws up its monetary policy, or decides to purposely devalue its currency in order to inflate away debt. Remember, the Fed doesn’t even have to print money, only electronically sell/buy a few dozen trillion dollars worth of bonds back and forth between it and the Treasury. Tadaaa inflation!! Yes, that is an extreme example, but I would point out they are already doing essentially that with QE, just on a smaller scale. Also bear in mind that they’re throwing lots of money at the GSE’s, who are lending out even if the banks aren’t right now.

It should be noted that while there have major deflationary forces due to large amounts of debt being defaulted on that the rate of inflation still hasn’t gone negative yet. We had a drop in the rate of inflation (disinflation) for a while around the start of 2009, and the drop was to a rate that was still positive, but then it went up again.

Couple comments here….
The Fed will never hyperinflate because it would mean the death of the Fed. Congress may try and force them to do it but even our idiot politicians know that governments tend to fall during currency crisis.
Second, the stated inflation rates are wrong. During the run-up they were dramatically UNDER-reporting inflation because they weren’t correctly factoring in housing costs. Likewise they are currently OVER-reporting inflation for the same reason.
Until all this money actually enters circulation we won’t have meaningful inflation. And at the end of the day, the banks don’t want to lend and people/companies don’t want to borrow. So for the foreseeable future all that printed money will be sitting in bank vaults or on reserve w/ the Fed.

100% of fiat currencies fail. It's just a question of when.

Buy when everyone is selling. Sell when everyone is buying. It always worked for me.

Jimmy says

100% of fiat currencies fail. It’s just a question of when

Actually, the truth is 100% of non-fiat currencies fail. History has shown this to be true.

tatupu70 says

Jimmy says

100% of fiat currencies fail. It’s just a question of when

Actually, the truth is 100% of non-fiat currencies fail. History has shown this to be true.

Can you give a few examples?

Contrarian doesn't mean buying crap. It generally means you're buying something fundamentally strong, but which has been hit for the wrong reasons. Wamu might have done poorly, but buying citi, wellsfargo, boa after the massive sell off would have been pretty profitable. Wellsfargo in particular!

pkennedy says

Contrarian doesn’t mean buying crap. It generally means you’re buying something fundamentally strong, but which has been hit for the wrong reasons. Wamu might have done poorly, but buying citi, wellsfargo, boa after the massive sell off would have been pretty profitable. Wellsfargo in particular!

IMO all the banksters were hit for the RIGHT reasons. We should have had some cleansing bankruptcies and moved on with our lives. However, they snowjobbed the media and the FedGov, who also propagandized you, that putting makeup on these corpses would fix everything. Maybe in some years from now they'll actually be viable banks again not firmly dependent on special facilities & Enron accounting tricks. All this, this is just consequence of limitless blank check backing of Treasury & Fed. Citibank in particular, just should not exist. Megabanks and Too Big To Fail needs to end.

I notice the word "new" in there and that your chart stops at 2006.
Obviously used homes and overhang need to be bulldozed. Or we can
just refer to Case-Shiller which may tell a different story.

Census-based chart of new homes and add a few years is less supportive of sharecropper inevitability:

Jimmy says

tatupu70 says
Jimmy says
100% of fiat currencies fail. It’s just a question of when
Actually, the truth is 100% of non-fiat currencies fail. History has shown this to be true.
Can you give a few examples?

Sure I could, but I think it would be easier just to turn it around. Are there any civilized countries not using fiat currency?

tatupu70 says

Jimmy says

tatupu70 says

Jimmy says

100% of fiat currencies fail. It’s just a question of when

Actually, the truth is 100% of non-fiat currencies fail. History has shown this to be true.

Can you give a few examples?

Sure I could, but I think it would be easier just to turn it around. Are there any civilized countries not using fiat currency?

lol. Does that mean you don't know any? Civilized countries want/need a fiat currency so they can print and make the citizens pay through inflation. So what if civilized countries have fiat currency. My original post stated that 100% of fiat currency fail. What does that have anything to do with your question? It sounds like you are trying to avoid it.

Jimmy--

I just didn't want to list every civilized country on here--it seemed kind of tedious. Unless you have a different definition of failure, I'd say the fact that most countries were on a fixed standard but switched to a fiat currency that is still in use is pretty good proof.

The larger issue w/ Bay Area homes are the expiration of QE and MBS purchases by the Fed.
The end of QE has not gotten much press; I read about it first on this CR thread. Ben has (for now!) landed the helicopters. The last of the MBS purchases are being sterilized by the Treasury Supplemental; supposedly, the Supplemental Bills (56 day terms) will be paid back as the Fed winds down some of its temporary measures from the beginning of the crisis (think TAF, TALF, etc...)

grywlfbg says
Couple comments here….
The Fed will never hyperinflate because it would mean the death of the Fed. Congress may try and force them to do it but even our idiot politicians know that governments tend to fall during currency crisis.
Second, the stated inflation rates are wrong. During the run-up they were dramatically UNDER-reporting inflation because they weren’t correctly factoring in housing costs. Likewise they are currently OVER-reporting inflation for the same reason.
Until all this money actually enters circulation we won’t have meaningful inflation. And at the end of the day, the banks don’t want to lend and people/companies don’t want to borrow. So for the foreseeable future all that printed money will be sitting in bank vaults or on reserve w/ the Fed.

The Fed doesn't have to want to hyperinflate for hyperinflation to occur, AFAIK no central bank has wanted to do that.

I would agree that the current rate of inflation is incorrect, but I don't think its being overreported now, still underreported IMO.

The banks don't have to lend out the money either for inflation/hyperinflation to occur. Even if they continue to sit on the funds for the next few years while the Fed prints eventually our creditors will get nervous and reduce or stop buying our debt on the long or short end or both. They don't have to sell it, just stop buying it and we'll have an hyperinflationary or high inflationary economic crisis.

tts says

The Fed doesn’t have to want to hyperinflate for hyperinflation to occur, AFAIK no central bank has wanted to do that.

It's not central banks that cause hyperinflation, it's a governments inability to meet is interest payment obligations or refinance it's debt. If/when hyperinflation happens in the USA, it will be no different. We are nowhere near that point, though certainly doing a slow steady march toward it by not addressing unfunded liabilities.

As for foreign central banks ceasing to stop buying treasuries sufficient to induce hyperinflation, that is extremely unlikely. It would not even do much to inflation here except for imports. It would likely be a positive thing for our economy, since really what they are doing is manipulating their currency to gain trade advantage.

MarkInSF says

It’s not central banks that cause hyperinflation, it’s a governments inability to meet is interest payment obligations or refinance it’s debt. If/when hyperinflation happens in the USA, it will be no different. We are nowhere near that point, though certainly doing a slow steady march toward it by not addressing unfunded liabilities.
As for foreign central banks ceasing to stop buying treasuries sufficient to induce hyperinflation, that is extremely unlikely. It would not even do much to inflation here except for imports. It would likely be a positive thing for our economy, since really what they are doing is manipulating their currency to gain trade advantage.

Historically debt payments exceeding 5% of GDP has been enough to cause an economic crisis in 2nd and 3rd world countries. The US was always considered a sort of special case, but even then it was thought that the max possible was perhaps 10% or so. We've been well over that since mid 2009. Some sort of inflationary/hyperinflationary crisis is a given at this point, the only question is when.

The gov. needs a constant growth in debt since they're rolling over their current debt with more debt, if they can't get more debt then they can't roll over their old stuff. They will of course resort to more QE when they get to that point, but by that point they'll nearly be the sole buyer of both short and long term US debt. Also the US depends heavily on cheap foreign goods, many if not most things people need are too expensive here. If you try to kill some or most of foreign trade to boost domestic manufacturing with monetary manipulation we'll get hurt far worse since few will be able to afford to buy the goods they produce and the goods will be too expensive to try and sell over seas.

The ugly fact of the matter is that there are no good or even palatable solutions to this mess left. The best we could hope for is an American version of what is going on in Japan, at worst we slowly turn into another shitty 3rd world country.

How about reining in some debt spending, compounding with a weaker dollar which will help exports, helped with a modest recovery plus a little light inflation.

There are answers, there are solutions. This isn't doom and gloom.

Just like when the banks started falling apart, the government did something.
Just like when the housing market started collapsing, the government did something.

It might not have been pretty but it appears to have worked, but there are still a lot of people sitting here scratching their heads saying "I don't get it, why aren't we at 1998 or early prices on houses! It doesn't make sense, the world should have imploded like I calculated with no one doing anything about it.... I'm stumped!"

tts says

Historically debt payments exceeding 5% of GDP has been enough to cause an economic crisis in 2nd and 3rd world countries. The US was always considered a sort of special case, but even then it was thought that the max possible was perhaps 10% or so. We’ve been well over that since mid 2009

I'm not following. 2008 was the biggest debt service to GDP.

$451B interest paid / $14.2T GDP = 3.2%

That is nowhere near 10%. Since then interest service has dropped as people rushed to the safety of treasuries because of the riskiness of private debt.

The US sovereign debt is nothing special. It's the "biggest debtor nation" but that's mostly because it's a huge country with huge economy. Many nations have comparable debt/GDP ratios. Japan's debt/GDP is about double ours.

They will of course resort to more QE when they get to that point.

This is one of the biggest misconceptions out there. QE was not undertaken because of sovereign debt issues. Not at all. It was all about private debt, mostly in finance and mortgages, and providing massive liquidity to keep the credit system from freezing up. Had that bubble in private debt not happened, there would be no QE.

pkennedy says

It might not have been pretty but it appears to have worked, but there are still a lot of people sitting here scratching their heads saying “I don’t get it, why aren’t we at 1998 or early prices on houses! It doesn’t make sense, the world should have imploded like I calculated with no one doing anything about it…. I’m stumped!”

Eventually it will come down to trends, it takes time. I dont see implosions, I see on going corrections.

Jimmy says

Civilized countries want/need a fiat currency so they can print and make the citizens pay through inflation.

You're forgetting the flip side. If citizens that hold money pay through inflation, then citizens in debt are getting an equal benefit through inflation, as their debt is inflated away. And since money supply and debt are equal, the benefit/taxation to citizens is nil.