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Agree, already seeing it in Az.
Watching the tenant base change is interesting. Who just lost a house, who is moving up or down in the rental flow. How little it takes to put the tenant under (unable to pay rent). It is not pretty on main street.
The easy money philosophy will continue until the asset stripping is complete.
I told those mortgages to stay in school months ago. Glad they took my advice!
That liquidity or the confidence it provides may be the only thing keeping the $$ velocity at its current miserable rate.
Not necessarily directed at you, but there are some on HCN who want to simultaneously believe that the $1T a year being pumped out by the Fed has served no purpose other than to enrich the TBTF and inflate equity and bond bubbles, and that withdrawing that $1T a year is going to immediately re-crash the housing market (purchases of which are made in significant amounts by at least the top three quintiles).
Neither one is entirely false. But the two together can't be entirely true, either.
Rob Dawg wrote:
Ark Ships "A" & "C" will be following you shortly Captain RiF.
Enough time for one more bath, though, I reckon.
Do you think perhaps the withdrawal of $1 TRILLION printed dollars/yr might have any impact ?
Well, remember, it's not as though that money's been jet-skiing around the economy in the first place. A great chunk of it has been sitting on bank balance sheets. Velocity is criminally low. Has there been some asset price inflation from it all? Undoubtedly, but housing specifically has been buoyed more by 1%'ers on the high end and hedgies on the low end.
What's the over/under on the first serious suggestion from Kruggles that the Fed should start buying U.S. corporate bonds and/or equities?
Tommy Vu wrote:
John Hilsenrath, considered to have insider access to the Federal Reserve, has been quoted as saying taper is off the table and in fact asset purchases will be doubled at the next FOMC meeting.
The first $3 trillion didn't work, but clearly the problem mustn't be the concept!
Ranking all housing market factors:
Monthly nut. (rates and prices)
Short- to medium-term: yes, approximately.
Long-term: household formation (more generally, demographics) trumps all, and I'd insert "labor mobility" into the middle of the list somewhere.
threaten to dump thousands of dwellings on the market at once.
Dumping them means booking gains/losses
Every one of these hedgies thinks that if RRE prices start to come down again, they can be the first ones out the theater door.
There was no unfortunate about it. The question was about the last 10 years. Mortgage rates and housing starts may have had some correlation/association up until 2001 (I picked starting 2001) but decoupled right when the biggest bubble in history started.
It seemed clear to me that your assertion all along has been that rising rates will kill the nascent sales recovery - i.e. we've since recoupled to an extent. Am I wrong?
By the way. I want to point out that - upon a rare instance of a negative economic indicator popping up - Sebastian was one of the first posters on the thread. Providing no spin and no excuses - and in fact including a link to the data for both new home sales and rates so the commentariat could investigate the correlations for themselves.
HCN is much the better for his having stuck around.
Here I did it:
FRED Graph - FRED - St. Louis Fed
Unfortunately you've got the date ranges set to ~10 years, and the correlation between the two in both the bubble and the crash came more or less completely unhinged.
Set the timeframe on both data series to begin at "1974-04-01" and the correlation becomes clear, and stark.
The same dynamics, and risks, that would apply to any leveraged speculative investment, now apply to j6p's primary dwelling. That's the true genius of the real estate 'miracle' accomplished over the past 40 years.
Asset stripping: Don't stop 'til you get enough!
I think we can all agree that it's imperative the Fed kick-start the housing market by lowering the Fed Funds rate.
Mortgage rates are too damn high!
Bruce in Tennessee wrote:
U.S. Fed may need to drain up to $2 trillion: Barclays
I've posted this before, but it deserves another look: http://www.hussmanfunds.com/wmc/wmc130617a.gif
And a corresponding theme song: YouTube - R.E.M. - Can't Get There From Here
Buy them all up?
Just all? Heck no, more than all.
"Crunch all you want - we'll make more!"
Woah. Ben had better do something fast and definitive.
Buy them all up?
You don't seriously think the top quintile continues to winter in the ice states?
Said in jest I realize, but in fact the number of states showing expansion has been hitting maxima in the winter and minima in the summer.
Prior to 2008 any seasonal differences were statistical noise at best.
It's an oddity, nothing more.
Is it just me, or has this index seemed to acquire a pronounced seasonal trend since the 2008 recession?
Reminds me - I gotta get myself a good cheesesteak again some time soon.
Yeah, free market principles, as long as it helps my bottom line.
Apparently the Libertarian Sword of Justice™ also comes with a Shield From Competition™.
Wait, wait. What about my options that were promised to expire worthless?
Worthless? That's all? Upgrade to the Platinum subscription and you can guarantee at least one margin call per month!
this may be right but is difficult to believe. It says the average cost increase from 1992-2007 was about 15% over a period of 15 years.
Source data: Net Price for Trends in College Pricing | Trends in Higher Education
The tables are understandable, but they don't include income quintile breakdowns. The charts are well-nigh impenetrable IMO.
Also of note, these figures are all in constant dollars and broadly inclusive of tax benefits and deductions. I wouldn't be surprised if a large portion of the supposed "higher prices" being paid by the top quintile were in fact their simply not qualifying for said tax benefits due to the AMT and such.
And well fed too, probably, given how much good BBQ they have there.
Many librul elites seem to conveniently overlook the fact that a good chunk of the US populace isn't really cut out for a career that offer challenges exceeding those of forklift driver. In fact, they are willing to stand in line for a shot at "those" jobs.
Barring "those jobs" their alternate choices range from welfare to crime & prison.
What? If anything I think it's the other way around - righties tend to subscribe to "anyone can build themselves up" while lefties tend to think there are those who can't pull themselves off the bottom and a "win" is keeping them off the streets and out of prison by whatever means.
For the record, I think your view is not just condescending but inaccurate. Spend some time in rural flyover watching a team of guys with an eighth-grade education seamlessly operate and maintain $100 million worth of industrial machinery and you might change your tune.
Drill for natural gas, then.
I love how the financial crisis has strengthened our economic system's laser focus on rewarding the most efficient and productive uses of capital possible.
Build why financing is in supply. Don't worry about commercial demand (ie high vacancy rates). You make the money in the deal.
That's half the story. The other half, from a corporate perspective, is: "Stop sitting on all that zero-interest cash and do something with it. Or we'll replace you with someone who will."
ZIRP's manifold economic distortions will take a generation to correct.
10y at lows for the day
10-year TIPS taking it even more on the chin. A 118-bp swing from one year ago (-0.47%) to today (0.71%).
But, but, I was assured that unlimited free money would have no long-term consequences!
black dog wrote:
JUSTICE PLANS NEW CASES FROM FINANCIAL CRISIS — Attorney General Eric Holder says the Justice Department is planning to announce a number of new cases stemming from the financial crisis against large financial institutions in the coming months.
And hopefully, the inevitable arrest of two or three 30-something former traders and risk managers eighteen organizational levels below the CEO will once again impinge upon Ken the urgent necessity for a HCN :onion: icon (hovertext: Life imitates The Onion).
Again, the job of the lender is to determine the likelihood that the borrower will be able to pay him back.
I don't understand. The SOPApedia entry for underwriting lists it as "an archaic, potentially discriminatory, and now mooted pseudoscience from the days before all losses were socialized."
Wait, there are higher mortgage rates!?
Luckily, the all-cash buyers with whom you're competing for starter homes don't have to worry about that.
When rates inevitably rise, tuition will keep on going up forever.
"And rents tuition continued to rise. Forever. The end."
Clearly, the fault lay with the homebuilders and mortgage finance companies, for not lobbying hard enough to make mortgage loans non-dischargeable in bankruptcy!
I can only hope those poor fools have learned their lesson.
Perhaps the lender shouldn't loan a pile of money to a student that is unlikely to be able to pay it back in a timely fashion? And if they do, they could suffer the losses so as to be unlikely to make the same unwise decision in the future. Dear god, that would be terrible. Clearly, the government must do something to keep tuitions rising forever while not making anyone feel left behind. I know -- we'll offer more debt at even lower quality standards!
Hey, it worked for housing! Until, ummmm, it didn't.
Okay, I'll bite. Why October?
OTOH popular and expensive projects like Med Center rail get almost the opposite treatment. Expansion will be expensive up front and then continue to drain TxDOT resources ongoing.
Don't think of it as a money pit. Think of it as a perpetual campaign contribution repayment mechanism.
Looking at the graphs it is clear it is two graphs spliced together sometime in the mid 1980s. This recovery period of low growth is all we can expect.
See also: Update on Potential Real GDP for 2nd quarter 2013 - Effective Demand
It's astonishing, and sobering, to think this level of growth may be all our current-day economy is capable of without sparking inflation worries.
kind of like voting rights under the 15th Amendment, which was lately nullified by the court. Back to 26 Amendments now.
Twenty-six? Optimist. The 10th Amendment hasn't been in force since the Reagan administration. And we can pretty well throw the last shovelful of dirt on the 4th. Et cetera.
Ed S. wrote:
Runup in prices collides with runup in interest rates.
The banks. Wait ... was that a trick question?
All he had to do was look at the history of Kroner CDs.
I particularly like the Mexican peso for this purpose myself: Mexican Peso | Actual Value | Historical Data | Forecast | Calendar
Years-long periods of stable exchange at above-market interest rates followed by unexpected, swift, and massive devaluations. A worthy addition to any POIC investor's portfolio!
I asked him whether he had taken into account currency risk. He brushed it off saying how the high interest rate was covering the currency risk.
And he was right. It was, until it wasn't.
Unlike with Greece, however, I somehow doubt that it's going to convince rich Europeans to switch their summer holidays to Mumbai.
The loudest voice spoke.
It's a good thing that money = speech, or it might have risked getting drowned out!
go back and read the Bible.
I think we'd all be better off if we encouraged CK and LL to move to Georgia, then sawed off Florida at the state line and let it drift somewhere far away.
Bitmines are heating my place tonight
YouTube - They Might Be Giants - Minimum Wage
Is razor wire considered a fixed accoutrement?
Nah, I just took down a few rolls' worth this morning and pawned it off on some guy by calling it "deer fencing".
That couple sure couldn't resist a "bargain"!
I recommend IO as you can stretch your housing dollars even further.
"Negative amortization"? Well, you see, that's just a fancy term for "payments lower than you ever thought possible". I know, I know, we mortgage brokers make things sound sooooo complicated, right?
The median price paid for a home in California last month was $363,000, up 3.1 percent from $352,000 in June and up 29.2 percent from $281,000 in July 2012. July was the 17th consecutive month in which the state's median sale price rose year-over-year. In March/April/May 2007 the median peaked at $484,000. The post-peak trough was $221,000 in April 2009.
Back closer to the peak than to the trough.
Clearly it's the former that represents sanity and sustainability, while the latter was an unfortunate and temporary market failure. You know, like the flash crash.
but 5.9x is stupid, sans massive leverage and subsidy.
Fortunately we've got an abundance of both!
Would that be a bump, due to folks trying to beat rising rates?
Rising rates don't matter when you have a healthy, growing economy!
I could swear I heard that somewhere recently.