{"id":15104,"date":"2012-10-27T12:29:36","date_gmt":"2012-10-27T16:29:36","guid":{"rendered":"http:\/\/theredphoenixapl.org\/?p=15104"},"modified":"2012-10-27T12:29:36","modified_gmt":"2012-10-27T16:29:36","slug":"is-housing-about-to-tank","status":"publish","type":"post","link":"https:\/\/redphoenix.news\/es\/2012\/10\/is-housing-about-to-tank\/","title":{"rendered":"Is Housing About to Tank?"},"content":{"rendered":"

\"\"<\/a><\/p>\n

You Call It Recovery, I Call It Bollocks<\/strong><\/span><\/p>\n

by MIKE WHITNEY<\/span><\/p>\n

Well, what do you know; mortgage applications have fallen off a cliff.<\/span><\/p>\n

According to the Mortgage Bankers Association (MBA) loan applications decreased by 12 percent on a seasonally adjusted basis from one week earlier \u201cregistering the biggest percentage\u00a0decline in a year as demand for both purchase loans and refinancings tumbled.\u201d<\/span><\/p>\n

But how can that be, after all, \u00a0the experts assured us that the Great Housing Rebound of 2012 was underway? They couldn\u2019t be wrong, could they?<\/span><\/p>\n

Uh huh. Just look at the data. Housing is still stuck in a long-term slump despite the cheerleading of \u201cbottom callers\u201d and oily TV pundits. The fact is, if the banks continue to keep their\u00a0distressed inventory \u201coff market\u201d, (as they have been) sales are going to go down, way down, because the availability of affordable, low-end homes is drying up. That\u2019s why mortgage\u00a0applications are taking a hit, because the higher prices are crimping demand.<\/span><\/p>\n

For the last few months there have been a number of factors that have helped to nudge prices higher than they should be. First, there\u2019s the deluge of industry propaganda about prices\u00a0\u201dhitting bottom\u201d. What a crock. The reason prices have been going up is because the banks have slashed the number of repo properties they\u2019re putting up for auction. Forget the\u00a0fundamentals, the banks are playing a big shell game to hoodwink the sheeple into believing its safe to come out of their bunkers and start perusing the MLS again. If they\u2019re smart,\u00a0they\u2019ll crawl back into their spiderholes and wait \u2019til the coast is clear.<\/span><\/p>\n

Another reason why prices have recovered is because Uncle Sugar has been dishing out more perks to private equity and other fatcat investors through the Foreclosure-to-Rental scam.\u00a0Many of these distressed properties have never even been listed on the MLS, so if you\u2019ve been hanging around waiting for prices to correct, you can forget about it. That 2-story Tudor\u00a0with the stone turret and the copper gargoyles just got offloaded to some moneybags shyster from\u00a0Brooklyn who\u2019s filling out his portfolio with budget real estate.<\/span><\/p>\n

Here\u2019s the scoop from\u00a0Dr Housing Bubble:<\/span><\/p>\n

\u201cRenting out foreclosed homes has increasingly emerged as an investment opportunity for Wall Street. Financiers are busily studying ways to take the single-family home rental business,\u00a0for years mostly a mom-and-pop affair, and make it a bigger industry. That has made it difficult for first-time shoppers to compete.\u201d<\/span><\/p>\n

So now you have to compete with Wall Street that receives favorable treatment from the government and Fed just to purchase an entry level home. This is becoming a closed loop\u00a0system. The same financiers that made billions upon billions of dollars shelling out fraudulent loans and toxic waste are now gaining favorable treatment in locking up blocks of\u00a0properties to jack up prices. The California median price is up 12.9 percent year over year while incomes remain stagnant. In Phoenix it is up a stunning 30 percent. Las Vegas? Up 18\u00a0percent year over year. These gains are on par with the peak years of the bubble.\u201d (\u201cA modern day feudal system for real estate\u201d, Dr Housing Bubble)<\/span><\/p><\/blockquote>\n

A \u201cclosed loop system\u201d. I love that. It really sums up what\u2019s going on behind the scenes and how all the gravy keeps flowing to the chiselers on top.<\/span><\/p>\n

And did you catch that part about Phoenix being up 30 percent in a year? That\u2019s what happens when the big boys come to town and start snapping up all the cheapo homes so they can\u00a0make a killing in the rental biz. It\u2019s like buzzards flocking to roadkill.<\/span><\/p>\n

Did you know that private equity firms have already raised \u201c$8 billion to buy as many as 80,000 single-family homes\u201d they plan to manage as rentals? That ought to keep prices going in\u00a0the right direction, right?<\/span><\/p>\n

Wrong. The truth is, rental management is tougher than it looks. It eats up a lot of time and money, which is why some of these investor groups are bailing already. It\u2019s not the golden\u00a0goose they thought it was going to be, so they\u2019re pulling up stakes.<\/span><\/p>\n

But if the private equity boys move on, then what\u2019s going to happen to prices? That\u2019s what everyone wants to know, including the Atlanta Fed who just wrote an analysis of the topic in a\u00a0paper titled \u201cInvestor Participation in the Home-Buying Market\u201d. Here\u2019s what they found:<\/span><\/p>\n

\u201cWhen asked to describe the distribution of home buyers in their market, our business contacts from the Southeast (excluding Florida) noted that one-fifth of home sales, on average,\u00a0were to investors. Once we added Florida into our tally of Southeast contacts, just over one-fourth of sales, on average, were to investors.\u201d (\u201cInvestor Participation in the Home-Buying\u00a0Market\u201d, Federal Reserve Bank of Atlanta)<\/span><\/p><\/blockquote>\n

Whoa. So 25% of sales are going to investors? That\u2019s a lot of real estate. So what happens if these heavyweights decide their investment strategy is a dud and pack-it-in before their\u00a0shareholders figure out what\u2019s going on? Then the market is in for another big price shock, right?<\/span><\/p>\n

Here\u2019s more from the Atlanta Fed:<\/span><\/p>\n

\u201c\u2026institutional investors ramped up activity earlier this year and have indeed concentrated their investment activity within a handful of markets that were hit hard by the housing\u00a0downturn. Acquisition strategies for these larger investors focus on mostly low-priced, distressed properties.<\/span><\/p>\n

This makes sense. The markets hit hardest by the housing downturn are also the markets where distressed properties make up a significant portion of the available homes for sale.\u00a0However, data from CoreLogic indicates that the share of distressed sales is steadily declining over time. As the distressed sales share continues to shrink and home prices continue to rise,\u00a0it stands to reason that investment activity will shrink (or continue to shrink).<\/span><\/p>\n

It was recently noted that Och-Ziff Capital Management Group LLC, a large institutional investor (not outlined in the table above), announced that it intends to exit this line of business.\u00a0Perhaps it is just a matter of time before other large investors follow suit.\u201d (\u201cInvestor Participation in the Home-Buying Market\u201d, Federal Reserve Bank of Atlanta)<\/span><\/p><\/blockquote>\n

Well now, that doesn\u2019t sound very encouraging. It sounds like the Fed has already figured out that the investment craze is a short-term phenom that will burn out and leave a big hole in\u00a0the market. How does that square with all the cheerleading hoopla we\u2019ve been hearing in the media lately? Not very well. In fact, it makes the \u201chousing has bottomed\u201d trope sound like\u00a0your typical, lying Madison Avenue hype designed to dupe the public. Check this out from the MBA:<\/span><\/p>\n

\u201cThe MBA is warning it expects to see $1.3 trillion in mortgage originations during 2013. This is down more than 25% from its revised estimation of $1.7 trillion in 2012.\u201d<\/span><\/p><\/blockquote>\n

So they were off by $400 billion in their estimate? How the heck does that happen? Have they been making their calculations on an abacus?<\/span><\/p>\n

Then there\u2019s this from CNBC where expert Diana Olick wants to know \u201cWhere is all this distressed supply\u201d:<\/span><\/p>\n

\u201cSo where is all this distressed supply, given that there are still 5.45 million homes with mortgages that are either delinquent or in the foreclosure process (per LPS Applied Analytics)?\u201d<\/span><\/p><\/blockquote>\n

Good question. How do you sweep 5 and a half million homes under the rug, that\u2019s what I\u2019d like to know? Here\u2019s more from Olick:<\/span><\/p>\n

\u201cThe biggest problem is that regular home sellers are not putting their homes on the market at a high enough rate to offset the drop in distressed volumes. Why? Part of it is still a lack of\u00a0confidence in the market, but most of it that, as of August, about 15 million homeowners still owed more on their mortgages than their homes were worth, according to Zillow. That\u2019s 31\u00a0percent of homes with a mortgage. Negative equity and near negative equity is largely what is holding the market back now, even as distressed homes slowly move out of the system.\u201d\u00a0(\u201cWhere is all this distressed supply?\u201d, CNBC)<\/span><\/p><\/blockquote>\n

So there\u2019s two things going on here. First, lenders are withholding their supply of distressed bank-owned homes in order to keep prices high. And, second, millions of people can\u2019t sell\u00a0because they\u2019re underwater and selling would mean they\u2019d have to come up with tens of thousands of dollars to close the deal. So it\u2019s cheaper for them to \u201cstay put.\u201d The point is, neither\u00a0of these are a sign of a strong market. Instead, they\u2019re an indication of how discombobulated and utterly out-of-whack housing really is. Six years after the bubble burst, and\u00a0policymakers are still holding the market together with bubble gum and duct tape. What a joke.<\/span><\/p>\n

The strained inventory situation could get a lot worse too, mainly because private equity is wiping out the stockpile of low-end homes which make up 65% of the market. For example,\u00a0sales of homes under 100 thousand dollars are down 47% out West year-over-year. As the cheap homes vanish, prices will rise, but sales will plunge. You can take that to the bank.<\/span><\/p>\n

Now take a look at this from the\u00a0National Association of Realtors (NAR) September report on existing home sales:<\/span><\/p>\n

\u201cTotal existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 1.7 percent to a seasonally adjusted annual\u00a0rate of 4.75 million in September from an upwardly revised 4.83 million in August, but are 11.0 percent above the 4.28 million-unit pace in September 2011.\u201d<\/span><\/p><\/blockquote>\n

Same old, same old, right? Prices up, sales down. Of course, Ben Bernanke thinks he can turn things around by lowering rates, flooding the system with liquidity, and reflating property\u00a0values to the point where people start spending like crazy again. But that hasn\u2019t happened yet, has it, mainly because Bernanke\u2019s crackpot QEternity has turned out to be a big, fat bust.\u00a0Did you know that in the six weeks since Ben Bernanke launched QE3, the 30-year fixed mortgage rate has dropped just 10 lousy basis points, which is virtually no difference at all. At\u00a0the same time, the S&P 500 has slipped 2 percent, while mortgage applications have gone into a deep swan dive. In other words, Bernanke\u2019s \u201caccommodative policy\u201d has had no\u00a0meaningful effect on housing at all. The market is still mired in a depression with just modest improvements in new homes sales. And even that\u2019s looking a bit sketchy. Take a look at\u00a0this from CNBC:<\/span><\/p>\n

\u201cNew U.S. single-family home sales surged in September to their highest level in nearly 2-1\/2 years, further evidence the housing market recovery is gaining steam. The Commerce\u00a0Department said on Wednesday sales increased 5.7 percent to a seasonally adjusted 389,000-unit annual rate \u2014 the highest level since April 2010, when sales were boosted by a tax credit\u00a0for first-time homebuyers.\u201d<\/span><\/p><\/blockquote>\n

Yippee. Housing is back. The recovery is real. Maestro Bernanke has triumphed.<\/span><\/p>\n

Er, not exactly. Here\u2019s a little background analysis you\u2019re not going to find on propaganda channels. This is from Lance Roberts at Street Talk Live:\u201dThe headline number that is released is a seasonally adjusted and annualized number based on the actual month to month data. The Commerce Department reported that sales of new\u00a0homes increased 5.7% to 389,000 in September. This increase against August\u2019s downwardly revised pace of 368,000-units. However, in reality there were only 31,000 ACTUAL new\u00a0homes sold across the entire United States in September. This is the same number that was sold in August and down from the 35,000 units sold in May. In other words, the entire 5.7%\u00a0increase in new home sales in September was strictly seasonal adjustments\u2026..\u201dOkay, so it\u2019s a bit technical, but you get the gist of what Robert\u2019s is saying. He\u2019s saying, It\u2019s all bollocks.<\/span><\/p>\n

The only part of the market that\u2019s busy is the low end where speculators are\u00a0fighting over a few measly crumbs. The rest of the market is kaput.<\/span><\/p>\n

You can call that a recovery. I call it bollocks.<\/span><\/p>\n

Fuente<\/span><\/a><\/span><\/p>","protected":false},"excerpt":{"rendered":"

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