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Million Dollar Shack: Trapped In Silicon Valley's Housing Bubble

Discussion in 'Real Estate & Other Investments' started by searcher, Oct 27, 2015.



  1. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  2. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    END OF THE MIDDLE CLASS - The Number Of Americans That Can’t Afford Their Own Homes Has Doubled
    Elite NWO Agenda



    Published on Jul 11, 2017
    END OF THE MIDDLE CLASS - The Number Of Americans That Can’t Afford Their Own Homes Has Doubled

    Have you lost your spot in the middle class yet? For years I have been documenting all of the numbers that show that the middle class in America has been steadily shrinking, and we just got another one. According to a report that was produced by researchers at Harvard University, the number of Americans that spend more than 30 percent of their incomes on housing has more than doubled. In 2001, nearly 16 million Americans couldn’t afford the homes that they were currently living in, but by 2015 that figure had jumped to 38 million.

    When I write about “economic collapse”, I am writing about a process that has been unfolding for decades in this country. Back in the early 1970s, well over 60 percent of all Americans were considered to be “middle class”, but now that number has fallen below 50 percent. Never before in our history has the middle class been a minority of the population, but that is where we are at now, and the middle class continues to get even smaller with each passing day.

    So these new numbers saddened me, but they didn’t exactly surprise me.

    Over 38 million American households can’t afford their housing, an increase of 146 percent in the past 16 years, according to a recent Harvard housing report.

    Under federal guidelines, households that spend more than 30 percent of their income on housing costs are considered “cost burdened” and will have difficulty affording basic necessities like food, clothing, transportation and medical care.

    But the number of Americans struggling with their housing costs has risen from almost 16 million in 2001 to 38 million in 2015, according to the Census data crunched in the report. That’s more than double.

    Sometimes people try to convince me that the economy is doing “well”, but when I ask them how they are doing personally the news is almost always dreary. I know so many people that are working for close to minimum wage that used to be solidly in the middle class.

    One of the biggest reasons why the middle class is shrinking is because paychecks are staying about the same while the cost of living continues to rise steadily. Of course one of the biggest factors in the rise of the cost of living is health insurance.

    There are many people out there that have seen their health insurance premiums double since Obamacare went into effect. And one health insurance company actually tried to do this to me and my family too, and so at that time I immediately switched carriers.

    But even though virtually every single Republican in Congress campaigned on repealing Obamacare, it doesn’t look like it is going to happen. In fact, on Sunday Senator John McCain told Face the Nation that the effort to repeal Obamacare is “probably going to be dead”…

    Sen. John McCain, R-Ariz., said Sunday the Republican bill to repeal and replace Obamacare is “probably going to be dead.”

    “My view is that it’s probably going to be dead,” he said on CBS’s Face the Nation.

    Support for the bill has been eroding over the July 4th recess, and McCain said he believes Republicans should work with Democrats to craft health care legislation.

    So many families are living on the edge right now. Various surveys have discovered that somewhere around two-thirds of the entire nation is living paycheck to paycheck at least part of the time, and one study found that 69 percent of all Americans do not have an adequate emergency fund.

    Every month, more Americans fall out of the middle class and into poverty. Even during this so-called “economic recovery”, we are seeing alarming spikes in poverty all over the nation. For example, the number of homeless people living on the street in New York City has increased by 39 percent over the past year… economy savings "savings account" "middle class" USA America "united states" 2017 2018 dollar USD "Save money" university "harvard university" home housing rent mortgage life living rental "rent apartment" NYC LA "New York City" lifestyle population money wealth cash debt "credit card" credit loan "interest rate" income job employment "minimum wage" salary benefits paycheck "cost of living" "low rent" cheap "health insurance" healthcare sale shopping

    And bankruptcies continue to rise as well. Consumer bankruptcies were up once again last month, and commercial bankruptcies continue their very disturbing climb…

    Commercial Chapter 11 bankruptcies – an effort to restructure the business, rather than liquidating it – jumped 16% year-over-year in June to 581 filings across the US. Total commercial bankruptcies of all types, by large corporations to tiny sole proprietorships, rose 2% year-over-year to 3,385 filings, according to the American Bankruptcy Institute. This was up 39% from June 2015 and up 18% from June 2014.
     
  3. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Los Angeles is the Whole Foods of Rental Markets: Renter households spend nearly 50 percent of their income on rent.


    The rental apocalypse continues in Los Angeles. It is interesting to see how far some house humpers will go trying to justify prices. Some are arguing future weed sales are going to create another boom which is somewhat ironic since the benefits are actually to mellow you out, not turn you into a Taco Tuesday baby boomer that becomes a cubicle stressed slave just to purchase a home. And many times people plan on having a family shortly after which means higher childcare costs which they tend to forget. However, Los Angeles once again continues to be the worst place to rent in terms of affordability (and own for that matter). Zillow put out some interesting research and of course as you would expect, those spending nearly half of their income on rent are simply not saving for retirement.


    L.A. is the Whole Foods of rental markets

    I liken the L.A. housing market to Whole Foods. Great and healthy items that usually break the bank. L.A. has a large number of young and healthy hipsters and Millennials but most can’t buy a home. Heck, most Uber and Lyft drivers have nicer cars than most of us. So we live in this market where the perception is that everyone is well off and healthy when in reality many homeowners are stuck in a ridiculous commute for a crap shack and that is bad for your health.

    Of course this isn’t some made up figure. Just take a look at how much income is dumped on rent in various markets:

    [​IMG]

    Los Angeles by far is the worst market for renters surpassing even New York and San Francisco. I’ve made this argument multiple times and that has to do with incomes being far lower in this area compared to San Francisco and New York. Of course to house humpers they only see coastal Santa Monica and somehow use this as the reference for every other hood in the area where most of the plebs live. They forget that L.A. County has 10,000,000 people with most not living on the coast.

    So it is also telling that L.A. is largely a renting household dominated county. You have millions of Millennials across the state living at home with their parents because rents are too expensive. There is also this romantic idea that many people are stashing millions of dollars away by doing this but the stats show a different story. Some are, but most are not.

    What you have is Taco Tuesday baby boomers now stuck in granite countertop HGTV upgraded sarcophagi that they can’t leave for a variety of reasons including locked in Prop 13 tax assessments and adult children back in their nursery rooms. You also have the issue of low inventory that is plaguing the country:

    [​IMG]

    The low inventory dilemma is not only a SoCal phenomenon but has also impacted most urban metro markets. This is why housing as an entire asset class has soared with the stock market since 2009. Unlike the stock market however, scarcity has been a large factor driving prices up in real estate.

    The issue of rents is problematic however. As the percentage of households that rent grows, you are going to get those in the middle being squeezed. What do renter households care if taxes get increased on property if they don’t own? Back in 1978 when Prop 13 passed you had a much larger percentage of California homeowners. Today that is clearly not the case. “Well we’ll just increase the rent and pass it on!” Do you think people think like this? Of course not! Just take a look at New York City where only 31 percent of households own. And look at how they tax people there. That is the future. Where only the uber elite will be comfortable in their homes. Grandfathered in Taco Tuesday baby boomer homeowners will live in million dollar crap shacks and shop at the 99 Cents Store.

    The idea that broke Millennials were going to buy in mass in Los Angeles never made sense. Many would rather eat out, work out, and live a more Spartan life (many by necessity). Ironically more are healthier than those pot belly cubicle dwellers that are stuck in obscene traffic everyday having to make that massive 30-year mortgage commitment. But hey, we do live in the Whole Foods of housing markets.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/...ble-county-once-again-rents-income/#more-9074
     
  4. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  5. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    California homeowners are getting older and taking homes into the grave. Property turnover has fallen substantially since 2000.


    California homeowners are entering into their geriatric phase. The share of homes owned by older Californians has grown substantially since 2000. The Taco Tuesday baby boomer crowd is dominating the ranks of homeowners. This trend is new and because of key items like Prop 13 and Millennials living with parents, very few homes are turning over. The first time home buyer in California is simply getting older and older contrary to the house humping cheerleaders talking about the days of “sucking it up” and having to save to buy a home. Of course many were not contending with hot global money, limited inventory, artificially low interest rates, and a delusion of crap shack grandeur. Now some yell from their beer belly exposed guts and a savory carne asada taco in the other hand that people should move out if they don’t like it here (and many are). The economics of course are more subtle.

    California old folks home

    The old dominate the homeownership ranks in California. Fewer properties are turning over because many older homeowners are now having their grown adult children moving back in. Which makes sense since many bought because they were itching to pop out offspring. Now their offspring is itching to pop out offspring but many are hesitant to do that when a “starter home” is $700,000 and many times is in an area with bad schools.

    Take a look at this chart of homeownership based on age cohorts:

    [​IMG]

    Source: California LAO

    The chart is interesting for the two groups in the middle. You can see the homeownership percentage of all homes owned by the 35 to 55 age group decline as it is overtaken by the 55 to 75 age group. In 2005 the 35 to 55 group dominated and now it is the 55 to 75 age group. But that group, your typical Taco Tuesday baby boomer, is now seeing many of their adult children moving back home.

    This is keeping property turnover very low:

    [​IMG]

    Why are people not selling if the market is so blistering hot? The demographics should explain a lot of this change. Older homeowners are now stuck in their stucco sarcophagus. If they sell, many metro areas across the country are also expensive. The only time they would maximize their wealth is if they left to a lower cost of living country. Many will not do that – they even hesitate going to lower cost states. They would rather shop at the 99 Cents Store and live in a million dollar crap shack than unlock that sweet tasting equity.

    That is one reason but another is the fact that their kids now live at home once again. 2.3 million grown adults live at home with their parents in California. Don’t think this is common as some are preaching as if suddenly California is Italy. This is uncommon. It is happening because people are broke after paying the monthly bills and even rents eat up a ridiculous amount of income.

    Also remember that we’ve been in a hot market for 8 years now. The business cycle is bound to rear its ugly head:

    [​IMG]

    The employment market is already looking a little softer. This can only mean that more adult children are going to be moving back home and of course this means home prices are going to go up forever because that is simply how things go in California where the tacos never run out on Tuesdays.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/...der-equity-property-turnover-lower/#more-9079
     
  6. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    The growing underclass of the Orange County Bubble: You need to earn an hourly wage of $28 to afford a basic one-bedroom apartment but 68 percent of OC jobs pay less than that amount.


    You have to love the Orange County bubble. It is fitting that Disneyland is in Anaheim and actually has some of the poorest households in the entire county. You have a world of Princesses and fantasy and right in the same city you have topless dancing fulfilling a fantasy of a different sort. You have cities like Irvine where most of the new homes are selling to investors or foreign buyers. It is an interesting county. Yet a new report continues to show that California is no place for the middle class. The report also found that Millennials are leaving the area while Taco Tuesday baby boomers and older folks are the only cohort actually expected to grow in proportion relative to other age groups over the next 25 years. It is also no surprise that plastic surgery and expensive leased cars dominate the crowded streets. Unlike L.A. County that understands that there is a large struggling class of people Orange County seems to be in a fog when it comes to the deeper realities.


    The growing underclass of Orange County

    So let us look at some challenging trends:

    “(OC Register) — To afford a median-priced, one-bedroom rental unit, an hourly wage of $27.62 is needed. Yet 68 percent of Orange County jobs pay below that.

    — Orange County’s cost of living is almost double the U.S. average (87% higher). Housing costs are 356% higher than the national average.

    — Residents 65 and older are the only group projected to grow proportionate to other age groups in the next 25 years.

    — 48 percent of children are not developmentally ready for kindergarten

    –Nearly 60,000 households are on waiting lists for government rental assistance.

    Michael Ruane, an affordable housing executive who was the county’s project director on its first indicators report 17 years ago, said the data show “there are two Orange Counties.”

    “What’s striking is the enormous variation. You have poverty in a prosperous region. You have a knowledge economy with high wages, and a tourism economy with lower wages.”

    First, let us examine costs for housing and income:

    [​IMG]

    When people are spending half of their income on rent, there is little left over to save. Plus, you need to earn roughly $28 an hour for a basic rental but many jobs in OC don’t pay that (think of working at Disneyland for example).

    Housing cost are 356% higher than the national average, which makes it tough for people to save to buy a home:

    [​IMG]

    Fewer and fewer people that live here can buy so they don’t. You have old school Taco Tuesday baby boomers going gray and fragile in their homes while new buyers are dual-income professionals, investors, or foreign cash buyers. Those Taco Tuesday baby boomers are the broke folks in their hood while the new buyers are cruising around in Teslas and BMWs. So as the report finds, oldies are going to stay in their homes and are also welcoming back their economically struggling adult children back.

    The fact that nearly half of kids are not ready for kindergarten is troubling. This is the future. If they are not being adequately prepared, are they going to be able to buy that $700,000 crap shack when it is their turn?

    And finally, the vast majority of the new building is focusing on higher income housing:

    [​IMG]

    So is it any surprise that you have a larger number of people just treading water in OC? But of course, don’t let that burst your perception of the OC.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/...-underclass-income-to-own-affordable-housing/
     
  7. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Baby boomers are refusing to sell and will age like a fine wine in their homes. The dominant force in the housing market.


    Older Americans own half of the houses in the market. Many are simply refusing to sell and others have adult “kids” moving back in since they can’t afford a place to rent or buy. It is a Catch 22 and many people are looking at countries like Italy where the number of adults that live at home is enormous. Multi-generational families just don’t coincide with the “rugged American” worldview where you go out on your own and you make it with your own two hands. Of course, many house humpers had mom and dad chip in but that doesn’t make for such a sexy story. In the end, however there are many baby boomers that simply are not selling. This is actually an interesting problem that is not going away.


    Refusing to sell

    Housing used to be a young person’s game. The U.S. housing market and to a large extent, the economy was driven by home buying and big ticket purchases. But that has definitely changed since the housing market imploded with the 2000s. It has also changed in terms of people marrying later, having fewer kids, and basically preferring to live in city centers versus suburbs. In other words, not a big need for McMansions.

    The oldies but goodies are now occupying a larger share of housing:

    [​IMG]
    800x-1

    Over half of homeowners in the U.S. are now 55 and older. And this figure is only going to grow over time. In places like California, the Taco Tuesday baby boomers own the housing market. This is just a fact and has kept inventory to a very low level.

    But housing has gotten more expensive across all U.S. metro areas so this is a much larger trend. It has absolutely crushed the available inventory out on the market:

    [​IMG]
    inventory

    Inventory still remains near record lows. This is a problem for those looking to buy especially when people are competing with investors, foreign money, and house lusting individuals that simply don’t want to wait any longer even if it means buying a crap shack. Yet all of this assumes the economy continues on this 8-year bull market.

    Also, while home building has picked up, it is still historically weak given the demand:

    [​IMG]
    building permits

    At the peak we were humming at 1.8 million housing units being built per year. We are currently at 823k. That is one million short from the peak days of the housing bubble.

    So why are baby boomers not selling?

    “(Bloomberg) The system is gridlocked,” says Dowell Myers, a professor of urban planning and demography at the University of Southern California. “The seniors aren’t turning over homes as fast as they used to, so there are very few existing homes coming online. To turn it over, they’ll have to have a landing place.”

    In Lexington, Massachusetts, a Boston suburb, broker Dani Fleming offers pizza and refreshments to entice the mostly elderly homeowners to attend seller seminars on “how to unlock the potential of your home.”

    In other words, these Taco Tuesday baby boomers are staying put. It is what we talked about in the sense that they are house rich and money poor. You need to sell to unlock that equity. And right now, living in a crap shack and buying tacos is much more appealing than unlocking cold hard cash.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/baby-boomers-are-refusing-to-sell-homeownership-rates/#more-9094
     
  8. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    REALIST NEWS - Full-Fledged Housing Crisis in Silicon Valley Palo Alto
    jsnip4



    Published on Aug 24, 2017
     
  9. Thecrensh

    Thecrensh Gold Member Gold Chaser

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    I don't think it's silicon valley. There are 3 houses in my small neighborhood that are either being auctioned or just had their asking price reduced by a significant percentage.
     
  10. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    San Francisco housing market overheats: Tech beauty is unable to modify the realities of the real estate market.


    The San Francisco housing market is the most inflated and delusional market in the United States. It does make sense though at least from a psychological perspective. You have many people that are cubicle or open space programming junkies working away to create the new app or new crypto currency and somehow, they feel that “tiny” spaces are worth lots of money. It is telling but no surprise given the environment many work in. Then you have the case of people doing mega commutes into the Bay Area from inland locations similar to the morning exodus of people from the Inland Empire to Los Angeles and Orange County. Yet the market does seem to be overheating and some reality is starting to creep in. Apparently, no amount of tech enabled photo filtering is going to turn a crap shack into the Cinderella of housing.


    Old homes in the Bay Area

    Let me start off that homes in the Bay Area are old. We are talking pre-World War II built old. Now of course we know that Taco Tuesday baby boomers now own the housing market in California but did you know that housing in the Bay Area is also aging and frail as well?

    Don’t take my word for it:

    [​IMG]

    San Francisco is old. The homes in San Francisco are old. But you are now starting to see some deals popping up in the market. And when I say deals, you have to decide what to make from that.

    Take a look at this place:

    [​IMG]

    1176 Quesada Ave,

    San Francisco, CA 94124

    2 beds 1 bath 891 sqft

    This place has a beautiful backyard that is full of potential. Maybe you can incubate the next Uber or Facebook here?

    [​IMG]

    Now I know what you are all thinking, “this is San Francisco. I know this beauty is going to be $1 million or more.” Oh no my friends, this place is priced to move:

    [​IMG]

    For only $699,000 you too can own a San Francisco home. It needs a little bit of TLC but nothing a few bucks from a tech job won’t remedy.

    I always think that getting a Street View does better justice here:

    [​IMG]

    Look at the drive in to the garage – it looks like it has been through multiple California quakes (big and small).

    People want San Francisco and prices are still incredibly inflated (but so is the NASDAQ). We’ve been on a massive bull run since 2009. There is bound to be a correction and when you look at company valuations something is going to give. But you got to love San Francisco and the tech driven real estate mania.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/...lues-tech-driven-how-old-san-francisco-homes/
     
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  11. Thecrensh

    Thecrensh Gold Member Gold Chaser

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    What a bargain... yikes.
     
  12. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

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    It's a box. If you want a decent new home try Bradenton, FL. The lot is small and I am not a fan of side load garages, but it is a decent neighborhood. 21034407_10211901836560079_5122752534816396667_n.jpg
     
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  13. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    California Dreaming – More than a third of California households have virtually no savings.


    A lot of people do not equate California with poverty. You certainly don’t think of poverty when you look at real estate values in places like San Francisco even though the homeless issue is right in your face. The reality is that most people do not live lavish lifestyles. In fact, a new report highlights that more than one-third of California households have virtually no savings. These households would not have the ability to live at the poverty level for three months if one paycheck in the household was lost due to a job loss. You also have more than 2 million young adults living at home with their parents since the rent is too high. This isn’t the California that is presented in Hollywood movies.


    California and the evaporation of the middle class

    The reality is, the middle class is slowly disappearing in California. There was a time not long ago when a blue collar worker was able to purchase a home in many California locations. But there has been an aggressive gentrification. Now many people feel it is necessary to go into big debt simply to purchase a crap shack.

    Here is the map of the study:

    [​IMG]

    “(Pasadena Star News) Lars Perner, an assistant professor of clinical marketing at the USC Marshall School of Business, said California’s high housing costs have put many households on shaky financial ground.

    “The cost of housing in California is exorbitant,” he said. “That’s a big part of the problem. People pay a disproportionate amount of their income toward housing.”

    In places like Los Angeles close to half of renting households send close to half of their paycheck off to rent. And for the majority that own they spend over 40 percent of their net income on housing costs. This provides very little buffer for any emergencies. And of course, people live day to day and the economy has been on a massive bull run since 2009. A small recession is going to cause major ripples. And the way California is structured supports a boom and bust economic cycle. Tax revenues are flush in good times thanks to high taxes across the board but when things contract, the money dries out very quickly.

    And inventory is down across the United States:
    [​IMG]

    Housing inventory across the US is down 12 percent year-over-year but in Los Angeles, it is down 26 percent from an already low level. So for those crap shack hunting house lusting couples, they are simply biting the bullet and buying. Of course they are buying when everything is rosy and assume there is no correction on the horizon.

    It is interesting that this shrinking of the middle class is happening virtually in all major metro areas. My view on this is that this is being accelerated by technology. People all want the same things across all areas: Amazon Prime, Netflix, Gyms, Whole Foods, Uber, etc. So what happens is that lifestyle choices are more standardized across cities because of technology so people push real estate values up in similar herd like trends.

    But it is troubling to know that 37 percent of California households are living on the financial edge. And this is a figure that comes when the economy at least on paper looks good. What happens when you get your inevitable pullback in the stock market and real estate?

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.


    California Dreamin'

     
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  14. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Tuesday, September 12, 2017
    Housing Bubble Symmetry: Look Out Below

    Housing markets are one itsy-bitsy recession away from a collapse in domestic and foreign demand by marginal buyers.

    There are two attractive delusions that are ever-present in financial markets:One is this time it's different, because of unique conditions that have never ever manifested before in the history of the world, and the second is there are no cycles, they are illusions created by cherry-picked data; furthermore, markets are now completely controlled by central banks so cycles have vanished.

    While it's easy to see why these delusions are attractive, let's take a look at a widely used measure of the U.S. housing market, the Case-Shiller Index:

    [​IMG]

    If we look at this chart with fresh eyes, a few things pop out:

    1. The U.S. housing market had a this time it's different experience in the 2000s, as an unprecedented housing bubble inflated, pushing housing far above the trendline of the Case-Shiller National Home Price Index.
    2. It turned out this time wasn't different as this extreme of over-valuation collapsed.
    3. For a variety of reasons (massive central bank and state intervention, the socialization of the mortgage market via federally guaranteed mortgages, historically low mortgage rates, massive purchases of mortgage backed securities by the Federal Reserve, etc.), the collapse in prices did not return to the trendline.
    4. There is a remarkable time symmetry in each phase of expansion and collapse; each phase took roughly the same period of time to travel from trough to peak and peak to trough.
    5. The Index has now exceeded the previous bubble peak, suggesting this time it's different once again dominates the zeitgeist.
    6. Those denying the existence of cycles have difficulty adequately explain away the classic cyclical nature of the 2000-2008 bubble rise and its collapse, and the subsequent expansion of housing prices in a near-perfect mirror-image of the first housing bubble's steep ascent.
    Claiming that this painfully obvious time symmetry is mere randomness/coincidence is not an explanation.
    7. This time symmetry suggests that the current housing bubble is close to its zenith and will likely collapse over a time frame similar to Housing Bubble #1.

    The basic arguments for ever-higher housing prices forever and ever are:

    A. central banks completely control all markets, including housing, and they will never let the housing market decline ever again.
    B. Foreign buyers paying cash (even if the "cash" was borrowed in Asia) will continue flooding into North America, elevating markets for the the foreseeable future.

    The omnipotence of central banks is a matter of near-religious certainty among the faithful, but skeptics note that central banks have played major roles in markets for decades, yet every asset bubble eventually pops despite central bank/state management of markets.

    True believers note that the central state/bank interventions have greatly expanded, and that there are no limits on future interventions; central banks can create trillions of dollars, yuan, yen, euros, etc., and use this "free money" to buy assets, propping up markets indefinitely.

    In this line of thinking, central banks/states "learned their lesson" in the first housing bubble and will never let the housing market collapse again.

    As for foreign demand: the number of buyers from China who are desperate to turn their cash into North American real estate holdings is practically limitless.

    The counter-arguments are:

    1. Despite the federal guarantees on mortgages, the housing market is still dominated by private-sector borrowers and lenders. As my colleague Mish has often pointed out, central banks/agencies cannot force people to borrow money to buy homes, vehicles, etc.
    If everyone who is qualified to buy a house and wants to buy a house has bought a house, then demand is limited to new households and foreign buyers.

    New household formation has recovered a bit but is still at historically low levels. New households burdened by student loan debt, high rents and stagnant wages are not qualified to borrow hundreds of thousands of dollars to buy homes at current nose-bleed valuations.

    While the number of foreign buyers may appear to be limitless in specific markets, counting on marginal buyers with cash to prop up markets across the board is an iffy proposition, given the potential for conditions to reverse due to global recession, capital controls, higher taxes imposed on foreign owners of vacant homes, etc.

    I would argue that this time is different, but not in a healthy way. Central bank/state interventions in the market have drawn in marginal borrowers who are a few paychecks away from default, and speculators who are leveraged to the hilt to buy homes to "flip for quick profits--a strategy that collapses if qualified buyers become scarce.

    Globally, housing has become a flight-to-safety asset for the global elites, a development with disastrous consequences for residents. Housing owned for investment often sits empty, effectively withdrawing much-needed housing units from the market for shelter. This investment buying reduces the pool of available housing, driving up rents and home prices, pushing shelter out of reach of the bottom 95% of wage earners in desirable urban areas.

    In response, municipalities are aggressively imposing fees on investment ownership of empty dwellings. At some point, these fees reduce demand for housing in "hot" markets. Once marginal cash purchases evaporate, markets fall back to what domestic demand can support.

    Housing markets are one itsy-bitsy recession away from a collapse in domestic and foreign demand by marginal buyers. This time is different isn't always bullish.

    If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

    Check out both of my new books, Inequality and the Collapse of Privilege($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform($3.95 Kindle, $8.95 print, $5.95 audiobook) For more, please visit the OTM essentials website.

    NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

    http://charleshughsmith.blogspot.co...d&utm_campaign=Feed:+google/RzFQ+(oftwominds)
     
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  15. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Getting out of San Francisco: 83 percent of Bay Area renters plan to leave the area before settling down.


    San Francisco real estate continues to operate in a land of full on self-indulged delusion and pseudo-tech worship. I travel to the Bay Area and San Francisco often and the amount of self-delusion when it comes to real estate is amazing. You will find all of these convoluted justifications as to why a crap shack should sell for $1.5 million and when some other chump takes the jump, they use this as some sort of reinforcement of their real estate buying acumen. You are the amazing market timer and they are the fool (at least that is the thought process). I’ve seen this with couples in the area where two professionals have sound financial judgment but then a kid is thrown into the mix and all hell breaks loose. “Well I don’t want my kid living in a rental!” or “I want them to have a piece of real estate when I turn over and pass on” as if your kid wants to chase the same Full House rat race. People are mistaking luck with skill but that is part of human nature. And a recent survey found that 83 percent of Bay Area renters are planning on getting out of the area to settle down.


    Getting out of San Francisco

    You are seeing people paying ridiculous amounts for San Francisco real estate and in some cases paying rental multiples that only a Pets.com investor would find appealing. The only justification is that property values will continue to move up in an unrelenting fashion. So I was up in the area recently and almost every other person was talking about the next tech related boom or about real estate value while pulling up random housing apps. It was as if you were walking around in a giant cult city. “Just look at this property” with a fancy chart looking like a Bugs Bunny prop. You then ask, “you live in the bath tub of a studio for $2,000 a month right?” – something just seems off.

    As we’ve talked about there has been a massive trend to renting since the housing market took it in the shorts a decade ago. There are many large metro areas where renters are planning on getting out before settling down:

    [​IMG]

    New York and Los Angeles also have a high percentage of renters saying they will get out before settling down. Of course part of the desire to get out is affordability. Crap shacks are solidly over $1 million in San Francisco and rents are astronomical as well:

    [​IMG]

    If you think economic changes don’t impact real estate you are out to lunch. Just look at what happened to rents when the dotcom bubble burst. Rents fell by 25% and rents are notoriously sticky on the way down. So of course the economy will impact home values and rents as well.

    Do you think there might be frothy valuations in some of the tech companies in the Bay Area?

    “(NY Times) Seven of the world’s 10 most valuable companies are in the tech sector, matching the late 1999 peak. As the American stock market keeps marching to new highs — the Dow hit 22,000 this week — the gains are increasingly concentrated in the big tech stocks. The bulls say it is inevitable that Apple will become the first trillion-dollar company.”

    So this justifies four programmers to squeeze into a crappy San Francisco rental and to pay absurd levels on rent thus negating any true benefit from their large incomes (assuming they are not socking it away and buying avocado toast, Teslas, or any Apple product that is being pushed out).

    The reality is, there is a large amount of delusion in the market and the fact that 83 percent of Bay Area renters plan on setting roots outside of the Bay Area should tell you something.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/...rs-plan-to-leave-83-percent-plan-to-leave-sf/


     
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  16. Thecrensh

    Thecrensh Gold Member Gold Chaser

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    Aren't some of the tech companies looking to relocate as a result of insane business (and living) costs in the Bay area?
     
  17. glockngold

    glockngold Gold Member Gold Chaser

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    And the trees come with much needed outriggers?
     
  18. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    San Francisco tenants fight back after landlord raises rent by $4,800 a month
    [​IMG]
    CNBC

    Shawn M. Carter
    2 hrs ago


    Paul Kelly and Danielle Phillips had a good deal: They paid $1,900 a month for their 1,000-square-foot two-bedroom apartment in the Outer Sunset neighborhood of San Francisco. At the time, that was well below the $4,650 median rent for a two-bedroom apartment in the city, according to financial website Smart Asset.

    Then, in January 2015, the couple's new landlord, attorney Matthew Dirkes, tripled the rent to $6,700. He gave the pair until April to comply.

    Kelly, an electrician, and Phillips, a bank manager, opted to move out and to take the matter to court. They filed a lawsuit, claiming Dirkes' rent hike was a play to get them out of the house without serving them with a formal eviction.

    "Let's be honest," Kelly tells San Francisco Magazine, "any person could see that he was doing this to get rid of us. He knew we couldn't pay $6,700 in rent — nobody in their right mind would pay it."

    The judge sided with the landlord. According to the California Costa-Hawkins Rental Housing Act, there are no limits on rent increases for single-family homes, regardless of the landlord's motives.

    "Their lease expired in April," Dirkes tells CNBC Make It. "I complied with [the laws]. I gave more than 60 days' notice. I let them know what was going on."

    Dirkes also explains that he expanded the couple's lease to include the downstairs portion of the house, which included the front driveway, garage, backyard and another full bathroom, so they were going to get more for their money. "It wasn't a straight rent increase," the landlord says. "They were going to be renting the entire house. The rent increase was more, [but] it was more space."

    He acknowledges that the hike put Kelly and Phillips in a tough position. "I understand they didn't have a choice. They couldn't say, 'Well, we just wanted to stay in our two-bedroom,'" Dirkes says. "But I couldn't just continue to rent the upstairs to them. Otherwise, I'm shelling out thousands of dollars every month."

    At the time he purchased the house, Dirkes was living with his two children in his mother's small apartment. "I was paying rent at my mom's and also paying mortgage, property insurance [and] property taxes on the house, which, all told, came to roughly $4,500 a month," he says.

    "I was losing money every month Paul and Danielle were there, but I respected that they had this lease."

    Kelly and Phillips are appealing the court's decision. The ruling, set for this fall, could set a precedent for future cases involving rent controls and potentially affect 56,000 homes and condos in the Bay area that are "in limbo," San Francisco Magazine reports.

    "If we lose this case on appeal, there will be no eviction protections at all for single-family homes and condos across the state," Joe Tobener, the couple's attorney, tells the magazine. If they win, it could present an opportunity for tenants to fight huge rent hikes.

    The cost of living in the Bay Area is among the highest in the country. In San Francisco proper,it's 63 percent higher than the U.S. average, a 2015 study from Smart Asset found. In 2016, you'd have had to make $216,129 a year to afford a two-bedroom apartment.

    That's partly why one Twitter employee earning $160,000 in San Francisco says he's barely scraping by and some Facebook engineers struggling with rent even asked Mark Zuckerberg for help.

    Dirkes tells CNBC Make It he sympathizes with families dealing with high rents and who are forced out of their home because they can't pay.

    "There are [certain] situations where … investment banks and large funds are essentially buying up properties then holding on to them with the idea to generate revenue down the road," he says.

    "I think that that's something where the California State Legislature needs to step in. There needs to be protection against that type of opportunistic and predatory homeownership."

    He says, though, that those instances are "a totally different situation than the one I'm in right now."

    Meanwhile, millennials nationwide can take precautions by fully reading and understanding their leases. Especially now, with apartment rental approval rates the highest they've been since 2014 and millennials representing the country's largest renting population.

    If you get a new landlord, be sure to review the new terms of your rental agreement. Or, if you have enough saved, you could buy a home and/or become a landlord yourself.

    Like this story? Like CNBC Make It on Facebook

    Don't miss: Poor credit isn't what makes renting hard—here's the real problem

    http://www.msn.com/en-us/money/real...r4800-a-month/ar-AAsx454?li=BBnbfcL&ocid=iehp
     
  19. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    San Francisco housing still in manic phase: Dump that is “uninhabitable” with fire damage has pending offer at $1.4 million.


    Well being back in the Bay Area I realize once again how delusional people have become when it comes to chasing unicorn startups and all things real estate. I ran into multiple people and it seems like everyone is talking about real estate. Some of these people were showing me “deals” on apps like Zillow or Redfin on their phones. “This place with some work can then be flipped in a month for a $200,000 profit.” Why work when you can speculate on housing? The housing market is now in cult status and this psychological territory isn’t new. We don’t have to dig deep into historical texts and read about Florida real estate in the 1920s but need only look at the 2000s. San Francisco is out of control. And of course you have insulated mindsets from many that work in tech or the financial sector since they feel that money or an app can solve all of life’s challenges. Today we take a look at a home worthy of the crap shack title in San Francisco.


    Uninhabitable San Francisco home with fire and water damage – $1.4 million

    You always hear that you are paying for the land, not the property in California. If there is ever an example more worthy of that adage it will be with this home.

    Take a look at this beauty:

    [​IMG]

    Now this home comes with a winning ad:

    [​IMG]

    A gorgeous home that is ready for a dual-income tech couple ready to nest and put their new kid here:

    [​IMG]

    Nic e little room for a mini tech baby. Or what about this room:

    [​IMG]

    Now I know what you are asking, “but what about the bathrooms? Surely that is going to look nice.” And you would be absolutely correct on that one:

    [​IMG]

    The property was foreclosed on in 2012 and actually made the news because of the fire:

    “SAN FRANCISCO (CBS SF) — The San Francisco Fire Department responded to a single-alarm fire in the city’s Ingleside Heights neighborhood Friday afternoon, according to a fire department official.

    The fire was reported at 12:11 p.m. in a multi-story, single-family home at 89 Belle Ave., the official said.”

    I had a reader send me this listing back on 9/20 and guess what? It has a pending offer:

    [​IMG]

    Now to make this place livable you will need to drop $650,000 to $1 million based on contractors hired by the bank. But this is part of the cult status of San Francisco. You can tear this place down, build whatever it is you have in mind, and next you can flip it for a million dollar profit.

    At this point, everyone is chasing easy money. Why slave away as a tech worker making a low six-figure salary when you can buy crap shacks across the state and simply flip them for profit? The place doesn’t even need to be livable apparently!

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/san-francisco-uninhabitable-home-million-dollars-fire-damage/
     
  20. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    The land of the permanent renter: More single family homes are now rentals with households moving less.


    There has been a massive trend towards renting. The vast majority of household growth since the housing bubble imploded has been with rental households. I know this is hard to believe for Taco Tuesday baby boomers but this is simply the new reality. And all of those investors that bought up single family homes for rentals are living it up. There are now a few major changes impacting the housing market – many more single family homes are rentals and many more renters are staying put. In other words, many are not looking to buy and builders realize this. There is now a large category of permanent renters since many people live and work in more expensive metro markets. Short of forking out an insane amount of money to live in say San Francisco, people are opting to rent. The proof is in the numbers.


    More renters are not moving

    Many households used renting as a bridge before venturing out and buying a home. But more people are renting and staying put:

    [​IMG]

    Across all age groups, people are staying put longer in their rentals. And this is being pushed by investors renting out single family homes:

    [​IMG]

    Look at the chart above. This is an anomaly in terms of how many single family homes are out in the market as rentals. In terms of how many SFRs are rented as a percentage of the entire SFR pool, this is an increase of 50% from the 1980s.

    You have many young adults that simply cannot move out on their own even for a rental:

    [​IMG]

    And if you are looking to buy in today’s house humping market be prepared to pay a premium because inventory is pathetic:

    [​IMG]

    Which leads us to a generational low homeownership rate:

    [​IMG]

    So what you have is a rental market that now has many more single family homes as rentals and many more renters are viewing these places as permanent versus transitory apartments. The fact that many more renters are staying put reflects this change. And why would a landlord argue with this? It is great to have long-term tenants. And for many, this meets their needs instead of buying an overpriced crap shack.

    Inventory remains pathetically low and younger American adults in large numbers are simply staying put and living at home with mom and dad. This is not a typical housing recovery. This is a distorted market and this is the outcome of mapped out bailouts with the banks, hedge funds buying up single family homes, and builders becoming reluctant to build.

    People try to paint this recovery as a broad one but what this is highlighting is that this “recovery” is essentially jamming 100 hungry people into a restaurant and saying that the first 20 people that get to the counter will get a cold taco. Everything is relative and right now, that dump of a home with crappy construction and toxic mold is looking appealing at $1 million.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/permanent-renter-households-single-family-homes-rentals/
     
  21. 97guns

    97guns Gold Member Gold Chaser

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  22. lumpOgold

    lumpOgold Gold Member Gold Chaser Site Supporter

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    Here's the other view.

    My co-worker just showed his ignorance about rent vs. buy property. He made an $850,000 offer on a 800+ sq ft condo (no yard or outdoor space at all!) and it was accepted. He had been crying lately about missing the bottom (I bought in 20111, timing it perfectly) and wanted to get out of renting at $2000 per month. So he traded 35 YEARS of rental payments for a 20 year mortgage at $3000 per month, plus he borrowed almost all the down payment (~$150k) from his in-laws. He had a below-market rental that was really nice and on good terms with the landlord, who had re-assured him there would be no big spikes in rent since they are happy with a long-term renter.

    I just can't believe how dumb some people are, he'd be better off saving his money, and renting for the next ten years and then getting the he!! out of Silicon Valley. Plus he's now in deep with the in-laws and that can't ever end good!
     
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  23. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  24. the_shootist

    the_shootist The war is here on our doorstep! Midas Member Site Supporter ++

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    We can't save them all
     
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  25. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  26. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  27. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Smallest home in Los Angeles: 264 square foot studio selling for $550,000 highlights collective insanity.


    People have once again lost their collective marbles when it comes to real estate. There is now a massive trend with momentum for non-stop housing appreciation. In other words, our housing bubble sins are now fully washed away making way for more aggressive risk taking. I’ve been traveling and seeing real estate from many different locations and thanks to ubiquitous sites like Zillow, virtually every large metro area is seeing massive housing appreciation detached from income growth and people are tracking real estate down like starving hyenas after an injured wildebeest. We are now in a market where potential buyers are in a panic to buy for no other reason beyond they feel they will miss the boat yet again. Today we highlight what is probably the smallest home we have ever featured on the site.


    Smallest of the small

    Los Angeles is in a big housing frenzy. Every area including those with high crime rates are seeing solid price gains. Who cares about crime when you can get a sweet taste of that housing equity nectar! Today we look at this 264 square foot gem:

    [​IMG]

    10449 Scenario Ln, Los Angeles, CA 90077

    Studio 1 bath 264 sqft

    I love how they also use a nice perspective on these photos to give it bigger depth:

    [​IMG]

    The ad is wonderfully worded:

    “Zen-like retreat, perfect for a UCLA student or young professional. Secluded and private hideaway in nature. It is a 264 square foot studio with skylights and sliders leading out to the deck and backyard. Carport has storage cabinets and a washer and dryer. It is located near UCLA and Beverly Hills, it is the least expensive property in the highly desirable Beverly Canyon area.”

    In a case like this, why not buy a larger RV and park it in a mobile lot? I mean seriously, this place is 264 square feet! And the asking price is $550,000. But you can see some wild pricing here:


    [​IMG]

    This is where you realize something is off in the market. So in June 2016 the place was listed for $499,000. A big stretch. Little by little they dropped the price to $299,000. That got someone’s attention and it sold for $335,000. Now, one year after that sale date someone is asking for $550,000. What caused this place to be “worth” $215,000 (64% increase) in this short period? I mean why would you work when you can buy a 264 square foot property and profit $215,000 in one year?

    Let us say a lot of work was done on this place. How much work can you do on a 264 square foot home?

    The market is manic. People are in a deep state of delusion. Welcome to California housing my friends!

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/smallest-home-los-angeles-for-sale-mania-bubble-housing/
     
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  28. lumpOgold

    lumpOgold Gold Member Gold Chaser Site Supporter

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    Insanity is what's driving it. It isn't uncommon for people with more money than they know what to do with pay $2k/sq ft for crappy 90 year old bungalows. As I said before, $1000/sq ft for a crappy condo with zero outdoor space is already insane.
     
  29. Thecrensh

    Thecrensh Gold Member Gold Chaser

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    Unless they have some insider information about some big development that is about to go down very close by...
     
  30. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  31. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    High Prices and Zombie Housing


    11/11/2017
    Doug French


    “The inventory coming, but people are buying faster than it can get here,” GLVR President David Tina told Channel 8. “We have 5,000 available houses, but we sell 3,000 a month.” The Business Press backs this up, “By the end of September, GLVAR reported 4,969 single-family homes listed for sale without any sort of offer. That’s down 33.1 percent from one year ago. For condos and townhomes, the 680 properties listed without offers in September represented a 41.4 percent drop from one year ago.”

    Dennis Smith of Home Builders Research points out, “There are still boatloads of homes underwater, or almost underwater, essentially keeping those owners from selling their home and buying another. However, there have been a lot of out of town buyers that have propped up the market and have kept the recovery moving forward.”

    What Tina and Smith don’t mention Eli Segall does in the Las Vegas Review-Journal,”Some 2.17 percent of homes in the Las Vegas area, or a total of 14,334 properties, are vacant. That’s up from 2.15 percent, or 13,896 properties, in 2016, according to Attom [Data Solutions].”

    That’s three months of inventory off the market.

    The nationwide vacancy rate is 1.58% according to Attom, with most of these vacancies (75%) being non-owner occupied. Attom’s website post is entitled, “Vacant Property Rate Increases From a Year Ago in 54 Percent of U.S. Local Housing Markets in Q3 2017.”

    According to the Attom report,

    vacant “zombie” pre-foreclosure properties — which have started the foreclosure process but have not yet been repossessed by the foreclosing lender — decreased 22 percent from a year ago to 14,312 as of the end of Q3 2017, 67 percent below the peak of 44,030 in Q3 2013. The number of vacant bank-owned properties decreased 48 percent from a year ago to 24,026 as of the end of Q3 2017.

    Most Zombie foreclosures are located in New York, New Jersey, Florida, Illinois and Ohio. Most vacant REOs are in New York, Chicago, Philadelphia, Baltimore, and Cleveland.

    Nevada is among the leaders in numbers of seriously underwater homes.

    The New York Times, The Guardian and CNN’s Lisa Ling have all reported on the Las Vegas squatter problem. Ion Lovett wrote for the NYT last year,

    Squatters have descended on every corner of the Las Vegas Valley, taking over empty houses in struggling working-class neighborhoods, in upscale planned communities like Summerlin, and everywhere in between. And they often bring a trail of crime with them.

    “Things get out of hand pretty quickly when these people move in,” Jacquelyn Romero, 59, told the NYT. She has lived in the neighborhood for about 15 years. “We’re trying to do almost like a neighborhood watch, just to keep ourselves safe.”

    Echoing that point, a vacant animal clinic in North Las Vegas was torched by squatters in the early hours of November 1st, reports the LVRJ.

    This strange brew of limited sale inventory, rising prices and yet three months of vacant inventory being ransacked by squatters is not how markets work, unless manipulated by government.

    Douglas French is former president of the Mises Institute, author of Early Speculative Bubbles & Increases in the Money Supply , and author of Walk Away: The Rise and Fall of the Home-Ownership Myth. He received his master's degree in economics from UNLV, studying under both Professor Murray Rothbard and Professor Hans-Hermann Hoppe.

    https://mises.org/wire/high-prices-and-zombie-housing
     
  32. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

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    A year ago in my area you could buy a vacant 80' x 125' lot and build a home. Lot prices were around $15k for something nice. During the 2007 peak lots prices were $80k and then crashed. Today there are 5 lots for $25k and all new listings are $30k+. There are literally less than 7 homes for sale less than $150k in a city with a population of 160k.

    When I sold new homes about 15 years ago the top was around $225k for a 4/3/2. Today that is base price and I am seeing most listings $300k+ with a couple sold @ $400k.

    Lots of people have been moving to Florida forcing it past New York as the 3rd most populous state behind California and Texas.
     
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  33. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    San Francisco housing market near bubble risk according to UBS report. Majority of Bay Area renters plan to leave.


    The San Francisco housing market is the most overvalued market in the United States. People over inflate the market because tech is sexy and cool and many are chasing the next Google, Amazon, or Facebook. Everyone wants to strike it rich with as little work as possible. And what better way to do that than in real estate? In San Francisco the typical crap shack will cost you $1.2 to $1.5 million. The response from many housing cheerleaders is the typical logic you see in manias – hey, someone paid for it! You also get similar stories from the tulip bubble, dotcom bubble, and other bubbles where the justification for higher prices is simply that some other sucker paid for it at that level. And there is now signs that we may be in a rental bubble in the Bay Area. 83 percent of renters surveyed in the Bay Area said they plan on leaving. Tie that in with the UBS Global Real Estate Index showing that San Francisco is dangerously close to bubble territory and you have indicators that something is rotten in SF.


    Riding the tech wave

    Some people understand the business cycle and the waves that ripple through our economy. The housing market and economy has been booming since 2009. People forget that recessions happen. And now that we have added millions of renter households with higher rents, what happens when that next correction hits? While you can sit in a home and let it flow into foreclosure like many did during the housing crisis, there is a smaller window for renters should cash flow issues occur.

    It is rather clear that San Francisco real estate is in a bubble. Even conservative UBS is showing that prices are inflated:

    [​IMG]

    But our neighbors to the north in Canada are taking it to another level with their housing bubble. It is nutty how obsessed people are with real estate in the Bay Area. People are drinking the Kool-Aid by the gallons. For those that own, you have a confirmation bias occurring and who could blame them? If you owned a piece of crap house and suddenly Zillow gives you a $1.5 million Zestimate why wouldn’t you believe it? I suppose you should never ask a barber if you need a haircut.

    Renters clearly think something is wrong since many are voicing their displeasure and have plans on leaving:

    [​IMG]

    So why are many staying? Jobs. The Bay Area has high paying jobs and people like the wages and will accept living like sardines for that salary bump. People need to take into serious consideration cost of living when they move to an area. What use is a high salary if you are chained to a cubicle pumping out lines of code, leave work to get stuck in mind numbing traffic, and only to arrive to a toaster sized box to knock out? I’ve known people moving to places like New York earning good wages only to realize they have entered into a trap – those wages can only buy you so much real estate in certain markets. You want a big McMansion then you need to broaden your horizons or increase your paycheck. That all works well as long as the system is humming. And what is keeping the system humming right now? Apps that can deliver a Big Mac to your house while you binge out on 20 seasons of random shows? We are in a market of saturation and people need to think outside the box.

    The Bay Area is great in terms of generating the next big thing. People are focused on tech and there is something alluring about putting together some great code, packaging it into an app, and suddenly becoming a wealthy individual which allows you to buy things in the real world. Things like real estate.

    Prices are sizzling in San Francisco:

    [​IMG]

    So get that down payment ready for your $1.5 million hole in the wall in San Francisco.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/san-francisco-real-estate-mania-ubs-renters-leaving/
     
  34. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  35. Treasure Searcher

    Treasure Searcher Platinum Bling Platinum Bling

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    As far as older people staying in their homes in California, here is my take: Proposition 13. From what I have studied, when a house is sold or added unto in California, then it can be re-assessed. Otherwise, there is a very nominal raise in taxes on the property per year. If you have an older person in their large house, it may make more sense to them to keep that larger house, than purchase a smaller one and then be subjected to higher property taxes.

    It is interesting studying Proposition 13. In the 1970's inflation and population increase was driving up the cost of housing in California. Valuations were increasing and of course property taxes were spiking. Senior citizens were being property taxed out of their homes. Several groups, such as homeowners in general got the initiated process going and were able to vote in Proposition 13.

    Of course, government tried to get away with introducing fees to raise revenue. But thats another story.
     
  36. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    GOP tax plan will be a bad hombre for the California housing market: National Association of Realtors warns that prices can fall by 8 to 12 percent if tax plan is approved.


    It seems like a lot of people are tripping over themselves regarding the GOP tax plan. For California, the housing cheerleaders always trumpeted the massive amount of tax deductions you got when buying a ridiculous crap shack. I always found this to be absurd. You usually got “free market” thinkers on the economy but then suddenly, wanted massive government support when they bought their expensive home. In the Bay Area a crap shack will cost you $1.5 million if you even want to have a parking spot within walkable distance. So it is no surprise that the GOP tax plan doesn’t give two seconds of thought as to what is good for California. And good just means on what side of the dinner table you are sitting at. Frankly, the rest of the country subsidizes the crazy housing market in California and other expensive states so it never made sense to have a mortgage interest deduction of up to $1,000,000 when the typical house in the U.S. costs $200,000. In regards to housing, the GOP tax plan will not help California housing values.


    Subsidizing expensive California

    There is some irony that San Francisco, a city that touts to be progressive and open to all is so incredibly expensive that only the elite can afford to live there. Surely you can see the cognitive dissonance in that? We want to help you so long as you stay far and away from our expensive NIMBYism enclave. An area where making $100,000 a year will confine you to living with roommates and eating Ramen from your tech cubicle.

    Here is why capping the mortgage interest deduction makes total sense from an equitable perspective. First, most people don’t live in expensive California crap shacks:

    [​IMG]

    They typical home costs $203,400. So assume a 10 percent down payment and you have an $183,060 mortgage. Assume that mortgage is at 4 percent interest. You are paying roughly $7,200 a year in mortgage interest. Now let us assume you buy a $1,000,000 California crap shack. Say you put down 20 percent. You are paying over $32,000 a year in mortgage interest. So why in the world is the person buying that California crap shack getting such a big mortgage deduction when by definition the typical home in the US costs $203,400?

    Of course, the National Association of Realtors (NAR) is upset by this:

    “(Mercury News) The tax incentives to own a home are baked into the overall value of homes in every state and territory across the country,” association president Elizabeth Mendenhall wrote in a news release over the weekend condeming the proposed tax overhaul. “When those incentives are nullified in the way this bill provides, our estimates show that home values stand to fall by an average of more than 10 percent, and even greater in high-cost areas.”

    I love how this is phrased. So basically socialism is baked into the home price. Okay you free market wannabes. You can’t have it both ways (okay, you can). The reason the NAR is upset by this is that they make money when people are churning real estate – meaning more buying and selling. They want volume. Like the McDonald’s of housing. So if this stalls home sales they lose.

    Another fun item for California is the following:

    “Another controversial housing-related item in the tax proposals is the capital gains provision. Under current law, homeowners can exclude up to $250,000 (or $500,000 for married couples) in capital gains on the profit from the sale of a home — if they have lived in the house for two of the last five years. Both the House and Senate proposals would change that — homeowners must have lived in the house for five of the past eight years to qualify for the savings.

    Last year, 13 percent of homeowners in California had lived in their home for between two and four years, meaning they won’t be eligible for that tax exclusion, according to the National Association of Realtors. Some housing experts worry the GOP tax plans will encourage Bay Area homeowners to stay put instead of selling, exacerbating the region’s housing shortage.”

    Bwahaha! So much for the home equity train. I’ve talked about this before but housing cheerleaders like to paint this quaint vision of getting old in a home, painting the walls of your kids bedroom, and acting as if you live in a place for 30 years. No, in reality most are house humpers that lust after those HGTV shows and can’t wait to sell into a bigger property. Well now, you have to wait five to eight years before working on those cap gains. Can you tolerate a crap shack for two years? Sure. Can you tolerate it for 5 to 8 years? Hmmm.

    And most Americans don’t itemize:

    [​IMG]

    This bill does not help your typical California house humper. It will help the majority of renters. Why? Because of the above. The standard deduction going from $6,350 to $12,000 for single filing households and from $12,700 to $24,000 for married filing households actually helps out the typical American household.

    I hesitate to get into the tribal mentality of “blue” team and “red” team because ultimately it divides people from actually doing a deeper analysis. There are good ideas and bad ideas coming out from both parties. In the above case regarding housing, a place like Los Angeles County with the majority of households being renters, it will help at least with their tax bill. This won’t help your future crap shack buyers in the Golden State.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/...prices-gop-tax-plan-real-estate-ca/#more-9154
     
  37. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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  38. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    California renters will come out ahead with new tax plan while homeowners will see a higher tax bill under GOP plan.


    You constantly hear that owning a home is a no brainer in California because you will always get major tax benefits. Well the new GOP tax plan is actually going to benefit California renters while California homeowners in crap shacks will see higher tax bills. It is an interesting tax proposal because the typical US household owning a typical $200,000 home is going to come out ahead. This is your bread and butter “American” family. However, Taco Tuesday Baby Boomers and Gen X’rs in California have been getting mega subsidies for buying hyper expensive crap shacks. Every tax bill that comes out seems to favor homeowners. In fact, I haven’t seen one that hasn’t favored homeownership. But the way the tax bill is setup, crap shack owners are going to actually have to pay more and renters are going to benefit nicely from the much larger standard deduction. We are now seeing some scenarios where this is playing out.


    Crap shacks getting more expensive

    The L.A. Times has a piece where they examine various households in regards to the proposed tax plan. In one example you have a professional couple that bought a crap shack in Redondo Beach (3 bedrooms and 2 bathrooms – your standard million-dollar SoCal home). They paid $915,000 for the place back in 2016. They are going to see an increase in their tax bill:

    [​IMG]

    So there goes the argument that every piece of legislation actually benefits homeowners. Not in this case and in many other cases where people over paid for crap shacks. But what about “poor” renters? There is another scenario presented in the L.A. Times with a professional couple that earns even more than the high income professional homeowner couple:

    [​IMG]

    You mean the GOP and Trump are friends of California renters? Not that they care or even spend two seconds thinking about people in SoCal but the way this tax plan is setup, crap shack owners are the folks who will take it in the shorts the most. The top one percent is going to make out like bandits of course:

    [​IMG]

    Welcome to the new world of politics where fake news dominates and the GOP is actually going to help out California renters thanks to their own selfish interest (but both parties are selfish so don’t delude yourself). I think it is ridiculous that people get tribal and think in terms of “blue” and “red” teams because in the end, it is a divide and conquer strategy. A lot of folks in L.A. and O.C. that voted for Trump, those dual income households are going to see their tax bills going up because of their crap shack obsession. Our deficit continues to soar and people are diving deep into crypto-currencies.

    And we are going to add many more renter households in L.A. County. Just look at where all the building permits are going:

    [​IMG]

    But guess what? These are the households that will start benefitting under the new tax plan. Is this a secret ploy to turn California blue? Not a chance. Just like Alabama went blue recently, there is so much at play that things are happening unintentionally here. If you want to think deeper, many dual income professional households would lean “blue” but these aren’t your uber-rich households. So this may be part of the overall strategy.

    2018 is going to be an interesting year but what year isn’t? You have rockets flying out of SoCal and people thinking we are being visited by UFOs.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/gop-tax-plan-california-homeowners-renters/
     
  39. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    Canada went full USA with their housing bubble: Their bubble is just starting to burst with home values dropping for the first time since Q1 2009.


    The Canadian housing market is entering into a “housing correction” courtesy of the mega debt our neighbors to the north have taken on. The bubble grew and grew and like most real estate bubbles, they can go on for years beyond what most would expect. Canada’s housing market is deep in a bubble. You have households deeply in debt and many taking on wild loans secured to the value of their real estate. It has been a few months but key markets are now seeing noticeable changes. The online news feed no longer reads like a cryptocurrency surge where everyone has to get in before missing the party. Canadians went full USA in their housing bubble. Should you expect a different outcome?


    Canada did it bigger than the USA

    The Canadian housing bubble is massive because when US real estate values were correcting and the market was being flushed, prices in Canada simply kept on climbing higher oblivious to what was going on in the south. The excuse was “hey, we didn’t have NINJA loans so we are good!” but this is nonsense. As we noted, out of the over 7 million US foreclosures most happened on plain vanilla 30-year fixed rate mortgages. The wild loans were simply the tip of the iceberg.

    Take a look at Canadian home values relative to US home values:

    [​IMG]

    The market has been out of control for a few years now. And of course, Canadian households drank their own Kool-Aid and have tapped out equity from their homes:

    [​IMG]

    Reminds you of the US when homes were being used like ATMs.

    Canadians are securing debt to their homes as if prices were never going to go down ever:

    [​IMG]

    The end result is that you have a nation with massively indebted people. The entire pyramid is built on ever growing housing values. And values are so out of sync that even a minor correction is set to topple this weak foundation.

    Are prices falling? Oh yes they are:

    “OTTAWA, Dec 13 (Reuters) – Canadian home prices fell again in November, the third straight monthly decline and the largest November drop outside of a recession, as Toronto prices fell for the fourth month and Vancouver prices were flat, data showed on Wednesday.

    The Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, showed national prices declined 0.5 percent in November from the month before as four of the 11 cities surveyed weakened.”

    While these are only the first cracks these are rare headlines for the Canadian housing market. Yet confidence is a big part of the current widespread bull market. Canada’s housing bubble is a symptom of a nation in too much debt (where the debt-to-disposable-income ratio is now over 170%). The strains were already there and 2018 is only going to push on this bubble more deeply.

    [​IMG]Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

    http://www.doctorhousingbubble.com/canada-real-estate-bubble-housing-bubble-helocs-debt-bubble/
     
  40. latemetal

    latemetal Platinum Bling Platinum Bling

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    I'd lecture them, but we don't seem to have our own house in order yet.
     

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