You might think that a post with that subject line would be snark. However, it isn't.
The man sent to the slammer for securities fraud and whose debauched diet of sex, drugs and money inspired The Wolf of Wall Street is heading Down Under to lecture real estate agents on the importance of ethics and integrity.I like how he claims to be reformed. It reminds me of that old saying about how the old tramp prays loudest in church.
The important point which you are likely to overlook is that he is lecturing real estate agents. It's a sign of top in the market. And while he's talking in Australia, he may as well be speaking in the United States.
Despite the 2006-2009 bubble crash, America's love affair with using homes as an investment is alive and well (just like our love affair with Dot-Com stocks).
As ZINC Financial recently reported, house flipping is up 114% in the United States since 2011.We are also seeing a return of home loan abuses.
Does that mean the same housing bubble is back? No. This is an entirely different sort of housing bubble, a concept that escapes some people that have trouble reading past headline numbers.
As I've been saying since last summer that this is an investor-led cycle, which is different from a normal housing cycle.
Big Wall Street investors jumped into the housing market near the bottom in 2012 and pushed up housing prices much faster than normal. Thus cutting young, first-time home buyers out of the market before they could get back in.
Now that the easy money has been made, the three largest firms are cutting back on their purchases.
Blackstone’s acquisition pace has declined 70 percent from its peak last year, when the private equity firm was spending more than $100 million a week on properties, said Jonathan Gray, global head of real estate for the New York-based firm.Wall Street's purchase of 200,000 homes made an immediate impact on the housing market.
American Homes 4 Rent and Colony American Homes, the second- and third-largest single-family landlords, also have been scaling back as bargains dry up. Home prices have risen 24 percent since a post-bubble low in March 2012, which was about when corporate buyers started their buying spree, according to the S&P/Case-Shiller index.
When they jumped in, housing prices shot up. When they cut back on purchases, housing activity dropped and prices stalled.
Like all economic problems, bad things roll downhill. The housing affordability problems have caused a severe rental affordability crisis.
Now that Wall Street and wealthy investors have picked all the "low-hanging fruit", that source of home-buying is going to dry up. The problem is that affordability is much too rare at these nose-bleed levels for regular, first-time home buyers. That means that total real estate activity will likely continue to drop, and that will continue to create headwinds for the economy.
“Household formation,” as economists call it, is the foundation of demand in the housing market...That means 2.3 million "missing" households, and that's mostly before the recent home price spike.
The number of households rose by an average of 569,000 a year from 2007 to 2013, according to census data, down from 1.35 million a year from 2001 to 2006.
Until prices fall significantly, the economy will continue to "miss" households. That means we must change our opinions about what constitutes a healthy housing market.
We think it is officially time to stop cheering for higher house prices. They aren’t having much of an impact on the economy anyway, and the resulting higher rents are hurting many.It's long past time that the market headline watchers consider that not all rising asset prices are good for the economy, and that more often than not it only benefits the upper-class.