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 The diary by bobswern is pretty detailed and has many linked sources, but sometimes that is too much.
   Some people don't have the time to read all those articles. For those people there are charts. Lots of them.

 First of all, let's agree what a "healthy" housing market looks like.
Traditionally it is: Young households take out mortgages and become first-time homebuyers. More established households, that may or may not have paid off their mortgages, sell these small homes and move into larger, more expensive homes.

   This is not what is happening today.

 First-time homebuyers only account for 26% of home sales in January. The percentage in a normal market is around 40% according to the NAR.

Even those lucky enough to get mortgages are encountering the exact same abuses we saw during the recent housing bubble.

  Despite extensive federal subsidies, the housing market continues to flounder.

 Why is housing activity not recovering? The answer is very simple - homes are too expensive. Young people can't afford them. And all those federal subsidies are part of the problem.
 So why are home prices going up if young people aren't buying?
It's because large, Wall Street investors are buying, and they are doing it with cash.
 This has led us to a very familiar place - home flipping.
The speculators are back.
    53% of home sales in January were either by all-cash buyers or "flippers". Seven out of ten investors paid cash.
 The deep-pocketed, Wall Street investors are buying up homes by the thousands in order to collect rents, just like in feudal days.
   This means fewer homeowners and higher rents.
 Yet even this Wall Street investment strategy is experiencing problems.
 People are noticing that home prices are going up, but they often don't ask who is buying.
   Investors are buying, not homeowners, and that makes a huge difference.

 Homeowners never sell, except to buy another home.

 Investors always sell, and they always sell to buy a different product.

 The housing "recovery" isn't a normal housing rebound. It is an investment rebound, and thus it will follow the laws of an investment cycle, like the stock market.
   That means after it goes up, it will go down. It's only a matter of time.

2:45 PM PT: Wall Street is now looking at buying foreclosed homes to rent.

  Investors buying NPLs to increase their rental portfolios is a cause for alarm because they stand to profit by pushing people out of their homes, said Kevin Stein, associate director of the California Reinvestment Coalition, a San Francisco-based tenant and consumer advocacy group....
   Brien said an estimated 30 percent to 50 percent of the NPLs will end up as rentals for the company. In other cases, the borrowers will resume paying the loans after a modification or the homes will be sold because the location or quality doesn’t match Starwood Waypoint’s criteria.
   “We’re always going to take the outcome that’s most economically beneficial,” Brien said.
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  •  Excellent! And, thank you! n/t (34+ / 0-)

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Fri Feb 21, 2014 at 10:40:55 AM PST

  •  Wonder how the Parasite Caste is doing w/ rentals (21+ / 0-)

    Are they really renting out a significant portion of the homes they are buying? I know that they are paying much less to buy than they would have in, say, 2005, but are their rents cheaper than the previously established market?

    If it were, I'd expect to see some downward pressure on rents. (In NYC, my landlord gets an automatic (approx) 4% annual increase, but I'm ignorant if that happens everywhere.)

    For all the FEDs worry about deflation, the only thing in real life which seems to deflate is the income and savings of the vast majority of people.

    Actual Democrats: the surest, quickest, route to More Democrats. And actually addressing our various emergencies.

    by Jim P on Fri Feb 21, 2014 at 10:42:03 AM PST

    •  NYC and San Francisco are a couple of markets... (14+ / 0-)

      ...where there is still a significant amount of big-money demand. But, even in NYC, cracks in the rush to (still) capitalize on this latest bubble are beginning to appear.

      "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

      by bobswern on Fri Feb 21, 2014 at 10:51:36 AM PST

      [ Parent ]

      •  Newport, Isle of Wight (7+ / 0-)

        is officially a deprived area. Property here is almost as cheap as you can get in the UK so…this is what you can get for $124,500 and trust me, the pictures make it look good: not much roof, the walls are crumbling, and what yard there is, is full of Japanese Knotweed requiring around $4,500 worth of professional remediation over 18 months.
        Trust me, most young people in the UK rent.

        "The 'Middle' is a crowded place - that is where the effective power is - the extreme right and left might annoy governments, but the middle terrifies them." Johnny Linehan

        by northsylvania on Fri Feb 21, 2014 at 12:24:26 PM PST

        [ Parent ]

        •  I kinda like that though. (3+ / 0-)
          Recommended by:
          weck, bobswern, northsylvania

          A bunch of thinset and some windows and the weeds taken on and that could be very cool.

          •  Lots of money to invest - how much of a return? (1+ / 0-)
            Recommended by:

            I'm just wondering if things like plumbing and electrical are in safe shape or if they'd have to be renovated.  Would it be less costly to scrape and rebuild?

            •  "grade two listed" (0+ / 0-)

              What that means is the exterior has to be refurbished to exactly what it looked like in 1962 when the County Councils listed the building. Generally, when a listed building is in as bad shape as this one is, the only thing that can be done with it, is let it fall down on its own, which can take years.
              For example: one way to stabilise it would be to reinforce the outer walls, put insulative render over the outside, and paint it, but it would not look as it did when it was listed. The windows also have bars, which would have to stay. (Why they put bars on the windows of a bakery is beyond me.)
              Even if we were able to refurbish, the price when finished would only be about twice the asking price because of the surrounding properties. We are looking for some place similar, but with the shell in better shape, not listed, and in a less dangerous area.

              "The 'Middle' is a crowded place - that is where the effective power is - the extreme right and left might annoy governments, but the middle terrifies them." Johnny Linehan

              by northsylvania on Sat Feb 22, 2014 at 01:08:15 AM PST

              [ Parent ]

  •  If the housing mkt is in such trouble, then why (4+ / 0-)

    can't I find a decent house for $150k now that prices are skyrocketing here in CA?   Only thing I can afford now is a mobile home.
      Please tell me where housing prices are still so depressed, yet not in a looney toone Red district.

    My Karma just ran over your Dogma

    by FoundingFatherDAR on Fri Feb 21, 2014 at 11:08:05 AM PST

  •  A big part of the problem (17+ / 0-)

    is that young people are saddled with huge amounts of debt.  Be it college loans, credit cards or whatever.  College loans are one of the biggest impediment to younger people buying houses.  

    But aside from that there are still alot of young people without jobs whose credit worthiness has been absolutely destroyed.  It'll take years for them to get out of those holes.

    I hate to tell you but it will STILL be a good 5-7 years before we see any sort of recovery in areas outside of the wealthy towns.  That's pending some govt intervention which could change things.  We won't see a real recovery in housing until the next decade.

    Of course the wealthy are doing well

    Just to give you an indication (be prepared to throw up):

    As the spring market begins to emerge in Westport, a choice few price ranges within its borders are heating up as well.  The hottest price pockets in town right now are between $3-3.5 million, $3.5-4 million, and tied for third place are the $2.25-2.5 million and the $5-10 million range.
    Market Stats

    There are now 232 homes that are actively on the market, which is roughly the same as last week. These currently available properties have been listed for average of 111 days, with a cumulative market time of 191 days.

    The average list price is now $2,545,739, and the median price has gone up slightly to $1,997,000.

    Just browse through.  They have a whole Teardown of the Day page where the catalog houses torn down.  That's not even a complete list.  Some of the numbers are eye popping and they don't tell half the story.  For example someone bought two adjoining properties costing over 9 million, is knocking down both homes and is planning on building a new house costing another 7-9 million.  

    This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

    by DisNoir36 on Fri Feb 21, 2014 at 11:26:24 AM PST

    •  It's just common sense (14+ / 0-)

      Kids are burdened with debt and can't find good jobs (if any jobs).
        Yet housing prices keep going up.

         So who are those Baby Boomers going to sell their homes too?
         That's where Wall Street steps in.

       But Wall Street is only worried about ROI. They don't want to actually live in those homes. They don't even want to keep those homes maintained.

        This is not your parent's housing market.

      None are so hopelessly enslaved, as those who falsely believe they are free. The truth has been kept from the depth of their minds by masters who rule them with lies. -Johann von Goethe

      by gjohnsit on Fri Feb 21, 2014 at 11:32:33 AM PST

      [ Parent ]

      •  No its not (6+ / 0-)

        but the same thing happened to a lesser extent in the early 1990's.  Investors stepped in and scooped all the cheap homes.  It's just that the economic destruction this time out has been so devastating that the recovery will take a far longer time.  And then something will have to give.  

        Inflation is one possible way out or devaluing the dollar.  Housing prices have seen significant inflation.  Yet wages have not kept pace.  I believe the minimum wage increases will help and in CT we're very likely to see an increase.  But that only takes us part of the way and it's not enough upward pressure on wages at the lower end.  The abnks and the gov't is gonna have to allow some inflation to take place.  They don't want it because obviously the values of their loans and so on will erode.  A $100,000 loan will be worth far less for example if the value of the dollar goes down and someone is making $100,000 a year as opposed to $30,000 a year.

        The govt isn't helping with QE.  The banks get free cash but they have NO incentive to help the economy.  Frankly I wish the govt would end QE and raise interest rates up a bit.  That way prices would be forced to go down.  It would hurt in the short term but the correction would help the real estate market in the long term by bringing some sanity back to these ridiculous prices.

        Hell no matter what we do it's gonna suck.  If we try to bring wages up or prices down, either has it's risks.  I say get the suck out of the way asap and move on.  Right now we're living in this limbo and the banks have all the leverage.  That dynamic HAS to change.  

        And you are right about Wall Street and these homes.  I've been privy to a few now where the homes are abandoned.  They don't care because they got those homes for literally pennies on the dollar.  So for them they can wait it out and hope the economy recovers and people are able to afford their 'reduced' yet still inflated prices.  Even if the houses deteriorate well so what?  They'll STILL sell them as fixer uppers for far more than what they paid.  There's ALOT of that crap out there but what they don't realize is that even at the reduced price, the price is still too high, especially when one factors in the costs to repair.  

        This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

        by DisNoir36 on Fri Feb 21, 2014 at 12:02:04 PM PST

        [ Parent ]

        •  I've done a lot of residential real estate, ad... (3+ / 0-)

          ...p.r., mktg. work in Fairfield County, and the wealthy towns (especially the ones with decent school districts), such as: Greenwich, Darien, New Canaan and Westport, etc., are very much in the same league as San Francisco and NYC, in terms of still seeing significant demand. These supposedly "immune" towns/cities (and to a lesser extent, the other towns in Fairfield Cty.) are always the last to see/feel the negative effects of whatever adversity might exist in the overall/national residential real estate marketplace.

          "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

          by bobswern on Fri Feb 21, 2014 at 12:24:56 PM PST

          [ Parent ]

          •  Westport more so than any other town. (2+ / 0-)
            Recommended by:
            bobswern, Dr Erich Bloodaxe RN

            Westport really did not get hit with the crash in 2008.  There was an obvious slowdown and a slight dip in the market but it was nowhere near as pronounced as in say Greenwich, Darien and New Canaan.  Prices went down a bit for about a year or two but demand remained high.  We're seeing prices as high or higher than the height of the market in 05-06.  Teardowns are the highest ever.  The whole town is undergoing gentrification but especially down by the coast.  

            One of the unfortunate effects of Sandy is that the waterfront communities got hit very hard but all that did was 'wash out' the 'lower class people' who held those summer homes for generations and could no longer afford to hold them for whatever reasons.  The rich are swooping in, scooping all those summer cottages up, tearing them down and building behemoths.  The ones which aren't getting torn down are getting lifted and renovated.  The net effect is that the waterfront communities which used to have small 1,500 sf or less homes on small lots are becoming 4,000 sf homes selling for 2 million and up. That's considered entry level by the water.    

            SW Fairfield County has always been considered the Gold Coast of CT but Westport is and always has been the one shiny spot even in dark times.  More so than any other wealthy community it is super frothy and there are no signs of it letting up.  Builders are going crazy in anticipation of the spring market.  The prices aren't quite what they are in say certain parts of Greenwich like Riverside (where the typical new construction is selling for about $800-$1000 a sf) but the demand is definitely there.  

            This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

            by DisNoir36 on Fri Feb 21, 2014 at 01:02:53 PM PST

            [ Parent ]

      •  Which is actually a dangerous situation for the (4+ / 0-)

        country to be in.  At some point, investors find another "opportunity" and walk away from housing, dropping prices or leaving thousands/millions homeless, etc.

        There's no path by which I can see this massive Wall Street investment in housing playing out well for the nation.

        It's almost like an exact recipe for a housing market-induced depression.

        "The law is meant to be my servant and not my master, still less my torturer and my murderer." -- James Baldwin. July 11, 1966.

        by YucatanMan on Fri Feb 21, 2014 at 02:05:47 PM PST

        [ Parent ]

    •  As a first-time buyer with low debt, I concur (8+ / 0-)

      I fully recognize my privilege and luck allowed me to buy an apartment in Brooklyn at 26. By the time I closed, I only had $5000 in student loan debt, which is now down to $790. It will be fully paid off end of March. If I had $50,000 in loan debt instead of $5,000, there's no way I would have been able to afford a house.

      So many of my peers have a mortgage's worth of debt before they have a mortgage! That's unsustainable.

      •  I have friends with over $100,000 in student loans (13+ / 0-)

        that's a fucking mortgage not a student loan.  

        How the hell are they going to afford a mortgage if they have $100,000 in student loans.  That's why you see more and more of them living with their parents.  They can't afford anything outside of those loans, let alone a mortgage or rent for a home.  Even if they manage to pay that off in 10 years, they'll be well into their 30's before they can even think of buying a home and they better pray they can find a job that pays them well enough to afford the super bloated mortgages once they do.  Until the problem of student loans is resolved we've basically fucked the next generation and ourselves when it comes to the housing market.    

        This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

        by DisNoir36 on Fri Feb 21, 2014 at 01:08:00 PM PST

        [ Parent ]

    •  Don't forget medical expenses (0+ / 0-)

      that weren't and still aren't covered by insurance. Like hearing aids.

  •  There Is No Economic Investment Happening. (13+ / 0-)

    Stocks, houses, commodities: it's all limited to the 1% betting on the betting of the 1%.

    There's basically no growth in the 99%, or the 90% certainly, so there's really no such thing as "investment" happening. Betters betting on betters is bubble land.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Fri Feb 21, 2014 at 11:45:54 AM PST

  •  I noticed this right after the market crashed. (15+ / 0-)

    I was actually looking to buy since prices were so low and I was renting - I sold my previous place before the crash on the recommendation of Atrios and Krugman.

    Anyway, I looked at a few foreclosed properties and I found that they would sell for cash the day it was listed. I started looking at all foreclosed properties and found that in most cases they'd sell in a day for cash.

    I then would see these same houses listed again at twice the price a year later. This is why young folks aren't buying - they can't pull the trigger fast enough on cheap houses and what is left are houses they can't afford.

    I do wonder if there is behind the scenes deals between the banks holding the foreclosed properties and the hedge fund managers buying these properties.

    For the record, I did find a great old fixer upper that I figure needed more work than the cash buyers thought was too much money for a good return. I've put a bit of work into the house and it has more than doubled in value over the past year.

  •  Home ownership is going down (9+ / 0-)

    U.S. homeownership at 1995 levels despite housing rebound

    Homeownership in the United States remained flat last quarter, staying at its lowest level in nearly two decades and underscoring the dominant role investors have played in the housing recovery.

    The nation’s homeownership rate was 65.1% on a seasonally adjusted level in the third quarter, unchanged from the second quarter, the Census Bureau reported Tuesday. Homeownership fell from a 65.3% rate in the third quarter last year. Besides the second quarter of this year, home ownership hasn’t been this low since the last three months of 1995.

    Add to this the homeowners who are under water;

    Study Finds 6.4 Million U.S. Homeowners Still Have Underwater Mortgages

    The American dream is disappearing.

    Daily Kos an oasis of truth. Truth that leads to action.

    by Shockwave on Fri Feb 21, 2014 at 12:05:36 PM PST

  •  this is good read... (5+ / 0-)
    Housing Bubble II: What’s Ruining Home Sales? Not The Weather!

    DateThursday, February 20, 2014 at 1:26AM by Wolf Richter

    The “potent combination of rapidly rising home prices” and “significant uptick in interest rates in the second half of 2013 caused the monthly cost of owning a home using traditional financing to jump substantially in many markets over the last year,” said Daren Blomquist, VP of RealtyTrac, whose housing affordability analysis has just been released. The monthly cost of owning a home was becoming “dangerously disconnected,” he said. On one side, “still-stagnant median incomes”; on the other, prices that had been driven up “by investors and other cash buyers who are not tethered to the typical affordability constraints.”  (emphasis mine)

    '' one day the poor will have nothing left to eat but the rich''

    by lostinamerica on Fri Feb 21, 2014 at 12:14:09 PM PST

  •  The charts would be a lot more useful (1+ / 0-)
    Recommended by:
    Catte Nappe

    if you had them starting from the same year. Just as a visual aid. It makes it more difficult to compare quickly as it is. Some of them start at the beginning of the 90s and others at the end.

    If knowledge is power and power corrupts, does that mean that knowledge corrupts?

    by AoT on Fri Feb 21, 2014 at 01:06:10 PM PST

  •  This is happening (4+ / 0-)

    In my neighborhood right now, an 80s-era development with big lots and well-built if slightly dated homes. When we bought in 2004 average DOM (days on market) on my street was 12. Twelve days. Ours was ten.

    By last year there were homes unsold for over a year. Then all the For Sale signs vanished at once, gradually replaced by For Rent signs. The company is Invitation Homes. I'm curious what they're getting in rent, but the search function on their site is either not mobile-friendly, or just sucks.

    Announcing the grand opening of my Etsy shop, Little Lotte Studio featuring hand-dyed textiles and custom beaded jewelry. Please stop by!

    by SteelerGrrl on Fri Feb 21, 2014 at 01:15:37 PM PST

  •  worse, Single Family Houses are lousy Rentals. (3+ / 0-)
    Recommended by:
    SteelerGrrl, gjohnsit, greengemini

    It's one thing if you live in town and you own a couple
    of rentals in town, sure.

    Knock yourself out.  My Dad lived in Chicago and owned
    a couple of rental properties, just zip on down the Tristate
    or I-55 and go deal with some BS.

    But, if you need to pay for superintendents, repair crews,
    etc, it's a nightmare.

    He had a couple condo's in one building, they would hire
    contractors to swap every Air Filter in the air handlers 2X per year.  They had a full time plumber just to fix the drains.
    They had  a full time pool/Deck person to work the pool and community deck.

    That was really efficient.

    But you want to be fixing up 25 houses, spread over a 2 square mile area, with different furnaces, different A/C, Different plumbing, different electrical systems. Now you need contractors, equipped to do almost anything, now it's a $500 truck roll, now its just misery.

    What these are slums that will get neglected and slowly run
    into the ground.

  •  I miss bonddad (4+ / 0-)

    This is a good diary. Bonddad used to write these kinds of market trend diaries a few times a week. I remember in 2007 and 2008 he screamed like his hair was on fire about the impending doom of the housing market.

    Every time my iPhone battery gets down to 47%, I think of Mitt Romney.

    by bobinson on Fri Feb 21, 2014 at 01:41:24 PM PST

    •  still writing (1+ / 0-)
      Recommended by:

      he's still writing, along with new deal democrat, at his blog 'Bonddad blog.' I was just there and ndd has an article up about this diary.

    •  He's already written a rebuttal. (1+ / 0-)
      Recommended by:

      -7.75 -4.67

      "Freedom's just another word for nothing left to lose."

      There are no Christians in foxholes.

      by Odysseus on Fri Feb 21, 2014 at 02:58:49 PM PST

      [ Parent ]

      •  NDD acts like he heard a dog-whistle (2+ / 0-)
        Recommended by:
        bobinson, Odysseus

        His article goes off yelling "doomers claim a bubble" over and over and over again.
           Please point to where I said "bubble". I didn't. What I pointed out was that the home buyers had changed to investors and were pricing out normal homebuyers.
           But NDD got stuck on the non-existent word "bubble" and can't seem to get past it.

         He claims that I "cherry-picked data", but then says: "Most of the graphs I actually have no problem with".
           His problem is that my charts don't present a claim that I in fact am not trying to show.

          His only point that I must conceed is that one of my charts (housing prices) has a flawed metric.
          Fortunately, in one of his diaries, someone responded with a fixed chart that NDD claimed was also flawed, but wasn't.
          So I'm going to swap out my flawed diary with the fixed one.

        None are so hopelessly enslaved, as those who falsely believe they are free. The truth has been kept from the depth of their minds by masters who rule them with lies. -Johann von Goethe

        by gjohnsit on Fri Feb 21, 2014 at 05:04:09 PM PST

        [ Parent ]

  •  Some of us aren't bubbling. (2+ / 0-)
    Recommended by:
    gjohnsit, Odysseus

    I paid 103k in '99 for my place.  The house next door, with an identical layout, has been on the market for something like 6-9 months now for 90k and isn't selling.  I suspect if I ever do sell, I'll have to end up losing 20k to sell.

  •  Contrast with Europe (2+ / 0-)
    Recommended by:
    gjohnsit, greengemini

    Netherlands has some good laws preventing price-gouging.

    In Germany lots of people rent. More than you'd expect.

    Also, in Europe people don't expect to live in such large spaces as we do.

    We made a huge mistake (under Reagan, I think) of not building more affordable housing.

    I hope to see diaries here about citizen action for Affordable Housing.

  •  Thanks for this.. but it is not only the 1% (0+ / 0-)

    who are investing.  There are tons of small flippers out there trying to make a quick buck.

    But, isn't this a self-correcting phenomena?

    How long will investors want to hang on to investment property?  Are rents a worthwhile investment?

    I always thought investors needed to flip right away while the market is hot.   They need to ride a rising market.

    If there are no end buyers, the longer they hold on to these properties, the more likely they will be stuck holding the bag when the bubble bursts - which will happen sooner than later if the only ones in this bubble market are investors.

    •  The rents (1+ / 0-)
      Recommended by:

      in my area apparently are. All the people losing their houses need somewhere to live after all and it's not like they can buy another house.

      I imagine the investors will hold onto the property until housing prices come back up whenever that may be.

      It's the policy stupid

      by Ga6thDem on Fri Feb 21, 2014 at 03:01:10 PM PST

      [ Parent ]

  •  Thank you thank you (1+ / 0-)
    Recommended by:

    This is such a great diary. Anytime a house in my neighborhood goes into foreclosure and there fore cheap some behemoth snaps it for use as a rental. The whole process is RIGGED against regular buyers because the banks jack around on these houses for months before finally closing and most people looking for a home dont want to wait six months to close on a house.

    So the cheap houses get snapped up and drive everybody else's housing values DOWN and people have a hard time refinancing. I really could write a thesis on the nightmare of the current housing market at least here in GA.

    We really need an HOLC that keeps the behemoths from buying all these houses.

    It's the policy stupid

    by Ga6thDem on Fri Feb 21, 2014 at 02:59:54 PM PST

  •  DUH! (1+ / 0-)
    Recommended by:

    There was NEVER any possibility that the housing crash would change anything once we say the bailout of the Banks, Lenders, Mortgage Companies and complex fake programs to re-do mortgages which would be handled by the Banks, Lenders, Mortgage Companies and complex fake programs. Sequence - 5.5% $185K mortgage on a house which lost $60K in a two month period. Tenant stopped paying rent (unemployed). Got 2 months behind and then held it at that for 9 months. Month 10 Bank which had gone bankrupt and sold the mortgage business to another BAnk which went Bankrupt and sold the mortgage to OCWEN (GMAC-ALLY-OCWEN) then spent a YEAR refusing payments, tacking on fees and foreclosing. FInally modified to a 4.5% mortgage for $205K. (tacking on all fees and penalties to the mortgage.) Saves me $200 a month.... at a cost of several hundred thousand in extra interest and in trashed credit. House now worth $65K if that. What could have been done? Revalue the houses, lower the mortgage amount OR just reduce the percentage (since the bank gets the money for 0.75%. OR Put the bankers in Jail and tell them to stuff it as they did to ME for a year.

  •  C'mon man .... (0+ / 0-)

    1) The rental market is large and diverse both on the supply  (landlord) and demand (renter) side.  On the macro scale it's way too big to manipulte - a fairly priced house will rent quickly and the opposite is also true.  The are obviously exceptions at the neighborhood level but even the big boys don't have the money/power to swing the macroequilibrium.  If you are advocating rent control to make things affordable that's a different story/argument.

    2) Buying and renting residential real estate is a lot of work and involves risk.  It's not that easy to cash flow a property - maybe if you bought at the troughs (e.g., 1996 or 2006 in Cali).  Otherwise the return isn't that good - for most people there are better ways to use your time and money.  

    3) It's a good thing that investors can buy foreclosures  - what would happen if only individuals had to "go to the courthouse steps" with six figure checks - prices would plummet and this would set of a downward spiral that would adversely affect many people.  I suppose this is a battle between young and old. Anyway, the big boys aren't going to buy properties indisriminately, there are macroeconomics involved here and the free market is mostly working right now - houses are fairly valued overall.  

    Thanks for the thought inspiring paper - it's obvious you put a lot of work into this.

    •  Re: (0+ / 0-)

      Reply to #1: normally that would be true, but we've never seen Wall Street do this before in history.
         Remember that before the crash of the last bubble people were saying that home prices never fall on a national level, only on a local level.
         Well, it turned out that they do fall on a national level, when you blow a big enough bubble.

      Reply to #2: I totally and absolutely agree. And that is the problem. I don't think Wall Street's investment strategy works in the long run. Thus I believe it is only a matter of time before this fails and they run for the exits.

      Reply to #3: I disagree, but time will tell. I think it would be great if those "investors" were small, local investors. Then I wouldn't have a problem with this trend.
         That's not the case.

      None are so hopelessly enslaved, as those who falsely believe they are free. The truth has been kept from the depth of their minds by masters who rule them with lies. -Johann von Goethe

      by gjohnsit on Fri Feb 21, 2014 at 05:42:05 PM PST

      [ Parent ]

  •  As an agent-property manager in Ohio... (1+ / 0-)
    Recommended by:

    We have a glut of properties sitting on the market.

    Many are in various stages of proceedings and many will not be bought by the idealized future-homeowner. These single family structures are in such bad shape and there are so many of them that investment purchases are necessary. Banks and other entities holding these bad properties want them off the books. If no one wants them, they eventually go to the investment property market.

    No one wants these properties. The rehab costs are so enormous that it is a good idea for the homeowner to continue looking. Housing values have crashed. At these market prices, there are many options and this is still a buyers market. Real estate is local in value and price.  

    Fed regulations regarding sales and loans have also changed. Closings are being delayed and may not happen at all. This is what reforms do to a destroyed market. We had no law for a decade. When law is brought back in, everything has to change. There are still bad guys in this market and until they get caught, they will still operate. In any market, this is true. The Feds just got done establishing that foreign banks have to follow American rules. Enforcement is another issue. A lot has changed.

    Lending is global and the White House has limited effect on the operations of foreign lenders who may wish to see a lax regulation environment and may want to pay off Congress again. If that happens again, we will see another Bush-type housing disaster. The financial services industry and the banks are paying more to the GOP in Congress. They pay less to Dems. This is traditional.

    A bubble in the market is simply hype and backed up by bogus loans often with predatory terms. That is what we are recovering from. Hence, the bogging down of loan making. Resources have been going to the top 1% for years. That is where the money is. This is the economy we inherited. If insurers want to invest in rentals, they can. They have the money. No one else does. Banks make nothing holding property. Properties have to perform and loans must be paid back with fees. That is how the banks make money.  

    Rental is a normal market. Before the Bush bubble, the normal market was rental until a family or person could afford a house. Wages have not kept up with the cost of living for at least 30 years. Rents now are unaffordable for the average service job worker. The old solution was to subsidize rents. HUD was used for buddies during the Bush years under Alphonso Jackson. Funds for subsidized housing have been reduced. Costs for utilities have increased. Other costs have also increased. Profit margins for traditional investors are slim. The old golden goose of federal funding is not there anymore. The incentive for abusing federal subsidies for housing has been reduced or removed.

    What we need is affordable housing for working families. Acceptable rentals for that market are not plentiful and need to be. Multifamily needs are on the increase and that is also normal for the housing market.

    We have always had need for apartment buildings. That is what the bulk of people use until they feel ready to consider a house. Relocation for jobs is a good reason why many people do not want the burden of an unsold house as they move for career reasons. That house becomes a drag on the personal budget and it may not sell for a quite a while in this glutted market. Loans made when the market prices were much higher have to be paid back. If the loan was for 190k and the house is now worth 110k, it doesn't matter to the bank. That loan still has to be paid and the person with that loan can't sell and can't get free. Refinancing is not a smart option. This is the scenario for trapped homeowners who want to relocate. This is why rental makes sense for many people. It always did.

    January showed a continuance of foreclosures, despite the usual fiction regarding sales from the National Association of Realtors media releases. The econ recovery has been delayed due to the usual circus from Congress and the usual insanity from extremist governors in states like Ohio, which is in a state of economic chaos and has been since 2010. Jobs are scarce and lending is iffy. Banks are still risk averse. They have suffered losses and some tanked. Their lending policies changed, some of which is due changes in federal lending law.

    As we all know, banks were tested and some failed. The administration in DC addressed these banks. Some banks are still being bought by other banks. SEC reports are still being issued about this. The SEC is also enforcing and  dramatically. There is still a need for more enforcement. This is a lending atmosphere of great caution. Wall St is still blowing smoke and offering garbage with hype.

    Personal credit scores were often destroyed by the Bush bubble. Private financers with LLC's have flocked in to offer the usual questionable loans to financially-challenged potential homebuyers working the low paying jobs prevalent in Ohio now. I am concerned about this aspect of the lending market.

    I would caution anyone considering buying a home to take time and consider all options. The same advice goes for investors who are interested in obtaining rental properties. A lack of experience can spell doom for eager investors. Investors who bought unwisely in Ohio are in deep and may not survive if they continue to operate foolishly. (When enforcement becomes more stringent after this notorious state administration leaves, I think we will see more cases brought forward.)

    There are a lot of inherited problems right now in the real estate market. I again urge anyone to get advice from experienced agents before assuming anything about a property. Experience in a local market is vital.

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