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   Very few people paid attention when Shaun Donovan, U.S. Secretary of Housing and Urban Development, gave this warning in December.

 "We are in the midst of the worst rental affordability crisis that this country has known."
   "Over four years, [there’s been] a 43 percent increase in the number of Americans with worst-case housing needs," says Donovan. "Let's be clear what that means: They're paying more than half of every dollar they earn for housing."
 This past week two other studies have been released that add solid numbers to this crisis.

  Earlier this week, Zillow released a study showing just how widespread the problem is.
 An analysis for The New York Times by Zillow, the real estate website, found 90 cities where the median rent — not including utilities — was more than 30 percent of the median gross income.
   Nationally, half of all renters are now spending more than 30 percent of their income on housing, according to a comprehensive Harvard study, up from 38 percent of renters in 2000.
 Things are expected to continue getting worse, as rents will outpace the rate of inflation (not to mention incomes) for years to come.

What is going on?

  Why is no one paying attention to this growing crisis?
For the same reason that no one paid attention to the 2002-2007 housing bubble: too many people are making money on it. A lot of people don't want to hear talk about a housing crisis when they are raking in the cash.
   In fact the housing market has been disfunctional for over a decade, and it has only gotten more disfunctional since the crash.

  First of all, let's remember 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.

  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.

   Even Zillow has admitted that homes are getting unaffordable.
 More than half the homes currently on the market in seven major American metros are currently unaffordable for local residents, and one-third of homes for sale are unaffordable by historic standards.
   That’s the conclusion from a Zillow analysis of income, mortgage and home value data in the fourth quarter of 2013, which puts to question the regular industry claim that housing is more affordable than ever because of the current price and interest rate levels coming out of the housing crash.
   “As affordability worsens, we’re already beginning to see more of the kinds of worrisome trends we saw en masse during the years leading up to the housing crash.
 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.
They've bought 200,000 single-family homes in less than a year.
   And now they are even looking at trailer parks.
 One place where you can see these wealthy cash buyers is in the sale of vacation homes.
 Sales of vacation homes are surging again, the result of rising wealth in higher-income households and renewed confidence in the housing market.
   The number of second homes acquired for part-time personal use jumped 30% last year to 717,000 homes, according to an annual survey by the National Association of Realtors. The gain was the largest since the association started tracking second-home sales in 2003.
    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.
 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.

  It deeply annoys me how some people will deny that there is anything seriously wrong with the housing market, or the economy in general, because the headline numbers show that everything is fine, even while regular people suffer.
   Headline numbers are distorting and hiding what is really going on in the housing market. It's long past time that some people looked at who the winners and losers are in the economy. 2:14 PM PT:

2:54 PM PT:
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