1. Same story, different day...........year ie more of the same fiat floods the world
    Dismiss Notice
  2. There are no markets
    Dismiss Notice
  3. Week of 6/24/2017 Closing prices & Chg Over Last Wk---- Gold $1256.40 Silver $16.64 Oil $43.01 USD $96.94
  4. "Spreading the ideas of freedom loving people on matters regarding high finance, politics, constructionist Constitution, and mental masturbation of all types"
    Dismiss Notice

The Housing Bubble Is Back

Discussion in 'Real Estate & Other Investments' started by Scorpio, May 3, 2017.



  1. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

    Joined:
    Mar 25, 2010
    Messages:
    23,596
    Likes Received:
    24,901
    Trophy Points:
    113
    The Housing Bubble Is Back

    April 25, 2017 4 Comments

    Last week I ran into a friend whom I’d been worrying about. He’s a real estate appraiser and his work had been drying up as interest rates rose and homeowners stopped refinancing their mortgages.

    But now he’s back to being happily swamped because instead of refinancing, everyone is buying — often, he says, for above the asking price.

    A couple of days later my wife and I were at a slide show put on by friends just back from New Zealand. They’d heard that a neighbor was thinking about selling his house and on an impulse made him an offer. He accepted, and our friends became instant homeowners.

    The very next day my wife’s father called to say that the company running a gas station next to his house wants to expand in his direction. They made him an unsolicited – and very generous — offer, which he accepted.

    Then, I did an interview with Gordon T. Long’s Macro Analytics website in which Gordon told the following story:

    My brother just sold one of his properties in Toronto [Ontario]. He had bidding war with 11 bidders so he demanded cash. Several of the Chinese buyers were on the phone overnight raising the money, which they got. My brother’s still partying after that sale.

    It definitely feels like the housing bubble is back. Here’s part of a (factual rather than anecdotal) overview of the subject from Charles Hugh Smith:

    Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak
    If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble.
    A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class.

    Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:

    [​IMG]

    [​IMG]

    [​IMG]

    Is an asset bubble merely in the eye of the beholder? This is what the multitudes of monetary authorities (central banks, realty industry analysts, etc.) are claiming: there’s no bubble here, just a “normal market” in action.

    This self-serving justification–a bubble isn’t a bubble because we need soaring asset prices–ignores the tell-tale characteristics of bubbles. Even a cursory glance at these charts reveals various characteristics of bubbles: a steep, sustained lift-off, a defined peak, a sharp decline that retraces much or all of the bubble’s rise, and a symmetrical duration of the time needed to inflate and deflate the bubble extremes.

    It seems housing bubbles take about 5 to 6 years to reach their bubble peaks, and about half that time to retrace much or all of the gains.

    Bubbles have a habit of overshooting on the downside when they finally burst. The Federal Reserve acted quickly in 2009-10 to re-inflate the housing bubble by lowering interest rates to near-zero and buying over $1 trillion of mortgage-backed securities.

    When bubbles are followed by echo-bubbles, the bursting of the second bubble tends to signal the end of the speculative cycle in that asset class. There is no fundamental reason why housing could not round-trip to levels below the 2011 post-bubble #1 trough.

    If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble. Oops, did I say bubble? I meant “normal market in action.”
    [​IMG]

    Who is prepared for the inevitable bursting of the echo bubble in housing? Certainly not those who cling to the fantasy that there is no bubble in housing.

    Dozens of other stats and charts are out there to support this assertion. With one big departure from 2007: This time around housing is just part of a constellation of bubbles that includes government bonds around the world, equities (the Nasdaq just hit 6000) and all manner of trophy assets like fine art.

    Predicting the imminent end of this mother of all financial manias is tiresome for both writers and readers, so let’s just assume it will end eventually, and that its demise will be spectacular.

    https://dollarcollapse.com/housing-bubble/housing-bubble-back/
     
  2. the_shootist

    the_shootist I self identify as a black '69 Camaro Midas Member Site Supporter ++

    Joined:
    May 31, 2015
    Messages:
    12,806
    Likes Received:
    12,485
    Trophy Points:
    113
    Occupation:
    Architect
    Location:
    Cow Hampshire
    Yep, those graphs will look very different in 6-12 months. You heard it here first!
     
  3. GOLDZILLA

    GOLDZILLA Harvurd Koleej Jeenyus Midas Member

    Joined:
    Apr 1, 2010
    Messages:
    6,797
    Likes Received:
    5,955
    Trophy Points:
    113
  4. Usury

    Usury Gold Chaser Platinum Bling

    Joined:
    Apr 1, 2010
    Messages:
    3,745
    Likes Received:
    2,759
    Trophy Points:
    113
    I think it'll be longer than that. By how much? Who knows.....but I can't help but think a lot of folks have a lot of incentive to time a market blow-up in all/lot of assets classes close to the next election cycle.
     
  5. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

    Joined:
    Jan 7, 2011
    Messages:
    10,284
    Likes Received:
    7,540
    Trophy Points:
    113
    Location:
    Florida
    It's bringing inflation. Get rid of the crap mexican labor and housing prices will rise based on labor shortages.
     
    Howdy likes this.
  6. Usury

    Usury Gold Chaser Platinum Bling

    Joined:
    Apr 1, 2010
    Messages:
    3,745
    Likes Received:
    2,759
    Trophy Points:
    113
    Good point nick.
     
  7. Mr Paradise

    Mr Paradise Midas Member Midas Member

    Joined:
    Dec 3, 2011
    Messages:
    6,540
    Likes Received:
    6,619
    Trophy Points:
    113
    Location:
    Lake Superior
    There's no bubble .....my home is worth 200 shares of AMZN.
     
    D-FENZ likes this.
  8. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

    Joined:
    Mar 31, 2010
    Messages:
    117,968
    Likes Received:
    35,954
    Trophy Points:
    113
    Time To Add Housing To The Bubble List?

    By: John Rubino



    -- Published: Tuesday, 30 May 2017

    Housing is hot again, but lately it’s been overshadowed by flashier bubbles in government debt, tech stocks and possibly cryptocurrencies.

    Still, the warning signs are spreading. Today’s Wall Street Journal, for instance, reports that homeowners are back to using their houses as ATMs:


    Homeowners Are Again Pocketing Cash as They Refinance Properties
    Americans refinancing their mortgages are taking cash out in the process at levels not seen since the financial crisis.

    Nearly half of borrowers who refinanced their homes in the first quarter chose the cash-out option, according to data released this week by Freddie Mac. That is the highest level since the fourth quarter of 2008.

    The cash-out level is still well below the almost 90% peak hit in the run-up to the housing meltdown. But it is up sharply from the post-crisis nadir of 12% in the second quarter of 2012.

    In a cash-out refi, a borrower refinances an existing mortgage with a new one, typically at a lower borrowing cost, that has a higher principal balance than the existing one. This allows the homeowner to pay off the old mortgage and still have cash left over for other uses.

    The growing popularity of cash-out refis has helped buoy refinance activity. After booming for several years, demand for refinance mortgages had begun to slow as the Federal Reserve began increasing short-term interest rates and longer-term bond yields moved higher.

    [​IMG]

    Mortgage rates remain low by historical standards, though. The average rate for a fixed, 30-year mortgage was 3.95%, Freddie Mac reported this week.

    Meanwhile, rising home prices have helped increase the equity homeowners have in their houses. This allows more people to refinance to capture the benefit of lower mortgage rates.

    And borrowers whose homes are rising in value are often more likely to be interested in refinancing for cash. For example, in Denver and Dallas, where home prices have jumped, more than half of refinancers opted for cash last year, according to Freddie Mac.

    To some housing-market observers, the fact that more homeowners are tapping their homes for cash represents a healthy confidence in the economy. It comes against a backdrop of continued gains in employment.

    At the same time, the increasing use of cash-out refis causes some concern since, in the run-up to the financial crisis, borrowers used their homes like veritable ATMs.

    Len Kiefer, Freddie Mac’s deputy chief economist, says this time has been different. Borrowers now are subject to stricter standards when they get a loan or refinance a mortgage. There is also less money at stake now than a decade ago.

    Cash-out refis in the first quarter represented about $14 billion in net home equity compared with more than $80 billion in each of three straight quarters in 2006. On an annual basis, total home equity cashed out in 2016 was $61 billion, according to Freddie Mac, versus $321 billion in 2006.

    “People have been using cash-out for years,” Mr. Kiefer said. “From a personal-finance standpoint, it can make a lot of sense.”

    One example is a borrower using the cash from a refinance to consolidate credit-card debt that has far higher yields. That in many cases can produce a big savings in debt-servicing costs by replacing debt that has double-digit interest rates with a loan that has a rate in the low single digits.

    Here we go again. In every cycle, destructive behavior like using home equity to pay off credit cards or take vacations or whatever starts to surge. And every time the banking/real estate complex trots out paid spokesmen masquerading as economists to explain that this behavior is perfectly safe because everything else is going so well.

    This deception eventually blows up in their faces, the pseudo-economists are disgraced (See Realtors’ Former Top Economist Says Don’t Blame the Messenger) and the people suckered in by the experts’ assurances are stuck with bills they can’t pay.

    If cash-out refis continue to soar in the second quarter, then housing is officially a bubble again — with one big difference: This time around it’s just one of many, which means the eventual reckoning will be a lot more complex and interesting.

    http://news.goldseek.com/DollarCollapse/1496150311.php
     
    Mr Paradise likes this.
  9. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

    Joined:
    Jan 7, 2011
    Messages:
    10,284
    Likes Received:
    7,540
    Trophy Points:
    113
    Location:
    Florida
    I am looking for a condo in Dade or Broward that I can use about 5-7 days per month and rent the rest of the time. Do you know how difficult it is to find a decent 1BR that is under $200k and not loaded with fees? It's impossible unless you go all the way down to Homestead which is out of the question. There are places on the beach for $100k, but they are roach hotels.
     
  10. Curtman

    Curtman Silver Member Silver Miner

    Joined:
    Mar 30, 2010
    Messages:
    919
    Likes Received:
    339
    Trophy Points:
    63
    Nick, could you clarify? Why would less demand increase asset value?
     
  11. nickndfl

    nickndfl Midas Member Midas Member Site Supporter ++

    Joined:
    Jan 7, 2011
    Messages:
    10,284
    Likes Received:
    7,540
    Trophy Points:
    113
    Location:
    Florida
    Demand will be the same and construction labor will be in shortage, they are the cheap labor that does drywall and roofs. Mexicans don't buy houses in Florida, they rent bedrooms or Sec. 8.
     

Share This Page