home prices – Page 2 – The Burning Platform

THE FED CAN’T FIND INFLATION ANYWHERE

The lying pricks at the Federal Reserve give speech after speech about no inflation, keeping rates low, and even blathering about negative interest rates. I guess these idiots don’t need to drive cars, eat food, pay rent, buy houses, or essentially live in the real world. Gas prices are up 22% since mid-February. Food prices are up 6% since early January. Rent has been ratcheting higher at a 4% annual rate for awhile. Home prices have been going up 5% to 10%. Various government taxes, fees and tolls have been accelerating at a 5% to 10% pace. And Yellen can’t find any inflation????

Via Anthony Sanders

CRB Foodstuff Index UP 6% Since Jan 4th (24% Annualized) – It’s Beginning To Look A Lot Like Inflation

It’s beginning to look a lot like inflation.

The Commodity Research Board’s Foodstuff index is up 6% since January 4, 2016. That is just in a little over 3 months. That translates to just under 24% growth on an annualized basis.

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With US Real Average Weekly Earnings 1982-1984 USD YoY at 0.7%, it really does feel like inflation. Although The Federal Reserve thinks inflation is just shy of 2%.

When The Federal Reserve conducts their closed meeting today (and meets with President Obama), I certainly hope it is to discuss rising food prices and NOT negative interest rates!

The Salary Needed to Buy a Home in 27 Different U.S. Cities

Courtesy of: Visual Capitalist

The popping of the Greenspan-era housing bubble took about six years in total to fully “deflate”.

Most U.S. housing markets peaked sometime in 2006, and it wouldn’t be until just before the third-round of quantitative easing in 2012 that this fall would finally be cushioned. Since then, the combination of QE and record-low interest rates have helped re-inflate the housing market. For better or worse, real estate in many U.S. cities are now approaching or passing their 2006 housing highs, but with a growing disparity between individual metropolitan areas.

Today’s 3D map comes to us from HowMuch.net, and it shows the very different salaries needed to buy a median home in 27 different U.S. metropolitan areas. The salaries range between $31,134 to $147,996, which is a discrepancy of over $100,000.

At the low end of the spectrum, it takes a salary of between $30,000 to $40,000 to buy a home in most metropolitan areas in the Midwest. In St. Louis, for example, the salary needed to buy a home is $34,778. Pittsburgh was the least expensive city analyzed, where a salary of $31,135 could buy the median house in the city.

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YELLEN, DRAGHI, KURODA: DERANGED LAB RATS

The stock market has regained all of its loses year to date as economic indicators continue to flash red, corporate profits continue to plunge, consumers continue to spend less at retailers, real wages continue to fall, and housing sales continue to decline. The entire dead cat bounce has been generated through corporate stock buybacks, Wall Street lemmings trying to make up for their terrible year to date investing performance, and central bankers who will stop at nothing to verbally manipulate markets higher – since their monetary machinations over the last seven years have been a miserable failure in reviving the real economy.

As John Hussman points out, the market is poised to deliver nothing over the next decade, with a 40% to 55% “dip” in the foreseeable future. I wonder how many barely sentient, iGadget addicted, non-questioning, normalcy bias dependent zombies are prepared for a third Federal Reserve generated market collapse in the last 15 years?

From a long-term investment standpoint, the stock market remains obscenely overvalued, with the most historically-reliable measures we identify presently consistent with zero 10-12 year S&P 500 nominal total returns, and negative expected real returns on both horizons. From a cyclical standpoint, I continue to expect that the completion of the current market cycle will likely take the S&P 500 down by about 40-55% from present levels; an outcome that would not be an outlier or worst-case scenario, but instead a rather run-of-the-mill cycle completion from present valuations.

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COMFORTABLY NUMB (Oldie but Goodie)

Originally published in November 2011.

Hello?
Is there anybody in there?
Just nod if you can hear me.
Is there anyone at home?
Come on, now,
I hear you’re feeling down.
Well I can ease your pain
And get you on your feet again.
Relax.
I need some information first.
Just the basic facts
Can you show me where it hurts?

Pink Floyd – Comfortably Numb

As I observe the zombie like reactions of Americans to our catastrophic economic highway to collapse, the continued plundering and pillaging of the national treasury by criminal Wall Street bankers, non-enforcement of existing laws against those who committed the largest crime in history, and reaction to young people across the country getting beaten, bludgeoned, shot with tear gas and pepper sprayed by police, I can’t help but wonder whether there is anyone home. Why are most Americans so passively accepting of these calamitous conditions? How did we become so comfortably numb? I’ve concluded Americans have chosen willful ignorance over thoughtful critical thinking due to their own intellectual laziness and overpowering mind manipulation by the elite through their propaganda emitting media machines. Some people are awaking from their trance, but the vast majority is still slumbering or fuming at erroneous perpetrators.

Both the Tea Party movement and the Occupy Wall Street movement are a reflection of the mood change in the country, which is a result of government overreach, political corruption, dysfunctional economic policies, and a financial system designed to enrich the few while defrauding the many. The common theme is anger, frustration and disillusionment with a system so badly broken it appears unfixable through the existing supposedly democratic methods. The system has been captured by an oligarchy of moneyed interests from the financial industry, mega-corporations, and military industrial complex, protected by their captured puppets in Washington DC and sustained by the propaganda peddling corporate media. The differences in political parties are meaningless as they each advocate big government solutions to all social, economic, foreign relations, and monetary issues.

There is confusion and misunderstanding regarding the culprits in this drama. It was plain to me last week when I read about a small group of concerned citizens in the next town over who decided to support the Occupy movement by holding a nightly peaceful march to protest the criminal syndicate that is Wall Street and a political system designed to protect them. My local paper asked for people’s reaction to this Constitutional exercising of freedom of speech and freedom of assembly. Here is a sampling of the comments:

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California renter apocalypse

Guest Post by Dr. Housing Bubble

The rise in rents and home prices is adding additional pressure to the bottom line of most California families. Home prices have been rising steadily for a few years largely driven by low inventory, little construction thanks to NIMBYism, and foreign money flowing into certain markets. But even areas that don’t have foreign demand are seeing prices jump all the while household incomes are stagnant. Yet that growth has hit a wall in 2016, largely because of financial turmoil. We’ve seen a big jump in the financial markets from 2009. Those big investor bets on real estate are paying off as rents continue to move up. For a place like California where net homeownership has fallen in the last decade, a growing list of new renter households is a good thing so long as you own a rental. The problem of course is that household incomes are not moving up and more money is being siphoned off into an unproductive asset class, a house. Let us look at the changing dynamics in California households.

More renters

Many people would like to buy but simply cannot because their wages do not justify current prices for glorious crap shacks. In San Francisco even high paid tech workers can’t afford to pay $1.2 million for your typical Barbie house in a rundown neighborhood. So with little inventory investors and foreign money shift the price momentum. With the stock market moving up nonstop from 2009 there was plenty of wealth injected back into real estate. The last few months are showing cracks in that foundation.

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Why do so many young adults live at home? A record 34.5 percent of Millennials live at home with their parents in California

Guest Post by Dr. Housing Bubble

A record 34.5 percent of Millennials live at home with their parents in California. This rate is higher than the national rate of 30.3 percent which is already incredibly high. There is ample evidence suggesting that Millennials simply do not want the same things as their Taco Tuesday baby boomer parents. And many simply don’t want the McMansion aspiration since many are going to have small families. This is an interesting shift. Boomers are trying to off load larger crap shacks to an audience that is more interested in smaller more centrally accessible properties. In California, those young adults that aren’t living at home are likely living in a rental and paying close to half their income on housing. Good luck saving that 20 percent down payment on a $700,000 crap shack (or $1 million crap shack in the Bay Area). So why do so many young adults live at home if the recession ended in 2009, more than half-a-decade ago?

Young adults living at home

It should come as no surprise that there are a record number of young adults living at home. A Fed study found that one major reason stems from younger Americans having massive debt, largely in the form of student debt. The latest figures show student debt outstanding at $1.3 trillion. This is an increase of $1 trillion in the last decade or so. So many young adults are starting life with a mini mortgage already.

Let us look at the changing trends here:

Source: Census

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THERE BE A SHITSTORM A BREWIN

Via Zero Hedge

Mortgage applications fell 17.0% this week on a non-adjusted basis (following a 7.2% the previous week) for the biggest 2-week drop since January 2015. Even on a seasonally-adjusted basis the last 2 weeks have dropped 6.2% and 7% (the biggest 2 week drop since Feb 2015). However, just as Sept 2014 was notably seasonally weak for mortgage applications, for this time of year, mortgage applications have not been weaker since 2000.

So we have mortgage rates still hovering near record lows. We supposedly have the lowest unemployment rate since 2007. Obama is tweeting about the 13 million jobs he has created. The economy has supposedly been growing for the last six years. Consumer confidence is back to pre-recession highs. And home prices have risen by 30% since 2012. The National Association of Realtors reports price wars and tremendous demand for homes.

One question. In a normal, non-manipulated, market based housing market, wouldn’t homes be bought by families who obtained a 30 year mortgage? Does the chart below present a strong recovering housing market?

Mortgage applications to purchase a home are at 2009 recession lows. They haven’t gone anywhere in five years. The peak was 2005 and the housing market was in full collapse mode in 2008. Mortgage applications are 40% below 2008/2009 levels. They are 50% below 2001/2002 levels. There is no housing recovery. Tolls Brothers and Hovnanian are reporting lower sales versus last year.

The entire housing recovery meme is bullshit. Wall Street, the Fed, the Treasury and the White House have colluded to drive home prices up to benefit the Wall Street shysters and to use as propaganda in their game to convince Americans the economy is great. Chinese and Russian billionaires, hedge funds, and flippers have been the major buyers driving up prices to unaffordable levels for most Americans.

This shitty recovery is all we’ve gotten with mortgage rates at all-time lows. Imagine the shitstorm headed our way with mortgage rates headed higher.

LIES, DAMNED LIES & STATISTICS

The government released their monthly CPI report this week. Even though it came in at an annualized rate of 3.6%, they and their mouthpieces in the corporate mainstream media dutifully downplayed the uptrend. They can’t let the plebs know the truth. That might upend their economic recovery storyline and put a crimp into their artificial free money, zero interest rate, stock market rally. If they were to admit inflation is rising, the Fed would be forced to raise rates. That is unacceptable in our rigged .01% economy. There are banker bonuses, CEO stock options, corporate stock buyback earnings per share goals and captured politician elections at stake.

The corporate MSM immediately shifted the focus to the annual CPI figure of 0.1%. That’s right. Your government keepers expect you to believe the prices you pay to live your everyday life have been essentially flat in the last year. Anyone who lives in the real world, not the BLS Bizarro world of models, seasonal adjustments, hedonic adjustments, and substitution adjustments, knows this is a lie. The original concept of CPI was to measure the true cost of maintaining a constant standard of living. It should reflect your true inflation of out of pocket costs to live a daily existence in this country.

Instead, it has become a manipulated statistic using academic theories as a cover to systematically under-report the true level of inflation. The purpose has been to cut annual cost of living adjustments to Social Security and other government benefits, while over-estimating the true level of GDP. Artificially low inflation figures allow the mega-corporations who control the country to keep wage increases to workers low. Under-reporting the true level of inflation also allows the Federal Reserve to keep their discount rate far lower than it would be in an honest free market. The Wall Street banks, who own and control the Federal Reserve, are free to charge 18% on credit card balances while paying .25% to savers. The manipulation of the CPI benefits the vested interests, impoverishes the masses, and slowly but surely contributes to the destruction of our economic system.

A deep dive into Table 2 from the BLS reveals some truth and uncovers more lies. Their weighting of everyday living expenditures is warped and purposefully misleading. Let’s look at the annual increases in some food items we might consume in the course of a month, living in this empire of lies:

Ground Beef – 10.1%
Roast Beef – 11.8%
Steak – 11.1%
Eggs – 21.8%
Chicken – 3.7%
Coffee – 3.4%
Sugar – 4.2%
Candy – 4.6%
Snacks – 3.5%
Salt & Seasonings – 5.3%
Food Away From Home – 3.0%

Continue reading “LIES, DAMNED LIES & STATISTICS”

BACK TO THE BEGINNING

The MSM is ecstatic about May’s “tremendous” surge in existing home sales to a 5.35 million annual rate. The recovery has arrived. All is well. Those Obama waiter jobs at Ruby Tuesday are leading to a dramatic housing recovery. Please note a few things on the chart below. There was a spike in 2013 to this level and then it petered out. There was a spike to this level in 2009 when the Obamanistas were offering the first time home buyer credit to dupes, and then sales predictably crashed.

So annual sales are now where they were in 2007, after a 25% crash from the 2005 high. Annual sales are back to the 1999 through 2001 range, before Greenspan created the biggest housing bubble in history. After six years of 0% interest rates, foreclosure suppression, Wall Street hedge funds doing much of the buying, and Chinese billionaires buying everything they can get their hands on, this is all we have? I noticed the percentage of first time buyers went up to 32% from 27% last year, while the percentage of investors dropped to a four year low. You can thank the government, as Fannie, Freddie, and the FHA are now pushing 3.5% down payment mortgages to the poor ignorant masses. The smart money (Wall Street) is exiting and the dumb money (average schmucks) is being lured into the market by low down payments and delusions of future price increases.

With mortgage rates already rising above 4%, artificial demand from investors in reverse, a stock market crash in the not so distant future, prices out of reach for most people, and stagnant real household incomes, this does not mark the start of a housing recovery. It marks the beginning of the end for the latest bubble in real estate. Anyone who bought a low end home in the last year is already underwater, as you can see in the chart below. At least the .1% are still reaping the benefits of ZIRP and QE, as high end homes are booming. Welcome to the Bernanke/Yellen housing recovery.

SOMETHING SMELLS FISHY

It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.

Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.

This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing. We now know who was responsible. Greenspan and Bernanke were at least 75% responsible for the housing bubble and its eventual implosion, which essentially destroyed our economic system. They purposely kept interest rates at obscenely low levels, encouraging every Tom, Dick and Julio to buy a home with a negative amortization, no doc, nothing down, adjustable rate mortgage, so they could live the American dream of being in debt up to their eyeballs.

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Fed and CPI missing housing inflation yet again: The CPI is completely missing the increase in housing prices.

Guest Post by Dr. Housing Bubble

The most widely used measure for inflation is the Consumer Price Index (CPI) put out by the Bureau of Labor and Statistics (BLS). Nearly a decade ago I discussed how poorly a job the CPI did in measuring home price increases while they were happening. In fact, during the raging housing bubble the CPI only measured moderate increases in home prices. Why? The measurement looks at something called the owners’ equivalent of rent (OER) that essentially considers what your home would rent for versus your actual housing payment.

So you could be paying $3,000 in a mortgage, taxes, and insurance but the actual rent would be something like $2,000. That is a massive differential. In the LA/OC market, this measurement did a horrible job. The argument of course is that rents eventually catch up and we are seeing some of that now. Yet Fed policy and other government decisions are made on the basis of the CPI and miss big changes by years. The latest CPI report is now showing this inflation creeping in but of course, it is late once again. And this is important to address because the largest component of the CPI is housing costs.

The problem with the CPI and housing

Housing makes up over 40 percent of the CPI tool which is a by far, the biggest component. So wouldn’t you want this instrument to accurately measure home value changes? We now have plenty of tools that can give a better indicator of home price changes like the Case-Shiller Index. There has been large pressure on home prices recently thanks to many years of slow home building and a lack of inventory. We also had the interesting phenomenon of investors diving into the market since the crash and being a dominant force.

First, it might be useful to look at how the CPI is composed:

Even looking at three categories in housing, education, and healthcare we know that costs are soaring. Yet the overall CPI has showed only tiny increases in prices. This is completely off base nationally and doubly so in bubblicious markets like California where people need to move into apartments with roommates as if they were crowding into clown cars to make the rent.

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GOVERNMENT USING SUBPRIME MORTGAGES TO PUMP HOUSING RECOVERY – TAXPAYERS WILL PAY AGAIN

It seems hard to believe, but your government is purposely recreating the mortgage debacle of 2007 and putting you on the hook for the billions in losses coming down the road. In their frantic effort to generate the appearance of economic recovery they are willing to gamble with taxpayer’s money while luring unsuspecting blue collar folks into buying houses they can’t afford. During the previous housing bubble, greedy Wall Street bankers, deceitful mortgage brokers, and corrupt rating agencies colluded to commit the greatest control fraud in the history of mankind. This time it is your government, aided and abetted by the Federal Reserve, that is actively promoting the lending of money to people incapable of paying it back. And again, you the taxpayer will be on the hook when it predictably blows up.

The FHA, created during the first Great Depression, is supposed to be self-sustaining through mortgage insurance premiums charged to homeowners, just like Fannie, Freddie, Medicare, Social Security, and student loan lending were supposed to be self- sustaining through taxes, fees, and interest. This agency was supposed to promote homeownership for lower income Americans, but has been used by politicians as a tool to capture votes, payoff crony capitalist benefactors, and as a Keynesian stimulus tool designed to kindle a fake housing recovery. They entered the fray at the tail end of the last Fed/Wall Street created housing bubble, insuring a huge number of subprime mortgage loans from 2007 through 2009. The taxpayer has already had to bail out this incompetent, politically motivated, joke of an agency to the tune of $1.7 billion in 2014.

Edward J. Pinto, a former Fannie Mae official, estimates that under standard accounting practices the agency is already insolvent to the tune of $25 billion. Mark to fantasy accounting hasn’t just benefitted the criminal Wall Street cabal, but also the bloated pig government housing agencies – Fannie, Freddie and the FHA. The FHA’s share of new loans with mortgage insurance stood at 16.4% in 2005 and currently stands at 44.3%. This is a ridiculously high level considering the percentage of first time home buyers is near all-time lows and low income buyers have lower real median household income than they had in 2005. Distinguished congresswoman Maxine Waters, who once declared: “We do not have a crisis at Freddie Mac, and particularly Fannie Mae, under the outstanding leadership of Frank Raines.”, prior to them imploding and costing taxpayers $187 billion in losses, thinks the FHA is doing a bang up job. Her financial acumen is unquestioned, so you can expect another bailout in the near future.

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RENTERS R US

About that housing recovery. The U.S. population has grown by 8% since 2005, while the number of households has grown by 5%. In addition to the weak overall household growth, due to stagnant wages, massive student loan debt, and only Obama shit service jobs, there have been no new owner occupied households. The number of owner occupied households is down 1%, while the number of rental households has soared by 16%.

The home ownership rate is now at a two decade low and sits at the same level it did in 1970, before Nixon closed the gold window and unleashed a debt and inflation tsunami upon our nation. The Federal Reserve solution to every bubble they create is to print enough to create another bubble. They have expanded their balance sheet by almost 600% since 2008, and have succeeded in crushing the middle class, senior citizens, and young people who should be buying their first homes.