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Old January 9th, 2010 #21
Alex Linder
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[comment from Lew Rockwell]

NY Times: ‘Walk Away From Your Mortgage’
Posted by Lew Rockwell on January 9, 2010 02:14 PM

From Roger Lowenstein and the heart of the power elite, more proof that houses still have far to fall, and the big banks and Fanny-Freddy too. Also proof that Americans are beginning to see houses for what they are in reality, not “investments,” but consumption goods, like cars and refrigerators. After all the nutso Keynesian propaganda on spending and debt as the path to prosperity, people are shedding debt, in proper and improper ways, and cutting spending in every way possible. Saving, contra Keynes, builds civilization. Americans are also rediscovering the truth that being a landlord is an important and specialized role in the division of labor, and that most of us are better off as renters rather than owners.


http://www.nytimes.com/2010/01/10/ma...wwln-t.html?em
 
Old January 9th, 2010 #22
Alex Linder
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...the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go.
 
Old January 9th, 2010 #23
Leonard Rouse
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I was working in a warehouse 3 years ago and had a debate on housing with a college student home on summer break. Nice guy--not that much younger than me--but eaten up with Keynesianism. Or more to the point, whatever his mommy professors had fed him.

Sunbelt. Southeast Georgia. Statesboro. Student was from rural farm family. Housing boom. College town. Refugees from the Black cesspool of Savannah. Also largest farm county in state. Fields converted from cotton/peanuts to subdivisions almost by the week. Largest number of banks per capita of anywhere I've ever lived. Crazy.

It was common for me and another guy to observe how we didn't know how people in Statesboro could afford to live in those houses. The wage level doesn't support it, and the newest subdivisions were pushing into the 600k-700k range for only slightly above average homes. No "ammenities," mind you. House House House.

I made the comment that I was better off renting, even though my rent was too high for a wage earner--being driven-up by a dearth of rental properties in a rural community and the artificial demand of college students and their parents' money.

I could hardly have gotten a worse "scolding" from the college student if I'd goose-stepped across the room. I was informed that housing is the best investment there is and always goes up, accompanied by the liberal/student "you're an idiot" surprised scowl. I was also informed that it is well documented that buying is better than renting. I responded that real estate does not always go up, as anyone owning his family's farm 140 years ago would have known, since Sherman came through that very area. Memories are short!

He wouldn't admit he was wrong, though. It was like the issue of race. I've never forgotten the incident because it seemed to be such a point of faith with him. I wonder if he's learned anything given the "Housing Crisis" that ensued. Probably not!

If an asset starts at a dollar and fifty years later is 2 dollars, it "rose over the long term," even though it rose to 10 and fell to a quarter in the intervening years. It was a "good long term investment," and only a fool would deny it. "Don't you see the chart?!"

That doesn't even factor the value of the dollar.

Alex, you may have seen this paper from Brent T. White at the University of Arizona Law School.

http://api.ning.com/files/CdXtKqMgxH...away_paper.pdf

It's called "Underwater and Not Walking Away: Shame, Fear, and the Social Management of the Housing Crisis" Arizona Legal Studies Discussion Paper No. 09-35 Oct. 2009

The gist is that individuals are always expected to honor their financial contracts, while banks and corporations break contracts all the time, be they purchase orders, development/hiring tax breaks, etc, etc. The massive bailout of the banks is the best (or worst) example of this duplicity.

When it comes to mortgages--or more specifically to individual mortgagors--banks pull out the "shame card," as if there were a moral issue and not a business contract. The bank, of course, would have no compunction about breaking the contract were the roles reversed. And the bank never mentions that it is complicit in the debacle, having made the loan.

White was on CNBC in November (I think) and he was set-up for one of the "money honeys" to denigrate him in a "debate." I was impressed with his poise in handling their idiocy. The following is the video of his appearance.

http://www.cnbc.com/id/34207654
 
Old June 19th, 2010 #24
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Quote:
Originally Posted by Leonard Rouse View Post
When it comes to mortgages--or more specifically to individual mortgagors--banks pull out the "shame card," as if there were a moral issue and not a business contract. The bank, of course, would have no compunction about breaking the contract were the roles reversed. And the bank never mentions that it is complicit in the debacle, having made the loan.
This is part of the Christian Credo . I 've heard preachers tell their audience , they must repay everything they owe even after declaring bankruptcy .

Besides , most good moral folk ( read; whites ) want to pay what they believe they owe , out of a sense of fairness and justice . The cons just love to exploit this sincere belief . Exploiting the goodness of people's nature for the benefit of evil .

The jews even exploit this sense of obligation in the girls they trick into White Slavery . They tell the girls they are obligated to work for the money spent in their purchase . Then , when the girl is sold to another procurer , he pulls the same con , saying she must work to pay for her purchase plus interest . So the girl is trapped into a never ending debt by the belief that she owes something . That , combined with intimidation , threats , drugs and constant surveillance , keeps her trapped in the sex trade .
 
Old June 19th, 2010 #25
Rick Ronsavelle
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There is no moral obligation to these counterfeiters. I say there is a right, if not obligation, to scam the scammers.

The "banking" cartel is not a legitimate business, nor is the IRS.
Act accordingly. Paying back fractional reserve loans is just another way of sucking joo cock.
 
Old June 19th, 2010 #26
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Mich. Included In Fraud Investigation

DOJ: Nearly 500 Arrests In mortgage Fraud Probe

Quote:
WASHINGTON -- The Justice Department announced Thursday that investigators have made nearly 500 arrests since March in a major crackdown on mortgage fraud.The nationwide initiative called Operation Stolen Dreams is the largest collective enforcement effort aimed at confronting the problem of mortgage fraud, Attorney General Eric Holder told a news conference. It involves 1,215 criminal defendants in cases that uncovered more than $2.3 billion in losses.

The Justice Department also has engaged in civil enforcement actions to recover more than $147 million in the operation.Two Countrywide companies will pay $108 million to settle allegations that they inflated the fees that homeowners paid.Hundreds of FBI agents are working on task forces with other law enforcement agencies to combat a type of crime that poses "a risk to our economic stability" as a nation, FBI Director Robert Mueller told the news conference.The Justice Department said the probe has resulted in significant criminal cases in Chico, Calif.; Miami; Detroit; Duluth, Minn.; New Jersey, and Atlanta.

In Detroit, investigators broke up a "ghost loan" mortgage scheme in which the conspirators allegedly posed as mortgage brokers, appraisers, real estate and title agents. They recruited over 108 straw buyers and obtained some 500 mortgages totaling more than $100 million. The alleged mortgage fraud scheme in Miami targeted the Haitian-American community. One of the defendants advertised herself as someone who could assist with immigration issues. The defendant also said she could provide assistance with the manager of a government-sponsored housing program. The defendants in the case used the personal information they gathered to fraudulently buy various properties without the permission of Haitian residents.

In Chico, Calif., one of the biggest home builders in the area was sitting on unsold new homes as the housing market cooled in 2006. The builder sold the homes to straw buyers at inflated prices, then rebated tens of thousands of dollars on each home to shell companies controlled by the buyers' agents. The lenders were unaware of the rebates. The Justice Department said that to date, 38 of the homes are in foreclosure. In New Jersey, the servicing manager of U.S. Mortgage pleaded guilty for his role in the fraudulent sale of more than $136 million in mortgage loans to Fannie Mae and other investors.
http://www.clickondetroit.com/news/23936771/detail.html
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Old June 20th, 2010 #27
Axel Faaborg
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Quote:
Originally Posted by Rick Ronsavelle View Post
There is no moral obligation to these counterfeiters. I say there is a right, if not obligation, to scam the scammers.

The "banking" cartel is not a legitimate business, nor is the IRS.
Act accordingly. Paying back fractional reserve loans is just another way of sucking joo cock.
The money was created for the house and the debt was paid through your signature and the promissory note. That's all the money needed. They trick you into paying twice.
 
Old July 9th, 2010 #28
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Quote:
Originally Posted by Kievsky View Post
I think the time is coming when you'll be able to get a house and even a multi-acre property for the equivalent of 10k or so, so long as you have money up front. Maybe a gold coin will be worth 5 or 10k, so you'll be able to buy a foreclosed horse farm for 10k.
That'll be the time to buy for sure. Maybe that's when the mestizo invaders will start buying homes en mass.
 
Old July 10th, 2010 #29
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Talking the 'rich' default

Quote:
Biggest defaulters on mortgages are the rich

Wealthy simply see loss of home as one bad investment and walk away

by David Streitfeld
The New York Times

updated 7/9/2010 6:46:09 AM ET


LOS ALTOS, Calif. — The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

More than one in seven homeowners with loans in excess of a million dollars is seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.

“The rich are different: they are more ruthless,” said Sam Khater, CoreLogic’s senior economist.

Five properties here in Los Altos were scheduled for foreclosure auctions in a recent issue of The Los Altos Town Crier, the weekly newspaper where local legal notices are posted. Four have unpaid mortgage debt of more than $1 million, with the highest amount $2.8 million.

Not so long ago, said Chris Redden, the paper’s advertising services director, “it was a surprise if we had one foreclosure a month.”

The sheriff in Cook County, Ill., is increasingly in demand to evict foreclosed owners in the upscale suburbs to the north and west of Chicago — like Wilmette, La Grange and Glencoe. The occupants are always gone by the time a deputy gets there, a spokesman said, but just barely.

In Las Vegas, Ken Lowman, a longtime agent for luxury properties, said four of the 11 sales he brokered in June were distressed properties.

“I’ve never seen the wealthy hit like this before,” Mr. Lowman said. “They made their plans based on the best of all possible scenarios — that their incomes would continue to grow, that real estate would never drop. Not many had a plan B.”

The defaulting owners, he said, often remain as long as they can. “They’re in denial,” he said.

Here in Los Altos, where the median home price of $1.5 million makes it one of the most exclusive towns in the country, several houses scheduled for auction were still occupied this week. The people who answered the door were reluctant to explain their circumstances in any detail.

At one house, where the lender was owed $1.3 million, there was a couch out front wrapped in plastic. A woman said she and her husband had lost their jobs and were moving in with relatives. At another house, the family said they were renters. A third family, whose mortgage is $1.6 million, said they would be moving this weekend.

At a vacant house with a pool, where the lender was seeking $1.27 million, a raft and a water gun lay abandoned on the entryway floor.

Lenders are fearful that many of the 11 million or so homeowners who owe more than their house is worth will walk away from them, especially if the real estate market begins to weaken again. The so-called strategic defaults have become a matter of intense debate in recent months.

Fannie Mae and Freddie Mac, the two quasi-governmental mortgage finance companies that own most of the mortgages in America with a value of less than $500,000, are alternately pleading with distressed homeowners not to be bad citizens and brandishing a stick at them.

In a recent column on Freddie Mac’s Web site, the company’s executive vice president, Don Bisenius, acknowledged that walking away “might well be a good decision for certain borrowers” but argues that those who do it are trashing their communities.

The CoreLogic data suggest that the rich do not seem to have concerns about the civic good uppermost in their mind, especially when it comes to investment and second homes. Nor do they appear to be particularly worried about being sued by their lender or frozen out of future loans by Fannie Mae, possible consequences of default.

The delinquency rate on investment homes where the original mortgage was more than $1 million is now 23 percent. For cheaper investment homes, it is about 10 percent.

With second homes, the delinquency rate for both types of owners was rising in concert until the stock market crashed in September 2008. That sent the percentage of troubled million-dollar loans spiraling up much faster than the smaller loans.

“Those with high net worth have other resources to lean on if they get in trouble,” said Mr. Khater, the analyst. “If they’re going delinquent faster than anyone else, that tells me they are doing so willingly.”

Willingly, but not necessarily publicly. The rapper Chamillionaire is a plain-talking exception. He recently walked away from a $2 million house he bought in Houston in 2006.

“I just decided to let it go, give it back to the bank,” he told the celebrity gossip TV show “TMZ.” “I just didn’t feel like it was a good investment.”

The rich and successful often come naturally to this sort of attitude, said Brent T. White, a law professor at the University of Arizona who has studied strategic defaults.

“They may be less susceptible to the shame and fear-mongering used by the government and the mortgage banking industry to keep underwater homeowners from acting in their financial best interest,” Mr. White said.

The CoreLogic data measures serious delinquencies, which means the borrower has missed at least three payments in a row. At that point, lenders traditionally file a notice of default and the house enters the official foreclosure process.

In the current environment, however, notices of default are down for all types of loans as lenders work with owners in various modification programs. Even so, owners in some of the more expensive neighborhoods in and around San Francisco are beginning to head for the exit, according to data compiled by MDA DataQuick.

In Los Altos, Los Altos Hills and the most expensive neighborhood in adjoining Mountain View, defaults in the first five months of this year edged up to 16, from 15 in the same period in 2009 and four in 2008.

The East Bay suburb of Orinda had eight notices of default for million-dollar properties, up from five in the same period last year. On Nob Hill in San Francisco, there were four, up from one. The Marina neighborhood had four, up from two.

The vast majority of owners in these upscale communities are still paying the mortgage, of course. But they appear to be cutting back in other ways. The once-thriving Los Altos downtown is pocked with more than a dozen empty storefronts in a six-block stretch.

But this is still Silicon Valley, where failure can always be considered a prelude to success.

In the middle of a workday, one troubled homeowner here leaned over his laptop at the kitchen table, trying to maneuver his way out from under his debt and figure out the next big thing.

His five-bedroom house, drained of hundreds of thousands of dollars of equity over the last 13 years, is scheduled for auction July 20. Nine months ago, after his latest business (he has had several) failed in what he called “the global meltdown,” the man, a technology entrepreneur, said he quit making his $9,000 monthly payments.

“I’m going to be downsizing,” he said.

The man spoke on the condition of anonymity because, he said, he did not want his current problems to interfere with his coming reinvention. “I’m a businessman,” he explained. “I have to be upbeat.”

Copyright © 2010 The New York Times
http://www.msnbc.msn.com/id/38158763...s-real_estate/
 
Old July 13th, 2010 #30
Katarina
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Default They are not rich

they are simply monetarily wealthy !
 
Old December 29th, 2010 #31
Mike Parker
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http://www.youtube.com/watch?v=GTAiw...%3Atop_stories

Professor Robert Shiller discusses why the index on home prices continues to decline.
 
Old December 31st, 2010 #32
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OPINION DECEMBER 30, 2010

Home Prices Are Still Too High

They would have to decline another 20% just to get back to the historical trend line.

By PETER D. SCHIFF

Most economists concede that a lasting general recovery is unlikely without a recovery in the housing market. A marked increase in defaults and foreclosures from today's already elevated levels could produce losses that overwhelm banks and trigger another, deeper financial crisis. Study after study has shown that defaults go up when falling prices put mortgage holders "underwater." As a result, the trajectory of home prices has tremendous economic significance.

Earlier this year market observers breathed easier when national prices stabilized. But the "robo-signing"-induced slowdown in the foreclosure market, the recent upward spike in home mortgage rates, and third quarter 2010 declines in the Standard & Poor's Case–Shiller home-price index—including very bad October numbers reported this week—have sparked concerns that a "double dip" in home prices is probable. A longer-term view of home price trends should sharply magnify this fear.

Even those economists worried about renewed price dips would be unlikely to believe that the vicious contractions of 2007 and 2008 (where prices fell about 30% nationally in just two years) could return. But they underestimate how distorted the market had become and how little it has since normalized.

By all accounts, the home price boom that began in January 1998, when the previous 1989 peak was finally surpassed, and topped out in June 2006 was extraordinary. The 173% gain in the Case-Shiller 10-City Index (the only monthly data metric that predates the year 2000) in those nine years averaged an eye-popping 19.2% per year. As we know now, those gains had very little to do with market fundamentals, and everything to do with distortionary government policies that set off a national mania for real-estate wealth and a torrent of temporarily easy credit.



If we assume the bubble was artificial, we can instead imagine that home prices should have followed a more traditional path during that time. In stock-market terms, prices should have followed a trend line. When you do these extrapolations (see lower line in the nearby chart), a sobering picture emerges. In his book "Irrational Exuberance," Yale economist Robert Shiller (co-creator of the Case-Shiller indices along with economists Karl Case and Allan Weiss), determined that in the 100 years between 1900 and 2000, home prices in the U.S. increased an average 3.35% per year, just a tad above the average rate of inflation. This period includes the Great Depression when home prices sank significantly, but it also includes the frothy postwar years of the 1950s and '60s, as well as the strong market of the early-to-mid 1980s, and the surge in the late '90s.

In January 1998 the 10-City Index was at 82.7. If home prices had followed the 3.35% annual 100 year trend line, then the index would have arrived at 126.7 in October 2010. This week, Case-Shiller announced that figure to be 159.0. This would suggest that the index would need to decline an additional 20.3% from current levels just to get back to the trend line.

How has the market found the strength to stop its descent? No one is making the case that fundamentals have improved. Instead, there is widespread agreement that government intervention stopped the free fall. The home buyer's tax credit, record low interest rates, government mortgage-assistance programs, and the increased presence of Fannie Mae, Freddie Mac and the Federal Housing Administration in the mortgage-buying business have, for now, put something of a floor under house prices. Without these artificial props, prices would have likely continued to fall.

Where would prices go if these props were removed? Given the current conditions in the real-estate market, with bloated inventories, 9.8% unemployment, a dysfunctional mortgage industry and shattered illusions of real-estate riches, does it makes sense that prices should simply fall back to the trend line? I would argue that they should overshoot on the downside.

With a bleak economic prospect stretching far out into the future, I feel that a 10% dip below the 100-year trend line is a reasonable expectation within the next five years, particularly if mortgage rates rise to more typical levels of 6%. That would put the index at 114.02, or prices 28.3% below where we are now. Even a 5% dip would put us at 120.36, or 24.32% below current prices. If rates stay low, price dips may be less severe, but inflation will be higher.

From my perspective, homes are still overvalued not just because of these long-term price trends, but from a sober analysis of the current economy. The country is overly indebted, savings-depleted and underemployed. Without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more. These are not conditions that inspire confidence for a recovery in prices.

In trying to maintain artificial prices, government policies are keeping new buyers from entering the market, exposing taxpayers to untold trillions in liabilities and delaying a real recovery. We should recognize this reality and not pin our hopes on a return to price normalcy that never was that normal to begin with.

Mr. Schiff is president of Euro Pacific Capital and author of "How an Economy Grows and Why it Crashes" (Wiley, 2010).

http://online.wsj.com/article/SB1000...261574342.html
 
Old January 1st, 2011 #33
Leonard Rouse
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Quote:
Originally Posted by Peter Schiff
Home Prices Are Still Too High

They would have to decline another 20% just to get back to the historical trend line.
Not "would have to." Two sides to the equation, two solutions. The prices of other assets in the economy could rise with housing staying steady. A real back-door mean reversion, right up the ol' kiester.

Jew Schiff knows the score, but he's careful to shift the discussion to government regulation and away from central bank currency manipulation, even though criticism of the latter is his very claim to fame. 'tis a very canny move. What other purpose can this dude serve than as a kosher false flag for the Fed-critical Tea Party/Ron Paul bunch?

Last edited by Leonard Rouse; January 1st, 2011 at 03:34 PM.
 
Old January 3rd, 2011 #34
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Now is the time to sell, real estate consultant says

People who have been delaying putting their homes on the market should do it soon because prices may go down 5% to 8% as banks unload a glut of repossessed properties, Steve Harney tells agents.

By Mary Umberger, Reporting from Chicago
January 2, 2011

Sell now, avoid (some) regret later.

That was Steve Harney's advice recently to a roomful of real estate agents. Harney is a housing industry consultant who told the assembled agents of John Greene Realtor in Naperville, Ill., that they should tell clients who have been sitting on the fence about selling that the time is now — if they want to sidestep more marketplace competition in a few months.

Or, as he put it, the cork in the dam is about to pop.

That "cork" is banks' indecisiveness. The "water" behind the dam is their stockpile of foreclosed homes, which has been growing with a vengeance for a couple of reasons, Harney said.

Banks have been in a state of limbo this year about what to do with repossessed houses, and so they have mostly held on to them in order not to add to the nation's oversupply of homes for sale, Harney told the agents.

"The banks have been saying, 'There has to be a number [the market] can hit where we can keep the river going without flooding the valley,'" he said.

Apparently, he said, the nation hit that number recently, as prices reached a relative level of stabilization. A Dec. 17 report from Re/Max, for example, said sale prices dropped "only" 1.7% from last year in its 54-city survey, which would indicate general price equilibrium.

But before you break into applause, consider that while the banks were waiting for that sign of stability to decide when to put their holdings on the market, they also were foreclosing at a rapid pace.

"In August, the number of houses banks took back was up 49% over the year before, and September was the greatest month in history for repossessions," Harney said.

That's bad for individuals, of course, but necessary, in Harney's view, for the housing market to heal itself.

Then, the robo-signing mortgage-document fiasco unfolded, causing major lenders to put new foreclosures on hold for a while. But as that situation begins to inch toward resolution, banks are resuming foreclosures, which is only putting more pressure on the dam, Harney said.

With the general agreement that the market has hit some long-awaited neutral spot, the banks have their hand on the cork, Harney said. He, among others, expects that cork to come out by the second quarter, as lenders push 3 million or 4 million (as seen by foreclosure-data firm RealtyTrac) to 8 million (as forecast by Morgan Stanley) foreclosed houses onto the market.

As a result, the burgeoning inventory should push prices down 5% to 8%, Harney said, although gloomier views foresee a 20% drop.

Harney is among those who believe that the worst is generally over for the market, and that the inventory mess and lending issues will work themselves out in 18 months or so as pent-up buyer demand begins to reassert itself.

Meanwhile, he said, selling earlier this year will probably net a better return than late.

"If you have a $500,000 house in Chicago, and the price drops 5%, you've just lost $25,000," he said. "That's why I'm telling agents, 'Don't let sellers wait till spring; they're going to lose money.' "

But what does that mean for buyers this year? Why should they buy from those early-year sellers if the prices are going to drop further?

Harney good-naturedly espouses a kind of logic that seems endemic to the real estate industry (and drives some economists crazy): That it's always a good time to buy — and to sell.

"There's no good news or bad news, just news," Harney said. "Every time a house rises in value, there's a person who makes money and a person who says, 'Darn!'

"And every time a house loses value, there's a person who says, 'Darn!' and a person who says, 'I got a steal!' "

Buyers, he said, should take a look at those recent charts that show mortgage interest rates creeping up and consider how much it might cost them to wait.

"That cost is going to go up, even as prices go down," said the former owner of a New York real estate brokerage. "Now is the time to buy."

Umberger writes for the Chicago Tribune.

http://www.latimes.com/business/real...,6685941.story
 
Old July 14th, 2011 #35
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OPINION JULY 11, 2011

A Home Is a Lousy Investment

Today's young people would be foolish to imitate their parents and view ownership as the cornerstone of personal finance



By ROBERT BRIDGES

At the risk of heaping more misery on the struggling residential property market, an analysis of home-price and ownership data for the last 30 years in California—the Golden State with notoriously golden property prices—indicates that the average single family house has never been a particularly stellar investment.

In a society increasingly concerned with providing for retirement security and housing affordability, this finding has large implications. It means that we have put excessive emphasis on owner-occupied housing for social objectives, mistakenly relied on homebuilding for economic stimulus, and fostered misconceptions about homeownership and financial independence. We've diverted capital from more productive investments and misallocated scarce public resources.

Between 1980 and 2010, the value of a median-price, single-family house in California rose by an average of 3.6% per year—to $296,820 from $99,550, according to data from the California Association of Realtors, Freddie Mac and the U.S. Census. Even if that house was sold at the most recent market peak in 2007, the average annual price growth was just 6.61%.

So a dollar used to purchase a median-price, single-family California home in 1980 would have grown to $5.63 in 2007, and to $2.98 in 2010. The same dollar invested in the Dow Jones Industrial Index would have been worth $14.41 in 2007, and $11.49 in 2010.

Here's another way of looking at the situation. If a disciplined investor who might have considered purchasing that median-price house in 1980 had opted instead to invest the 20% down payment of $19,910 and the normal homeownership expenses (above the cost of renting) over the years in the Dow Jones Industrial Index, the value of his portfolio in 2010 would have been $1,800,016. The stocks would have been worth more than the house by $1,503,196. If the analysis is based on 2007, the stock portfolio would have been worth $2,186,120, exceeding the house value by $1,625,850.

In light of this lackluster investment performance, and in the aftermath of the recent housing-market collapse, why is there such rapt attention to the revival of the homebuilding industry and residential property markets? The answer is that for policy makers whose survival depends on economic recovery, few activities have such direct, intense and immediate positive economic impact as new home construction.

These positive effects are transitory, however, when local economies have insufficient permanent employment to justify a constant level of demand for new housing stock. Existing housing does little to create new employment beyond limited levels of service employment. By contrast, a business investment in the amount of the several hundred thousand dollars represented in the value of a house would likely create many permanent jobs and produce income, profits and competition. As with most things, the benefits of building new homes come with a sobering caveat: What becomes of the work force once the party is over?

Home values may gain value over time, but home equity is locked-in until the house is sold. The profits may then be reinvested or spent, creating significant stimulative effects, but usually this happens when market conditions are strong, exacerbating unsustainable market booms. When troubled assets are dumped, or when defaults occur during weak market conditions, the trough is deepened.

Housing markets may be forever doomed to cyclicality for many reasons, but public policies that stimulate new construction or home purchases by tax and financing subsidies, reduction of qualifying incomes, buyer credits, mortgage backstopping, and preferential zoning and permitting, only intensify these cycles. Efforts to reduce loan balances and to create special rescue programs have reduced the security of loans, challenged the enforceability of contracts, and driven up real borrowing costs. Nearly a third of our states do not allow lenders the recourse provisions necessary to go after a borrower's personal assets in case of default on a residential mortgage. The sanctity of mortgage obligations has become the rough moral equivalent of the 55-mile-per-hour speed limit.

There is also a misconception that paying off a home mortgage is a path to financial or retirement security. The reality is that tapping the equity is expensive: Home-equity loans or lines of credit made with low qualifying incomes often command high interest rates and costs. If an emergency occurs—the loss of a job, or a business setback—it's likely that the same conditions creating the problem will lower the value and impede the marketability of the home and curtail the availability of financing for a buyer. Funds set aside for emergencies should always be liquid assets.

Is it wise for coming generations to continue to view ownership as the cornerstone of personal finance? Young people planning for retirement increasingly face a choice between house payments and contributions to retirement accounts. They simply can't afford both. With the specter of looming cuts in Social Security and other entitlement programs, or even possible systemic insolvency, the challenge for tomorrow's retirees is income self-sufficiency.

A nation of house buyers becomes captive to the economic cyclicality caused by bursts of construction activity, and it is not lifted or sustained by the limited levels of service employment related to existing housing. By contrast, a nation of business startups and investors supports our capital markets and creates long-term employment, income, exports and the myriad technological advancements desperately needed by an expanding American society.

New home construction and the markets for existing homes should be recognized as activities secondary to, and dependent on, employment. Healthy job markets create healthy property markets, not the reverse. Housing demand driven by job growth creates conditions capable of sustaining a stable level of construction employment, attracting private equity investment, sustaining competitive private debt markets, encouraging capital growth, and ensuring the lowest possible housing prices.

Owner-occupied homes will always be the basis for healthy and stable neighborhoods. But coming generations need to realize that while houses are possessions and part of a good life, they are not always good investments on the road to financial independence.

Mr. Bridges is professor of clinical finance and business economics at the University of Southern California's Marshall School of Business.

http://online.wsj.com/article/SB1000...googlenews_wsj
 
Old July 14th, 2011 #36
Leonard Rouse
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In 2007 (about a year before the proles realized there was a problem with housing and debt), I got in an argument at work with a guy younger than me--he was still in college--about the prudence of home ownership.

I observed that the large town/small city we were in had more banks per capita than anywhere I'd ever lived--or seen, for that matter. I further observed that the price level of the new homes in the new subdivisions everywhere being constructed was such that I (along with the truck driver also in the conversation) couldn't imagine how all these people were paying for these homes given the general wage level of the area.

The college guy was someone I liked, but he had a bad case of farmboy fever--what happens when an otherwise intelligent person goes off to a diploma mill from a rural area. These sorts invariably have a low self esteem chip on their shoulder and get eaten alive by braindead professors and the propaganda du jour. They eat that shit up in a vain attempt to "be somebody."

I hadn't observed anything that anybody else hadn't seen every day, but it was like I'd insulted his mother or something. His response to me was like some crazy temperance crusader or "anti-racism" schoolmarm. He actually began talking down to me, explaining slowly to me how home ownership was the best investment possible "and it's been proven for a long time, actually."

I observed that it certainly wasn't that way when Sherman came through, and in any event I (and a large section of the local workforce) couldn't afford the going rates.

I've often wondered if he learned anything from that conversation and the subsequent "sub-prime" debacle.
 
Old July 14th, 2011 #37
Rick Ronsavelle
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Default housing inflation adjusted same as 1895 (case-shiller)



The stock market has gone up for two different reasons. First, general inflation. Second, much lower interest rates. The second reason is over. Interest rates lowered when the feds starting lying about the CPI. Housing was removed and replaced by "owner's equivalent rent." The CPI is weighted and housing was 47% of the weight.

Last edited by Rick Ronsavelle; July 14th, 2011 at 10:32 AM.
 
Old December 1st, 2011 #38
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Default Southern California before the FEDERALLY-SPONSORED postwar housing boom




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Old December 21st, 2011 #39
Alex Linder
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Krampus @MyUncleJerry

I think what makes Barney Frank so incredibly arrogant is that he refuses to acknowledge his role in the housing loan crisis which triggered the great recession that made so many of our lives miserable.

For most of his career, Barney Frank was the principal advocate in Congress for using the government's authority to force lower underwriting standards in the business of housing finance. He instituted the measures that forced Fannie Mae and Freddie Mac to include "affordable housing" to subprime borrowers at least 30% of their total portfolio although to be fair that percentage was increased under President Bush and Bush and his Republican counterparts in Congress had no qualms about increasing the percentage.

Still it was Frank's own affordable housing law that required Fannie and Freddie to meet government quotas when they bought loans from banks and other mortgage originators.

But if Frank was so smart he should have recognized the horror of this mistake before it was too late.



...

Krampus @MyUncleJerry

Barney Frank played a central role in the subprime mortgage fiasco because he was the driving force in Congress behind passing legislation requiring Freddie Mac and Fannie Mae to finance subprime mortgages originated by private lenders by buying the subprime mortgages from the private lenders after they were originated by the private lenders.

Before Barney Frank pushed that legislation through Congress Freddie Mac and Fannie Mae were not permitted to finance subprime mortgages. Once the legislation was passed the pool of money available to private lenders to finance subprime mortgages was for all effective purposes limitless.

Then Freddie Mac and Fannie Mae purchased up to a trillion dollars of subprime mortgages originated by the private lenders essentially making the U.S. government holding the bag on the subprime mortgages that subsequently defaulted. Without Frank's legislation that pool of money would never have been available to private lenders.

Sure investment bankers exacerbated the mess through credit default swaps and other voodoo financial instruments but that doesn't mean Frank didn't play a central role in all this.

http://gawker.com/5869494/barney-fra...-his-man-boobs

Last edited by Alex Linder; December 21st, 2011 at 09:06 PM.
 
Old December 21st, 2011 #40
-JC
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Default Why do you suppose the ASSOCIATION OF REALTORS would create this graph and a DOW JONES publication publish it?

[QUOTE=Mike Parker;1294578]OPINION JULY 11, 2011

A Home Is a Lousy Investment

Today's young people would be foolish to imitate their parents and view ownership as the cornerstone of personal finance



By ROBERT BRIDGES

At the risk of heaping more misery on the struggling residential property market, an analysis of home-price and ownership data for the last 30 years in California—the Golden State with notoriously golden property prices—indicates that the average single family house has never been a particularly stellar investment.

In a society increasingly concerned with providing for retirement security and housing affordability, this finding has large implications. It means that we have put excessive emphasis on owner-occupied housing for social objectives, mistakenly relied on homebuilding for economic stimulus, and fostered misconceptions about homeownership and financial independence. We've diverted capital from more productive investments and misallocated scarce public resources.
[...]
Mr. Bridges is professor of clinical finance and business economics at the University of Southern California's Marshall School of Business. [That's Jew S.C.]

http://online.wsj.com/article/SB10001424052702304259304576375323652341888.html?mod=googlenews_wsj[/QUOTE]

You'll notice that a lot of the articles posted to this thread are by the usual suspects.

Those who've made a million in the stock, bond, real estate, and other markets have done so by operating counter to the trend. Wall Street is not for the little guy.

Advising dumping, much less selling paid-off homes, is a self-fulfilling prophesy that WILL depress home prices and create greater opportunities for investors. Most paper investment vehicles are simply ways their brokers make money: Those of you who had fathers in your home growing-up ever heard anything like you can't get something for nothing? Capital is your tools whether skills, a chest-full of mechanics or home maintenance/improvement tools, a piece of income property, what have you-- it is not cash-- because what you can earn with capital is not as exposed to currency manipulation as holding cash beyond enough to get you through emergencies.

Keep an eye on Iceland becuase those White people decided to give the bankers a little of the bankers' own medicine knowing they'd have to take some lumps. That will continue to be expensive short-term to scare anyone considering it but, in my opinion, they will be better-off in the long run that probably won't be that long.

Right now its a renter's market but do you really believe all those who are buying-up homes at fire sale prices are going to keep rents and interest rates low? Ron Paul acknowledges that a President can't change much by himself. And Austian economists while correct have significantly different views than many of us on many issues. Ron Paul would be a breath of fresh air but, if elected-- and I think he will be elected-- and if not shot, will likely preside during a period of bank-enforced wailing & grashing of teeth to try to drive their training home. Expect to have to do what bankers are doing for the long haul and if you don't have both the financial strength AND stamina then park your "capital somewhere" like trade school or another means of production. If you can't piss in the tall weeds with the big dogs then stay on the porch.

A home mortgage is a tremendous liability and, agreed, not a good "investment." But home ownership without a mortgage isn't so bad if you can pay the property taxes: Don't worry so much about the numbers on the "dollars" it costs to buy things if you have a roof over your head, some food in the pantry, and a way to keep it that way regardless of what the banks, brokers, teachers and other government employees are telling you things cost. Most would rather have someone else with a conflict of interest do the math for them and don't wake up to the magnitude of most major frauds that make finance such a major occupation until their productive years have been greatly consumed, split with an ex-wife, spent on leisure and luxury they can't afford, etc.

Last edited by -JC; December 21st, 2011 at 04:14 AM.
 
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