Tuesday, August 31, 2010

Pop Goes The Bubble!

Pop Goes The Bubble!

It's the American dream to own a big house in a suburban wasteland. People always tell you you're a sucker for renting and throwing your money away. Homes are some of the worst investments you can possibly make. Oh hey, I pay 15k a year in property taxes, insurance and maintenance, but at least I'm not lighting a match to my money by renting!!!

Property tax in Ca may be low, but it isn't that low if your property has been reassessed at all in the last 10 years. And by now I'm sure it comes to a surprise to anyone who doesn't have any common sense or an ounce of logic on their persons, but there was some bad news in the home owner market last week. You see, the existing home sales in July fell 27.2%
NEW YORK (CNNMoney.com) -- With home sales plunging to their lowest level in 15 years, economists warn that a double-dip in housing prices is just around the corner, threatening to further slow the overall recovery.

Existing home sales sank 27.2% in July, twice as much as analysts expected, to a seasonally adjusted annual rate of 3.83 million units. Much of that drop is attributed to the end of the $8,000 homebuyer tax credit.

That credit brought buyers out in droves, as they tried to sign home contracts before the April 30 deadline. Now, two months later, sales are 34% below April's tax incentive-induced peak.

"Home sales were eye-wateringly weak in July," said economist Paul Dales of Capital Economics. "It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With an increasingly inevitable double-dip in housing prices yet to come, things could get a lot worse."

The sales pace of all homes -- single-family homes, townhomes, condominiums and co-ops -- is at the lowest since NAR began tracking the figure in 1999. Sales of single-family homes, which account for a bulk of the transactions, are at the lowest level since May 1995.

Inventory has also continued to climb, rising 2.5% to 3.98 million existing homes for sale. That represents a 12.5-month supply at the current sales pace, the highest since October 1982 when it stood at 13.8 months. A six-month of supply is considered normal.

The combination of weak demand and glut of homes has put downward pressure on prices.

And as the recession proved, the housing market and the broader economy are closely intertwined. When housing prices collapse, so does the overall wealth and confidence of Americans.
Bu-bu-bu-bu-but a house is suppose to be an investment! Just ignore the fact that an investment is not guaranteed to rise in value.

You see that little hump on Y? That's the home buyers tax credit from April. See that red line? That's where we're heading to. Hee, yeah. We're fucked.

I know its been said plenty of times, but what the hell were people thinking in between 2002 and 2007? Anyone looking at that data should have been able to see trouble brewing. Let's just ignore the fact that this doesn't even take into account the ARMs that will be resetting in the next 6-12 months... Yeah, we're pretty much doomed.

I would like to point out to all you who want to be a home owner, it's seriously a better idea to rent a nice apartment for a year than buy a house right now. I'm not even joking. Don't go on with this mentality that even though you're a Mcdonalds worker by day, that you can flip low-grade "beef" in the way of homes at night and make a profit. You can't. Stop thinking you can.

Just look at this next chart. I know, charts are boring, but look at it. 150 billion dollars of mortgages reset in Q3/Q4 of 2011, it will be breathtaking.

Just look at that. It's pretty clear that this will all be over by 2012. What a silver lining! Not to mention that the messiah will most likely be here by then, too. Jesus told me so. He also let slip that he was a Muslim and related to Barack Obama. I know, crazy huh.

Banks are already sitting on a massive amount of unforeclosed defaulted properties. I wonder if there is likely to be any real change when more start defaulting or if it will just keep on keepin on. I guess at some point existing bank home inventory will become so unmanageable, they'll start practically giving these homes away with the opening of a new bank account.

Of course only the super rich will be allowed to own homes and you'll have to submit a blood sample, DNA print and your soul to get one.

In the event that you don't understand the reset, let me break it down for you. Because most of those loans were sold with absurdly low teaser rates, lower than even the 4.5 a well qualified borrower could get, they're going to reset well above what the average interest rate would have ever been qualified for.

In fact, one of the more popular loans was a "neg-am" arm or "negative amortization". Meaning you pay a less-than-you-owe monthly payment even on the teaser rate phase. Then when it's time for the loan to reset it doesn't just rest, it "Recasts" to include the entire outstanding balance, which by now has grown really large, at the non-teaser rate, and now over 25 years instead of 30. So in short.. people are going to be fucked.

Just think of this, One in 10 with a mortgage face foreclosure.
WASHINGTON — One in 10 American households with a mortgage was at risk of foreclosure this summer as the government's efforts to help have had little impact stemming the housing crisis.

About 9.9 percent of homeowners had missed at least one mortgage payment as of June 30, the Mortgage Bankers Association said Thursday.

That number, which is adjusted for seasonal factors, was down slightly from a record-high of more than 10 percent as of April 30.

In a worrisome sign, the number of homeowners starting to have problems with their mortgages rose after trending downward last year. The number of homes in the foreclosure process fell slightly, the first drop in four years.

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year.

The number of Americans missing payments and falling into foreclosure has followed the upward trend in unemployment, which has been near double digits all year and has shown no sign of dropping soon.

And the percentage of loans receiving their first notice of foreclosure also dipped. That fell to 1.1 percent in the second quarter from 1.2 percent in the first quarter.

Besides forcing people from their homes, foreclosures and distressed home sales have pushed down on home values and crippled the broader housing industry. They have made it difficult for homebuilders to compete with the depressed prices and discouraged potential sellers from putting their homes on the market.

Government efforts haven't made much of a difference. Nearly half of the 1.3 million homeowners who have enrolled in the Obama administration's main mortgage-relief program have been cut loose through July, the Treasury Department said last week. The program is intended to help those at risk of foreclosure by lowering their monthly mortgage payments.

Roughly 32 percent of those who started the program have received permanent loan modifications and are making their payments on time.
The percent of fall still to come is 42%. It's going to be comical. Someday, you too may be able to buy a house. Once you're able to hire some guns to evict the squatters and set up a perimeter.

With all that said, let's move on to the next stage of this blog and play a game.. One in which we guess the next bubbles that will be bursting. Take a guess on which of the following will be the next pop that will send America into the hole that we clearly dug for ourselves..

- Student Loans as tuition raises, curriculum increases, boomers never fucking die and no more jobs come to America.

- Drones and Border turrets

- Carbon Credits.
(And the left will take 150% of the blame even though it was never our idea in the first place)

-Real estate again and again.

-Price of organs harvested from tent city dwellers

-Durable goodes
(specifically tools and tooling equipment, appliances, camping/outdoor gear, etc.)
price of organs harvested from tent city dwellers

-Life insurance for the working class.

- Tech Stocks

- Whatever Goldman sachs is making most of their money on right now.

I can't wait for Glenn Beck to explain why investing in gold is a good idea after its price falls $300. Never a better time to buy! When it's going up, you're on the gravy train to a gold plated house. When it's going down "the bottom is near, buy buy buy!" Just like the stock market and every other capitalist scam.

In short Death is certain

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