housing recovery

Peter Schiff: ‘An Economy That Lives By QE Dies By QE’

“The Federal Reserve decided Wednesday to hold monetary policy steady, saying that conditions remained too weak to pull back from its bond-buying program.

By a vote of 9 to 1, the Fed decided to maintain the pace of its $85 billion-per-month asset purchase plan.”

-MarketWatch.com, October 30, 2013

Another Federal Open Market Committee meeting has come and gone, and with it, the decision by the U.S. central bank to reduce, or “taper,” its $85 billion-per-month stimulus program.

Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, appeared on Canada’s only all-business and financial news television channel BNN last Friday, and correctly-predicted once again that the Federal Reserve wouldn’t start tapering its quantitative easing just yet. Schiff told Business News Network viewers:

My view has been consistent since the beginning. I said when the Fed first launched QE1 that it was a mistake. That they had checked into the equivalent of the monetary roach motel. That they had no exit strategy. That QE would continue indefinitely. That we would have increasing doses of this monetary heroin. And, eventually it’s going to come to an end. Not because the Fed tapers. The Fed’s actually going to do the opposite of tapering- they’re going to up the dosage. It’s going to end when there’s a currency crisis. When the dollar collapses, and then that morphs into a sovereign debt crisis. That’s going to force the Fed’s hand. But until then, it’s just going to pretend that there’s an exit. It’s going to pretend that there’s tapering. But it can’t do it, because it can’t remove the QE without removing the recovery and putting the economy back into a worse recession than before the Fed began this experiment.

When asked about the possibility of a “beginning to the reduction of bond purchases,” Schiff replied:

No. Because when they even talked about it last time- when the Fed talked about the possibility of maybe reducing QE- interest rates went way up, and that threatened to unravel the housing recovery, the bull market in stocks, and so the Fed had to back off. The Fed is saying that it’s only going to take away the punch bowl if the party keeps going. But the party’s going to stop if it takes away the punch bowl. That is the predicament that it’s in. You know, an economy that lives by QE dies by QE.

Schiff talked of bubbles in housing and stocks, and warned viewers:

But ultimately, those bubbles are going to burst. If the Fed eventually does the right thing, and lets interest rates rise, we’ll have a worse financial crisis than 2008. If it does the wrong thing, and doesn’t let interest rates rise, but keeps printing money instead, then we’re going to have runaway inflation and a much bigger financial disaster than what would happen if the Fed just let rates rise.


“Fed Will Do The Opposite Of Tapering- And Print More Money!”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page. I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Doubts About Sustainable Housing ‘Recovery’ Linger

My doubts about the U.S. economy being in any sort of sustainable recovery able to stand on its own without government and central bank intervention spill over to the housing sector.

As it concerns real estate, a lot of that pessimism stems from the following that I’ve heard being discussed (albeit, somewhat quietly) for some days now but which popped up in my Sunday paper this weekend. From one of my favorite real estate reporters, Mary Umberger, over at the Chicago Tribune:

Halfsies. If you’re among those who think we’re in the midst of some kind of “normalization” of the real estate market, I offer you the conclusions of Goldman Sachs investment banking firm, which estimates that more than half of all recent real estate transactions nationwide have been all-cash deals, without mortgages.

Its report found that all-cash deals hit 57 percent in the first quarter of 2013, compared with 19 percent in the first quarter of 2005.

Such sales appear to be concentrated at the lower end of the price scale, Goldman Sachs said, and reflect the efforts of investors who are buying more modest homes to rent out.

(Editor’s note: Italics added for emphasis)

57 percent all-cash deals? During the housing bubble’s heyday, I seem to recall hearing of individuals who couldn’t even afford to buy a new TV somehow getting mortgages for new McMansions.

I just can’t see your typical homebuyer plunking down all cash for a home. So if investors are fueling this housing “recovery,” well, let’s just say my doubts concerning a sustainable residential real estate comeback continue to linger. Especially if mortgage rates continue to climb higher.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Umberger, Mary. “From remodeling lows to Florida highs.” Chicago Tribune. 30 Aug. 2013. (http://www.chicagotribune.com/classified/realestate/sc-cons-0829-umberger-20130830,0,6086796.column). 9 Sep. 2013.

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Monday, September 9th, 2013 Business, Housing, Recovery No Comments

More Chicago-Area Homes Underwater Last Quarter

Back when I was running “The Most Hated Blog On Wall Street” I used to talk with increasing regularity about the “underwater people”- Americans who owed more on their mortgages than their homes were worth. According to online home and real estate marketplace Zillow, their ranks are now thinning out. At least in certain parts of the country. Cory Hopkins reported on the Zillow Blog yesterday:

Almost 2 million American homeowners were freed from negative equity in 2012, and the overall percentage of all homeowners with a mortgage in negative equity fell to 27.5 percent at the end of the fourth quarter, according to Zillow’s fourth quarter Negative Equity Report.

The falling negative equity rate is good news for struggling homeowners and is largely attributable to a 5.9 percent bump in home values nationwide last year to a median Zillow Home Value Index of $157,400 (when home values rise, negative equity falls). At the end of 2011, 31.1 percent of homeowners with a mortgage were underwater, or more than 15.7 million people…

Still, despite more than 1.9 million homeowners nationwide finding their way back above water last year, 13.8 million American homeowners are still struggling with negative equity.

Here in the Chicagoland region, there’s still plenty of “underwater people” around. Francine Knowles reported on the Chicago Sun-Times website early this morning:

Nearly 37 percent of homeowners with mortgages in the Chicago area had negative equity in the fourth quarter of 2012, edging up from the third quarter, according to a new report that forecasts conditions will be worse by the end of the year… That was up from 36.6 percent in the third quarter, but down from 39.2 percent in the fourth quarter of 2011.

The Seattle, Washington-based company predicts falling home prices for the “Windy City.” Knowles added:

Zillow expects the percent of homes with negative equity will rise to 37.3 by the end of this year.

“Our forecast shows that Chicago’s negative equity rate is expected to rise because home values are expected to decrease by 0.6 percent” in the metropolitan area in December 2013, Zillow senior economist Svenja Gudell said in an email.

(Editor’s note: Italics added for emphasis)

I’ve been reading/hearing about a Chicago-area housing market recovery in the local media outlets with more frequency these days. Sure, sales are up. But prices have been going down. Plus there’s a whole bunch of foreclosures in the pipeline.

A recovery? I’ll believe it when I see it. And let you know when that happens.

UPDATE: This afternoon the Chicago media is running stories about a February 21 Illinois Association of REALTORS press release which might be interpreted as showing the Chicago-area housing market is experiencing a solid recovery. The problem is, January 2013 home sales and median prices are being compared to just one month (“year-over-year”)- January 2012. Instead, consider what the REALTORS wrote on January 22 about the nine-county Chicago Primary Metropolitan Statistical Area (PMSA) over 12 months (January through December 2012):

Year-end 2012 home sales totaled 90,365, up 26.7 percent from 71,315 homes sold in the region in 2011… The year-end 2012 median price reached $160,000, down -1.5 percent from $162,500 in 2011.

(Editor’s note: Italics added for emphasis)

Like I said before: Sales up. Prices down.

Analyze year-end totals for home sales and median prices, and a clearer picture emerges of how healthy the Chicago-area housing market really is.

Or isn’t.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Hopkins, Cory. “2 Million Homeowners Freed From Negative Equity in 2012; 1 Million More to Come in 2013.” Zillow Blog. 20 Feb. 2013. (http://www.zillowblog.com/2013-02-20/2-million-homeowners-freed-from-negative-equity-in-2012-1-million-more-to-come-in-2013/). 21 Feb 2013.

Knowles, Francine. “More Chicago homes underwater in last 3 months of 2012.” Chicago Sun-Times. 21 Feb. 2013. (http://www.suntimes.com/business/18361768-420/more-chicago-homes-underwater-in-last-3-months-of-2012.html). 21 Feb. 2013.

“Home sales, median prices increase in January; housing gains extend into new year.” Illinois Association of REALTORS. 21 Feb. 2013. (http://www.illinoisrealtor.org/node/3203). 21 Feb. 2013.

“Illinois sees home sales increase in December; 2012 notches 22.9 percent sales gain over 2011.” Illinois Association of REALTORS. 22 Jan. 2013. (http://www.illinoisrealtor.org/node/3182). 21 Feb. 2013.

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Thursday, February 21st, 2013 Housing, Main Street, Mainstream Media, Recovery No Comments

S&P/Case-Shiller: Chicago-Area Home Prices Decline Again

Data through October 2012 from the Standard & Poor’s/Case-Shiller home price indices paints a not-too-pretty picture for Chicago-area residential real estate. Sandra Guy wrote on the Chicago Sun-Times website yesterday:

The Chicago-area housing market continued to lag national numbers, posting the largest non-seasonally adjusted single-home price decline — 1.5 percent from September to October and 1.3 percent year-over-year — of 20 major cities in the Standard & Poor’s/Case-Shiller national home price index released Wednesday.

Of the 20 cities, 12 saw housing prices drop.

(Editor’s note: Italics added for emphasis)

Recent rising prices have led to claims the U.S. housing market is in recovery-mode.

However, doubts remain. AnnaMaria Andriotis reported on the MarketWatch website on December 20:

But experts say that spike is largely due to the limited number of homes on the market. There were about two million existing homes available for sale at the end of November, which equates to the lowest housing supply since September 2005, according to the NAR. With fewer homes to choose from, buyers intent on purchasing a property are more inclined to offer a higher price or engage in bidding wars, housing analysts say, which ultimately drives prices up.

The problem is this limited inventory underscores a weakness in the housing market: Many sellers have resisted putting their home up for sale, out of concern that it will sell for far less than they paid for it, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla. That’s set off a domino effect. Because they’ve held off, supply has remained limited, in turn pushing prices up. “Prices have gone up in the last year because of this temporary, artificial market,” he says…

Separately, in some neighborhoods, median or average sales prices are rising because the mix of homes selling has been shifting toward higher-end, more expensive properties — not necessarily because the value of the typical home is rising, says Jed Kolko, chief economist at Trulia.com, a real-estate listing site. Sales of existing single-family homes priced at $1 million or more increased 52% in November from a year ago, a trend that’s been in play for most of the year, according to the NAR.

(Editor’s note: Italics added for emphasis)

More later on these doubts…

By Christopher E. Hill, Editor
Survival And Prosperity (http://www.survivalandprosperity.com)

Sources:

Guy, Sandra. “Chicago-area home prices see steepest drop nationwide: report.” Chicago Sun-Times. 26 Dec. 2012. (http://www.suntimes.com/business/17230482-420/chicago-area-home-prices-see-steepest-drop-nationwide-report.html). 27 Dec. 2012.

Andriotis, AnnaMaria. “The real meaning of rising home prices.” MarketWatch. 20 Dec. 2012. (http://www.marketwatch.com/story/the-real-meaning-of-rising-home-prices-2012-12-20). 27 Dec. 2012.

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Thursday, December 27th, 2012 Housing, Recovery No Comments

‘Irrational Exuberance’ Back In Housing

There are two real estate reporters I like to follow on a regular basis. CNBC’s Diana Olick and the Chicago Tribune’s Mary Umberger. Why do I like them so much? Because they don’t hold back on reporting the real conditions of the U.S. and Chicago housing markets. I remember them pretty much telling it as it was as the United States went through that housing bubble and subsequent crash- while many of their colleagues assumed the role of self-appointed real estate cheerleaders even as home sales and prices plummeted.

And these days, I’m detecting ‘irrational exuberance’ again in residential real estate. It’s not just me either. Umberger wrote in last weekend’s Sunday edition of the Chicago Tribune:

If the Chicago real estate market were a patient recovering from a lingering, debilitating illness, the doctor might be obliged to set the patient’s over-expectant family straight: Yes, your loved one’s symptoms have eased up, says the MD, but, gee, it’s a little too soon to be training for a marathon.

Those are the kinds of expectations that many Chicago-area homeowners seem to harbor these days, according to Naperville appraiser Alvin “Chip” Wagner, whose recent newsletter to members of the local real estate community sought to address a form of irrational exuberance he’s seeing lately: Yes, the market is better, but that doesn’t necessarily mean your home is gaining in value — in fact, some prices might fall further.

(Editor’s note: Italics added for emphasis)

Umberger interviewed Wagner, who had this to say about Chicagoland homeowners being overly-optimistic. From the piece:

Well, absolutely, the market is improving, but not in the area of pricing, which is what homeowners want to know about. In the third quarter, the average sales price throughout the area was $244,203. One year ago, the average was $258,364. That’s about a 5.5 percent decline.

Yet, I go to people’s houses to do appraisals, and (the homeowners’ expectations are) driven by what they see in the media, and they say to me, the market has picked up, and they expect their house is growing in value. They expect to see a 3 to 5 percent growth. I end up having to tell them, your values aren’t appreciating, they may be flat or even declining.

(Editor’s note: Italics added for emphasis)

I don’t like hearing about the housing market being crummy as much as the next person. But what I do like are people being straight with me. Especially journalists.

“And (the homeowners’ expectations are) driven by what they see in the media.”

See what I mean about those cheerleaders? This is why I like straight-shooting reporters like Olick and Umberger. Wish more of their contemporaries could be like them, instead of barfing up a whole lot of nonsense all over my computer screen.

Source:

Umberger, Mary. “A reality check on housing market.” Chicago Tribune. 30 Nov. 2012. (http://articles.chicagotribune.com/2012-11-30/classified/ct-mre-1202-umberger-housing-20121130_1_number-of-active-listings-naperville-appraiser-sales-price). 7 Dec. 2012.

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Friday, December 7th, 2012 Bubbles, Housing, Mainstream Media, Propaganda No Comments

CoreLogic: Home Prices Up Year-Over-Year, But Not Around Chicago

There’s been a lot of talk lately about a supposed recovery in the U.S. housing market.

Fueling such chatter is a report released earlier this morning from Irvine, California-based real estate analytics and services provider CoreLogic concerning home prices. From their website:

CoreLogic (NYSE: CLGX), a leading provider of information, analytics and business services, today released its October CoreLogic HPI report. Home prices nationwide, including distressed sales, increased on a year-over-year basis by 6.3 percent in October 2012 compared to October 2011. This change represents the biggest increase since June 2006 and the eighth consecutive increase in home prices nationally on a year-over-year basis. On a month-over-month basis, including distressed sales, home prices decreased by 0.2 percent in October 2012 compared to September 2012…

I noticed the following in the “Highlights” section of this latest report:

Including distressed sales, the five states with the greatest home price depreciation were: Illinois (-2.7 percent), Delaware (-2.7 percent), Rhode Island (-0.6 percent), New Jersey (-0.6 percent) and Alabama (-0.3 percent).

Once again, Illinois is number one on a list you don’t want to be at the top of.

Reuters (with Chicago Tribune real estate reporter Mary Ellen Podmolik contributing) published the following on the Tribune website this morning as it concerns CoreLogic findings for the Chicagoland area:

In the Chicago area, October home prices fell 2.3 percent compared with a year ago and were down 1.1 percent since September.

Down 2.3 percent year-over-year? No recovery here.

Interestingly, I noticed the following uttered twice in the piece:

Excluding distressed sales…

Followed by prices rose or were up.

You don’t say?

Is it just me, or does excluding distressed sales skew home price calculations to the upside, making the housing market look better than it really is?

You can read the entire CoreLogic report on their website here.

Source:

“CoreLogic: U.S. home prices show biggest annual gain since June 2006.” Reuters. 4 Dec. 2012. (http://www.chicagotribune.com/business/breaking/chi-corelogic-us-home-prices-show-biggest-annual-gain-since-june-2006-20121204,0,5529349.story). 4 Dec. 2012.

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Tuesday, December 4th, 2012 Housing, Recovery No Comments

Robert Shiller: ‘I’m Not Ready Yet’ To Call U.S. Housing Bottom

The housing bulls are out in full-force these days after repeated smack-downs since the air was let out of the U.S. housing bubble (“housing’s coming back in 2007, no 2008, maybe 2009, make that 2010, 2011 anyone?”)

But one housing expert, who was out there in the mid-2000s warning anyone who would listen about the housing bubble and subsequent crash, isn’t sure residential real estate in the United States has bottomed-out just yet.

Yale University economist Robert Shiller talked to CNBC’s Scott Wapner on the TV show Fast Money earlier today. From their exchange on the “Halftime Report”:

WAPNER: You don’t think that housing is on the road to recovery?

SHILLER: I think it might be. There are a lot of positive indicators. But I think people tend to overreact to these. And if you look at the trend- which has been down since 2006- it’s a pretty strong trend that we have to see reversed. You know, maybe, you know, I might call it later this year that we’ve reached the bottom. But I’m not ready yet.

Dr. Shiller noted that there have been four attempts at a housing recovery since the subprime crisis.


“Shiller: ‘Not Ready Yet’ to Call Housing Bottom”
CNBC Video

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Tuesday, September 18th, 2012 Bubbles, Crash Prophets, Housing, Recovery No Comments
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