mortgages

Project Prepper, Part 45: Top 3 Threat Priorities

“As a result of my research and this blog, I’m now aware of the myriad of man-made and naturally-occurring threats to my life and lifestyle (and those of my loved ones), and think it’s probably wise to acquaint myself more with ‘prepping’ via a sustained ‘hands-on’ program of learning and doing, which I’ll call ‘Project Prepper.’

Through a series of posts on this blog which I suspect should last for quite some time (years?), I’ll be able to share my preparedness experiences with you…”

Survival And Prosperity, “Project Prepper, Part 1: It Begins,” October 24, 2012

This week’s “Project Prepper” post is going to be a little different. While I’m currently working on a number of projects related to fulfilling seven “innate survival needs” (hat tip Jack Spirko @ The Survival Podcast):

1. Physical Security
2. Financial Security
3. Water
4. Food
5. Sanitation and Health
6. Energy
7. Shelter

Today I’m going to talk about threat priorities. As a forty-something homeowner residing with my girlfriend in the suburbs of Chicago, Illinois, in 2016, “I’m now aware of the myriad of man-made and naturally-occurring threats to my life and lifestyle (and those of my loved ones).” Regular readers of Survival And Prosperity know I blog about them frequently. But from my vantage point, here are the “top 3” I’m mostly concerned about:

1. Severe Weather
2. Financial Crisis
3. Terrorism

Concerning severe weather, here in the Chicagoland area residents have to contend with spring and summer storms that can consist of high winds, torrential rain, flooding, and tornadoes. Winter can bring along with it ice storms (not too often), significant snowfall/blizzards, and brutally-cold temperatures. Consequently, structural damage, utility outages, hazardous travel conditions, and other threats to life and property accompany such events.

Case in point, prior to my girlfriend and I moving into our house in 2013, a large part of the Chicago metro area suffered significant damage from a “derecho” (widespread, long-lived wind storm) event that left many area homeowners without electricity for several days. A real nuisance for most of those affected, but potentially deadly to those with serious health issues- like my elderly father. And in case readers think I’m talking about those far-off “suburbs” of Chicago here (I remember one real estate agent referring to Rochelle- approximately 80 miles west of Chicago- as a “western suburb” during the housing boom last decade), these extended outages were taking place in near “North Shore” enclaves. I remember watching one furious Northbrook homeowner being interviewed on the local televised news, saying how he had been without power for a number of days and couldn’t understand why it hadn’t been restored yet considering the high taxes he paid to live in such a nice area. Anyway, severe weather tops the list for me. Not as “sexy”- as some would say- as preparing for the “Zombie apocalypse,” but oh well.

Financial crisis. Regular readers of Survival And Prosperity and its predecessor know I’ve been on the lookout for coming “tough times” for some years now. From this blog’s “About” page:

Back in 2004 when SP’s creator/editor Christopher Hill was surveying the economic and investment landscape in support of his own investing activities, he concluded from his own research that the United States was heading towards a financial crash. Deciding that this was something other Americans might want to know about, Mr. Hill launched the independent financial blog Boom2Bust.com, “The Most Hated Blog on Wall Street,” on Memorial Day Weekend 2007 with the purpose of warning and educating others about the approaching U.S. economic crash. He has been credited with calling last decade’s housing bubble and subsequent bust, the 2008 global economic crisis, and the “Great Recession” as a result of his work on this project. Chris wrote over 1,500 posts on Boom2Bust.com during its nearly three-year run, with many of these picked up and republished on the web sites of The Wall Street Journal, Fox Business, Fox News, Reuters, USA Today, the Chicago Sun-Times group, the Austin-American Statesman, the Palm Beach Post, and the West Orlando News, among other media outlets. Chris was also interviewed for a May 2009 MSNBC.com article as a result of his work with the blog.

Since Memorial Day Weekend 2007, I’ve stood by and watched as the bursting of the U.S. housing bubble and subprime mortgage crisis was quickly followed by carnage on Wall Street in the autumn of 2008 and a “Great Recession.” I also observed how the Washington politicians and the Fed responded by “papering up” the mess with massive government and central bank intervention. But as everyone knows, you can only “kick the can down the road” so far. And my concern is that the road is rapidly coming to an end. Visit this blog often enough and you might get that sense as well.

Consequently, I’ve come to believe that the U.S. financial crash I still see headed our way won’t be like an airplane that suffers a sudden, catastrophic failure and plummets back to Earth like a rock. Rather, taking into account the abilities of the federal government and central bank to keep the aircraft aloft for quite some time, the crash may be more akin to a slow- yet-unavoidable descent into the ground. At which point, Americans might be left pondering what had happened to them, just like Argentines did after their economy crapped out in the early 2000s after prosperous times.

Making matters worse is the fact that I still reside in Cook County and Illinois, whose financial troubles are well-publicized. While I’ve left Chicago, I still haven’t made Wisconsin my permanent home address.

When the “balloon goes up” locally and nationally, I suspect everyday living is going to get particularly gritty around these parts.

As terrorism is concerned, post-9/11 I found myself working in the public safety field. As part of my duties at a local fire department, I catalogued potential terrorist targets in the area in the hunt for money to upgrade the agency’s response capabilities. It was my belief that the threat was real then, and it remains so today. Even more so in 2016, as U.S. border security is quite suspect at a time when those who would wish to harm the “homeland” continually make their operational capabilities and future desires for wreaking death and destruction known.


“Border Patrol Admits US Citizenship Doesn’t Matter”
YouTube Video

Like I’ve repeatedly said before on this blog, I believe it’s only a matter of time before the United States suffers terror attacks possibly resembling what occurred in Beslan (Russia) in 2004, Mumbai (India) in 2008, and more recently in Paris and Brussels. And a terrorist strike rivaling or even surpassing the carnage of September 11, 2011, is not out of the question as far as I’m concerned. New jihadists continue to replace their fallen predecessors in this “War on Terror,” and the religious duty of killing “infidels” remains the same. On May 6, 2011, I wrote:

In 2005, Dr. Paul L. Williams, a journalist and author, published the book The Al-Qaeda Connection, in which he discussed plans for a future nuclear terrorist strike, dubbed “American Hiroshima.” He wrote:

Bin Laden asserts that he must kill four million Americans- two million of whom must be children- in order to achieve parity for a litany of “wrongs” committed against the Muslim people by the United States of America. The “wrongs” include the establishment and occupation of military bases between the holy cities of Mecca and Medina in Saudi Arabia, the support of Israel and the suppression of the Palestinian people, the Persian Gulf War and the subsequent economic sanctions, and the invasions of Somalia, Afghanistan, and Iraq…

(Editor’s note: Bold added for emphasis)

These days, the Islamic State has stolen the headlines from Al-Qaeda and other Muslim extremists. But such religious fanaticism as a whole remains a top concern for me.

Severe weather, financial crisis, and terrorism are natural and man-made threats that register the most on my radar. But this doesn’t mean I discount other potential dangers to life and property either (pandemic, severe space weather, and war would probably be the next three on the list). As such, an “all-hazards” approach is emphasized in my “Project Prepper” activities.

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

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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 Comments Off on Doubts About Sustainable Housing ‘Recovery’ Linger

Peter Schiff: Fed Creating Another Housing Bubble, ‘Day Of Reckoning’ Early In Obama’s Second Term

First it was “crash prophet” Jeremy Grantham warning:

Courtesy of the above Fed policy, all global assets are once again becoming overpriced.

Now, Peter Schiff is saying the same about housing.

And that America’s “day of reckoning” is right around the bend.

From a March 1 entry posted on The Schiff Report YouTube video blog:

The Fed influenced the housing market during the bubble predominantly by influencing the short end, making it easier for people to take out ARMs. Today, the Fed is influencing the housing market not predominantly by influencing adjustable rate mortgages, but by outright buying 30-year fixed-rate mortgages to drive mortgage interest rates down to record lows. But in both cases, it was the Fed’s interference that inflated the prices, inflated the bubbles, and there’s going to be a disastrous consequence when this bubble bursts. Although this bubble, is not going to be, I think, as large as the previous bubble. I think the consequences will be much bigger, as the Fed is not going to succeed in elevating home prices. But what they are succeeding at doing is transferring significant percentages of bad mortgages from the private sector to the Federal Reserve. In fact, the federal government has never been more involved in the housing market than it is today. Not only does the government insure over 90 percent of the mortgages, through the FHA, through Fannie, and Freddie. But now the government owns the mortgages. The Federal Reserve is financing them. The Federal Reserve is buying $45 billion worth of mortgages every month. So the government is the housing market…

Now President Obama, we’s got a bigger bubble going during his presidency, and he ain’t getting out of Dodge either. Only this time, I think, the bubble is going to burst not late in his second term, but early. And the difference is going to be- there are no more bailouts. This is the last bubble. This is the biggest bubble. In my book, The Real Crash: America’s Coming Bankruptcy: How to Save Yourself and Your Countryicon, I call it the “government bubble.” That’s what we have. This is the final bubble, and there is no bailout. We’re finally going to have to deal with the consequences of our profligacy. And the problem is, because we’ve kicked the can down the road for so long, right? We’ve papered it over with so much inflation, that the problems have gotten that much worse, which means when we finally are forced to confront them. And again, we’re going to be forced to do it. We’re not going to do it on our own. We’re not going to voluntarily check into rehab. We’re going to have to be forced to do it, because we’ve hit rock bottom, and the world has done an intervention. This “day of reckoning” is coming. And it’s not because of the sequester. Everybody is making a big deal about how painful this sequester is supposed to be. Well this is nothing compared to what’s really going to happen when we really have to swallow the bitter tasting medicine to restore health to an economy that is virtually going to be on its deathbed as a result of all the bad medicine that has been forced-fed it over the years by the Federal Reserve, by Congress, to mask the symptoms while the underlying disease gets that much worse.


“Bernanke Almost Comes Clean On ‘Exit’ Strategy”
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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Monday, March 4th, 2013 Bubbles, Crash Prophets, Federal Reserve, Government, Housing, Inflation, Interest Rates, Monetary Policy Comments Off on Peter Schiff: Fed Creating Another Housing Bubble, ‘Day Of Reckoning’ Early In Obama’s Second Term

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 Comments Off on More Chicago-Area Homes Underwater Last Quarter

Peter Schiff Predicts ‘A Tidal Wave Of Inflation’ For U.S.

Yesterday, “crash prophet” Peter Schiff addressed the Fed’s announcement of QE4 from earlier in the day in the latest installment of The Schiff Report YouTube video blog. Schiff, who correctly-predicted the bursting of the U.S. housing bubble and 2008 global economic crisis, didn’t pull any punches when he warned viewers:

Well, the Fed now has come to a point where it can’t do that anymore, so it announced starting January 1- as expected- the Fed is going to begin to expand its balance sheet by an additional $45 billion per month, as it prints new money to buy up long-term government bonds. That’s in addition to the $40 billion worth of mortgages the Fed is already buying with money that it creates out of thin air. So if you take 40 and 45, that’s $85 billion a month, multiply that by 12, and the Fed has announced that it intends to expand its balance sheet by over a trillion dollars in 2013…

So, in other words, what Ben Bernanke said is, we’re just going to print money, and we’re going to buy a trillion dollars worth of paper every year, as far as the eye can see.

The President and Chief Global Strategist of Euro Pacific Capital talked about what inflating the money supply will mean for stocks and precious metals:

This is a very inflationary policy. Which, I guess, from a nominal perspective is bullish for stocks- not from a real perspective. But it is extremely bullish when it comes to precious metals.

Schiff recommended viewers do the following:

The bottom line to all of this is get out of the dollar. Don’t wait, run. Get out of it. Don’t worry if you’re a little bit too early (chuckle). Because believe me, you don’t want to be too late…

But you’ve got to get out of the dollar, and buy some gold. It is amazing that gold is still as cheap as it is…

But given all the money that has been printed- not only by the Fed, but central banks around the world- and all the money that is about to be printed, they are going to unleash a tidal wave of inflation. And the best way to float to the surface, and avoid being dragged under with the tide, is to have a life raft of precious metals. And then, look at other stock markets, where you might have some real growth.


“Ben Bernanke throws the dollar over the Currency Cliff.”
YouTube Video

(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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Friday, December 14th, 2012 Bonds, Commodities, Crash Prophets, Currencies, Federal Reserve, Government, Inflation, Investing, Monetary Policy, Monetization, Money Supply, Precious Metals, Stimulus, Stocks Comments Off on Peter Schiff Predicts ‘A Tidal Wave Of Inflation’ For U.S.

Gen X Households See Net Worth Plummet

Since I’m from that age group known as “Generation X,” the following hits somewhat close to home. Paul Tharp wrote on the New York Post website yesterday:

Young US households — those aged 35-to-44 — lost a stunning 59 percent of their wealth during the recession, a government report released yesterday revealed.

That’s the stiffest hit of any age group, said the report from the US Census Bureau.

The age group — typically struggling with mortgages, tuition bills and rising tax bills — makes up the backbone of America’s middle class.

The losses were mainly due to the drop in the value of their homes during the 2005 through 2010 period, the report said.

(Editor’s note: Italics added for emphasis)

Tharp added:

Overall, the average family lost 35 percent of its household wealth, composed largely of home values and stock investments.

Perhaps my Gen X cohorts- and other families- should look at the bright side. Like I’ve told those who’ve been concerned about the volatile price fluctuations with their commodity-based paper assets recently, it’s not like the assets are gone. Plus, these valuations are just numbers on a piece of paper, so to speak, that are bound to fluctuate over time.

Source:

Tharp, Paul. “Young households ‘crushed’ by recession.” New York Post. 19 June 2012. (http://www.nypost.com/p/news/business/young_households_crushed_by_recession_Qjxwnpp1eTApumagYlS66H). 20 June 2012.

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Wednesday, June 20th, 2012 Education, Housing, Main Street, Net Worth, Stocks, Taxes, Wealth Comments Off on Gen X Households See Net Worth Plummet

2013 Housing Recovery Could Be Dashed By Next Foreclosure Wave

Unbridled optimism about the nation’s economic health seems to be in the air these days- at least for the mainstream media and financial types. There’s no shortage of talk about a strengthening economic recovery, higher stock/401k values, peaking gas prices, and a housing market bottom and recovery.

Hey, all of that sounds good to me.

Problem is, as it concerns housing, many of those claiming home prices are close to bottoming out and recovering are the same ones who didn’t see the recent housing bubble and subsequent crash in the first place.

And, is it just me, or is that spiel about a comeback in residential real estate being played over and over like a broken record? Housing will recover in 2008. Wait, 2009. No, make that 2010. 2011. 2012. And now, Lucia Mukitani writes on the MSNBC website this morning:

The relentless decline in home prices is nearing an end and prices should rise for the first time in seven years in 2013, but a possible new wave of foreclosures could threaten the recovery, according a Reuters poll of economists.

The median forecast of 24 economists polled by Reuters was for the S&P/Case-Shiller 20-city home price index to end the year unchanged. That was the same finding back in January for this house price gauge, which covers 20 cities.

“We are expecting a gradual improvement, but if we get a big wave of new foreclosures coming to the market, price declines could be even greater,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

The survey forecast the S&P/Case-Shiller home price index rising 2.0 percent next year, up from 1.5 percent in the January survey.

(Editor’s note: Italics added for emphasis)

Did you notice the concern about foreclosures? It’s later muted in the piece. Mukitani added:

The survey predicted about 1.5 million foreclosed properties will come on to the market this year. While there is no comparison for this figure, most analysts believe the foreclosure wave has either peaked or is close to topping out.

(Editor’s note: Italics added for emphasis)

That may be so, but it sounds like there’s enough foreclosures in the pipeline- with still more coming- to possibly lower home prices even more. From the CNBC website this morning:

More U.S. homes are entering the foreclosure process, setting the stage for a surge in properties repossessed by lenders this year.

The number of homes that received first-time foreclosure notices rose 7 percent in March from the previous month, foreclosure listing firm RealtyTrac said Thursday.

That marks the third consecutive monthly increase this year and reflects stepped-up efforts by banks to take action against homeowners who fail to keep up with mortgage payments.

“We’re not out of the woods yet with foreclosures,” said Daren Blomquist, a vice president at RealtyTrac. “There are more batches of foreclosures coming through the pipeline.”

(Editor’s note: Italics added for emphasis)

Now, foreclosure activity slowed in the first quarter. But not for reasons one might suspect. From MSNBC.com senior producer John Schoen earlier today:

Foreclosure activity fell in the first quarter to the lowest level in more than four years, but mainly because the process of removing people from their homes has slowed. The number of homes just beginning the foreclosure process rose in March for a third straight month, a sign that the nation’s housing problems are far from over, according to RealtyTrac, which tracks the figures.

“The low foreclosure numbers in the first quarter are not an indication that the massive reservoir of distressed properties built up over the past few years has somehow miraculously evaporated,” said Brandon Moore, chief executive officer of RealtyTrac.

He said a large backlog of bank-owned properties that has accumulated over the past few years will put added pressure on the housing market when banks eventually list them for sale.

“The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen,” he said in a news release.

(Editor’s note: Italics added for emphasis)

“Added pressure,” “Dam… will eventually burst.” Sounds like home prices could keep falling. Nick Carey wrote on the Reuters website back on April 4:

Real estate company Zillow Inc says more than one in four American homeowners were “under water” or owed more than their homes were worth in the fourth quarter of 2011. The crisis has wiped out some $7 trillion in U.S. household wealth…

Zillow expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.

“The hangover from this crisis will far outlast the party of the boom years,” said Zillow chief economist Stan Humphries.

(Editor’s note: Italics added for emphasis)

So 2013 might not be the year of housing’s recovery?

2014, anyone?

Sources:

Mukitani, Lucia. “Close to bottoming, home prices may rise in 2013.” MSNBC. 12 Apr. 2012. (http://economywatch.msnbc.msn.com/_news/2012/04/12/11161950-close-to-bottoming-home-prices-may-rise-in-2013?lite). 12 Apr. 2012.

“First-Time Foreclosure Notices Hit 6-Month High.” CNBC. 12 Apr. 2012. (http://www.cnbc.com/id/47028071). 12 Apr. 2012.

Schoen, John W. “Foreclosures slow as pipeline keeps backing up.” CNBC. 12 Apr. 2012. (http://economywatch.msnbc.msn.com/_news/2012/04/12/11145443-foreclosures-slow-as-pipeline-keeps-backing-up?lite). 12 Apr. 2012.

Carey, Nick. “Americans brace for next foreclosure wave.” Reuters. 4 Apr. 2012. (http://www.reuters.com/article/2012/04/04/us-foreclosure-idUSBRE83319E20120404). 12 Apr. 2012.

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Thursday, April 12th, 2012 Bubbles, Housing, Mainstream Media, Recovery 3 Comments

Housing Is Back!

Every few days, I see it snuck in somewhere on various mainstream media websites:

Housing is back

Doubtful. A number of housing experts point out that for residential real estate to achieve a sustained recovery in this country, substantial progress has to be made in reducing the glut of properties languishing on the market. The National Association of Realtors reported on August 18:

Total housing inventory at the end of July fell 1.7 percent to 3.65 million existing homes available for sale, which represents a 9.4-month supply at the current sales pace, up from a 9.2-month supply in June.

And don’t forget about the “shadow inventory,” or looming foreclosures that are expected to hit the market. Reuters’ Leah Schnurr wrote yesterday:

“There are probably about 3.5 million loans that should be in foreclosure but aren’t yet, and we’re going to have to work through that inventory before the housing market can come back,” said [RealtyTrac senior vice president Rick] Sharga. “This is a painful but necessary first step to get the housing market back on a more even keel.”

After foreclosure activity slowed down for a period of time, the banks appear to be back in the saddle again. The Chicago Tribune’s Mary Ellen Podmolik wrote yesterday:

Notices of mortgage default, the first step in the home foreclosure process, jumped 25 percent in Illinois last month, putting the threat of additional strain on local housing markets.

In August, 7,264 Illinois households received default notices in August, compared to 5,786 households that had foreclosure proceedings started against them by lenders in July, RealtyTrac reported Thursday. It was the most default notices filed against Illinois homeowners since March.

Illinois’ heightened activity mirrors a national trend. Across the country, 78,880 U.S. properties received a default notice in August, a nine-month high and a 33 percent increase from July…

States where default notices rose more than 40 percent from July included New Jersey, Indiana and California.

Based on inventory alone, it sounds like a sustained housing recovery in the United States is still a ways off.

Sources:

“Existing-Home Sales Down in July but Up Strongly From a Year Ago.” National Association of Realtors. 18 Aug. 2011. (http://www.realtor.org/press_room/news_releases/2011/08/july_ehs). 16 Sep. 2011.

Schnurr, Leah. “Mortgage default notices jump in August: RealtyTrac.” Reuters. 15 Sep. 2011. (http://www.reuters.com/article/2011/09/15/us-usa-economy-realtytrac-idUSTRE78E0OM20110915). 16 Sep. 2011.

Podmolik, Mary Ellen. “Mortgage default notices in Illinois surge 25% in August.” Chicago Tribune. 15 Sep. 2011. (http://www.chicagotribune.com/classified/realestate/foreclosure/chi-mortgage-default-warnings-surged-in-august-20110915,0,421789.story). 16 Sep. 2011.

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Friday, September 16th, 2011 Defaults, Housing Comments Off on Housing Is Back!

U.S. Housing Prices To Fall Another 20 Percent?

The rate of new home construction in the United States exceeded analysts’ expectations and rose in June by 14.6 percent to an annualized rate of 629,000 units, the Commerce Department reported Tuesday…

The June rate was the highest monthly housing starts figure since January.

-FOX News website, July 19

Sales of previously owned homes fell in June, defying expectations for even a slight pickup after a lousy spring selling season.

The National Association of Realtors said sales fell 0.8 percent month over month to an annual rate of 4.77 million units, the lowest since November, as cancellations of pending contracts surged. May’s sales were unrevised at a 4.81 million-unit rate…

After six months, sales are on pace to finish behind last year’s 4.91 million homes sold — the weakest sales in 13 years. Sales have fallen in four of the past five years.

-MSNBC website, July 20

Now that the “flurry” of spring home sales has subsided (ha!), I’ve continued my hunt for a permanent residence in southeastern Wisconsin (I still intend to keep a residence in the Chicagoland area as well due to family obligations). A couple of days ago, I noticed some significant price reductions among a number of homes for sale in the town I’ve been frequenting since 1984 and would like to buy property in. Seeing that residential real estate is on my mind these days, I decided a post about the outlook for U.S. housing is called for.

Recently, I’ve noticed a couple of headlines in the financial media that mentioned “crash prophet” Gary Shilling and a recent housing call he made. Back on April 15, I talked about Shilling, who is the founder and president of A. Gary Shilling & Co., Inc., an economic consulting company he founded back in 1978. The publisher of the monthly newsletter INSIGHT is known for making numerous correct market calls. In fact, Shilling not only successfully predicted the 2008 financial crisis- but he identified a primary catalyst for it as well. Back on June 14, 2007, I wrote in one of my old blogs:

And what will trigger the meltdown? According to Farrell, Shilling still sees the subprime debacle as the catalyst.

Shilling wrote in The Christian Science Monitor on April 5 that a further fall in housing prices could drag the United States back into recession. These days, he fears this scenario could be playing out right before our eyes. The author of the recently-released The Age of Deleveraging appeared on Yahoo! Finance’s The Daily Ticker show on July 13 and responded to statements he made in the July issue of his newsletter. From the Ticker’s Peter Gorenstein that day:

“Economic growth here and abroad is slipping, making a 2012 recession a distinct possibility,” he writes in his July newsletter. And, “when you have slow growth it doesn’t take much of a shock to throw you in negative territory.”

Shilling says the shock to trigger the next recession is “another big leg-down in housing.”

(Editor’s note: Italics added for emphasis)

Here’s what Shilling had to say about residential real estate:

It’s probably going to be another big leg down in housing. The problem that is there’s just too many excess inventories there. We estimate that there are two to two-and-a-half million excess housing unit inventories over and above the normal working levels. And that’s a lot. We normally build about a million-and-a-half houses a year. Getting rid of those excess inventories, if you look at what’s happening in terms of household formation and new housing being built, it’ll probably take four or five years, and that’s plenty of time for this excess inventory to depress prices. Excess inventories are the mortal enemy of prices. We’re looking for another 20 percent decline in house prices

If we had the 20 percent decline- which would bring us back to the long-term trend, inflation-adjusted, on house prices- if we have that, and I think that’s likely, and markets often overshoot on the downside, by the way, so it may be a conservative estimate. But we have that the percentage of mortgages underwater, by our calculation, would jump from 23 percent now to 40 percent. And at that point, strategic defaulting- in other words, people walking away from houses even if they can afford them if they’re underwater- that would become a favorite cocktail party conversation. “Have you strategically-defaulted?” In other words, it’s a critical mass. I think it would be devastating to consumer spending. Home equity, of those with mortgages, now 19 percent would drop to 8 percent. It would be very difficult for anybody who’s in the mortgage business, the derivatives, the banks holding mortgages…

(Editor’s note: Italics added for emphasis)

Shilling warned Ticker viewers:

This is something I think is going to unfold in the next couple of years. But at what point it would be a shock enough to, in effect, cause a negative economic growth pattern, which is pretty much what you’re talking about with a recession, I think, I think next year looks pretty critical in this whole situation

(Editor’s note: Italics added for emphasis)

“20 percent decline in house prices.” “Mortgages underwater, by our calculation, would jump from 23 percent now to 40 percent.” Not good.

Earlier this month, CNN Money surveyed a number of economists concerning their outlook for U.S. housing prices. Their predictions weren’t too rosy either. From their website on July 7:

Housing prices are likely to keep falling the rest of this year, and probably won’t show much improvement next year either, according to a survey of economists.

A CNNMoney exclusive survey of 27 economists showed the battered housing market is facing myriad problems and won’t turn around anytime soon.

Of the 22 who had specific predictions for the closely watched Case-Shiller home price index, the median forecast was for a 3.9 percent decline in the second quarter compared to a year earlier, and a 2.9 percent drop in prices over the course of the full year.

Only three economists expect prices to rise this year.

The outlook for 2011 is only modestly better — a 2 percent increase in home values, with six of the economists forecasting another drop in prices next year.

[Editor’s notes: Italics added for emphasis. Also, I believe there was a typo in that final sentence. It seems to make more sense were it to read “The outlook for 2012…”]

Stay tuned…

Sources:

Shilling, A. Gary. “A fragile recovery – and five shocks that threaten it.” The Christian Science Monitor. 5 Apr. 2011. (http://www.csmonitor.com/Business/2011/0405/A-fragile-recovery-and-five-shocks-that-threaten-it). 15 Apr. 2011.

Gorenstein, Peter. “20% Drop in Housing to Cause Recession in 2012, Says Gary Shilling.” Yahoo! Finance’s Daily Ticker. 13 July 2011. (http://finance.yahoo.com/blogs/daily-ticker/20-drop-housing-cause-recession-2012-says-gary-161445494.html). 20 July 2011.

“Economists: No rebound this year in housing prices.” CNN Money. 7 July 2011. (http://www.chicagotribune.com/business/breaking/chi-economists-no-rebound-this-year-in-housing-prices-20110707,0,5383577.story). 20 July 2011.

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Wednesday, July 20th, 2011 Banking, Crash Prophets, Derivatives, Housing, Recession Comments Off on U.S. Housing Prices To Fall Another 20 Percent?

Is Housing In A Depression?

Pew Research Center surveyed more than 2,100 adults in March on their views about homeownership. What did it find? Some 81 percent of people surveyed “somewhat” or “strongly” agreed with the statement that homeownership is the best long-term investment a consumer can make.

Chicago Tribune, May 8, 2011

I wonder how many survey respondents who comprised that 81 percent agreeing homeownership is the best long-term investment might be reconsidering their answer these days, in light of the latest developments with the U.S. housing market.

Last week, I blogged about CNBC real estate reporter Diana Olick declaring a double-dip for national home prices “official.”

And yesterday, MarketWatch senior columnist Brett Arends suggested that the housing bust is still on. From the MarketWatch website:

If you thought the housing crisis was bad, think again.

It’s worse.

New data just out from Zillow, the real-estate information company, show house prices are falling at their fastest rate since the Lehman collapse.

Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month, according to Zillow.

And the percentage of homeowners in negative-equity positions — with a home worth less than its mortgage — has rocketed to 28%, a new crisis high.

Zillow now predicts prices will fall about 8% this year and says it no longer expects the market to bottom before 2012.

Furthermore, Arends, who’s also a personal finance columnist for the Wall Street Journal, ridicules the idea of a housing “recovery” that a number of housing Pollyannas have been actively pushing for some time now. From the piece:

Here in America we have “zombie homeowners.” Millions of them.

According to Zillow, a record 16.3 million families are upside-down on their home loans. Sixteen million! And many are a long way upside-down. Their homes may never be worth as much as their mortgage. But they are hemorrhaging cash to pay the nut every month.

Recovery? What recovery? This looks a bit like a depression to me.

Olick and Arends aren’t the only ones predicting the slump in residential real estate will continue. Bloomberg’s Hugh Son wrote this afternoon:

A majority of the economists surveyed by Madison, New Jersey-based MacroMarkets predict prices will be flat or drop as much as 7 percent this year as foreclosures add to the supply of distressed properties.

Robert Shiller, the Yale University economics professor who co-founded the forecasting firm, said April 26 that values may decline “another 5 or 10 percent.” Morgan Stanley’s Oliver Chang is calling for a drop of as much as 11 percent.

To be continued.

In more ways than one, it sounds like.

Sources:

Arenda, Brett. “Housing crash is getting worse: report.” MarketWatch. 9 May 2011. (http://www.marketwatch.com/story/housing-crash-is-getting-worse-2011-05-09?link=MW_story_popular). 10 May 2011.

Son, Hugh. “BofA Billions in Loan Losses at Stake on Moynihan Outlook.” Bloomberg.com. 10 May 2011. (http://www.businessweek.com/news/2011-05-10/bofa-billions-in-loan-losses-at-stake-on-moynihan-outlook.html). 10 May 2011.

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Survival And Prosperity
Est. 2010, Chicagoland, USA
Christopher E. Hill, Editor

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