Unlike Detroit, which will run out of cash next month, Japan prints its own money, so bankruptcy in the Detroit sense is not in the cards. But they do have two things in common: depopulation and a ballooning stock of abandoned houses. For Japan, it’s an issue that even the most prodigious money-printing binge cannot resolve.
Entries in Housing (18)
We have seen it for several years: foreclosure sales have become the hunting grounds for investors with two goals: hanging on to these homes until the Fed’s flood of money drives up their value; and renting them out. Thousands of smaller investors have piled into the game. And so have the giants. But now the second half of the equation is collapsing.
I have written about the housing quagmire from different angles, and there hasn't been a heck of a lot of good news. However, there have been spurts in home prices propagated by the media with enormous hoopla that later turned out to have been sucker rallies, with prices hitting new multi-year lows after each one. And now there is another wave of media hoopla about housing, but once again, something is off key.
Certain central bankers are coming out of the closet admitting that their favorite shenanigans—ultralow interest rates and printing money with utter abandon—can’t solve the very problems they were designed to solve, which has been obvious for a long time. What they’re not yet admitting massively, though some are starting to hand out hints, is just how much havoc these policies are wreaking.
Since the lousy jobs report, there has been a veritable orgy of Fed Speak with juicy morsels and contradictions, interspersed with leaks and rumors, that climaxed today with Chairman Ben Bernanke’s words of wisdom. It whipped markets into a frenzy, drove the Dow up 500 points, knocked yields to historic lows, and caused gold, the safe-haven, to bounce up and down like a rubber ball. And everyone was eagerly waiting for the big lie.
Contributed by Chriss Street. The American taxpayer is about to be saddled with another multi-billion bail-out of sub-prime mortgage loan losses from the stealth Federal Housing Authority (FHA) lending program that has been offering ultra-low 3.5% down payments since 2009. Delinquency rates are already at 9% in California and expanding rapidly across the United States.
Pundits who have been announcing the imminent turnaround in housing for the last few years were disappointed once again by the Case-Shiller composite, which declined 0.8% for the month and 3.5% for the year. It has fallen to a level last seen in October 2002. Since that time, inflation has eaten up another 27%, which would take the composite back to the 1990s. And now, even a trend that supported housing for decades has reversed.
Germans are euphoric these days—compared to the dour mood that prevailed for nearly two decades when real wages declined in a stagnating economy with high unemployment. This new optimism is joyriding the powerful German export machine and appears to be impervious to the nightmarish scenarios playing out at the periphery of the Eurozone. And now, Germans have something else to be euphoric about: a housing bubble.
There still are some economic numbers that aren’t seasonally adjusted or manipulated with fancy statistical footwork by governmental, quasi-governmental, or non-governmental number mongers. And they give us the true picture of the worldwide economy: beer, wine, mood, and San Francisco real estate—with more predictive power than is allowed by law.
Among the “good” economic news today was private residential construction, up 2%, confirming trends in building permits and housing starts. Construction creates lots of jobs and contributes significantly to GDP. Everyone, from the President down to local politicians, wants it to grow. It gets them reelected. But for homeowners, banks, and tax payers, these trends are costly.
The government forks over another $13.8 billion to Fannie Mae and Freddie Mac to cover their losses for the last quarter. The regular drumbeat of bailout billions handed to these zombies barely enters the nation’s consciousness anymore, but it adds up: $184.8 billion since 2008. And there is no end in sight. Supercommittee, where art thou?
According to last week's GDP number, the economy has been growing supposedly at a rate of 2.5% in the third quarter—thanks largely to the inexplicable American consumer, the toughest creature out there. But there are some pernicious trends and unpleasant zigzags that point the opposite way.
President Obama's expansion of a mortgage refinancing program is a way for underwater homeowners to reduce their monthly payments. That would save them some money, he said, "...and it gets those families spending again.” But there is an insidious hook buried inside....
The ugly numbers speak volumes on how the Fed's policies hurt the real economy. But those policies enable Congress and the White House to run up ruinous budget deficits that make those of the Eurozone look benign.
That's inflation—not jobs, wages, or GDP.
In its schizophrenic manner, the media lamented the ugly housing-starts number. But for the market to heal, that number should be near zero. In Japan, 20 years after the housing bubble burst, land prices are still declining, and even the Yakuza, who're heavily invested in the construction trade, are complaining.
The economy is going back to hell, but stock markets are surging. Nothing new. It always ends in tears. But this time, the Fed's money-printing strategy will make things only worse. Today's horrid numbers show us why.
Fannie Mae—you already forgot all about it, didn't you?—well, it just reared its ugly head again with its Q2 earnings report. Here is the most important number: $5.1 billion in new bailout money from the U.S. Treasury—the eleventh quarter in a row it has received bailout money. That brings the total bailout money it received so far to $104.8 billion, with no end in sight.