Category Archives: Housing

Massive Shifts Underway In Residential Rental Real Estate Rates

Massive Shifts Underway, Rental Market Reacts in Near-Real Time: Rents Plunge in San Francisco & Oil Patch, Drop in Expensive Cities. But Long List of Double-Digit Gainers

There are now at least three factors that have plowed into the US housing market – and the rental market is reacting in near-real time to them: The unicorn-startup bust that began last year and built up into a crescendo this year; the Pandemic-inspired move to work-from-home; and the oil-and-gas bust that took on special vigor this spring when crude oil prices totally collapsed.

People are bailing out of some places and moving elsewhere. In the most expensive cities, rents are dropping, but in other cities – a lot of them – rents are skyrocketing by the double-digits.

Crazy-overpriced San Francisco rents.

Rents in San Francisco plunged more than in any other major market in June. This is still the most expensive city to rent in, though there are a few zip codes in Manhattan and in Los Angeles where rents are more expensive than in the most expensive zip code in San Francisco. But it got less expensive in June.

In June, the median asking rent for a one-bedroom apartment dropped 2.4% from May, to $3,280, down 11.8% from June last year, which made the city the fastest-dropping rental market in the US.

The median asking rent for two-bedroom apartments in June fell 1.8% from May to $4,340 and was down 9.6% year-over-year.

The still crazy-overpriced San Francisco market – it’s called the “Housing Crisis” locally – had hit a ceiling in October 2015, with the median asking rent for a 1-BR apartment at $3,670 and for a 2-BR at $5,000. Then rents declined by close to 10% into 2017 before picking up again. While 1-BR rents eked out a new record in June last year (by $50), 2-BR rents never got close to their October 2015 record and are now 13.2% below it.

These are median asking rents. “Median” means half the asking rents are higher, and half are lower. “Asking rent” is the advertised rent. This is a measure of the current market in near-real time, like the price tag in a store that can be changed from day to day to attract shoppers, depending on market conditions. Asking rent is not a measure of what tenants are currently paying on their existing leases or under rent-control programs.

A sea of red in the 17 most expensive rental markets.

The table below shows the 17 most expensive major rental markets by median asking rents. The shaded area shows their respective peaks and changes from those peaks. Almost all of them have declined from their peaks – with eight of them by the double digits, led by Chicago and Honolulu, where rents have gotten crushed since their respective peaks in 2015.

Seattle is now solidly on the list of double-digit decliners, booking the third largest decline-from-peak in 2-BR rents (-15.1%), behind Chicago and Honolulu, and the ninth largest in 1-BR rents (-9.5%).

Denver, not long ago one of the hottest rental markets in the US, has frozen over, with declines-from-peak in the -10% range.

The rents we’re discussing here are for apartments in apartment buildings, including new construction. Not included are rents for single-family houses, condos for rent, rooms, efficiency apartments, and apartments with three or more bedrooms. The data is collected by Zumper from over 1 million active listings, including Multiple Listings Service (MLS) in the 100 largest markets.

The Cities with the biggest %-declines in 1-BR rents.

The table below shows the 31 cities with the largest year-over-year rent declines in June for 1-BR apartments, with San Francisco at the top, followed by Syracuse, NY, a college town now under siege from the Pandemic. Denver, with a 10% year-over-year decline, rounds out the double-digit decliners.

Then there are a bunch of cities in the Texas-Oklahoma-Louisiana oil-patch on this list, including Tulsa and Houston in 5th and 6th place. There are eight cities in Texas on this list. Louisiana is represented by New Orleans (#18) and Baton Rouge (#31).

The oil patch is in serious trouble. The oil bust started in mid-2014, when the price of crude oil grade WTI began its long decline from $100-plus per barrel to a low of $26 a barrel in early 2016. Then the price began to recover but never made it back to levels where the shale oil industry can survive long-term.

In January this year, WTI started heading lower again, and this April hit a new low, when in some places the price at the wellhead dropped to zero and when WTI futures briefly collapsed below zero for the first time ever.

Hundreds of oil-and-gas drillers have filed for bankruptcy over the past three years, and the speed and magnitude of those bankruptcy filings is picking up, with one of the biggies, Chesapeake, which is based in Oklahoma City, filing for bankruptcy on Sunday.

Houston is the center of the US oil patch, and despite its vast and diversified economy, the city has gotten slammed by the oil-and-gas bust in various ways, including by the highest office vacancy rates in the US, now at a catastrophic 24.5%.

Also on this list are Silicon Valley (San Jose), Southern California (Los Angeles, Anaheim, Santa Ana), and three markets in Florida, among others.

Biggest Declines, in %
1 BR Rent Y/Y %
1 San Francisco, CA $3,280 -11.8%
2 Syracuse, NY $860 -11.3%
3 Denver, CO $1,440 -10.0%
4 Irving, TX $1,080 -9.2%
5 Tulsa, OK $590 -9.2%
6 Houston, TX $1,100 -9.1%
7 Madison, WI $1,080 -8.5%
8 Aurora, CO $1,090 -8.4%
9 San Jose, CA $2,300 -8.0%
10 Orlando, FL $1,220 -6.9%
11 Durham, NC $1,040 -6.3%
12 Laredo, TX $780 -6.0%
13 Anaheim, CA $1,600 -5.9%
14 Jacksonville, FL $900 -5.3%
15 Charlotte, NC $1,200 -4.8%
16 Fort Worth, TX $1,100 -4.3%
17 Los Angeles, CA $2,150 -3.6%
18 New Orleans, LA $1,380 -3.5%
19 Santa Ana, CA $1,720 -3.4%
20 Seattle, WA $1,800 -2.7%
21 Plano, TX $1,130 -2.6%
22 Tampa, FL $1,150 -2.5%
23 Corpus Christi, TX $830 -2.4%
24 Louisville, KY $860 -2.3%
25 San Antonio, TX $880 -2.2%
26 Salt Lake City, UT $1,050 -1.9%
27 Raleigh, NC $1,020 -1.9%
28 New York, NY $2,890 -1.7%
29 Boston, MA $2,410 -1.6%
30 Dallas, TX $1,230 -1.6%
31 Baton Rouge, LA $820 -1.2%

The Cities with biggest %-increases in 1-BR rents.

OK, get ready. Among the 100 largest rental markets are 9 cities where rents skyrocketed by over 15% year-over-year in June. And except for Philadelphia, all of them sport median asking rents for 1-BR apartments that are well below the national median ($1,229 according to Zumper). Meaning these cities with these huge rent increases are still deep in the lower half of the rental spectrum. In total, there are 20 cities with double-digit rent increases:

Biggest Increases, in % 1 BR Rent Y/Y %
1 Cleveland, OH $940 16.0%
2 Indianapolis, IN $870 16.0%
3 Columbus, OH $810 15.7%
4 Rochester, NY $970 15.5%
5 Chattanooga, TN $900 15.4%
6 Cincinnati, OH $900 15.4%
7 Philadelphia, PA $1,510 15.3%
8 St Louis, MO $910 15.2%
9 Norfolk, VA $920 15.0%
10 Lincoln, NE $770 14.9%
11 Newark, NJ $1,320 14.8%
12 Des Moines, IA $930 14.8%
13 Detroit, MI $700 14.8%
14 Wichita, KS $700 14.8%
15 Bakersfield, CA $840 13.5%
16 Reno, NV $1,030 13.2%
17 Baltimore, MD $1,320 11.9%
18 St Petersburg, FL $1,230 11.8%
19 Akron, OH $610 10.9%
20 Boise, ID $1,060 10.4%
21 Tucson, AZ $700 9.4%
22 Buffalo, NY $1,080 9.1%
23 Chesapeake, VA $1,080 9.1%
24 Fresno, CA $1,090 9.0%
25 Nashville, TN $1,340 8.9%
26 Memphis, TN $790 8.2%
27 Sacramento, CA $1,360 7.9%
28 Colorado Springs, CO $990 7.6%
29 Arlington, TX $880 7.3%
30 Albuquerque, NM $750 7.1%
31 Gilbert, AZ $1,280 6.7%

Among the top 100 cities, 59 cities experienced year-over-year increases in the median asking rent in June. In eight cities, there was no change in rents. And in 33 cities, asking rents declined, including in many of the largest cities in the US.

The top 100 rental markets, from most expensive to least expensive.

The list goes from San Francisco to Tulsa, with asking rents for 1-BR and 2-BR apartments, in order of 1-BR rents, from $3,280 in San Francisco (-11.8%) to $590 in Tulsa (-9.2%).

These rents that are dropping in some markets and surging in others show two things:

  • Rental markets are local, and the median national rent is irrelevant at the local level.
  • Big shifts are underway in housing, and the rental market is pointing out the weaknesses in demand where it exists in near-real time.

Markets where rents are increasing 10% or 15% a year are asking for trouble unless they have a booming job market with surging wages – this was the case in San Francisco, Seattle, and other hot markets. But if they don’t have surging wages, many renters, who are already tapped out, will run out of money. And it’s renters that keep the show going.

You can search the list list via the search box in your browser. If your smartphone clips this 6-column table on the right, hold your device in landscape position:

1-BR rent Y/Y % 2-BR rent Y/Y %
1 San Francisco, CA $3,280 -11.8% $4,340 -9.6%
2 New York, NY $2,890 -1.7% $3,210 -5.0%
3 Boston, MA $2,410 -1.6% $2,900 2.1%
4 Oakland, CA $2,300 4.5% $2,850 4.8%
4 San Jose, CA $2,300 -8.0% $2,860 -4.7%
6 Washington, DC $2,270 1.3% $2,920 2.5%
7 Los Angeles, CA $2,150 -3.6% $2,960 -5.1%
8 Miami, FL $1,800 0.6% $2,310 0.4%
8 Seattle, WA $1,800 -2.7% $2,250 -6.3%
10 San Diego, CA $1,750 -0.6% $2,300 -4.2%
11 Santa Ana, CA $1,720 -3.4% $2,310 6.0%
12 Honolulu, HI $1,670 0.0% $2,100 -8.7%
13 Fort Lauderdale, FL $1,650 3.1% $2,200 4.8%
14 Anaheim, CA $1,600 -5.9% $1,960 -7.5%
14 Long Beach, CA $1,600 3.2% $2,010 0.5%
16 Chicago, IL $1,510 1.3% $1,800 0.0%
16 Philadelphia, PA $1,510 15.3% $1,750 2.9%
18 Providence, RI $1,470 2.8% $1,650 4.4%
19 Atlanta, GA $1,440 5.1% $1,840 5.7%
19 Denver, CO $1,440 -10.0% $1,880 -5.1%
21 Portland, OR $1,420 4.4% $1,750 1.2%
22 Minneapolis, MN $1,400 0.0% $1,900 3.8%
22 Scottsdale, AZ $1,400 1.4% $1,870 -2.1%
24 New Orleans, LA $1,380 -3.5% $1,610 5.2%
25 Sacramento, CA $1,360 7.9% $1,600 8.8%
26 Nashville, TN $1,340 8.9% $1,450 7.4%
27 Baltimore, MD $1,320 11.9% $1,540 10.8%
27 Newark, NJ $1,320 14.8% $1,680 14.3%
29 Gilbert, AZ $1,280 6.7% $1,490 4.2%
30 Austin, TX $1,250 5.0% $1,520 0.7%
30 Chandler, AZ $1,250 3.3% $1,440 -0.7%
32 Dallas, TX $1,230 -1.6% $1,680 -1.8%
32 St Petersburg, FL $1,230 11.8% $1,600 3.9%
34 Orlando, FL $1,220 -6.9% $1,400 -6.7%
35 Charlotte, NC $1,200 -4.8% $1,370 0.0%
36 Tampa, FL $1,150 -2.5% $1,390 4.5%
37 Plano, TX $1,130 -2.6% $1,540 -0.6%
38 Henderson, NV $1,120 -0.9% $1,350 0.0%
39 Richmond, VA $1,110 2.8% $1,370 11.4%
40 Fort Worth, TX $1,100 -4.3% $1,360 1.5%
40 Houston, TX $1,100 -9.1% $1,310 -6.4%
42 Aurora, CO $1,090 -8.4% $1,350 -9.4%
42 Fresno, CA $1,090 9.0% $1,240 8.8%
44 Buffalo, NY $1,080 9.1% $1,350 14.4%
44 Chesapeake, VA $1,080 9.1% $1,250 4.2%
44 Irving, TX $1,080 -9.2% $1,390 -10.3%
44 Madison, WI $1,080 -8.5% $1,310 -5.1%
44 Pittsburgh, PA $1,080 1.9% $1,350 3.8%
49 Boise, ID $1,060 10.4% $1,120 1.8%
50 Salt Lake City, UT $1,050 -1.9% $1,300 -5.1%
50 Virginia Beach, VA $1,050 0.0% $1,250 1.6%
52 Durham, NC $1,040 -6.3% $1,230 -3.1%
53 Reno, NV $1,030 13.2% $1,350 3.1%
54 Raleigh, NC $1,020 -1.9% $1,200 0.0%
55 Phoenix, AZ $1,010 1.0% $1,280 2.4%
56 Las Vegas, NV $1,000 1.0% $1,200 4.3%
56 Milwaukee, WI $1,000 3.1% $1,170 14.7%
58 Colorado Springs, CO $990 7.6% $1,250 7.8%
59 Rochester, NY $970 15.5% $1,130 15.3%
60 Anchorage, AK $960 5.5% $1,180 2.6%
60 Kansas City, MO $960 0.0% $1,120 0.9%
60 Mesa, AZ $960 4.3% $1,190 3.5%
63 Cleveland, OH $940 16.0% $1,000 14.9%
64 Des Moines, IA $930 14.8% $990 15.1%
65 Norfolk, VA $920 15.0% $1,070 1.9%
66 St Louis, MO $910 15.2% $1,290 12.2%
67 Chattanooga, TN $900 15.4% $1,020 14.6%
67 Cincinnati, OH $900 15.4% $1,200 7.1%
67 Jacksonville, FL $900 -5.3% $1,100 1.9%
70 Arlington, TX $880 7.3% $1,150 5.5%
70 San Antonio, TX $880 -2.2% $1,100 -1.8%
72 Glendale, AZ $870 3.6% $1,100 2.8%
72 Indianapolis, IN $870 16.0% $940 16.0%
74 Louisville, KY $860 -2.3% $940 -1.1%
74 Syracuse, NY $860 -11.3% $1,060 1.0%
76 Omaha, NE $850 1.2% $1,020 -2.9%
77 Bakersfield, CA $840 13.5% $1,070 15.1%
78 Corpus Christi, TX $830 -2.4% $1,050 -0.9%
79 Baton Rouge, LA $820 -1.2% $940 1.1%
80 Columbus, OH $810 15.7% $1,050 -1.9%
80 Knoxville, TN $810 1.3% $950 5.6%
80 Spokane, WA $810 0.0% $1,070 7.0%
83 Winston Salem, NC $800 3.9% $880 6.0%
84 Augusta, GA $790 5.3% $880 8.6%
84 Memphis, TN $790 8.2% $840 9.1%
86 Laredo, TX $780 -6.0% $890 0.0%
87 Lincoln, NE $770 14.9% $920 3.4%
88 Tallahassee, FL $760 0.0% $900 2.3%
89 Albuquerque, NM $750 7.1% $900 7.1%
89 Lexington, KY $750 0.0% $950 -3.1%
89 Oklahoma City, OK $750 4.2% $880 0.0%
92 Greensboro, NC $720 1.4% $840 1.2%
93 Detroit, MI $700 14.8% $800 15.9%
93 Tucson, AZ $700 9.4% $930 5.7%
93 Wichita, KS $700 14.8% $750 0.0%
96 El Paso, TX $680 4.6% $800 0.0%
97 Lubbock, TX $650 3.2% $840 7.7%
97 Shreveport, LA $650 0.0% $800 14.3%
99 Akron, OH $610 10.9% $730 0.0%
100 Tulsa, OK $590 -9.2% $810 1.3%

Source: by Wolf Richter | Wolf Street Report

30% Of Americans Didn’t Make Their Housing Payment In June

A stunning 30% of Americans didn’t make their housing payment for June – a figure that is likely going to ripple through the housing industry in coming months. According to a new survey by Apartment List, the rate is similar to May and shows that even though other industries are rebounding, the situation has not yet improved meaningfully in housing.

These figures stood at 24% in April and 31% in May, before falling slightly to 30% in June. One third of the 30% in June made a partial payment, while two thirds made no payment at all.

“Missed payment rates are highest for renters (32 percent), households earning less than $25,000 per year (40 percent), adults under the age of 30 (40 percent), and those living in high-density urban areas (35 percent). While the missed payment rate for mortgaged homeowners is just 3 percentage points lower than renters,” the survey showed.

Despite the trend of missing payments at the beginning of the month, households have been able to play catch-up later in the month and “narrow the gap” by making payments in the middle of the month. This was the case in May, where the missed payment rate “dropped from 31 percent at the beginning of the month to 11 percent at the end.”

We’ll see how long people can play catch up. 

Meanwhile, as the survey notes, delayed payments in one month are a strong indicator for coming months. 83% of those who paid on time in May did so in June. Meanwhile, only 30% of those who were late in May have made their payment in full for June.

This means the data for the beginning of July is likely to be just as ugly as June.

 

And, rightfully so, there continues to be concern over eviction notices in the coming months. The survey found that: “over one-third of renters are at least ‘somewhat concerned’ that they will be served an eviction notice in the coming six months.”

The number rises to 56% when polled just among those who have not yet paid their full rent for June.

Recall, just days ago ZeroHedge wrote that Americans had already skipped payments on more than 100 million loans while, at the same time, job losses continue to accelerate. 

“The number of Americans that filed new claims for unemployment benefits last week was much higher than expected,” we noted.

To put this in perspective, let me once again remind my readers that prior to this year the all-time record for a single week was just 695,000.  So even though more than 44 million Americans had already filed initial claims for unemployment benefits before this latest report, there were still enough new people losing jobs to more than double that old record from 1982.

That is just astounding.  We were told that the economy would be regaining huge amounts of jobs by now, but instead job losses remain at a catastrophic level that is unlike anything that we have ever seen before in all of U.S. history.

Source: ZeroHedge

China Home Sales Crash

Bloomberg cited a new report via China Merchants Securities (CMSC) that said new apartment sales crashed 90% in the first week of February over the same period last year. Sales of existing homes in 8 cities plunged 91% over the same period.

Wuhan, Hubei, China Sunrise

“The sector is bracing for a worse impact than the 2003 SARS pandemic,” said Bai Yanjun, an analyst at property-consulting firm China Index Holdings Ltd. “In 2003, the home market was on a cyclical rise. Now, it’s already reeling from an adjustment.”

Long before the coronavirus outbreak, China’s housing market has been on shaky grounds amid declining demand, stricter mortgage requirements, and price discounts.

The latest shock: two-thirds of China’s economy has come to a standstill, could generate enough pessimism to pop the country’s massive housing bubble. 

The CPC failed to stimulate the economy last year, with credit impulse not turning up as expected. The virus outbreak has allowed the CPC to scapegoat the slowdown and the inevitable crash.   

Real estate transactions have been forbidden in many cities. This means fire sales could be seen once selling restrictions end.  

E-House China Enterprise Holdings Ltd.’s research institute said four units per day were being sold in Beijing last week, and this is down from several hundred per day during the same period in the previous year. 

China International Capital Corp. analyst Eric Zhang said demand could pick back up in April, assuming the virus outbreak is under control. 

However, residents in major cities are frightened by the virus outbreak and how easily it spreads in apartment buildings

The downturn in China’s property market could get a lot worse, and without proper liquidity from the central bank, once selling restrictions end, it could trigger a liquidity gap where housing prices face a deep correction. 

But remember, the CPC can now blame the virus for a housing market crash or a downturn in the economy. 

Source: ZeroHedge

Why Manhattan’s Skyscrapers Are Empty

Approximately half of the luxury-condo units that have come onto the market in the past five years remain unsold.

In Manhattan, the homeless shelters are full, and the luxury skyscrapers are vacant.

Such is the tale of two cities within America’s largest metro. Even as 80,000 people sleep in New York City’s shelters or on its streets, Manhattan residents have watched skinny condominium skyscrapers rise across the island. These colossal stalagmites initially transformed not only the city’s skyline but also the real-estate market for new homes. From 2011 to 2019, the average price of a newly listed condo in New York soared from $1.15 million to $3.77 million.

But the bust is upon us. Today, nearly half of the Manhattan luxury-condo units that have come onto the market in the past five years are still unsold, according to The New York Times.

What happened? While real estate might seem like the world’s most local industry, these luxury condos weren’t exclusively built for locals. They were also made for foreigners with tens of millions of dollars to spare. Developers bet huge on foreign plutocrats—Russian oligarchs, Chinese moguls, Saudi royalty—looking to buy second (or seventh) homes.

But the Chinese economy slowed, while declining oil prices dampened the demand for pieds-à-terre among Russian and Middle Eastern zillionaires. It didn’t help that the Treasury Department cracked down on attempts to launder money through fancy real estate. Despite pressure from nervous lenders, developers have been reluctant to slash prices too suddenly or dramatically, lest the market suddenly clear and they leave millions on the table.

The confluence of cosmopolitan capital and terrible timing has done the impossible: It’s created a vacancy problem in a city where thousands of people are desperate to find places to live.

From any rational perspective, what New York needs isn’t glistening three-bedroom units, but more simple one- and two-bedroom apartments for New York’s many singlesroommates, and small families. Mayor Bill De Blasio made affordable housing a centerpiece of his administration. But progress here has been stalled by onerous zoning regulations, limited federal subsidies, construction delays, and blocked pro-tenant bills.

In the past decade, New York City real-estate prices have gone from merely obscene to downright macabre. From 2010 to 2019, the average sale price of homes doubled in many Brooklyn neighborhoods, including Prospect Heights and Williamsburg, according to the Times. Buyers there could consider themselves lucky: In Cobble Hill, the typical sales price tripled to $2.5 million in nine years.

This is not normal. And for middle-class families, particularly for the immigrants who give New York City so much of its dynamism, it has made living in Manhattan or gentrified Brooklyn practically impossible. No wonder, then, that the New York City area is losing about 300 residents every day. It adds up to what Michael Greenberg, writing for The New York Review of Books, called a new shameful form of housing discrimination—“bluelining.”

We speak nowadays with contrition of redlining, the mid-twentieth-century practice by banks of starving black neighborhoods of mortgages, home improvement loans, and investment of almost any sort. We may soon look with equal shame on what might come to be known as bluelining: the transfiguration of those same neighborhoods with a deluge of investment aimed at a wealthier class.

New York’s example is extreme—the squeezed middle class, shrink-wrapped into tiny bedrooms, beneath a canopy of empty sky palaces. But Manhattan reflects America’s national housing market, in at least three ways.

First, the typical new American single-family home has become surprisingly luxurious, if not quite so swank as Manhattan’s glassy spires. Newly built houses in the U.S. are among the largest in the world, and their size-per-resident has nearly doubled in the past 50 years. And the bathrooms have multiplied. In the early ’70s, 40 percent of new single-family houses had 1.5 bathrooms or fewer; today, just 4 percent do. The mansions of the ’70s would be the typical new homes of the 2020s.

Second, as the new houses have become more luxurious, homeownership itself has become a luxury. Young adults today are one-third less likely to own a home at this point in their lives than previous generations. Among young black Americans, homeownership has fallen to its lowest rate in more than 60 years.

Third, and most important, the most expensive housing markets, such as San Francisco and Los Angeles, haven’t built nearly enough homes for the middle class. As urban living has become too expensive for workers, many of them have either stayed away from the richest, densest cities or moved to the south and west, where land is cheaper. This is a huge loss, not only for individual workers, but also for these metros, because denser cities offer better matches between companies and workers, and thus are richer and more productive overall. Instead of growing as they grow richer, New York City, Los Angeles, and the Bay Area are all shrinking.

Across the country, the supply of housing hasn’t kept up with population growth. Single-family-home sales are stuck at 1996 levels, even though the United States has added 60 million people—or two Texases—since the mid-’90s. The undersupply of housing has become one of the most important stories in economics in the past decade. It explains why Americans are less likely to movewhy social mobility has declinedwhy regional inequality has increasedwhy entrepreneurship continues to fallwhy wealth inequality has skyrocketed, and why certain neighborhoods have higher poverty and worse health.

In 2010, one might have thought that the defining housing story of the century would be the real-estate bubble that plunged the U.S. economy into a recession. But the past decade has been defined by the juxtaposition of rampant luxury-home building with the cratering of middle-class-home construction. The future might restore a measure of sanity, both to New York’s housing crisis and America’s. But for now, the nation is bluelining itself to death.

Source: by Derek Thompson | The Atlantic

Sonoma County California Plans To Evict Renters To Buy Million Dollar Housing For Hobos

SANTA ROSA (KPIX) — A controversial plan to solve the homeless crisis has people fired up in Sonoma County where officials plan to spend millions of dollars to buy three properties that would be used to house the homeless.

All three properties have one thing in common. They’re big and have multiple units, but many of those units are currently occupied by tenants.

“I’m sure the tenants have been asked to leave,” said Allen Thomas.  He lives near one of the three properties, 811 Davis Street in Santa Rosa.

Neighbors said it’s counterproductive to evict renters to house the homeless.

“It’s just insanity,” said Karen Sanders, who also lives in Santa Rosa.

Sonoma County leaders plan to buy two properties in Santa Rosa and one in Cotati. They’ll spend roughly one million dollars for each property. One county worker said they’re already in contract to buy the property on Davis Street.

“Million dollar homes; million dollar homes for these transients living on the trail,” said Sanders.

The county wants to get the homeless out of an encampment on the Joe Rodota Trail. Many neighbors of those three properties worry the new neighbors will bring along crime and other quality of life issues.

“I’m not NIMBY, but we’ve done enough,” said Sher Ennis, a neighbor who lives near the Davis street property.

She said she was attacked in her home by a man from a re-entry housing program years ago.  She worries about her safety.

“We don’t know. Are we getting dangerous criminals? Are we getting felons? Or are we getting people who are simply down on their luck,” said Ennis.

Another neighbor supports the county’s plan.

“I don’t think that it makes [the neighborhood] any less safe, no,” said Andrew Atkinson.

He said the county has to act now.

“It’s going to take more than this, I think, to solve the problem. But I’m glad to see they’re trying,” said Atkinson.

Many upset neighbors voiced their concerns at a community meeting Friday night in Santa Rosa. County leaders will talk about the plan to buy the houses and other solutions to house the homeless.

Source: by Da Lin | KPIX CBS SF Bay Area

Los Angeles Homelessness Czar to Resign After Homelessness Grows by 33%

Los Angeles’ head of homelessness announced on Tuesday, December 10, 2019 that he will be resigning after presiding over a 33 percent increase in homelessness during the last five years.

Peter Lynn, the head of the Los Angeles Homeless Service Authority, revealed that he would leave at the end of the year.

According to Paul Joseph Watson of Summit News, LAHSA reportedly spent $780 million with no effect.

The city’s homeless population grew even larger from 2018 to 2019, where it witnessed a 12 percent increase in that period.

Even with these unsavory facts in front of him, L.A. Mayor Eric Garcetti believed he did an amazing job and presided over “historic action.”

Lynn was apparently making $242,000 while homelessness went up along with cases of leprosy, typhoid fever, and even bubonic plague.

A few months ago, Dr. Drew Pinsky said L.A.’s public health infrastructure was a complete mess.

Source: by Jose Nino | Big League Politics

NJ To Become Wasteland: 44% Of Residents Plan To Flee State

Thanks to the highest property taxes in the nation and an unsustainable cost of living, 44% of New Jersey residents plan to leave the state in the ‘no so distant future,’ according to a recent survey from the Garden State Initiative (GSI) and Fairleigh Dickenson University School of Public & Global Affairs.

Committing to a more solid time frame, 28% say they are planning to leave within five years, and 39% say they will do so over the next decade, according to Insider NJ.

Unsurprisingly, Property Taxes and the overall Cost of Living were cited as the main drivers. The results also debunk two issues frequently cited in anecdotal accounts of out migration, weather and public transportation, as they ranked 8th and 10th respectively, out of 11 factors offered.

The desire to leave the Garden State was reflected most strongly among young residents (18-29) with almost 40% anticipating leaving the state within the next five years. At the other end of the spectrum, a third (33%) of those nearing retirement (50-64) plan to leave within the next five years. –Insider NJ

These results should alarm every elected official and policymaker in New Jersey, said GSI’s president, former Chris Christie Chief of Staff Regina Egea. GSI focuses on providing “research-based answers to fiscal and economic issues” facing the state.

“We have a crisis of confidence in the ability of our leaders to address property taxes and the cost of living whether at the start of their career, in prime earning years, or re-positioning for retirement, New Jersey residents see greener pastures in other states.  This crisis presents a profound challenge to our state as we are faced with a generation of young residents looking elsewhere to build their careers, establish families and make investments like homeownership.”

After taxes and a high cost of living, government corruption and concerns about crime and drugs concerned citizens the most. Insider notes that there were no significant differences in responses across income levels.

Source: Garden State Initiative | ZeroHedge

“It’s Cozy” – Los Angeles Imports Are Paying $800/Month To ‘Live In Coffins

First it was the unaffordability of ‘real’ homes (combined with massive student loan debt) that spoiled the living-the-Dream narrative for America’s young people.

Remember this 350-square foot studio in NYC that cost $645,000?

Then it was a shift to “tiny homes” – which became popular with millennials since their standard of living has collapsed.

But while they could virtue signal with solar panels and wind power systems, an eco-friendly bathroom, and a kitchen with everything needed to make avocado and toast, living in with post-industrial feel using an old shipping container for $37,000 was too much for many

So ‘podlife’ sprung up on the coasts – as the housing affordability crisis deepened on the West Coast, a new style of living, one that reminds millennials of their college dormitory days, sprang up in cities across California.

But, residents were upset by having to adhere to house rules, one being that lights go out at 10 pm each night, and no guests are allowed inside.

And so, as AFP reports, young Americans flocking to LA and NYC are now resorting to “Capsule Living” as the only affordable option

Inspired by the famous hotels in Japan, each room contains up to six capsules, described by residents as “cozy,” containing a single bed, a bar for hanging clothes, a few compartments for storing shoes and other items and an air vent.

By most standards, the coffin-like accommodation is still not cheap – $750 per month plus taxes. That works out at around $800 and there are still rules… women and men sleep apart, and having sex is not an option.

For Dana Cuff, an architect and professor at the University of California, Los Angeles (UCLA), this type of community presents only a short-term solution.

“We basically need to be developing a huge range of options for the kinds of housing that are available,” she said.

“To me, co-living pods… are symptoms of this deep need for a much greater range of housing alternatives.”

Alejandro Chupina, 27, left home as a teenager because his parents did not support his career as an actor and musician.

“We have so many different amenities… for what we’re paying, I feel like we’re getting way more, in different ways,” said the young man with a handlebar mustache, who can recite the musical “Hamilton” by heart.

We give the final word to Kay Wilson, who packed up her life in a hurry and moved to Los Angeles… only to find that what she paid in Pennsylvania for a nice studio apartment would only get her a 2.9-square-meter box in California.

“I sold all my belongings and I moved here to be in this pod… I’m finding comfort in being uncomfortable,”

The American Dream indeed…

Source: ZeroHedge

How Pricey Urban Meccas Become Crime-Ridden Ghost Towns

As the exodus gathers momentum, all the reasons people clung so rabidly to urban meccas decay.

The lifestyle you ordered is not just out of stock, the supplier closed down.

(Charles Huge Smith) If there is any trend that’s viewed as permanent, it’s the enduring attraction of coastal urban meccas: despite the insane rents and housing costs, that’s where the jobs, the opportunities and the desirable urban culture are.

Nice, but like many other things the status quo considers permanent, this could reverse very quickly, and all those pricey urban meccas could become crime-ridden ghost towns. How could such a reversal occur?

1. Those in the top 10% who can leave reach an inflection point and decide to leave. The top 1% who live in enclaves filled with politicians, celebrities and the uber-wealthy see no reason to leave, as the police make sure no human feces land on their doorstep.

It’s everyone who lives outside these protected enclaves, in neighborhoods exposed to exasperating (and increasingly dangerous) decay who will reach a point where the “urban lifestyle” is no longer worth the sacrifices and costs.

It might be needles and human feces on the sidewalk, it might be petty crime such as your mail being stolen for the umpteenth time, it might be soul-crushing commutes that finally do crush your soul, or in Berkeley, California, it might be getting a $300 ticket for not bringing your bicycle to a complete stop at every empty intersection on a city bikeway. (I’ve personally witnessed motorcycle officers nailing dozens of bicyclists with these $300 tickets.)

It might be something that shreds the flimsy facade of safety and security complacent urban dwellers have taken for granted, something that acts as the last grain of sand on the growing pile of reasons to get the heck out that triggers the decision.

Not everyone can move, but many in the top tier can, and will. Living in a decaying situation is not a necessity for these lucky few, it’s an option.

2. Those who have to leave when they lose their job. A funny thing happens in all economies, even those with central banks: credit-cycle / business-cycle recessions are inevitable, regardless of how many times financial pundits say, “the Fed has our back” and “don’t fight the Fed.”

As I’ve noted here numerous times, a great many small businesses in these pricey urban meccas are one tiny step from closing: one more rent increase, one more bad month, one more regulatory burden, one more health issue and they’re gone. They will move to greener pastures for the same reason as everyone else–they can’t afford to live in urban meccas.

Once enough of the top 10% leave (by choice or because they can no longer afford it), the food/beverage service industry implodes. Wait staff and bartending have been a major source of jobs in these urban meccas, and when hundreds of struggling establishments fold due to a 10% decline in their sales, thousands of these employees will lose their jobs and the prospects of getting hired elsewhere decline with every new closure.

The vast majority of these service employees are renters, paying sky-high rents that unemployment can’t cover. They will hang on for a few months and then cash in their chips and move to more affordable climes.

3. Once the stock market returns to historic norms, the gargantuan capital gains that supported local tax revenues and spending dry up. WeWork is the canary in the coal mine; from a $50 billion IPO to insolvency in six weeks.

Once tax revenues plummet (no more IPOs, hundreds of restaurants closing, etc.), cities and counties will have to trim their work forces to maintain their ballooning pension payments for retirees. This will leave fewer police and social workers available to deal with everyone with little motivation (or option) to leave: thieves, those getting public services and the homeless.

4. Housing prices and rents are sticky: sellers and landlords won’t believe the good times have ended, and so they will keep home prices and rents at nosebleed valuations even as vacancies soar and the market is flooded with listings.

Neighborhoods that had fewer than 100 homes for sale will suddenly have 500 and then 1,000, as sellers realize the boom has ended and they want out–but only at top-of-the-bubble prices.

Ironically, this stubborn attachment to boom-era prices for homes and rents accelerates the exodus. As incomes decline, costs remain sky-high, so the only option left is to move away, the sooner the better.

By the time sellers grudgingly reduce prices, it’s too late: the market has soured. The Kubler-Ross dynamic is in full display, as sellers go through the stages of denial, anger, bargaining and acceptance: they grudgingly drop the price of the $1.2 million bungalow or flat to $1.15 million, then after much anger and anguish, to $1.1 million, but the market has imploded while they processed a reversal they didn’t think possible: now sales have dried up, and prices are sub-$800,000 while they ponder dropping their asking price to $995,000.

Vacant apartments pile up, as the number of laid-off and downsized employees who can still afford high rents collapses. (Recall that tens of thousands of recent arrivals in urban meccas rely heavily on tips for their income, and as service and gig-economy business dries up, so do their tips.)

5. As the exodus gathers momentum, all the reasons people clung so rabidly to urban meccas decay: venues and cafes close, street life fades, job opportunities dry up, and yet prices for everything remain high: transport, rent, taxes, employees, etc.

Friends move away, favorite places close suddenly, streets that were safe now seem foreboding, and all the friction, crime, grime and dysfunction that was once tolerable becomes intolerable.

6. In response to deteriorating city and county finances, local government jacks up fees, tickets, permits and taxes, accelerating the exodus. How many $300 tickets, fees and penalties does it take to break the resolve to stick it out?

7. Those on the cusp cave in and abandon the mecca. Once those who had the option to leave have left, and those who can no longer afford to stay leave, the decay causes those on the cusp of bailing out to abandon ship.

Renters move out in the middle of the night, homeowners who have watched their equity vanish as prices went into free fall jingle-mail the keys to the house to the lender and small businesses that had clung on, hoping for a turn-around close their doors.

8. Each of these dynamics reinforce the others. Soaring taxes, decaying services, declining business, rising insecurity and stubbornly high costs all feed on each other.

And that’s how pricey urban meccas turn into ghost towns inhabited by those who can’t leave and those living on public services, i.e. those too poor to support the enormously costly infrastructure of public spending in the urban mecca.

Source: by Charles Hugh Smith | ZeroHedge

Pod People – The Future Of Housing In America’s ‘Sharing’ Economy

Urban millennials are shelling out half their income to inhabit pods in decaying mega cities.

For the low-low price of $1400/month, you can live in Venice Beach at a PodShare

Away from the glossy PR, it doesn’t look so great…

No privacy, no pets, no family.

Cheek by jowel with other pod-dwellers on prison-style bunk beds.

Forced to live like ants in colonies because none of them can afford to buy a home anymore.

As Paul Joseph Watson explains in his inimitable way, millennials are “living the dream!

*  *  *

Of course, images of ‘pod people’ sparked a large response from the twitterati as the scenes reminded them of horrors from the past…

 

Although it beats this…

Source: ZeroHedge

The Rise of the New Left Urbanists

(City Journal) America’s big cities are, without exception, politically blue cities, with a new class of progressive politicians doing real damage to public order. When it comes to urban development, however, the blue monolith breaks down: socialists, city planners, cyclists, environmentalists, pragmatists, and social-justice activists are often at odds with one another. They might all support more housing, more density, and more public transportation, but they disagree sharply on the means for getting there.

In recent years, a new faction has emerged in city politics: what one might call the new Left urbanists. These activists believe that local governments must rebuild the urban environment—housing, transit, roads, and tolls—to produce a new era of city flourishing, characterized by social and racial justice and a net-zero carbon footprint. The urbanists rally around provocative slogans like “ban all cars,” “raze the suburbs,” and “single-family housing is white supremacy”—ironically, since they’re generally white, affluent, and educated themselves. They’re often employed in public or semipublic roles in urban planning, housing development, and social advocacy. They treat public housing, mass transit, and bicycle lanes as a kind of holy trinity—and they want to impose their religion on you.

Housing is the central political battleground for these progressive activists. As David Madden and Peter Marcuse write in their book, In Defense of Housing: “The residential is political—which is to say that the shape of the housing system is always the outcome of struggles between different groups and classes.” Their goal is not simply to get new housing built but to build new housing owned, operated, and controlled by the state. If they can dictate how cities construct new housing, their logic goes, they can dictate how people live—and set right society’s economic, social, and moral deficiencies.

The urbanists laid out their plans in a widely circulated report from the People’s Policy Project, a crowd-funded organization founded in 2017 that seeks to “fill the holes left by the current think tank landscape with a special focus on socialist and social democratic economic ideas.” They envision the construction of 10 million “municipal homes” over the next ten years. Under this proposal, government would become the nation’s largest landlord and residential construction firm, building more housing units than the entire private construction industry. The abysmal record of public housing in the United States, from the Cabrini-Green Homes in Chicago to the Foote Homes in Memphis, where crime and blight prevailed, makes no difference to these urbanists. They have simply rebranded “housing projects” to “municipal homes,” arguing that public housing has been “unjustly stigmatized” and that these new units will somehow avoid the fate of American public-housing ventures over the past half-century. They believe that the new “municipal homes” will resemble neighborhoods in Stockholm, Vienna, or Helsinki rather than in Detroit, Newark, or Oakland.

The question for the activists is not just how much new housing gets built but who builds it and who will live in it. That is, new developments must also tick off the boxes of identity politics. In cities like San Francisco, some activists have taken the hardline position of opposing all private housing construction, regardless of how it might reduce the cost of housing for middle-class residents. In an essay in the San Francisco Examiner, public-housing activists Andrew Szeto and Toshio Meronek called advocates for more private-market housing part of a “libertarian, anti-poor campaign to turn longtime sites of progressive organizing into rich-people-only zones” and compared them with alt-right white nationalists.

One might dismiss this as radical posturing in a local alt-weekly, but public-housing advocates have seized real power in city hall. They have learned how to use the zoning and permitting bureaucracy to achieve their goals of no new private development. In San Francisco’s Mission District, activists forced Laundromat owner Bob Tillman to spend $1.4 million and nearly five years to gain permission to convert his business into an apartment building. Activists and their enablers in city hall claimed that Tillman’s project would cause gentrification and displace minority residents, and forced him through a gauntlet of Kafkaesque legal proceedings. At one point, the planning commission even hired a “shadow consultant” to offer an expert opinion on whether the shadows cast by the proposed building would create social and racial inequities. To the new Left urbanists, housing isn’t just housing; it must be evaluated on social-justice standards. If it fails to measure up, it must go.

In New York City, progressive urbanists have seized on public transportation as a primary instrument of “social, environmental, immigrant, and economic justice.” New York’s subway system was designed in the early twentieth century to serve the practical needs of city residents, but today’s activists have come to see its tunnels and trains as grand mechanisms for cosmic justice. In its annual “Transportation and Equity” report, for example, the Straphangers Campaign argues that “the most vulnerable New Yorkers suffer disproportionately from high fares, long commutes, polluted air, and dangerous streets,” and therefore, “equity demands that state leaders prioritize transit in the public budget and policymaking process.”

The Straphangers estimate that an additional $30 billion in tax revenues would be needed to complete its desired overhaul of the mass-transit system, with a ten-year goal of upgrading 11 subway lines, building 130 new accessible subway stations, and purchasing 3,000 new subway cars and 5,000 new buses. While state and local leaders haven’t signed up for such an ambitious plan, they do support some of the Straphangers’ funding proposals to expand the transit system—including congestion pricing, a “millionaire’s tax,” marijuana tax, stock-transfer tax, and even a $3-per-package tax on Amazon deliveries.

Most New Yorkers would agree that investment in mass transit is a necessity, and there is a reasonable argument for congestion pricing in traffic-glutted Manhattan—but the activists don’t formulate their arguments on these practical grounds. A close reading of their reports reveals that the long-term vision involves elimination of the automobile, which remains a staple for middle-class residents in New York’s outer boroughs. In the Straphangers’ plan, activists want to restrict curbside space for cars dramatically by building “protected bike lanes on all major arterial streets across the five boroughs,” “giving developers incentives to contribute toward sustainable transportation over private vehicle usage,” and eliminating parking requirements for new housing projects. Activists deploy euphemisms like “transportation alternatives” and “transportation choices”; but at heart, their vision for mass transportation is not about choice but control. They want to remake the urban infrastructure in their own image: green, moral, healthy, just, and in solidarity with the masses—at least as those masses exist in their imagination.

The new Left urbanists’ fatal mistake is their failure to absorb the reality that cities are not just buildings, roads, tunnels, and bike lanes, but living entities. The urbanists can demolish and rebuild the physical environment, but they cannot pave over the people who make up our cities. Life in a metropolis is simply too complex, too variable, and too ephemeral—it will evade even the most careful planning. If we want better, more beautiful, cities, we must bring neighbors, developers, employers, and governments into the conversation. Our cities must be built through cooperation, not compulsion.

Source: by Christopher F. Rufo | City Journal

(Australia) Banks Are Now Referring Borrowers to Foodbank to Help Keep Up On Mortgage Payments

Foodbank South Australia has been approached by banks wanting to refer their clients to the charity, in the hope it will prevent people from defaulting on mortgage payments.

It comes as a new report has shown mental distress is increasing in older Australians, with nearly half of all homeowners aged 55 to 64 still paying off a mortgage — up from just 14 per cent 30 years ago.

Foodbank South Australia is now working on a new agreement which would enable clients to access its food services directly, with a voucher funded by the major bank.

However, Foodbank South Australia chief executive Greg Pattinson told ABC Radio Adelaide it was still exploring how the program would work.

“That’s what we are exploring with some of the banks at the moment … it hasn’t started yet because we are still working through the process.

“We’ve never been approached by financial institutions in the past and the banks, to their credit, are doing the right thing in trying to find a way of keeping people in their houses.”

He said traditionally, Foodbank worked through charities and the welfare sector but it had seen an increase in the number of people who require food assistance that are working.

“Increasingly we are being approached now by organisations other than traditional charities, so schools for example, where the schools have identified the children of parents who are doing it tough,” he said.

“Each year we’ve seen an increase in South Australia of anywhere up to 20 per cent in the number of people seeking food assistance.”

‘Cost of living’ is causing a shift

Mr Pattinson said the stereotype of a person or family that required food assistance was diminishing.

He said more people must be suffering from mortgage stress because more of those needing help were from working families.

“We certainly do provide services to the unemployed and to people who are homeless,” he said.

“But we are seeing an increase in the numbers of working families and working Australians who are needing to seek food assistance because of cost of living increases.

“We see an increase in demand, for example every three months, when people get their electricity bills.

“It’s a case of those weeks where people are saying, ‘we’ll make sure the kids are fed, the roof is over our head but mum and dad don’t eat this week’.”

Trying to help clients ‘balance their budget’

Mr Pattinson said the fact it had been approached by the banks had shown a significant shift and Foodbank was working on a project to support those in need.

“We’re getting inquiries from schools, pastoral care workers, from principals at various schools around the state,” he said.

“And increasingly, we are now seeing inquiries from banks and financial institutions who are looking to try and find a way of helping their clients balance their budget.”

He said the program was still in its early stages, but he hoped Foodbank would have a concrete program in place within the next two to three months.

“It may even be as simple as the banks referring their clients to the Foodbank food hubs,” he said.

“But there would obviously be conditions to that which would have to be assessed by the bank to make sure those people … are genuinely in need of those services.

“We don’t want to shift the food away from people who are genuinely needing it.”

Source: by Brittany Evans | ABC.net.au

Walmart Sues Tesla Over Solar Panel Fires, Claims SolarCity Purchase Was A Bailout

Until now, the general public was only aware of the remarkable ability of Tesla cars to spontaneously combust, that is at least when they are not smashing into random things while on autopilot. It now appears that Tesla’s solar panels (some may be unaware that several years ago, Elon Musk tried to unsuccessfully pivot Tesla into a solar power company as well as that’s where a few billion in government subsidies were to be found) are just as combustible.

On Tuesday, Walmart sued Tesla, after its solar panels atop seven of the retailer’s stores allegedly caught fire, alleging breach of contract, gross negligence and failure to live up to industry standards. Walmart is asking Tesla to remove solar panels from more than 240 Walmart locations where they have been installed, and to pay damages related to all the fires Walmart says that Tesla caused.

Walmart said it had leased or licensed roof space on top of more than 240 stores to Tesla’s energy operations unit, formerly known as SolarCity (which was basically a bailout by Elon Musk for Elon Musk who was also the largest SolarCity shareholder), for the installation and operation of solar systems. But as of November, fires had broken out at no fewer than seven of the stores, forcing the disconnection of all the solar panel systems for the safety of the public.

The breach-of-contract suit by Walmart, which was filed in the state of New York, alleges that: “As of November 2018, no fewer than seven Walmart stores had experienced fires due to Tesla’s solar systems-including the four fires described above and three others that had occurred earlier.” The fires resulted in evacuations, damaged property and inventory.

Walmart’s inspectors additionally found that Tesla “had engaged in widespread, systemic negligence and had failed to abide by prudent industry practices in installing, operating and maintaining its solar systems.’

Walmart also claimed that “Tesla routinely deployed individuals to inspect the solar systems who lacked basic solar training and knowledge and also alleged that Tesla failed to ground its solar and electrical systems properly, and that Tesla-installed solar panels on-site at Walmart stores contained a high number of defects that were visible to the naked eye, including loose and hanging wires at several locations, and which Tesla should have found and repaired before they led to fires.

It gets better: according to the suit, Tesla’s own inspection reports revealed “improper wire management, including abraded and hanging wires,” as well as “poor grounding” and “solar panel modules that were broken or contained dangerous hot spots.”

To state the obvious, properly designed, installed, inspected and maintained solar systems do not spontaneously combust, and the occurrence of multiple fires involving Tesla’s solar systems is but one unmistakable sign of negligence by Tesla,” Walmart said in the suit. “To this day, Tesla has not provided Walmart with the complete set of final ‘root cause’ analyses needed to identify the precise defects in its systems that caused all of the fires described above.”

Walmart said the first fire broke out at a store in Beavercreek, Ohio, a suburb of Dayton, in March 2018, and two more fires occurred at stores in California and Maryland in May of that year. While Tesla disconnected the panels at Walmart’s request that same month, it wasn’t enough to stop fires from occurring, and another blaze broke out in November at a store in Yuba City, California.

Ironically, the lawsuit comes at a time when Tesla has been trying to salvage its collapsing solar business; on Sunday, Elon Musk announced in a string of tweets which reeked of desperation that customers in some states can now rent Tesla’s residential, solar rooftop systems without a contract. The offer is available in six states, and will cost customers at least $50 a month (or $65 a month in California). And although Musk touted the ease of cancelling a rented roof at anytime, CNBC noted that the fine print on Tesla’s website mentions a $1,500 fee to take out the solar panels and restore the customer’s roof.

There is a reason why Tesla is basically giving the spontaneously combustible solar panels away: In the second quarter, Tesla installed a mere 29 megawatts of solar, a record low for the company in a single quarter. In its heyday, Tesla’s solar division (formerly SolarCity) installed over 200 megawatts in a single quarter.

But wait there is more.

As if allegations of shoddy quality control, dismal workmanship and overall blatant lack of professionalism weren’t enough, Walmart also “went there” and in the “explosive”, pun not intended 114-page lawsuit, piled onto a long-running controversy according to which Tesla bailed out a failing SolarCity in 2016 when it purchased the company for $2.6 billion (Elon Musk was also the biggest shareholder of SolarCity at the time, while Tesla’s Elon Musk bought out SolarCity in a gross conflict of interest), with WalMart highlighting the familial ties between Tesla and SolarCity as the underpinnings of a flawed merger that allegedly produced shoddy craftsmanship and led to fires at seven Walmart stores.

“On information and belief, when Tesla purchased SolarCity to bail out the flailing company (whose executives included two of Tesla CEO Elon Musk’s first cousins), Tesla failed to correct SolarCity’s chaotic installation practices or to adopt adequate maintenance protocols, which would have been particularly important in light of the improper installation practices,” Walmart claimed in a suit that is sure to draw regulators attention to the 2016 deal that should never have been allowed. As shown in the diagram above, SolarCity co-founders Lyndon Rive and Peter Rive are Musk’s cousins, while Musk was the largest shareholder of both companies.

So already facing a slumping stock price from dozens of lawsuits and investigations, store closings, delayed loan repayments and the departure of key executives, CNBC notes that the Walmart suit lands at a particularly difficult time for Tesla and Musk. Specifically in regards to SolarCity, Musk was slated to be deposed earlier this month in a complaint brought by shareholders over the deal.

The name “SolarCity” shows up 46 times in the lawsuit, which alleges the company had a failed business model, stemming from a goal to speed up revenue growth at all costs.

“Walmart’s experience bears out Tesla, Inc.’s and Tesla’s inability to turn around and bail out the solar panel operations acquired from SolarCity,” the suit says.

* * *

Walmart is asking a judge to declare Tesla in breach of contract, order the company to remove the solar panels from all of its stores and award damages equal to its costs and consulting fees in connection with the fires.

Tesla shares fell as much as 1.7% to $222.70 as of 6:45 p.m. in after hours trading. The stock is down 32% this year.

The case is Walmart Inc. v. Tesla Energy Operations, New York State Supreme Court, New York County; Index No.  654765/2019.

The full lawsuit is below

Source: ZeroHedge

FHA Eases Condo Rules, Expanding The Purchase And Reverse Mortgage Market

Through a new rule announced Wednesday, the Federal Housing Administration (FHA) is making it easier for aspiring entry level housing buyers and condo owners to get reverse mortgages with FHA insured financing. 

The FHA published a final regulation and policy implementation guidance this week establishing a new process for condominium approvals which will expand FHA financing for qualified first time home buyers as well as seniors looking to age in place, the Department of Housing and Urban Development said in a press memo. 

In a stated Trump Administration effort to “reduce regulatory barriers restricting affordable home ownership,” the new rule introduces a new single-unit approval procedure that eases the ability for individual condominium units to become eligible for FHA-insured financing. It also extends the recertification requirement for approved condominium projects from two years to three.

The rule will also allow more mixed-use projects to be eligible for FHA insurance, the department said in a press release. HUD Secretary Ben Carson touted the rule’s ability to assist both first-time home buyers, as well as seniors aiming to age in place.

“Condominiums have increasingly become a source of affordable, sustainable home ownership for many families and it’s critical that FHA be there to help them,” said Carson in a press release announcing the new rule. “Today, we take an important step to open more doors to home ownership for younger, first-time American buyers as well as seniors hoping to age-in-place.”

Acting HUD Deputy Secretary and FHA Commissioner Brian D. Montgomery added that this rule is being implemented partially in response to the demands of the housing market.

“Today we are making certain FHA responds to what the market is telling us.
Montgomery said in the release. “This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for home ownership and are most likely to enter the market with the purchase of a condominium.”

The last notable action taken by FHA in terms of condominium approvals took place in the fall of 2016, when the agency proposed new rules that would allow individual condo units to become eligible for FHA financing, including Home Equity Conversion Mortgages (HECMs).

FHA estimated this new policy will notably increase the amount of condominium projects that can now gain FHA approval. 84 percent of FHA-insured condominium buyers have never owned a home before, according to agency data. Only 6.5 percent of the more than 150,000 condominium projects in the United States are approved to participate in FHA’s mortgage insurance programs.

“As a result of FHA’s new policy, it is estimated that 20,000 to 60,000 condominium units could become eligible for FHA-insured financing annually,” the press release said.

Read the final rule in the Federal Register.

Source: by Chris Clow | Reverse Mortgage Daily

Coastal Cities Lead In Apartment Rents

Not surprisingly, apartment rents in the US are the highest in land-use restricted coastal cities like San Francisco, New York city, San Jose CA, Boston and Washington DC. Other west coast cities and Miami round out the remaining top ten most expensive apartment rents.

According to Zumper, North Carolina (Raleigh and Charlotte) and Arizona (Glendale and Scottsdale) along with Fort Worth TX saw the biggest increases in apartment rents.

Raleigh, NC saw one bedroom rent climb 5.1%, which was the largest monthly rental growth rate in the nation, to $1,040. This large bump moved the city up 2 positions to become 49th most expensive rental market.

Charlotte, NC took a 5 ranking bump up to 26th with one bedroom rent climbing 5% to $1,260 and two bedrooms increasing 2.2% to $1,370.

Glendale, AZ jumped up 7 spots to rank as the 67th most expensive city. One bedroom rent grew 5% to $840, while two bedrooms were up 1.9% to $1,070.

Scottsdale, AZ saw one bedroom rent climb 4.5%, settling at $1,380, and up 3 positions to become the 21st priciest city.

Fort Worth, TX moved up 3 spots to rank as 40th with one bedroom rent jumping 4.5% to $1,150 and two bedrooms increasing 2.3% to $1,340.

On the downward side, tax- and pension-crazy Chicago has fastest declining rents. And it is Always Sunny In Philadelphia for rents!

Chicago, IL fell 2 spots to rank as the 17th priciest city with one bedroom rent dropping 5.1%, which is tied with Bakersfield’s growth rate as the largest dip in the nation, to $1,490.

Bakersfield, CA saw one bedroom rent drop 5.1%, settling at $740, and down 7 positions to become 86th.

Anchorage, AK moved down 3 spots to 62nd with one bedroom rent falling 4.2% to $910. Two bedrooms, on the other hand, were flat at $1,150.

Atlanta, GA took a 4 ranking dip to 22nd with one bedroom rent decreasing 4.2% to $1,370 and two bedrooms down 3.3% to $1,740.

Philadelphia, PA one bedroom rent dropped 3%, settling at $1,310, and down 2 spots to rank as the 24th priciest city. Two bedrooms stayed stable at $1,700.

Of the top 100 cities, LeBron James’s home town of Akron has the lowest apartment rents in the nation. Followed closely by other non-coastal cities like Wichita, Detroit, Lubbock TX and Tucson AZ. And if you are taken back to Tulsa, you will find relatively inexpensive apartment rents.

Source: Confounded Interest

Rent Unaffordability Continues To Grow For Americans

The National Low Income Housing Coalition has published its latest “Out of Reach” report which shows that renting is becoming increasingly unaffordable for countless Americans.

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Its central statistic is the Housing Wage which is an estimate of the hourly wage a full-time worker must earn to rent a home without spending more than 30 percent of his or her income on housing costs. As Statista’s Niall McCarthy notes, for 2019, the Housing Wage is $22.96 and $18.65 for a modest two and one-bedroom flat respectively based on the “fair market rent”.

A worker earning the federal wage would have to put in 127 hours every week – equivalent to more than two full-time jobs – to afford a two-bedroom apartment. It isn’t just a regional issue – there isn’t a single state, metro area or county in the U.S. where a full-time worker earning the minimum wage can afford to rent a two-bedroom property.

It isn’t just workers on the minimum wage who are effected.

The report also states that the average renter’s hourly wage is $1.08 less than the Housing Wage for a one-bedroom rental and $5.39 less than a two-bedroom rental. That means that an average renter in the U.S. has to work a 52 hour week, something that becomes increasingly difficult if that renter is a single parent of someone struggling with a disability. When it comes to the situation in different occupations, a median-wage worker in eight of the country’s largest ten occupations does not earn enough to afford a one-bedroom apartment.

https://infographic.statista.com/normal/chartoftheday_18485_housing_wage_compared_to_median_hourly_wages_n.jpg(source)

Software developers, general managers and nurses are able to meet both Housing Wages but for many other occupations and accomodations, renting is becoming increasingly difficult. Medical assistants, laborers and janitors are among those falling short while the gap back to minimum wage workers is even greater still. Worryingly, these are the ten jobs that are expected to see the biggest growth over the coming decade and that is likely to result in an even greater disparity between wages and housing costs by 2026.

Source: ZeroHedge

The Evolution Of Mortgage Policy, 1970-1999

“A Crack in The Foundation?” Part 2: Three Decades of Red Flags — Mortgage Policy & Praxis, 1970-1999

Welcome to “A Crack in the Foundation?”, a four-part series in which Maxwell Digital Mortgage Solutions will examine the evolution of the mortgage industry and homeownership in America, with an eye on government policies and how GSEs can promote (or prohibit) periods of economic growth.

Part 2 begins at the start of the 1970s and follows the uneasy path of government policy and economic turmoil as we creep towards the end of the century. (Missed Part 1? Read it here).  This section will follow the astronomical growth in the secondary market, the mounting government pressure put on Fannie and Freddie to increase their offerings to lower- and moderate-income borrowers, as well as a widespread shift towards deregulation in the market that (spoiler alert) will prove to have disastrous consequences as the new millennium begins.

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California’s Housing Bubble’s So Bad, 100s Forced To Live On Boats

California’s housing affordability crisis is getting worse. Affordability in San Francisco is now at 10-year lows, and only one in five households can afford to purchase a median-priced single-family home in the Bay Area. The crisis has driven many people onto the water, living on makeshift boats, outside marinas, and wealthy communities.

Sausalito officials and other agencies have been stepping up efforts to manage ‘anchor out’ mariners and floating debris in Richardson Bay. (Robert Tong/Marin Independent Journal)

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The Evolution Of Mortgage Policy, 1930-1960

“A Crack in The Foundation?” Part 1: Fannie & Friends — The Evolution of Mortgage Policy from 1930-1960

Welcome to “A Crack in the Foundation?”, a four-part series in which Maxwell Digital Mortgage Solutions will examine the evolution of the mortgage industry and homeownership in America, with an eye on government policies and how GSEs can promote (or prohibit) periods of economic growth.

Part I starts at the turn of the 20th century and traces the establishment of the Federal Housing Administration (FHA), as well as the birth of Fannie and Ginnie, to look at the inception of the modern mortgage and its impact on home ownership.

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Attention Millennials: You Can Now Buy Tiny Homes On Amazon

One of the main goals of the Federal Reserve’s monetary policies of the past decade was to generate the “wealth effect”: by pushing the valuations of homes higher, would make American households feel wealthier. But it didn’t. Most Americans can’t afford the traditional home with a white picket fence around a private yard (otherwise known as the American dream), and as a result, has led to the popularity of tiny homes among heavily indebted millennials.

Tiny homes are popping up across West Coast cities as a solution to out of control rents and bubbly home prices, also known as the housing affordability crisis.

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Amazon has recognized the hot market for tiny homes among millennials and has recently started selling DIY kits and complete tiny homes.

One of the first tiny homes we spotted on Amazon is a $7,250 kit for a tiny home that can be assembled in about eight hours.

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A more luxurious tiny home on the e-commerce website is selling for $49,995 +$1,745.49 for shipping. This one is certified by the RV Industry Association’s standards inspection program, which means millennials can travel from Seattle to San Diego in a nomadic fashion searching for gig-economy jobs.

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Those who want a 20 ft/40 ft expandable container house with solar energy, well, Amazon has that too. This tiny home has it all: a post-industrial feel using an old shipping container, virtue signaling with solar panels, full bathroom, and a kitchen to make avocado and toast.

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With almost two-thirds of Millennials living paycheck to paycheck and less than half of them have $500 in savings, we’re sure this lost generation could afford one of these trailers tiny homes with their Amazon credit card. Nevertheless, the tiny home craze among millennials is more evidence that living standards are collapsing.

Source: ZeroHedge

Gavin Newsom Wants To Fix California’s Housing Crisis. So What Are His Options?

Gov. Gavin Newsom says California’s housing affordability crisis is so severe that he wants a bit of everything to solve it.

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California Governor Gavin Newsom and Megan Colbert compare notes on raising toddlers as she shares her struggles as a single parent while talking about affordable housing issues on Tuesday, March 26, 2019 in Sacramento. Newsom held a round table discussion to address housing affordability and rising rents. Renée C. Byer rbyer@sacbee.com

That means seeding construction for millions of new residences, opening the door to a new rent control law and finding ways to protect low-income families from eviction.

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Where Home Prices Are Rising the Fastest (Slowest) In America

Since the end of the great recession, home prices in America have rebounded substantially. Since the dark days of 2009, prices have steadily climbed and are up over 50% on average from the lowest point.

This is great news for homeowners whose homes may be worth more than their pre-recession values, but less great news for homebuyers who can afford less house for the dollar. What’s more is that in some places, home prices have spiked much faster than average, while in other places, home prices have remained depressed.

So where in America are home prices increasing the fastest and the slowest? In light of fluctuating mortgage interest rates, tax reform that’s limited many homeowner deductions, and an affordability crisis in many urban areas, along with Priceonomics customer RefiGuide.org thought we’d dive deeper into the home price data published, aggregated and made available by Zillow.

Over the last year, the median home prices increased the fastest at the state level in Idaho, where prices increased by a staggering 17.2%. In just two states did home prices actually fall last year (Alaska and Delaware). The large cities with the fastest home appreciation were Newark, Dallas, and Buffalo where prices increased more than 15% in each place. The large city where prices decreased the fastest was Seattle, where home prices actually fell 2.4%.

Lastly, we looked at the expensive markets (where homes cost more than a million dollars) that had the highest price appreciation. St. Helena, CA, Quogue, NY and Stinson Beach, CA all had prices increase over 20% last year.

***

For this analysis, we looked at data from the beginning of March 2019 compared to prices one year earlier. We looked at Zillow’s seasonally adjusted median price estimate as published by Zillow Research Data.

Nationally, home prices increased 7.2% last year or about $15,000 more than the year before. However, in some states prices spiked much more than that.

https://www.zerohedge.com/s3/files/inline-images/state1.jpg?itok=FY7fZuHw

Idaho leads the country with home prices increasing by 17.2% last year, driven by strong demand in the Boise market. In Utah the impact of a thriving economy and growing population is that prices increased 14% in just one year. Nevada, likewise is seeing strong home price growth as people migrate from California and the state’s low taxes are more favorable under the most recent tax reform. Alaska and Delaware have the distinction of being the only states where home prices fell over the last year.

Next, we looked at home prices in the top one hundred largest housing markets, as measured by population. Which cities were experiencing rapid home equity appreciation and which ones are not? 

https://www.zerohedge.com/s3/files/inline-images/states2.jpg?itok=6VBwCrMd

At the city level, home prices have increased the fastest in Newark, NJ where prices have increased more than 17% as buyers who are priced out of New York City have purchased in this area. Dallas, a city with a strong economy and low taxes has seen home prices increase nearly 17% as well.

Notably, some of the most expensive and desirable cities like Seattle, Oakland and Portland have seen their prices decrease in the last year. Each of these locations has experienced price appreciation during this decade, however.

Were there any smaller cities and towns that experienced home prices rising faster than the big cities? Below shows the fifty places in the United States where home prices increased the most this last year:

https://www.zerohedge.com/s3/files/inline-images/states3.jpg?itok=m0ox7MnB

Across the Midwest and South, numerous smaller cities experienced price appreciation much greater than 25% last year. In Nettleton, MS prices increased 49% in just one year! Notably, almost none of these high-price growth cities are located on the coasts.

Lastly, what are expensive places to buy a home in America that are just getting more expensive? To conclude we looked at locations where the median home price was over one million dollars and the prices keep rising:

https://www.zerohedge.com/s3/files/inline-images/state4.jpg?itok=mLMpJ2ww

In this rarefied group, prices increased the most in Saint Helena, CA. In this tony town in Napa Valley, prices increased over 25% last year. In second place was Quogue, NY a town in the Hamptons. In fact, 9 out of the top 10 expensive cities with high price appreciation are in California or New York. More specifically, many of these locations are in the vicinity of San Francisco and New York City, the two very large economic engines that are driving home prices.

***

After nearly a decade of vibrant stock market and real estate returns, this year home prices have continued to climb at a steady clip. In only two states in America did prices actually fall, and in five states prices grew more than 10% in a year. As the economy has continued roaring, places that were once known for being affordable like Idaho, Utah, and Nevada have seen home prices spike. While expensive cities like Seattle, Portland and Oakland have seen prices level off in the last year, and places like Newark, Dallas and Buffalo have become less affordable. In this stage of American economic expansion, the once affordable places are seeing their prices escalate.

Source: ZeroHedge | by Priceonomics

Mapped: The Salary Needed To Buy A Home In 50 U.S. Metro Areas

Over the last year, home prices have risen in 49 of the biggest 50 metro areas in the United States.

At the same time, mortgage rates have hit seven-year highs, making things more expensive for any prospective home buyer.

With this context in mind, today’s map comes from HowMuch.net, and it shows the salary needed to buy a home in the 50 largest U.S. metro areas.

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The Least and Most Expensive Metro Areas

As a reference point, Visual Capitalist’s Jeff Desjardins points out that the median home in the United States costs about $257,600, according to the National Association of Realtors.

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With a 20% down payment and a 4.90% mortgage rate, and taking into account what’s needed to pay principal, interest, taxes, and insurance (PITI) on the home, it would mean a prospective buyer would need to have $61,453.51 in salary to afford such a purchase.

However, based on your frame of reference, this national estimate may seem extremely low or quite high. That’s because the salary required to buy in different major cities in the U.S. can fall anywhere between $37,659 to $254,835.

The 10 Lowest Cost Metro Areas

Here are the lowest cost metro areas in the U.S., based on data and calculations from HSH.com:

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After the dust settles, Pittsburgh ranks as the cheapest metro area in the U.S. to buy a home. According to these calculations, buying a median home in Pittsburgh – which includes the surrounding metro area – requires an annual income of less than $40,000 to buy.

Just missing the list was Detroit, where a salary of $48,002.89 is needed.

The 10 Most Expensive Metro Areas

Now, here are the priciest markets in the country, also based on data from HSH.com:

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Topping the list of the most expensive metro areas are San Jose and San Francisco, which are both cities fueled by the economic boom in Silicon Valley. Meanwhile, two other major metro areas in California, Los Angeles and San Diego, are not far behind.

New York City only ranks in sixth here, though it is worth noting that the NYC metro area extends well beyond the five boroughs. It includes Newark, Jersey City, and many nearby counties as well.

As a final point, it’s worth mentioning that all cities here (with the exception of Denver) are in coastal states.

Notes on Calculations

Data on median home prices comes from the National Association of Realtors and is based on 2018 Q4 information, while national mortgage rate data is derived from weekly surveys by Freddie Mac and the Mortgage Bankers Association of America for 30-year fixed rate mortgages.

Calculations include tax and homeowners insurance costs to determine the annual salary it takes to afford the base cost of owning a home (principal, interest, property tax and homeowner’s insurance, or PITI) in the nation’s 50 largest metropolitan areas.

Standard 28% “front-end” debt ratios and a 20% down payments subtracted from the median-home-price data are used to arrive at these figures.

Source: ZeroHedge

Americans Can’t Afford To Buy A Home In 70% Of The Country

Even at a time of low interest rates and rising wages, Americans simply can’t afford a home in more than 70% of the country, according to CBS. Out of 473 US counties that were analyzed in a recent report, 335 listed median home prices were more than what average wage earners could afford. According to the report from ATTOM Data Solutions, these counties included Los Angeles and San Diego in California, as well as places like Maricopa County in Arizona.

New York City claimed the largest share of a person’s income to purchase a home. While on average, earners nationwide needed to spend only about 33% of their income on a home, residents in Brooklyn and Manhattan need to shell out more than 115% of their income. In San Francisco this number is about 103%. Homes were found to be affordable in places like Chicago, Houston and Philadelphia.

This news is stunning because homes are considerably more affordable today than they were a year ago. Although prices are rising in many areas, they are also falling in places like Manhattan. Unaffordability in the market has been the result of slower home building and owners staying in their homes longer. Both have reduced the supply of homes in the market.

And the market may continue to create better conditions for buyers. Affordability could improve because of the fact that homes are out of reach for so many seekers, according to Todd Teta, chief product officer at ATTOM Data Solutions. Today’s market is also more affordable than it was a decade ago, before the crisis. Home prices were about the same prior to the crisis, even though income adjusted for inflation was lower.

“What kept the market going was looser lending standards, so that was compensating for affordability issues,” Teta said. Since then, standards have toughened (for now, at least).

We recently wrote about residents of New York City who simply claimed they couldn’t afford to live there.

More than a third of New York residents complained that they “can’t afford to live there” anymore (and yet they do). On top of that, many believe that economic hardships are going to force them to leave the city in five years or less, according to a Quinnipiac poll published a couple weeks ago. The poll surveyed 1,216 voters between March 13 and 18.

In total, 41% of New York residents said they couldn’t cope with the city’s high cost of living. They believe they will be forced to go somewhere where the “economic climate is more welcoming”, according to the report.

Ari Buitron, a 49-year-old paralegal from Queens said: “They are making this city a city for the wealthy, and they are really choking out the middle class. A lot of my friends have had to move to Florida, Texas, Oregon. You go to your local shop, and it’s $5 for a gallon of milk and $13 for shampoo. Do you know how much a one-bedroom, one-bathroom apartment is? $1700! What’s wrong with this picture?”

Source: ZeroHedge

HUD Planning Crackdown On Illegal Aliens Taking Advantage Of Public Housing

The Department of Housing and Urban Development (HUD) will be proposing a new rule that further prevents illegal immigrants from taking advantage of public housing assistance, The Daily Caller has learned.

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Section 214 of the Housing and Community Development Act prevents non-citizens from obtaining financial housing assistance. However, the presence of so-called “mixed families” has complicated the enforcement of the rule. Illegal immigrants have previously been able to skirt the restrictions by living with family members who are U.S. citizens and receive subsidized housing through HUD. (RELATED: Trump’s HUD Official Moves To The Projects In The Bronx)

HUD intends to roll out a proposal over the next few weeks that prohibits any illegal immigrant from residing in subsidized housing, even if they are not the direct recipient of the benefit. HUD currently estimates that tens of thousands of HUD-assisted households are headed by non-citizens.

Families who are caught gaming the system by allowing illegal immigrants to stay with them either have to comply with the new rule or they will be forced to move out of their residence.

Households will be screened through the Systematic Alien Verification for Entitlements, or “SAVE,” program.

An administration official told the Caller that this is a continuation of the president’s “America First” policies.

“This proposal gets to the whole point Cher was making in her tweet that the President retweeted. We’ve got our own people to house and we need to take care of our citizens,” the official said. “Because of past loopholes in HUD guidance, illegal aliens were able to live in free public housing desperately needed by so many of our own citizens. As illegal aliens attempt to swarm our borders, we’re sending the message that you can’t live off of American welfare on the taxpayers’ dime.”

According to HUD, there are currently millions of American citizens on the waitlist for government-assisted housing because the department does not have enough resources to provide every eligible family with financial assistance.

The president has repeatedly lamented the drain that illegal immigration has on resources for American families.

Source: by Amber Athey | The Daily Caller

***

HUD moves to cancel illegal aliens’ public housing access

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The Trump administration is proposing a new rule to try to block some 32,000 illegal immigrant-led families from claiming public housing assistance, saying it’s unfair to hundreds of thousands of Americans who are stuck on waiting lists.

41% Of New York Residents Say They Can No Longer Afford To Live There

More than a third of New York residents complaint that they “can’t afford to live there” anymore (and yet they do). On top of that, many believe that economic hardships are going to force them to leave the city in five years or less, according to a Quinnipiac poll published Wednesday. The poll surveyed 1,216 voters between March 13 and 18. 

In total, 41% of New York residents say they can’t cope with the city’s high cost of living. They believe they will be forced to go somewhere where the “economic climate is more welcoming”, according to the report.

Ari Buitron, a 49-year-old paralegal from Queens said: “They are making this city a city for the wealthy, and they are really choking out the middle class. A lot of my friends have had to move to Florida, Texas, Oregon. You go to your local shop, and it’s $5 for a gallon of milk and $13 for shampoo. Do you know how much a one-bedroom, one-bathroom apartment is? $1700! What’s wrong with this picture?”

https://www.zerohedge.com/s3/files/inline-images/apartments%20for%20rent%20new%20york.jpg?itok=BSU4QTYO

In response to a similar poll in May 2018, only 31% of respondents said they felt as though they would be forced to move, indicating that the outlook among residents is getting much worse – very quickly.

New York native Dexter Benjamin said: “I am definitely not going to be here five years from now. I will probably move to Florida or Texas where most of my family has moved.”

Many of those who have moved, prompted by New York’s tax burden and new Federal law that punishes high tax states, aren’t looking back. Robert Carpenter, 50, who moved from Brooklyn to New Jersey told the Post: “Moving to New Jersey has only added 15 minutes to my commute! And I am still working in Downtown Brooklyn. I save about $300 extra a month, which in the long run it matters.”

He continued: “Because of the city tax and the non-deductibility of your real estate taxes, we’re seeing a lot more people with piqued interest.”

The poll also found that minorities have an even more pessimistic outlook on things. Non-whites disproportionately ranked their situations as “poor” and “not good” according to the poll.

Clifton Oliver, 43, who is black and lives in Washington Heights, said: “When I moved here there was no H&M, no Shake Shack — it was authentically African-American New York Harlem. Now Neil Patrick Harris lives down the block. People are going down south to Florida, Alabama, Baltimore.”

Source: ZeroHedge

Basement-Dwelling Millennials Beware: Reverse Mortgages May Evaporate Your Inheritance

With nearly 90% of millennials reporting that they have less than $10,000 in savings and more than 100 million Americans of working age with nothing in retirement accounts, we have bad news for basement-dwelling millennials invested in the “waiting for Mom and Dad to die” model;

Reverse mortgages are set to make a comeback if a consortium of lenders have their way, according to Bloomberg.

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Columbia Business School real estate professor Chris Mayer – who’s also the CEO of reverse mortgage lender Longbridge Financial, says the widely-panned financial arrangements deserve a second look. Mayer is a former economist at the Federal Reserve of Boston with a Ph.D. from MIT. 

In 2012, Mayer co-founded Longbridge, based in Mahwah, New Jersey, and in 2013 became CEO. He’s on the board of the National Reverse Mortgage Lenders Association. He said his company, which services 10,000 loans, hasn’t had a single completed foreclosure because of failure to pay property taxes or insurance. –Bloomberg

Reverse mortgages allow homeowners to pull equity from their home in monthly installments, lines of credit or lump sums. Over time, their loan balance grows – coming due upon the borrower’s death. At this point, the house is sold to pay off the loan – typically leaving heirs with little to nothing

Elderly borrowers, meanwhile, must continue to pay taxes, insurance, maintenance and utilities – which can lead to foreclosure.

While even some critics agree that reverse mortgages make sense for some homeowners – they have been criticized for excessive fees and tempting older Americans into spending their home equity early instead of using it for things such as healthcare expenses. Fees on a $100,000 loan on a house worth $200,000, for example, can total as much as $10,000 – and are typically wrapped into the mortgage. 

The profits are significant, the oversight is minimal, and greed could work to the disadvantage of seniors who should be protected by government programs and not targeted as prey,” said critic Dave Stevens – former Obama administration Federal Housing Administration commissioner and former CEO of the Mortgage Bankers Association. 

To support his claims that reverse mortgages are far less risky than they used to be, Mayer cites a 2014 study by Alicia Munnell of Boston College’s Center for Retirement Research. Munnell, a professor and former assistant secretary of the Treasury Department in the Clinton Administration (who once invested $150,000 in Mayer’s company and has since sold her stake). Munnell concluded that industry changes requiring lenders to assess a prospective borrower’s ability to pay property taxes and homeowner’s insurance significantly reduces the risk of a reverse mortgage

The number of reverse mortgages, or Home Equity Conversion Mortgages (HECM) in the United States between 2005 and 2018 has not shown a recent upward trend – however that may change if Mayer and his cohorts are able to convince homeowners that reverse mortgages aren’t what they used to be.

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Cleaning up their image

For years, the reverse mortgage industry has relied on celebrity pitchmen to convince Americans to part with the equity in their homes in order to maintain their lifestyle. 

The late Fred Thompson, a U.S. senator and Law & Order actor, represented American Advisors Group, the industry’s biggest player. These days, the same company leans on actor Tom Selleck.

Just like you, I thought reverse mortgages had to have some catch,” Selleck says in an online video. Then I did some homework and found out it’s not any of that. It’s not another way for a bank to get your house.

Michael Douglas, in his Golden Globe-winning performance on the Netflix series The Kominsky Method, satirizes such pitches. His financially desperate character, an acting teacher, quits filming a reverse mortgage commercial because he can’t stomach the script. –Bloomberg

In 2016, American Advisers and two other companies were accused by the US Consumer Financial Protection Bureau of running deceptive ads. Without admitting guilt, American Advisers agreed to add more caveats to its promotions and paid a $400,000 fine. 

As a result, the company has made “significant investments” in compliance, according to company spokesman Ryan Whittington, adding that reverse mortgages are now “highly regulated, viable financial tools,” which require homeowners to undergo third-party counseling before participating in one. 

The FHA has backed more than 1 million such reverse mortgages. Homeowners pay into an insurance fund an upfront fee equal to 2 percent of a home’s value, as well as an additional half a percentage point every year.

After the last housing crash, taxpayers had to make up a $1.7 billion shortfall because of reverse mortgage losses. Over the past five years, the government has been tightening rules, such as requiring homeowners to show they can afford tax and insurance payments. –Bloomberg

As a result of tightened regulations, the number of reverse mortgage loans has dropped significantly since 2008. 

Making the case for reverse mortgages is Shelly Giordino – a former executive at reverse mortgage company Security 1 Lending, who co-founded the Funding Longevity Task Force in 2012. 

Giordino now works for Mutual of Obama’s reverse mortgage division as their “head cheerleader” for positive reverse mortgages research. One Reverse Mortgage CEO Gregg Smith said that the group is promoting “true academic research” to convince the public that reverse mortgages are a good idea. 

Mayer under fire

University of Massachusetts economics professor Gerald Epstein says that Columbia may need to scrutinize Mayer’s business relationships for conflicts of interest. 

They really should be careful when people have this kind of dual loyalty,” said Epstein. 

Columbia said it monitors Mayer’s employment as CEO of the mortgage company to ensure compliance with its policies. “Professor Mayer has demonstrated a commitment to openness and transparency by disclosing outside affiliations,” said Chris Cashman, a spokesman for the business school. Mayer has a “special appointment,” which reduces his salary and teaching load and also caps his hours at Longbridge, Cashman said.

Likewise, Boston College said it reviewed Professor Munnell’s investment in Mayer’s company, on whose board she served from 2012 through 2014. Munnell said another round of investors in 2016 bought out her $150,000 stake in Longbridge for an additional $4,000 in interest.

“Anytime I had a conversation like this, I had to say at the beginning that I have $150,000 in Longbridge,” said Munnell. “I had to do it all the time. I’m just as happy to be out, for my academic life.” 

Source: ZeroHedge

The Most Splendid Housing Bubbles in America Get Pricked

San Francisco Bay Area & Seattle lead with biggest multi-month drops since 2012; San Diego, Denver, Portland, Los Angeles decline. Others have stalled. A few eke out records.

San Francisco and San Diego are catching the Seattle cold, and others are sniffling too, as the most splendid housing bubbles in America are starting to run into reality.

House prices in the Seattle metro dropped 0.6% in December from November, according to S&P CoreLogic Case-Shiller Home Price Index, released this morning, and have fallen 5.7% from the peak in June 2018, the biggest six-month drop since the six-month drop that ended in February 2012 as Housing Bust 1 was bottoming out. The index is now at the lowest level since February 2018. After the breath-taking spike into June, the index is still up 5.1% year-over-year, and is 27% higher than it had been at the peak of Seattle’s Housing Bubble 1 (July 2007):

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-Seattle-2019-02-26.png

So Seattle’s Housing Bubble 2 is unwinding, but more slowly than it had inflated. Many real estate boosters simply point at the year-over-year gain to say that nothing has happened so far — which makes it a picture-perfect “orderly decline.”


San Francisco Bay Area:

The Case-Shiller index for “San Francisco” includes five counties: San Francisco, San Mateo (northern part of Silicon Valley), Alameda, Contra Costa (both part of the East Bay ), and Marin (part of the North Bay). In December, the index for single-family houses fell 1.4% from November, the steepest month-to-month drop since January 2012. The index is now down 3% from its peak in July, the biggest five-month drop since March 2012.

Given the surge in early 2018, the index is still up 3.6% from a year ago and remains 37% above the peak of Housing Bubble 1, fitting into the theme of a perfect orderly decline:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-San-Francisco-Bay-Area-2019-02-26.png

Case-Shiller also has separate data for condo prices in the five-county San Francisco Bay Area, and this index fell 0.9% in December from November, after an blistering 2.4% drop in the prior month. From the peak in June 2018, the index has now dropped 4.2%, the steepest six-month drop since February 2012:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-San-Francisco-Bay-Area-Condos-2019-02-26.png

The Case-Shiller Home Price Index is a rolling three-month average; this morning’s release tracks closings that were entered into public records in October, November, and December. By definition, this causes the index to lag more immediate data, such as median prices, by several months.

The index is based on “sales pairs,” comparing the sales price of a house in the current month to the prior transaction of the same house years earlier (methodology). This frees the index from the issues that plague median prices and average prices — but it does not indicate prices.

It was set at 100 for January 2000; a value of 200 means prices as tracked by the index have doubled since the year 2000. Every index on this list of the most splendid housing bubbles in America, except Dallas and Atlanta, has more than doubled since 2000.

The index is a measure of inflation — of house-price inflation. It tracks how fast the dollar is losing purchasing power with regards to buying the same house over time.

So here are the remaining metros on this list of the most splendid housing bubbles in America.

San Diego:

House prices in the San Diego metro declined 0.7% in December from November and are now down 2.6% from the peak in July, the biggest five-month drop since March 2012, leaving the index at the lowest level since February 2018, and just one hair above the peak of Housing Bubble 1:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-San-Diego-2019-02-26.png

Los Angeles:

The Case-Shiller index for the Los Angeles metro was about flat in December with November but down 0.5% from the peak in August — don’t laugh, the largest four-month decline since March 2012. What this shows is just how relentless Housing Bubble 2 has been. The index is up 3.7% year-over-year:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-Los-Angeles-2019-02-26-B.png

Portland:

The Case-Shiller Index for the Portland metro inched down in December from November for the fifth month in a row and is now down 1.4% from the peak in July 2018. And that was the steepest five-month drop since March 2012. Year-over-year, the index was up 3.9%:

https://wolfstreet.com/wp-content/uploads/2019/01/US-Housing-Case-Shiller-Portland-2019-01-29.png

Denver:

House prices in the Denver metro edged down in December from November for the fourth month in a row, after an uninterrupted 33-month run of monthly increases. The four-month drop amounted to 0.9%, which, you guessed it, was the steeped such drop since March 2012. The index is at the lowest level since May 2018 but is still up 5.5% year-over-year:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-Denver-2019-02-26.png

Dallas-Fort Worth:

The Case-Shiller Index for the Dallas-Fort Worth metro in December ticked up by less than a rounding error to a new record, leaving it essentially flat for the seventh month in a row. The index is up 4.0% year-over-year:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-dallas-2019-02-26.png

Boston:

In the Boston metro, house prices dipped 0.5% in December from a record in November and are now back where they’d been in June. The Case-Shiller Index is up 5.3% from a year ago:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-Boston-2019-02-26.png

Atlanta:

The Case-Shiller Home Price Index for the Atlanta metro inched up a smidgen in December, to a new record, and is up 5.9% from a year ago:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-Atlanta-2019-02-26.png

New York City Condos:

The Case-Shiller index for condo prices in the New York City metro ticked down in December for the second month in a row after a mighty bounce in September and an uptick in October. This index can be volatile, but after all these bounces and declines, the index was up just 1.5% from a year ago, the smallest year-over-year price gain on this list of the most splendid housing bubbles in America:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-New-York-condos-2019-02-26.png

On a national basis, these individual markets get averaged out with other markets that didn’t quite qualify for this list since their housing bubble status has not reached the ultimate splendidness yet. Some of those markets, such as the huge metro of Chicago, remain quite a bit below their Housing Bubble 1 peaks and are now declining, while others are shooting higher.

So the Case-Shiller National Home Price Index has been about flat since July, but is still up 4.7% year-over-year and is 11% higher than it had been at its prior peak in July 2006 during Housing Bubble 1:

https://wolfstreet.com/wp-content/uploads/2019/02/US-Housing-Case-Shiller-National-Index-2019-02-26.png

It always boils down to this: Regardless of how thin you cut a slice of bologna, there are always two sides to it. When home prices drop after a housing bubble, there are many losers. But here are the winners – including a whole generation. Listen to my latest podcast, an 11-minute walk on the other side…

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Why Are An Increasing Number Of High-Income Americans Choosing To Rent?

(MishTalk) The percentage of high-income households choosing to rent is on the rise. High-income is defined as $150,000 and up.

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2814%29.jpg?itok=mVkK1F7g

The Rent Cafe reports High-Income Americans Are the Fastest Growing Renter Segment — Up by 1.35 Million in a Decade.

The most recent U.S. Census data tells us that the annual increase in the number of high-income renter-occupied households – defined here as those earning $150,000 or more – has been consistently faster than owner-occupied households. As a matter of fact, from 2007 to 2017, the numbers of those rich enough to own, yet who still prefer to rent grew by 175%. That’s compared to a decade-long increase of 67% in homeowners within the same income bracket.

Top-Earning Renters Are Growing Faster than Any Other Renter Income Bracket

Of the 43.3 million renters nationwide, 2.1 million are top earners. High-income renters represent the demographic that experienced the largest boom across the U.S. given that, back in 2007, there were only 774,000.

Breakdown

  • Over $150K — ↑175%
  • $100K – $150K — ↑111%
  • $75K – $100K — ↑66%
  • $50K – $75K — ↑32%
  • Under $50K —↓0.2%

High-Income Renter-Occupied vs Homeowner-Occupied Households 2007-2017

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2815%29.jpg?itok=og0hQlCI

Debate Over High-Income Definition

Arguably, $150K may not be enough to qualify as high-income in places like San Francisco or New York City, which is probably why the two cities have the largest numbers of renter-occupied households inside this bracket.

NYC’s upper-bracket renters outpace owners not only in net numbers but also in the rate of increase. Wealthy renter-occupied households in New York doubled in the course of a decade, going from 125,000 in 2007 to the largest number of wealthy renters in the U.S. today — 249,000. As for people earning $150K or more who own a home in the Big Apple, their numbers have increased by a lesser 63% over the course of a decade (189,000 in 2007 to 306,000 ten years later).

Top 10 Cities With High-Income Renters

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2816%29_0.jpg?itok=eNMXepdt

American Dream

The Rent Cafe concluded. “The attitude toward renting at any income level is changing. With renters becoming the majority population in many U.S. cities, the spike in the national population of wealthy renter households could mean a change in attitude toward an American Dream that no longer belongs to this generation of renters.”

Marriage Rates Down, Cohabitation Up

https://www.zerohedge.com/s3/files/inline-images/https___s3-us-west-2.amazonaws%20%2817%29.jpg?itok=Oy6khVgc

Not Just Student Debt

The Rent Cafe article ties in nicely with my previous report: Marriage Rates Down, Cohabitating Rates Up: It’s Not Just Student Debt to Blame

Attitudes, Attitudes, Attitudes

A Fed study on Consumers and Communities released last month had an interesting comment on homeownership.

“We estimate that roughly 20 percent of the decline in homeownership among young adults can be attributed to their increased student loan debts since 2005. Our estimates suggest that increases in student loan debt are an important factor in explaining their lowered homeownership rates, but not the central cause of the decline.”

The rest is explained by changing attitudes and affordability.

Attitudes about marriage, having kids, mobility, and debt have all changed.

This is not 1960 or 1971.

To top it off, houses simply are not affordable. That’s what the cohabitation rate shows. Wages have not kept up with home prices even without the burden of student debt.

American Dream

Even when high-income households can afford a house, many choose to rent instead. Why?

  1. Changing attitudes about the “American Dream”.
  2. The Marriage Tax Penalty
  3. The Remarriage Penalty

Reader “Cecilia” thoughtfully added “Liquidity and Walk Away Arbitrage”, which also ties into the remarriage issue.

Remarrying can greatly complicate divorce financial arrangements. It’s easier to live with someone. No one wants a second divorce, especially if the first one was messy.

Source: ZeroHedge

 

Oregon Defies Logic With Statewide Rent Control

It is often said by cynical economists and political commentators, usually of the right or libertarian persuasion, that the road to hell is paved with good intentions. There is no more odious and damaging economic policy that comes from the heart than rent control. For years, limiting the cost of living spaces was done at the local level, but one West Coast state aims to be the first to implement statewide rent controls.

https://www.zerohedge.com/s3/files/inline-images/rent1.png?itok=vibPikMf

Oregon’s Proposed Rent Controls

Oregon is set to pass SB 608, legislation that prohibits landlords from raising rents in the first year of a resident’s tenancy. The bill would also cap future rent hikes at 7% annually, plus inflation. This will target all rental properties 15 years or older but exempt units that are a part of a government housing project.

It should be noted that SB 608 does not have vacancy controls, which means buildings can jack up the rent by any amount once the tenant gives his or her notice. Because of this, the legislation bans no-cause evictions, so any landlord must offer a government-approved excuse for evicting a tenant.

With Democratic supermajorities in both chambers of the legislature, SB 608 is likely to pass, making Oregon the first state with statewide rent control.

Gov. Kate Brown (D-OR) is proud of the move, saying in her inaugural address:

“We also need to help Oregonians who have homes but are struggling with the high cost of rent. We can help landlords and tenants navigate this tight housing market. Speaker [Tina] Kotek and Sen. [Ginny] Burdick have innovative proposals that will give renters some peace of mind.”

Lawmakers are jubilant over the bill, but economic experts call the Beaver State’s policy proposal risky, including Mike Wilkerson of ECONorthwest, an economics consulting firm, telling Reason: “You’d be hard-pressed to find any economist who comes out in favor of rent control as a means to help improve whatever failure you are experiencing.”

Rent Control Hurts the Poor

First, it is important to examine the justification for rent controls. Advocates contend that it is immoral for someone who has lived in a neighborhood his entire life to be suddenly priced out of it. It is also wrong, they assert, that landlords are just sitting on their rear ends, enjoying higher rents, because there is a greater demand to reside in New York, San Francisco, or Boston than in Jerome, AZ, or Bonanza, CO.

Proponents will ignore the unintended consequences of rent control. New properties are not erected, vacancy rates plunge, existing landlords exit the market, and the small supply of housing diminishes. Landlords will try to evade regulations by transforming their units into condominiums, luxury apartments, furnished suites, or offices.

Advocates also overlook two other important facts: Real estate can be utilized for a diverse array of purposes (commercial, housing, or industrial), and these laws distort pricing signals.

Ultimately, the state plays a game of cat-and-mouse, coming up with intrusive ways to rein in the evaders. Regulation begets regulation.

New York City

When World War II ended and peacetime reigned supreme in America again, things were not what they used to be, at least for the thousands of troops returning home. After being engaged in battles overseas, soldiers had a new front to fight at home: life – and everything it had to offer.

Despite the inflation rate either contracting or rising in single digits between 1947 and 1952, the cost of living ballooned for the returning heroes of the Armed Forces. One area of the country that increasingly priced these men out of the market was New York City, where real estate values were skyrocketing – and still are!

Officials had an idea to help everyone affected by rising housing costs: rent controls. While the goal was to make units more affordable, the city made the situation worse by introducing temporary relief.

Like economist Milton Friedman once quipped, “There is nothing more permanent than a temporary government program.” This relic of 1947 is still around today, exacerbating the housing affordability crisis. It is estimated that approximately 50,000 apartments and one million rent-stabilized units are controlled by a 70-year-old law.

To understand how egregious this policy is, look no further than former Rep. Charles Rangel (D-NY). The Wall Street Journal reported in September 2008 that he occupied “four rent-stabilized apartments in a posh New York City building,” living in three and using another as an office. By holding four properties, he took advantage of valuable resources at below-market prices at the expense of others.

Controls

Is there a difference between bombs and rent control? Economists often pose this question when debating the efficacy of government controls. The Mises Institute’s Joseph Salerno delivered a lecture a few years ago, showing pictures of urban areas and asking his audience if these dilapidated units were the victims of a bombing campaign or rent controls.

When you even pose the question, you know it’s necessary to second-guess the prescription.

Any time officials use “controls,” you know the policy is going to be a failure. Whether it is preceded by “price” or “rent,” this economically defiant measure produces destitution, deterioration, and destruction. It’s too bad politicians and bureaucrats never learn their lesson.

Source: ZeroHedge

Roughly Half Of Millennials Have No Money Saved For A Down Payment

Millennials are on the cusp of surpassing baby boomers as the largest generational demographic in the US, yet a startling plurality of them are woefully under prepared to assume the typical trappings of adulthood – like starting a family and buying a home.

And in a detailed report published this week, analysts at ApartmentList illustrated just how wide of a gulf lies between millennials and their economic and financial goals. Perhaps the most surprising finding: Nearly half of millennial renters have zero money saved for a down payment – which doesn’t bode well for the housing market, where home prices have surpassed their pre-crisis highs (though signs of weakness are starting to emerge). And just 11% say they have $10,000 saved.

https://www.zerohedge.com/sites/default/files/inline-images/2018.12.12millennialstwo.JPG?itok=9BvNWq85

To wit, 72% of millennial renters cite “affordability” as the biggest factor barring them from home ownership. Student debt is another factor: While 23% of college graduates might be able to scrape together enough for a down payment, that figure falls to 12% for those who are currently paying off student loans.

But these aren’t the only factors holding millennials back from home ownership. A handful of macroeconomic trends are also to blame: Much of the generation came of age during or in the aftermath of the Great Recession, resulting in limited opportunities and stagnant wage growth in the crucial early stages of millennials’ careers. Construction of new single-family homes has lagged significantly in recent years, leading to a severe shortage of starter homes.

Roughly 9 in 10 millennial renters want to purchase a home; but just 4.4% plan to do so within the next year:

https://www.zerohedge.com/sites/default/files/inline-images/2018.12.12apartment.JPG?itok=R-mh_rNr

The “burden of affordability” primarily manifests in millennials inability to scrape together enough money for a down payment:

https://www.zerohedge.com/sites/default/files/inline-images/2018.12.12millennials.JPG?itok=EDhkDd8u

And even if they can manage to save some money, the amount needed for a down payment is often larger than they think:

https://www.zerohedge.com/sites/default/files/inline-images/2018.12.12downpayment.JPG?itok=aHdCXuQp

And at the present average savings rate, most millennials will need more than two decades to save up enough for a down payment.

https://www.zerohedge.com/sites/default/files/inline-images/2018.12.12downpaymentthree.JPG?itok=33IzSzfP

Ironically, millennials with the highest incomes receive the most help from family for their down payments.

https://www.zerohedge.com/sites/default/files/inline-images/2018.12.12millennialsfive.JPG?itok=tGb4OYOv

And as we mentioned above, student-loan debt is one of the biggest obstacles absorbing all of the money that would otherwise be saved for a down payment.

https://www.zerohedge.com/sites/default/files/inline-images/2018.12.12student.JPG?itok=eEX1e_Se

The upshot of this is that, instead of accumulating wealth in a home – which has always been the primary source of value for American families – millennials will continue throwing it away on rent, which offers them no return and no security later in life.

Source: ZeroHedge

Over 150 People Move Out Of Chicago Every Day

With its nation-leading murder rate, lake-effect weather, endemic corruption and financial mismanagement, who really wants to live in Chicago? Well, the data is in, and as Mayor Rahm Emmanuel prepares to hand power to a new administration next year, his legacy – already marred by the above-mentioned scourges – has accrued another ignominious distinction. According to Census data analyzed by Bloomberg, Chicago experienced the highest daily net migration in the US, losing 156 residents a day (strictly due to migration, not murder) a day in 2017.

After Chicago, Los Angeles came second with 128, followed by New York with 132.

On the other side of that coin were cities across the US sun belt, like Dallas (No. 1, with 246 net incoming), followed by Phoenix (with 174) and Atlanta (No. 3 with 147).

https://www.zerohedge.com/sites/default/files/inline-images/2018.12.14tripledigits.JPG?itok=2ikoSSfuhttps://www.zerohedge.com/sites/default/files/inline-images/2018.12.14bbgtwo.JPG?itok=NGSUAKFp

In terms of total net migration for the year, the tallies differed only slightly. While the sun belt was the biggest beneficiary of Americans’ growing preference for sunnier weather, lower rents and plentiful job opportunities…

Dallas was the greatest beneficiary of this domestic migration, adding nearly 59,000 domestic movers in 2017, followed by Phoenix (51,000) and Tampa (41,000), which serve as anchors for the western and southern regions that got the bulk of the gains.

…some of America’s largest cities saw net outflows as rising rents, crumbling (or inadequate) public infrastructure. The city with the biggest outflow was NYC, followed by Los Angeles and – in third place – beautiful Bridgeport, Conn.

On the flip side, more than 208,000 residents left the New York City metropolitan area last year. This was nearly twice as many as the second biggest loser, Los Angeles, which had a decline of nearly 110,000. Chicago fell by 85,000. Honolulu, San Jose, New York and Bridgeport, CT lost the highest shares of their residents to other parts of the country.

In Chicago, New York and Los Angeles, the three areas with a triple-digit daily exodus, people are fleeing at a greater rate than just a few years earlier. Soaring home prices and high local taxes are pushing local residents out and scaring off potential movers from other parts of the country.

But maybe if Emmanuel’s successor can successfully implement the outgoing mayor’s plans for a city wide UBI (which we imagine would go a long way toward offsetting its hated ‘amusement tax’ and other levies needed to pay off the city’s brutal debt burden), maybe he can bribe residents into staying.

Source: ZeroHedge

“A Rough Decade Ahead” – ‘Math’ & The Future Of The US Housing Market

Authored by Chris Hamilton via Econimica blog,

Summary

  • New Housing is being Created at an Unprecedented 2.5x’s the pace of the Growth of the 15 to 64yr/old Population
  • Total Annual Population Growth Has Slowed 25% from Peak Growth, 2 Decades Ago
  • However, Annual Population Growth Among 15 to 64yr/olds Has Slowed Over 80% From Peak Growth & Will Continue Decelerating Through 2030
  • 15 to 64yr/olds Do Nearly all the Net Home Buying, 65+yr/olds Net Home Selling
    • 15 to 64yr/olds Have a 70% Labor Force Participation Rate vs. 27% for 65-74yr/olds, just 8% for 75+yr/olds
    • 15 to 64yr/olds Earn and Spend Double that of 65-74yr/olds & triple that of 75+yr/olds
    • 65+yr/olds Have Highest Home ownership Rate at 78% vs. Just 36% for Group with Lowest Rate, 15 to 34yr/olds
    • 15-64yr/olds are Credit Willing Relative to Credit Averse 65+yr/olds

I read an article a few days ago that got me thinking.  The article’s author claimed,

“At 5% mortgage rates and with today’s level of affordability, history shows that there is nothing in the way from having a home building boom over the next ten years to satisfy this demographic demand.”

I found the claim contrary to everything I think I know, so I thought I’d lay out the counter argument.

The chart below shows annual growth of the 15+yr/old US population (blue columns) vs. the annual growth of the 15 to 64yr/old population (red balls).  The 15+yr/old annual population growth has fallen 25% (decline of a half million annually) since the 1998 peak but more significantly, the 15 to 64yr/old annual population growth has fallen over 80% (decline of 1.8 million/yr) due to a combination of lower immigration rates and lower birth rates.

https://www.zerohedge.com/sites/default/files/inline-images/40246456-1540573727993815.png?itok=TOw6SAp-

These population growth trends will only continue to slow through 2030, according to UN and Census estimates (not really estimates, since this population is already born and simply advancing into adulthood).  The future estimates for 15 to 64yr/old population growth (presented above) include estimated immigration well above present rates.  Most, if not all (net) of the assumed 15 to 64yr/old minimal population growth is premised on ongoing immigration that continues slowing.  Thus the forward looking 15 to 64yr/old growth estimates are likely to be lower and perhaps even turning to outright annual declines.

The chart below shows average income, spending, and LFP (labor force participation) rates by age segment.  No shocker, those actively working make and spend more than those with low rates of employment.  Those who have worked longer earn more than those new to the labor force.  Elderly expenditures come into very close alignment with their (generally) fixed incomes.

https://www.zerohedge.com/sites/default/files/inline-images/40246456-15405775019409947.png?itok=pGk1ZXnO

Noteworthy is that 75+yr/olds have only an 8% LFP rate but will make up over half of the total 65+yr/old population growth through 2030.  The next largest growth segment is among 70 to 74yr/olds with a 19% LFP rate, and the smallest increase is among the 65 to 69yr/olds with a 32% LFP.   As an aside, 65+ year olds have the highest home ownership rates at 78% vs. 36% for those aged 15 to 34. So while the more affluent portion (5% to 20%?) of 65+yr/olds may be interested in a second home in the desert, the mountains, or beach…the majority already own and are eventually looking to downsize.  Simply stated, nearly all the coming growth is among those that work the least, earn the least, spend the least, already own homes, and are more likely to downsize than buy a second home.

https://www.zerohedge.com/sites/default/files/inline-images/40246456-15405820325401883.png?itok=tYwxN_9R

Putting it all together (chart below), annual 15+yr/old total population growth (blue columns), 15 to 64yr/old population growth (red line), housing starts (yellow line), and federal funds rate (black line).  Given it is the 15 to 64yr/old population that does the net home buying, (and growth among them continues decelerating…coupled with rising rates and elevated valuations versus most population growth among 75+yr/olds who are more likely to sell via downsizing and/or willing properties to their heirs) I contend the US is creating too many homes presently, not too few.  Of course, this doesn’t even factor in things like the lack of income growth among the vast majority those working, high student debt loads, slowing household formation, continued delayed family formation and the lowest birth rates in US history which were just recorded in the first quarter of 2018 (according to CDC…HERE), etc. etc.

https://www.zerohedge.com/sites/default/files/inline-images/40246456-15405930794152036.png?itok=DjqawWsJ

Contrary to the author of the article that inspired me, I contend that housing is in for another very rough decade (at the very least)… likely worse than the period during the GFC.  The math is pretty straightforward on this one.

Source: ZeroHedge

Record Inventory Floods Seattle, Sending Home Prices Significantly Lower

This is how housing markets turn. Slowly, then all at once.

Seven years of Seattle home prices outpacing wage growth because of low rates; bidding wars replaced by sales at the asking price; days or weeks on the market turning into months; sellers reduce home prices; surging mortgage rates; buyers disappear, and wallah – a classic turning point in an auction, otherwise known as an unfair high that is now rippling through the real estate food chain in the Seattle area.

As a reminder, before we dive into the faltering real estate market in Seattle. Back in September, we outlined a significant clue about the overall health of America’s housing industry: Bank of Ameria called it: “The Peak In-Home Sales Has Been Reached; Housing No Longer A Tailwind.”

With that in mind, it comes as no surprise that inventory countywide soared 86% among single-family homes and 188% among condos in October compared to a year prior, according to newly published data by the Northwest Multiple Listing Service. It was the most massive year-over-year increase on record, dating back to the Dotcom bust, a rhythm that has some asking: Is the housing industry about to go bust?

Mike Rosenberg, a Seattle Times real estate reporter, has been documenting the rise and fall of the real estate market on the West Coast.

Rosenberg said the median home price plummeted to $750,000, down $25,000 in one month and down $80,000 from all-time highs in spring.

He warned, “that is not a normal seasonal drop — prices in the city actually went up during those time frames last year.”

Compared to 2017, prices inched up about 2%. He said interest rates had moved higher in that span have increased monthly mortgage costs.

On the Eastside, the median home sold for $890,000, unchanged from the previous month, but down $87,000 from the all-time high in late summer. On a year-over-year basis, prices were still up 5.3%.

https://www.zerohedge.com/sites/default/files/inline-images/sales%20map.png?itok=wGv4JCCX

Rosenberg notes that prices dipped on a month-over-month basis in South King County but surged at the northern end of the county. He said inventory is flooding the market at the same time as buyer demand evaporates.

https://www.zerohedge.com/sites/default/files/inline-images/Oct%20home%20sales.png?itok=HokTF4vt

As we highlighted in the BofA report, sellers across the country are unloading properties into a weakening market will trigger downward momentum in prices.

Back to Seattle, that is precisely what is happening, as sellers have reacted by cutting asks faster than any other metro area in the country. To make matters worse, buyers are now negotiating prices down even further, as the average home is selling for below list price for the first time in four years, said Rosenberg.

Rising interest rates, declining demand, and flat-lining rents have been the main drivers of failing home buyer demand in the second half of 2018.

Into the fall months, brokers told Rosenberg that buyers are now pausing as they wait for the storm to blow over. 

Ken Graff, a broker with Coldwell Banker Bain in Seattle, listed a townhouse in Magnolia on the market in April, “right before the apparent peak of the market,” and had 11 bidders who ferociously fought for the home, with a winning bid for $800,000. In September, he listed an identical town home in the same neighborhood, it stood on the market for three weeks before selling for $725,000.

“Buyers are still having to pay a premium for Seattle-area properties, but it lacks the frenzy we’ve seen in the last few years,” Graff said.

“People can be a little more measured now, which is a good thing.”

Among other regions where home prices have dropped in October on a year-over-year basis: West Bellevue, Southeast Seattle, Burien-Normandy Park, and the Skyway area. On the other end, prices rose more than 10% from a year ago in Jovita-West Hill Auburn, Auburn, Kent, Renton-Benson Hill, Mercer Island, Kirkland-Bridle Trails and Juanita-Woodinville.

Elsewhere, the rest of the Puget Sound region also saw expanding inventory, including a 65% increase in Snohomish County.

https://www.zerohedge.com/sites/default/files/inline-images/home%20price%20activity.png?itok=Vh7i0Cad

The slowdown in Seattle housing shows little signs of abating as the Federal Reserve is expected to hold rates on Thursday before a hike in December. At their most recent meeting in late September, Fed officials communicated a plan for three more hikes in 2019. With one more rate hike forecasted in 2018 and three more in 2019, it seems that Seattle and much of the country’s real estate market could be at a significant turning point into the 2020 presidential elections. Let us hope real estate prices do not fall even further, as many home buyers could vote with their home prices.

Source: ZeroHedge

 

The Cycle That Has Been Saving Home Buyers $3,000 Per Year Just Ran Out Of Fuel

Summary

  • After five years of supporting rising home prices, the latest phase of a long-term financial cycle is nearing its end.
  • While little followed in the real estate market, this cycle of yield curve spread compression has been one of the largest determinants of home affordability and housing prices.
  • Using a detailed analysis of national statistics, it is demonstrated that average home buyers in 2018 have been saving about $250 per month, or $3,000 per year.
  • The reasons why the cycle is ending are mathematically and visually demonstrated.

(Daniel Amerian) Home buyers in every city and state have been benefiting from a powerful financial cycle for almost five years. Most people are not aware of this cycle, but it has lowered the average monthly mortgage payment for home buyers on a national basis by about $250 per month since the end of 2013.

The interest rate cycle in question is one of “yield curve spread” expansion and compression, with yield curve spreads being the difference between long-term and short-term interest rates. This interest rate spread has been going through a compression phase in its ongoing cycle, meaning that the gap between long-term interest rates and short-term interest rates fell sharply in recent years.

https://static.seekingalpha.com/uploads/2018/11/2/566013-15411612062108982.jpg

The green bars in the graph above show national average mortgage payments (principal and interest only), and they fell from $861 a month in 2013 to $809 a month in 2016 and have now risen to $894 per month. However, without the narrowing of the spread between short-term rates and long-term rates, mortgage payments would have been entirely different (and likely home prices as well).

Without the cycle of yield curve spread compression then, as shown with the blue bars, average mortgage payments would have been above $900 per month even in 2014, and they would have risen every year since without exception. If it had not been for compression, national average mortgage payments would have reached $978 per month in 2016 (instead of $809) and then $1,138 per month in 2018 (instead of $894).

The yellow bars show the average monthly savings for everyone buying a home during the years from 2014 to 2018. The monthly reduction in mortgage payments has risen from $57 per month in 2014 to $169 per month in 2016, to $244 per month by 2018 (through the week of October 11th).

In other words, the average home buyer in the U.S. in 2018 is saving almost $3,000 per year in mortgage payments because of this little-known cycle, even if they’ve never heard of the term “yield curve.” Indeed, while the particulars vary by location, home affordability, home prices and disposable household income have been powerfully impacted in each of the years shown by this interest rate cycle, in every city and neighborhood across the nation.

While knowledge of this cyclical cash flow engine has not been necessary for home buyers (and sellers) to enjoy these benefits in previous years, an issue has developed over the course of 2018 – the “fuel” available to power the engine has almost run out. That means that mortgage payments, home affordability and housing prices could be traveling a quite different path in the months and years ahead.

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The yield curve spread is shown in the blue area above, and it was quite wide at the beginning of this particular cycle, equaling 2.62% as of the beginning of 2014. It has been steadily used up since that time, however, with the compression of the spread being shown in red. As of the current time, the yield curve compression which has powered the reduction in mortgage payments has almost maxed out, the blue area is almost gone and the ability to further compress (absent an inversion) is almost over.

This analysis is part of a series of related analyses; an overview of the rest of the series is linked here.

(More information on the data sources and calculations supporting the summary numbers above can be found in the rest of series, as well as in the more detailed analysis below. A quick summary is that mortgage rates are from the Freddie Mac Primary Mortgage Market Survey, Treasury yields are from the Federal Reserve, the national median home sale price is from Zillow for the year 2017 and the assumed mortgage LTV is 80%.)

A Cyclical Home Buyer Savings Engine

A yield curve spread is the difference in yields between short-term and long-term investments, and the most common yield curve measure the markets looks to is the difference between the 2-year and 10-year U.S. Treasury yields.

An introduction to what yield curves are and why they matter can be found in the analysis “A Remarkably Accurate Warning Indicator For Economic And Market Perils.” As can be seen in the graph below and as is explored in more detail in some of the linked analyses, there is a very long history of yield curve spreads expanding and compressing as part of the overall business cycle of economic expansions and recessions, as well as the related Federal Reserve cycles of increasing and decreasing interest rates.

https://static.seekingalpha.com/uploads/2018/11/2/566013-1541161506247822.jpg

Since the beginning of 2014, the rapid shrinkage of the blue area shows the current compression cycle, and a resemblance (in broad strokes) can be seen with the compression cycles of 1992-2000 and of 2003-2006.

What has seized the attention of the markets in recent months is what followed next in some previous cycles, which is that yield curve spreads went to zero and then became negative, creating “inversions” where short-term yields are higher than long-term yields (as shown in the golden areas). This is important because, while such inversions are quite uncommon, when they do occur they have had a perfect record in recent decades (over the last 35 years) of being followed by economic recessions within about 1-2 years.

However, yield curves don’t have to actually invert in order to turn the markets upside down, and as explored in the analysis linked here, when the Fed goes through cycles of increasing interest rates, we have a long-term history of yield curve spreads acting as a counter cyclical “shock absorber” and shielding long-term interest rates and bond prices from the Fed actions.

That only works until the “shock absorber” is used up, however, and as of the end of the third quarter of 2018, the yield curve “shock absorber” has been almost entirely used up. So, when the Fed increased short-term rates in late September of 2018, there was almost no buffer, and that increase passed straight through to 10-year Treasury yields. The results were painful for bond prices, stock prices and even the value of emerging market currencies.

The same lack of compression led to a sudden and sharp leap to the highest mortgage rates in seven years. Unfortunately, that jump may also potentially be just a taste of what could be on the way, with little further room for the yield curve to compress (without inverting).

Understanding The Relationships Between Mortgage Rates, Treasury Yields and Yield Curve Spreads

The graphic below shows weekly yields for Fed Funds, 2-year Treasuries, 10-year Treasuries and 30-year fixed-rate mortgages since the beginning of 2014.

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The first relationship is the visually obvious close correlation between the top purple line of mortgage rates and the green line of 10-year Treasury yields. Mortgage amortization and prepayments mean that most mortgage principal is returned to investors well before the 30-year term of the mortgage, and therefore, investors typically price those mortgage rates at a spread (the distance between the green and purple lines) above 10-year Treasury yields. It isn’t a perfect relationship – the 10-year Treasury tends to be a bit more volatile – but is a close one.

The bottom two lines are the short-term yields, with the yellow line being effective overnight Fed Funds rates, and the red line being 2-year Treasury yields. Because the yield curve has been positive over the entire time period shown (as it almost always is), long-term rates have consistently been higher than short-term rates, and 10-year Treasury yields have been higher than 2-year Treasury yields, which have been higher than Fed Funds rates.

Now, the long-term rates have been moving together, and while the relationship is not quite as close, the short-term rates have also been generally moving together, with the 2-year Treasury yield more or less moving up with the Fed’s cycle of increasing interest rates (each “step” in the yellow staircase is another 0.25% increase in interest rates by the Federal Reserve).

However, the long-term rates have not been moving with the short-term rates. As can be seen with point “D,” 10-year Treasury yields were 3.01% at the beginning of 2014, 2-year Treasury yields were a mere 0.39% and the yield curve spread – the difference between the yields – was a very wide 2.62%.

About a year later, by late January of 2015 (point “E”), 10-year Treasury yields had fallen to 1.77%, while 2-year Treasury yields had climbed to 0.51%. The yield curve spread – the distance between the green and red lines – had narrowed to only 1.26%, or a little less than half of the previous 2.62% spread.

It can be a little hard to accurately track the relative distance between two lines that are each continually changing, so the graphic below shows just that distance. The top of the blue area is the yield curve spread; it begins at 2.62% at point “D” and falls to 1.26% by point “E.” The great reduction between points “D” and “E” is now visually obvious.

https://static.seekingalpha.com/uploads/2018/11/2/566013-15411616451828508.jpg

So, if there had been no change in yield curve spreads, and the 2-year Treasury had risen to 0.51% while the spread remained constant at 2.62%, then the 10-year Treasury yields would have had to have moved to 3.13%.

But they didn’t – the yield curve compressed by 1.36% (2.62% – 1.26%) between points “D” and “E,” and the compression can be seen in the growing size of the red area labeled “Cumulative Yield Curve Compression.” If we start with a 2.62% interest rate spread, and that spread falls to 1.26% (the blue area), then we have used up 1.36% (the red area) of the starting spread and it is no longer available for us.

The critical importance of this yield curve compression for homeowners and housing investors, as well as some REIT investors, can be seen in the graphic below:

https://static.seekingalpha.com/uploads/2018/11/2/566013-15411616777403066.jpg

The top of the green area is the national average 30-year mortgage rate as reported weekly by Freddie Mac. That rate fell from 4.53% in the beginning of 2014 (point “D”) to 3.66% in late January of 2015.

But remember the tight relationship between the green and purple lines in the graph of all four yields / rates. Mortgage investors demand a spread above the 10-year Treasury, mortgage lenders will only lend at rates that will enable them to meet that spread requirement (and sell the mortgages), and therefore, it was the reduction in 10-year Treasury yields that drove the reduction in mortgage rates. And if the yield curve compression had not occurred, then neither would have the major reduction in mortgage rates.

As we saw in the “Running Out Of Room” graphic, the red area of yield curve compression increased by 1.36% between points “D” and “E.” If we simply take the red area of yield curve compression from that graph and we add it to the green area of actual mortgage rates, then we get what mortgage rates would have been with no yield curve compression (all else being equal).

With no yield curve compression, mortgage rates of 3.66% at point “E” would have been 5.02% instead (3.66% + 1.36% – 5.02%).

With a $176,766 mortgage in late January of 2015, a monthly P&I payment at a 3.66% rate is $810. (This is based on a national median home sale price for 2017 of $220,958 (per Zillow) and an assumed 80% mortgage LTV.)

At a 5.02% mortgage rate – which is what it would have been with no yield curve compression – the payment would have been $951. This meant that for any given size mortgage, monthly payments were reduced by 15% over the time period as a result of yield curve spread compression ($810 / $951 = 85%).

Now, at that time, housing prices were still in a somewhat fragile position. The largest decrease in home prices in modern history had just taken place between the peak year of 2006 and the floor years of 2011-2012. Nationally, average home prices had recovered by 9.5% in 2013, and then another 6.4% in 2014.

Here is a question to consider: Would housing prices have risen by 6.4% in 2014 if mortgage rates had not reduced monthly mortgage payments by 15%?

The Next Yield Curve Spread Compression

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Our next key period to look at is between points “E” and “G,” late January of 2015 to late August of 2016. We are now beginning a rising interest rate cycle when it comes to short-term rates. The Fed had done its first slow and tentative 0.25% increase in Fed Funds rates, and 2-year Treasury yields were up to 0.80%, which was a 0.29% increase.

All else being equal, when we focus on the yellow and red lines of short-term interest rates, mortgage rates should have climbed as well. (Graphs are repeated for ease of scrolling.)

https://static.seekingalpha.com/uploads/2018/11/2/566013-15411617690603347.jpg

However, that isn’t what happened. After a brief jump upwards at point “F,” yield curve spreads had substantially fallen to 0.78% by point “G,” as can be seen in the reduction of the blue area above. For this to happen, the compression of yield curve spreads had to materially increase to 1.84%, as can be seen in the growth of the red area.

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In the early stages of a cycle of rising interest rates (as part of the larger cycle of exiting the containment of crisis), mortgage rates did not rise, but fell from the very low level of 3.66% at point “E” to an even lower level of 3.46% at point “G,” as can be seen in the reduction of the green area.

To get that reduction in the green area during a rising interest rate cycle required a major growth in the red area of yield curve compression. To see what mortgage rates would have been without yield curve compression (all else being equal), we add the red area of cumulative yield curve compression of 1.84% to the green area of actual mortgage rates of 3.46% and find that mortgage rates would have been 5.30%.

Returning to our $176,766 mortgage example, the monthly mortgage payment (P&I only) is $790 with a 3.46% mortgage rate, and is $982 with a 5.30% mortgage rate. Yield curve compression was responsible for a 20% reduction in mortgage payments for any given borrowing amount by late August of 2016.

However, a problem is that by late August of 2016, the 1.84% cumulative cyclical compression of the yield curve meant that only 0.78% of yield curve spreads remained. A full 70% of the initial yield curve spread had been used up.

(Please note that the mortgage payments in this section of the analysis are calculated based on historical mortgage rates for the particular weeks identified. The annual average payments presented in the beginning of this analysis are the average of all weekly payment calculations for a given year, and therefore, do not correspond to any given week.)

Using Up The Rest Of The Fuel (Yield Curve Spreads):

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After its slow and tentative start, the Federal Reserve returned to 0.25% Fed Funds rate increases in December of 2016, and has kept up a much steadier pace since that time. As of October of 2018, Fed Funds rates are now up a total of 2% from their floor. As can be seen in the line graph of the yield curve over time, 2-year Treasury yields have also been steadily climbing and were up to 2.85% by point “J,” the week ending October 11th.

However, 10-year Treasury yields are not up by nearly that amount. By late August of 2018, 10-year Treasury yields were only up to 2.87%, which was 1.29% above where they had been two years before.

https://static.seekingalpha.com/uploads/2018/11/2/566013-15411618892487876.jpg

The difference can be found by looking at the very small amount of blue area left by point “J” – yield curve spreads were down to a mere 0.22% by the week ending August 29th, or less than one 0.25% Fed Funds rate increase. This meant that the red area of total cumulative yield curve compression was up to 2.40%, which means that 92% of the “fuel” that had been driving the compression profit engine had been used up – before the Fed’s 0.25% Fed Funds rate increase of September 2018.

As explored in much more detail in the previous analysis linked here, when the Federal Reserve raised rates for the eighth time in September, the yield curve did not compress. Such a compression could have been problematic, as the yield curve would have been right on the very edge of inverting, and there is that troubling history when it comes to yield curve inversions being such an accurate warning signal of coming recessions.

Instead, the short-term Fed Funds rate increase went straight through to the long-term 10-year Treasury yields, full force, with no buffering or mitigation of the rate increase by yield curve compression. The resulting shock as the 10-year Treasury yield leaped to 3.22% led to sharp losses in bonds, stocks and even emerging market currencies.

The same shock also passed through in mostly un-buffered form to the mortgage market via the demand for mortgage investors to be able to buy mortgages at a spread above the 10-year Treasury bond. Thirty-year mortgage rates leaped from 4.71% to 4.90%, an increase of 0.19%, and the highest rate seen in more than seven years.

(I’ve concentrated on the 2- to 10-year yield curve spread in this analysis to keep things simple, to correspond to the market norm for the most commonly tracked yield curve spread and because it has a strong explanatory power for the big picture over time. If one wants to get more precise (and therefore, quite a bit messier), there are also the generally much smaller spread fluctuations between 1) Fed Funds rates and 2-year Treasury yields; and 2) 10-year Treasury yields and mortgage rates.)

https://static.seekingalpha.com/uploads/2018/11/2/566013-1541161992846963.jpg

When we look at the period between points “G” and “J,” it looks quite different than either of the previous periods we looked at. Mortgage rates have been rising, with the largest spike occurring at the time that the Federal Reserve proved it was serious about actually materially increasing interest rates with the Fed Funds rate increase of December 2016 (point “H”).

However, this does not mean that the money saving power of yield curve compression had lost its potency. Between points “D” and “J,” early January of 2014 and early October of 2018, average annual mortgage rates rose from 4.53% to 4.90%, as can be seen in the green area – which is an increase of only 0.37%. Meanwhile, the yield curve spread between the 2- and 10-year Treasuries was compressing from 2.62% to 0.29%, which was a yield curve compression of 2.33%. Adding the red area of cumulative yield curve compression to the green area of actual mortgage rates shows that current mortgage rates would be 7.23% if there had been no yield curve compression (all else being equal).

Mortgage principal and interest payments on a 30-year $176,766 mortgage with 4.90% interest rate are $938 per month, and they are $1,203 per month with a 7.23% mortgage rate. This means that yield curve compression has reduced the national average mortgage payment by about 22%.

Turning The Impossible Into The Possible:

This particular analysis is a specialized “outtake” from the much more comprehensive foundation built in the Five Graphs series linked here, which explores the cycles that have created a very different real estate market over the past twenty or so years.

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As developed in that series, as part of the #1 cycle of the containment of crisis, the attempts to cure the financial and economic damage resulting from the collapse of the tech stock bubble and the resulting recession, the Federal Reserve pushed Fed Funds rates down into an outlier range (shown in gold), the lowest rates seen in almost 50 years.

As part of the #3 cycle of the containment of crisis, in the attempt to overcome the financial and economic damage from the Financial Crisis of 2008 and the resulting Great Recession, the Federal Reserve pushed interest rates even further into the golden outlier range, with near-zero percent Fed Funds rates that were the lowest in history.

By the time we reach early January of 2014 to late January of 2015, points “D” to “E,” Fed Funds rates were still where they had been the previous five to six years – near zero. Mathematically, there was no room to reduce interest rates, without the U.S. going to negative nominal interest rates.

But yet, mortgage rates fell sharply, from an already low 4.53% to an extraordinarily low 3.66%. This sharp reduction in rates transformed the housing markets and would steer extraordinary profits to homeowners and investors over the years that followed. However, none of it would have been possible without the compression of yield curve spreads.

Once the past has already happened, it is easy to not only take it for granted, but to internalize it and to make it the pattern that we believe is right and natural. Once this happens, the next natural step is to then either explicitly or implicitly project this assumed reality forward, as that trend line then becomes the basis for our financial and investment decisions.

However, where this natural process can run into difficulties is when what made the past possible becomes impossible. Yield curve spread compression took what would have been impossible – a plunge in mortgage rates even as short-term rates remained near a floor – and made it possible. But that pattern can’t repeat (at least not in that manner) when there is no longer the spread to compress.

Source: by Daniel Amerian | Seeking Alpha

Home Price Growth Slows Most Since 2011 As Case-Shiller Rolls Over

Amid the collapse on US home sales, as mortgage rates surge above 5.00%, August’s Case-Shiller home price data plunged to its weakest annual growth since Dec 2016, dramatically missing expectations).

Against expectations of a 5.80% YoY rise, August home prices rose 5.49% (slowing from July’s 5.90% YoY) to its weakest since Dec 2016…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_6-02-10.jpg?itok=N0TP2Lt_

This is the biggest two-month slowdown in Case-Shiller home price growth since 2014…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30.png?itok=k6MAWHOy

On a non-seasonally-adjusted basis, home prices rose 5.77%, down from 5.99%, the lowest since June 2017.

And judging by mortgage rates, it’s about to get a whole lot worse…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_6-12-59.jpg?itok=8UhvPbfH

Of course, the establishment is saying this is “contained”:

“Following reports that home sales are flat to down, price gains are beginning to moderate,” David Blitzer, chairman of the S&P index committee, said in a statement. “There are no signs that the current weakness will become a repeat of the crisis, however.”

Las Vegas had the biggest annual increase at 13.9 percent, followed by San Francisco at 10.6 percent and Seattle at 9.6 percent,

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30%20%281%29.png?itok=vPBTu7Dq

But Seattle’s price appreciation slumped MoM…the biggest drop since Feb 2011…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_6-23-32.jpg?itok=bTwOj3sb

Is it any surprise that home builder stocks have collapsed along with US housing data?

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_5-58-59.jpg?itok=U2x9OqyF

Source: ZeroHedge

The “Rental Affordability Crisis” Explained In Three Charts

Four years ago, the United States Department of Housing and Urban Development (HUD) warned of “the worst rental affordability crisis ever,” citing data that:

“About half of renters spend more than 30% of their income on rent, up from 18% a decade ago, according to newly released research by Harvard’s Joint Center for Housing Studies. Twenty-seven percent of renters are paying more than half of their income on rent.”

This is a significant problem for US consumers, and especially millennials, because as we have noted repeatedly over the past year, and a new report confirms, “rent increases continue to outpace workers’ wage growth, meaning the situation is getting worse.”

In the second quarter of 2017, median asking rents jumped 5% from $864 to $910. In the first half of 2018, they have remained at levels crushing the American worker.

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While the surge in median asking rents has triggered an affordability crisis, new data now shows just how much a person must make per month to afford rent.

According to HowMuch.Net, an American should budget 25% to 30% of monthly income for rent, but as shown by the New Deal Democrat, workers are budgeting about 50% more of their salaries than a decade earlier. The report specifically looked at the nation’s capital, where a person must make approximately $8,500 per month to afford rent.

https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/Rent%20map.png?itok=HHeBBKrU

In California, the state with the largest housing bubble, the monthly income to afford rent is roughly $8,300, followed by Hawaii at $7,800 and New York at $7,220.

https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/Rent%20Map%202_0.png?itok=czp0y6sD

In contrast, the Rust Belt and the Southeastern region of the United States, one needs to make only $3,500 per month to afford rent.

“Based on the rule of applying no more than one-third of income to housing, people living in the Northeast must earn at least twice as much as those living in the South just to afford rent for what each market considers an average home,” HowMuch.net’s Raul Amoros told MarketWatch.

Which, however, is not to say that owning a house is a viable alternative to renting. In fact, as Goldman notes in its latest Housing and Mortgage Monitor, “buying is looking increasingly less affordable vs. renting with home prices growing faster than rents.”

https://www.zerohedge.com/sites/default/files/inline-images/goldman%20rental%20affordability.jpg?itok=nuiZGj-s

In short: the situation is not likely to improve in the short-term.

A sign of relief could be coming in the second half of 2019 or entering into 2020 when the US economy is expected to enter a slowdown, if not outright recession. This would reverse the real estate market, thus providing a turning point in rents that would give renters relief after a near decade of overinflated prices.

Source: ZeroHedge

San Francisco Bay Area Expats Are Driving Up Home Prices From Boise To Reno

In the not-too-distant future, it’s not improbable that low-wage laborers in San Francisco will be replaced by ubiquitous machines (the city is already home to the first restaurant run by a robot). And not just fast food workers, either – the jobs of teachers, fire fighters and law enforcement will all be assumed by robots, as NorCal’s prohibitively high cost of living and astronomical home prices spark a mass exodus of families earning less than $250,000 a year.

https://www.zerohedge.com/sites/default/files/inline-images/2018.10.24cali.JPG?itok=aZQnQjNE

While this scenario might seem like an exaggeration (and it very well might be), we’ve paid close attention to the flight of Californians who are abandoning the Bay Area for all of the reasons mentioned above, as well as what Peter Thiel (himself a Bay Area emigre) once described as a political “monoculture” that has made California inhospitable for conservatives. And as if circumstances weren’t already dire enough for would-be homeowners (even miles away from San Francisco, relatively modest homes still sell for upwards of $2 million), a report published earlier this year by realtor.com illustrated how a lapse in new home construction has led to a serious imbalance between home supply and the increasing demand of the state’s ever-growing population, leading to a cavernous supply gap.

https://www.zerohedge.com/sites/default/files/inline-images/2018.10.24california.jpg?itok=ltrugbRz

With this in mind, it shouldn’t be surprising that Californians comprise a majority of the residents moving into other states in the American West – even states like Idaho where the culture is very different from the liberal Bay Area. This week, Bloomberg published a story about how Californians constitute an increasing share of out-of-state homebuyers in small cities like Boise, Phoenix and Reno, which are significantly more affordable than California, and offer some semblance of the walkable urban environment that nesting millennials crave.

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As Californians sell their homes in the Bay Area in search of roomier, cheaper locales, they’re bringing the curse of surging property prices with them. In fact, the influx of Californians is the primary factor leading to some of the largest YoY price increases in the country, as Bloomberg explains:

About 29 percent of the Idaho capital’s home-listing views are from Californians, according to Realtor.com. Reno and Prescott, Ariz., also were popular. These housing markets are soaring while much of the rest of the country cools. In Nevada, where Californians make up the largest share of arrivals, prices jumped 13 percent in August, the biggest increase for any state, according to CoreLogic Inc. data. It was followed closely by Idaho, with a 12 percent gain.

Even in places like deep-red Idaho, these transplants are beginning to remake the terrain in their own image, as food co-ops and Women’s Marches starting to populate the landscape. Businesses are rushing to Boise to meet every desire of the newly arrived Cali transplants.

D’Agostino, the Bay Area transplant, isn’t ashamed of her progressive views and is finding her place: at the natural foods co-op downtown, the Boise’s Women’s March last year, and with the volunteer group she founded to collect unused food for the needy. But it was also good to get out of her comfort zone, she says. “I can’t remember a time when it’s ever been this divided, so the fact that I can have some interaction with people who might not have exactly the same beliefs as me, that’s fine,” she says. “As long as we can respect each other.”

It’s not new for politics to factor into moving decisions—it’s just that in the age of Trump, tensions get magnified. “What’s different now is how far apart the parties are ideologically,” says Matt Lassiter, a professor of history at the University of Michigan.

Politics aside, businesses are rushing into Boise to fill every West Coast craving. In nearby Eagle, the new Renovare gated community is selling 1,900- to 4,000-square-foot homes with floor-to-ceiling glass and “wine walls” that start at $650,000—a bargain by California standards, says sales agent Nik Buich. About half of buyers are from out of state, he says.

One couple even opened a “boutique taqueria” and another transplant is preparing to start a blog about his experience moving to Idaho.

Julie and John Cuevas left Southern California a year ago to open Madre, a “boutique taqueria” in Boise that would make many of their fellow transplants feel at home. It’s more fusion than typical Mexican fare, with taco fillings including kimchi short rib and the popular “Idaho spud & chorizo.” It would have cost them three times as much to open a restaurant in California, says John, a former chef at a Beverly Hills hotel.

John Del Rio, a real estate agent sporting a beard, baseball cap, and sunglasses, just registered moving2idaho.com, where he’s planning to blog about all the things that make his new home great. He left Northern California two years ago with his wife in search of a place with less crime, lighter regulation, and more open space. Del Rio, a conservative with a libertarian bent, is reassured to see average people walking through Walmart with handguns in their holsters. In Idaho, he says, “nobody even flinches.”

In Boise alone, Californians made up 85% of new arrivals, and have driven home prices up nearly 20% in the span of a year. One realtor described the attitude of transplants as like “they’re playing with monopoly money.”

Nestled against the foothills of the Rocky Mountains, Boise (pop. 227,000) has drawn families for decades to its open spaces and short commutes. It’s been particularly attractive to Californians, who accounted for 85 percent of net domestic immigration to Idaho, according to Realtor.com’s analysis of 2016 Census data. While it has always prided itself on being welcoming, skyrocketing housing costs fueled by the influx is testing residents’ patience. In his state of the city speech last month, Mayor David Bieter outlined steps to keep housing affordable and asked Boise to stay friendly: “Call it Boise kind, our kindness manifesto,” he said.

It’s especially easy for buyers who have sold properties in the Golden State to push up prices in relatively cheap places because they feel like they’re playing with Monopoly money, Kelman says. The median existing-home price in Boise’s home of Ada County was $299,950 last month—up almost 18 percent from a year earlier, but still about half California’s. The influx is great news for people who already own homes in the area, says Danielle Hale, chief economist for Realtor.com. “But if you’re a local aspiring to home ownership, it feels very much that Californians are bringing high prices with them.”

And now that Trump’s tax reform package has been implemented, it’s only a matter of time before a whole new batch of Californian home owners, unwilling to forego their SALT tax write offs, start looking for greener pastures in low-cost red states.

Source: ZeroHedge

SF Bay Area Realtor Caters To Mass Exodus Out Of The Region

A real estate brokerage near San Francisco is capitalizing on the mass exodus out of the Bay Area. 

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According to an April report by a Bay Area advocacy group, 46% of locals say they want to move out of the area within the next few years, citing the high cost of living and skyrocketing housing prices as main reasons for wanting out. In February, CBS San Francisco reported that the number of people packing up and leaving the Bay Area has reached its highest level in more than a decade. And fo the first time in ages, the number of people leaving are outnumbering the people coming in.

Meanwhile, a statewide poll conducted by UC Berkeley last year revealed that 56 percent of voters have considered moving due to the housing crisis – and 1 in 4 of those residents said they’d leave the state.

Some are already making good on that promiseData from earlier this year confirms that Sacramento is experiencing its highest rate of domestic migration in over a decade.

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Catering to the exodus

To serve the real estate needs of soon-to-be former Bay Area residents, East-Bay broker Scott Fuller – a real estate broker of 18 years, launched LeavingTheBayArea.com, which helps clients design a relocation strategy. After helping clients sell their home “within a timeframe that works for you,” Fuller will “partner you up with a real estate specialist” in the desired destination city in order to perform an “in-depth needs analysis” in order to coordinate the move.

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Fuller says that the majority of his clientele are retirees looking to cash out and move to cheaper pastures in areas such as Portland, Las Vegas, Reno, Dallas, Austin and cities in Arizona. Those looking to remain in California have been moving to Folsom and El Dorado Hills.

Source: ZeroHedge

Strategic Relocation: Are You Missing Out?

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The concept of strategic relocation is not new, but it’s recently become more popular, as more and more liberty-loving folks get tired of being crammed into crowded public transportation or spending hours on the road in the daily snail-pace commute. For many, the thought of leaving everything can be a bit terrifying, and if you have a family who doesn’t want to leave, you might be thinking that your Big Move is more of a pipe dream than a real possibility, even though you see the death grip on your everyday freedoms tightening by the day. Here’s the truth: it can be done. And yes, you can be amazingly happy in a new location that is more conducive to the type of life you want to live.

Just like changing your physical condition requires time, discipline, and effort, so does changing your permanent residence. Add to that a lot of planning, and you’ll see yet another reason why a lot of people don’t do it. Before we get into how to effectively and efficiently plan such a move, however, let’s look at why you might choose that path — or at least, why you’re probably interested in the idea. Over the next few days we’ll go through the process of aligning your thought process, getting down to brass tacks, and even what you should be doing when you get to your new location.

Why Move?

Maybe you live in a high-crime neighborhood. Contrary to what society will tell you these days, moving because you don’t want to deal with crime, homeless camps, drug addicts, or other social problems and vices does not make you a racist. If you want a safer environment for your family, then moving might be your best bet. When I first purchased my home in a quiet lake community north of Seattle, it was a great environment for my kid to grow up, with lots of opportunities. A few short years later, within a five block radius, there was a convicted rapist, a chop shop, a meth house, two shootings, and a hotbed of criminal activity on the next corner. That’s not counting the commute, which more than doubled in time due to exploding population. It was time to go, and I don’t regret making that move one bit. It was hard — and it continues to be. For us, it’s worth it, and we would never even consider leaving our little farm.

There is a long list of reasons why moving out of the city is an excellent choice; if you’re already considering it, then you’ve probably already thought of at least some of these:

  • Crowds
  • Crime
  • Traffic/Long commutes
  • Nosy neighbors
  • Inability to become truly sustainable
  • Lack of room for storing preps or other necessities
  • Higher prices and cost of living
  • Draconian HOAs and suburban “beautification” organizations
  • Gun laws
  • Overregulation, ordinances, taxes, levies, and all the related idiocy
  • Wanting to get your kids out of public schools
  • Lack of like-minded attitudes or political/religious ideals

Another thing you might be dealing with in your area is the locale’s natural disaster type. Everything is a trade, and while preparing for natural disaster is somewhat the same regardless of where you live, each area has its own specific challenges that you might not be okay with.

If you live in an urban or even suburban area, you might also find that you’re having a hard time finding people who believe as you do, whether that be your worldview, politics, or religious belief. Like it or not, harassment is a very real thing—and not in the ways the media would have you believe. Being liberty-minded, religious, or even just the wrong color in certain areas can get you in big trouble—and that goes for anyone. Regardless of what race you are, there are places you aren’t welcome.

The reasons to move are many, and the bottom line is that you don’t need to justify those reasons to anyone. What matters is what’s best for you and your family, and if that means pulling stakes, then so be it. If you’re set on moving, let’s talk about how to make it happen.

Choosing a Location

Once you’ve outlined your reasons for moving (thereby outlining what you’d need in a new location), you’ll need to figure out where to go. Do you just move to a different neighborhood? Out of the city into a nearby suburb? Do you stay in the same state but move to a rural locale? Or do you go all out and move to a different part of the country?

A lot of this will depend on what your reasons for moving are. If state gun laws are an issue for you, for instance, then you’ll probably need to move out of state. If you just want to be able to see your kids go to a less violent or better school, you may be able to get away with just moving to a different neighborhood. If you’ve ever wanted to try your hand at homesteading, you’ll be looking at states where that’s being done successfully.

If you use social media, you can look at groups that are local to the area you’re interested in moving to, to get a feel for the culture. Read their local paper, maybe even pull up the radio frequencies for their local police and fire and listen to the type of calls they’re dealing with on a daily basis. Are they getting a lot of overdoses? Shootings? What area of the town or county are the calls coming from? Are they places you can avoid? Is the crime location-based (such as a specific block or business) or is it widespread all over the county? If you notice over the course of a few weeks of paying attention that a specific street gets a lot of calls, or maybe the cops get called to a certain bar for fights, you can avoid that problem by simply not going to that location.

Look up the laws in your proposed new locale and see what’s considered legal and what’s not. You may very well choose to ignore certain laws in your quest for more freedom, but you should at least be able to make an informed decision about what you’re choosing, and what the potential consequences are so you can mitigate any potential fallout.

Check the county zoning laws and building permit requirements, too. One person I know found the perfect off-grid home—only to find that it was sitting just on the wrong side of the county line, in a location where the county wanted permits for everything and lots of taxes and fees. They chose to pass on that house and went to a county where there are no building permits, and no one cares what they do on their land.

Before choosing a location, you can also pull up all manner of data on everything from average income and education level to demographics, home prices, economic growth, and anything else you’d like to know. It all depends on what kinds of information you seek, and whether you’re willing to do the research. You’re never going to find the perfect place; you can, however, find something that fits the non-negotiables. Check out the local weather too, and keep in mind what will be expected in that area. Are you choosing a place with hard winters? Super-hot summers? Higher altitude? Before you throw out the idea of living in a place with rough winter, for instance, keep in mind that there are positives to everything. Snow runoff, for instance, can help you water your garden months later during a drought if you’ve thought ahead in terms of collection. And after the busyness of spring and summer, you’ll look forward to winter, when you have a freezer full of meat, shelves and root cellar packed with food, enough firewood to keep the house warm, and lots of time to work on indoor projects or study new skills in preparation for spring thaw.

One more thing—be aware of any tourist attractions, natural wonders, or other curiosities in your area. They draw crowds and everything that goes with them. You might have your heart set on living in the mountains of Wyoming—only to later realize that you moved too close to Yellowstone National Park and now have tens of thousands of people clogging your local area for half the year.

Taking the Next Step

Once you’ve decided on a location (or at least narrowed it down to 2), it’s time to talk funding. Look at average rents/mortgage payment amounts. You may need to rent a smaller place until you can buy. You may want a bit of land to raise animals. You may choose to live remotely or in a small town near a larger area. If your ultimate goal is to get as off-grid as possible, understand that you’re not going to want to go directly from an urban or suburban environment directly to a place where you have no electricity and have to haul water. You and your family will get frustrated very fast, and you’ll be tempted to move back. Start small; rent a place with a well and power.

Above all, be realistic about how it’ll be. The first year is really, really hard. The second year is a bit easier but it’s still difficult. Don’t be tempted to show up and assume you’ll be able to be fully sustainable within a year. You’ll learn some hard lessons; those lessons, however, will not only make you stronger, but you’ll find that you’re able to adapt better for the next situation. You’ll learn to use what you have instead of running to the store for everything. Depending on where you end up, you may find that certain times of the year require you to prepare, or forego certain activities in favor of making your life easier later. You’ll learn that at least part of each season is spent preparing for the next one, or getting done various tasks that need doing. There’s a routine to it, however, and over time you’ll also find that you are emotionally attached and invested in your homestead. It’s something you’ve worked on and sweated over, and it helps you survive. If you can find your spot in a state or area that is also more liberty-minded than where you are, you’re doubly blessed.

If you’ve read this far and aren’t interested in taking the leap of faith, that’s fine too — there are those who believe that freedom can be found anywhere. Ultimately, it’s your choice, and you don’t have to defend that to anyone either. For those who can smell the fresh air and imagine a different life for yourself and your family, however, stay tuned. Tomorrow we’ll talk about where you’ll find the money to make it happen.

Source: by Kit Perez | American Partisan

“Largest Ever Homeless Camp” Suddenly Appears In Minneapolis

The Associated Press (AP) has revealed a troubling story of the largest ever homeless encampment site mostly made up of Native Americans has quickly erected just south of downtown Minneapolis, Minnesota.

City officials are scrambling to contain the situation as two deaths in recent weeks, concerns about disease and infection, illicit drug use and the coming winter season, have sounded the alarm of a developing public health crisis.

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“Housing is a right,” Mayor Jacob Frey said. “We’re going to continue working as hard as we can to make sure the people in our city are guaranteed that right.”

The AP said approximately 300 people are living in the camp that is situated beside 16th Ave S & E Franklin Ave.

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Earlier this month, a team of AP reporters visited the camp and found dozens of tents lining the city street.

To their amazement, most of the residents were Native American.

The homeless camp — called the “Wall of Forgotten Natives” because it lined a highway sound barrier, is in a section of the city with a large concentration of American Indians that are suffering from extreme wealth, health, and education inequality. The AP said the tents stand on what was once considered Dakota land.

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“They came to an area, a geography that has long been identified as a part of the Native community. A lot of the camp residents feel at home, they feel safer,” said Robert Lilligren, vice chairman of the Metropolitan Urban Indian Directors.

The camp illuminates the inequalities (mentioned above) that face American Indians in the state. AP provides a shocking statistic that American Indians make up 1.1% of Hennepin County’s residents, but 16% of the homeless population, according to government data from April.

It is also a community that is being decimated by opioids. Minneapolis officials in July sued a group of opioid manufacturers and distributors, alleging their actions to promote prescription opioid drugs, such as OxyContin, have caused an addiction crisis straining the city’s resources.

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AP said one end of the camp had been designated for families, while adults — some of whom were high on drugs — were on the other end. In the middle, an organization called Natives Against Heroin, a tent where volunteers handed out bottles of water, food, and clothing. The group also provides addicts with clean needles, and most volunteers carry naloxone to treat overdoses.

“People are respectful,” said group founder James Cross. “But sometimes an addict will be coming off a high… We have to de-escalate. Not hurt them, just escort them off. And say “Hey, this is a family setting. This is a community. We’ve got kids, elders. We’ve got to make it safe.”

With hundreds of people living in close quarters, health officials fear an outbreak of infectious diseases like hepatitis A. Local support groups have started administering vaccines. Earlier this month, a woman died when she did not have an asthma inhaler, and one man died from a drug overdose.

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Local government agencies have set up areas to provide medical assistance, antibiotics, hygiene kits or other supplies. There are tents advertising free HIV testing, a place to apply for housing, and temporary showers. Portable restrooms and hand-sanitizing stations had also been positioned around the camp.

The Minneapolis City Council voted Wednesday to move the camp to a 1.5-acre commercial property owned by the Red Lake Nation. The decision came five days after Mayor Jacob Frey and representatives of ten tribes said the industrial site was the best place to relocate the tent city.

The new site at 2105-2109 Cedar Ave. South will not be ready until December because demolition work will take several months, according to David Frank, the city’s Community Planning and Economic Development director.

“We will go as quick as we can to have the interim navigation center operational and ready,” Frank said. “We have our permitting people standing by. We have our housing team, our facilities team and our projects management all lined up to do this work.”

The cost of preparing the site with living accommodations for dozens of people will be between $2 million and $2.5 million, Frank added.

Minneapolis’ homeless explosion comes as no surprise. The much larger trend at play is the nation’s homeless population increasing for the first time since 2010 — driven by housing affordability issues, and widening inequalities. But do not tell President Trump the real economy continues to deteriorate.

In 40 different venues over the last three months, President Trump declared the economy is the greatest, the best or the strongest in US history.

— Trump, in a speech at a steel plant in Illinois, July 26

“This is the greatest economy that we’ve had in our history, the best.”

— Trump, in a rally in Charleston, W.Va., Aug. 21

“You know, we have the best economy we’ve ever had, in the history of our country.”

— Trump, in an interview on “Fox and Friends,” Aug. 23

“It’s said now that our economy is the strongest it’s ever been in the history of our country, and you just have to take a look at the numbers.”

— Trump, in remarks on a White House vlog, Aug. 24

“We have the best economy the country’s ever had and it’s getting better.”

In a recent, Bank of America note titled “The Thundering World,” a major theme in development for the 2020s could be “the epic wealth inequality” that is plaguing the economy.

BofA says quantitative easing amplified income and wealth inequality over the last decade. The distribution of wealth is the widest ever. The top 1% own 40% of the global wealth; the bottom 80% own 7%.

What does this all mean? Well, decades of failed economic and social policies are about to come home to roost. The explosion of homelessness in Minneapolis over a short period, is an example of the breakdown of the social fabric that will strain many more municipalities across the country in the years ahead. The America that we knew will not be the same by 2030.

Source: ZeroHedge

Home Builder Stocks Decline As Fed Hikes Rates And Unwinds

The bloom is off the rose for home builders. Yes, it had been a great run, fueled by The Fed’s zero-interest rate policy (ZIRP) and asset purchases (QE). But despite a roaring economy, SPDR S&P Home builders ETF have been falling since January as The Federal Reserve Open Market Committee (FOMC) sticks to their guns and keeps normalizing interest rates.

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Yes, the Fed Dots Plot project indicates that there is still upside momentum to short-term interest rates.

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And the Fed’s System Open Market Accounts (SOMA) show a declining inventory of Treasury Notes and Bonds to let mature.

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Source: Confounded Interest

 

New York Millennials Paying $1800 Per Month To Cram Into 98-Square-Foot Rooms

Millennials in New York are known for living in a state of perpetual brokeness – between student loans, $20 nightclub drinks and $15 avocado toast, it’s easy to understand why 70% of millennials have less than $1,000 in savings. 

Now we can add expensive, glorified closets to the mix, as the Wall Street Journal reports.

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30-year-old marketing manager Scott Levine lives in an $1,800 per month, 98-square-foot room in a postage-stamp of an apartment – “basically, a kitchen” – with two roomates. Every week, someone from Ollie – his property manager, stops by to drop off towels and toiletries. 

A “community-engagement team” at Ollie helps plan Mr. Levine’s social calendar. A live-in “community manager”—sort of like a residential adviser for a college dorm—gets to know Mr. Levine and everyone else living on the 14 Ollie-managed floors of the Alta LIC building, known as Alta+, and finds creative ways to get them engaged in shared activities, like behind-the-scenes tours of Broadway shows or trips to organic farms. –WSJ

“Life in general can be a bit of a headache,” says Mr. Levine. Thanks to Ollie, he adds, “Everything is done for you, which is convenient.”

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Ollie’s business model is all about convenience and roommates – usually single people in their 20s and 30s who have all amenities provided for them, while sharing a kitchen and common area. 

For city-dwellers accustomed to living cheek-by-jowl with people whose names they’ll never bother to learn, this might seem strange. But for young people still forming their postcollege friend groups—in an era when participation in civic life is down and going to a bar can mean huddling in a corner swiping on Tinder—it makes sense. So much sense that people put up with apartments so small they’re called “micro.” But hey, free shampoo. –WSJ

Meanwhile, startups such as Ollie and Common are competing with big-city real-estate developers. Common manages 20 co-living properties in six cities where roommate situations are more common, such as New York, Los Angeles and Washington DC. They have approximately 650 renters according to CEO Brad Hargreaves. 

“Our audience is people who make $40,000 to $80,000 a year, who we believe are underserved in most markets today,” Mr. Hargreaves says.

Other startups are managing existing homes and apartments, “Airbnb-style” as the WSJ puts it. 

Bungalow, which just announced $64 million in funding, wants property owners to offer space to “early-career professionals” looking for a low-maintenance place to stay. It charges rent that’s “slightly higher” than what it pays those owners, a company spokeswoman says. It currently maintains over 200 properties—housing nearly 800 residents—across seven big cities, says co-founder and CEO Andrew Collins.

As with Common and Ollie, Bungalow advertises that it furnishes the common areas in its homes, installs fast free Wi-Fi, and cleans them regularly. The company also organizes events and outings to help you “build a community with… your new friends.” –WSJ

One of the underlying aspects of the co-living startup models is a technology platform that both advertises to prospective tenants and takes care of their needs once they’re living on-site. Ollie’s “Bedvetter” system, for example, shows apartments to potential tenants – and shows who’s already signed up to live there with links to their personal profiles in order to match roommates. Bedvetter also matches people into “pods” of “potential roommates” before they begin an apartment hunt. 

“It’s like online dating,” says Levine – while his roommate, Joseph Watson, 29, compares it to eHarmony or Match.com vs. Tinder, as it’s designed for long term pairings.

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“Micro Economics” 

While millennials in New York and other urban areas scramble to make ends meet, developers are making hand over fist on the co-living movement – even though the renters themselves are paying less than they would for a private studio. 

The Alta LIC building also has conventional apartments, but the co-living units are filling up faster, says Matthew Baron, one of the Alta LIC building’s developers. What’s more, he adds, he can get more than $80 a square foot for Ollie units compared with around $60 a square foot for the others, even though the Ollie ones are on the lower, less-desirable floors. –WSJ

Another complication with co-living arrangements is tricky community management. L.A.’s PodShare, for example, vets potential tenants beforehand – however issues with problem tenants are unavoidable. “We’ve hosted 25,000 people at this point, so there’s bound to be some problems,” says founder Elvina Beck. 

Common building tenant Teiko Yakobson said that the “community vibe broke down after Common eliminated the paid “house leader,” complaining that “We all just became strangers, and it was no better than living in any other apartment.” Common instead replaced the program with “centralized” community managers at the corporate level – which Hargreaves says is “more coherent” for them. 

It’s not all bad, however…

When it does work, co-living can re-create the kind of communities tenants seek online—ones grounded in common interests and shared socioeconomic status.

Mr. Levine, who not only lives in a co-living building but also works in a co-working space—and in whose social circle most people do either one of those or the other—is aware that, while this isn’t for everyone, he is hardly a standout. “One thing I’ve heard before is that I’m a stereotype of a New York millennial,” he says.

Just make sure you have earplugs in case your roommate is able to get laid in their respectively expensive, tiny room. 

Source: ZeroHedge

The Millennial Crisis

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There is a serious economic crisis brewing that few seem to be paying attention. According to a new survey from Zillow Group Inc. (ZG  Get Report), approximately 22.5% of millennials ages 24 through 36 are living at home with their moms or both parents, up nine percentage points since 2005  which was 13.5% and the most in any year in the last decade. Between the student loans which cannot be discharged thanks to the Clintons (to get the support of bankers) even after they find that degrees are worthless when 60% of graduates cannot find employment with such a degree and the fact that taxes have escalated to nearly doubling over the last 20 years that is predominantly state and local, the affordability of buying a home has been fading fast. Despite the fact that millennials are eager to enter the real estate market, they’re bearing the brunt of the challenge directly caused by the combination of taxes and non-dischargeable student loans.

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Now 63% of millennials under the age of 29 cannot even afford the cost of home ownership, according to a CoreLogic and RTi Research study. The expense, in fact, is their number one reason for remaining a renter. In their research, they concluded that one-third of millennial renters reported feeling they cannot afford a down payment to buy a home. This is a sad response that is not being taken into consideration by governments.

Where home prices have not risen sharply, taxes have. First-time home buyers face ever-growing challenges to find and buy affordable entry-level homes as the economics of inefficient governments at the state and local levels have refused to reform and raise taxes to meet pension costs they promised themselves. Politicians from London to Vancouver have increased taxes to try to bring home prices down rather than looking at the problem objectively. All they are accomplishing is punishing people who have owned homes and destroying their future when home values were their retirement savings.

California and Illinois are just two major examples at the top of the list of grossly mismanaged state governments. It is this net affordability factor that has begun to encumber sales of real estate, softening prices and turning many millennials into renters rather than home buyers. Then add the rise of interest rates and we have an economic cocktail of taxes that is beginning to kill the real estate market in a slow death drip by drip. Depressions take place when the debt and real estate markets collapse – not equities and commodities. The amount of money invested in debt markets dwarfs equities, It is ALWAYS the debt market that you undermine when you want to destroy an economy.

Taxes and the rise in interest rates will further erode affordability and is beginning to slow existing-home sales in many markets already. As this trend continues, home prices and mortgage rates over the next couple of years will likely dampen sales and home price growth. There was another study conducted by Freddie Mac which also found that affordability challenges are contributing to a downtrend in young adult home ownership. Long-term, real estate prices will decline as taxes and interest rates rise. The next crop of buyers is being culled and as that unfolds, real estate cannot rise when banks also begin to curtail the availability of mortgages.

Source: by Martin Armstrong | Armstrong Economics

Millennials Are Flocking To Cheap Rust Belt Cities

Educated, but poor, millennials are transforming neighborhoods in several Rust Belt states like Ohio, Michigan, and Wisconsin in search for affordable communities.

Since the end of the American high (the late 1960s), the Rust Belt had experienced decades of de-industrialization and a mass exodus of residents. Manufacturing plants closed down, jobs disappeared, and communities disintegrated, as this once vibrant region is now a symbol of decay and opioids.

However, this trend has reversed in recent years, as some millennials have abandoned big cities for Rust Belt communities, in hopes to catch the falling knife and invest in real estate that could be near its lows.

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It is a massive risk, and the narrative behind this “attractive investment bet” are affordable communities, unlike the Washington Metropolitan Area, San Francisco, New York, San Diego County, and Boston.

Yet this revitalization of the Rust Belt economy could not have come at the worse time: Last week, Bank of America rang the proverbial bell on the US real estate market, saying existing home sales have peaked, reflecting declining affordability, greater price reductions and deteriorating housing sentiment.

While it is difficult to say what exactly happens in Rust Belt communities in the next downturn, one should understand that housing prices in these regions will probably stay depressed for the foreseeable future. So, if the millennial who was hoping for a Bitcoin-style like move, they should think again as investing in Rust Belt communities is a long-term strategy.

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Constantine Valhouli, Director of Research for the real estate research and analytics firm NeighborhoodX, told CNBC that millennials are flocking to these areas not just for home ownership, but rather rebuilding these communities from the bottom up.

“It is about having roots and contributing to the revival of a place that needs businesses that create jobs and create value.”

According to Paul Boomsma, president and CEO of Leading Real Estate Companies of the World (LeadingRE), some of these formerly blighted towns are gradually coming back to life. The latest influx of millennials view these regions as financial opportunities and places to construct new economies – especially with real estate prices far below the Case–Shiller 20-City Composite Home Price Index.

“Millennials are swiping up properties for next-to-nothing prices near downtown city areas that have completely revitalized,” Boomsma said. LendingRE has listed a three-bedroom Victorian home in Mansfield, Ohio, with an asking price of $39,900.

The median home value in Mansfield is $60,300, now compare that to the median home value of nearly $700,000 in New York City and a whopping $1.3 million in San Francisco, and it is obvious why millennials are flocking to the Rust Belt. Experts add that there is more to consider than discounted prices.

“There is a community-mindedness with millennials that attracts them to the smaller Rust Belt towns,” said Peter Haring, president of Haring Realty in Mansfield, Ohio.

“We are seeing an intense interest in participating in the revitalization of our towns and being a part of the community. It’s palpable, and it’s exciting,” he added.

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Haring said affordable homes in Mansfield comes with a significant drawback: distance. The closest large cities, Cleveland and Columbus, are each an hour’s drive, and amenities are lacking.

“For people working in those cities, they are sacrificing drive time,” Haring said. “In some cases, they are sacrificing the convenience of nearby shopping and restaurants.”

But for millennials that is a little concern: they have the luxury of working remotely and ordering consumable goods from Amazon.

“More and more people are now working virtually, which means they do not need to be in their office and can work from almost anywhere,” said Ralph DiBugnara, senior vice president at Residential Home Funding. “So why not find somewhere to live where your city dollars can go a lot further?”

CNBC points out that some large corporations are moving back into these areas, the same areas that they left decades ago for cheap labor overseas. One example is home appliance manufacturer Whirlpool, whose corporate headquarters are in Benton Harbor, Michigan.

“It helped revitalize surrounding areas with new lifestyle and cultural amenities,” said LendingRe’s Boomsma. “This type of corporate commitment draws a young workforce, who are attracted by the lifestyle, paired with the relative affordability.”

Todd Stofflet, a Managing Partner at the KIG CRE brokerage firm, said for the millennials who still cannot afford to buy a home, the Rust Belt also has a robust rental market. Millennials who are heavily indebted with student loans, auto debt, and high-interest credit card loans could discover that these low-cost regions are perfect strategies to break free from the debt ball and chain and start saving again. Restore capitalism and say goodbye to creditism, something the Federal Reserve and the White House would not be happy about.

Millennials are creating demand for new apartments, which is a “a catalyst for retail, grocery and office development,” Stofflet added. “As downtown populations experience a resurgence, so does the dining, entertainment and lifestyle of the area.”

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Although discounted real estate prices in Rust Belt regions are appealing in today’s overinflated Central Bank controlled markets, Daniela Andreevska, a marketing director at real estate data analytics company Mashvisor, cautioned millennials to learn about the dynamics of why these communities have low prices.

“One should keep in mind that many of the homes there are foreclosures or other types of distressed properties,” she said. “You should analyze and inspect the property well in order to know how much exactly you will have to pay in repairs before buying it.”

These migration trends indicate both positive and negative shifts: on one hand millennials are fleeing unaffordable large cities to Rust Belt regions, in an adverse reaction to failed economic policies to reinflate the housing market. On the other hand, for millennials with insurmountable debt, migrating to these low-cost regions could be the most viable solution to get their finances under control.

Source: ZeroHedge

 

Existing Home Sales At Lowest In 30 Months, Inventories Rise First Time In 3 Years

Following continued weakness in July, analysts once again hope for a rebound in home sales in August but once again they were disappointed. August existing home sales were unchanged from July’s -0.7% drop, hovering at 5.34mm SAAR – the lowest since Feb 2016.

Expectations were for a 0.5% jump in August, but printed unchanged (home sales haven’t seen a monthly increase since March)

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Both single-family and multi-family units were unchanged in August as median prices dipped for the second month in a row (up 4.6% YoY still).

The West saw a 5.9% slump MoM in existing home sales as Northeast sales rose 7.6% MoM.

Inventory of available properties rose 2.7% y/y to 1.92m, which was the first increase in more than three years. At the current pace, it would take 4.3 months to sell the homes on the market, compared with 4.1 months a year earlier; Realtors group considers less than five months’ supply consistent with a tight market.

“While inventory continues to show modest year over year gains, it is still far from a healthy level and new home construction is not keeping up to satisfy demand,” said Yun.

“Homes continue to fly off the shelves with a majority of properties selling within a month, indicating that more inventory – especially moderately priced, entry-level homes – would propel sales.”

Hope is high for NAR however…

“There are buyers on the sidelines” ready to re-enter the market, Lawrence Yun, NAR’s chief economist, said at a press briefing accompanying the report.

“The housing market can turn for the better” as long as inventory continues to rise, he said.

And despite NAHB sentiment near cycle highs, home builder stocks and housing data continues to tumble…

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Time for more rate-hikes, right?

“Rising interests rates along with high home prices and lack of inventory continues to push entry-level and first time home buyers out of the market,” said Yun.

“Realtors continue to report that the demand is there – that current renters want to become homeowners – but there simply are not enough properties available in their price range.”

Source: ZeroHedge

What’s Driving The Housing Market Today?

The Housing Picture Is Not Brightening – Part I

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A house should be earned – It is not a right

The future of the housing market is a topic that has been subject to a great deal of debate and can be somewhat confusing. The intention of this post is to dispel some of the myths that have been generated and add some clarity to the discussion. One of the charts below clearly shows that new construction is still far below levels prior to 2008. It should also be noted that much of the new construction is in apartments and not single family dwellings. In much of the country, housing units are being built using cheap money flowing from the Fed and Wall Street under the idea that if it is built “they will come.” While many people claim the formation of new households and pent-up demand drives this construction I beg to differ. I contend it is a combination of too much money looking for a place to hide and buyers looking for a safe place to put their money.

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As I wrote this post I tried to do a bit of additional research to supplement what I know as a contractor and Apartment owner but what I found was more like a pack of lies and half-truths spun to fit an agenda. In America, the government, coupled with a slew of builder and Realtor associations control the housing narrative. Huge discrepancies exist in the cost of housing in the various markets across America and while price variations are not uncommon they should be seen as a red flag and reason for caution. Many of the messages being promoted as common knowledge do not pass serious scrutiny. Those of us in the trenches and with our boots on the ground often see things from a different perspective than the economist in their ivory towers, Washington politicians, Wall Street elite, or the media. Home ownership in America is in decline and demographics are not supportive of higher prices. If prices rise it most likely it will be a result of inflation.

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Note the amount of traffic, or calls an apartment complex receives may have little to do with the strength of the market. A well qualified potential tenant only has to apply at one complex while those who are rejected continue time after time. Government subsidized housing through programs such as section 8 have cannibalized the market often taking the “best of the worse” and leaving those landlords who choose not to participate with a rather unsavory pool of potential tenants from which to choose. This often includes those denied government housing, nearly bankrupt, or chronically unemployed. The city where I live ranks 23rd in the nation for having the most “zombie foreclosures” however, markets in other parts of the nation are often not as strong as the media claims. A relative of mine who sold a home with an extra lot that was on a golf course north of Houston several years ago took a severe beating. Weak pricing in a market that was touted as very solid is more proof that what many claim is a “boom” is far from spectacular.

A Bloomberg article years ago titled “Wall Street Unlocks Profits From Distress With Rental Revolution” looked behind the curtain and pointed out that a great deal of this housing recovery that has driven the average home price up 30% since 2012 has been the result of Wall Street hedge funds buying in bulk foreclosed houses in order to turn them into rentals. Like many people, I find it totally objectionable these deals were “bundled” and offered in such a way that allowed big business to crowd the average American out of the housing market. In parts of the country, cash fleeing China and other troubled countries has flowed into the market pumping up prices. These type of situations create a questionable base for higher home prices when we consider the low end of the market is driven by Fannie, Freddie, and the FHA all insuring 3.5% down payments from borrowers that lack substantial collateral. History has shown that such special financing simply encourages people to rush out and buy homes they cannot afford. It is important to remember that low-interest rates do not necessarily bring about quality growth or prosperity, decades of slow growth in Japan has proven this.

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One of the sad accomplishments of current Fed policy is that low-interest rates often do not create all that much new demand but simply moves what does exist forward. To make the situation worse the FHA is busy issuing and guaranteeing risky mortgages written by thinly capitalized non-banks. In 2012 the large Wall Street banks represented over 65% of FHA backed loans, today that number has cratered. Even they have realized loaning money to people that won’t pay it back is a recipe for disaster. America is preparing for a replay of the 2008 housing crisis. Our politically motivated government has insured subprime mortgages with down payments of as little as 3.5% while using weak underwriting standards. We are even seeing restrictions raised on borrowers with past foreclosures in a housing market that may drop 20% when this Fed Wall Street bubble pops. Years ago Lee Iacocca who brought Chrysler back from the brink and made the company viable said something to the effect of when you special out all your cars on Monday you have no sales for the rest of the week. In the current situation, low-interest rates are only one of the factors distorting and skewing America’s housing markets, others will be discussed in part two.

Housing In America – Part II

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When it comes to real estate, low-interest rates at some point becomes a double edge sword, that affects both its value by making it easier to purchase thus driving up prices, and at the same time allowing more building to take place and increasing the supply. Often we reach or exceed demand, this eventually has a dampening effect on rents and people stop buying it as an “investment”. Rents from real estate and the prices it brings when sold must appreciate more than the natural depreciation from the wear and tear from age or the main driver for owning it as an investment quickly vanishes. Oversupply is the bane of real estate and crushes the value of this hard and expensive to maintain commodity. History has generally shown homes that are paid for and un-leveraged to be a better than average place to store wealth when purchased for a good price, as to whether now is a good time to buy that is difficult to say.

How does the reality of a half-empty apartment complex and a slew of empty houses gel with what we hear about soaring rents, the demand for more housing, and more affordable housing? Those declaring housing has fully recovered must admit housing prices vary greatly across the nation and this is a problem that can be difficult to get your head around. Only politicians in Washington would be silly enough to think that landlords who have to compete against subsidized housing would be eager to remain in the game or that someone working for a living enjoys paying more for an older apartment than someone on the dole who moves into a brand new unit for a fraction of the cost. By not rewarding those who do the right thing our current policies have a corrosive effect on both housing and society.

America has built a lot of housing units over the years, now we must face the fact that they need to be maintained. Instead of focusing and creating policies to rebuild our cities by encouraging homeowners to invest more in upgrading windows, adding insulation and improving the existing housing stock, Washington has doled out low-interest money to Wall Street and home builders in an effort to kick-start the economy by building new housing to generate the illusion of growth and rising prices. Currently, we are in uncharted waters and where this market is headed is anyone’s guess but one thing is certain it is not straight up. Speculating on housing is dangerous and should not be encouraged through bad policy. When people leave older neighborhoods and move to a new house in the suburbs enticed by current artificially low-interest rates they in effect hollow out our cities.

https://martinhladyniuk.files.wordpress.com/2018/09/440c6-old-house-crazy-painting-the-porch-diy-05.jpgOld houses need to be maintained

Adding to our housing problems is low down payments and other policies often put people in older houses that they have no interest or knowledge in how to maintain. This can cause even more people to flee the area and brings about further decay. When offered the choice many people find moving easier than repairing and maintaining their homes or neighborhoods and low-interest rates power this trend forward.  Policies should be geared toward creating jobs that maintain these units instead of making them prematurely obsolete. This is a flashing red light warning of danger ahead. By choosing the easy answers America has not faced its housing problems with long-term solutions and encouraging this bodes poorly for the future.

Get your financing in order and get the project started before the market dries up has been how developers everywhere have operated for decades. I have owned an apartment complex in the Midwest for many years and many houses in my area are empty or under leased. In 2005 and 2006 prior to the housing collapse, many people were looking at second homes, today not only have they shed the extra home many have doubled up with family or friends reducing the need for housing. This has left me busy trying to sort out and make sense of the current economy. This is no easy task, it seems we are pushing on a string and calling it demand when someone who can barely pay the rent is encouraged by the government to buy a house they can neither afford or maintain. Currently, we have a shortage of “qualified” buyers and renters.

A close look of permits and starts shows many of the future housing starts are multi-family units, these are being built with cheap “Wall Street” money for the markets of tomorrow with little regard for the realities of today. A new report by Yardi Systems Inc indicates apartment construction is far outpacing demand in many markets, this overbuilding of multi-family will have ramifications on the cost of living and the resale value of homes going forward. It is a fact that single-family housing starts have languished as the percentage of multi-unit buildings under construction has risen. Some of these may be slated as condos but another name for an unsold condo that is being leased is “apartment.”  Let us call a spade a spade, much of what we see today is not a housing market, it is a place where too much money has gone to hide under the impression and hope it will pay off when inflation awakes and comes out roaring from its quiet slumber.

Source: by Bruce Wilds | Advancing Time | Part 1 | Part 2

Permits Plunge But Starts Surge As Housing Data Suggests Rough Future Ahead

After small rebounds in July (after three ugly months prior), August was expected to see those gains consolidate but the picture was extremely mixed with Starts spiking 9.2% MoM and Permits plunging 5.7% MoM.

  • The surge in Starts is the best month since January 2018
  • The plunge in Permits is the worst month since Feb 2017

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This suggests a rough time ahead for housing as Permits plummet to the lowest since May 2017…

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All of which suggests home builder stocks have further to fall…

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Probably time for some more rate hikes!

Source: ZeroHedge

Meet America’s First “Shipping Container” Apartment Building For Millennials

“Live with your friends in these Shipping Container Apartments!” the Craigslist, Inc. post reads 

As President Trump’s trade war seizes up global supply chains, one side-effect is an overabundance of shipping containers. And, with just one simple click on eBay, there are pages and pages of 40-foot shipping containers for sale ranging from $1,500 to $3,500. 

Intertwined in the pages, dozens of pre-fab architecture firms are offering tiny modern homes built with containers. 

Some pre-fab container homes are more luxurious than others, ranging from $30,000 to $449,000 for a massive luxury duplex.  While most Americans are too blind to understand their living standards are in decline, on a post-great financial crisis basis, the search trend among Americans for “shipping container homes for sale” has rapidly grown in the past decade.

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The American dream has transformed from a McMansion of the 1990s and 2000s to a tiny modern container home built with relics from the industrial past of a once vibrant economy.

Enter the brave new world of shipping container apartment buildings.

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About 16 days ago, someone posted an ad on Craigslist, offering “units” for rent in a brand new container apartment building in Washington, D.C. where each unit costs about $1,099 per month, and in light of DC’s unaffordable rents, this seems like a good deal for heavily indebted millennials.

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“This uniquely constructed 4 unit building is truly one of a kind. Welcome to DC’s first shipping container residential building. Constructed using repurposed steel shipping containers, this brand new modern apartment is one of the most memorable multi-family buildings in all of DC. You can rent a bedroom for yourself or bring a group of friends!” the ad stated.

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As shown above, residents share a “large restaurant style kitchen,” and have a large communal area, sort of like a dormitory (below).

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Could shipping container “apartments” be the solution for cities battling a housing affordability crisis? If the experiment proves successful in Washington, expect the metal crate buildings to show up in a port city neighborhood near you housing several dozen broke, if entitled, young Americans, and owned by – who else – Blackstone.

… meanwhile, realtors are getting nervous about sustainability of the Las Vegas area housing market for good reason.

Source: ZeroHedge

Average US Rent Hits All Time High Of $1,412

With core CPI printing at a frothy 2.4%, and the Fed’s preferred inflation metric, core PCE finally hitting the Fed’s 2.0% bogey for the first time since 2012, inflation watchers are confused why Jerome Powell’s recent Jackson Hole speech was surprisingly dovish even as inflation threatens to ramp higher in a time of protectionism and tariffs threatening to push prices even higher.

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But the biggest concern from an inflation “basket” standpoint has little to do with Trump’s trade war, and everything to do with shelter costs, and especially rent, the single biggest contributor to the Fed’s inflation calculation. It’s a concern because according to the latest report from RentCafe and Yardi Matrix, which compiles data from actual rents charged in the 252 largest US cities, fewer than expected apartment deliveries this year increased competition among existing units, pushing up the national average rent by another 3.1% – the highest monthly increase in 18 months –  to $1,412 in August, an all time high.

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The national average monthly rent swelled by $42 since last August and $2 since last month. Above-average numbers of renters renewing leases at the end of the summer and heightened demand from college-age renters also contributed to the rise in rents this time of year.

The rental market is so hot right now – perhaps a continue sign that most Americans remain priced out of purchasing a home – that rents increased in 89% of the nation’s biggest 252 cities in August, stayed flat in 10% of cities, and dropped in only 1% of cities compared to August 2017. Queens (NYC), Las Vegas, and Phoenix rents increased the most in one year, while Baltimore, San Antonio, and Washington, DC rents have changed the least among the nation’s largest cities.

Here are the main highlights for large, mid-size and small markets:

  • Renter Mega-Hubs: The largest increases were in Orlando (7.7%) and Phoenix (6.8%), while Manhattan (1.9%) and Washington, D.C. (2.1%) saw some of the slowest growing rents in this category. The biggest net changes were felt by renters in Los Angeles, which pay $102 more per month this August compared to last year.
  • Large cities: Rents in Queens and Charlotte surge by 8.4% and 5.2% respectively, but barely move in Baltimore (0.2%) and San Antonio (1.5%).
  • Mid-size cities: Mesa (6.9%), Tampa (6.4%), and Sacramento (5.5%) rents increase at the fastest pace. At the other end of the spectrum, rents only ticked up in Virginia Beach (1.4%) and Albuquerque (1.7%).
  • Small cities: Due to limited stock and high demand, Lancaster and Reno rents soared by 9.7% and 11.3% respectively. Apartment prices in Midland (31.9%) and Odessa (30%) are over $300 per month more expensive than in August 2017. Brownsville (-2%) and Baton Rouge (-0.7%) saw rents decrease over the past year.

Orlando’s fast-growing rents outpaced the nation’s largest renter hubs

Of the top 20 largest renter hubs in the U.S., Orlando apartments are seeing the highest increase in rent over the past year, 7.7%, reaching $1,393 in August, while San Antonio apartments saw the weakest rent growth of the 20 cities, 1.5% in one year, posting an average rent of $996 per month in August. The biggest net changes in rent compared to August 2017 were felt by renters in Los Angeles, who are paying on average $102 per month more this August compared to the same month last year. Orlando rents increased by no less than $99 per month, and Tampa, Chicago, and Manhattan (New York City) rents are $77 above last year’s average. At the opposite end, rents in San Antonio saw the smallest uptick, only $15 more per month than they were one year ago.

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NATIONAL LEVEL: Rents in Nevada and Arizona feel the heat from increased demand

Housing in the Permian Basin continues to see the steepest price increases in the country. Apartments for rent in Midland, TX now cost $1,595 per month, a 31.9% leap from one year prior. Likewise, rentals in neighboring Odessa, TX cost $1,365 on average, having jumped 30% in one year.

  • Reno, NV‘s housing crunch is worsening due to limited land development and high demand for rentals. Rents in Reno are the third fastest rising in the country, behind only Midland and Odessa. The average rent in Reno is $1,253 per month, a massive 11.3% increase year over year, or $127 more per month compared to the same time last year. The average rent in Reno was around $900 just three years ago but has jumped by more than $300 in 36 months, making it increasingly unaffordable for renters. Nevada’s growing popularity as a destination for those moving out of California is reflected in rapidly-growing real estate prices. Besides Reno, apartments in Las Vegas are also getting expensive, with the third fastest growing rents in the U.S. compared to other large cities.
  • Peoria, AZ is facing a similar situation. What used to be an affordable town in the Phoenix area, with an average rent of about $900 per month no more than three years ago, now has apartments that go for $1,114 per month on average, over $200 more expensive, a big leap and a heavy burden for the area’s renters. Compared to August 2017, the average rent in Peoria is 10.1% or $102/month more expensive, the fourth fastest growing this August out of 252 cities surveyed. Likewise, rents in other parts of the Phoenix metro are also rising faster than most other parts of the country, as a consequence of strong demand boosted by big increases in population.
  • Lancaster, CA is fifth in the U.S. in terms of fastest-growing rents. The average rent in Lancaster shot up 9.7% year over year, reaching $1,274 per month. The likely reason? Not enough apartments are being built to keep up with the surge in renter population in this town located on the northern fringes of Los Angeles County.

On the other end of the national spectrum, rent prices have decreased in August in border town Brownsville, TX (-2% y-o-y), Orange County’s Irvine, CA (-0.9% y-o-y), Norman, OK (-0.9% y-o-y), Baton Rouge, LA  (-0.7%) and Dallas suburb Richardson, TX (-0.6%). Amarillo, TX, New Haven, CT, Baltimore, MD, Frisco, TX and Stamford, CT round up the 10 slowest growing rent prices in the U.S. in August.

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LARGE CITIES: Rents rise the fastest in Queens, NY, Phoenix, AZ and Las Vegas, NV

  • Step aside Brooklyn: rent prices are now racing in the NYC borough of Queens, up 8.4% compared to last year, with an average rent of $2,342, behind Manhattan’s average rent of $4,119 and Brooklyn’s $2,801. Rents in Manhattan are among the slowest growing in the U.S., 1.9%, while in Brooklyn rents were up 3.9%.
  • The second fastest growing rents among the nation’s largest cities are in Phoenix, AZ, up 6.8% over the year. The area has seen a surge in population in search of affordable housing and job opportunities. Even with prices of apartments growing at annual rates of 6-7%, the average rent is still affordable at $996 per month, especially when compared to most other major cities in the country.
  • Las Vegas is an increasingly popular place to move to, as Census population estimates show, but the local real estate market is slow to respond. New apartment construction is low, causing rents to go up significantly. An apartment in Las Vegas costs on average $1,011, up 6.2% since August 2017.

At the same time, rents decreased in August in border town Brownsville, TX (-2% y-o-y), Orange County’s Irvine, CA (-0.9% y-o-y), Norman, OK (-0.9% y-o-y), Baton Rouge, LA  (-0.7%) and Dallas suburb Richardson, TX (-0.6%). Amarillo, TX, New Haven, CT, Baltimore, MD, Frisco, TX and Stamford, CT round up the 10 slowest growing rent prices in the U.S. in August.

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MID-SIZE CITIES: Mesa and Tampa apartments see steepest rises in rents

Apartments in Mesa, AZ and Tampa, FL are seeing price increases above 6% in August. Rents in Mesa reached $965 per month, and in Tampa the average rent is $1,287. Sacramento, Pittsburgh, and Fresno wrap up the top 5, with annual price increases of above 5%.

  • Pittsburgh, PA is emerging as a hot rental market, as the city’s job market is gaining traction in tech-related fields. The average rent in Steel City is $1,216, but it is expected to keep growing as apartment construction is not yet in line with the sudden increase in demand.

At the other end of the chart are Wichita, KS, with rents decreasing by 0.8%, Lexington, KY, where prices for apartments moved by 1.1% in one year, Tulsa, OK, where rents changed by 1.3%, Virginia Beach, with prices up by only 1.4% and Albuquerque, NM, where rents saw a 1.7% uptick. The average rent in Lexington sits at $889 per month, in Virginia Beach it is slightly higher, at $1,169 per month, and in Albuquerque, it averages $852 per month.

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SMALL CITIES: Rents in Midland and Odessa are over $300 per month more expensive than last year

The most fluctuating prices are in small cities at both ends of the list. The top 20 list of highest annual rent increases is dominated by small cities (17 out of 20). Midland and Odessa,  however, stand out from the rest of them, with annual percentage increases of over 30%, which translate into an additional $300 or more per month to the average rent check. The region is economically centered around the shale/oil industry and it’s booming, and real estate prices are taking off as well.

Small cities make up most of the bottom of the list, as well, in terms of slowest growing rents: Brownsville, TX, Irvine, CA, Norman, OK, Baton Rouge, LA, and Richardson, TX saw rents stagnate over the past year. Akron, OH, Thousand Oaks, CA, and McKinney, TX are in the same boat.

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In terms of absolute prices, the top cities with the 10 highest rents in the country remains unchanged. Manhattan is still the most expensive, with apartment rents at $4,119, San Francisco is second, with an average rent of $3,579, and Boston is third, with an average rent of $3,388. San Mateo, CA and Cambridge, MA also have an average rent above $3,000 per month. The cheapest rents of the 252 cities surveyed are in Wichita, Brownsville, and Tulsa, all below $700 per month.

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According to RentCafe, much of the change in rent prices we see this year is driven by how much demand there is in a specific area and what that area does to deal with it. However, the underlying factors are more complex. The housing market continues to change as a result of the 2007 subprime crisis, according to Doug Ressler, Director of Business Intelligence at Yardi Matrix. Furthermore, markets are undergoing a significant change driven by dramatically different demographic trends. Trends vary by market and will be impacted by population aging, population growth, immigration and home ownership trends, says Ressler.

Naturally, they will also be impacted by the state of the economy, the Fed’s monetary policy and the level of the capital markets.

However, should the current rental surge continue, the Fed will have no choice but to hike rates far higher than the general market consensus expects, especially following Powell’s “dovish” Jackson Hole speech.

Source: ZeroHedge

Facebook Removes Their Favorite Ad Options After HUD Complaint

Facebook is removing thousands of targeting options from its advertising platform after the Department of Housing and Urban Development accused the social media giant of discriminatory practices with its housing ads.

HUD filed a complaint last Friday against Facebook that claimed the social network’s advertising platform allowed users to discriminate against prospective renters and buyers by being able to limit who saw their ads based on the users’ race, color, religion, sex, family status, national origin, disability, ZIP code, and other factors.

“There is no place for discrimination [on our advertising platform],” Facebook stated in response to the HUD complaint. So far, they’ve removed more than 5,000 ad target options to “help prevent misuse,” according to the company. Facebook removed options such as “limiting the ability for advertisers to exclude audiences that relate to attributes such as ethnicity or religion.”

The company also announced that all advertisers in the U.S. will be required to comply with its non-discrimination policy if they wanted to advertise on Facebook.

“While these options have been used in legitimate ways to reach people interested in a certain product or service, we think minimizing the risk of abuse is more important,” Facebook said of its decision to remove the target options within its ad platform.

Facebook said it will share more updates to its targeted advertising tool over the next few months as it continues to “refine” it.

The National Association of REALTORS® released a statement this week in support of HUD’s enforcement of the Fair Housing Act and actions against Facebook. This year marks the 50th anniversary of the Fair Housing Act.

“As various online tools and platforms continue to transform the real estate industry in the 21st century, our understanding of how this law is enforced and applied must continue to evolve as well,” Elizabeth Mendenhall, NAR president, said in a statement. “REALTORS® commend the Department of Housing and Urban Development and Secretary Ben Carson for taking decisive action to defend fair housing laws, and for working to ensure its intended consumer protections extend to wherever real estate is marketed.”

Source: Realtor Magazine

BOOM: HUD Files Housing Discrimination Complaint Against Facebook

Secretary-initiated complaint alleges platform allows advertisers to discriminate

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) announced today a formal complaint against Facebook for violating the Fair Housing Act by allowing landlords and home sellers to use its advertising platform to engage in housing discrimination.

HUD claims Facebook enables advertisers to control which users receive housing-related ads based upon the recipient’s race, color, religion, sex, familial status, national origin, disability, and/or zip code. Facebook then invites advertisers to express unlawful preferences by offering discriminatory options, allowing them to effectively limit housing options for these protected classes under the guise of ‘targeted advertising.’ Read HUD’s complaint against Facebook.

“The Fair Housing Act prohibits housing discrimination including those who might limit or deny housing options with a click of a mouse,” said Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity. “When Facebook uses the vast amount of personal data it collects to help advertisers to discriminate, it’s the same as slamming the door in someone’s face.”

The Fair Housing Act prohibits discrimination in housing transactions including print and online advertisement on the basis of race, color, national origin, religion, sex, disability, or familial status. HUD’s Secretary-initiated complaint follows the Department’s investigation into Facebook’s advertising platform which includes targeting tools that enable advertisers to filter prospective tenants or home buyers based on these protected classes. 

For example, HUD’s complaint alleges Facebook’s platform violates the Fair Housing Act. It enables advertisers to, among other things:

  • display housing ads either only to men or women;
  • not show ads to Facebook users interested in an “assistance dog,” “mobility scooter,” “accessibility” or “deaf culture”;   
  • not show ads to users whom Facebook categorizes as interested in “child care” or “parenting,” or show ads only to users with children above a specified age;
  • to display/not display ads to users whom Facebook categorizes as interested in a particular place of worship, religion or tenet, such as the “Christian Church,” “Sikhism,” “Hinduism,” or the “Bible.”
  • not show ads to users whom Facebook categorizes as interested in “Latin America,” “Canada,” “Southeast Asia,” “China,” “Honduras,” or “Somalia.”
  • draw a red line around zip codes and then not display ads to Facebook users who live in specific zip codes.

Additionally, Facebook promotes its advertising targeting platform for housing purposes with “success stories” for finding “the perfect homeowners,” “reaching home buyers,” “attracting renters” and “personalizing property ads.”

In addition, today the U.S. Attorney for the Southern District of New York (SDNY) filed a statement of interest, joined in by HUD, in U.S. District Court on behalf of a number of private litigants challenging Facebook’s advertising platform.

HUD Secretary-Initiated Complaints

The Secretary of HUD may file a fair housing complaint directly against those whom the Department believes may be in violation of the Fair Housing Act. Secretary-Initiated Complaints are appropriate in cases, among others, involving significant issues that are national in scope or when the Department is made aware of potential violations of the Act and broad public interest relief is warranted or where HUD does not know of a specific aggrieved person or injured party that is willing or able to come forward. A Fair Housing Act complaint, including a Secretary initiated complaint, is not a determination of liability.

A Secretary-Initiated Complaint will result in a formal fact-finding investigation. The party against whom the complaint is filed will be provided notice and an opportunity to respond. If HUD’s investigation results in a determination that reasonable cause exists that there has been a violation of the Fair Housing Act, a charge of discrimination may be filed. Throughout the process, HUD will seek conciliation and voluntary resolution. Charges may be resolved through settlement, through referral to the Department of Justice, or through an administrative determination.

This year marks the 50th anniversary of the Fair Housing Act. In commemoration, HUD, local communities, and fair housing organizations across the country have coordinated a variety of activities to enhance fair housing awareness, highlight HUD’s fair housing enforcement efforts, and end housing discrimination in the nation. For a list of activities, log onto www.hud.gov/fairhousingis50.

 

Persons who believe they have experienced discrimination may file a complaint by contacting HUD’s Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY).

Source: HUD.gov

Homeownership Losing Edge To Renting

Owning a home is generally viewed as a better deal than renting, but in cities with exploding home prices and relatively flat rents, that may not be the case anymore.

According to Trulia, it now makes more financial sense to rent than buy in the nation’s two most expensive markets — San Jose and San Francisco. The balance is also shifting in favor of renting in a few other high-cost cities, such as Honolulu, Seattle and Portland, Oregon, according to a recent study by the San Francisco-based company.

Trulia said the overall U.S. market still solidly provides buyers with a financial benefit. But in the five years since Trulia began estimating the financial advantages of buying versus renting, this is the first time renters have come out ahead in any of the major metros it tracks.

In San Jose and San Francisco, renting was 12 percent and 6 percent cheaper, respectively, for the consumer than buying a home, Trulia said. San Francisco and San Jose are outliers, though. The National Association of Realtors, for example, has estimated that for a person earning $100,000, just 2.5 percent of the June listings in San Jose and 9 percent in San Francisco were affordable. Trulia reported that buyers still have a significant advantage over renters in places like Detroit. 

Trulia estimated that on a nationwide basis, buying a home was 26 percent cheaper for a consumer than renting as of last month. This is the narrowest gap in five years, and has come down from 41 percent in 2016, according to Trulia. The key factor in closing the gap is that house prices have increased steeply along with mortgage rates, while rents are remaining relatively stable. In San Jose, for example, home prices have jumped up 29 percent in a year, while rents were unchanged. Home values rose 14 percent in San Francisco, and rents fell by 3 percent. 

“There are a lot of factors,” Trulia’s Senior Economist Cheryl Young said during an interview on Thursday. “Obviously, mortgage rates are going up. That is going to tip the scales a little bit toward renting, but also home value appreciation is far outpacing rent growth right now. So, rents are pretty much cooling out. As they cool down and home prices track up, that margin between buying and renting starts closing.”     

 Young said the balance could tip in favor of renters in other cities as well.  

 “There are markets that are always close to that margin, and things that could tip it,” she said. “If mortgage rates were to rise and we still see rents flattening and even decreasing as they have been in some places relative to rising home prices, we may see some markets tip.” 

Trulia’s calculations include forecasts on future rent and price appreciation, and also estimates on how much a renter can potentially earn by investing in other vehicles. Trulia assumes that the buyer will stay in the home for seven years, put 20 percent down on a 30-year fixed mortgage.

Other housing analysts told Scotsman Guide News that gauging the advantages of buying versus renting can be a tricky exercise. 

“The housing market doesn’t necessarily favor either one right now, as the choice of whether to be an owner or the renter is not a purely economic decision, but often includes the lifestyle decisions of an individual,” said Mark Fleming, chief economist for First American Corp.

Fleming also noted that in some of these high-cost cities, renters are in better position now to buy than when home prices were near their low point seven years ago.

“While housing prices are on the rise across the country, by historical standards they are still within reach in many markets,” Fleming said. “In fact, when you account for the historically low interest rate environment and rising incomes, consumer house-buying power is up nearly 24 percent since 2011,” he added.

Len Kiefer, deputy chief economist for Freddie Mac, said that rising home values tend to give the buyer a financial edge over the renter, who is gaining no equity.

“Certainly if we look back historically, homeowners have done pretty well relative to renters,” Kiefer said. “It doesn’t mean that it is going to be true in the future, but if you look at where our forecast is for the overall economy, we are still forecasting home prices to continue to rise at a pretty healthy pace over the next couple of years.”

Kiefer said in a few high-cost cities with high property taxes, homeowners will be hurt by new tax changes that eliminated or reduced homeownership perks in the federal tax code. This may give renters some advantage. He said the tax changes so far don’t seem to have reduced homebuyer demand significantly, though.

“Certainly in the high-cost, high-tax markets, places like parts of California, New Jersey, Illinois,  the cost of homeownership is going to be a little bit negative,” Kiefer said. “But if we look at actual data on what has happened in those markets,  it is hard to see a discernible impact in terms of slower overall activity that you could attribute to the tax law,” he said. Kiefer said rising prices and higher rates were likely making homebuying less appealing, however.

Renters have been less sold on the financial benefits of owning a home, according to recent Fannie Mae surveys. In January 2010, for example, 76 percent of surveyed renters saw an advantage in buying. That number has fallen to 68 percent as of the end of June. 

“Renters’ view of the financial benefit of owning has come down a little bit,” said Mark Palim, deputy chief economist for Fannie Mae. “That probably reflects that home prices are up substantially.”

Palim said that renters are still expressing a strong desire in buying homes for non-financial, quality-of-life factors. He said the improved economy and a surge in household formation has kept the buyer demand up in spite of rising home prices and rates. 

“Millennials have really moved into the market in a big way, and they are closing the gap relative to other generations,” Palim said. “People have far more financial means to afford a home and go out and buy a home, and that has translated into pretty brisk demand.”

Source: Scotsman Guide

The Number Of Americans Living In Their Vehicles “Explodes” As The Middle Class Collapses

If the U.S. economy is really doing so well, then why is homelessness rising so rapidly?

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As the gap between the rich and the poor continues to increase, the middle class is steadily eroding.  In fact, I recently gave my readers 15 signs that the middle class in America is being systematically destroyed.  More Americans are falling out of the middle class and into poverty with each passing day, and this is one of the big reasons why the number of homeless is surging.  For example, the number of people living on the street in L.A. has shot up 75 percent over the last 6 years.  But of course L.A. is far from alone.  Other major cities on the west coast are facing similar problems, and that includes Seattle.  It turns out that the Emerald City has seen a 46 percent rise in the number of people sleeping in their vehicles in just the past year

The number of people who live in their vehicles because they can’t find affordable housing is on the rise, even though the practice is illegal in many U.S. cities.

The number of people residing in campers and other vehicles surged 46 percent over the past year, a recent homeless census in Seattle’s King County, Washington found. The problem is “exploding” in cities with expensive housing markets, including Los Angeles, Portland and San Francisco, according to Governing magazine.

Amazon, Microsoft and other big tech companies are in the Seattle area.  It is a region that is supposedly “prospering”, and yet this is going on.

Sadly, it isn’t just major urban areas that are seeing more people sleeping in their vehicles.  Over in Sioux Falls, South Dakota, many of the homeless sleep in their vehicles even in the middle of winter

Stephanie Monroe, managing director of Children Youth & Family Services at Volunteers of America, Dakotas, tells a similar story. At least 25 percent of the non-profit’s Sioux Falls clients have lived in their vehicles at some point, even during winter’s sub-freezing temperatures.

“Many of our communities don’t have formal shelter services,” she said in an interview. “It can lead to individuals resorting to living in their cars or other vehicles.”

It is time to admit that we have a problem.  The number of homeless in this country is surging, and we need to start coming up with some better solutions.

But instead, many communities are simply passing laws that make it illegal for people to sleep in their vehicles…

A recent survey by the National Law Center on Homelessness and Poverty (NLCHP), which tracks policies in 187 cities, found the number of prohibitions against vehicle residency has more than doubled during the last decade.

Those laws aren’t going to solve anything.

At best, they will just encourage some of the homeless to go somewhere else.

And if our homelessness crisis is escalating this dramatically while the economy is supposedly “growing”, how bad are things going to be once the next recession officially begins?

We live at a time when the cost of living is soaring but our paychecks are not.  As a result, middle class families are being squeezed like never before.

A recent Marketwatch article highlighted the plight of California history teacher Matt Barry and his wife Nicole…

Barry’s wife, Nicole, teaches as well — they each earn $69,000, a combined salary that not long ago was enough to afford a comfortable family life. But due to the astronomical costs in his area, including real estate — a 1,500-square-foot “starter home” costs $680,000 — driving for Uber was a necessity.

“Teachers are killing themselves,” Barry says in Alissa Quart’s new book, “Squeezed: Why Our Families Can’t Afford America” (Ecco), out Tuesday. “I shouldn’t be having to drive Uber at eight o’clock at night on a weekday. I just shut down from the mental toll: grading papers between rides, thinking of what I could be doing instead of driving — like creating a curriculum.”

Home prices are completely out of control, but that bubble should soon burst.

However, other elements of our cost of living are only going to become even more painful.  Health care costs rise much faster than the rate of inflation every year, food prices are becoming incredibly ridiculous, and the cost of a college education is off the charts.  According to author Alissa Quart, living a middle class life is “30% more expensive” than it was two decades ago…

“Middle-class life is now 30% more expensive than it was 20 years ago,” Quart writes, citing the costs of housing, education, health care and child care in particular. “In some cases the cost of daily life over the last 20 years has doubled.”

And thanks to the trade war, prices are going to start going up more rapidly than we have seen in a very long time.

On Tuesday, we learned that diaper and toilet paper prices are rising again

Procter & Gamble said on Tuesday that it was in the process of raising Pampers’ prices in North America by 4%. P&G also began notifying retailers this week that it would increase the average prices of Bounty, Charmin, and Puffs by 5%.

P&G is raising prices because commodity and transportation cost pressures are intensifying. The hikes to Bounty and Charmin will go into effect in late October, and Puffs will become more expensive beginning early next year.

I wish that I had better news for you, but I don’t.  We are all going to have to work harder, smarter and more efficiently.  And we are definitely going to have to tighten our belts.

Many middle class families are relying on debt to get them from month to month, and consumer debt in the United States has surged to an all-time high.  But eventually a day of reckoning comes, and we all understand that.

The U.S. economy is not going to be getting any better than it is right now.  So it is time to be a lean, mean saving machine, because it will be important to have a financial cushion for the hard times that are ahead of us.

Source: ZeroHedge

Lumber Futures Dump As US Construction Spending Slumps – Worst June In 18 Years

Lumber futures prices are limit down today, falling to their lowest price since Dec 2017, erasing much of the post-tariff surge in prices as US construction spending unexpectedly tumbles in June.

Lumber prices are free falling back towards pre-tariff levels…

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And with home starts, permits, and sales all weaker…

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It is no surprise that US construction spending tumbled in June…

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Bearing in mind the upward revision for May, this is the worst construction spending drop for a June since the year 2000…

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Still seem like a sustainable 4% economy?

Source: ZeroHedge

Philadelphia Plunders Its Property-Owners For Cash

Like a lot of major cities in the United States, Philadelphia is in pretty rough financial condition.

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One of the city’s biggest problems is its woefully underfunded public pension, which has a multi-billion dollar funding gap.

In 2001, Philadelphia’s pension fund was still in decent shape with a funding level of 77%, meaning that it had sufficient assets to meet 77% of its long-term obligations.

By 2017 the funding level had dropped to less than 50%.

Part of this is just blatant mismanagement; while most of the market soared in 2016, for example, Philadelphia’s pension fund lost about $150 million on its investments, roughly 3.17% of its capital.

It’s interesting that, along the way, the city has actually tried to fix the problem. Between 2001 and 2017, the amount of money that the city contributed to the pension fund actually increased by 230%.

Yet despite increasing contributions to the fund, the fund’s solvency level keeps shrinking.

Mayor Jim Kenny summed up the grim situation in his budget address last year:

The City’s annual pension contribution has grown by over 230 percent since fiscal year 2001. . . These increasing pension costs have caused us to cut important public services while the pension fund’s health has grown weaker. In fact, our pension fund has actually dropped from 77 percent funded to less than 50 percent funded during the same time our contributions were so rapidly increasing.

So, desperate for revenue, the local government has been relying on an old tactic to get their hands on every spare penny they can.

The city of Philadelphia owns the local gas company – Philadelphia Gas Works (PGW). It’s essentially a local government monopoly.

And over the last few years, PGW developed an automated system to comb its billing records, find delinquent accounts, and file a lien on those properties.

If you’re not familiar with real estate law, a ‘lien’ is a formally-registered security interest in which your property serves as collateral for a debt.

When you borrow money from the bank to buy a home, for example, the bank registers a lien over your home for the value of the mortgage.

The lien prevents you from selling the home until you satisfy the debt. It also means that if you don’t pay the debt, the lien

holder (the bank, or the gas company) can seize the property.

In PGW’s case, the gas company is filing liens over people’s properties due to unpaid gas bills for as little as $300.

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There is essentially zero due process here.

It’s not like the gas company has to go in front a jury and prove that there’s an unsatisfied debt.

They just have their automated system file some papers, and, poof, the lien is registered.

So someone could have their home encumbered for a $300 late bill that ended up being an administrative error.

More importantly, it’s curious why the gas company is filing a lien against the property… because it’s entirely possible that the delinquent customer isn’t even the property owner.

Let’s say you’re a landlord and renting out your investment property to a tenant… and the tenant doesn’t pay his gas bill: PGW will put a lien on your property, even though it’s not your bill.

Even worse, you wouldn’t even know about it, because PGW would be sending the late notices to the tenant… not to you.

At that point it turns into a total bureaucratic nightmare.

If you’re lucky enough to even find out about it, you call PGW to try and get the lien removed.

But (according to court documents), PGW tells angry landlords that they have no control over the lien process, and tell people to file a complaint with the Pennsylvania Public Utility Commission.

But then the Pennsylvania Public Utility Commission tells you that they have no jurisdiction over liens in Philadelphia, and that you should talk to the utility company.

Classic government bureaucracy. You just get bounced around between various departments and nothing ever gets resolved from a problem that you didn’t even create.

Well, a bunch of landlords finally had enough of this nonsense, so they got together and sued the city in federal court.

It seemed like a slam dunk case. Why should property owners be held liable for the actions of their tenants?

If tenants don’t pay for their own gas, the tenants should be held responsible… not the property owners.

Common sense, right?

Wrong. The landlords lost the case.

Two weeks ago the US District Court for the Eastern District of Pennsylvania ruled that the City of Philadelphia was well within its rights to hold property owners responsible… and to file a lien on the property without even notifying the owner to begin with.

This is a pretty strong reminder of how low governments will sink when they become financially desperate.

Source: ZeroHedge

Mortgage Prison: Sydney Home Prices Suffer Largest Annual Decline Since 2008

Home prices in Sydney and Melbourne are back to 2016 levels. That is a tiny down payment as to what is coming.

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News AU reports House Prices Drop in Sydney, as Melbourne Prices Stall.

Tumbling house prices in Sydney and Melbourne are the main drivers behind the first annual drop in national property prices in six years, a new report shows. The national median house price fell 1.0 per cent over the June quarter and year, according to a report by property classifieds group Domain released on Thursday.

It is the first time values have fallen on an annual basis since June 2012.

The negative national growth rate reflects weakening house prices in Sydney and Melbourne, which together represent about two thirds of Australia’s housing market by value.

Sydney house prices fell by 4.5 per cent in the 12 months to the end of June for their largest annual drop since 2008. Sydney units also fell by 3.5 per cent over the same period.

The figures chime with those released this week by property data firm CoreLogic, which said overall Sydney prices fell 5.0 per cent in the 12 months to July 22.

“House and unit prices in Sydney are now back to values seen at the end of 2016,” Domain property analyst Nicola Powell told AAP. Tighter credit availability and a high number of units being built are key factors behind the dive, Dr Powell said.

Apartment Boom Comes to End

Next up, please consider Construction Set for Biggest Decline Since the Global Financial Crisis

Australia’s building commencements, fueled by investor apartment construction, look like heading from boom to bust, according to forecaster BIS Oxford Economics.

In a reality check for investors who bought at the top of the apartment boom, BIS is predicting the biggest correction since the global financial crisis hit in 2008, with housing starts set to fall by almost 23 per cent by 2020.

Associate director Adrian Hart told the ABC’s AM program that the slump would be led by high-density dwelling construction, which is set to halve over the next two years

A key factor in the residential slowdown has been tougher regulation by the Australian Prudential Regulation Authority (APRA) to curb investor lending, while the Foreign Investment Review Board (FIRB) and tax office has been clamping down on overseas buyers.

Mortgage Prison

Finally, and most importantly, please consider Aussie Homeowners Trapped in ‘Mortgage Prison’.

Australian homeowners are trapped in “mortgage prison” because of a rule change. And there is no easy way out.

Changes in bank rules around living expenses calculations have effectively wiped huge amounts off the maximum a bank will allow you to borrow.

Many people are now finding they originally borrowed more than a bank would lend them under current conditions, meaning they haven’t got the option of shopping around to get a better interest rate — no bank will lend them the amount they need.

Precise numbers of Australia’s mortgage prisoners are hard to come by, but Mozo investment and lending expert Steve Jovcevski told news.com.au that he expected most of them are those who have borrowed and bought in the last five years.

Oops!

Jovcevski gave an example in which a couple was able to borrow $800,000 a year ago can now only borrow $680,000 under the same rules.

They are now trapped in a mortgage with no way to refinance and no buyers because of declining prices.

Mortgage Slaves for Life

This is precisely what some us foresaw years ago. It’s finally come home to roost, and at a time China is highly unlikely to bail out these buyers.

People may be trapped for decades. So expect to see more articles like this as desperation sets in: Australia Housing Insanity: Tent Outside, Full Use of Apartment, Cheap, $90 Per Week.

That was from a year ago. Rates will drop fast. Buyers will need tenants to stay afloat.

Special Mention

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Dateline July 23, 2017

13-Year-Old Kid Buys $552,000 Home

Meet Akira Ellis a 13-year-old kid. He just bought his first piece of real estate, a $552,000 four-room one bath house in Melbourne’s Frankston.

Right at the peak of the market a 13-year-old kid (with obvious help from his parents), bought a house costing over half a million dollars.

I noted “Akira is already looking for his next property.”

I asked “What can possibly go wrong?”

Today, we found out.

Source: ZeroHedge

If California Is Split Into 3, What New State Will Have The Hottest Housing?

https://www.mercurynews.com/wp-content/uploads/2018/07/0715-BUS-SPLIT-CA-01.jpg?w=842In this June 18, 2018, photo, venture capitalist Tim Draper points to a computer screen at his offices in San Mateo, showing an initiative to split California into three states qualified for the ballot. Opponents of an initiative are asking the state Supreme Court to pull the measure from the ballot. (AP Photo/Haven Daley)

Voters will decide in November on a proposition that calls for California to be split into three new and separate states.

This column isn’t the place to debate the merits of the idea. Nor will I ponder its odds at the ballot box. And I’ll leave to other pundits the vast legal, political and operational impacts of such a historic change — and that’s only if the breakup ever got all the necessary approvals after a winning vote.

We are here to talk one thing: What might these three new state housing markets look like based on historical trends. Geographically speaking, the plan creates new state borders along county lines.

There’s the retooled “California,” essentially the coastal counties from Los Angeles to Monterey. There’s the oddly named “Southern California” combining Orange, San Diego, Riverside and San Bernardino counties up through the interior to Lake Tahoe. And there’s “Northern California,” everything else or basically the Bay Area plus everything up to Oregon.

Knowing the new county lineup, I filled my trusty spreadsheet with historical housing data provided by Attom Data Solutions. Looking at stats from 2000 through 2018’s first quarter, here are 10 things you should know about the housing markets within each of the new proposed states.

1. Price tags: When you shuffle the counties into three states, what does a sales-weighted median for 2018’s first-quarter selling prices for all properties look like? It’s no surprise that it would cost the most to buy in Northern California at $580,200. Next was the new coastal California at $571,900. Southern California was most affordable — remember all the cheaper inland properties are in this new state — at $426,000.

2. Best bet: Where was the best performance this century, as measured by growth in median selling prices for all properties, 2000 through this year? Well, seaside property rocks. The Pacific-hugging new California’s 181 percent gain was tops vs. Southern California at 148 percent and Northern California’s 120 percent.

3. Most pain: Split or not, don’t forget the pain of housing’s bubble bursting! What new state’s housing market would have fared the worst in the 2006-2011 downturn? Northern California’s 46 percent price drop was the largest loss and a shade ahead of Southern California’s fall of 45.6 percent and new California’s 41.4 percent tumble.

4. Top recovery: Where was the post-recession rebound the best, measured by the 2011-2018 selling price upswing? Northern California produced 108 percent in gains in seven years vs. Southern California at 84 percent and new California’s 83 percent.

5. Predictability: Split the state into three, expect the same crazy real estate. Just peek at the nearly uniform best and worst 12-month periods since 2000! New California’s best was up 30 percent vs. its worst of down 35 percent; Southern California ran from up 29 percent to down 37 percent; and Northern California ranged from up 29 percent to down 42 percent.

6. Big sellers: Ponder the size of these markets, in terms of purchase transactions closed in the past 18 years. Most sales activity in 2000-2018 was Southern California’s 3.2 million sales followed by Northern California’s 2.9 million and new California’s 2 million.

7. Sales dips: Home buying is down since the turn of the century as homeowners choose to move less and ownership is less affordable. New California’s sales pace is down 19 percent since 2000; Northern California is off 10 percent; Southern California is down 4.5 percent.

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8. Home sweet home: Now let’s think about single-family homes under the proposed three-way split. Southern California would have 2.77 million single-family homes worth a combined $1.44 trillion. New California gets 1.84 million single-family homes worth $1.41 trillion. Northern California is home to 2.87 million homes worth $2.18 trillion.

9. Price extremes: Where’s the budget-busting housing in the proposed new states  … and where are the bargains? Southern California’s priciest single-family homes are in Orange County at an average value of $871,635 vs. the cheapest county, Kings, at $202,699. New California’s priciest is Santa Barbara County at $804,942 vs. San Benito County’s $541,434 low. Of course, Northern California has an insane gap: the highest prices are in San Mateo County at $1.61 million vs. the cheapest county, Modoc, at $89,158.

10. Tax bite: Ownership equals property taxes. How would that cost for single-family homes slice up among the three proposed states? Southern California’s 2017 tax collections for single-family homes ran $12.13 billion or $4,372 per average taxpayer. Northern California property taxes totaled $15.53 billion or $5,419 per average taxpayer. And the biggest individual tax bills were in the new California where $10.38 billion in collections translates to an average $5,636 per property.

Source: by Johnathan Lansner | Mercury News

From Cash-Strapped Roommates To Airbnb Billionaires

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A decade ago a pair of San Francisco roommates decided to make rent money by using air mattresses to turn their place into a bed-and-breakfast when a conference in the city made hotel rooms scarce.

The brainwave led to the creation of Airbnb, a startup now valued at more than $30 billion which boasts millions of places to stay in more than 191 countries, from apartments and villas to castles and tree houses.

Here are some key facts about the sharing-economy star, which has sent tremors through the hotel industry:

– Humble beginnings –

– In late 2007, with hotel rooms selling out due to a design conference in San Francisco, Brian Chesky and Joe Gebbia decide to make some extra money to help cover the rent in the apartment they share, by using air mattresses to turn it into a bed-and-breakfast.

– A third former roommate of theirs, Nathan Blecharczyk, teams with Chesky and Gebbia in a venture they call “Air Bed and Breakfast,” launching a website in August of 2008.

– Struggling to get the business off the ground, the startup founders stage a quirky stunt at the Democratic National Convention in late 2008, selling boxes of cereal custom-branded “Obama-O’s” and “Cap’n McCains” for $40 each — raising enough money to stay afloat, and earning much-needed publicity.

– The startup name is changed in March of 2009 to Airbnb as it envisions being about more than sleeping on air mattresses.

– In April of 2009 Airbnb gets $600,000 in seed funding from Sequoia Capital after a string of rejections from other venture capitalists.

– Disrupting an industry –

– In 2011, Airbnb boasts of being in 89 countries and of booking more than a million nights’ lodgings. The startup becomes a Silicon Valley “unicorn” valued at a billion dollars based on some $112 million pumped into it by venture capitalists.

– In June of 2012, Airbnb announces that more than 10 million nights of lodging have been booked on its service, with some three-quarters of that business coming from outside the US.

– In 2012, Airbnb is hit with the problem of some guests leaving homes in dismal condition due to parties or other raucous activities. The startup puts in place a million-dollar damage coverage policy as a “Host Guarantee.”

– In September of 2016, Airbnb raises funding in a round that values the company at $30 billion.

– In November of 2016, Airbnb launches Trips, tools that tourists can use to book local offerings or happenings.

– Growth, and backlash –

– Airbnb begins facing trouble as cities and landlords crack down on “hosts” essentially turning homes into hotels.

– In late 2016, Airbnb implements policies aimed at preventing racial discrimination by hosts and creates a permanent team aimed at fighting bias, following growing complaints.

– In early 2017, Airbnb announces plans to double its investment in China, triple its workforce there and change its name to “Aibiying” in Chinese.

– In September of 2017, Airbnb teams with Resy, which becomes a minority shareholder in the new venture, to offer table reservations at 700 restaurants in 16 US cities.

– Airbnb is reported to have made a profit of $93 million on $2.6 billion in revenue in the year 2017.

– In 2018, battling a global backlash against “sharing economy” startups disrupting traditional industries, Airbnb is forced to cancel thousands of reservations in Japan to comply with a new law regulating short-term rentals.

This fellow has a series of videos about how to run your own Airbnb business…

Source: Yahoo News

“This Isn’t Fake, This Is Real”: Millennials Resort To Cyber Begging To Finance Down Payment

We imagine there are millions of American millennials who have made it through college, found a job, got married and would like to take their next crucial step on the way to adulthood: Buying a home. There’s only one problem: Thanks to stagnant wages and onerous student loan debt (factors that have helped jack up spending even as incomes have languished) most millennials don’t have any money.

Indeed, for the first time ever, millennials with student debt now have a negative net worth.

https://www.zerohedge.com/sites/default/files/inline-images/2018.06.29millennialschart.png?itok=YOrEbMi4

While most Americans borrow when buying their homes, millennials can’t even afford the down payment that lenders typically require so that their customers have some “skin in the game.”

Yet, while most lenders view this fact as a risk (borrowers typically need to put up 20% of the price), a growing number of enterprising lenders see these broke borrowers as an opportunity. The latest example of this ill-advised trend was highlighted by the Wall Street Journal on Friday, with the absurdity inadvertently laid bare by WSJ’s social media team.

As WSJ explains, enabling millennials to buy homes they can’t afford risks igniting a re-run of the housing crisis – an outcome made more likely by the fact that home prices have already surpassed their excesses from the pre-crisis era. The phenomenon has been exacerbated by a shortage of homes that has persisted for years.

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But what’s even more alarming than the fact that lenders are out there chasing this business (despite the fact that nearly 40% of renters ages 25 to 34 said they save nothing every month for a down payment) are the schemes that some lenders have devised to help their borrowers “fund” their down payments.

To wit, CMG Financial created HomeFundMe, a service it launched last year. As its name would imply, HomeFundMe helps would-be borrowers beg for cash from their friends and family by sending passive aggressive emails.

Reese and Kyle Rademacher weren’t sure how they would afford a down payment to buy a home until their real-estate agent mentioned an offbeat idea: crowdfund the money from friends and family.

Mrs. Rademacher, a 28-year-old construction technician, set up an online profile with a program called HomeFundMe to solicit donations. Her parents and a few others responded, and in March the Rademachers closed on a $320,000 home in Cheyenne, Wyo.

HomeFundMe, a service launched by lender CMG Financial last year, is among a growing suite of services that help borrowers cobble together the funds to buy homes. These companies — startups and established players in the housing market alike — say they’re offering options for borrowers who have good credit and income but are struggling to save.

About 400 borrowers have used HomeFundMe to help buy homes since the program launched in October. On average, they raise about $2,500, though CMG also can kick in matching grants, and most borrowers have some of their own money saved as well, said chief marketing officer Paul Akinmade. Friends and family can also make their gifts conditional, meaning borrowers won’t get the money unless they actually purchase the home.

Mrs. Rademacher said she felt uncomfortable at first asking for help through HomeFundMe. But the Rademachers’ budget was tight after paying for their wedding, and a credit union had already denied their mortgage application because they didn’t have enough in savings.

“Whenever I emailed people the link, I would explain, ‘This isn’t fake, this is real,'”Mrs. Rademacher said. Now, some of her friends are interested in following suit. “It just worked out so well,” she said, “that people were like, ‘No way, I want that!”

One startup lender called Loftium will supply $50,000 for a down payment, on the condition that the home buyer agrees to rent out a room a Airbnb.

Erik and Rafaela de los Reyes considered applying for an FHA loan to buy a home in Seattle but were put off by the mortgage insurance and other costs. They instead got $28,000 from Loftium, the startup that offers funding in exchange for a cut of their Airbnb income. The couple have pledged to rent out their mother-in-law suite for three years.

“If you don’t have the down payment, it’s a great way to start,” said Mrs. de los Reyes, a 29-year old flight attendant. She and Mr. de los Reyes had never been Airbnb hosts before, so they were apprehensive. But as for their guests, Mrs. de los Reyes said, “we barely see them.”

Yifan Zhang got the idea for Loftium after renting out a spare room in her Seattle home. One of her goals, she said, is to even the playing field between millennials whose parents can help them buy their first home and those who are trying to save on their own.

“If you’re willing to kind of sacrifice and generate this extra income, then you should be able to have this leg up in homeownership,” said Ms. Zhang, the company’s CEO and co-founder.

Perhaps these lenders have forgotten the most enduring lesson from the financial crisis: When borrowers don’t have “skin in the game” – ie they’re playing with “other people’s money” – they’re much more likely to walk away when home prices fall.

Economists caution that actions such as loosening credit standards or supplying borrowers with more down payment money worsen the problem by creating more demand in a supply-constrained market, leading to a further overheating of home prices. And if home prices later fall, borrowers with little of their own money invested are more likely to simply walk away, they say.

These aren’t the only options for young people. And as we’ve previously pointed out, Freddie Mac recently revised its “3% down” mortgage program to eliminate pesky income restrictions and geographic restrictions allowing a new wave of “income-challenged” Americans to rush into already-hot housing markets. The Federal Housing Administration has a similar 3%-down program.

https://www.zerohedge.com/sites/default/files/inline-images/2018.06.29schiller.jpg?itok=CqAlc3ws

Then again, while some people are turned off entirely by the GoFundMe concept, the idea isn’t so hard to rationalize: Why shouldn’t boomers pitch in to help millennials make their down payments? After all, they’re the ones who wrecked the economy and the housing market, right?

Source: ZeroHedge

Wealthy Blue-Staters Are Using Shady Alaskan Trusts To Dodge SALT-Deduction Caps

Wealthy Americans living in blue states are scrambling to find tax loopholes that will help them get around one of the most controversial (and for some, infuriating) provisions in President Trump’s tax plan: The capping of the so-called SALT deduction. Enter real-estate planner Jonathan Blattmachr, who this week made the mistake of explaining to a Bloomberg reporter about a plan he’s devised for his clients who are trying to get out of paying the additional taxes on their summer homes in the Hamptons or Cape Cod. According to the Bloomberg story, Blattmachr is planning on transferring the interest in his two New York residences – one in Garden City and one in Southampton – into LLCs, which he will then divide up into five separate trusts that will be based in Alaska. He can then use the trusts to take the maximum $10,000 deduction five separate times. In this way, he can deduct $50,000 in mortgage taxes from his federal tax bill instead of $10,000.

“This is an under-the-radar thing and it’s novel,” said Blattmachr. (Or at least it was under-the-radar until you went blabbing to the media). The trusts that Blattmachr and other savvy estate planners are using to take advantage of this loophole are called non-grantor trusts. While trusts are typically used by the wealthiest Americans to preserve their wealth as it’s handed down from generation to generation, the tax law is giving the merely wealthy an incentive to explore setting up these trusts to pay taxes at rates found in low-tax red states. The trusts can help property owners avoid paying an additional $100,000 in taxes across their properties.

However, the plan isn’t practical for everybody, and even those who can reap the benefits over the long term must take an up-front risk because they must pay the maintenance costs for the trusts – which can be as high as $20,000 – up front. If the IRS ever issues guidance invalidating the loophole, there’s no way to recover those costs.

Setting up dozens of non-grantor trusts for those with six-figure plus property taxes can be impractical and burdensome. Plus, those whose taxes are under six figures feel the new cap most acutely, according to Steffi Hafen, a tax and estate planning lawyer at Snell & Wilmer in Orange County, California. Those clients often have monthly mortgage payments that eat up a big chunk of their take-home pay, Hafen said.

More than 10 percent of taxpayers in New Jersey will see a tax hike under the new law – the highest percentage in the U.S. – followed by Maryland and the District of Columbia at 9.4 percent, 8.6 percent in California and 8.3 percent in New York, according to an analysis earlier this year by the Tax Policy Center. Those who’ll pay more are mostly being affected by the state and local tax deduction limit.

Mark Germain, founder of Beacon Wealth Management in Hackensack, New Jersey, said the strategy is “absolutely viable,” adding that he has about a dozen clients who want to create non-grantor trusts.

Building and administering the trusts could cost about $20,000, according to Brad Dillon, a senior wealth planner at Brown Brothers Harriman. But those expenses would be justified after a few years, said Scott Testa, a lawyer who leads the estates and trusts tax practice at Friedman LLP in East Hanover, New Jersey.

Already, it’s unclear just how much longer individuals will be able to take advantage of the loophole. As Bloomberg explains, an existing provision in the US tax code could easily be revived to prohibit Americans from using trusts to avoid paying SALT taxes. Though it would take effort on the IRS’s part.

Still, the Internal Revenue Service could issue guidance that would prevent taxpayers from using the trusts to get around the SALT cap. An existing provision says that multiple non-grantor trusts with identical beneficiaries and identical grantors – and whose primary purpose is to avoid taxes – can potentially be considered a single entity, with just one $10,000 SALT deduction. But the measure has never been bolstered by regulations, leaving it vague.

That IRS provision could potentially derail the whole strategy, Dillon said. But compared to the other workarounds that have been proposed by high-tax states, the non-grantor trust “is the only one that’s come out of the fray that seems like a viable structure,” Dillon said.

Furthermore, people with large mortgages might have difficulty convincing their lender to allow them to transfer ownership over to an LLC.

The strategy isn’t for everybody: People with large mortgages on their homes might not be able to win approval from the bank to transfer ownership to an LLC. Also taxpayers with a primary residence in Florida, which like Alaska doesn’t have an income tax, can’t take advantage of the scheme because of complex rules surrounding the state’s homestead exemption.

But for those who are curious, here’s an in-depth explanation of how the process works:

Here’s how it works: First, you set up an LLC in a no-tax state such as Alaska or Delaware. Then, you transfer fractions of that LLC into multiple non-grantor trusts, which are trusts that are treated as independent taxpayers (unlike grantor trusts, where the person who creates them are generally taxed on the trust income). Each trust can take a deduction up to $10,000 for state and local taxes.

If a spouse is designated as the beneficiary, another “adverse” party – meaning someone who may want the money also — has to approve any distributions.

Keep in mind that you no longer control or can benefit from anything placed in the trust. And you have to put investment assets in the trust that will generate enough income to balance out the $10,000 deduction. One option would be a vacation home that generates rental income, according to Steve Akers, chair of the estate planning committee at Bessemer Trust. Marketable securities could also work.

Some caveats: If the home placed in the non-grantor trust is sold, the trust recognizes the gains on the sale and has to pay taxes on it – and it won’t be able to take advantage of a special home sale exclusion that’s available under a separate tax rule. For those with New York residences, putting the home in the LLC or the trust could potentially trigger the state’s 1 percent mansion tax, which is levied on sales of homes of at least $1 million.

As we pointed out earlier this year (citing research from BAML), the Northeast and West coast – traditionally liberal bastions and, according to some, explicitly targeted by the Trump administration – generally have higher average amounts and will feel most of the pain. The chart below shows a heat map for average amount claimed under SALT deductions, with redder states farther above $10k and greener states below.

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For those who are still getting up to speed on the new tax law, Goldman offered this guide earlier in the year to the most important provisions. Of course, estate planners aren’t the only ones searching for loopholes. Several blue-state governors have threatened “economic civil war” on Washington by devising loopholes for their residents that will allow them to take advantage of a “charitable” fund being set up by certain states that will essentially allow them to convert some of their taxes into charitable contributions that can still be deducted from their federal tax bill. However, the IRS has already warned states not to try and circumvent the SALT deduction caps. The retaliation has sent state lawmakers scrambling for an alternate solution. As next year’s tax deadline draws closer, expect the conflict between blue states and the federal government to intensify.

Source: ZeroHedge

***

The Sources Of Tax Revenue For Every US State, In One Chart

In the aftermath of Trump’s tax reform, which many mostly coastal states complained would cripple state income tax receipts and hurt property prices, S&P offered some good news: in a May 30 report, the rating agency said that “[s]tate policymakers have a lot to cheer,” noting the current slowdown in Medicaid signups and dramatically higher revenue collections, to the tune of 9.4%, are significantly boosting state fiscal positions.

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Still, the agency’s view is that current conditions are “most likely only a temporary respite” (very much the same as what is going on at the federal level) means that the agency is likely to focus on “a state’s financial management and budgetary performance during these ‘good’ times” to determine its “resilience to stress when the economy eventually softens” according to BofA.

To that end, S&P warns that:

“For those [states] that either stumble into political dysfunction or – out of expedience – assume recent trends will persist, this moment of fiscal quiescence could prove to be a mirage.”

For now, however, let the good times roll, and with real GDP growth tracking at 3.8% for 2Q18, state tax receipts should grow at a rate of over 10% based on historical correlation patterns, with the growth continuing at 9% and 8% in Q3 and Q4.

https://www.zerohedge.com/sites/default/files/inline-images/state%20taxes.jpg?itok=lpbVNyfL

This is good news for states that had expected a sharp decline in receipts, and is especially important for states heavily skewed to the personal income tax since revenue from that source should rise by over 14%, according to BofA calculations.

Finally, the BofA chart below is useful for two reasons, first, it shows the states most reliant on individual income taxes from the Census Bureau’s most recent annual survey of tax statistics. Oregon – at 69.4% of total tax collections – is most reliant on individual income taxes, followed by Virginia (57.7%), New York (57.2%), Massachusetts (52.9%) and California (52.0%). More notably, it shows the full relative breakdown of how states collect revenues, from the Individual income tax-free states such as Florida, Texas, Washington, Tennessee, and Nevada, to the sales tax-free Alaska, Vermont and Oregon, to the severance-tax heavy Wyoming, North Dakota and Alaska, and everyone in between: this is how America’s states fund themselves.

https://www.zerohedge.com/sites/default/files/inline-images/state%20revenue.jpg?itok=PBD-1Mn5
(click here for larger image)

Source: ZeroHedge

Affordability Crisis: Low-Income Workers Can’t Afford A 2-Bedroom Rental Anywhere In America

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The National Low Income Housing Coalition’s (NLIHC) annual report, Out of Reach, reveals the striking gap between wages and the price of housing across the United States. The report’s ‘Housing Wage’ is an estimate of what a full-time worker on a state by state basis must make to afford a one or two-bedroom rental home at the Housing and Urban Development’s (HUD) fair market rent without exceeding 30 percent of income on housing expenses.

With decades of declining wages and widening wealth inequality via the financialization of corporate America, and thanks to the Federal Reserve’s disastrous policies (whose direct outcome is the ascent of Trump), the recent insignificant countertrend in wage growth for low-income workers has not been enough to boost their standard of living.

The report finds that a full-time minimum wage worker, or the average American stuck in the gig economy, cannot afford to rent a two-bedroom apartment anywhere in the U.S.

According to the report, the 2018 national Housing Wage is $22.10 for a two-bedroom rental home and $17.90 for a one-bedroom rental. Across the country, the two-bedroom Housing Wage ranges from $13.84 in Arkansas to $36.13 in Hawaii.

The five cities with the highest two-bedroom Housing Wages are Stamford-Norwalk, CT ($38.19), Honolulu, HI ($39.06), Oakland-Fremont, CA ($44.79), San Jose-Sunnyvale-Santa Clara, CA ($48.50), and San Francisco, CA ($60.02).

For people earning minimum wage, which could be most millennials stuck in the gig economy, the situation is beyond dire. At $7.25 per hour, these hopeless souls would need to work 122 hours per week, or approximately three full-time jobs, to afford a two-bedroom rental at HUD’s fair market rent; for a one-bedroom, these individuals would need to work 99 hours per week, or hold at least two full-time jobs.

The disturbing reality is that many will work until they die to only rent a roof over their head.

The report warns: “in no state, metropolitan area, or county can a worker earning the federal minimum wage or prevailing state minimum wage afford a two-bedroom rental home at fair market rent by working a standard 40-hour week.”

The quest to afford rental homes is not limited to minimum-wage workers. NLIHC calculates that the average renter’s hourly wage is $16.88. The average renter in each county across the U.S. makes enough to afford a two-bedroom in only 11 percent of counties, and a one-bedroom, in just 43% .

FIGURE 1: States With The Largest Shortfall Between Average Renter Wage And Two-Bedroom Housing Wage

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Low wages and widespread wage inequality contribute to the widening gap between what people earn and mandatory outlays, in the price of their housing. The national Housing Wage in 2018 is $22.10 for a two-bedroom rental home and $17.90 for a one-bedroom, the report found.

FIGURE 3: Hourly Wages By Percentile VS. One And Two-Bedroom Housing Wages 

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Here is how much it costs to rent a two-bedroom in your state:

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https://www.zerohedge.com/sites/default/files/inline-images/Screen-Shot-2018-06-15-at-7.38.14-AM-768x523.png?itok=XbVW_WOH

Case Shiller House Prices have continued to surge to bubble levels with growing demand for rental housing in the decade post the Great Recession.

https://www.zerohedge.com/sites/default/files/inline-images/DeaHhBBVAAAeXNU-1-768x822.jpg?itok=YoWejOTe(Click here for larger image)

The report indicates that new rental construction has shifted toward the luxury market because it is more profitable for homebuilders. The number of rentals for $2000 or more per month has more than doubled between 2005 and 2015.

Here are the Most Expensive Jurisdictions for Housing Wage for Two-Bedroom Rentals

https://www.zerohedge.com/sites/default/files/inline-images/Screen-Shot-2018-06-15-at-8.30.11-AM.png?itok=U4SbvhkU(click here for larger image)

Here is how your state ranks regarding Housing Wage: 

https://www.zerohedge.com/sites/default/files/inline-images/Screen-Shot-2018-06-15-at-8.31.40-AM.png?itok=OEREudkr(click here for larger image)

“While the housing market may have recovered for many, we are nonetheless experiencing an affordable housing crisis, especially for very low-income families,” said Bernie Sanders quoted in the report.

The fact is, the low-wage workforce is projected to soar over the next decade, particularly in unproductive service-sector jobs and odd jobs in the gig economy, as increasingly more menial jobs are replaced by automation/robots. This is not sustainable for a fragile economy where many are heavily indebted with limited savings; this should be a warning, as many Americans do not understand their living standards are in decline. American exceptionalism is dying.

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The bad news is that for the government to combat the unaffordability crisis, deficits would have to explode because even more Americans would demand housing subsidies, setting the US debt on an even more unsustainable trajectory. Even though Congress marginally increased the 2018 HUD budget, the change in funding levels for some housing programs have declined.

Changes In Funding Levels For Key HUD Programs (FY10 Enacted To F18 Enacted) 

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But wait a minute, something does not quite add up: consider President Trump’s cheer leading on Twitter calling today’s economy the “greatest economy in History of America and the best time EVER to look for a job.”

Source: ZeroHedge

Consumer Credit Expansion Continues During Q1, 2018

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Total Household Debt Rises for 15th Straight Quarter, Led by Mortgages, Student Loans

Just Released: New York Fed Press Briefing Highlights Changes in Home Equity and How It’s Used

Household Debt And Credit Report Q1, 2018

Remarks at the Economic Press Briefing on Homeownership and Housing Wealth

A Close Look at the Decline of Home Ownership

 

San Francisco Sues Airbnb Users For $5.5M

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The city of San Francisco is seeking $5.5 million from two Airbnb owners who illegally rented out 14 apartments for nearly one year. They made more than $700,000 from the illegal rentals.

Darren and Valerie Lee own 45 apartments in 17 buildings across the city. San Francisco law restricts building owners to one short-term rental per building — and that apartment must be the owner’s home. According to the city’s lawyer, 14 of the Lees’ apartments were short-term rentals, rented under the names of friends and associates who pretended to be genuine tenants.

During inspection, the couple went through elaborate motions to make it appear like people actually lived there. But it was evident that it was a fraud.

“Every apartment had the same staging: the same Costco food items scattered about, the same arrangement of dirty breakfast dishes in every kitchen sink, same personal products in each bathroom, same damp towels artfully draped over doors as though someone had recently showered, the same collection of shoes and clothes in closets, and same houseplants in each apartment,” city lawyers wrote in the court filing.

The motion to the court seeks a penalty of $750 for every day that each apartment was available and $1,500 for every day that an apartment was rented. The penalty comes out to a grand total of $5.5 million. (Under state law, the penalty could have been as high as $30 million.)

San Francisco first sued the Lees in 2014 when they evicted tenants to turn their building into a collection of rentals to list on Airbnb. A year later, they settled for $276,000 and a promise to abide by short-term rental law.

The couple’s “greed, fraud and deceit was breathtaking,” city attorney Dennis Herrera said in a statement.

The case will be heard in court on June 12.

Airbnb did not immediately respond to request for comment.

Source: by Cailey Rizzo | Travel And Leisure

Housing Starts, Permits Tumble In April

Having bounced notably in March, both Housing Starts and Building Permits in April tumbled (-3.7% MoM and -1.78% MoM respectively).

  • March building permits growth was upwardly revised from +2.5% MoM to +4.1% MoM
  • March housing starts growth was upwardly revised from +1.9% MoM to +3.6% MoM

Starts dropped 3.7% MoM in April – far worse than the 0.7% drop expected but while permits also dropped 1.8% MoM, this was slightly better than the expected 2.1% drop…

https://www.zerohedge.com/sites/default/files/inline-images/2018-05-16_5-34-03.jpg?itok=8B4H7_68

For some context, Starts and Permits remain over 40% below their 2005/6 peaks…

https://www.zerohedge.com/sites/default/files/inline-images/2018-05-16_5-32-15.jpg?itok=i-6Djf8L

Housing Permits breakdown…

https://www.zerohedge.com/sites/default/files/inline-images/2018-05-16.png?itok=OoA8ZcQy

The driver of the tumble in housing starts is a 11.3% plunge in multi-family.. (single-family 893k vs 894k prior and multi-family 374k from 428k)

https://www.zerohedge.com/sites/default/files/inline-images/2018-05-16%20%281%29.png?itok=wf60mKdp

Three of four regions posted declines in starts, led by a 16.3 percent decrease in the Midwest and a 12 percent drop in the West.

Construction climbed 6.4 percent in the South, reflecting the fastest pace of single-family starts since July 2007.

As always, weather is blamed for any downside.

Source: ZeroHedge

WSJ Sounds The Alarm: “There’s No Getting Over” Gas at $4 a Gallon

Consumers, who are already being squeezed by rising interest rates (even as the return on their cash deposits remains anchored near zero), are facing another potential constraint on their already limited purchasing power. And that constraint is  rising gasoline prices, which, as we pointed out last month, could erode the stimulative impact of President Trump’s tax plan as rising prices sop up what little money the middle class is saving.

As prices rise and banks scramble to update their forecasts, the Wall Street Journal has become the latest publication to sound the alarm over what is, in our view, one of the biggest threats facing the US economy in the ninth year of its post-crisis expansion. 

In its story warning about $3 a gallon gas (of course, we’re already seeing $4 a gallon in parts of California and other high-tax states), WSJ cited Morgan Stanley’s latest projection that rising gas prices could wipe out about a third of the annual take-home pay generated by the tax cuts.

Rising fuel costs can also feed inflation and pressure interest rates. Even though the Federal Reserve typically looks past volatile energy prices in the short term, higher energy costs help shape consumer confidence. And with the central bank poised to be more active this year, rising energy costs pose an additional risk to the economy.

Morgan Stanley estimates that if gas averages $2.96 this year, it would take an annualized $38 billion from spending elsewhere, an upward revision from the bank’s $20 billion estimate in January. That would wipe out about a third of the additional take-home pay coming from tax cuts this year, the analysts said.

Patrick DeHaan, petroleum analyst at GasBuddy”Three dollars is like a small fence. You can get through it, you can get over it,” said Patrick DeHaan, petroleum analyst at GasBuddy, a fuel-tracking app. “But $4 is like the electric fence in Jurassic Park. There’s no getting over that.”

Of course, MS’s take appears downright pollyannaish when compared with a Brookings Center report that we highlighted last month.

The left-of-center think tank, which of course has every reason to hope that the next recession will materialize on President Trump’s watch, projected that consumers would soon spend about half of the money saved from tax cuts on fuel costs.

And in a report published in April, Deutsche Bank illustrated how rising fuel costs will disproportionately squeeze the most vulnerable among us – a cohort of consumers who already shoulder an outsize share of the country’s household debt.

https://www.zerohedge.com/sites/default/files/inline-images/2018.05.15db.jpg?itok=H0g5_RQa

The FT put it another way…

https://www.zerohedge.com/sites/default/files/inline-images/2018.05.15ft.jpg?itok=HdnzBFje

As the chart above shows, middle-income families – aka the engine of consumption – will be the hardest hit by rising gas prices.

Indeed, small business owners in California, where gas prices are the fifth highest in the nation thanks to taxes and stringent emissions standards, say they’ve seen their energy bills shoot higher in the past few months. Car salesmen say consumers are asking more questions about mileage, according to WSJ.

Robert Lozano, a car salesman in Los Angeles where some gas prices are already above $4, said the dealership’s gas bill has climbed from about $9,000 to about $12,000 a month recently.

Customers are inquiring more about electric vehicles, he said.

“It’s more in the consumer’s mind as to what the most efficient vehicle is.”

With oil already at $70 a barrel, early indicators imply that the summer driving season could see an unusually large spike in demand for gas…

https://www.zerohedge.com/sites/default/files/inline-images/2018.05.15vacations.png?itok=oOyR1nG8

…As the number of Americans intending to take vacations in the next six months climbs to its highest level in decades.

Heightened vacation intentions suggest the number of vehicle miles driven will also climb (because people tend to travel greater distances when they go on vacation). As the chart below shows, fluctuations in miles driven – a close proxy for gas demand – are quickly reflected in prices at the pump.

https://www.zerohedge.com/sites/default/files/inline-images/2018.05.14gascorrelation.png?itok=Q3j2fPOJ

While the US’s increasing prominence in the oil-export market could soften some of the economic blow as the energy business booms, other large business from airlines to shipping companies would feel the pinch at a time when costs are already rising.

But some economists say the growing importance of energy to the U.S. economy could blunt some of the impact from rising oil prices.

The country has become a more prominent supplier of crude oil and fuel. Domestic production has reached record weekly levels of 10.7 million barrels per day and a lot of it is being exported.

[…]

“People don’t understand how we could double crude oil production” and see higher gas prices, said Tom Kloza, global head of energy analysis at the Oil Price Information Service. “The answer lies in the balance of payment. We are an exporting power right now.”

[…]

Airlines and shipping companies will also be paying more for jet fuel and diesel – costs that may be passed along to consumers. Even companies such as Whirlpool Corp. have noted that higher oil prices have boosted the cost of materials.

Refiner Valero Energy Corp. said it wouldn’t expect consumer demand to drop off until oil prices are at $80 to $100.

But demand is only one factor driving up oil prices. Supply issues have also weighed on oil traders’ minds. Traders pushed oil prices higher as the US pulled out of the Iran deal as some worried that it could impact global supplies (though, as we’ve pointed out, there are plenty of other buyers waiting to step in and buy Iranian crude). Even if the Iranian crude trade isn’t impacted by sanctions, plummeting production capacity in Venezuela could ultimately have a bigger impact on global supply.

Conflicts in other oil producing regions could also impact supplies, pushing prices higher.

Last week, Bank of America became the first Wall Street bank to call $100/bbl for Brent crude (at the time, it was trading around $77/bbl) in 2019. That could send prices to highs not seen since 2008. Other banks have been scrambling to raise their forecasts as well. 

With the Fed changing its language in its latest policy statement to reflect rising inflation expectations, rising oil prices could also inspire the Fed to hike interest rates more quickly for fear that the economy might overheat. That could result in four – or perhaps five – rate hikes this year.

The resulting effect would be like economic kudzu strangling the buying power of consumers and possibly forcing a long-overdue debt reckoning as millennials, who are already drowning in debt, are forced to put off home ownership and family formation until they’re in their late 30s or even their 40s.

Source: ZeroHedge

Eviction Courts Overwhelmed As Housing Crisis Unfolds In Colorado

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It is official. Consumers in Colorado appear to be tapped out.

This comes at a time when the recovery is now tied for the second-longest economic expansion in American history. The stock market is near an all-time high, unemployment is the lowest in two decades, consumer confidence is beyond euphoric, and Trump tax cuts are stoking the best earnings quarter since 2011 — unleashing a record amount of corporate stock buybacks.

While a real economic recovery could be plausible this late in the business cycle, the unevenness of the recovery has left many residents in Colorado without a paddle. Accelerating real estate and rent prices across Colorado are squeezing residents out of their homes at an alarming pace.

According to ABC Denver 7, Denver metro area’s skyrocketing cost of living, stagnate wage growth, and lack of affordable real estate has fueled an enormous housing crisis — overwhelming the state’s eviction courts.

Colorado Center on Law and Policy (CCLP), which has spent decades advocating for tenant rights, warns that an eviction crisis is underway in the Denver region.

ABC Denver 7 said, “27 percent of all civil cases filed in Colorado in 2017 were evictions, which represents 45,000 cases.” In Denver alone, eviction cases accounted for nearly 18 percent (8,000 eviction cases) of all evictions across the state. Arapahoe County, the third-most populated county outside of Denver, experienced the most significant number of eviction cases at nearly 22 percent (10,000 eviction cases) in 2017.

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Jack Regenbogen, attorney and policy advocate for the Colorado center on Law and Policy, told ABC Denver 7 that most tenants are underrepresented in eviction court cases. In return, this has led to more evictions forcing tenants out onto the streets. He says about 90 percent of landlords are represented by legal counsel during an eviction process, but less than one percent of tenants have legal assistance.

“Traditionally, Colorado has been a very friendly state towards landlords. We really need our policymakers to begin investing meaningful resources to address this issue,” said adds.

ABC Denver 7 indicates that more than 50 percent of Coloradans are renting, and as court dockets continue to expand with evictions in 2018, the crisis is far from over.

According to the Denver Metro Association of Realtors (DMAR) May housing trends report, the average cost of a single-family home in the Denver metro area edged up, as it hit $543,059 in April. More and more homes are listing in the range between $500,000 to $750,000 than all of the price ranges below $500,000 combined. A spokesman from DMAR said homes priced between $500,000 and $749,000, is now considered the “new norm.”

https://www.zerohedge.com/sites/default/files/inline-images/2018-05-04_09-10-30-768x372.png?itok=eIfKB9Xb

“This demonstrates home buyer demand remains robust,” said Steve Danyliw, Chairman of the DMAR Market Trends Committee. “As new listings poured into the market, buyers that were waiting for them quickly gobbled them up, driving the average days on market down to 20 days.”

Danyliw, further said housing activity remains stable, but increasing interest rates could have an eventual impact on the real estate market.

Evidence continues to build that housing affordability is getting worse, particularly for everyday Americans. Colorado is the latest example of consumers physically tapping out, as they can no longer afford soaring real estate/rent prices – which is now overwhelming state courts in Denver. 

Source: ZeroHedge

Pending Home Sales Decline For 4th Straight Month, Weather Blamed

Pending Home Sales rose just 0.4% MoM (missing expectations of 0.7% MoM) and saw prior months revised notably lower (Feb down from +3.1% to +2.8%).

https://www.zerohedge.com/sites/default/files/inline-images/2018-04-30_7-10-03.jpg?itok=-F_JYU-p

Weather remains the ‘go to’ blame factor from realtors as the regional differences suggest…

  • Northeast fell 5.6%; Feb. rose 10.3%
  • Midwest up 2.4%; Feb. rose 0.7%
  • South up 2.5%; Feb. rose 2.9%
  • West fell 1.1%; Feb. fell 0.7%

Unadjusted pending home sales dropped 4.4% YoY (the 4th straight month of declines – the longest streak since 2014)…

https://www.zerohedge.com/sites/default/files/inline-images/2018-04-30_7-12-14.jpg?itok=wm1BUV5v

“Healthy economic conditions are creating considerable demand for purchasing a home, but not all buyers are able to sign contracts because of the lack of choices in inventory,” Lawrence Yun, NAR’s chief economist, said in a statement.

“Prospective buyers are increasingly having difficulty finding an affordable home to buy.”

“It is an absolute necessity for there to be a large increase in new and existing homes available for sale in coming months to moderate home price growth,” he said.

“Otherwise, sales will remain stuck in this holding pattern and a growing share of would-be buyers — especially first-time buyers — will be left on the sidelines.”

Purchases dropped 5.6 percent in the Northeast, reflecting multiple winter storms…

“As anticipated, the multiple winter storms and unseasonably cold weather contributed to the decrease in contract signings in the Northeast.”

As a reminder, economists consider pending sales a leading indicator because they track contract signings.

Source: ZeroHedge

California’s Most Controversial Housing Bill In Years Just Died With A Thud

Listen to an excellent podcast at the end of this article.https://calmatters.org/wp-content/uploads/ThinkstockPhotos-468601463-1280x800.jpg?x74105Dense housing makes San Francisco one of the most compact cities in America. Photo via Thinkstock

The most controversial state housing bill in recent memory died with a pretty resounding thud.

Senate Bill 827, which would have forced cities to allow taller, denser development around public transit, got only four votes on the 13-member Senate Committee on Transportation and Housing. Both Democrat and Republican lawmakers voted against the bill.

Authored by state Sen. Scott Wiener, Democrat from San Francisco, the bill would have allowed developers to build five-story apartment buildings near major public transit stops, including neighborhoods previously zoned for single family homes. The bill received a ton of media attention, including a fairly flattering write-up on the front page of the New York Times.

The most controversial state housing bill in recent memory died with a pretty resounding thud.

Senate Bill 827, which would have forced cities to allow taller, denser development around public transit, got only four votes on the 13-member Senate Committee on Transportation and Housing. Both Democrat and Republican lawmakers voted against the bill.

Authored by state Sen. Scott Wiener, Democrat from San Francisco, the bill would have allowed developers to build five-story apartment buildings near major public transit stops, including neighborhoods previously zoned for single family homes. The bill received a ton of media att

Urbanist “Yes In My Backyard” (YIMBY) groups mourned the bill’s death as yet another roadblock to building the new housing the state so desperately needs. Cities and anti-gentrification groups cheered the demise of what they viewed as an unprecedented inroad on local control.

What to make of all the hubbub? Some key takeaways:

Enemies, enemies, got a lot of enemies

It’s tough for anyone to take on cities and counties, who wield enormous power in Sacramento and to whom state legislators often give considerable deference. It’s tough for anyone to take on the construction trades’ union, a major source of campaign contributions for Democratic lawmakers. It’s tough for anyone to take on equity and social justice groups, who can bend the ear of progressive legislators.

It’s really tough to take on all three at the same time. That likely wasn’t Sen. Wiener’s strategy when he first introduced SB 827, but that’s ultimately what helped doom the bill. The support of realtors, developers, YIMBYs and a handful of affordable housing advocates couldn’t muster the votes he needed.

Supporters of the bill arguably made a misstep in not courting social justice groups early enough. A flurry of amendments to protect renters from being displaced and to force developers to include units reserved for lower-income tenants failed to calm their concerns.

Last year, Wiener was able to push through a bill that stripped local control over some housing developments by getting labor and affordability advocates on his side. That bill was also part of a larger package of housing legislation that had something for everyone, including a new revenue source. Gov. Jerry Brown was a driving force behind that package.

None of that that happened this time.

The bill did spark a statewide debate on whether to up density to help remedy our housing crisis

https://calmatters.org/wp-content/uploads/IMG_0577-600x357.jpg?x74105Opponents came from San Francisco and its environs to lobby against the bill—and the gentrification they feared it would bring. Photo by Matt Levin for CALmatters

What Wiener was attempting was truly revolutionary. You can debate how dramatically the character of a city would change by building a five-story apartment building next to a single family home. But taking away the power of local governments to block those types of developments was a pretty radical step—a step that a growing number of Californians think is necessary to prevent cities from obstructing new housing.

The bill received a ton of media attention, both in California and nationally. It garnered support from prominent urban planners, environmentalists and civil rights advocates. It’s both cliche and premature to say it shifted the needle on the housing debate. But it certainly framed the conversation squarely around the state’s role in compelling cities to build.

Expect something like this to come back soon.  

Nearly every Democratic legislator who voted against SB 827 caveated their opposition by praising the bill’s vision and audacity. Sen. Jim Beall, Democrat from San Jose and chair of the housing committee, said at the hearing that while he couldn’t support the bill in its current form, he was eager to work on something like it in the months ahead.

Could SB 827 ever rise from the dead? Well for his part, Wiener has vowed to re-introduce something like it in the future. Combining his push for density around transit stations with a broader mix of tenant protections and new funding for affordable housing could make it more palatable to the interest groups Wiener needs to succeed.

Source: By Matt Levin | Cal Matters

 

No Relief In Sight: Housing affordability is weakening at the fastest pace in a quarter century

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  • Rising home prices, rising mortgage rates and rising demand are colliding with a critical shortage of homes for sale. And all of that is slamming housing affordability.
  • This year, affordability — based on the amount of the monthly mortgage payment will weaken at the fastest pace in a quarter century, according to researchers at Arch Mortgage Insurance.
  • Other studies that factor in median income also show decreasing affordability because home prices are rising far faster than income growth.

It is the perfect storm: Rising home prices, rising mortgage rates and rising demand are colliding with a critical shortage of homes for sale.

And all of that is slamming housing affordability, which is causing more of today’s buyers to overstretch their budgets. This year, affordability — a metric based solely on the amount of the monthly mortgage payment — will weaken at the fastest pace in a quarter century, according to researchers at Arch Mortgage Insurance.

The average mortgage payment, based on the median-priced home, increased by 5 percent in the first quarter of 2018 nationally and could go up another 10 to 15 percent by the end of the year, according to their report.

Researchers looked at the median-priced home, now $250,000, and estimated price gains this year of 5 percent in addition to mortgage rates going from 4 percent to 5 percent on the 30-year fixed. Other studies that factor in median income also show decreasing affordability because home prices are rising far faster than income growth.

That is a national picture – but all real estate is local, and some markets will see affordability weaken more dramatically. The average monthly payment in Tacoma, Washington, is estimated to increase 25 percent this year, given sharply rising prices. In Baltimore and Boston, it could rise 21 percent in each. Philadelphia, Detroit and Las Vegas could all see 20 percent increases in the average monthly payment.

“If mortgage rates and home prices continue to rise as expected, affordability will get hammered by year-end as demand continues to outstrip supply,” said Ralph DeFranco, global chief economist-mortgage services at Arch Capital Services. “A strong U.S. economy combined with a housing shortage in many markets means that there is little hope of any price drop for buyers. Whether someone is looking to upgrade or purchase their first home, the window to buy before rates jump again is probably closing fast.”

Barely a decade after home values crashed especially, they are now hovering near their historical peak, accounting for inflation. Prices are being driven by record low inventory of homes for sale. Home builders are still producing well below historical norms, and demand for housing is very hot. The economy is stronger, which is giving younger buyers the incentive and the means to buy homes.

Stretching budgets and pushing limits

Maryland real estate agent Theresa Taylor said the supply shortage is hitting buyers hard. She is seeing more clients stretch their budgets to win a deal amid multiple offers.

“People are having to escalate offers on top of rates going up. I’m seeing it in all price ranges,” said Taylor, an agent at Keller Williams. “I am seeing it when I’m getting five offers, and people are trying to package up an offer where they’re pushing their limits.”

Buyers are taking on much higher debt levels today to be able to afford a home. In fact, the share of mortgage borrowers with more than 45 percent of their monthly gross income going to debt payments more than tripled in the second half of last year. Part of that was because Fannie Mae raised that debt-to-income threshold to 50 percent, but clearly there was demand waiting.

“Family income is rising more slowly than home prices and mortgage rates, meaning that the mortgage payment takes a bigger bite out of income for new home buyers,” said Frank Martell, president and CEO of CoreLogic. “CoreLogic’s Market Conditions Indicator has identified nearly one-half of the 50 largest metropolitan areas as overvalued. Often buyers are lulled into thinking these high-priced markets will continue, but we find that overvalued markets will tend to have a slowdown in price growth.”

CoreLogic considers a market overvalued when home prices are at least 10 percent higher than the long-term, sustainable level. High demand makes the likelihood of a national home price decline very slim, but certain markets could see prices cool if supply grows or if there is a hit to the local economy and local employment.

In any case, the more home buyers stretch, the more house-poor they become, and the less money they have to spend in the rest of the economy.

With no relief in either inventory or home price appreciation in sight, the housing market is likely to become even more competitive this year.

At some point, however, there will come a breaking point when sales slow, which is already beginning to happen in some cities. Home prices usually lag sales, so if history holds true, price gains should start to ease next year.

(video interview)

Source: By Diana Olick | CNBC

Economists Who Push Inflation Stunned That Rising Home Prices Have Put Buyers Deeper Into Debt

Once again, when the government intervenes – this time in housing – the left hand is starting a fire that the right hand is trying to put out. Rising prices for homes are once again pricing out prime borrowers and nobody can “figure out” why this is happening.

It is news like this article reported this morning by the Wall Street Journal that continues to perpetuate the hilarious notion of Keynesian economics as giving a job to one man digging a hole and another job to another man filling it, simply so that they both have jobs.

There is nothing funnier (or sadder) than “economists” struggling to understand how housing prices got so high and why people are taking on more debt in order to purchase them. However, that is the great mystery that the Wall Street Journal reported on Tuesday morning, making note of the fact that people are “stretching“ in order to purchase homes. What’s the solution to this problem? How about just easing lending standards again? After all, what could go wrong?

Apparently blind to the obvious – that forced inflation could amazingly make things more expensive relative to income – “economists” have hilariously blamed this price/debt delta on lack of supply. Of course, no one has mentioned the credit worthiness of borrowers getting worse or the fact that homes prices are being manipulated in order to offer home ownership to people who otherwise may not be in the market.

More Americans are stretching to buy homes, the latest sign that rising prices are making homeownership more difficult for a broad swath of potential buyers.

Roughly one in five conventional mortgage loans made this winter went to borrowers spending more than 45% of their monthly incomes on their mortgage payment and other debts, the highest proportion since the housing crisis, according to new data from mortgage-data tracker CoreLogic Inc. That was almost triple the proportion of such loans made in 2016 and the first half of 2017, CoreLogic said.

Economists said rising debt levels are a symptom of a market in which home prices are rising sharply in relation to incomes, driven in part by a historic lack of supply that is forcing prices higher.

The “lack of supply” argument is just wonderful – a bunch of “economists” finding a basic free market capitalism solution to a problem that has nothing to do with free market capitalism. Perhaps “economists” can also argue that building more, despite the lack of prime borrower demand, will also have the added benefit of puffing up GDP. From there, it’s only a couple more steps down the primrose path that leads to China’s ghost cities.

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And of course, people are worried that we could have a “weak selling season” upcoming. In a free market economy, weakness is necessary and normal. In Keynesian theory, it’s the devil incarnate. The Wall Street Journal continued:

Real-estate agents worry that buyers’ weariness from being priced out of the market could make this one of the weakest spring selling seasons in recent years.

Consumers are growing more optimistic about the economy and their personal financial prospects but less hopeful that now is the right time to buy a home, according to results of a survey released in late March by the National Association of Realtors.

At the same time, the average rate for a 30-year, fixed-rate mortgage has risen to 4.40% as of last week from 3.95% at the beginning of the year, according to Freddie Macputting still more pressure on affordability.

These factors “are working against affordability and that’s why you get the pressure to ease credit standards,” said Doug Duncan, chief economist at Fannie Mae. He said that pressure has to be balanced against the potential toll if underqualified buyers eventually default on their mortgages.

CoreLogic studied home-purchase loans that generally meet standards set by Fannie Mae and Freddie Mac, the federally sponsored providers of 30-year mortgage financing.

The amount of these loans packaged and sold by Fannie and Freddie increased 73% in the second half of 2017, compared with the first half of the year, according to Inside Mortgage Finance, an industry research group. In that same period, overall new mortgages rose 15%.

As if the signs weren’t clear enough that manipulating the economy and manipulating the housing market has a detrimental effect, the article continued that Fannie Mae and Freddie Mac are “experimenting with how to make homeownership more affordable, including backing loans made by lenders who agree to help pay down a buyer’s student debt“. Sure, solve one government subsidized shit show (student loan debt) with another one!

Is it any wonder that the entire supply and demand environment for housing has been thrown completely out of order?  On one hand, the government wants to make housing affordable so that everybody can have it, which closely resembles socialism. On the other hand, they are targeting prices to rise 2% every single year and claim that this is normal and healthy economic policy that we should all be buying into and applauding. The left hand doesn’t know what the right hand is doing!

We were on this case back in October 2017 when we wrote an article pointing out that home prices had again eclipsed their highest point prior to the financial crisis. We knew this was coming. We at the time that the ratio of the trailing twelve month averages of median new home sale prices to median household income in the U.S. had risen to an all time high of 5.454, which following revisions in the data for new home sale prices, was recorded in July 2017. The initial value for September 2017 is 5.437.

In other words, the median new home in the US has never been more unaffordable in terms of current income.

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Here we are 6 months later and “economists” are just figuring this out. What’s wrong with this picture?

What’s really happening is clear. Instead of letting the free market determine the pricing and availability of housing, the government has continued to try and manipulate the market in order to give everyone a house. This is simply going to lead to the same type of behavior that led Fannie Mae and Freddie Mac to fail during the housing crisis.

If we are going to have free market capitalism, the reality of the situation is that not everybody is going to own a house.

Furthermore, while there are many benefits to owning a house, there are also many reasons why people rent. Peter Schiff, for instance, often makes the case that renting is generally worth it because you’re saving yourself on upkeep and it allows you to be flexible with where you live and when you have the opportunity to move. He himself rents property for these reasons, which he often notes in his podcast. Sure, there are some benefits of homeownership, namely that a homeowner is supposed to be building equity in something, but looking again at the situation we are in today, is it worth investing in the equity of a home that might see its price crash significantly again, similar to the way housing prices did in 2008?

The government is creating both the problem and the solution here and instead of trying to continually fix the housing market, they should just keep their nose out of it and allow the free market to determine who should own a house and at what price. Call us crazy, but we don’t think that’s going to happen.

Source: ZeroHedge

How Much Income You Need to Afford the Average Home in Every State

The housing market has not only recovered its pre-recession levels, but some observers are actually starting to worry about yet another housing bubble. Housing prices are on the rise, thanks in large part to extremely tight inventory, so it’s worth asking: are potential home buyers getting priced out of the market? The answer depends on where they live and how much money they make.

https://cdn.howmuch.net/articles/salary-need-to-afford-home-2018-8426.png(click here for larger image)

We collected average home prices for every state from Zillow which we then plugged into a mortgage calculator to figure out monthly payments. Remember, mortgage payments consist of both the principal and the interest for the loan. The interest rate we used varied from 4 to 5% in each state, depending on the market. The lower the interest rate, the lower the monthly payment. To keep things simple, we assumed buyers could contribute a 10% down payment. Another thing to keep in mind is that financial advisors commonly recommend the total cost of housing take up no more than 30% of gross income (the amount before taxes, retirement savings, etc.). Using this rule as our benchmark, we calculated the minimum salary required to afford the average home in each state.

Top Five Places Where You Need the Highest Salaries to Afford the Average Home

1. Hawaii: $153,520 for a house worth $610,000

2. Washington, DC: $138,440 for a house worth $549,000

3. California: $120,120 for a house worth $499,900

4. Massachusetts: $101,320 for a house worth $419,900

5. Colorado: $100,200 for a house worth $415,000

Top Five Places Where You Need the Lowest Salaries to Afford the Average Home

1. West Virginia: $38,320 for a house worth $149,500

2. Ohio: $38,400 for a house worth $149,900

3. Michigan: $40,800 for a house worth $160,000

4. Arkansas: $41,040 for a house worth $161,000

5. Missouri: $42,200 for a house worth $165,900

Our map creates a quick snapshot of housing affordability across the United States. There are several pockets in which only the upper middle class and above can afford to own even the average home, most notably across the West and in the Northeast. There are only two states west of the Mississippi River where a worker with an annual salary under $40,000 can afford a mid-level home:  Missouri and Oklahoma. Colorado stands out as the only landlocked state requiring a significant amount of income ($100,200), thanks in large part to the housing market around Denver.

Homes tend to be more affordable in the eastern half of the country, with a notable pocket of “green” (less expensive) states located in the upper Midwest. The North is generally more affordable than the South and the typical home is significantly easier to buy in places like Michigan or Ohio than in Louisiana or Arkansas.  Additionally, our map indicates that workers can more easily afford homes in the East than in the West, which is surprising given how much more land is available out West. It is important to note that there are certainly deep pockets of poverty in all of these places, which suggests that our map obscures the inequality behind averages.

The best takeaway from our map is that housing remains affordable in large swaths of the country, even though there will always be places like California and New York where there is simply too much demand for the available inventory. Thankfully, that doesn’t mean that buying a home is suddenly out of reach for average Americans in Ohio or Mississippi, for example.

Source: HowMuch

Progressive Property Tax Spikes Throwing Thousands of Seattle Seniors Out of Their Homes

https://static.seattletimes.com/wp-content/uploads/2018/03/2f8b0bc0-33c0-11e8-9316-bc6406bfcffc-960x640.jpgDennis and Patricia Hall stand beside their Kirkland family home, built by Dennis in 1980. They raised their daughter there and planned to stay for the rest of their lives. But now on a fixed income will be forced out of their home due to parabolic government property tax hikes.

The Seattle Times has collected hundreds of reader responses to the tax hikes. Many who said they’re retired or disabled, and living on fixed incomes, offered emotional stories of being unable to afford the heftier rate.

Dennis Hall imagined living his whole life in the country-style home he and his wife built in Kirkland for $55,000 in 1980. But the couple, now retirees on a fixed income, say the latest tax bill for their property — valued at $1.2 million — is forcing them to rethink their golden years, sell the beloved home and move. “This year was the breaking point. Enough is enough,” said Hall, 65, thinking about the big tax increase, a reflection of skyrocketing home values, voter-approved levies and a plan by state lawmakers to fully fund public schools. “We were hoping on dying here.” With this round of property-tax notices, the couple are not alone in their worries. As the effects of the higher rates spread statewide, some homeowners are calling the tax increase a tipping point in a period of financial stress that’s forcing too-soon goodbyes to longtime homes. Over the course of weeks, The Seattle Times collected hundreds of emails, phone calls and responses on social media from people like Hall, many of whom identified as retired or disabled, saying they have limited options for paying the heftier amounts. “Should anything happen to me like an illness or injury, I will be homeless pretty quick,” wrote a 61-year-old homeowner in Seattle’s Ballard neighborhood. “There is no way I can make it; have to sell our home,” another person said in a voicemail. “I don’t know what to say or do.”  

Property-tax increases vary greatly from city to city.

A handful of people shared less emotional stories of budgeting without lattes or expansive cable packages to cover the larger bills. A few said the spike is a result of Washington’s regressive tax structure. And in a region with a growing housing- affordability and homelessness crisis, a couple of respondents acknowledged their status as “well-paid” and fortunate enough to afford the tax by simply shifting around their spending.

With Social Security, some seniors hoping to qualify for assistance reported annual incomes that barely surpass the state’s maximum of $45,000 for tax deferrals or $40,000 for exemptions. Recipients of the former eventually have to repay with interest, while tax exemptions reduce amounts due based on various criteria, including income and home value. According to numbers provided by the Washington State Department of Revenue, about 107,000 seniors participated in the exemption program last year — or roughly 7 percent of the state’s total senior population. The department, meanwhile, received 558 applications for deferrals.

House for settling down

Surrounded by spacious fields and livestock, the Kirkland home was ideal for Hall and his wife, Patricia, to settle down in and raise a family, with college and the military behind them. Born and raised in the suburb, he worked in construction while she managed the home. They adopted a baby girl in 1985. “That’s when the house came alive,” he recalled. Nearly four decades later, a time span that included the birth of their grandson, the couple’s budget tightened significantly when he retired in 2010 at age 58. The latest tax increase of $1,500 on the property — not far from Microsoft’s campus — hit hard. They sold the land and home to a local developer soon after and started making plans to move to the Duvall area, where their daughter’s family lives. “I’m not against paying taxes,” Dennis Hall said, so long as the government services he sees are on par with how much he pays. These days, relocating for more affordable living is not a phenomenon unique to Washington retirees. New U.S. census data show populations of retiree-friendly communities rising faster than national population growth, The Wall Street Journal reports. But the shift for homeowners here, in the metropolitan area of King, Snohomish and Pierce counties, comes with incomparable pressure. Single-family-home values in the three counties have been rising faster than anywhere else in the country. Median house prices recently hit records of $777,000 in Seattle and $950,000 on the Eastside. Beyond the surging values, this year’s property-tax increases are largely a result of last year’s bipartisan deal by lawmakers to shift spending on public schools.

In an effort to comply with the state Supreme Court’s 2012 McCleary ruling, which found the state has neglected its constitutional duty to pay for public schooling, lawmakers voted to raise the state property-tax levy for schools to $2.70 per $1,000 of assessed value, up from $1.89 in 2017. The plan will reduce local school levies, but not until next year. “Wondering if ‘laptops for kids’ is worth losing homeowners,” a Bothell reader wrote to the newspaper, saying her family picked the city in 2009 because of its lower taxes compared with the Seattle area.

“Guess that was nine years ago — not the future.”

Property-tax insider

Michelle LeMay, 64, of Seattle, knows the effects of property taxes well. She worked almost two decades in the King County Assessor’s Office as an administrative specialist, mailing tax notices to homeowners, fielding phone calls and helping people such as seniors with exemption paperwork. But the tables have turned. Now, she and her husband, on a fixed income, feel they’re being pushed out of their house in Greenwood with this year’s property-tax increase of 22 percent. Their income is barely above the maximum to qualify for a senior tax exemption, she said. “You can’t live in Seattle for $40,000.”In many poorer and rural school districts across Washington, projections for the new law on school spending show cuts in property taxes in future years, while taxes remain higher in richer areas like Seattle, Bellevue and Mercer Island. Voter-approved levies make up a large portion of the hikes in some areas, too, including King County, where the increases range from 9 percent in Normandy Park to 31 percent in Carnation. Among U.S. states, a 2016 report by the Tax Foundation found Washington had the 26th-highest property-tax rate (0.94 percent). That compared with the highest rate of 2.11 percent in New Jersey. It’s unclear how the new taxes may change Washington’s rank. As LeMay and her husband go through their belongings and contemplate selling their home eventually, they told The Times they feel overwhelmed and are looking at possibilities outside King County. “Arizona seems like the place a lot of people are relocating,” LeMay said.Beyond tax exemptions and deferrals for qualified seniors, widows and people with low incomes or disabilities can apply through the state for tax help. Also, homeowners can appeal the assessor’s valuation of their homes, which determines tax increases, by July 1 or within 60 days of receiving notification of their assessment. Kathleen Dellplain, 72, formerly of Seattle’s Fauntleroy neighborhood, moved away before the pack. A retired widow, she noticed herself losing financial ground as the owner of a waterfront home years ago. She put the house on the market after receiving this year’s assessment and moved to a farmhouse in Enumclaw, in Southeast King County. “If I could’ve frozen my tax or kept it with the regular rate of inflation, I would have probably stayed there for the rest of my life,” she said. But costs rose too quickly for her income, she said, especially with her commitment to help grandkids through college.

Source: Seattle Times

 

National Apartment Rents Stabilize As Small Cities Boom

After years of torrid growth that has far outstripped wages, national apartment rents have finally plateaued, climbing a scant 2.5% YOY to $1,371 in March, according to RentCafe‘s latest monthly rent report.

Interestingly, the hottest rental markets (Brooklyn, for example), have seen rents retreat from record highs as they grapple with too much development at the high end of the housing market.

Meanwhile, mid-sized cities like Sacramento, Colorado Springs and Tampa have seen strong growth. But by far the strongest growth has been recorded in small cities like Midland, Texas (famously the home of George W Bush) and Yonkers, New York. Midland saw rents increase by a staggering 29% over the past 12 months, while nearby Odessa recorded a nearly 40% rent increase. Meanwhile, Reno, Tacoma and Orlando are in the top ten fastest growing rental markets.

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Still, despite a slight year-over-year drop, Manhattan still has the highest average rent in the country, followed by San Francisco, which saw rents rise 2.4% year-over-year.

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Of the 250 cities surveyed by RentCafe, Wichita, Kansas had the lowest average rent at $632 a month.

Source: ZeroHedge

Intolerant California Woman Refuses To Sell Her House To Trump Supporters

A Sacramento, California woman selling a house which has been in her family for half a century will sell to just about anyone – unless they’re a Trump supporter.

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The homeowner, who declined to give her name, told CBS Sacramento “I told her [the realtor] that I didn’t want her to sell it to a Trump supporter.”

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The woman’s realtor, Elizabeth Weintraub, says that the “no Trump supporter” caveat is a first for her. “We can ask somebody how they voted, but they don’t have to tell us,” said Weintraub.

But is it actually legal? Attorney Allen Sawyer thinks not: “That’s an unlawful contractual term that infringes the freedom of association and first amendment rights,” said Sawyer.

According to the Fair Housing Act, political party affiliation doesn’t fall into one of the seven protected classes. They include race, religion, color, disability. National origin, sex and familial status. –CBS Sacramento

“People have a right to believe what they want to believe and they shouldn’t be restricted from purchasing property based on that,” said Sawyer.

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Either way – the seller is clearly limiting the buying pool according to certified appraiser Ryan Lundquist – who notes that “39 percent of voters voted for Donald Trump in the Sacramento region. That’s an absolute fact.”

The homeowner doesn’t care: “When you’re talking about principals, morals, and ethics, it’s very very deep,” she said.

Source: ZeroHedge

In Nearly 70% Of US Counties, The Average Worker Can’t Afford To Buy A Home

Housing, as we’ve pointed out in the past, is perhaps the most reliable bellwether of widening economic inequality in the US. And in its latest quarterly report on housing affordability in the US, ATTOM discovered that median-priced homes aren’t affordable to average wage earners in an astounding 68% of US housing markets.

In its report, the company calculated affordability by incorporating the amount of income needed to make monthly home payments – including mortgage payments, property tax payments and insurance – on a median-priced home, assuming a 3% down payment and a 28% maximum “front-end” debt-to-income ratio.

That required income was then compared with the median home price.

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The 304 counties where a median-priced home in the first quarter was not affordable for average wage earners included Los Angeles County, California; Maricopa County (Phoenix), Arizona; San Diego County, California; Orange County, California; and Miami-Dade County, Florida. Meanwhile, the 142 counties (32 percent of the 446 counties analyzed in the report) where a median-priced home in the first quarter was still affordable for average wage earners included Cook County (Chicago), Illinois; Harris County (Houston), Texas; Dallas County, Texas; Wayne County (Detroit), Michigan; and Philadelphia County, Pennsylvania.

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Already, the “hottest” housing markets are seeing an exodus of working- and middle-class individuals who can no longer afford to pay the high rents – let along afford to set aside enough money for a down payment.

Eight of the top 10 counties with the highest median home prices in Q1 2018 posted negative net migration in 2017: Kings County (Brooklyn), New York (25,484 net migration decrease); Santa Clara County (San Jose), California (5,559 net migration decrease); New York County (Manhattan), New York (3,762 net migration decrease); Orange County, California (3,750 net migration decrease); and San Mateo, Marin, Napa and Santa Cruz counties in Northern California.

Furthermore, ATTOM’s data found that this problem is getting worse, not better, with 41% of housing markets less affordable than their historical average during the first quarter. That’s up from 35% the quarter before.

Meanwhile, a staggering 73% of markets posted worsening affordability compared with a year ago, including Los Angeles, Cook County (home to Chicago), Maricopa County (Phoenix) and Kings County (Brooklyn).

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The counties where the average wage earner would need to spend the highest share of their income to buy a median-priced home are Baltimore, Bibb County (Macon, Georgia) and Wayne County (Detroit).

Continuing with the trend of home prices rising more than twice as quickly as wages, home-price appreciation outpaced wage growth in 83% of housing markets.

When Fed Chairman Jerome Powell warned last month that “valuations are still elevated across a range of asset classes” and that he fears “signs of rising non-financial leverage” it’s possible that he was still understating the problem.

Source: ZeroHedge

 

Median Home Price In San Francisco Hits $1.42 million: A Standard Condo In San Francisco Is Now Selling For $1.15 Million.

San Francisco housing has entered into a new reality.  Tech money and foreign cash continues to flood the market and pushing prices to astronomical levels.  The typical San Francisco crap shack now will cost you $1.42 million, a new record high with condos going for $1.15 million.  The city is entering into escape velocity of gentrification.  You have older Taco Tuesday baby boomers with rudimentary tech knowledge that bought decades ago living next to a new generation of wealth and tech savvy professionals.  You see this as well in Los Angeles.  Some real estate “experts” barely have a working understanding of tech but definitely know how to navigate to Zillow to view their inflated prices. San Francisco is such an odd case study.  A city that outwardly states it supports the poor but when you look at prices even making $100,000 a year makes you part of a new high income poor – at that income level a sizable amount of your net income is going to go to simply paying for housing unless you want to be part of the mega commuting culture that is now emerging in California.  What is going on in San Francisco?

The new ultra rich in San Francisco

It is hard for people to wrap their minds around the cost of housing in a place like California.  Not so much that it is expensive, but once you look at the property and price you realize people are paying high prices for crap shacks.

Take a look at prices in San Francisco:

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And people are still active and buying. You’ll notice that prices for the U.S. and California overall are merely back to their previous peak price points. Adjusting for inflation, things are moving along more carefully. In San Francisco, we are in a different dimension.

You have foreign money flooding the market and you also have dual income high tech households trying to buy up what little inventory exists. This new class of wealth would rather live in a million dollar dump than spend horrendous hours in a commute. The new sign of status is living near your work, not a McMansion out in the middle of nowhere.

And properties are moving along nicely in San Francisco even at a median price of $1.42 million:

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What is telling is that the media is now in unison championing why real estate is a great buy, even at these prices.  Forget about the multitude of factors that now face our economy including jobs that don’t last for a lifetime or the necessity for mobility with the new workforce.  You have the Taco Tuesday baby boomer mentality where people want to stay put forever and assume everyone is going to follow in their same footsteps.  Apple wasn’t built following the old.  Facebook wasn’t built by following the old.  Tesla wasn’t built by following the old.  This generation is different and their need in housing are reflecting a changing tone.

Beyond the obvious, even at $1.42 million most are not going to have the money to buy these properties.  So what does this do to the current market? What does it do to neighborhoods?  Or how about the local school systems?

I think people just assume that high prices are always going to be part of the equation in California.  But recent history shows that we go in booms and busts.  For those that seem to think the market can only go up they should be out in the market buying real estate.  That is their position.  For those renting, you are already taking a position.  And many parts of the state are becoming renting majority counties.

San Francisco real estate continues to go up.  Who is buying right now?  Funny how those buying real estate at these levels don’t see it as speculation but think stocks or crypto are “crazy” – everyone picks their “investment” product and the market seems frothy across all areas.

Source: Dr.HousingBubble

HUD’s Top Tech Employee Resigns Amid Corruption Scandal

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On the same day Ben Carson, head of The United States Department of Housing and Urban Development (Commonly known as HUD) testified before Congress about the dire need to upgrade the Department of Housing and Urban Development’s computer systems, its chief information officer resigned amid corruption allegations.

Johnson Joy submitted his resignation to Carson on Tuesday, according to a report from The Guardian, and the secretary accepted. Whistleblower Katrina Hubbard, Joy’s former executive assistant, filed a complaint about potential corruption in the CIO’s office, including suspicious over payments of a subcontractor.

Hubbard also claims that she was transferred and then fired after reporting the suspected fraud, with HUD citing job performance issues.

Joy first came under scrutiny last weekend, when The Guardian reported his connection to GJH Global Ministries, a religious charity that solicited donations but did not have a clear objective. The group’s website had mission statements copied from other churches, and was soon locked after The Guardian began asking questions about it.

“We literally did nothing,” GJH Global Ministries director Stephen Austin told a Guardian reporter.

Another HUD official who resigned amid questions about his background, Naved Jafry, was also involved in the charity; Jafry was a subcontractor associated with the same firm that allegedly received inflated payments.

The DC palace intrigue comes as Carson, a former Republican US Presidential Candidate and Trumps pick to head up HUD tries to weather the MSM (main stream media) hype controversy surrounding his office’s attempted purchase of a $31,000 dining room set, which was cancelled amid critical news coverage. Carson was again thumped in the MSM for his response to the situation during a Congressional hearing Tuesday, in which he appeared to blame his wife — who is not a HUD employee — for arranging the purchase and claiming that the old furniture was a safety hazard.

During the same hearing, Carson repeatedly emphasized the importance of upgrading the Federal Housing Administration’s aging information technology infrastructure, which he claimed weathers 2,000 to 3,000 hacking attempts per week — and is based on software that dates back decades. 

“We have to get the IT systems at FHA up to par. We are putting a lot of money and a lot of people in jeopardy by continuing this,” he said.

Source: By Alex Spanko | Reverse Mortgage Daily

U.S. Starter Homes Are Scarcer, Pricier, Smaller and More Run-Down

Homebuyers in the U.S. have plenty to grouse about these days. Prices have climbed steeply in many metro areas, mortgage rates are rising and inventory is thin. But for people looking to purchase their first home, it’s ugly out there.

“Starter homes have become scarcer, pricier, smaller, older and more likely in need of some TLC” than they were six years ago, the real estate website Trulia reported Wednesday after analyzing housing stock across the country. Trulia began tracking prices and inventory in 2012.

 Oh, Give Me a Home …

The supply of U.S. homes is up 3.3%, driven by a 13.3% jump in the premium category, while starter-home inventory has hit its lowest level since Trulia started keeping track in 2012.

It’s grim all over. American homes are at their least affordable in the report’s history. But the median listing price of available starter homes has risen 9.6 percent in the past year, easily beating out the trade-up and premium categories, while starter-home supply has fallen to a new low this quarter, Trulia reported.

Perhaps the most striking finding is that the very buyers who are typically least able to plunk down a lot of money are confronted with the least affordable homes. The share of income needed by those in the market for a premium home was 15 percent, and for a trade-up home 27 percent. For a starter it was 41 percent.

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Adding insult to injury, the homes aimed at first-time buyers are less likely to be ready for human habitation than others, with fixer-uppers accounting for 11.2 percent of the category. They’re about nine years older than they were in 2012, and 2 percent smaller.

On the bright side, 2 percent isn’t a whole lot smaller. Until you learn that homes overall are more than 8 percent bigger.

Source: By Noah Buhayar | Bloomberg