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$22 Billion in California Homes Sold to Chinese All-Cash Buyers; “Beginning of Title Wave” says NAR Chief Economist

Author: Mike Shedlock

Real estate is well back in bubble territory in some places, notably California. It won’t end any differently this time for the buyers, but at least banks will not be on the hook for all of the loans.

All cash buyers from China are bidding up the price of mansions, defined as anything with two stories.

Bloomberg reports Chinese Cash-Bearing Buyers Drive U.S. Foreign Sales Jump.

Henry Nunez, a real estate agent in Arcadia, California, met with so many homebuyers from China that he bought a Mandarin-English translation app for his phone.

The $1.99 purchase paid off last month, when he sold a five-bedroom home with crystal chandeliers, marble floors and two kitchens, one designed for smoky wok cooking. The buyers were a Chinese couple who paid $3.5 million in cash.

Buyers from Greater China, including people from Hong Kong and Taiwan, spent $22 billion on U.S. homes in the year through March, up 72 percent from the same period in 2013 and more than any other nationality, the National Association of Realtors said yesterday in its annual report on foreign home purchases. That’s 24 cents of every dollar spent by international homebuyers, according to the survey of 3,547 real estate agents.

Chinese buyers paid a median of $523,148 per transaction, compared with a U.S. median price of $199,575 for existing-home sales. While Canadians bought more houses than the Chinese, they spent less — a median of $212,500 per residence, for a total of $13.8 billion.

Chinese bought 32 percent of homes sold to foreign buyers in the state, double the share sold to Canadians, according to an April survey by the California Association of Realtors. About 70 percent of international buyers pay cash, the survey showed.

Buyers from China are driving up prices and fueling new construction in Southern California areas such as Arcadia, a city of about 57,500 people with top-rated schools, a large Chinese immigrant community and an array of Chinese restaurants and markets.

The median home price in Arcadia’s 91006 ZIP code was $1.28 million in May, up 18.5 percent from a year earlier, according to research firm DataQuick.

“About 90 percent of my buyers are from China,” said Peggy Fong Chen, a broker with Re/Max Holdings Inc., who sold 80 homes in Arcadia last year. “They want new construction. They want two levels. In China, it is considered a mansion if it has two levels.”

Chinese investors are moving into development in Arcadia, Chen said. They are buying lots with homes built in the 1970s and ’80s, tearing them down and erecting sprawling houses like the one Nunez sold for $3.5 million, which has a double-height entry hall and wood-paneled library.

“Local people really cannot afford these most of the time,” Chen said.

Buyers from China and Asian-Americans purchased about 80 percent of the 47 houses sold at Tri Pointe Homes Inc.’s Arcadia at Stonegate community in Irvine, about 40 miles southeast of Los Angeles, according to Tom Mitchell, president of the Irvine-based builder.

Almost half of the buyers paid cash for houses in the development, at prices starting at $1.16 million, he said. The company has been surprised by how word travels among overseas buyers.

“A Chinese national bought one of our houses at Arcadia in Irvine after reading about it on a blog,” Tri Pointe CEO Doug Bauer said in a telephone interview. “It was a Chinese blog. We couldn’t even read it.”

The share of money arriving from China is likely to keep growing, according to Lawrence Yun, chief economist for the Realtors.

“It’s just the beginning of a tidal wave,” he said in a telephone interview.

Overseas buyers are changing Arcadia, according to Nunez, 55, who has lived in the city since he was 6 years old.

“You drive every street and there are three or four new houses being built,” he said. “It’s just incredible, the demand.”

“Beginning of Tidal Wave”

Lawrence Yun, is Chief Economist and Senior Vice President of Research for the National Association of Realtors.

As for the “beginning”, I seem to recall similar statements from the NAR made in 2005. Of course, when you are dealing with the NAR, no matter when or where, there’s “never been a better time to buy than now.”

Nonsensical statements marked the peak of housing insanity in 2005.

Please recall that disgraced former NAR chief economist, David Lereah timed the exact peak in the the housing bubble with his book Why the Real Estate Boom Will Not Bust – And How You Can Profit from It.

The reviews are hilarious.

Today’s Raison d’être

Today’s Raison d’être from the NAR is the “It’s just the beginning of a tidal wave.” Yeah, right. Beginning of the end of the echo bubble is more like it.

Why Housing Will Crash Again – But For Different Reasons Than Last Time

Published by: Charles Hugh Smith

Institutionalizing the speculative excesses that inflated the previous housing bubble has fed magical thinking and fostered illusions of phantom wealth and security.

The global housing market has been dominated by magical thinking for the past 15 years. The magical thinking can be boiled down to this:

A person who buys a house for $50,000 will be able to sell the same house for $150,000 a few years later without adding any real-world value. The buyer will be able to sell the house for $300,000 a few years later without adding any real-world value. The buyer will be able to sell the house for $600,000 a few years later without adding any real-world value.

And so on, decade after decade and generation after generation: a house should magically accumulate enormous capital (home equity) without the owner having to do anything but pay the mortgage for a few years.

The capital isn’t created by magic, of course: it’s created by a greater fool paying a fortune for the house on the speculative confidence that an even greater fool will magically appear to pay an even greater fortune for the same house a few years hence.

This is the result of housing transmogrifying from shelter purchased to slowly build equity over a lifetime of labor into a speculative bet that credit bubbles will never pop. This transmogrification is the final stage of the larger dynamic of financialization, which turns every asset into a speculative commodity that can leveraged via debt and derivatives and sold into global markets.

The magic of something for nothing is especially compelling to a populace whose earnings have stagnated for decades. The housing bubble fed the fantasy that a household could set aside next to nothing for retirement and then cash out their “winnings” in the housing casino when they reached retirement age.

What believers in the sustainability of the housing casino conveniently ignore is the enormous risk (and debt) being taken on by the last greater fool: if the buyer pays cash, they are gambling on rents continuing to skyrocket along with home valuations, though these two are not as correlated as many assume.

Younger buyers have less disposable income than their elders due to deteriorating wages, higher student loan debt and higher taxes on earned income. As a result, the risk of their defaulting or being impoverished by the collapse of housing valuations is much higher than the risks faced by the buyers who rode the first bubble up to (ephemeral/phantom) riches.

The only way a young household can buy a $150,000 house for $600,000 is if interest rates are low enough to enable a modest income to leverage a huge mortgage. This is the basis of the Federal Reserve’s campaign to buy Treasury bonds and mortgages: by driving interest rates to unprecedented lows, the Fed enables marginal buyers to become the last greater fool.

The first housing bubble circa 2001-2008 inflated as a result of financialization. The second, current echo-bubble has inflated on the socialization of financialization: the FHA and other government agencies have essentially taken over the entire mortgage market, guaranteeing or backing 95% of all mortgages, while the Fed has pushed rates down to historic lows to enable marginal buyers to make bets in the housing casino.
The current echo-bubble has another speculative source: cash buyers of homes to rent. About a third of all home sales in many markets are cash buyers, speculators hoping to cash in on the bubble by selling to a greater fool, or investors seeking the safe returns of rental housing.

Unbeknownst to the majority of these investors, there is no guaranteed return in rental housing when you overpay for the property and a recession guts demand for rentals. This is another form of magical thinking: nothing ever goes down.

The stock market goes higher forever, housing goes higher forever, and the Fed has banished recessions forever. If this isn’t magical thinking, then what is it? Faith in the New Normal? Based on what?

Let’s quantify the magical thinking and the echo bubble with a few charts. Home prices are still 130% above pre-bubble valuations.



Declining mortgage rates (courtesy of the Fed) fueled the first housing bubble and the current echo-bubble.


Measured by houshold earned income, mortgage debt is more than double the historic average of wages-to-mortgage-debt.


Take a look at the Fed’s purchases of mortgages: from zero to $1.2 trillion, and then another $800 billion for good measure. The Fed has intervened in the Treasury market to the tune of almost $2 trillion to suppress interest rates.


The Fed’s pause in mortgage purchases caused the housing market “recovery” to nosedive. This should make us wonder what will happen when the Fed’s mortgage purchases finally end.



Relying on greater fools and expecting the rental housing market to magically ignore the ravages of recession for the first time in history is not a formula for financial or speculative success. The current echo-bubble in housing will pop, just like every other leverage/credit-fueled speculative bubble in history.

Institutionalizing the speculative excesses that inflated the previous housing bubble has fed magical thinking and fostered illusions of phantom wealth and security. The damage that will be unleashed by the echo-bubble deflating will be substantial, and in line with the The Smith Uncertainty Principle, not as predictable as many imagine:

The Smith Uncertainty PrincipleEvery sustained action has more than one consequence. Some consequences will appear positive for a time before revealing their destructive nature. Some consequences will be intended, some will not. Some will be foreseeable, some will not. Some will be controllable, some will not. Those that are unforeseen and uncontrollable will trigger waves of other unforeseen and uncontrollable consequences.

World Resistance Report: Davos Class Jittery Amid Growing Warnings of Global Unrest

World of Resistance Report: Davos Class Jittery Amid Growing Warnings of Global Unrest

By: Andrew Gavin Marshall

Originally posted on 4 July 2014 at Occupy.com

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In Part 1 of the WoR Report, I examined the “global political awakening” as articulated by arch-imperial strategist Zbigniew Brzezinski. In Part 2 published last week I took a more detailed look at the ways global inequality and injustice relate to the coming era of instability and social unrest. Here, in Part 3, I explore the warnings on inequality and revolt now coming from one of the premier institutions of the global oligarchy: the World Economic Forum.

As an annual gathering of thousands of leading financial, corporate, political and social oligarchs in Davos, Switzerland, the World Economic Forum (WEF) has taken a keen interest in recent years discussing the potential for social upheaval as a result of mass inequality and poverty. A WEF report released in November of 2013 warned that a “lost generation” of unemployed youth in Europe could potentially pull the Eurozone apart. One of the report’s authors, the CEO of Infosys, commented that “unless we address chronic joblessness we will see an escalation in social unrest,” noting that youth especially “need to be productively employed, or we will witness rising crime rates, stagnating economies and the deterioration of our social fabric.” The report added: “A generation that starts its career in complete hopelessness will be more prone to populist politics and will lack the fundamental skills that one develops early on in their career.”

In short, if the global ruling class – known affectionately as the Davos Class – doesn’t quickly find ways to accommodate the continent’s increasingly unemployed and “lost” youth, those people will potentially turn to “populist politics” of resistance that directly challenge the global political and economic order. For the individuals and interests represented at the World Social Forum, this poses a monumental and, increasingly, an existential threat.

The World Economic Forum’s Global Competitiveness Report for 2013-2014, entitled “Assessing the Sustainable Competitiveness of Nations,” noted that the global financial crisis and its aftermath “brought social tensions to light” as economic growth was not translated into positive benefits for much or most of the planet’s population. Citing the Arab Spring, growing unemployment in Western economies and increasing income inequality, there was growing recognition that dangerous upheaval could be on the way. The report noted: “Diminishing economic prospects, sometimes combined with demand for more political participation, have also sparked protests in several countries including, for example, the recent events in Brazil and Turkey.”

The WEF report wrote that “if economic benefits are perceived to be unevenly redistributed within a society,” this could frequently result in “riots or social discontent” such as the Arab Spring revolts, protests in Brazil, the Occupy Wall Street movement, and other recent examples. The report concluded that numerous nations were at especially high risk of social unrest, including China, Indonesia, Turkey, South Africa, Brazil, India, Peru and Russia, among others.

Phila Unemployment Project

In early 2014, the World Economic Forum released the 9th edition of its Global Risks report, published to inform the debate, discussion and planning of attendees and guests at the annual WEF meeting in Davos. The report was produced with the active cooperation of major universities and financial corporations, including Marsh & McLennan Companies, Swiss Re, Zurich Insurance Group, National University of Singapore, University of Oxford, and the University of Pennsylvania’s Wharton Risk Management and Decision Processes Center. It included a large survey conducted in an effort to assess the major perceived risks to the global order atop which the Davos Class sits.

The report noted that the “most interconnected” risks were fiscal crises, structural unemployment and underemployment, all of which link to “rising income inequality and political and social instability.” The young generation now coming of age globally, noted the WEF, “faces high unemployment and precarious job situations, hampering their efforts to build a future and raising the risk of social unrest.” This “lost generation” faces not only high unemployment and underemployment, but also major educational challenges since “traditional higher education is ever more expensive and its payoff more doubtful.”

Perceiving the innovations and skills of today’s generation which are enabling the growing foment, the Forum noted:

“In general, the mentality of this generation is realistic, adaptive and versatile. Smart technology and social media provide new ways to quickly connect, build communities, voice opinion and exert political pressure… [youth are] full of ambition to make the world a better place, yet feel disconnected from traditional politics and government – a combination which presents both a challenge and an opportunity in addressing global risks.”

The Global Risks 2014 report cited a global opinion survey on the “awareness, priorities and values of global youth,” which the authors refer to as “generation lost.” This generation, noted the survey, “think independently of this basic fallback system of the older generation – governments providing a safety net,” which “points to a wider distrust of authorities and institutions.” The “mindset” of today’s youth has been additionally shaped by the repercussions and apparent failures to deal with the global financial crisis, as well as increasing revelations about U.S. intelligence agencies engaging in massive digital spying. For a generation largely mobilized through social media, online spying has held particular relevance, as “the digital revolution gave them unprecedented access to knowledge and information worldwide.”

Protests and anti-austerity movements were able to “give voice to an increasing distrust in current socio-economic and political systems,” with youth making up significant portions of “the general disappointment felt in many nations with regional and global governance bodies such as the EU and the International Monetary Fund.” The youth “place less importance on traditionally organized political parties and leadership,” which creates a major “challenge for those in positions of authority in existing institutions” as they try “to find ways to engage the young generation,” adds the report.

According to the World Bank, more than 25% of the world’s youth, or some 300 million people, “have no productive work.” On top of this, “an unprecedented demographic ‘youth bulge’ is bringing more than 120 million new young people on to the job market each year, mostly in the developing world.” This fact “threatens to halt economic progress, creating a vicious cycle of less economic activity and more unemployment,” which “raises the risk of social unrest by creating a disaffected ‘lost generation’ who are vulnerable to being sucked into criminal or extremist movements.”

Noting that more than 1 billion people currently live in slums – a number that has been steadily increasing as income inequality rises – the report stated that “this growing population of urban poor is vulnerable to rising food prices and economic crises, posing significant risks of chronic social instability.” Growing income inequality is now being termed a “systemic risk,” according to the WEF. And in a stark admission from that institution representing the world’s major profiteers of global capitalism, the report acknowledged that globalization “has been associated with rising inequality between and within countries” and that “these factors render poor people and poor countries vulnerable to systemic risks.”

The four major “emerging market” BRIC nations of Brazil, Russia, India and China “now rank among the 10 largest economies worldwide.” But slow political reforms within these countries, coupled with external economic shocks (like financial crises caused by Western nations and their corporate institutions) could aggravate the “existing undertones of social unrest.” Within the BRIC nations and other emerging market economies, “popular discontent with the status quo is already apparent among rising middle classes, digitally connected youths and marginalized groups,” the report went on. Collectively, these groups “want better services (such as healthcare), infrastructure, employment and working conditions,” as well as “greater accountability of public officials, better protected civil liberties and more equitable judicial systems.” Further, a “greater public awareness of widespread corruption have sharpened popular complaints.”

Both Brazil and Turkey have made universal healthcare systems a constitutional obligation, which was a stated ambition of other emerging market nations such as India, Indonesia and South Africa. The failure to create these healthcare systems “may arouse social unrest,” warned the WEF. The World Economic Forum’s chief economist, Jennifer Blanke, stated: “The message from the Arab Spring, and from countries such as Brazil and South Africa is that people are not going to stand for it any more.” David Cole, the group chief risk officer of Swiss Re (one of the contributing companies to the WEF report) commented: “The members of generation lost are not lost because they have tuned out. They are highly tuned in. They are lost because they are being left out or they are deciding to leave.” http://www.theguardian.com/business/2014/jan/16/income-gap-biggest-risk-global-community-world-economic-forum

The World Economic Forum’s Risk report for 2014 was primarily concerned with “the breakdown of social structures” and “the decline of trust in institutions.” It warned of risks of “ideological polarization, extremism – in particular those of a religious or political nature – and intra-state conflicts such as civil wars.” All of these issues relate directly “to the future of the youth.”

It’s an interesting paradox for an organization to see the greatest threat to its ideological and social power being “the future of the youth” when it has already written off the present generation as “lost.” However, this is a view shared not only by the World Economic Forum but, increasingly, by other powerful institutions creating something of an echo chamber through the mainstream media. The head of the IMF has warned that youth unemployment in poor nations was “a kind of time bomb,” and the head of the International Labor Organization (ILO) warned in 2011 that the “world economy” was unable “to secure a future for all youth,” thus undermining “families, social cohesion and the credibility of policies.” While there was “already revolution in the air in some countries,” as reported in the Globe and Mail, the dual crises of unemployment and poverty were “fuel for the fire.”

In April of 2014, the World Economic Forum on Latin America reported that the primary challenge for the region was “to reduce inequality,” noting that between 70 and 90 million people in Latin America had entered what were referred to as the “consuming classes,” or “middle classes,” over the previous decade. However, Marcelo Cortes Neri, Brazil’s Minister of Strategic Affairs, explained, “When we talk about middle class we think of the U.S. middle class, with two cars and two dogs and a swimming pool. That is not Latin American middle class or the world middle class.”

He added that the emerging so-called “middle class” in Latin America and elsewhere “could become a problem for governance,” commenting: “They are the ones that put pressure for better levels of education and healthcare; they are the ones that go to the streets to demand rights.” Neri then posed the question: “How prepared is Latin America to have a robust middle class?” In particular, youth between the ages of 15 and 29 raised specific concerns for Latin America’s elite, with Neri warning: “This is the group I am most worried about. They have very high expectations and so the probability they will get frustrated is enormous.”

When one of the world’s most influential organizations representing the collective interests of the global oligarchy openly acknowledges that globalization has increased inequality, and in turn, that inequality is fueling social unrest around the world manifesting the greatest potential threat to those oligarchic interests, we can safely say we’re entering a new era of global instability and resistance.

Andrew Gavin Marshall is a researcher and writer based in Montreal, Canada. He is project manager of The People’s Book Project, chair of the geopolitics division of The Hampton Institute, research director for Occupy.com’s Global Power Project and World of Resistance Report, and host of a weekly podcast show with BoilingFrogsPost.

 

Excluding Oil, The US Trade Deficit Has Never Been Worse

By Tyler Durden, Zero Hedge

Remember when in January 2010 Obama promised that he should double US exports in five years in a bid to collapse the US trade deficit? Not only that, but in his 2010 SOTU address, Obama doubled down by saying “It’s time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America.”

Back then, Jennifer R. Psaki who was still a simple White House spokesperson, said that the White House “had been working for several months on a policy to increase exports. She said the plans included the creation of an export promotion cabinet and steps to help small and medium-size businesses tap markets in other countries. ”

Well, it isn’t quite five years later (he still has six months), but we doubt that anyone would have expected what the outcome of Obama’s export boosting campaign would be. We show it below in the following chart which captures the US trade deficit, excluding oil.

 

What this chart shows is that when it comes to core manufacturing and service trade, that which excludes petroleum, the US trade deficit hit some $49 billion dollars in the month of May, the highest real trade deficit ever recorded!

In other words, far from doubling US exports, Obama is on pace to make the export segment of the US economy the weakest it has ever been, leading to millions of export-producing jobs gone for ever (but fear not, they will be promptly replaced by part-time jobs). It also means that the collapse in Q1 GDP, much of which was driven by tumbling net exports, will continue as America appear largely unable to pull itself out of its international trade funk, much less doubling its exports.

What’s perhaps just as bad, is that the chart above shows that global trade continues to collapse: just recall the near standstill in Chinese trade, both exports and imports, that took place earlier this year. We wonder: is the fact that the world is trading with each other at the slowest pace since the Lehman collapse also due to harsh winter weather?

Yet while core trade is the worst ever, overall US trade is not all that bad. Why? Because of the shale revolution of course, and the fact that net US petroleum imports have plunged.

 

Note, the above chart does not imply the US is a net exporter of petroleum, especially considering the recent news surrounding the easing of the oil export ban. That simply won’t happen as was explained previously. What it does show is that oil imports as a percentage of the total US trade deficit continue to decline, even if the US still remains a net oil importer.  Which is curious because as Bloomberg reports, “the U.S. will remain the world’s biggest oil producer this year after overtaking Saudi Arabia and Russia as extraction of energy from shale rock spurs…  U.S. production of crude oil, along with liquids separated from natural gas, surpassed all other countries this year with daily output exceeding 11 million barrels in the first quarter, the bank said in a report today. The country became the world’s largest natural gas producer in 2010. The International Energy Agency said in June that the U.S. was the biggest producer of oil and natural gas liquids.”

So even with the world’s biggest crude production, the US still needs to import nearly $9 billion in petroleum goods every month? That is hardly enough to offset the massive loss of jobs experienced in other non-energy sectors of the economy which unlike oil, have never seen a worse trade deficit.

Furthermore, even as the energy sector soaks up some $200 billion in capex or some 20% of the total private fixed-structure spending, the US shale renaissance will only persist for another 5 or so years before the output rates peak and resume their downward direction:

U.S. oil output will surge to 13.1 million barrels a day in 2019 and plateau thereafter, according to the IEA, a Paris-based adviser to 29 nations. The country will lose its top-producer ranking at the start of the 2030s, the agency said in its World Energy Outlook in November.

Or sooner. Or later. The funny thing about petroleum production is how dependant on extraction technology it is. Still, while the shale revolution has been a blessing since the Lehman collapse, it may be on the verge of some serious disappointments: recall back in March when the Monterey Shale, whose reserves were said to account for two-thirds of all recoverable US shale oil resources, saw the EIA cuts these estimates by a whopping 96% overnight!

Furthermore, as we also reported back in March, the US may well have hit the tipping ROI point, as shale costs have exploded in recent months. In fact, the one thing that may be masking the increasing unprofitability of shale production in the US is that old standby: debt. Some of the choice fragments from the indepth look at the shale industry, from Shale Boom Goes Bust As Costs Soar:

The U.S. shale patch is facing a shakeout as drillers struggle to keep pace with the relentless spending needed to get oil and gas out of the ground.

Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.

“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.”

In a measure of the shale industry’s financial burden, debt hit $163.6 billion in the first quarter… companies including Forest Oil Corp. , Goodrich Petroleum Corp. and Quicksilver Resources Inc. racked up interest expense of more than 20 percent.

Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can’t afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.

But one doesn’t need to look at the shale driller’s balance sheets to know that something is afoot: a quick glimpse at recent Bakken shale dynamics, shows that the well efficiency has topped out and the only offset is the exponentially rising number of wells: an exponential line which as the excerpt above shows is only sustainable courtesy of ZIRP and ultra cheap debt. If and when the Fed’s generosity ends, watch out as the shale day of reckoning finally arrives .

In any event, the above shale discussion is tangential – perhaps the US will uncover new technologies to tap even more oil, at lower prices and higher efficiencies. But probably not, as even the E&P industry is increasingly more focused on buybacks and cashing out here and now, than on capex and R&D spending.

Ironically, it is precisely the oil industry in general, and shale in particular, that Obama blasted as recently as 2011. As the NRO helps us recall, it was back in 2007, Obama said he wanted to free America from “the tyranny of oil.” In 2011, he called oil “yesterday’s energy.” He also decried the profits being made by the oil and gas sector and declared that it was time to repeal the tax preferences given to it (which cost taxpayers about $4 billion per year), calling them “oil-company giveaways.” How ironic is it, then, that it is precisely the oil companies which prevent the soaring US trade gap in all other goods and services to disintegrate the US economy completely.

In any event, in a world in which trade increasingly does not matter (because central banks supposedly can and will merely print “prosperity” to offset the lost wealth that comes with international trade and comparative advantage, a concept that has been around since the late 1700s), it is becoming clear that America has certainly adhered to the Fed’s mission of forcing capital misallocation worse than ever, by focusing not on being competitive in an increasingly more technological and sophisticated world, but merely pretending that an economy can achieve escape velocity almost exclusively through stock buybacks.

And yet somehow there are those who still vouch for 3% GDP growth any minute now, a renaissance in capital spending also any minute now, just, well, never now, and who believe that some 285K jobs can be created at a time when the US economy is free falling and the M&A bubble is laying off tens of thousands every month left and right all in the name of the almighty EPS beat.

But then again, Obama still has 6 months to make good on his promise to “double US exports in 5 years.” We are confident that in retrospect, just like in all of his other public appearances, he will have spoken nothing but the truth…

‘1,000 Shades of Non-QM’: Home Lenders Court Niche Borrowers

By Kate Berry, National Mortgage News    Nonstandard. Atypical. Irregular. One-off.

These are just a few of the terms that mortgage lenders have coined to describe loans that do not meet the Consumer Financial Protection Bureau’s definition of an ultra-safe “qualified mortgage.”

Since the CFPB’s mortgage rules went into effect in January, some mortgage lenders and investors have been desperately trying to figure out how to originate loans that fall outside the definition.

Non-QM loans offer lenders the potential to earn the kind of profits last seen during the heady days of subprime lending. At a time when loan volumes have plummeted, lenders can charge consumers significantly higher mortgage rates for these products. The profit potential would be even greater if the loans eventually get pooled together, securitized and sold to investors.

“Mortgage bankers are looking to find other sources of business in order to remain profitable or to get back to profitability,” says Michele Perrin, a principal at Perrin & Associates, a warehouse lending advisory firm in Tustin, Calif. “Everybody is looking for financing for non-QM loans.”

Many lenders are wading into the non-QM space by initially offering loans to self-employed borrowers, foreign nationals and borrowers with blemished credit from a past short sale or foreclosure. Some lenders also are focusing on specific property types like condominiums that do not meet standards set by Fannie Mae or Freddie Mac.

“There will be 1,000 flavors of non-QM like 1,000 shades of gray,” says Brian Hale, the CEO of Stearns Lending, in Santa Ana, Calif. “I believe all lenders will have to do some portion of their volume in the non-QM space. It’s easy to race in and there’s no shortage of demand because there are an awful lot of customers that don’t fit the QM box.”

But non-QM loans come with significant legal risks. The “ability to repay,” rule, a crucial provision of the Dodd-Frank Act, requires that lenders consider eight specific underwriting factors to verify the borrower’s income.

Failure to do so can result in possible criminal liability, fines of $5,000 per day, enforcement actions by federal and state agencies, and civil and class action lawsuits by individual borrowers. Borrowers have three years to bring a legal action against a lender for potential violations of the ability to repay rule and also can raise a defense to a foreclosure years down the road.

Lenders are dividing the market into various niches that they deem safe enough to compensate for legal dangers. Most are identifying well-qualified borrowers with ample assets but income that might be difficult to document.

“I think you’ll find that non-QM loans are pristine loans otherwise that could be challenged on the ability to repay rule,” says Raymond Natter, a partner at the law firm of Barnett Sivon & Natter, who conceded that “nonbank lenders might be more comfortable with a riskier business model.”

Of course, the nation’s top banks originally claimed they would not make any non-QM loans, but they all have continued to make interest-only jumbo mortgages to wealthy borrowers. Such loans are held on bank balance sheets and tend to have very low default rates. Interest-only loans are excluded from being considered ultra-safe “qualified mortgages” because borrowers often face payment shock once they are required to start paying principal, typically after five to seven years of paying just interest.

Non-QM lenders are replicating the playbook of banks that naturally gravitated toward interest-only and jumbo loans to borrowers with lots of reserves and income.

“They’re not making an IO loan to a part-time Wal-Mart worker who lives paycheck to paycheck,” says Michael Kime, the chief operating officer at W.J. Bradley Mortgage, a Colorado lender. “Banks feel grounded to defend the non-predatory nature of the loan. How do we identify underserved markets, make responsible loans and have enough of them to get…deal flow?”

This month, W.J. Bradley will start originating nonagency condo loans. Many condominiums are tied up in litigation or have too many unoccupied units that make them ineligible for sale to Fannie Mae or Freddie Mac. Mortgages on certain mixed-use commercial and residential properties also can’t be sold to the government-sponsored enterprises and exemplify the types of niche non-QM loans W.J. Bradley will originate from now on, Kime says.

“We’re wringing our hands at the opportunity,” he says. “How do we parlay the same logic a bank is using into a nonbank securitization?…The real issue is ability-to-repay: Are you [the lender] behaving in a predatory manner or are you originating assets to reasonable borrowers?”

A handful of lenders and investors are lining up to originate nonagency, non-QM loans. They include Caliber Home Loans, an Irving, Texas, lender owned by private equity firm Loan Star Funds, and Legg Mason Inc.’s bond firm Western Asset Management, which plans to buy non-QM loans from lenders.

Perrin is working with non-QM lenders including some hard-money lenders that are offering short-term financing at rates ranging from 11% to 13% to individual investors who are buying and flipping properties. The biggest hurdle, she says, is trying to get warehouse lines of credit.

“Warehouse lenders do not want to be anywhere near the origination piece of the transaction,” says Perrin. “They do not want to be potentially sued and most of these firms believe attorneys will be lining up to sue non-QM lenders.”

Some warehouse lenders are considering creating special purpose entities that would serve as a buffer between them and the originating lender as a shield from being sued, Perrin says.

Non-QM lending is still in the very early stages and many lenders believe it will evolve as lenders become more comfortable with the litigation risk.

“You’re going to have non-QM, it’s just another asset to throw in there along with reperforming and nonperforming securitizations,” says Michele Patterson, a senior director at Kroll Bond Rating Agency.

Still, the lack of a secondary market take-out for lenders, the dearth of available capital and historically low interest rates, which make the risks harder to justify, are all headwinds for non-QM loans.

Finding a catchy moniker also would help.

“We started internally calling these nonprime loans but that has a connotation of subprime, and you can’t call them alt-A because of the stigma,” says Kime, referring to alternative-A, a boom-era subcategory of loans that had less than full documentation and lower credit scores but higher loan-to-value ratios.

Related:

Record Number of Americans Not in Labor Force in June

Source: CNSNews.com – The number of Americans 16 and older who did not participate in the labor force climbed to a record high of 92,120,000 in June, according to data from the Bureau of Labor Statistics (BLS).

This means that there were 92,120,000 Americans 16 and older who not only did not have a job, but did not actively seek one in the last four weeks.

That is up 111,000 from the 92,009,000 Americans who were not participating in the labor force in April.

In June, according to BLS, the labor force participation rate for Americans was 62.8 percent, matching a 36-year low. The participation rate is the percentage of the population that either has a job or actively sought one in the last four weeks.

In December, April, May, and now June, the labor force participation rate has been 62.8 percent.

Before December, the last time the labor force participation rate sank as low as 62.8 percent was in February 1978, when it was also 62.8 percent. At that time, Jimmy Carter was president.

At no time during the presidencies of Ronald Reagan, George H.W. Bush, Bill Clinton or George W. Bush, did such a small percentage of the civilian non-institutional population either hold a job or at least actively seek one.

While the number of Americans not in the labor force increased, the unemployment rate dropped — from 6.3 percent in April to 6.1 percent in June.

What’s Behind The Rise In US Industrial Production?

The domestic energy boom is behind the expansion of Industrial Production.

Source: oftwominds.com

In contrast to other measures of economic activity that are stagnant or declining, U.S. industrial production has been rising: Industrial Production and Capacity Utilization (Federal Reserve data)


Is this evidence that manufacturing is on-shoring, i.e. returning from overseas? While there is anecdotal evidence for on-shoring, it appears that energy production (classified as part of mining in government statistics) is the big driver of rising industrial production.

Longtime correspondent B.C. submitted these two charts breaking down industrial production into mining, manufacturing and total production. While manufacturing has recently returned to pre-recession levels of late 2007, energy production (included in mining) has soared as the energy industry has put fracking and new wells into production. B.C. Commented: “The remarkable untold story: Ex mining and oil and gas extraction, US Industrial Production has been in contraction for most of the period since Peak Oil in 2005-08.”



The red line is the ratio of total production to mining/energy. Its decline reflects the dominance of mining/energy in the rise of industrial production as a whole.

The second chart is percent change from a year ago. This shows the rate of manufacturing expansion has been declining since 2010 while mining/energy has been on a tear, spiking as high as 10% gains per year.



Here is a chart of the U.S. oil/gas rig count:



For context, here is a longer term look at the U.S. rig count. Note that the number of active rigs in the early 1980s was considerably higher than the present count.



For context, here is total U.S. energy consumption. The takeaway here is the reliance on oil, gas and coal, i.e. the fossil fuels:




One last bit of context: U.S. oil imports. While the increase of 3+ million barrels a day in domestic production is welcome on many fronts (more jobs, more money kept at home, reduced dependence on foreign suppliers, etc.), the U.S. still needs to import crude oil.


U.S. Imports by Country of Origin (U.S. Energy Information Administration)

Why Hasn’t the Fed Taper Sent Mortgage Rates Soaring?

Source: fool.com

Mortgage rates play a key role in making houses affordable for would-be home buyers, as the lower mortgage rates are, the lower monthly payments will be on any loan amount. Yet as the Federal Reserve has continued along its yearlong path of winding down the amount of mortgage-backed securities it buys on the open market, financial analysts have been confounded regarding why mortgage rates haven’t risen in response. Moderation in mortgage rates has been beneficial to the Dow Jones industrials (DJINDICES: ^DJI  ) and to financial institutions, especially Dow component JPMorgan Chase (NYSE: JPM  ) and other major mortgage lenders.

Simple economics
The fears of investors in JPMorgan and in other banks outside the Dow Jones Industrials are fairly easy to understand. Throughout 2013, the Federal Reserve spent $85 billion each month to buy bonds, including $40 billion specifically aimed at the mortgage-backed securities market. By focusing buying activity on mortgage-backed securities (unlike previous quantitative easing programs), the Fed believed that it could keep mortgage rates down more effectively than by counting on market mechanisms to restrain them.

As buying activity helped keep mortgage rates down, it was natural for investors to assume that taking away those purchases would allow mortgage rates to rise again. Indeed, about a year ago, just the hint that the Fed might taper its bond purchases in the future sent mortgage rates soaring, creating problems for financial stocks both inside and outside of the Dow as mortgage-lending activity dried up and bond prices started falling to earth.

Since the end of last year, the Fed has reduced that $40 billion monthly amount toward mortgage-backed securities purchases by $5 billion each meeting, with the latest pronouncement Wednesday cutting the total to just $15 billion per month. At this rate, the Fed will stop buying mortgage-backed bonds entirely by the end of 2014.

The other side of the equation
But looking only at demand for mortgage-backed securities gives you only half of the story. Interestingly, the supply of mortgage-backed securities has also fallen lately. Data from the Securities Industry and Financial Markets Association show that Fannie Mae (NASDAQOTCBB: FNMA  ) and Freddie Mac (NASDAQOTCBB: FMCC  ) have both dramatically reduced the amount of mortgage-backed debt they have outstanding, likely as part of their ongoing process of winding down in conservatorship.


Source: SIFMA.

Even as Fannie Mae and Freddie Mac see their outstanding debt levels shrink, even the modest uptick in mortgage rates has already had a big impact on activity in the market. Most people had already refinanced their mortgages at the lowest rates possible, and so refinancing activity will be much lower going forward than seen in the past. That will reduce the turnover in existing mortgage-backed securities and eliminate the need for as many newly issued securities to come out.

Of course, the Federal Reserve has started signaling that short-term interest rates will also eventually start making their way back up. Once monetary policy starts tightening more aggressively, it would be much harder to see mortgage rates sustain their current levels. For now, though, mortgage rates have held their own, and that has been a boon for the big mortgage banks and for the Dow Jones industrials in general.

CFPB Disregards Employment Classification to Find Kickbacks

Source: National Mortgage News

Last week the Consumer Financial Protection Bureau announced another enforcement action aimed at “kickbacks” prohibited by the Real Estate Settlement Procedures Act. This time, it was a title company that had received referrals of title business from independent sales agents. What is particularly interesting about the CFPB’s actions in this case, are that it recognized a distinction in terms of the treatment of persons working for a company based upon their classification as employees or contractors. Although it is clear that employees can receive referral payments under RESPA, there was a lack of clarity in the case of “independent contractors” who performed nearly the same services but were simply designated as stand-alone companies. Although some believed that this differentiated tax treatment would not necessarily matter as to kickbacks if the services were similar to those of employees, it appears from the CFPB’s actions, that the statute—which says “employees”—will be strictly construed.

Even more important, however, is that in the instant enforcement action, the CFPB set aside the tax designation of the parties, relying instead upon legal definitions, to determine the classification. In other words, although the parties designated the relationship as employment and issued W-2 tax forms (for employees), the CFPB applied a legal standard used to determine employment status and found that in reality these individuals did not meet the definition of employees and were in fact contractors. Specifically, because the CFPB found that the title company did not direct and control the means and manner of the work performed by the sales agents. This lack of control vitiated the employment classification turning the sales agents into contractors and thus evoking Section 8 of RESPA.

This action is not without precedent. The CFPB has shown a clear willingness to call it like it sees it, and disregard agreements and classifications between parties when it views the relationship as a sham. Moreover, courts have developed large bodies of law regarding employment misclassification. Lenders should pay careful attention to this case, however, as it could be used to impact not only RESPA, but also affiliated business disclosures and even QM status. Whereas the employment classification is beneficial for the purposes of RESPA, misclassified contractors who become reclassified as employees could potentially change the applicability of ABA disclosures and QM status. The bottom line is that lenders must pay attention to the designation of contractors (in both directions) and make sure they meet the legal definitions and standards for which they are classified. Otherwise, a potential misclassification could prove costly in a variety of ways.

Number One Reason People Move

From 2012 to 2013, 36 million people who are one year and older moved, but why?  (source: HousingWire)

School. Work. Friends. Family. All of these are valid options, but the U.S. Census Bureau released a report putting real numbers and reasons behind the question.

The number one reason cited: housing.

Family, which made up 30.3%, employment, 19.4%, and other, 2.3%, closely followed behind housing, which made up 48%.

“We asked people to select the reason that contributed most to their decision to move. Picking one reason can be difficult as moves are often motivated by many different, and oftentimes competing, factors,” said the report’s author, David Ihrke, a demographer in the Census Bureau’s Journey to Work and Migration Statistics Branch.

“For instance, if one’s primary reason for moving is to be closer to work or having an easier commute, they may have to sacrifice other preferences. This could include forgoing cheaper housing options or settling for a different neighborhood. If they mainly want cheaper housing, they may have to deal with a longer commute.”

Key findings in the report include that males were more inclined to move for job-related reasons than females.

In addition, married respondents were the least likely to move for family-related reasons.

Census Bureau_ Moving

(source: Census Bureau. Click image for larger picture)

Foreclosures Tossed Out Of Ohio Courts – ”They Own Nothing”

Source: loansafe.org

Judge Christopher A. Boyko of the Eastern Ohio United States District Court, seven years ago on October 31, 2007 dismissed 14 Deutsche Bank-filed foreclosures in a ruling based on lack of standing for not owning/holding the mortgage loan at the time the lawsuits were filed.

Judge Boyko issued an order requiring the Plaintiffs in a number of pending foreclosure cases to file a copy of the executed Assignment demonstrating the plaintiff (Deutsche Bank) was the holder and owner of the Note and Mortgage as of the date the complaint was filed, or the court would enter a dismissal.

The Court’s amended General Order No. 2006-16 requires the plaintiff (Deutsche Bank) to submit an affidavit along with the complaint, which identifies them as the original mortgage holder, or as an assignee, trustee or successor-interest.

Apparently Deutsche Bank submitted several affidavits that claim that they were in fact the owner of these mortgage notes, but none of these affidavits mention assignment or trust or successor interest.

Thus, the Judge ruled that in every instance, these submissions create a “conflict” and they “do not satisfy” the burden of demonstrating at the time of filing the complaint that Deutsche Bank was in fact the “legal” note holder.

While the decision is great for homeowners in distress (due to providing a new escape hatch out of foreclosure), it also represents a serious roadblock. If the toxic mortgage fiasco is to be cleaned up, there must be a simple means of identifying what banks own and what they do not own. This judgment is an example of the enormous task ahead in sorting out the mortgage mess.

Jacksonville Area Legal Aid Attorney, April Charney, had said this in regards to the Ohio Federal Court ruling (emphasis ours): “This court order is what I have been saying in my cases. This is rampant fraud on every court in America or non judicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.”

These loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged “sale” to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require. This means that many securitized trusts don’t really, legally own these bad loans. Regarding this mess Charney further explains:

“In my cases, many of the trusts try to argue equitable assignment that predates the filing of the foreclosure, but a securitized trust cannot take an equitable assignment of a mortgage loan. It also means that the securitized trusts own nothing.”

This decision confirms that investors in the mortgage debacle may very well own nothing—not even the bad loans they funded! It seems their right to the cash flow from the underlying properties does not extend to ownership of the properties themselves; thus, clouding the recovery picture considerably.

Summarizing the problem Charney concludes:

Photobucket “This opinion, once circulated and adopted by State and Federal Courts across the country, will stop the progress of foreclosures, at first in judicial foreclosure states, across America, dead in their tracks.”

We agree with the remarks Charney makes pointing out that this decision will have major adverse implications for the prospects of an amicable financial workout for the various investor contingents in mortgage-backed securities (MBSes). Doubt is cast on where the full write-downs will eventually land, and this uncertainty can only be expected to further harm the market value of MBS and MBS-based synthetic securities, already in shambles purely due to rising underlying delinquencies. Investors in these securities might have assumed—wrongly, it turns out—that they actually owned some “real estate” in these deals.

To paraphrase Jim Cramer, “They own nothing!”

Buying A Condo For Your Child Near His Or Her College Is Often A Sound Investment

Source: LA Times

Giving your offspring a place to live eliminates the cost of rent. And if the condo is large enough — say, two or three bedrooms — the extra rooms can be rented to other students to help defray the cost of ownership.

Moreover, over the four-year span until your child graduates — and often a year or two longer these days — your investment is likely to appreciate. Although rising values are not guaranteed, housing near universities and colleges is usually scarce. If that’s the case where your child chooses to matriculate, the law of supply and demand is the rule, not the exception.

If there has been mismanagement or the building is in financial distress, you could wind up paying dollars to replace the dollars someone else squandered. – Dan S. Barnabic, author of ‘The Condo Bible for Americans’

Still, although buying a condo as an investment near a college is not terribly different from buying one elsewhere, more thorough diligence is often required.

Here’s one caution that probably never entered your mind: Is the campus likely to remain where it is and not move to another location?

Most likely it will stay put. But it’s not unheard of for a campus to close in one place and reopen somewhere else, says Dan S. Barnabic, author of “The Condo Bible for Americans” (Neon Publishing Corp., 2013).

It’s fairly simple to find out whether a move’s afoot. Simply call the registar’s office, or the school’s president, and ask.

But remember, the time frame that you hold the place might be somewhat longer than four years, and even longer if owning a rental apartment turns out to be a strong investment.

Toronto-based Barnabic, a former real estate agent, broker, manager and condo developer, also wants you to beware of buying into a financially troubled or poorly managed property.

“If there has been mismanagement or the building is in financial distress,” he says, “you could wind up paying dollars to replace the dollars someone else squandered.”

To prevent that, he suggests standing outside the building and asking residents as they walk in and out about their experiences. Are there any maintenance deficiencies? Is management responsive? Are battles raging among neighbors — or perhaps more important, among board members who are elected to run the complex and make sure the rules are followed?

Next, obtain an estoppel certificate, a document similar to a survey for a single-family property, that shows the unit, the maintenance fees, the amount of the building’s debt and any assessments that are either contemplated or set in stone.

It is most important to pay attention to the annual budget. If the budget or reserve is underfunded, you as the owner will be responsible for making up your share of the shortfall.

The author also advises potential condo buyers to obtain a status certificate on the unit they are thinking about buying and submit it to a knowledgeable attorney for a thorough investigation. Here, it is worth paying $100 or more to the board to cover your lawyer’s fees to determine whether there are any outstanding liens against the unit, and whether you will have to pay them.
If there are liens for unpaid monthly or quarterly dues, the board might be open to negotiations to wipe the slate clean. This would let them turn an otherwise non-paying apartment — a drag on the books — into one that pays its dues and assessments on time without a peep.

Similarly, Barnabic says you should gain approval from the board, if necessary, to check with the municipal zoning and planning department to ensure there are no pending work orders or infractions against the condo complex for violations of building codes.

While you’re at it, ask the zoning or permit department whether there are any new buildings planned in proximity to yours, either in this complex or adjoining ones. If there are, your unit’s value could be diminished not only by obstructed views, but also because newer units are more desirable.

Consider investing in any new properties as they go up. But remember, even budgets for brand-new buildings are underfunded, especially if the developer wants his place to look as good on paper as possible. If that’s the case, your share could double or even triple when the builder finally turns the property over to the condo board.

One more thing: People who buy larger units with the idea that their sons or daughters will act as their on-site property managers sometimes find out later that that kind of arrangement doesn’t work. That’s especially true, says Barnabic, when the people who lease the extra bedrooms are friends.

Kids, even those of college age, are not usually very good property managers, he says. “To do a proper job, they must be diligent in collecting rent, maintaining the apartment and refereeing inevitable disputes between roommates. In other words, they must be responsible, and that’s not always the case.”

lsichelman@aol.com Distributed by Universal Uclick for United Feature Syndicate.
Copyright © 2014, Los Angeles Times

Retail Death Rattle Grows Louder

The definition of death rattle is a sound often produced by someone who is near death when fluids such as saliva and bronchial secretions accumulate in the throat and upper chest. The person can’t swallow and emits a deepening wheezing sound as they gasp for breath. This can go on for two or three days before death relieves them of their misery. The American retail industry is emitting an unmistakable wheezing sound as a long slow painful death approaches.

It was exactly four months ago when I wrote THE RETAIL DEATH RATTLE. Here are a few terse anecdotes from that article:

The absolute collapse in retail visitor counts is the warning siren that this country is about to collide with the reality Americans have run out of time, money, jobs, and illusions. The exponential growth model, built upon a never ending flow of consumer credit and an endless supply of cheap fuel, has reached its limit of growth. The titans of Wall Street and their puppets in Washington D.C. have wrung every drop of faux wealth from the dying middle class. There are nothing left but withering carcasses and bleached bones.

Once the Wall Street created fraud collapsed and the waves of delusion subsided, retailers have been revealed to be swimming naked. Their relentless expansion, based on exponential growth, cannibalized itself, new store construction ground to a halt, sales and profits have declined, and the inevitable closing of thousands of stores has begun.

The implications of this long and winding road to ruin are far reaching. Store closings so far have only been a ripple compared to the tsunami coming to right size the industry for a future of declining spending. Over the next five to ten years, tens of thousands of stores will be shuttered. Companies like JC Penney, Sears and Radio Shack will go bankrupt and become historical footnotes. Considering retail employment is lower today than it was in 2002 before the massive retail expansion, the future will see in excess of 1 million retail workers lose their jobs. Bernanke and the Feds have allowed real estate mall owners to roll over non-performing loans and pretend they are generating enough rental income to cover their loan obligations. As more stores go dark, this little game of extend and pretend will come to an end.

Retail store results for the 1st quarter of 2014 have been rolling in over the last week. It seems the hideous government reported retail sales results over the last six months are being confirmed by the dying bricks and mortar mega-chains. In case you missed the corporate mainstream media not reporting the facts and doing their usual positive spin, here are the absolutely dreadful headlines:

Wal-Mart Profit Plunges By $220 Million as US Store Traffic Declines by 1.4%

Target Profit Plunges by $80 Million, 16% Lower Than 2013, as Store Traffic Declines by 2.3%

Sears Loses $358 Million in First Quarter as Comparable Store Sales at Sears Plunge by 7.8% and Sales at Kmart Plunge by 5.1%

JC Penney Thrilled With Loss of Only $358 Million For the Quarter

Kohl’s Operating Income Plunges by 17% as Comparable Sales Decline by 3.4%

Costco Profit Declines by $84 Million as Comp Store Sales Only Increase by 2%

Staples Profit Plunges by 44% as Sales Collapse and Closing Hundreds of Stores

Gap Income Drops 22% as Same Store Sales Fall

American Eagle Profits Tumble 86%, Will Close 150 Stores

Aeropostale Losses $77 Million as Sales Collapse by 12%

Best Buy Sales Decline by $300 Million as Margins Decline and Comparable Store Sales Decline by 1.3%

Macy’s Profit Flat as Comparable Store Sales decline by 1.4%

Dollar General Profit Plummets by 40% as Comp Store Sales Decline by 3.8%

Urban Outfitters Earnings Collapse by 20% as Sales Stagnate

McDonalds Earnings Fall by $66 Million as US Comp Sales Fall by 1.7%

Darden Profit Collapses by 30% as Same Restaurant Sales Plunge by 5.6% and Company Selling Red Lobster

TJX Misses Earnings Expectations as Sales & Earnings Flat

Dick’s Misses Earnings Expectations as Golf Store Sales Plummet

Home Depot Misses Earnings Expectations as Customer Traffic Only Rises by 2.2%

Lowes Misses Earnings Expectations as Customer Traffic was Flat

Of course, those headlines were never reported. I went to each earnings report and gathered the info that should have been reported by the CNBC bimbos and hacks. Anything you heard surely had a Wall Street spin attached, like the standard BETTER THAN EXPECTED. I love that one. At the start of the quarter the Wall Street shysters post earnings expectations. As the quarter progresses, the company whispers the bad news to Wall Street and the earnings expectations are lowered. Then the company beats the lowered earnings expectation by a penny and the Wall Street scum hail it as a great achievement.  The muppets must be sacrificed to sustain the Wall Street bonus pool. Wall Street investment bank geniuses rated JC Penney a buy from $85 per share in 2007 all the way down to $5 a share in 2013. No more needs to be said about Wall Street “analysis”.

It seems even the lowered expectation scam hasn’t worked this time. U.S. retailer profits have missed lowered expectations by the most in 13 years. They generally “beat” expectations by 3% when the game is being played properly. They’ve missed expectations in the 1st quarter by 3.2%, the worst miss since the fourth quarter of 2000. If my memory serves me right, I believe the economy entered recession shortly thereafter. The brilliant Ivy League trained Wall Street MBAs, earning high six digit salaries on Wall Street, predicted a 13% increase in retailer profits for the first quarter. A monkey with a magic 8 ball could do a better job than these Wall Street big swinging dicks.

The highly compensated flunkies who sit in the corner CEO office of the mega-retail chains trotted out the usual drivel about cold and snowy winter weather and looking forward to tremendous success over the remainder of the year. How do these excuse machine CEO’s explain the success of many high end retailers during the first quarter? Doesn’t weather impact stores that cater to the .01%? The continued unrelenting decline in profits of retailers, dependent upon the working class, couldn’t have anything to do with this chart? It seems only the oligarchs have made much progress over the last four decades.

Screen-Shot-2014-03-29-at-9.23.25-PM.png

Retail CEO gurus all think they have a master plan to revive sales. I’ll let you in on a secret. They don’t really have a plan. They have no idea why they experienced tremendous success from 2000 through 2007, and why their businesses have not revived since the 2008 financial collapse. Retail CEOs are not the sharpest tools in the shed. They were born on third base and thought they hit a triple. Now they are stranded there, with no hope of getting home. They should be figuring out how to position themselves for the multi-year contraction in sales, but their egos and hubris will keep them from taking the actions necessary to keep their companies afloat in the next decade. Bankruptcy awaits. The front line workers will be shit canned and the CEO will get a golden parachute. It’s the American way.

The secret to retail success before 2007 was: create or copy a successful concept; get Wall Street financing and go public ASAP; source all your inventory from Far East slave labor factories; hire thousands of minimum wage level workers to process transactions; build hundreds of new stores every year to cover up the fact the existing stores had deteriorating performance; convince millions of gullible dupes to buy cheap Chinese shit they didn’t need with money they didn’t have; and pretend this didn’t solely rely upon cheap easy debt pumped into the veins of American consumers by the Federal Reserve and their Wall Street bank owners. The financial crisis in 2008 revealed everyone was swimming naked, when the tide of easy credit subsided.

The pundits, politicians and delusional retail CEOs continue to await the revival of retail sales as if reality doesn’t exist. The 1 million retail stores, 109,000 shopping centers, and nearly 15 billion square feet of retail space for an aging, increasingly impoverished, and savings poor populace might be a tad too much and will require a slight downsizing – say 3 or 4 billion square feet. Considering the debt fueled frenzy from 2000 through 2008 added 2.7 billion square feet to our suburban sprawl concrete landscape, a divestiture of that foolish investment will be the floor. If you think there are a lot of SPACE AVAILABLE signs dotting the countryside, you ain’t seen nothing yet. The mega-chains have already halted all expansion. That was the first step. The weaker players like Radio Shack, Sears, Family Dollar, Coldwater Creek, Staples, Barnes & Noble, Blockbuster and dozens of others are already closing stores by the hundreds. Thousands more will follow.

This isn’t some doom and gloom prediction based on nothing but my opinion. This is the inevitable result of demographic certainties, unequivocal data, and the consequences of a retailer herd mentality and lemming like behavior of consumers. The open and shut case for further shuttering of 3 to 4 billion square feet of retail is as follows:

  • There is 47 square feet of retail space per person in America. This is 8 times as much as any other country on earth. This is up from 38 square feet in 2005; 30 square feet in 2000; 19 square feet in 1990; and 4 square feet in 1960. If we just revert to 2005 levels, 3 billion square feet would need to go dark. Does that sound outrageous?

https://martinhladyniuk.com/wp-content/uploads/2014/05/5a7fc-retail-square-footage-per-person-usa-1960e280932005.jpg

  • Annual consumer expenditures by those over 65 years old drop by 40% from their highest spending years from 45 to 54 years old. The number of Americans turning 65 will increase by 10,000 per day for the next 16 years. There were 35 million Americans over 65 in 2000, accounting for 12% of the total population. By 2030 there will be 70 million Americans over 65, accounting for 20% of the total population. Do you think that bodes well for retailers?

 

  • Half of Americans between the ages of 50 and 64 have no retirement savings. The other half has accumulated $52,000 or less. It seems the debt financed consumer product orgy of the last two decades has left most people nearly penniless. More than 50% of workers aged 25 to 44 report they have less than $10,000 of total savings.
  • The lack of retirement and general savings is reflected in the historically low personal savings rate of a miniscule 3.8%. Before the materialistic frenzy of the last couple decades, rational Americans used to save 10% or more of their personal income. With virtually no savings as they approach their retirement years and an already extremely low savings rate, do retail CEOs really see a spending revival on the horizon?

  • If you thought the savings rate was so low because consumers are flush with cash and so optimistic about their job prospects they are unconcerned about the need to save for a rainy day, you would be wrong. It has been raining for the last 14 years. Real median household income is 7.5% lower today than it was in 2001. Retailers added 2.7 billion square feet of retail space as real household income fell. Sounds rational.

  • This decline in household income may have something to do with the labor participation rate plummeting to the lowest level since 1978. There are 247.4 million working age Americans and only 145.7 million of them employed (19 million part-time; 9 million self-employed; 20 million employed by the government). There are 92 million Americans, who according to the government have willingly left the workforce, up by 13.3 million since 2007 when over 146 million Americans were employed. You’d have to be a brainless twit to believe the unemployment rate is really 6.3% today. Retail sales would be booming if the unemployment rate was really that low.

  • With a 16.5% increase in working age Americans since 2000 and only a 6.5% increase in employed Americans, along with declining real household income, an inquisitive person might wonder how retail sales were able to grow from $3.3 trillion in 2000 to $5.1 trillion in 2013 – a 55% increase. You need to look no further than your friendly Too Big To Trust Wall Street banks for the answer. In the olden days of the 1970s and early 1980s Americans put 10% to 20% down to buy a house and then systematically built up equity by making their monthly payments. The Ivy League financial engineers created “exotic” (toxic) mortgage products requiring no money down, no principal payments, and no proof you could make a payment, in their control fraud scheme to fleece the American sheeple. Their propaganda machine convinced millions more to use their homes as an ATM, because home prices never drop. Just ask Ben Bernanke. Even after the Bernanke/Blackrock fake housing recovery (actual mortgage originations now at 1978 levels) household real estate percent equity is barely above 50%, well below the 70% levels before the Wall Street induced debt debacle. With the housing market about to head south again, the home equity ATM will have an Out of Order sign on it.

 

  • We hear the endless drivel from disingenuous Keynesian nitwits about government and consumer austerity being the cause of our stagnating economy. My definition of austerity would be an actual reduction in spending and debt accumulation. It seems during this time of austerity total credit market debt has RISEN from $53.5 trillion in 2009 to $59 trillion today. Not exactly austere, as the Federal government adds $2.2 billion PER DAY to the national debt, saddling future generations with the bill for our inability to confront reality. The American consumer has not retrenched, as the CNBC bimbos and bozos would have you believe. Consumer credit reached an all-time high of $3.14 trillion in March, up from $2.52 trillion in 2010. That doesn’t sound too austere to me. Of course, this increase is solely due to Obamanomics and Bernanke’s $3 trillion gift to his Wall Street owners. The doling out of $645 billion to subprime college “students” and subprime auto “buyers” since 2010 accounts for more than 100% of the increase. The losses on these asinine loans will be epic. Credit card debt has actually fallen as people realize it is their last lifeline. They are using credit cards to pay income taxes, real estate taxes, higher energy costs, higher food costs, and the other necessities of life.

The entire engineered “recovery” since 2009 has been nothing but a Federal Reserve/U.S. Treasury conceived, debt manufactured scam. These highly educated lackeys for the establishment have been tasked with keeping the U.S. Titanic afloat until the oligarchs can safely depart on the lifeboats with all the ship’s jewels safely stowed in their pockets. There has been no housing recovery. There has been no jobs recovery. There has been no auto sales recovery. Giving a vehicle to someone with a 580 credit score with a 0% seven year loan is not a sale. It’s a repossession in waiting. The government supplied student loans are going to functional illiterates who are majoring in texting, facebooking and twittering. Do you think these indebted University of Phoenix dropouts living in their parents’ basements are going to spur a housing and retail sales recovery? This Keynesian “solution” was designed to produce the appearance of recovery, convince the masses to resume their debt based consumption, and add more treasure into the vaults of the Wall Street banks.

The master plan has failed miserably in reviving the economy. Savings, capital investment, and debt reduction are the necessary ingredients for a sustained healthy economic system. Debt based personal consumption of cheap foreign produced baubles & gadgets, $1 trillion government deficits to sustain the warfare/welfare state, along with a corrupt political and rigged financial system are the explosive concoction which will blow our economic system sky high. Facts can be ignored. Media propaganda can convince the willfully ignorant to remain so. The Federal Reserve can buy every Treasury bond issued to fund an out of control government. But eventually reality will shatter the delusions of millions as the debt based Ponzi scheme will run out of dupes and collapse in a flaming heap.

The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since I always look for a silver lining in a black cloud, I predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.

Source: The Burning Platform

Rent or Buy? The Math Is Changing

Billy Gasparino and Jenna Dillon-Gasparino were savvy enough to wait out the housing boom of a decade ago as renters. Not until 2010, well into the bust, did they buy a house in the Venice neighborhood of Los Angeles, less than a mile from the beach, for $810,000.

Only four years later, the couple see new signs of excess in the housing market and have decided to go back to renting. They are close to a deal to sell their house – for $1.35 million, a cool 67 percent gain.

“It just seems like the housing market came back so strongly, so fast, that maybe there’s a little bit of a bubble there,” said Mr. Gasparino, 37, an executive with the San Diego Padres.

Their decision reflects a new reality in many of the nation’s largest metropolitan areas. An analysis by The New York Times finds that in the country’s most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago.

The Times also created an online calculator that enables prospective buyers and renters to analyze their own decision. For example, for a typical person considering the purchase of a $500,000 house who expects to live there seven years, it might make more sense to rent if a similar place is available for $1,956 a month or less.

“A lot of these coastal markets look overvalued compared to rents,” said Mark Zandi, the chief economist at Moody’s Analytics. “In these markets, it seems generally more attractive to rent than to buy, even as the national market is broadly well balanced.”

For example, Venice, where the Gasparinos are selling their house, has benefited from an influx of tech industry, including from the opening of Google’s Los Angeles office there in 2011. “You have engineers, visual effects artists, people making 2, 3, 400 thousand dollars a year coming in,” said Tami Pardee, principal of Pardee Properties real estate brokerage in Venice. “The problem I’m having is inventory. There isn’t enough of it.”

Thanks to low interest rates and home prices that remain 13 percent below their 2006 peak nationally, buying continues to look like a good deal in much of the country. In the once-frothy markets of Phoenix, Las Vegas and Orlando, Fla., for example, the typical home price is still 30 to 40 percent below 2006 levels, even more if one accounts for inflation.

But across much of California and the Northeast, prices are now high enough that the costs of owning a home – property taxes, repairs, fees to real-estate agents and mortgage interest – may outweigh the financial benefits, including the tax break.

It is the latest change in a yo-yo pattern over the past decade. From 2004 to 2006, the math overwhelmingly favored renting rather than buying across most of the country, even as many Americans mistakenly decided that home prices could never fall. From 2009 to 2011, buying was an extraordinary deal in most of the country. Even the markets that have experienced huge price increases are far from the clear-cut bubble conditions of the mid-2000s, but they’re inching closer with every bidding war.

Since the start of 2011, prices have risen 33 percent in the San Francisco area, 30 percent in Miami, 24 percent in Los Angeles — and even more in some of the most desirable neighborhoods within those areas.

In the San Francisco Bay Area, home of the sharpest recent price increases, the sale price of a home is about 20 times what it would cost to rent a home of the same size for a year. That ratio, based on an analysis of data from Zillow, is the same as in 2003, when the San Francisco real estate market had yet to become an out-of-control bubble but was well on its way there.

When low mortgage rates are taken into account, buying a home in San Francisco looks somewhat more attractive — but with a 10 percent down payment and prevailing interest rates, buying a home is 6 percent more expensive than renting a place of the same size, the same premium for buying as there was during the dot-com boom in 1999. Just two years ago, buying in the San Francisco area was 24 percent cheaper than renting an equivalent place.

The potentially overvalued markets are the result of three forces. They are taking place in local economies that suffered only minimally during the recession that began in 2008 and have experienced strong job growth since then.

They are fueled further by the low-interest rate policies that are aimed at bolstering the overall national economy but don’t discriminate based on geography. Even as San Francisco’s housing market is at risk of overheating, buyers there get the same ultralow mortgage rates engineered by the Federal Reserve as home buyers in depressed Detroit or Cleveland do.

And the new booms are taking place in markets where restrictions on building hinder developers from responding to rising demand by constructing more housing. That distinguishes the major California markets from the strong local economies in Texas and elsewhere. The Dallas area and the San Francisco area added similar numbers of jobs last year, but local governments in Dallas issued permits for nearly four times as many new housing units.

There are important caveats, of course. The wisdom of buying versus renting depends heavily on each person’s financial situation, plans and preferences. And the cliché about all real estate being local holds; each neighborhood can have its own unique dynamics in the for-sale and for-rent housing sectors that must be considered.

Home buyers in even the highest-price markets can take some solace in the fact that prices aren’t as outlandishly high relative to rents as they were in 2006. But they should also know that homes are also priced richly enough to leave no room for error.

It’s a bit like the current consensus opinion of economists on the value of the stock market: not in a bubble, necessarily, but certainly expensive enough to make a buyer wary. While home prices may stay high for months or years to come, buyers are leaving themselves vulnerable to a decline toward more normal historical valuations. Renters avoid that risk, even if they also don’t get some of the upside if the bull market for houses in places like Santa Monica, Nob Hill and TriBeCa has longer to run.

“If you thought home values in the Bay Area or Southern California were such that we might see another housing correction, that radically starts to advantage rental housing,” said Stan Humphries, Zillow’s chief economist, who argues that current prices are reasonably well justified, while acknowledging that prices are high enough to leave buyers exposed.

The real estate market in Venice, where the Gasparinos are selling their house to lock in the gains, shows the forces shaping the new boom markets. Besides the tech employment there on Silicon Beach, as the local boosters put it, the supply of housing can’t expand to meet that rising demand. The area is filled with block after block of low-slung houses and apartments, and density restrictions stand in the way of constructing tall buildings.

That combination has been enough to send the median price per square foot of homes that are sold up 49 percent since late 2010 in the 90291 ZIP code, according to Zillow, and the median rent per square foot up 23 percent in the same span.

“When we bought four years ago after the crash, the market was dead, and it felt like everybody learned their lesson,” Mr. Gasparino said. “It just went back so fast.”

Source: New York Times

We All Agree: We want to keep people in their homes if possible… sort of.

Re-posted From: Mandelman Matters

I have a long-time reader by the name of Arthur Pritchard.  He’s a really smart guy in his mid-70s, who lives in San Francisco.  He purchased the lot in 1978, and then designed and built his home on Howth Street, right near San Francisco City College, in 1988, with the help of a carpenter and the like.

In 2005, at 66 years young, and getting ready to retire or at least re-tread, he wanted to take some cash out of his home’s equity and the nice people at World Savings were standing by ready willing and able to put him right into an Option ARM mortgage, which I think even the most predatory of the predatory lenders would agree would have been about the most inappropriate choice for him in his stage of life… but, no matter.  We can always come back to that later if it makes sense.

Next, we all know what happened… the world blew up, as the housing market melted down, and the financial crisis ended the rich histories of every single investment bank on Wall Street.  Like millions of others, soon Arthur couldn’t keep up with his mortgage payments and faster than you could say, “don’t worry, you can always refinance,” he found himself headed for foreclosure.

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So far, there’s nothing that’s the least bit surprising or even unusual about Arthur’s story.  I mean, other than the people at World Savings being predatory shitheads that should probably have gone to jail or something close, everything is as it should be, right?  Of course, right.

Well, Arthur vacillated a bit on whether he should fight the loss of his home.  He tried to get a modification, to no avail, which was also not a surprise in the least.  He filed bankruptcy, tried again, and then seeing the writing on the walls he had built himself, he decided to move out and give up the fight.

The problem was that he didn’t have anywhere to go, and with his income a mere shadow of its former self, he ended up in one of the Bay Area’s finest shelters for the poor, the elderly, the people who at one time were abducted by aliens, and several drummers from bands who had hit singles during the 1960s.

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Now, Arthur’s truly a stand up guy, and when I say he’s smarter than your average bear, I’m not just whistling Dixie.  But, living in a shelter in San Francisco and later in San Jose, had to be a lousy way to look at living through his golden years, and after a while, since his home was still sitting there, he moved back in and decided to continue his fight to try to keep his home… or if not, then short sell it.

Either way, at least he wasn’t sleeping in a shelter anymore, so life was better than it would have been otherwise.  And, as is commonly the case, Wells Fargo Bank didn’t seem to be in much of a rush to foreclose and send him packing, so why not keep trying until all avenues had been exhausted?

Besides, since it had been over a year since Wells had filed a Notice of Default, they would have to start the foreclosure process over again from the beginning, so he had some time to stall if nothing else.  He rented the bottom floor of his home to a woman who had lost everything in a bankruptcy and foreclosure, in part because he wanted to help, and also to give him some walking around money and provide some protection against Wells Fargo being able to get him out in a hurry, if that’s what they decided to do.

In fairly short order, he found a lawyer who said that he could probably help him get Wells Fargo to approve a short sale, and sure enough, that’s what happened.  Wells, at least in principal (pun intended) agreed to take $375,000 for the home, the short sale process began in earnest, and being in a desirable area of San Francisco, perhaps the country’s hottest housing market, several buyers appeared on the scene.

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But wait… there’s more.

Quite predictably, another lawyer materialized saying that he could sue Wells Fargo, and get them to settle, which could mean Arthur would get to keep his home.  Having heard similar claims every day for the last six years, I wasn’t totally paying attention… that is, until yesterday.

So, that’s where things stood, at least until last night when Arthur called me to tell me of the latest developments affecting his picture perfect retirement years.

Apparently, the lawyer would not take his case to court unless Arthur could come up with some serious coinage, yet another entirely unsurprising development to my way of thinking, so Arthur was back to the short sale path, and that meant he’d be back in a shelter at some point in his future.  And, I’m sorry, but that just sucks and now my mind was connecting dots.

Okay, so maybe a lawsuit over the predatory use of the now illegal Option Arm loan would have been the best answer… maybe Wells could be pressured to settle with a guy in his mid-70s, who never should have been offered such a volatile solution.  But, regardless… Wells was already approving a short sale at $375,000…

… and having recently done a lot of research into reverse mortgages, it occurred to me that I could help Arthur get a reverse mortgage for right around $375,000 too. 

So, if Wells Fargo was now willing to allow Arthur to sell the home he’d built and lived in since 1988 for $375,000… why not sell the home to Arthur for $375,000, and Arthur would use a reverse mortgage for the purchase.  That way, he’d be able to live in his home as long as he wanted to without having to make a mortgage payment… while Wells Fargo would still be getting the exact same amount for the property they already said they were fine with receiving.

Now, I’ve known for some time that both Fannie Mae and Freddie Mac have strict policies against such transactions.  They approve short sales, but only if the current homeowner moves out… the new buyer or renter has to be a stranger to the property.

The first time I heard about Fannie and Freddie’s policy about post-short sale strangers, I thought it sounded stranger than fiction. Banks approve short sales because doing so makes more financial sense than foreclosing as re-selling the property at auction.  Absent any fraudulent intent on the part of the borrower, why would anyone care who was renting or buying a home after it was short sold?

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But, I remember clearly, the day I called Fannie’s spokesperson to inquire about the thought process behind the policy, and was told… sure enough, the current homeowner had to move out, or the short sale would not be approved.  It seemed to me that the policy was intended to punish the borrower who could no longer afford his or her mortgage payments, and that punishment was to lose the home as either owner or renter.

I do understand, under more normal circumstances, why such a rule would be in place.  I mean, you wouldn’t want borrowers capable of paying their payments to be able to simply decide to pay some lesser amount, while remaining in their homes.  But, come on… these are not “normal” circumstances, by any stretch of the imagination.  And again… Arthur’s is NOT a Fannie or Freddie loan anyway.

So again, the operative question would seem to be: Can we all agree that we want to keep people in their homes if possible… or aren’t we in true agreement about that?

Just consider once more the facts of Arthur’s situation:

  1. He built his home in 1988.
  2. He’s now in his mid-70s, and can’t keep up with the increasing payments on his Option ARM mortgage, courtesy of World Savings.
  3. Wells Fargo has agreed to short sale the property for $375,000 and with an appraisal of roughly $600,000, at his age, Arthur could get a reverse mortgage for, let’s just say, $375,000 and that way, remain in his home for the rest of his life without having to make a mortgage payment.
  4. After his death, the home would be sold and the $375,000 lien (plus interest) would be paid from the proceeds of that sale.
  5. Anything left over after that, would go to Arthur’s heirs.

But, Wells won’t take the $375,000 from Arthur.  They’ll only take the money… even though it’s the same amount… from a stranger.  Wells is not protecting the investor with this policy, the investor would get the same amount either way.

All Wells Fargo’s refusal to accept the money from Arthur would accomplish is to force a 75 year-old man into a homeless shelter.  Everything else would remain the same either way.

So… do we agree that we want to keep people in their homes if possible or don’t we?

Surely, there aren’t people at Wells that would prefer that Arthur have no home to live in for his remaining years.  Surely, there aren’t investors that care where the $375,000 comes from, right?  Doesn’t it seem obvious that there’s some way to make this situation have a much happier ending than it will if everything is left status quo?

Are we trying to keep people in their homes, if it’s possible to do so?  Or are we more concerned with punishing borrowers who fall upon hard times, as in the worst “hard times” in 70 years, as is the situation today?

Surely, we can all see that desperate times call for desperate measures, or at least unusual times call for unusual measures… and no one benefits from putting a 75 year-old on the streets of San Francisco.  Arthur is 75… is someone honestly concerned about “moral hazard,” here?

If so, that’s just stupid.  This is a common sense solution to an obviously undesirable outcome that will occur without it.  Do we want to keep people in their homes if possible?  Or are we punishers first, who are more concerned with leaving a nickel on the table?

I’d like to say that I know the answer to that question.  I used to think I knew… but now, I’m not at all sure.

The Questionable Link Between Saturated Fat and Heart Disease

Are butter, cheese and steak really bad for you? The dubious science behind the anti-fat crusade.

“Saturated fat does not cause heart disease”—or so concluded a big study published in March in the journal Annals of Internal Medicine. How could this be? The very cornerstone of dietary advice for generations has been that the saturated fats in butter, cheese and red meat should be avoided because they clog our arteries. For many diet-conscious Americans, it is simply second nature to opt for chicken over sirloin, canola oil over butter.

The new study’s conclusion shouldn’t surprise anyone familiar with modern nutritional science, however. The fact is, there has never been solid evidence for the idea that these fats cause disease. We only believe this to be the case because nutrition policy has been derailed over the past half-century by a mixture of personal ambition, bad science, politics and bias.

Chocolate has many health benefits but can it actually help you lose weight? Is there a right and wrong way to eat chocolate? Dr. Will Clower, author of “Eat Chocolate, Lose Weight,” joins Lunch Break. Photo: Getty.

People are nixing various foods from their diets, often without consulting a doctor. Is there actually any medical evidence behind it? Sarah Nassauer reports on Lunch Break. Photo: Getty.

Our distrust of saturated fat can be traced back to the 1950s, to a man named Ancel Benjamin Keys, a scientist at the University of Minnesota. Dr. Keys was formidably persuasive and, through sheer force of will, rose to the top of the nutrition world—even gracing the cover of Time magazine—for relentlessly championing the idea that saturated fats raise cholesterol and, as a result, cause heart attacks.

This idea fell on receptive ears because, at the time, Americans faced a fast-growing epidemic. Heart disease, a rarity only three decades earlier, had quickly become the nation’s No. 1 killer. Even President Dwight D. Eisenhower suffered a heart attack in 1955. Researchers were desperate for answers.

As the director of the largest nutrition study to date, Dr. Keys was in an excellent position to promote his idea. The “Seven Countries” study that he conducted on nearly 13,000 men in the U.S., Japan and Europe ostensibly demonstrated that heart disease wasn’t the inevitable result of aging but could be linked to poor nutrition.

Critics have pointed out that Dr. Keys violated several basic scientific norms in his study. For one, he didn’t choose countries randomly but instead selected only those likely to prove his beliefs, including Yugoslavia, Finland and Italy. Excluded were France, land of the famously healthy omelet eater, as well as other countries where people consumed a lot of fat yet didn’t suffer from high rates of heart disease, such as Switzerland, Sweden and West Germany. The study’s star subjects—upon whom much of our current understanding of the Mediterranean diet is based—were peasants from Crete, islanders who tilled their fields well into old age and who appeared to eat very little meat or cheese.

As it turns out, Dr. Keys visited Crete during an unrepresentative period of extreme hardship after World War II. Furthermore, he made the mistake of measuring the islanders’ diet partly during Lent, when they were forgoing meat and cheese. Dr. Keys therefore undercounted their consumption of saturated fat. Also, due to problems with the surveys, he ended up relying on data from just a few dozen men—far from the representative sample of 655 that he had initially selected. These flaws weren’t revealed until much later, in a 2002 paper by scientists investigating the work on Crete—but by then, the mis-impression left by his erroneous data had become international dogma.

In 1961, Dr. Keys sealed saturated fat’s fate by landing a position on the nutrition committee of the American Heart Association, whose dietary guidelines are considered the gold standard. Although the committee had originally been skeptical of his hypothesis, it issued, in that year, the country’s first-ever guidelines targeting saturated fats. The U.S. Department of Agriculture followed in 1980.

Other studies ensued. A half-dozen large, important trials pitted a diet high in vegetable oil—usually corn or soybean, but not olive oil—against one with more animal fats. But these trials, mainly from the 1970s, also had serious methodological problems. Some didn’t control for smoking, for instance, or allowed men to wander in and out of the research group over the course of the experiment. The results were unreliable at best.

But there was no turning back: Too much institutional energy and research money had already been spent trying to prove Dr. Keys’s hypothesis. A bias in its favor had grown so strong that the idea just started to seem like common sense. As Harvard nutrition professor Mark Hegsted said in 1977, after successfully persuading the U.S. Senate to recommend Dr. Keys’s diet for the entire nation, the question wasn’t whether Americans should change their diets, but why not? Important benefits could be expected, he argued. And the risks? “None can be identified,” he said.

In fact, even back then, other scientists were warning about the diet’s potential unintended consequences. Today, we are dealing with the reality that these have come to pass.
One consequence is that in cutting back on fats, we are now eating a lot more carbohydrates—at least 25% more since the early 1970s. Consumption of saturated fat, meanwhile, has dropped by 11%, according to the best available government data. Translation: Instead of meat, eggs and cheese, we’re eating more pasta, grains, fruit and starchy vegetables such as potatoes. Even seemingly healthy low-fat foods, such as yogurt, are stealth carb-delivery systems, since removing the fat often requires the addition of fillers to make up for lost texture—and these are usually carbohydrate-based.

The problem is that carbohydrates break down into glucose, which causes the body to release insulin—a hormone that is fantastically efficient at storing fat. Meanwhile, fructose, the main sugar in fruit, causes the liver to generate triglycerides and other lipids in the blood that are altogether bad news. Excessive carbohydrates lead not only to obesity but also, over time, to Type 2 diabetes and, very likely, heart disease.

The real surprise is that, according to the best science to date, people put themselves at higher risk for these conditions no matter what kind of carbohydrates they eat. Yes, even unrefined carbs. Too much whole-grain oatmeal for breakfast and whole-grain pasta for dinner, with fruit snacks in between, add up to a less healthy diet than one of eggs and bacon, followed by fish. The reality is that fat doesn’t make you fat or diabetic. Scientific investigations going back to the 1950s suggest that actually, carbs do.

The second big unintended consequence of our shift away from animal fats is that we’re now consuming more vegetable oils. Butter and lard had long been staples of the American pantry until Crisco, introduced in 1911, became the first vegetable-based fat to win wide acceptance in U.S. kitchens. Then came margarines made from vegetable oil and then just plain vegetable oil in bottles.

All of these got a boost from the American Heart Association—which Procter & Gamble, the maker of Crisco oil, coincidentally helped launch as a national organization. In 1948, P&G made the AHA the beneficiary of the popular “Walking Man” radio contest, which the company sponsored. The show raised $1.7 million for the group and transformed it (according to the AHA’s official history) from a small, underfunded professional society into the powerhouse that it remains today.

After the AHA advised the public to eat less saturated fat and switch to vegetable oils for a “healthy heart” in 1961, Americans changed their diets. Now these oils represent 7% to 8% of all calories in our diet, up from nearly zero in 1900, the biggest increase in consumption of any type of food over the past century.

This shift seemed like a good idea at the time, but it brought many potential health problems in its wake. In those early clinical trials, people on diets high in vegetable oil were found to suffer higher rates not only of cancer but also of gallstones. And, strikingly, they were more likely to die from violent accidents and suicides. Alarmed by these findings, the National Institutes of Health convened researchers several times in the early 1980s to try to explain these “side effects,” but they couldn’t. (Experts now speculate that certain psychological problems might be related to changes in brain chemistry caused by diet, such as fatty-acid imbalances or the depletion of cholesterol.)

We’ve also known since the 1940s that when heated, vegetable oils create oxidation products that, in experiments on animals, lead to cirrhosis of the liver and early death. For these reasons, some midcentury chemists warned against the consumption of these oils, but their concerns were allayed by a chemical fix: Oils could be rendered more stable through a process called hydrogenation, which used a catalyst to turn them from oils into solids.
From the 1950s on, these hardened oils became the backbone of the entire food industry, used in cakes, cookies, chips, breads, frostings, fillings, and frozen and fried food. Unfortunately, hydrogenation also produced trans fats, which since the 1970s have been suspected of interfering with basic cellular functioning and were recently condemned by the Food and Drug Administration for their ability to raise our levels of “bad” LDL cholesterol.
Yet paradoxically, the drive to get rid of trans fats has led some restaurants and food manufacturers to return to using regular liquid oils—with the same long-standing oxidation problems. These dangers are especially acute in restaurant fryers, where the oils are heated to high temperatures over long periods.

The past decade of research on these oxidation products has produced a sizable body of evidence showing their dramatic inflammatory and oxidative effects, which implicates them in heart disease and other illnesses such as Alzheimer’s. Other newly discovered potential toxins in vegetable oils, called monochloropropane diols and glycidol esters, are now causing concern among health authorities in Europe.

In short, the track record of vegetable oils is highly worrisome—and not remotely what Americans bargained for when they gave up butter and lard.

Cutting back on saturated fat has had especially harmful consequences for women, who, due to hormonal differences, contract heart disease later in life and in a way that is distinct from men. If anything, high total cholesterol levels in women over 50 were found early on to be associated with longer life. This counterintuitive result was first discovered by the famous Framingham study on heart-disease risk factors in 1971 and has since been confirmed by other research.

Since women under 50 rarely get heart disease, the implication is that women of all ages have been worrying about their cholesterol levels needlessly. Yet the Framingham study’s findings on women were omitted from the study’s conclusions. And less than a decade later, government health officials pushed their advice about fat and cholesterol on all Americans over age 2—based exclusively on data from middle-aged men.

Sticking to these guidelines has meant ignoring growing evidence that women on diets low in saturated fat actually increase their risk of having a heart attack. The “good” HDL cholesterol drops precipitously for women on this diet (it drops for men too, but less so). The sad irony is that women have been especially rigorous about ramping up on their fruits, vegetables and grains, but they now suffer from higher obesity rates than men, and their death rates from heart disease have reached parity.

Seeing the U.S. population grow sicker and fatter while adhering to official dietary guidelines has put nutrition authorities in an awkward position. Recently, the response of many researchers has been to blame “Big Food” for bombarding Americans with sugar-laden products. No doubt these are bad for us, but it is also fair to say that the food industry has simply been responding to the dietary guidelines issued by the AHA and USDA, which have encouraged high-carbohydrate diets and until quite recently said next to nothing about the need to limit sugar.

Indeed, up until 1999, the AHA was still advising Americans to reach for “soft drinks,” and in 2001, the group was still recommending snacks of “gum-drops” and “hard candies made primarily with sugar” to avoid fatty foods.

Our half-century effort to cut back on the consumption of meat, eggs and whole-fat dairy has a tragic quality. More than a billion dollars have been spent trying to prove Ancel Keys’s hypothesis, but evidence of its benefits has never been produced. It is time to put the saturated-fat hypothesis to bed and to move on to test other possible culprits for our nation’s health woes.

Ms. Teicholz has been researching dietary fat and disease for nearly a decade. Her book, “The Big Fat Surprise: Why Butter, Meat and Cheese Belong in a Healthy Diet,” will be published by Simon & Schuster on May 13.

Source: Wall Street Journal

US Middle-Class Is Going

Ever wondered why the rest of the world envied the US middle-class? There were many reasons once, a long time ago and one of them was their affluence, their wealth, their ability to be able to afford whatever they wanted. But, that was back in the days when there was a team spirit out there in the US. People were working together not against each other. Today, nobody envies or eyes the American middle-class; it’s poverty-stricken and has turned into the poor workers (if they even have a job). Middle America is so yesteryear. Today, it seems as if it’s fashionable to be poor; at least, we’re all doing it.

The fat cats are grabbing the cream at a faster pace than most other countries in the world, but Middle Americans are doing far from well in comparison with other middle-classes around the world today. For the first time in decades, the American middle class is in decline in comparison with other countries.

It’s the first time in forty years that the Canadian middle-class equivalent family has been better off than the American middle class. That can’t be said in less stark terms. The nineteenth century was characterized by the abolition of the ruling classes to the benefit of the middle classes, growth in wealth and better sharing out of what was in the coffers of our nations. Today, the decline of the middle class in the US is on and it will be mirrored by all other nations in the world in years to come. We have returned to feudal England, the ruling few and the poverty-stricken masses.

But it’s now the Canadians that are doing better than the middle class Americans. The mere fact that it’s Canada is even harder as a blow for the middle-class Americans that laugh at the late-night TV-show jokes that use the guys just over the boarder as the butt of their every joke. It’s middle-class Americans that will have the tables turned on them now. The idea that they still have more income than others in the middle classes around the world is now a thing of the past.

How can the US maintain its position of the superlative-laden economy where things are done best? It can’t in a world in which the Chinese have understood that they need to send their kids to school; Highly-skilled people are now just about everywhere and competing with that is impossible. The US has failed to redistribute the wealth of the nation in a fairer way and it’s the top layer that gets to keep more and more. The lower echelons just slumber in growing struggles to keep their heads above the water. Who gets favored by the tax system in the US? Certainly not the middle class.

Median income in Canada was already on a par with US median wages in 2010. Over the past decade countries in Europe such as the UKSweden and the Netherlands are slowly closing the gap in median incomes with the US. Once upon a time, it was the US that was way ahead, now the gap is closing fast.

Per Capita gross Domestic Product (PPP) shows that the USA is not doing so badly. It’s the 8th country in the world today in terms of GDP per capita (PPP):

The USA has the wealth, but it’s not being distributed in a fair-deal way. For the middle class to be suffering like this it means that the money is going somewhere else than to the middle class. Americans that are in the middle class are not managing to keep up pace with their counterparts around the world.

• Median income stood at $18,700 in the US in 2010.
• That’s $75,000 for a family of four after tax.
• This means a 20%-increase in comparison with 1980.
• But, it’s not moved at all since 2000 (after adjustments for inflation).
• In the UK there was a 20%-increase between 2000 and 2010.
• Median Income in Canada rose also by 20% over the same period.

Thankfully, the US is a country of gamblers, a place where there will hopefully be a big-game hunt for the idea that will renew the challenge of the economy. In the meantime, it’s the middle-class American that looks as if it is nearing extinction.

Source: The Middle-Class Is Going

All-Cash Home Purchases on the Rise

Analysis of data collected for the Realtors Confidence Index shows the market share of all-cash purchases is on the rise, despite declines in distressed sales and investor activity, according to the National Association of Realtors (NAR).

“Distressed home sales, most popular with investors who pay cash, have declined notably in the past two years, yet the share of all-cash purchases has risen,” said Lawrence Yun, NAR chief economist. “At the same time, investors have declined as a market share, indicating other changes have been underway in the marketplace.”

Distressed home sales declined from 26 percent of the national market in 2012 to 17 percent in 2013 and 15 percent in the first quarter of this year; NAR projects distressed homes to drop to a single-digit market share by the fourth quarter. All-cash purchases rose from 29 percent in 2012 to 31 percent in 2013 and 33 percent in the first quarter of 2014

In Florida more than half of all homes were purchased with cash. High levels of all-cash sales also were recorded in Nevada, Arizona and West Virginia, accounting for close to four out of 10 transactions.

The findings, derived from a survey of about 3,000 responses each month for NAR’s Realtors Confidence Index, also show investors edged down from 20 percent of buyers in 2012 to 19 percent in both 2013 and the first quarter of this year.

A separate annual study of consumers, NAR’s 2014 Investment and Vacation Home Buyers Survey, shows investors at a somewhat higher market share, but declining more sharply from 24 percent in 2012 to 20 percent in 2013.

“These findings beg the question as to why we’re seeing higher shares of cash purchases,” Yun said. “The restrictive mortgage lending standards are a factor, but the higher levels of cash sales may also come from the aging of the baby boom generation, with more trade-down and retirement buyers paying cash with decades of equity accumulation.”

Another study, the 2013 National Association of Realtors Profile of Home Buyers and Sellers, shows trade-down buyers rose to 29 percent of buyers last year from 25 percent in the 2012 study and 23 percent in 2011, suggesting a contribution to the trend in cash sales.

“A majority of foreign buyers pay cash as well, and the five-year bull run of the stock market has also provided financial wherewithal among higher wealth households,” Yun said.

In Florida, where more than half of buyers paid cash in 2012 and 2013, distressed home sales declined from nearly four in 10 purchases in 2012 to three in 10 during 2013, and investors edged down.

“Florida is the most popular state for international buyers, who generally pay cash, as well as vacation-home buyers who frequently pay cash. In addition, downsizing retirees are known to pay cash from the proceeds of their homes in the north. This helps to explain the disparity there, but that isn’t the case in most other states,” Yun said.

For example, in West Virginia cash sales rose from about one-third of buyers in 2012 to nearly four out of 10 buyers in 2013, but distressed sales declined from a quarter of the market to less than one in five, and investors were half of what they had been in 2012.

Source: National Mortgage News

Homeownership Rate Slips To 19-year Low While Rental Market Tightens

The nation’s home ownership rate slipped to its lowest level in 19 years in the first quarter as more households rented and home sales remained low.

That’s according to the Census Bureau, which said 64.8% of homes in the U.S. are owner-occupied, the lowest share since the second quarter of 1995. Home ownership rates topped 69% at various times in 2004 and 2005 before the foreclosure crisis and housing crash pushed millions of Americans back to renting.
Meanwhile, the census said the rental vacancy rate stayed near record lows at 8.3%, and the median rent for available units nationwide hit an all-time high of $766 per month.

Housing economists say there are a number of factors at work. Tight credit and higher-than-they-have-been home prices are keeping some would-be buyers out of the market. Others are sidelined by high student debt or concern about the soft job market. And there’s at least some evidence that young adults are postponing home ownership, either by choice or through economic necessity.
“I think a lot of households will be renting instead of buying for some time,” said Stan Humphries, chief economist at real estate website Zillow.

Just 36.2% of households headed by someone younger than 35 owned their home in the first quarter, down from 41.3% in 2008 — though the homeownership rate has fallen across every age group except for senior citizens.

Home ownership is lowest in the West, at 59.4%.

Source: Tim Logan / LA Times

Unemployment May Be Shrinking But So Is The Labor Force

The US unemployment rate plunged last month from 6.7 percent to 6.3 percent, the lowest it has been since September 2008 when it was 6.1 percent. Economists had generally expected the rate to only decline from 6.7 percent to 6.6 percent.

On its face, it appears this report is indicative of a booming US economy. But, as they say, the devil is in the details and, in this case, the details are simply bad news. The sharp drop occurred because the number of people working or seeking work fell. The Bureau of Labor Statistics does not count people not looking for a job as unemployed.

The U.S. labor-force participation rate sank to 62.8 percent in April from 63.2 percent in March to match a 35-year low. Some 806,000 people dropped out of the labor force.

Despite the unemployment rate plummeting, more than 92 million Americans remain out of the labor force. The amount of Americans (not seasonally adjusted) not in the labor force in April rose to 92,594,000, almost 1 million more than the previous month. In March, 91,630,000 Americans were not in the labor force.

Within that overall number, the number of women, 16 and older, not in the labor force climbed to a record high of 55,116,000 in April. This means there were 55,116,000 women, 16 and older, who were in the civilian, non-institutional population who not only did not have a job, they did not actively seek one in the last four weeks. That is up 428,000 from the 54,688,000 women who were not in the labor force in March.
A number of economists look past the “main” unemployment rate to a different figure the Bureau of Labor Statistics calls “U-6,” which it defines as “total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers.”

In other words, the unemployed, the underemployed and the discouraged. The U-6 rate in April was 12.3 percent, a rate that remains high.

The jobs numbers weren’t the only statistic that fell short of expectations today. The Commerce Department reported this morning that new orders for manufactured goods increased 1.1 percent in March. A consensus of economists had forecast new orders received by factories advancing 1.4 percent. In other words, the actual numbers fell significantly short of expectations. Moreover, February’s orders were revised downward to show a 1.5 percent rise instead of the previously reported 1.6 percent gain.

Source: Swiss America

Implosion of Housing Bubble 2 Hits Six Cities In The West

Source: Testosterone Pit

“Homes in more than 1,000 cities and towns nationwide either already are, or soon will be, more expensive than ever,” Zillow reported gleefully the other day. “National home values have climbed year-over-year for 21 consecutive months, a steady march upward….”

Glorious recovery. Our phenomenal housing bubble that, when it blew up spectacularly, helped topple our financial system, threw the economy into the Great Recession, caused millions of jobs to evaporate, and made people swear up and down: never-ever again another housing bubble.
Steps in the Fed, and trillions of dollars get printed and handed to Wall Street, and asset prices become airborne, and Wall Street jumps into the housing market and buys up hundreds of thousands of vacant single-family homes, drives up prices, and armed with free money, shoves aside first-time buyers and others who would actually live in these homes, and turned them instead into rental units. Now in over 1,000 cities, prices are, or soon will be, as high as they were at the peak of the last housing bubble.

The difference? Last time, all that craziness was called a “bubble” with hindsight. This time, it’s called a “housing recovery.”

The result of this, as Zillow called it, “remarkable milestone”: real buyers who intend to live in these homes are falling by the wayside. Every week for months, mortgages to purchase homes have been between 10% and 15% below the same week in the prior year. In the latest week, they dropped 21%, the worst week I remember seeing. The number of refis has plunged even more, but that only ate into bank income statements and caused thousands of people to get laid off. Purchase mortgages, when they drop, decimate home sales.

Real Americans, rather than Wall Street, have been priced out of the housing market. Inflation has eaten into their wages. Many people can only find part-time work. Mortgage interest has risen from ridiculously low to just historically low [ Hot Air Hisses Out Of Housing Bubble 2.0: Even Two Middle-Class Incomes Aren’t Enough Anymore To Buy A Median Home].

So the rate of homeownership in the first quarter, after ticking up last year and triggering bouts of false hope, fell to 64.8%. The lowest level since 1995! It had peaked in Q2 2004 at 69.2%, a sign that even as the prior housing bubble was gaining steam, regular folks were already priced out of the market. This ugly trajectory is the face of the “housing recovery” sans Wall Street:

And now history has become a Fed-induced rerun. It started in six until recently white-hot housing markets in Arizona and California – Phoenix, Ventura, Riverside, L.A., Sacramento, and San Diego – where home prices have skyrocketed to the point where few people can afford them. Electronic real-estate broker Redfin, which covers 19 metro areas around the country, explained the impact of “the double whammy” – rising prices and mortgage rates – this way:

Someone who purchased a $350,000 home in Riverside in March 2013 with a 20 percent down payment and a 30-year fixed rate of 3.4% would have a monthly mortgage payment of $1,241. But with prices up 19.6%, the same home would now cost $418,600. At the current mortgage rate of 4.33%, the monthly mortgage payment on that home is now $1,663, a 34% jump from a year ago.
And even a year ago, a family with two median incomes had to stretch to buy that house. Now, in these six markets, sales are plunging and inventories of houses for sale are soaring. A deadly mix.
In Phoenix, inventories were up 42.7% in March from prior year, but sales were down 17.4%. So sellers slashed prices to get rid of these homes. In Phoenix, the hardest hit of the bunch, 45% of the sellers cut their prices. That’s how it starts. Haven’t we been there before? For instance, at the beginning of the prior housing-bubble implosion? This is what that debacle looks like:

It didn’t look quite this terrible in 11 of the other markets that Redfin tracks: Austin, Baltimore, Boston, Chicago, Long Island, Philadelphia, Portland, San Francisco, San Jose, Seattle, and Washington, D.C. (due to “data anomalies,” Denver and Las Vegas were not included). Sales were still down, but so were inventories. When the last housing bubble imploded, it didn’t happen all at once across the country. In some cities, home prices peaked in early 2006; in San Francisco, they peaked in November 2007.

And what happened to the Wall Street investors who whipped the market into frenzy by deploying the Fed’s free money? Soaring prices are “eroding investor profit potential,” Redfin points out, and many have pulled back. As of year-end 2013, the percentage of investor purchases in these six markets dropped to 10.6% from 15.6% a year earlier. And since then, they’ve dropped even more. Easy come, easy go.

“Housing affordability is really taking a bite out of the market,” is how the chief economist for the California Association of Realtors explained the March home sales fiasco. “We haven’t seen this issue since 2007.” And so, the benchmarks established during the terrible implosion of the prior housing bubble are suddenly reappearing.

4/17/14: So Cal Residential Market Summary

Southern California home sales quickened last month compared with February, as they normally do, but remained far below average and at the lowest level for a March in six years. The median sale price rose to a more-than-six-year high, driven up by demand that continues to exceed supply in many areas, as well as a shift toward a greater share of sales in middle and high-end markets, according to San Diego-based DataQuick.

A total of 17,638 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 25.7 percent from 14,027 sales in February, and down 14.3 percent from 20,581 sales in March last year.
For seasonal reasons sales shoot up between February and March, with that gain averaging 36.3 percent since 1988, when DataQuick’s statistics begin. Southland sales have fallen on a year-over-year basis for six consecutive months, and last month was the second in a row in which sales were at the lowest level for that particular month in six years.

Sales during the month of March have ranged from a low of 12,808 in 2008 to a high of 37,030 in 2004. Last month’s sales were 26.9 percent below the average number of sales—24,115—for March since 1988. Sales haven’t been above average for any month in more than seven years.
“Southland home buying got off to a very slow start this year, with last month’s sales coming in at the second-lowest level for a March in nearly two decades. We see multiple reasons for this: The inventory of homes for sale remains thin in many markets. Investor purchases have fallen,” said DataQuick Analyst Andrew LePage. “The jump in home prices and mortgage rates over the past year has priced some people out of the market, while other would-be buyers struggle with credit hurdles. Also, some potential move-up buyers are holding back while they weigh whether to abandon a phenomenally low interest rate on their current mortgage in order to buy a different home.”

The median price paid for all new and resale houses and condos sold in the six-county region last month was $400,000, up 4.4 percent from $383,000 in February and up 15.8 percent from $345,500 in March 2013. Last month’s median was the highest since it was $408,000 in February 2008.
The median has risen on a year-over-year basis for 24 consecutive months. Those gains have been double-digit—between 10.8 percent and 28.3 percent—over the past 20 months. The 15.8 percent year-over gain in the median last month marked the lowest increase for any month since September 2012, when the $315,000 median rose 12.5 percent from a year earlier.

The March median sale price stood 20.8 percent below the peak $505,000 median in spring/summer 2007.
DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. DataQuick was acquired last month by Irvine-based property information company CoreLogic.
Home prices continue to rise at different rates depending on price segment. In March, the lowest-cost third of the region’s housing stock saw a 21.0 percent year-over-year increase in the median price paid per square foot for resale houses. The annual gain was 15.9 percent for the middle third of the market and 14.3 percent for the top, most-expensive third.

Last month the number of homes that sold for $500,000 or more increased 2.9 percent from one year earlier, while $800,000-plus sales rose 5.4 percent. Sales below $500,000 fell 26.4 percent year-over year, while sales below $200,000 plunged 45.7 percent.
In March, 35.1 percent of all Southland home sales were for $500,000 or more, up from 33.5 percent the month before and up from 27.8 percent a year earlier.
The impact of distressed properties continued to wane.

Foreclosure resales—homes foreclosed on in the prior 12 months—accounted for 6.4 percent of the Southland resale market in March. That was down from a revised 6.7 percent the prior month and down from 13.8 percent a year earlier. In recent months the foreclosure resale rate has been the lowest since early 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.
Short sales—transactions where the sale price fell short of what was owed on the property—made up an estimated 7.7 percent of Southland resales last month. That was down from a revised 9.3 percent the prior month and down from 18.7 percent a year earlier.

Absentee buyers—mostly investors and some second-home purchasers—bought 27.4 percent of the homes sold last month, down from 28.9 percent in February and down from 31.2 percent a year earlier. The monthly average since 2000, when the absentee data begin, is 18.7 percent. The number of homes purchased by absentee buyers in March fell nearly 30 percent from a year earlier and was at its lowest level for a March since 2010. Last month’s absentee buyers paid a median $337,500, up 22.7 percent year-over-year.
In March 5.3 percent of all Southland homes sold on the open market were flipped, meaning they had previously sold in the prior six months. That’s down from a flipping rate of 6.1 the prior month and it’s down from 6.3 percent a year earlier.

Buyers paying cash last month accounted for 29.1 percent of Southland home sales, down from 30.9 percent the month before and down from 35.1 percent in March last year. Since 1988 the monthly average for cash buyers is 16.5 percent of all sales. Cash buyers paid a median $365,000 last month, up 28.1 percent from a year earlier.

In March, Southern California home buyers forked over a total of $4.04 billion of their own money in the form of down payments or cash purchases. That was up from a revised $3.36 billion in February and down from $4.46 billion a year ago. The out-of-pocket total peaked last May at $5.41 billion.
Credit conditions appear to have eased in recent months, although they remain tight in an historical context.

Last month 13.3 percent of Southland home purchase loans were adjustable-rate mortgages (ARMs)—nearly double the ARM level of a year earlier. Last month’s figure was up from 12.9 percent in February and up from 7.4 percent in March 2013. Since 2000, a monthly average of about 31 percent of Southland purchase loans have been ARMs.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 29.5 percent of last month’s Southland purchase lending. That was the highest level for any month since the credit crunch struck in August 2007. Last month’s figure was up from 27.2 percent the prior month and up from 23.8 percent a year earlier. Prior to the August 2007 credit crunch jumbos accounted for around 40 percent of the home loan market.

All lenders combined provided a total of $4.96 billion in mortgage money to Southern California home buyers in March, up from a revised $3.91 billion in February and down from $5.29 billion in March last year.

The most active lenders to Southern California home buyers last month were Wells Fargo with 7.1 percent of the total home purchase loan market, Bank of America with 3.0 percent and IMortgage with 2.4 percent.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 18.4 percent of all purchase mortgages last month. That was down from 18.9 percent the month before and down from 22.5 percent a year earlier. In recent months the FHA share has been the lowest since early 2008, mainly because of tighter FHA qualifying standards and the difficulties first-time buyers have competing with investors and cash buyers.

The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,591, up from $1,516 the month before and up from $1,252 a year earlier. Adjusted for inflation, last month’s typical payment was 33.9 percent below the typical payment in the spring of 1989, the peak of the prior real estate cycle. It was 45.9 percent below the current cycle’s peak in July 2007.
Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

Reposted From: National Mortgage Professional

FHA Mortgage Insurance Is Just Too Expensive

Higher Premiums: An under-the-radar tax on low-to-moderate income consumers

A while back I cited our US Department of HUD (Housing and Urban Development), guided by Assistant Secretary for Housing / Federal Housing Commissioner Carol J. Galante, had determined that the best way to fix the financial woes of the FHA, was to have low-to-moderate income borrowers foot the bill. “How the Payroll Tax Cut Is Costing Low Income Borrowers” described how mandates from Commissioner Galante had increased already expensive MIP (Mortgage Insurance Premiums) as a means to fund an underfunded 2% reserve requirement in the MMI (Mutual Mortgage Insurance) Fund and offset lost revenues as a result of the payroll tax cut.

Now the Realtor lobby has taken up the cause and is sending in reinforcements with all of the mighty power and the big stick that they do yield.

Brian Collins reports in The National Mortgage News from April 8, 2014, that NAR (National Association of Realtors) president Steve Brown sent a letter to the FHA (Federal Housing Administration), claiming that “between 125,000 and 375,000 renters” were priced out of the homebuyers market in 2013 due to high priced FHA mortgage insurance.

FHA mortgage consumers are primarily low-to-moderate income borrowers and the financial burden for these initiatives is being forced on those who can least afford it.
Until 12/31/2012, FHA MIP was also funding (amazingly by law) the Temporary Payroll Tax Continuation Act of 2011. I had hoped that the end of the payroll tax cut would mean the need to siphon (what the Vegas mob called “skimming”), MIP funds for this lawful but awful initiative would no longer exist and exorbitant mortgage insurance increases would be rolled back. I was wrong.

Astonishingly, exactly one month later on 1/31/2013, HUD issued Mortgagee Letter 2013-04 actually INCREASING the MIP and closing loopholes to existing FHA mortgage borrowers to prevent them from eliminating MIP through equity growth.

MMI Fund management and unprecedented delinquencies had rendered HUD’s strategy to maintain the federally mandated 2% reserve requirement ineffective. At the time, HUD was reporting a “$16.3 billion deficit in its insurance fund for fiscal 2012, opening the door to a taxpayer bailout for the first time in its 79-year history.”

Clearly, HUD’s MMI Fund management strategies were absent real world analysis and had in fact failed to accomplish any meaningful results other than an unprecedented MMI Fund deficit. Squeezing more dollars from a shrinking pool of already stretched-to-the-limit FHA mortgage consumers was ill conceived and based on flawed analysis, the results speak for themselves. If MIP dollars were no longer needed to subsidize the payroll tax cut, and used solely to replenish the MMI Fund shortage, surely this additional inflow would significantly eliminate the need for additional MIP cost increases for low-to-moderate income borrowers. This of course was merely my common sense assumption and I was proven wrong, as Commissioner Galante’s Mortgagee Letter 2013-04 confirmed.

As I said previously, this is an under-the-radar tax on low-to-moderate income consumers, and it is absent implementation resistance because it is so well disguised as to be undetectable. This is not a headline grabbing tax increase and there is no mechanism for reporting it on a paystub or a tax return. It is a quiet, tacit, mandatory add-on for all FHA mortgage consumers, measured in basis points and virtually invisible to the naked eye. It is so well hidden as to eliminate any risk of push-back from those affected, it is an incremental cost incurred by those who have no other choice because they are part of a captive audience. The financial burden for HUD’s inability to manage the FHA marketplace is now shouldered by those mortgage consumers who can least afford it.

Since August, 2010, Public Law 111-229 has given HUD sweeping authority to arbitrarily raise FHA MIP premiums at the discretion of the Secretary, with no additional oversight or justification required to warrant these increases. This is more commonly known as a blank check.

In her written testimony for the House Financial Services Committee Hearing back on February 13, 2013, Assistant Secretary Galante lamented the “difficult choice” of having to increase mortgage insurance premiums for the fifth time in only three years, arguing that “the premium increases made since 2009 have, to date, yielded more than $10 billion in additional economic value for the Fund.” The unvarnished facts are that HUD has raised an incremental $10 billion over three years to replenish the MMI Fund, yet it reported a $16.3 billion deficit for that fund in 2012. I submit that more effective fund management strategies may exist.

HUD’s program of continually increasing FHA MIP is pricing low-to-moderate income borrowers out of the housing market and the NAR agrees. Historically low interest rates and low housing prices have increased the Housing Affordability Index (as reported by the National Association of Realtors) to record highs. But stir in increasingly costly mortgage insurance, and much of that affordability evaporates, turning homebuyers into wait-and-seers. FHA mortgage financing is the single biggest and in many cases, the only opportunity for “marginal” buyers to secure mortgage financing. HUD’s MIP pricing strategy is thwarting that opportunity and stalling the recovery in our housing markets.

The brain trust collecting HUD paychecks need more effective ideas and they need look no further than this post. The solution to subsidizing the 2% reserve requirement for the MMI fund is to reduce FHA MIP premiums across the board. Yes reduce, as in lower. By reducing or lowering the costs associated with FHA mortgage financing, affordability increases for low-to-moderate income buyers and loan volume actually accelerates. More people buy houses because more people can afford to buy houses! The premiums may be smaller but there will be lots more of them!

FHA loans today are so thoroughly vetted, that the documentation requirements alone, significantly reduce risk profiles, defaults and foreclosures. QM (Qualified Mortgage) incents lenders to lend responsibly resulting in fewer defaults and foreclosures which mean fewer dips into the MMI fund to make a lender whole when a loan goes bad. More MIP inflows, fewer MMI fund dips and presto; a fully funded MMI pool with a 2% reserve.

I am just a soldier at the front reporting back to command to redirect the offensive, lower MIP premiums to increase housing affordability and accelerate loan volume. The QM culture has already loaded logic and common sense into the credit policy breach and loan defaults are in retreat. Do this and the MMI Fund and reserves will be fortified and the housing market will be triumphant.

Source: Author Mark Greene Forbes

MLS’s At Cliff’s Edge Over Pocket Listings

Source: Inmannews

SAN FRANCISCO — Call them what you will — pocket listings, coming soon listings, whisper listings, off-market listings — but the Internet has made it easier than ever to engage in the long-standing practice of selling a home outside of the multiple listing service.

Inventory shortages in many markets also appear to be contributing to a surge in pocket listings. A study by MLSListings Inc. found that pocket listings as a percentage of total home sales in some Northern California markets increased from 15 percent in 2012 to 26 percent during the first quarter of 2013.

So it’s not surprising that hundreds of Realtors packed a cavernous room upstairs at the Moscone Center Friday to mull what MLSListings Chairman Robert Bailey called “the hole in the donut” — the erosion of the dominance of MLSs as a facilitator of residential real estate deals.

What’s unique about MLSs, Bailey said, is that they facilitate cooperation among brokers in a local market and put forth offers of compensation to agents who come together to close a deal. Typically, an agent must list a home for sale in the MLS within two days of securing a listing agreement.

However some sellers, especially in low-inventory markets with frothy buyer demand, prefer to keep their listings off an MLS for privacy and security reasons, and acknowledge in writing that they don’t want to list the property in the MLS.

In some cases, as Inman News columnist Teresa Boardman has pointed out, sellers can negotiate a lower commission from agents in deals that don’t go through the MLS.

Other sellers may not sign formal listing agreements with agents, but entertain offers from interested buyers an agent brings to the table.

“We’re standing at the cliff’s edge,” MLSListings’ Robert Bailey warned the audience.

Off-MLS deals can benefit agents, who have the opportunity to double-end a deal by securing a buyer through personal networks, or private networks established for such a purpose.

One of those private networks, PreMLS.com, founded by Virginia-based broker Frank LLosa, aims to connect buyers and sellers’ agents with listings before they’re in listed in an MLS in 13 markets using a network of regional, private Facebook groups.

The large Chicago brokerage @properties has developed an app that allows the firm’s agents to market new listings to each other before they hit the MLS.

MLSListings, which serves approximately 16,000 agents in eight San Francisco Bay Area counties, started analyzing what Bailey called “off-MLS” deals a few years ago.

Off-MLS deals represented 11.8 percent, about $2.5 billion in transaction volume, of those transactions in MLSListings’ market in 2011, Bailey told the crowd. In 2012, it was 14.5 percent, and through the first three quarters of 2013 it had risen to 21.1 percent, representing $3.8 billion in transactions, more than all of 2012 ($3.4 billion).

Based on the striking rise in those numbers, “I’m going to guess that this is an issue that’s going to come to an area near you,” Bailey told the Realtor crowd.

As deals migrate away from the MLS system, the MLS’s data and ability to generate accurate comparable values of homes weakens and an agent’s value erodes, he said.

With more than a fifth of all deals done in his MLS in the shadows, Bailey said he’s taking this as a serious indication that the MLS model is on precarious ground.

“We’re standing at the cliff’s edge,” Bailey warned the audience.

The California Association of Realtors, the U.S.’s largest Realtor association, has taken notice and has begun putting its hefty weight behind educating consumers and its 150,000-plus members about the importance of the marketing listings in the MLS.

CAR’s Senior Counsel Elizabeth Miller-Bougdanos told the crowd that CAR has responded to the perceived threat of the increasing prevalence of off-MLS deals by:
•Informing members of the practice and its hazards, including a Q-and-A it created for news media and for agents to distribute to their clients titled “The Pros and Cons of Off-MLS Listings: What Consumers and Real Estate Agents Should Know.”
•A consumer-facing advertising campaign, which included ads in places like the Los Angeles Times extolling the benefit to consumers of having their homes listed in an MLS.
•A revision of its Standard Listing Agreements form and Seller Exclusion Form to more clearly articulate the benefits of listing a home in the MLS to the consumer and to ensure that the agent’s broker is aware of the off-market status of any listing that goes that route.
•Revised its model MLS rules to ensure that all listings not listed in an MLS have a filed Seller Exclusion Form.

CAR revised its residential listing agreement form to include a detailed set of four benefits to listing the property in the MLS that the seller must acknowledge they want to forgo with their initials on each one, Miller-Bougdanos said. In addition to the seller, the broker or office sales manager must initial each item, making it harder for rogue agents to secure pocket listings without their broker’s knowledge.

While keeping a listing off the MLS is not illegal, Miller-Bougdanos told the audience, the practice puts agents in a precarious position, legally and ethically.

If an agent doesn’t fully disclose or is perceived as acting in his own financial best interest in keeping a listing out of the MLS, he could be found in breach of his fiduciary duty as an agent and in violation of the Realtor code of ethics that require an agent to “protect and protect the interests of clients” and cooperate with other agents.

Private agent clubs, she pointed out, also must face questions about their conformation to antitrust laws, something the MLSs are focused on ensuring.

Off-MLS deals are not always clear cut.

Retta Treanor, president of Trinity County (Calif.) Association of Realtors in Northern California, asked the panel, which also included real estate speaker and CEO of Philadelphia-based Century 21 Advantage Gold Bill Lublin, for clarification about a member who she suspects is illegitimately entering off-MLS listings into her association’s 40-member MLS.

Treanor, who is also a broker-owner in the Northern California market, says the agent entered 18 listings into the association’s MLS in 2012 as sold with a comment noted that the property was sold without a listing agreement but was “facilitated” by the agent.

Other agents in the market, Treanor said, felt like they had buyers that would have paid more for some of the properties that closed.

The panel suggested she look into the “facilitation” language in the broker comment and question the agent about acting as an agent without following the MLS’s agency rules.

Echoing Bailey’s closing point, Treanor said her primary concern is with maintaining consumers’ trust in the MLS as the best place to market and sell a property.

Shocking Facts About The Deindustrialization Of America That Everyone Should Know

How long can America continue to burn up wealth?  How long can this nation continue to consume far more wealth than it produces?  The trade deficit is one of the biggest reasons for the steady decline of the U.S. economy, but many Americans don’t even understand what it is.  Basically, we are buying far more stuff from the rest of the world than they are buying from us.  That means that far more money is constantly leaving the country than is coming into the country.  In order to keep the game going, we have to go to the people that we bought all of that stuff from and ask them to lend our money back to us.  Or lately, we just have the Federal Reserve create new money out of thin air.  This is called “quantitative easing”.  Our current debt-fueled lifestyle is dependent on this cycle continuing.  In order to live like we do, we must consume far more wealth than we produce.  If someday we are forced to only live on the wealth that we create, it will require a massive adjustment in our standard of living.  We have become great at consuming wealth but not so great at creating it.  But as a result of running gigantic trade deficits year after year, we have lost tens of thousands of businesses, millions upon millions of jobs, and America is being deindustrialized at a staggering pace.

Click here to read the rest of this article in The Economic Collapse

The Chinese Are Acquiring Large Chunks Of Land In Communities All Over America

Source: The American Dream

Has the United States ever experienced a time when a foreign nation has attempted to buy up so much of our land all at once? As you will read about in this article, the Chinese are on a real estate buying spree all over America. In fact, in some cases large chunks of land are actually being given to them. Yes, you read that correctly. China is on the way to becoming the dominant land owner in the entire country, and that is starting to alarm a lot of people. Do we really want a foreign superpower to physically own so much of our territory?

There are some that are playing down this threat by making a distinction between the Chinese government and Chinese corporations, but things work differently over in China than they do here. In China, the government is involved in everything. In fact, 43 percent of all corporate profits in China are produced by companies that the Chinese government controls. And all of the rest of the companies are very careful to follow the lead and direction of the Chinese government.

That is why what is going on in places such as Thomasville, Alabama is so alarming. Small communities such as Thomasville are so starved for jobs that they are willing to give land away for free to Chinese companies in order to entice them to build factories…

Gov. Robert Bentley said Friday that he will announce an economic development project in Thomasville, Ala., Monday morning.

That project is likely a copper tube plant to be built by Golden Dragon Precise Copper Tube Group. A legal notice published Thursday indicates that the city of Thomasville and others intend to give land and other incentives to GD Copper USA, which state corporation records identify as a Florida-based subsidiary of Golden Dragon.

And in this particular case, we are not just talking about a small plot of land. We are talking about a 40 acre chunk of land worth 1.5 million dollars…

The legal notice indicated the city plans to give Golden Dragon a 40-acre site. Thomasville Mayor Sheldon Day has said that land is in a city industrial park south of Thomasville High School. It includes a $1.5 million, 50,000-square-foot building that the city constructed in 2009 to attract businesses.

But in most cases, the Chinese actually have to spend money to acquire our real estate. And they are starting to make some really high profile acquisitions in some of our most expensive cities…

China Vanke and Tishman Speyer signed a deal for a $620 million luxury condo project in San Francisco this winter. In April, another deal for a cool $1.5 billion was inked in Oakland between Zarsion and Signature Development Group.
In June, several big deals in New York City went down. Zhang Xin, CEO of Soho China , joined forces with the wealthy Safra family (of Banco Safra fame) of Brazil to buy a stake in the General Motors Building in Midtown, The New York Times reported on June 25. Dalian Wanda Group, another Chinese developer, is planning to build a greenfield luxury hotel in Manhattan.

In other cases, the Chinese are gaining control over vast tracts of U.S. territory by buying up our large corporations.
For example, when the Chinese purchased Smithfield Foods, they suddenly owned 460 large farms and became the top employer in dozens of communities all over the United States…

Smithfield Foods is the largest pork producer and processor in the world. It has facilities in 26 U.S. states and it employs tens of thousands of Americans. It directly owns 460 farms and has contracts with approximately 2,100 others. But now a Chinese company has bought it for $4.7 billion, and that means that the Chinese will now be the most important employer in dozens of rural communities all over America.

And the Chinese seem to have a particular interest in economically-depressed areas of the country. Perhaps they feel that now is the time to gobble up companies and properties in such areas for bargain-basement prices. For instance, the following is from a CNBC article that detailed how the Chinese are aggressively “putting down roots in Detroit”…

Dozens of companies from China are putting down roots in Detroit, part of the country’s steady push into the American auto industry.
Chinese-owned companies are investing in American businesses and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores, and hiring experienced engineers and designers in an effort to soak up the talent and expertise of domestic automakers and their suppliers.

Speaking of Michigan, one company known as “Sino-Michigan Properties LLC” actually had plans to buy up 200 acres of land near the town of Milan, Michigan. The goal was to build an entire “China City” with artificial lakes, a Chinese cultural center and hundreds of housing units for Chinese citizens.
But that is nothing compared to the “China City” that was being planned for New York state. The following is a short excerpt from one of my previous articles…

The Chinese have made trillions of dollars flooding our shores with super cheap products, and now they are using some of that money to buy land and property all over America. For example, there is now a proposal to construct a multibillion dollar “China City” that would span approximately 600 acres in a remote area of New York state. This “China City” (that is actually what it would be called) would be located on Yankee Lake in Sullivan County, New York. The plans anticipate large numbers of Chinese businesses, plenty of homes for Chinese immigrants, a Chinese high school, a college, a casino and even a theme park. And the first 600 acres is only for “phase one” of the plan. Ultimately, the goal is for “China City” to cover more than 2,000 acres. Those promoting this plan say that it will be a great way for New Yorkers to learn to appreciate Chinese culture.

But of much greater concern is the huge wave of real estate purchases that are quietly happening all around us every single day.
The following is from a recent CNBC article entitled “Chinese buying up California housing“…

At a brand new housing development in Irvine, Calif., some of America’s largest home builders are back at work after a crippling housing crash. Lennar, Pulte, K Hovnanian, Ryland to name a few. It’s a rebirth for U.S. construction, but the customers are largely Chinese.
“They see the market here still has room for appreciation,” said Irvine-area real estate agent Kinney Yong, of RE/MAX Premier Realty. “What’s driving them over here is that they have this cash, and they want to park it somewhere or invest somewhere.”

So what happens when we get to the point when the Chinese government and/or Chinese citizens own 10 percent of all the real estate in the entire country?
Will it be a problem then?
What about if we get to 20 percent or 30 percent?
At what point will we be forced to admit that we have a major problem on our hands?
Many of our leaders seem resigned to the fact that the future will be dominated by communist China.
For example, the President of the St. Louis Federal Reserve recently stated that “attitudes in the U.S. are going to have to change” because America “will not permanently be the global leader”…

That’s according to Federal Reserve Board of St. Louis President James Bullard, who spoke to the Wall Street Journal on the sidelines of a conference during a recent visit to Hong Kong.
“Attitudes in the U.S. are going to have to change, because the U.S. will not permanently be the global leader,” Mr. Bullard said.

In fact, Bullard insists that it is inevitable that the U.S. will end up playing second fiddle to communist China…

In that case, “the U.S. would be playing a role to China similar to the role the U.K. plays to the U.S. today,” Mr. Bullard said. “People think it’s 50-75 years away but it’s probably only 25 or 20 years away, something like that.”

And this is one of the guys that is running the U.S. economy? There is more than one way to dominate your enemy, and the Chinese understand this. Sadly, most Americans have absolutely no idea what is happening.

What about you? What do you think about all this?

Farm Mortgage Lending Faces Leaner Times After Run-Up

Source: National Mortgage News

No, it’s not the national real estate market. U.S. home values are still 9% lower than the last cyclical peak, according to the Mortgage Bankers Association. (Though that last peak deflated with a bang, so keep an eye out.) I’m talking about a niche market, though it is a sizeable one, with $3 trillion in assets and more than $300 billion in outstanding loans.

The farm mortgage market is a funny animal, dominated by a hybrid residential-commercial mortgage (though much more like commercial) along with a sizeable amount (about 40% now) of non-real estate production loans. Still, according to the U.S. Department of Agriculture, farm debt will reach $316 million this year, with $187 billion of that in real estate loans. And that $187 billion is an amount that has jumped 20% since 2010.

Farmers have been benefiting from steady increases in the prices of commodities in recent years, some of it driven by extreme weather. But the underpinnings of that growth seem to be on the wane now. The USDA is projecting a 22% drop in farm cash income for this year, to $102 billion from $130 billion. And crop receipts are projected to fall by 12%. “The average prices for corn, wheat, soybeans, cotton, vegetables and melons are expected to decline in 2014,” says the American Bankers Association.

That’s bad news for farm real estate, where the land becomes more valuable the higher the prices it yields on crops, and it bodes poorly for lending against such property. The USDA predicts such debt will grow by 3.2% this year, about a third less than it did last year.
Consultant Bert Ely, who writes about Farm Credit System issues for the ABA, agrees with me that the market is “getting a little frothy. But it’s not going to be as bad as it was in the early 1980s,” he says, referring to the last big farm disaster. “Whatever dropoff there is isn’t going to be as much.”

The ABA’s performance report on farm banks (it counts 2,152 of them) for 2013 agrees. “One area of concern for farm bankers and their regulators has been the rapid appreciation of farmland values in some areas of the country,” it says. “However, the run up in farmland values so far is not a credit driven event. Farm banks are actively managing risk associated with agricultural lending and underwriting standards on farm real estate loans are very conservative.”

Farm lenders commenting in a video discussion of ABA’s report see no immediate need to worry. “I’m pretty optimistic [on the outlook for 2014] even though prices are reduced from what they were,” says Kreg Denton, a senior vice president at First Community Bank in Fancy Farm, Ky. “Farmers in our area have gotten themselves in pretty good shape as far as finances are concerned.”

Nate Franzen, the ag division president at First Dakota National Bank in Yankton, S.D., says credit quality is “strong,” though he admits “there’s a little more stress than in the past.” Still, “It’s not any type of disaster at this point.” Is there potential turbulence ahead? “Ag is cyclical,” Franzen says. “We need to plan for tougher times. As long as we do that, everything will be fine.”

How big has the run up in prices been? The USDA says farm real estate values hit $2,900 an acre in 2013, up 9% from 2012. Cropland popped 13%, to $4,000 an acre. That seems pretty frothy, indeed.

Some areas of the country are also looking overheated for farm debt. The Northeast region saw farmland loans increase 30% last year, ABA finds. Of course, the Northeast isn’t the biggest farming sector in the country. But all other sectors saw healthy jumps, with the South up 5%, the Corn Belt up 8%, the West 9% and the Plains 10%.

Just as farm mortgages are quite a bit different than residential ones, the lenders in the area are a bit of a different cohort as well. The share leader is the Farm Credit System associations, specialized farm lenders funded by an arm of the country’s oldest government-sponsored enterprise, the Farm Credit Administration. The Farm Credit System lenders, which lend but do not take deposits, have a little less than half of the farm real estate loans outstanding. Commercial banks have about a third of the market, and are followed by life insurance companies and individuals, which together have more than $25 billion in farm real estate debt.

Commercial banks, however, are smarting over what they see as unfair advantages enjoyed by Farm Credit System lenders, including funding costs. “GSEs borrow very cheaply and at the long end of the yield curve,” Ely says, noting that spreads for farm debt recently came to 54 basis points over the 10-year Treasury and 33 basis points for seven years. And, Farm Credit System lenders’ profits from real estate lending are exempt from all taxation.

Taking a look at some typical FCS lenders, New Mexico has a total of two that seem to be doing well. Ag New Mexico of Clovis is fairly small, at $185 million in assets. Farm Credit of New Mexico, based in Albuquerque, is much larger, at $1.4 billion in assets. Both are well capitalized, Ag New Mexico at 17% capital-to-assets and Farm Credit at 22% at the end of last year, according to call reports they filed with FCA. Both saw profits increase in the last half of 2013, from $1.4 million at June 30 to $2.9 million at yearend for the smaller institution, and from $14 million to $26 million for the bigger one.

New York’s MetLife is an example of a life insurer with a big interest in agricultural mortgages (it says it has been in this field since 1917). It says it originated $3 billion in ag mortgages in 2012. Interestingly, $300 million of that volume went out of country, to Brazilian farmers. Its total ag portfolio was nearly $13 billion at yearend 2012.

As those Brazilian farmers doubtless know, froth is great for specialty coffee. But it’s not so good for specialty finance.

The Music Just Ended: “Wealthy” Chinese Are Liquidating Offshore Luxury Homes In Scramble For Cash

Source: Zero Hedge

One of the primary drivers of the real estate bubble in the past several years, particularly in the ultra-luxury segment, were mega wealthy Chinese buyers, seeking to park their cash into the safety of offshore real estate where it was deemed inaccessible to mainland regulators and overseers, tracking just where the Chinese record credit bubble would end up. Some, such as us, called it “hot money laundering”, and together with foreclosure stuffing and institutional flipping (of rental units and otherwise), we said this was the third leg of the recent US housing bubble. However, while the impact of Chinese buying in the US has been tangible, it has paled in comparison with the epic Chinese buying frenzy in other offshore metropolitan centers like London and Hong Kong. This is understandable: after all as Chuck Prince famously said in 2007, just before the first US mega-bubble burst, “as long as the music is playing, you’ve got to get up and dance.” In China, the music just ended.

But more so than mere analyses which speculate on the true state of the Chinese record credit-fueled economy, such as the one we posted earlier today in which Morgan Stanley noted that China’s “Minsky Moment” has finally arrived, we now can judge them by their actions.

And sure enough, it didn’t take long before the debris from China’s sharp, sudden attempt to “realign” its runaway credit bubble, including the first ever corporate bond default earlier this month, floated right back to the surface.

Presenting Exhibit A:

Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.

Said otherwise, what goes up is now rapidly coming down.

Wealthy Chinese were blamed for pushing up property prices in the former British territory, where they accounted for 43 percent of new luxury home sales in the third quarter of 2012, before a tax hike on foreign buyers was announced.

The rush to sell coincides with a forecast 10 percent drop in property prices this year as the tax increase and rising borrowing costs cool demand. At the same time, credit conditions in China have tightened. Earlier this week, the looming bankruptcy of a Chinese property developer owing 3.5 billion yuan ($565.25 million) heightened concerns that financial risk was spreading.

Some of the mainland sellers have liquidity issues – say, their companies in China have some difficulties – so they sold the houses to get cash,” said Norton Ng, account manager at a Centaline Property real estate office close to the China border, where luxury houses costing up to HK$30 million ($3.9 million) have been popular with mainland buyers.

Alas, as the recent events in China, chronicled in minute detail here have revealed, the “liquidity issues” of the mainland sellers are about to go from bad to much worse. As for Hong Kong, it may have been last said so long ago nobody even remembers the origins of the word but, suddenly, it is now a seller’s market:

Property agents said mainland Chinese own close to a third of the existing homes that are now for sale in Hong Kong – up 20 percent from a year ago. Many are offering discounts of 5-10 percent below the market average – and in some cases as much as 20 percent – to make a quick sale, property agents and analysts said.

Also known as a liquidation. And like every game theoretical outcome, he who defects first, or in this case sells, first, sells best. In fact, since panicked selling will only beget more selling, watch as prices suddenly plunge in what was until recently one of the most overvalued property markets in the world. And with prices still at nosebleed levels, not even BlackRock would be able to be a large enough bid to absorb all the slamming offers as suddenly everyone rushes to cash out.

The biggest irony: after creating ghost towns at home, the Chinese “uber wealthy” army is doing so abroad.

In a Hong Kong housing development called Valais, about 10 minutes drive from the Chinese border, real estate agents said that between a quarter and a half of the 330 houses are now on sale. At the development’s frenzied debut in 2010, a third of the HK$30-HK$66 million units were sold on the first day, with nearly half going to mainland China buyers.

Dubbed a “ghost town” by local media, the development built by the city’s largest developer, Sun Hung Kai Properties Ltd (0016.HK), is one of many estates in Hong Kong where agents are seeing an increasing number of Chinese eager to sell.

“Many mainland buyers bought lots of properties in Hong Kong when the market was red-hot three years ago,” said Joseph Tsang, managing director at Jones Lang LaSalle. “But now they want to cash in as liquidity is quite tight in the mainland.”

Perhaps our post from yesterday chronicling the crash of the Chinese property developer market was on to something. And of course, as also described in detail, should China’s Zhejiang Xingrun not be bailed out, as the PBOC sternly refuted it would do on Weibo, watch as the intermediary firms themselves shutter all credit, and bring the Chinese property market, both domestic and foreign, to a grinding halt (something he highlighted in our chart of the day).

Meanwhile, the selling rush is on.

In a nearby development called The Green – developed by China Overseas Land & Investment (0688.HK) – about one-fifth of the houses delivered at the start of this year are up for sale. More than half of the units, bought for between HK$18 million and HK$60 million, were snapped up by mainland Chinese in 2012.

Because so much changes in just over a year.

“Some banks were chasing them (Chinese landlords) for money, so they need to move some cash back to the mainland,” said Ricky Poon, executive director of residential sales at Colliers International. “They’re under greater pressure from banks, so they’re cutting prices.”

In West Kowloon district, an area where mainland Chinese bought up close to a quarter of the apartments in many newly-developed estates, some Chinese landlords are offering discounts on the higher-end, three- to four-bedroom apartments they bought just a few years ago.

This month, a Chinese landlord sold a 1,300 square foot (121 square meter) apartment at the Imperial Cullinan – a high-end estate developed by Sun Hung Kai in 2012 – for HK$19.3 million, 17 percent less than the original price. The landlord told agents to sell the flat “as soon as possible,” said Richard Chan, branch manager at Centaline Property in West Kowloon.

In the same area, a 645 square foot, 2-bedroom flat in the Central Park development was sold in just two days after the Chinese owner put it on the market at HK$6.5 million in what agents called the year’s best bargain – the cheapest price for a unit of its kind over the past year.

Don’t worry there will be many more bargains. Why? Because what was once a buying panic – as recently as months ago – has finally shifted to its logical conclusion. Selling.

“The most important thing for them is to sell as soon as possible,” Centaline’s Chan said. “In the past two weeks, those who were willing to cut prices were mainland Chinese. It is going to have some impact on the local property market, that’s for sure.”

Indeed. And once the Hong Kong liquidation frenzy is over, and leaves the city in a state of shock, watch as the great Chinese selling horde stampedes from Los Angeles, to New York, to London, Zurich and Geneva, and leave not a single 50% off sign in its wake.

The good news? All those inaccessibly priced houses that were solely the stratospheric domain of the ultra-high net worth oligarch and criminal jet set, will soon be available to the general public. Especially once the global housing bubble pops, which may have just happened.

California Dominates Top 10 Sellers’ Housing Markets

Source: Reverse Mortgage Daily

Five of the nation’s top 10 sellers’ markets are located in California, while all of the top buyers’ markets are located in Midwest and Eastern metros as the housing market increasingly becomes localized.

San Jose, San Francisco, Los Angeles, Riverside, and Sacramento are among the top sellers’ markets according to the February Zillow Real Estate Market Reports, accompanied by San Antonio, Seattle, Denver, D.C., and Dallas-Forth Worth.

It’s more of a buyer’s market on the other side of the country, where there’s less competition and more room for bargaining on prices in metros such as Cleveland, Philadelphia, Tampa, Chicago, and Pittsburgh.

“The real estate data in markets on both coasts are telling markedly different stories. Relatively strong job markets in the West are helping spur robust demand, which is being met with limited supply, causing rapid home value appreciation and giving sellers an edge,” said Zillow Chief Economist Dr. Stan Humphries.  ”In the East, housing markets are appreciating a bit more slowly, and homes are staying on the market longer, which helps give buyers the upper hand.”

Buyers in sellers’ markets can expect tight inventory, more competition, and a greater sense of urgency, he continued.

Home values rose to $169,200 in February, Zillow’s Home Value Index indicates, up 5.6% year-over-year, and are expected to rise another 3% through next February. However, national home values stayed almost flat from January to February, while monthly and annual home value appreciation slowed to their lowest paces in months.

“As we put the housing recession further in the rear-view mirror, the broad-based dynamics that applied during those days, when all markets were reacting similarly to nationwide economic conditions, are fading,” Humphries said. “Real estate has always been local, and as the spring market gains momentum, this old adage will only become more pronounced.”

The Hybrid ARM Is Back – And It’s A Smart, Customizable Mortgage Option

Source: Forbes

Fast forward to last May, as much noise was swirling around the Fed’s tapering strategy: 30-year fixed rates ascended a full percentage point in less than 30 days, based only on the conversations of the small screen financial talking heads, and all before the Fed announced anything!  Not long afterwards, borrowers started to ask me about hybrids.   3/1, 5/1, 7/1, 10/1, what is the spread between the 30-year fixed, what are the caps, what is the index, how do they work?

Let’s review the mechanics:

Hybrid ARMs as the name implies, have a fixed rate component on the front end of the mortgage term (3 years, 5, 7 or 10) and an adjustable rate component on the back end of the mortgage term, when the interest rate can change/adjust annually.  For example; a 5/1 ARM in today’s market could have an interest rate that is fixed for the first 5 years at 3.00% compared to a 30-year fixed rate mortgage at 4.50%. For a $200,000 mortgage, that would save $170/month.  After 5 years/60 months, the interest will adjust annually based on an index (1 year LIBOR or 1 year Treasury/CMT), plus a margin of somewhere between 2.25% and 2.75%.

Of course there are caps on the interest rate adjustments.  Typically the initial adjustment cap is 2% above the start rate, unless the initial term is 5 years or longer, then the initial caps can be as high as 5%. The periodic or yearly caps are typically 2% above (or below) the existing rate and the lifetime cap is 5% or 6% above the initial fixed rate, depending on the term.

Since birth, hybrid ARMs have maintained  space on the entrée side of the menu, for a time even expanding to include interest only variations, which have become scarce now that QM is sheriff.  While fixed rates have enjoyed a prolonged period of historical lows, the demand for hybrid ARMs has fallen dramatically.

Enter the current generation of mortgage consumers with a seemingly much lower tolerance for rising interest rate pain than their counterparts of 20 years ago, and demand for hybrid ARMs is seeing traction.  Technology has given buyers access to more information than ever before, comparing options for individual circumstances results in savvy mortgage consumer financing choices.

So just why are hybrid ARMs a good fit if 30-year fixed rates are still close to historical lows?  Fact is that although most people opt for 30 year mortgages, very few actually stay in the property or the mortgage for that long.  People move, families grow, personal economics rise and fall and for lots of other reasons, the lifespan of a mortgage tends to be far less than the 30 years it is amortizing.

The buyer with a five year planning horizon choosing the $200,000 5/1 ARM over the 30-year fixed mentioned earlier, would save $10,200 and enjoy the security of a fixed rate for those five years.  If plans change as they so often do (when life shows up), the adjustment caps can protect those savings while plans are adjusted and new mortgage financing strategies are considered.  This is the nature of today’s generation of mortgage consumer; they are sophisticated, they have access to more information for more informed consideration and they want what best fits their personal financial universe.

At some point in the future, mortgage interest rates will begin the inevitable climb to higher norms and Hybrid ARMs will have a louder voice in the mortgage financing conversation.  As with virtually everything else, organic evolution has led to 3/3 ARMs and 5/5 ARMs and other variations that together offer consumers a menu of custom made mortgage financing options for just about every circumstance.  Learning the mechanics of how these loans work and matching planning horizons with adjustment periods can be a useful tool in an overall financial planning portfolio.

U.S. Housing Sector Is in Big Trouble

Source: National Mortgage News

Events in the Ukraine have been distracting the global financial markets, but for investors and financial institutions in the U.S., the deteriorating economic fundamentals in the housing sector are probably a more urgent concern.

While many parts of the U.S. economy are growing, the housing sector is increasingly a drag on consumption and job creation. The fault lies not with the market, however, but with ill-considered regulations and bank capital rules.

On the surface, things look o.k. Nationwide, house prices rose 1.2% in the fourth quarter of 2013 according to the Federal Housing Finance Agency’s index. This is the tenth consecutive quarterly price increase in the purchase-only, seasonally adjusted index.

But the FHFA’s principal economist, Andrew Leventis noted that the appreciation was “more modest than in recent periods,” and cautioned: “It is too early to know whether the lower quarterly growth rate represents the beginning of more normalized price appreciation patterns or a more significant slowdown.”

Most housing indicators suggest that the overall rate of home price appreciation is slowing considerably, with a few of the more attractive markets around the country. accounting for most of the upward momentum. Home prices probably peaked overall in the second quarter of 2013, but the time delay in most of the major data series on housing masks this reality.

For example, the National Association of Realtors reports that existing home sales and median home price information showed gains of 10.4% in prices in January compared to a year earlier, “a slight acceleration from the 9.7 percent year over year gains in December but notably slower than trends in early summer/fall 2013.”

The Realtors report the median price of all homes that have sold while FHFA and Case-Shiller report the results of a weighted repeat-sales index. Because home sales among higher priced properties have been growing more than among lower-price tiers, the Realtors’ median price had risen by more than the weighted repeat sales index, which computes price change based on repeat sales of the same property.

Only six cities – Dallas, Las Vegas, Miami, San Francisco, Tampa and Washington – posted gains for the month of December, according to the 20-city Case Shiller Index. While average home prices have returned to 2004 levels, 20% to 30% of American homeowners remain either underwater on their mortgages or have too little equity to sell their homes. A lack of supply of homes is actually driving appreciation in many of the hottest markets, but sales volumes remain well below pre-2007 levels.

Applications for home mortgages, including both new purchases and refinancings, are at the lowest levels in more than a decade. While many observers blame rising interest rates for the paucity of new loan applications, factors such as a poor job market, flat to down consumer income and excessive regulation are probably more important. Commercial banks are fleeing the mortgage lending and loan servicing businesses, in large part because of punitive regulations and new Basel III capital requirements which demonize private mortgage lending.

“Rules enacted last year appear to be steadily forcing banks to exit the mortgage servicing business, transferring such rights to nonbanks,” Victoria Finkle writes in American Banker. “The situation is stoking fears on Capitol Hill and elsewhere that regulators went too far.” Those fears are well founded.

The latest data from the Federal Deposit Insurance Corp. confirms that the loan portfolios of commercial banks devoted to housing are running off. For example, the total of 1-4 family loans securitized by all U.S. banks fell almost 5% in the fourth quarter of 2013 to a mere $610 billion. Real estate loans secured by 1-4 family properties held in bank portfolios as of the fourth quarter fell to $2.4 trillion in the last quarter, the lowest level since the fourth quarter of 2004. The FDIC reports that the amount of 1-4 family loans sold into securitizations exceeded originations by almost $30 billion.

As 2014 unfolds, look for lending volumes in 1-4 family mortgages to continue to fall as a lack of demand from consumers and draconian regulations force many lenders out of the market. While leaders such as Wells Fargo have indicated that they will write loans with credit scores in the low 600s range, there are not enough borrowers in the below prime category to make up for the dearth of consumers seeking a mortgage overall. When home prices measures generally start to fall later this year, maybe our beloved public servants in Washington will start to get the message.

29% Of All U.S. Adults Under The Age Of 35 Are Living With Their Parents

Source: The Economic Collapse

Why are so many young adults in America living with their parents?  According to a stunning Gallup survey that was recently released, nearly three out of every ten adults in the United States under the age of 35 are still living at home with Mom and Dad.  This closely lines up with a Pew Research Center analysis of Census data that looked at a younger sample of Americans which found that 36 percent of Americans 18 to 31 years old were still living with their parents.  That was the highest level that had ever been recorded.  Overall, approximately 25 million U.S. adults are currently living at home with their parents according to Time Magazine.  So what is causing all of this?  Well, there are certainly a lot of factors.  Overwhelming student loan debt, a depressing lack of jobs and the high cost of living are all definitely playing a role.  But many would argue that what we are witnessing goes far beyond temporary economic conditions.  There are many that believe that we have fundamentally failed our young people and have neglected to equip them with the skills and values that they need to be successful in the real world.

More Americans than ever before seem to be living in a state of “perpetual adolescence”.  As Gallup noted, one of the keys to adulthood is to be able to establish independence from your parents…

An important milestone in adulthood is establishing independence from one’s parents, including finding a job, a place to live and, for most, a spouse or partner, and starting one’s own family. However, there are potential roadblocks on the path to independence that may force young adults to live with their parents longer, including a weak job market, the high cost of living, significant college debt, and helping care for an elderly or disabled parent.

Unfortunately, it is becoming increasingly difficult for young people to become financially independent.  While they are in high school, we endlessly pound into their heads the need to go to college.  Then we urge them to take out whatever loans that they will need to pay for it, ensuring them that they will be able to get “good jobs” which will enable them to pay off those loans when they graduate.

Of course a very large percentage of them find that there aren’t any “good jobs” waiting for them when they graduate.  But because of the crippling loans that they have accumulated, they quickly realize that they have decades of debt slavery ahead of them.

Just consider the following numbers about the growth of student loan debt in the United States…

-The total amount of student loan debt in the United States has risen to a brand new all-time record of 1.08 trillion dollars.

-Student loan debt accounted for 3.1 percent of all consumer debt in 2003.  Today, it accounts for 9.4 percent of all consumer debt.

-In the third quarter of 2007, the student loan delinquency rate was 7.6 percent.  Today, it is up to 11.5 percent.

This is a student loan debt bubble unlike anything that we have ever seen before, and it seems to get worse with each passing year.

So when is the bubble going to finally burst?

Meanwhile, our young adults are still really struggling to find jobs.

For those in the 18 to 29-year-old age bracket, it is getting even harder to find full-time employment.  In June 2012, 47 percent of those in that entire age group had a full-time job.  One year later, in June 2013, only 43.6 percent of that entire age group had a full-time job.

And in many ways, things are far tougher for those that didn’t finish college than for those that did.  In fact, the unemployment rate for 27-year-old college dropouts is nearly three times as high as the unemployment rate for those that finished college.

In addition, since Barack Obama has been president close to 40 percent of all 27-year-olds have spent at least some time unemployed.

So it should be no surprise that 27-year-olds are really struggling financially.  Only about one out of every five 27-year-olds owns a home at this point, and an astounding 80 percent of all 27-year-olds are in debt.

Even if a young adult is able to find a job, that does not mean that it will be enough to survive on.  The quality of jobs in America continues to go downhill and so do wages.

The ratio of what men in the 18 to 29-year-old age bracket are earning compared to what the general population is earning is at an all-time low, and American families that have a head of household that is under the age of 30 have a poverty rate of 37 percent.

No wonder so many young people are living at home.  Trying to survive in the real world is not easy.

Many of those that are trying to make it on their own are really struggling to do so.  Just consider the case of Kevin Burgos.  He earns $10.50 an hour working as an assistant manager at a Dunkin Donuts location in Hartford, Connecticut.  According to CNN, he can’t seem to make enough to support his family no matter how hard he works…

He works 35 hours each week to support his family of three young children. All told, Burgos makes about $1,800 each month.

But his bills for basic necessities, including rent for his two-bedroom apartment, gas for his car, diapers and visits to the doctor, add up to $2,400. To cover these expenses without falling short, Burgos would need to make at least $17 per hour.

“I am always worried about what I’m going to do for tomorrow,” Burgos said.

There are millions of young people out there that are pounding their heads against the wall month after month trying to work hard and do the right thing.  Sometimes they get so frustrated that they snap.  Just consider the following example

Health officials have temporarily shut down a southern West Virginia pizza restaurant after a district manager was caught on surveillance video urinating into a sink.

Local media reported that the Mingo County health department ordered the Pizza Hut in Kermit, about 85 miles southwest of Charleston, to shut down.

But as I mentioned earlier, instead of blaming young people for their failures, perhaps we need to take a good, long look at how we have raised them.

The truth is that our public schools are a joke, SAT scores are at an all-time low, and we have pushed nearly all discussion of morality, values and faith out of the public square.

No wonder most of our young people are dumb as a rock and seem to have no moral compass.

Or could it be possible that I am being too hard on them?

Obama’s TTP Trade Officials Received Hefty Bonuses From Banks

Source: Republic Report

Officials tapped by the Obama administration to lead the Trans-Pacific Partnership trade negotiations have received multimillion dollar bonuses from CitiGroup and Bank of America, financial disclosures obtained by Republic Report show.

Stefan Selig, a Bank of America investment banker nominated to become the Under Secretary for International Trade at the Department of Commerce, received more than $9 million in bonus pay as he was nominated to join the administration in November. The bonus pay came in addition to the $5.1 million in incentive pay awarded to Selig last year.

Michael Froman, the current U.S. Trade Representative, received over $4 million as part of multiple exit payments when he left CitiGroup to join the Obama administration. Froman told Senate Finance Committee members last summer that he donated approximately 75 percent of the $2.25 million bonus he received for his work in 2008 to charity. CitiGroup also gave Froman a $2 million payment in connection to his holdings in two investment funds, which was awarded “in recognition of [Froman’s] service to Citi in various capacities since 1999.”

Many large corporations with a strong incentive to influence public policy award bonuses and other incentive pay to executives if they take jobs within the government. CitiGroup, for instance, provides an executive contract that awards additional retirement pay upon leaving to take a “full time high level position with the U.S. government or regulatory body.” Goldman Sachs, Morgan Stanley, JPMorgan Chase, the Blackstone Group, Fannie Mae, Northern Trust, and Northrop Grumman are among the other firms that offer financial rewards upon retirement for government service.

Froman joined the administration in 2009. Selig is currently awaiting Senate confirmation before he can take his post, which collaborates with the trade officials to support the TPP.

The controversial TPP trade deal has rankled activists for containing provisions that would newly empower corporations to sue governments in ad hoc arbitration tribunals to demand compensation from governments for laws and regulations they claim undermine their business interests. Leaked TPP negotiation documents show the Obama administration is seeking to prevent foreign governments from issuing a broad variety of financial rules designed to stem another bank crisis.

A leaked text of the TPP’s investment chapter shows that the pact would include the controversial investor-state dispute resolution system. A fact-sheet provided by Public Citizen explains how multi-national corporations may use the TPP deal to skirt domestic courts and local laws. The arrangement would allows corporations to go after governments before foreign tribunals to demand compensations for tobacco, prescription drug and environment protections that they claim would undermine their expected future profits. Last year, Senator Elizabeth Warren warned that trade agreements such as the TPP provide “a chance for these banks to get something done quietly out of sight that they could not accomplish in a public place with the cameras rolling and the lights on.”

Others have raised similar alarm.

“Not only do US treaties mandate that all forms of finance move across borders freely and without delay, but deals such as the TPP would allow private investors to directly file claims against governments that regulate them, as opposed to a WTO-like system where nation states (ie the regulators) decide whether claims are brought,” notes Boston University associate professor Kevin Gallagher.

Limits to Growth–At our doorstep, but not recognized

Gail Tverberg's avatarOur Finite World

How long can economic growth continue in a finite world? This is the question the 1972 book The Limits to Growth by Donella Meadows and others sought to answer. The computer models that the team of researchers produced strongly suggested that the world economy would collapse sometime in the first half of the 21st century.

I have been researching what the real situation is with respect to resource limits since 2005. The conclusion I am reaching is that the team of 1972 researchers were indeed correct. In fact, the promised collapse is practically right around the corner, beginning in the next year or two. In fact, many aspects of the collapse appear already to be taking place, such as the 2008-2009 Great Recession and the collapse of the economies of smaller countries such as Greece and Spain. How could collapse be so close, with virtually no warning to the population?

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Banker Suicides: The JPMorgan-CIA-NYPD connection Exposing what lies beneath the bodies of dead bankers and what lies ahead for us

Source: Reprinted From Canada Free Press

I feel that this is one of the most important investigations I’ve ever done. If my findings are correct, each of us might soon experience a severe, if not crippling blow to our personal finances, the confiscation of any wealth some of us have been able to accumulate over our lifetimes, and the end of the financial world as we once knew it. The evidence to support my findings exists in the trail of dead bodies of financial executives across the globe and a missing Wall Street Journal Reporter who was working at the Dow Jones news room at the time of his disappearance.

If the bodies were dots on a piece of paper, connecting them results in a sinister picture being drawn that involves global criminal activity in the financial world the likes of which is almost without precedent. It should serve as a warning that we are at the precipice of something so big, it will shake the financial world as we know it to its core. It seems to illustrate the complicity of big banks and governments, the intelligence community, and the media.

Although the trail of mysterious and bizarre deaths detailed below begin in late January, 2014, there are others. Not only that, there will be more, according to sources within the financial world. Based on my findings, these are not mere random, tragic cases of suicide, but of the methodical silencing of individuals who had the ability to expose financial fraud at the highest levels, and the complicity of certain governmental agencies and individuals who are engaged in the greatest theft of wealth the world has ever seen.

It is often said that life imitates art. In the case of the dead financial executives, perhaps death imitates theater, or more specifically, the movie The International, which was coincidentally released in U.S. theaters exactly five years ago today.

We are told by the media that the untimely deaths of these young men and men in their prime are either suicides or tragic accidents. We are told what to believe by the captured and controlled media, regardless of how unusual or unlikely the circumstances, or how implausible the explanation. Such are the hallmarks of high level criminality and the involvement of a certain U.S. intelligence agency intent on keeping the lid on money laundering on a global scale.

Obviously, it is important that this topic is approached with the utmost respect for the families of those who died, that they be allowed to grieve for the loss of their loved ones in private. However, it is extremely important that the truth about what is happening in the global financial arena is not kept from us, as we will also be victims of a different nature.

The missing and the dead: a timeline

The following is provided as a chronological list of those who have gone missing or been found dead under mysterious circumstances. It is important to note that this list consists of names of the most recent incidents. There are more that extend back through 2012 and beyond.

January 11, 2014:

MISSING: David Bird, 55, long-time reporter for the Wall Street Journal working at the Dow Jones news room, went for a walk on Saturday, January 11, 2014, near his New Jersey home and disappeared without a trace. Mr. Bird was a reporter of the oil and commodity markets which happened to be under investigation by the U.S. Senate Permanent Subcommittee on Investigations for price manipulation.

January 26, 2014:

DECEASED: Tim Dickenson, a U.K.-based communications director at Swiss Re AG, was reportedly found dead under undisclosed circumstances.

DECEASED: William Broeksmit, 58, former senior manager for Deutsche Bank, was found hanging in his home from an apparent suicide. It is important to note that Deutsche Bank is under investigation for reportedly hiding $12 billion in losses during the financial crisis and for potentially rigging the foreign exchange markets. The allegations are similar to the claims the institution settled in 2013 over involvement in rigging the Libor interest rates.

January 27, 2014:

DECEASED: Karl Slym, 51, Managing director of Tata Motors was found dead on the fourth floor of the Shangri-La hotel in Bangkok. Police said he “could” have committed suicide. He was staying on the 22nd floor with his wife, and was attending a board meeting in the Thai capital.

January 28, 2014:

DECEASED: Gabriel Magee, 39, a JP Morgan employee, died after reportedly “falling” from the roof of its European headquarters in London in the Canary Wharf area. Magee was vice president at JPMorgan Chase & Co’s (JPM) London headquarters.

Gabriel Magee, a Vice President at JPMorgan in London, plunged to his death from the roof of the 33-story European headquarters of JPMorgan in Canary Wharf. Magee was involved in “Technical architecture oversight for planning, development, and operation of systems for fixed income securities and interest rate derivatives” based on his online Linkedin profile.

It’s important to note that JPMorgan, like Deutsche Bank, is under investigation for its potential involvement in rigging foreign exchange rates. JPMorgan is also reportedly under investigation by the same U.S. Senate Permanent Subcommittee on Investigations for its alleged involvement in rigging the physical commodities markets in the U.S. and London.

Regarding the initial reports of his death, journalist Pam Martens of Wall Street on Parade astutely exposed the controlled, scripted details of the media accounts surrounding Magee’s death in an article written on February 9, 2014. Ms. Martens writes:

“According to numerous sources close to the investigation of Gabriel Magee’s death, almost nothing thus far reported about his death has been accurate. This appears to stem from an initial poorly worded press release issued by the Metropolitan Police in London which may have been a result of bad communications between it and JPMorgan or something more deliberate on someone’s part.” [Emphasis added].

Ms. Martens also notes:

No solid evidence exists currently to suggest that the death was a suicide. In fact, there is a strong piece of evidence pointing in the opposite direction. Magee had emailed his girlfriend, Veronica, on the evening of January 27 to say that he was about to leave the office and would see her shortly. [Emphasis added].

Based on information she developed, it appears likely that Magee did not meet his fate on the morning his body was discovered, but hours earlier. Considering the possibility that Magee might now have died in the manner publicized, Ms. Martens offers speculation, and notes it as such:

If Magee became aware that incriminating emails, instant messages, or video teleconferences were not turned over in their entirety to Senate investigators or Justice Department prosecutors, that might be reason enough for his untimely death.

Looking at the death of Magee in the context of a larger conspiracy, it is difficult not to suspect foul play and media manipulation.

January 29, 2014:

DECEASED: Mike Dueker, 50, who had worked for Russell Investment for five years, was found dead close to the Tacoma Narrows Bridge in Washington State. Dueker was reported missing on January 29, 2014. Police stated that he “could have” jumped over a fence and fallen 15 meters to his death, and are treating the case as a suicide.

Before joining Russell Investments, Dueker was an assistant vice president and research economist at the Federal Reserve Bank of St. Louis from 1991 to 2008. There he served as an associate editor of the Journal of Business and Economic Statistics and was editor of Monetary Trends, a monthly publication of the St. Louis Federal Reserve.

In November 2013, the New York Times reported that Russell Investments was one of several investment companies that were under subpoena from New York State regulators investigating potential “pay-to-play” schemes involving New York pension funds.

February 3, 2014:

DECEASED: Ryan Henry Crane, 37, was the Executive Director in JPMorgan’s Global Equities Group. Of particular relevance is that Crane oversaw all of the trade platforms and had close working ties with the now deceased Gabriel Magee of JPMorgan’s London desk. The ties between Mr. Crane and Mr. Magee are undeniable and outright troublesome. The cause of death has not yet been determined, pending the results of a toxicology report.

February 6, 2014:

DECEASED: Richard Talley, 57, was the founder and CEO of American Title, a company he founded in 2001. Talley and his company were under investigation by state insurance regulators at the time of his death. He was found in the garage of his Colorado home by a family member who called authorities. Talley reportedly died from seven or eight “self-inflicted” wounds from a nail gun fired into his torso and head.

The enormity of the lie

One must look back far enough to understand the enormity of the lie and the criminality of bankers and governments alike. We must understand the legal restraints that were severed during the Clinton years and the congress that changed the rules regarding financial institutions. We must understand that the criminal acts were bold and bipartisan, and were designed to consolidate wealth through the destruction of the middle class. All of this is part of a much larger plan to establish a one world economy by “killing” the U.S. dollar and consequently, eradicating the middle class by a cabal of globalists that existed and continue to exist within all sectors of our government. The results will be crippling to not just the United States, but the entire Western world.

What began decades ago is now becoming more transparent under the Obama regime. Perhaps that’s the transparency Obama promised, for we’ve seen little else in terms of transparency with regard to the man known as Barack Hussein Obama. For those not locked into the captured corporate media, we’re starting to see the truth emerging. The truth is that we’ve been living under a giant Ponzi scheme and we, the American citizens, are the suckers. As illustrated by the list of dead bankers above, however, the power elite need a bit more time before the extent of their criminality is revealed. They need a bit more time to transfer the remaining wealth from middle-class America to their private coffers. Timing is everything, and a magic act only works when all props are in place before the illusion is performed. Only when their timing is right will the slumbering Americans realize the extent of the illusion by which they’ve been entranced, at which time they will be forced into submission to accept a financial reset that will ultimately subjugate them to a global economy. I contend that this is the reason for the recent spate of deaths, for those who met their tragic and untimely end had the ability to expose this nefarious agenda by what they knew or discovered, or what they would reveal under subpoena and the damage they could cause to the globalist financial agenda.

It is an insult to the public intellect that the media so readily pushes the official line that the deaths were all suicides given the unusual circumstances surrounding nearly all of those listed. This itself should be ringing alarm bells with anyone of reasonable sensibilities, or at last those who are paying the slightest bit of attention to the larger picture. The media is either complicit or completely inept. While incompetence is evident in many areas, even the most inept journalist or media company cannot possible deny what exists directly in front of them. They can only withhold the truth.

Connecting the dots

To understand what is taking place, I contacted a financial source who has accurately predicted many events that we are now seeing taking place, including the deaths of certain financial people for an explanation. In fact, he actually predicted that we would see a “clean-up” of individuals who posed a serious threat to certain too-big-to-fail-or-jail banks and “banksters” a full week before the events began to unfold. Truth be told, I initially greeted his prediction with some skepticism, for such things don’t really happen in the real world, or so the obedient and well-managed media tells me.

V, The Guerrilla Economist” as he is known in the alternative media, has provided numerous insider alerts for Steve Quayle‘s website and has appeared as a regular guest on The Hagmann & Hagmann Report. He has an undeniable track record for accuracy, which has earned my respect. However, I thought that he had taken temporary leave of his senses when he twice suggested that there will be some house cleaning done of anyone posing a threat to the agenda of certain banks and the globalist agenda on our broadcasts of November 20, 2013, and again on January 10, 2014. In a separate venue, he described what was about to take place by using the analogy of the movie The International. Several dead bodies and a missing journalist later, that analogy has been proven accurate.

The fact is that we are seeing a clean-up where JPMorgan and Deutsche Bank seems to appear at the epicenter of it all. In January, JPMorgan admitted facilitating the Bernie Madoff Ponzi scheme by turning its head to his activities. Despite this admission, the U.S. Department of Justice under Eric Holder declined to send anyone to jail under a deferred prosecution agreement. Yet this is only the proverbial tip of the iceberg.

In March, 2013 the U.S. Senate Permanent Subcommittee on Investigations released a heavily redacted 307-page report detailing the financial irregularities surrounding the actions of JPMorgan and the deliberate withholding of critical financial information by JPMorgan. Prominent in the mix are the actions of Bruno Iksil, who earned the nickname the “London Whale,” for his “casino bets” of other’s money that caused billions of dollars in losses. Yet, no cooperation was provided by Dimon’s foot soldiers as they failed to testify or otherwise cooperate with Senate investigators.

Remember the damage control and the deliberate downplaying by Jamie Dimon, who maintained that there was nothing to see here with regard to the “London Whale” criminal activities? What was originally described as a loss of perhaps $2 billion ultimately turned into many more times that, yet the actual numbers are still hidden from the public. Such events occurred under the noses of numerous financial executives who had knowledge that went undisclosed.

As we fast forward to today and the current spate of mysterious deaths, we begin to see that many of those who died existed on the periphery of events in the criminal actions of the financial industry. Moreover, it is reasonable to conclude that they possessed knowledge that if disclosed, could have interrupted the magic act taking place for the awestruck audience, captivated by the carefully crafted words of Yellen, her predecessors and the operatives within government who’s duty it is to regulate whatever is left of our current financial system.

That regulation is now a thing of the past. What we have today is a system of facilitation and co-operation between the largest corporations and financial institutions and the U.S. and our intelligence agencies. We now have the “too-big-to-fails” operating with impunity as a result of an incestuous, if not outright unconstitutional relationship where the banks are acting as operational assets for the CIA, the NYPD, and other intelligence and police agencies.

The JPMorgan-CIA-NYPD connection

Perhaps one of the best kept secrets, at least from the majority of the American public, is the integration and overlap between the “too-big-to-fail-and-jail” banks and the most advanced system of surveillance in the U.S. Would it surprise you to learn that the very banks that brought the United States to the brink of financial collapse in 2008, who looted the American public and continue to engage in what most perceive as criminal behavior in the financial venue not only have ties to the CIA, but are actually partnered with the CIA and NYPD surveillance of all of lower Manhattan? That’s right, the big banks such as JPMorgan, Citigroup and others have their own desks and surveillance monitors at a facility known as the Lower Manhattan Security Coordination Center, located at 55 Broadway, deep in the center of New York’s financial district.

The big banks—the very banks that have been the focus of fraud and corruption investigations have their own system of cameras, more than 2,000 in number, and operate them in tandem with NYPD surveillance cameras at a center that was funded with taxpayer money. Every square inch of lower Manhattan is under surveillance 24/7, not just by NYPD, but by JP Morgan and other members of the so-called “one percent.” Carefully consider the implications of this pact.

JPMorgan Chase and others have had long and quite intimate ties with the CIA. Today, however, the line between the banks that control our financial present and future and police and intelligence agencies no longer exist. This relationship of mutual benefit permits the CIA to use the financial institutions to “handle the money” for their various global initiatives, while it provides the banks a stable of “professional assistants” to handle their “security,” whether such security issues arise in the U.S., London, or elsewhere. Highly trained and skilled CIA operatives now work within the system of interlocked financial institutions that have been at the epicenter of the most egregious crimes involving the theft from our bank accounts and retirement savings.

Please stop and consider this for a moment. The very banks and their top executives who have not only brought the U.S. to the brink of financial collapse and Martial Law, engaged or facilitated in various criminal actions that resulted in fines (but no jail time) for the perpetrators, are working hand-in-hand with the CIA. Not only that, they are working in tandem with the NYPD at their surveillance centers, watching and videotaping every move made by anyone—including potential whistleblowers within their vast purview. By the way, this is no ordinary surveillance or surveillance cameras. You won’t find these cameras on the shelves of your local spy shop. These cameras can focus on the footnotes of a book you might be reading, or the words written on a piece of paper being held by an unwitting person. They employ facial recognition and other advanced visual and data aggregation capabilities, and the extent of their technological abilities is increasing every day.

Additionally, the data is collected and maintained, and files are created of people and groups who are merely going about their daily lives. Equally important, files are created and maintained of problem children and groups, like the Occupy movement and others who lawfully exercise their constitutional rights to protest the actions of the one-percent. Consider this in the context of the Occupy Wall Street protests. where the protesters were not only under police surveillance, but surveillance by the banks and their corporate officers against whom they were protesting. And it was all done with the approval and assistance of the police, in this case the NYPD, and U.S. intelligence agencies.

Now consider the plight of a whistleblower who wants to expose criminality within the ranks of a too-big-to-fail. The institution who is engaged in purported criminality based on the findings of the whistleblower can observe the whistleblower’s every move. Where they go, who they meet and what they are carrying to such a meeting. They can be tracked to a residence, a business, or even to their psychiatrist’s office, place of ill repute, or the residence of some significant other outside of their marriage, all of which would be invaluable for blackmail.

Perhaps the potential whistleblower is clean and free from anything that might dissuade them from revealing what they know, their case could be turned over to the in-house security of former CIA agents for proper disposition. It makes the movie The Firm look like child’s play by comparison.

This is not some fanciful delusion. There is proof of this that exists. The New York Civil Liberties Union (NYCLU) has documented the increasingly extensive surveillance being conducted in lower Manhattan and throughout the city. They have verified that not only are our constitutional rights being violated every minute of every day, but the fruits of surveillance by police and corporate entities are shared between the police, the intelligence agencies and private financial institutions, without restraint on the distribution on such findings.

Are you engaged in a protesting against the criminality of the one-percent? Well, they one-percent are watching you, and they are literally seated right next to the police. Are you a journalist following up on possible “bankster” corruption by meeting a potential whistleblower? You better understand that the bankster target of your investigation is watching you, in real-time, with the complete approval and cooperation of the police. As documented by the NYCLU, you are likely now “on file,” and all data compiled is maintained and accessible not just to law enforcement, but to the very target of your investigation—in real time.

Such surveillance and integration between big banks, law enforcement and spy agencies is not just limited to lower Manhattan or even the United States. It is also most prevalent in London and other cities where international banking is conducted.

Real-time surveillance and the close working relationship between the “one-percenters,” police and the intelligence agencies gives the targets of criminal probes the ability to be pro-active when necessary. It’s all being done under the pretext of national security when it would appear that the real objective is to insulate the banksters from potential problems that exposure of their criminal actions might cause.

Oh, and don’t forget that it is us who are paying for this.

Perhaps we would be well advised to not only consider the capabilities of the surveillance apparatus that exists where the big banks and police are working at adjacent surveillance terminals at 55 Broadway and other locations, but the incestuous working relationship between the banks and the CIA when we read about banker suicides.

Do not expect to see any exclusive report on this in the corporate media, for they, as requested have dutifully maintained their code of silence by not showing pictures of the brass name plates that identify the bankster terminals situated adjacent to the police terminals during photo shoots of this super-secret surveillance complex a few years ago. As detailed by the tenacious and indefatigable Pam Martens, journalist for Wall Street on Parade in this article, the captured media took a pass on revealing the whole truth about what’s really going on at 55 Broadway.

What has been revealed here is merely the tip of the iceberg. The tentacles of the corporate elite, facilitated and empowered by the CIA, the NYPD top brass, and other agencies have now covertly and effectively succeeded in invading everything you do. The fruits of this operation are being used to advance their global financial agenda and silence the opposition.

Knowing this, is it possible that the dead bodies that are increasing in number are the results of this joint surveillance operation? You will not find any answers in the mainstream media. The big banks have chosen to remain silent, even in the face of subpoenas, and have yet to face any legal consequences for their contempt. It’s not, however, merely contempt of congress or pseudo-investigative bodies. It’s their contempt of humanity, of you and me, and the victims that lie dead, leaving their families broken and wanting for the truth.

Greed Is Good

Source: QZ.com

Who says mergers and acquisitions can’t create value?

Despite critics of M&A activity, who complain that mergers are often risky, unproductive and destined to fail, Goldman Sachs argues in a recent research note to clients that the best M&A creates a near-oligopoly, and that should be the bank’s goal.

Goldman analysts argue that oligopolies—you know, the ones that foster price strangleholds by whittling down the competition—are “the good kind” of merger. Here are some snippets from the bank’s research note from earlier this week:

“M&A is often assailed as a risky or value-destroying endeavor—e.g., management teams’ empire building, joining incompatible cultures or overpaying for growthy bolt-ons, to name a few common objections.”

“M&A that drives an industry toward oligopoly is the good kind.”

“An oligopolistic market structure can turn a cut-throat commodity industry into a highly profitable one. Oligopolistic markets are powerful because they simultaneously satisfy multiple critical components of sustainable competitive advantage—a smaller set of relevant peers faces lower competitive intensity, greater stickiness and pricing power with customers due to reduced choice, scale cost benefits including stronger leverage over suppliers, and higher barriers to new entrants all at once.”

Goldman’s M&A analysis is mainly arguing for mergers and acquisitions in mature industries, those in which prices are already relatively stable and scale matters more. Remind you of those choice lines from capitalist icon Gordon Gekko in the 1987 film Wall Street?

“Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit.”

Goldman’s note comes as the global merger machine, which stalled in the aftermath of the global financial crisis, vies to pick up more M&A business this year from cash-flush corporations. No wonder the bank is rationalizing the move; it’s already the global leader in mergers.

Martin’s conclusion:  Despite the negative spin, I can’t imagine a better strategy for GS and their M&A clients.

Southern California Housing Lost It’s Momentum In January

Source: LA Times

Southern California home buyers continue to turn their backs on an expensive market with few houses for sale.

Home prices fell 3.8% in January compared with December, though the median price remained up sharply compared with January of last year, research firm DataQuick reported Wednesday. The price decline, coupled with falling sales, revealed a market that has lost momentum after an explosive price run-up in the first half of 2013.

“Buyers are not overpaying,” said Broker Derek Oie, owner of Century 21 the Oie Group in the Inland Empire. “They know the market has changed.”

January’s median home price, $380,000, is the lowest since May. The year-over-year gain — prices rose 18.4% since January 2013 — is the smallest increase since November 2012.

In the six-county Southland, 14,471 new and resale condos and houses changed hands last month, a three-year low for a January, signaling that high prices and tight inventory have handcuffed buyers. Sales were 9.9% below January 2013 levels and have now fallen year-over-year for four consecutive months.

“The pause is related to a deterioration in affordability,” said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate. “The urgency to buy has essentially evaporated.”

The price decline from December isn’t unusual; the market typically slows in the winter months. But this year’s decline was slightly sharper than normal, DataQuick said. Investors usually play a larger role in the marketplace this time of year as families pull back. That can drop the median price because investors often seek lower-priced homes.

The median price is the point at which half of homes sell for less and half for more.

Absentee buyers — mostly investors and some second-home purchasers — bought a slightly higher share of homes last month: 27.5%, compared with 27.2% in December.

Prices soared early last year as investors and families rushed to buy homes they viewed as bargains. But the demand pushed prices up quickly, forcing many buyers out of the market.

In last year’s fourth quarter, only 32% of California’s potential home buyers could reasonably afford a median-priced home, the California Assn. of Realtors said Wednesday. That was unchanged from the previous quarter, but down from 48% in the fourth quarter of 2012.

The spring home-buying season should provide clearer insight into the direction of demand and prices.

DataQuick President John Walsh said two big questions hang over the market: Will sellers list more homes to cash in on recent price appreciation? And if inventory does expand, how much pent-up demand is left?

“Unfortunately, we’ll probably have to wait until spring for the answers,” Walsh said in a statement.

Some agents, especially those in wealthier neighborhoods, say they’ve already noticed a shift.

“The moment the clock hit January, it was like a starting gun went off,” South Bay real estate agent David Keller said. “We are all busy.”

Sales in the lower end of the market continued to decline in January, while sales in more affluent neighborhoods rose. The number of homes that sold for $800,000 or more jumped 36.7% compared with a year earlier.

But overall sales fell, as lower-priced neighborhoods remain stymied by low inventory and weak income growth. Even though prices have risen considerably in these areas, many homeowners saw big drops in their home’s value during the housing crash. So listings remain limited because many homeowners still owe more on their mortgages than their homes are worth.

Real estate agent Leo Nordine said he’s seen the disparity across his coverage area of South Los Angeles and the South Bay, with far more demand in upper-class neighborhoods.

“Everywhere else is really weak,” he said.

Congressman Calls CFPB The Gestapo

Source: The National Real Estate Post

“Florida Congressman Dan Webster slams CFPB for gathering sensitive information on 53 million Americans with Gestapo like techniques into a database that every Federal employee has access to.

Over here at the National Real Estate Post we’ve being barking about the fact that the CFPB has no one to answer to.  To us they seem like a rogue agency going wild imposing fines on literally any company they want.  Most companies don’t even try to fight the claims made by the CFPB as it’s simply cheaper to settle.  And when we say cheaper, we mean often times to the tune of tens of thousands of dollars even for small companies.

Florida’s Dan Webster has made it known how he feels about them and it’s not much different than us.  His gripe right now is how much sensitive personal data the CFPB has gathered on 53 million Americans.  What gives the CFPB the right to obtain this data?  How well protected is it?  Well according to a hearing testimony the data on these 53 million Americans is in a database that every Federal employee has access to!  We over here don’t think they have the right to collect this data, along with Mr. Webster.  Problem is, there’s no one to look into the situation and see what’s going on.  Great.”

Click here for Congressman Webster’s video testimony.

More Details Emerge About Three Bankers Who Died In Six Days

Source: HousingWire

((See links to updated reports at end of this article))

HousingWire first reported Feb. 1 that three prominent bankers were found dead in apparent suicides spanning the course of just six days.

Since then, details emerged about the work of the three that suggests at least a passing commonality – that is, the institutions they worked for were all connected to investigations in the United States or the United Kingdom for various types of fraud or misconduct.

Former Federal Reserve economist Mike Dueker, 50, was found dead in an apparent suicide near Tacoma, Washington on Jan. 31. Dueker was chief economist at Russell Investments.

On Jan. 26, William Broeksmit, 58, a former senior manager for Deutsche Bank, was found hanging in his home, also an apparent suicide.

On Jan. 28, Gabriel Magee, 39, vice president at JPMorgan Chase (JPM) London headquarters, apparently jumped to his death from a building in the Canary Wharf area.

New York state Department of Financial Services subpoenaed Russell Investment as well as other major firms in November 2013 as part of an investigation by Superintendent Benjamin Lawsky into how the firm’s handle investment proposals, compensation practices, relationships with money managers and investment tracking practices.

Lawsky is the same regulator who on Thursday put an indefinite hold on a $2.7 billion MSR deal between Ocwen Financial Corp. (OCN) and Wells Fargo (WFC). Lawsky has been described in press reports as “an enforcer with zeal.”

The New York Times wrote on Nov. 5 that “regulators appeared to be trying to learn whether any consultants were being paid by the firms they recommended, including in-kind payments or job offers.”

Broeksmit, a top executive at Deutsche Bank who had retired in 2013, had been found hanged in his home in the South Kensington section of London, according to London newspapers.

Global regulators are currently investigating Deutsche Bank for allegedly rigging foreign exchange markets. It settled similar charges in 2013 over involvement in the manipulation of the Libor interest rate benchmark.

Two days after Broeksmit’s death, former Deutsche Bank risk analyst Eric Ben-Artzi spoke at Auburn University in Alabama, alleging that Deutsche hid $10 billion in losses during the financial crisis.  Other whistleblowers have come forward with similar allegations.

Magee’s employer, JPMorgan, is under investigation by U.S. legislators for misconduct in physical commodities markets in both the U.S. and U.K. JPMorgan is currently under investigation for the same kind of alleged involvement in manipulating foreign exchange rates as Deutsche Bank.

Magee’s parents have told the London Evening Standard that they don’t believe their son would commit suicide, and they have raised troubling questions about how their son was able to access the roof from which he is said to have jumped to his death.

Meanwhile, among those following developments in these deaths, there is chatter about the disappearance of another Wall Street regular, veteran Wall Street Journal oil commodities markets reporter David Bird.

The markets Bird covers are currently under investigation by the U.S. Senate Permanent Subcommittee on Investigations for physical commodities manipulation. His family tells the New York Daily News that they are concerned his disappearance may be connected to his investigative coverage of OPEC.

Bird has been missing since Jan. 11. Bird told family he was going for a hike and left his New Jersey home without critical daily medication he takes. Five days after he disappeared, a credit card in his name was used in Mexico.

2/16/14 Click here for the first in depth follow up article on this evolving story titled:
Banker Suicides: The JPMorgan-CIA-NYPD connection exposing what lies beneath the bodies of dead bankers and what lies ahead for us

2/17/14 Click here for a video report published by RT
2/18/14 Click here for JP Morgan investment banker suicide in Hong Kong
2/19/14 Click here for “Does The Trail Of Dead Bankers Lead Some Where”
2/20/14 click here for “As Deaths Continue To Shock, Documents Reveal….”
2/20/14 click here for “A Third Death at JPMorgan and Another Press Lockout on Information”

 

When To Hire An Assistant

Source: realtor.org

Your business is on the way up, and everything is perfect because you’re making more money, right? Wrong! As the Notorious B.I.G. once said, “Mo money, mo problems.” One of the biggest as a real estate professional is how to spend your money wisely to continue to grow your business.

Today’s blog will focus on when it’s the right time to bring in an assistant or other support staff. Here are 3 signs you’re ready:

1. Promptness is becoming difficult.

If everyone got what they wanted right when they wanted it, you’d be out of business. I get that, so I’m not expecting miracles. However, if you’ve built a reputation on being fast to respond, easy to reach, and quick to get people information, then you risk doing major damage to that reputation if you can no longer live up to those expectations.

If you are finding that you’re no longer able to get people a comparable market analysis the same day you meet with them to preview their home, then it might be a good time to think about what portion of your daily tasks could actually be handled by an administrative person. If there are too many A-level tasks to finish by their due dates because you’re constantly bugged down by B- and C-level tasks (which never seem to end), then it’s definitely the time to consider staffing up.

2. Things consistently slip through the cracks.

We’ve all forgotten to write something down, or missed an appointment or a call – that’s understandable. However, if you’re finding that you’re so busy that you’re getting distracted while trying to stay on task, then finding some help is definitely worth looking into.

I knew it was time to hire my first assistant when I sat in my office staring blankly at a dry-erase board, completely unable to remember all of the prospects I had in my pipeline. I was so busy that I had no time to right anything down – and I’m awful with details to begin with – and I knew that someone I forgot would turn into a paycheck for another agent who had it together.

3. You’re on the opposite schedule of everyone else.

If you are not utilizing staff when you should be, you’re essentially working two jobs but only being paid for one. This is going to have a negative impact on your life in a variety of ways.

For starters, many of the things put off doing during the day because you’re out in the field taking listings, showing properties, and networking to get new business, are time sensitive. Attorneys and lenders don’t usually work beyond 5 p.m. or on weekends. If you’re never around to take phone calls or respond to emails during regular 9-5 business hours, and don’t have someone doing that for you, by the time you get home at 8 p.m. and start responding, you’re forced to wait until the next day for a response.

Being available and reachable during standard business hours and having flextime in the evenings for a variety of professional activities is crucial to building a successful business. If you constantly find yourself burning the candle at both ends, consider adding someone to your company.

Remember, as I always say, don’t look at yourself as just a real estate agent, but instead as CEO of YOUR NAME, INC.  You need to make smart decisions, not only with the real estate related matters, but also with the general business matters you need to address to continue to grow your business – staff is one of the most crucial!

Innovations Emerge In Lending, Buying & Investing In Real Estate

Source: LA Times

Despite the recent spate of far-reaching federal regulations hammering the mortgage business, innovation is far from dead.

For example, one of the nation’s largest credit unions now allows borrowers to reset their rate at no cost up to five times over the life of the loan. A Beverly Hills company has created a way for small investors to put their money in commercial real estate deals that are usually reserved for wealthy individuals. There’s also a new online search tool that allows homebuyers to identify and compare houses for sale based on drive times to work and other places, night and day.

Let’s start with a rate protection feature offered by the Pentagon Federal Credit Union, a 1.2-million-member institution headquartered in Alexandria, Va. It is available on the credit union’s 5/5 adjustable rate mortgage, which adjusts to the then-market rate every five years over the 30-year term. Beginning with the loan’s second year, borrowers can choose to change their rate to PenFed’s current rate plus 0.25% at any time. So, say in the third year, you don’t like which way rates are heading and you want to nip an increase in the bud. Or you’d like to take advantage of lower rates. You can simply “click” to reset the loan on PenFed’s website. You can exercise the reset option any time after the first year, up to five times. But once you do, you have to wait 12 months to do so again. The feature gives borrowers five shots at the brass ring, says PenFed executive James Schenck. It “puts borrowers in control of their mortgage,” he says, and is a cheaper, less cumbersome way for them to refinance and take advantage of current rates.

There is a new investment vehicle from Realty Mogul, which calls it “crowdfunding for real estate.” The Southern California company creates an online marketplace for accredited investors to pool their money and buy shares of office and apartment buildings and retail centers, and gives developers access to a broader pool of capital. The concept is another form of syndication, but it is done solely online, and “you don’t need to be a Rockefeller” to participate, says Realty Mogul co-founder and Chief Executive Jilliene Helman. Typically, deals the size of those put together by the company — the latest is a group of five multifamily buildings in Los Angeles — are the province of people who can invest $100,000 or more. But with Realty Mogul, investors with as little as $10,000 can participate. The investments are fully vetted, and Realty Mogul over-raises to cover future repairs or improvements. Consequently, Helman says, there are no calls for investors to put up more money later. Another key feature: monthly or quarterly distributions to investors. “We focus on cash flow,” Helman says. “We are looking to be a source of income for our investors.”

Finally, there is a new drive-time search tool, which has already been scooped up by the Re/Max real estate network that gives buyers an easy, visual way to find houses within a specific drive-time from work, schools or other important locations. Drive times can be calculated at rush hour and at other times of the day or night. “Drive time is a quality-of-life issue to buyers. For many, it’s as important as the neighborhood and good schools,” said Re/Max Technology Strategy Officer John Smiley. “We’re taking the guesswork out of one of consumers’ most important purchase criteria: their commute.” The agency plans to bring the app to its customers in all 50 states, beginning with New Jersey sometime in this year’s first quarter. To determine drive times using the new feature, which was developed by Inrix, buyers will enter the addresses of the locations most important to them as part of their search criteria on the Re/Max website. The tool then automatically shows neighborhoods and properties that meet their desired travel time. “In a world measured in miles, we measure it in minutes,” said Inrix General Manager of GeoAnalytics Kevin Foreman in a news release. According to the release, the program gets its traffic information “from a variety of public and private sources ranging from government road sensors, official accident and incident reports to real-time traffic speeds crowd-sourced from a community of approximately 100 million drivers.” Factors such as the day of the week, the season, local holidays, forecasted and actual weather, accidents and construction are also considered. Inrix says its program has been found accurate to within 3 mph of actual traffic speeds under all driving conditions around the clock.

BOE, World’s Oldest Central Bank Said to Have Condoned Currency Trading Manipulation

Source: Bloomberg

The Bank of England stands on Threadneedle Street in London.

Bank of England officials told currency traders it wasn’t improper to share impending customer orders with counterparts at other firms, a practice at the heart of a widening probe into alleged market manipulation, according to a person who has seen notes turned over to regulators.A senior trader gave his notes from a private April 2012 meeting of currency dealers and two central bank staff members to the Financial Conduct Authority about six weeks ago because of mounting media coverage of the investigation, said the person, who asked not to be named while probes are under way.Traders representing some of the world’s biggest banks told officials at the meeting that they shared information about aggregate orders before currency benchmarks were set, three people with knowledge of the discussion said. The officials said there wasn’t a policy on such communications and that banks should make their own rules, according to the people. The notes could drag the U.K. central bank into another market-rigging scandal two years after it was criticized by lawmakers for failing to act on warnings that Libor was vulnerable to abuse.If traders can show “they made Bank of England officials aware of practices in the FX market some time ago, then the bank will be at risk of being characterized as having endorsed, by its silence and inaction, the very practices which are now under investigation,” said Simon Hart, a lawyer at RPC LLP in London.

‘Brief Discussion’

A spokeswoman for the Bank of England declined to comment about the 2012 meeting beyond what was contained in a summary provided to Bloomberg News last month. Those notes included a reference to “a brief discussion on extra levels of compliance that many bank trading desks were subject to when managing client risks around the main set-piece benchmark fixings.” No further details of the discussion were provided.

“The Bank of England has already released its record” of the meeting, the central bank said in a statement today. “We are continuing to support the FCA in its investigations.”

The central bank had no responsibility for regulating U.K. lenders until April 2013. Chris Hamilton, a spokesman for the FCA, which supervises British markets, declined to comment.

“Allegations that banks may have been rigging the forex market are extremely serious, particularly for firms but also for regulators who had been telling Parliament that banking standards were improving,” Andrew Tyrie, the British lawmaker who led an inquiry into practices in the banking industry following the Libor scandal, said in a statement today.

Suspended Traders

Dealers at the April 2012 meeting with Martin Mallett, the Bank of England’s chief currency dealer, and James O’Connor, who works in its foreign-exchange division, were told not to record the discussion or take notes, one of the people said. One trader wrote down what was said soon after leaving because of concerns spawned by investigations of attempted manipulation of the London interbank offered rate, or Libor, the person said.

Two traders at the meeting — Citigroup Inc. (C)’s Rohan Ramchandani and UBS AG (UBSN)’s Niall O’Riordan — are among at least 20 employees of global banks who have been fired, suspended or put on leave since Bloomberg News first reported in June that dealers said they shared information about client orders to manipulate benchmark rates used in the $5 trillion-a-day currency market, the world’s biggest.

No firms or traders have been accused of wrongdoing by government authorities. Mallett and O’Connor didn’t respond to e-mails or return phone calls seeking comment. Ramchandani, who was fired, said he couldn’t comment. O’Riordan, who was suspended, didn’t respond to a message left on his mobile phone.

‘Bandits’ Club’

At the center of the inquiries are instant-message groups such as “The Cartel” and “The Bandits’ Club.” Their members, which included Ramchandani, exchanged information on client orders and agreed how to trade at the fix, the one-minute window when benchmark rates are set, five people with knowledge of the probes said in December.

The U.S. Justice Department, the Federal Reserve, the Swiss Competition Commission and the European Commission are among more than a dozen authorities on three continents investigating currency-trading practices. New York’s top financial regulator, Benjamin Lawsky, has asked more than a dozen banks, including Goldman Sachs Group Inc. (GS) and Deutsche Bank AG (DBK), for documents related to foreign-exchange trading, Bloomberg News reported this week, citing a person familiar with the matter. Spokesmen for those two banks declined to comment.

Sharing Positions

The 2012 meeting was one of three held that year by the chief dealers’ subgroup of the Bank of England’s Foreign Exchange Joint Standing Committee. The group was set up in 2005 to bring central bank officials together with spot traders from the world’s largest banks to discuss market issues.

The April session, held at BNP Paribas SA (BNP)’s London office on Harewood Avenue, was led by Mallett, according to the Bank of England summary. In addition to O’Connor, Ramchandani and O’Riordan, more than half a dozen traders from lenders including Royal Bank of Scotland Group Plc were in attendance, two of the people with knowledge of the meeting said.

During a 15-minute conversation on currency benchmarks, traders said they used chat rooms to match buyers and sellers ahead of the fix to avoid trading at one of the most volatile periods of the day, the people said. That required them to share aggregate positions. They instigated the discussion because they were concerned that similar practices were under scrutiny at the time in the Libor investigations, the people said.

Pooling Information

The Bank of England officials said they viewed the practices as positive to reduce market volatility and wouldn’t take the matter to the standing committee, according to the people with knowledge of the meeting. That body included a representative from the Financial Services Authority, the FCA’s predecessor, according to central bank records.

By pooling information on client orders, current and former traders interviewed by Bloomberg News have said they could gain an impression of probable moves in currency markets, knowledge they said they sometimes used to place their own bets before the benchmark WM/Reuters rates are set at the 4 p.m. London close.

Spokesmen for Paris-based BNP, New York-based Citigroup, Edinburgh-based RBS and Zurich-based UBS declined to comment.

The Bank of England, then under the leadership of Mervyn King, was criticized by lawmakers in July 2012 for failing to act on warnings about Libor, the benchmark interest rate used for $300 trillion of securities. While the U.K. central bank and the Federal Reserve Bank of New York discussed flaws in the rate-setting process for Libor in 2008, the benchmark fell outside their jurisdiction — a conclusion the U.K. Parliament’s Treasury Select Committee agreed with in a 2012 report. Rate-rigging continued at several of the largest banks for years, according to findings by the committee.

“The Libor scandal demonstrated regulators need to be extra vigilant about how key benchmarks are set,” said Pat McFadden, a member of Parliament who sits on the Treasury Select Committee. “The Bank of England has taken over hugely increased responsibilities, but that system will only work if it shows a strong appetite for investigating any suggestion of improper market behavior.”

Banks, Mortgage Companies Defrauded HUD, Veteran Whistleblower Says

Source: Mortgage Servicing News

A whistle blower with a track record of wresting large settlements from banks is suing 22 companies for allegedly filing fraudulent mortgage documents with the Department of Housing and Urban Development.

Lynn E. Szymoniak, famous for her 2011 “60 Minutes” interview on the robo-signing scandal, filed a lawsuit late Monday against the companies, including Deutsche Bank, Wells Fargo, JPMorgan Chase and Bank of America. The Palm Beach, Fla., plaintiff’s lawyer alleges the 22 banks, mortgage servicers, trustees, custodians and default management companies created fraudulent mortgage assignments and submitted tens of thousands of false claims to HUD.

The lawsuit is a stark reminder that banks still face massive litigation and potential settlements for wrongdoing from the mortgage boom and financial crisis. On Wednesday, JPMorgan Chase acknowledged that it violated the False Claims Act and agreed to pay $614 million to settle claims that it improperly approved Federal Housing Administration and Veterans Affairs loans that did not meet underwriting standards.

HUD oversees the FHA, which reimburses servicers for losses and fees when government-guaranteed loans go into foreclosure.

Banks can be held liable for treble damages under the False Claims Act if they are found to have “falsely certified” that mortgages met all FHA requirements. The act also gives whistle blowers the right to file suit on behalf of the government.

“It’s been very difficult to uncover how fraudulent documents were created and spread through the system,” says Reuben Guttman, Szymoniak’s attorney at the firm of Grant & Eisenhofer. “Lynn Szymoniak did the original analysis, looked at documents and put the pieces together in a way that nobody else did.”

The new lawsuit was filed in the U.S. District Court in South Carolina. Several of the defendants, including Deutsche Bank and Wells Fargo, said they are reviewing the lawsuit and could not immediately comment.

In 2012, Szymoniak helped the government recover $95 million from the top five mortgage servicers, as part of the $25 billion national mortgage settlement. She personally received $18 million for providing information on the filing of false claims on FHA loans.

The suit also seeks to recover damages and penalties on behalf of the federal government, 16 states, the District of Columbia and the cities of Chicago and New York for the financial harm incurred in the purchase of private-label mortgage-backed securities that allegedly used fraudulent documents in foreclosure filings since 2008.

As investors in mortgage bonds, the government and others paid fees and expenses for services such as reviewing all mortgage documents put into trusts that were supposed to be performed by trustees. The federal government bought mortgage-backed securities with missing or forged documents through several avenues, including the Federal Reserve’s direct purchases and Maiden Lane vehicles, and the Treasury Department’s purchases through public-private partnership investment funds, the suit states.

The complaint does not specify damages but Szymoniak says she expects them to total around $10 billion.

The fraudulent mortgage documents were created because the original loans documents either were never delivered to the securitization trusts, or they were lost or destroyed, the lawsuit states. Many of the documents were created years after the trusts’ closing dates and showed the trusts acquired the loans only after they were in default.

Servicers “devised and operated a scheme to replace the missing documents,” the lawsuit states, and to conceal the fact that the trusts and servicers never actually held the mortgage notes and assignments, which are needed to initiate a foreclosure.

Szymoniak was also instrumental in uncovering fraud and forged documents at DocX, a now-defunct subsidiary of Lender Processing Services. She worked with the Federal Bureau of Investigations and U.S. Attorney’s office in Jacksonville, Fla., that ultimately led to the conviction of an LPS executive, the closure of DocX, firm, and various settlements by LPS, which is now owned by Black Knight Financial Services.

The Exquisitely Reengineered Frankenstein Housing Monster

It’s back, a new and improved contraption, a synthetic structured security that on its polished surface looks like that triple-A rated mortgage-backed toxic waste that helped blow up the banks and your 401(k) in 2008. But this time, it’s different. It’s even worse.

American Homes 4 Rent, a highly leveraged REIT that went public last August with great hoopla and that owns 21,000 single-family homes it bought helter-skelter out of foreclosure since 2012 and is now desperately trying to rent out – well, that Wall Street darling, according to unnamed sources of the New York Times, is planning to hawk securities backed by $500 million of mortgage debt.

But this time, the mortgages aren’t on homes owned by regular folks who lied on their applications about their income and who refinanced the heck out of ever uptick in price to yank out cash. This time, the securities – if you can call them that – are backed by rental payments from single-family homes that are, hopefully, rented out, and will, hopefully, stay rented out.

The usual suspects are lined up to engineer these elegant products, the same ones that were bailed out last time: JP Morgan, Goldman Sachs, and Wells Fargo. The securities are to be sold during the first quarter to investors that have been driven to near insanity by the Fed’s repression of yield on even the riskiest crap – investors who’ve learned to hold their nose and ignore the risks no matter how large just to get a little extra yield.

Wall Street is licking its chops: the market for this type of synthetic monster is estimated to be $1.5 trillion. They’re hoping that $7 billion of these kinds of securities will be shoved out the door in 2014, and once the routine sets in, about $20 billion per year. Since 2012, when all this craziness started, mega-landlords have bought about 200,000 vacant, single-family homes out of foreclosure for which they’re now trying to find tenants.

If anyone at the Fed needed more proof that the US is in the midst of the largest and craziest credit bubble in history, here it is.

Private-equity mastodon Blackstone Group, whose entity Invitation Homes became the largest landlord in the country by gobbling up tens of thousands of vacant, foreclosed single-family homes since 2012, broke the ice last fall with its $479-million single-family rental securitization. Mutual funds, insurance companies, pension funds, etc. fell all over each other to buy them and stuff them into bond funds and other receptacles for iffy stuff.

Securitization has its benefits – for the mega-landlords. Banks usually require 40% equity for lines of credit on these rental properties. By slicing and dicing the debt and packaging it into securities, landlords can cut their equity down to maybe 25% – or less when no one is looking. In many of these markets where mega-landlords bought every vacant single-family home they could get their hands on, like Phoenix or Las Vegas, prices have jumped 25% or more in just one year. But these price gains can be ephemeral. When home prices drop to where they were a year or two earlier, and occupancy isn’t high enough to service the debt, those finely engineered securities will turn into toxic waste.

But securitization provides landlords with the most valuable drug on Wall Street these days: more leverage – so that they can gobble up more single-family homes.

The next step is to offer this kind of securitization to everyone, practically: speculators, flippers, mom-and-pop investors, private-equity funds, REITs, and other small and large investors. All based on the unreliable income streams, if any, from rentals. Cerberus Capital and Blackstone are already working on it. In the end, these rentals could all be packaged together, sliced into different tranches, sold indirectly to some unsuspecting pension fund participant.

With this business of slicing and dicing back in vogue, investors have a new source of cash and can take on more leverage to gobble up even more single-family homes and drive up prices even further, pushing regular home buyers to the edge.

It has been showing up in a litany of numbers for months, with the volume of transactions heading the wrong way. And purchases by first-time home buyers – the crux of the housing market – dropped to just 27% of all purchases in December, from 28% in November, from 30% in December 2012, and from the 30-year average of 40%. It was the lowest ever recorded in the data series going back to 2008. First-time buyers have been pushed out by higher home prices, higher mortgage rates, and a veritable flood of cash buyers – in Florida, 62.5% of all buyers – many of whom are investors.

With the nearly free money that the Fed is still handing out, Wall Street is taking over the American Dream, driving up prices, shoving first-time buyers to the side, but then graciously allowing them to become tenants in their empires. To grab even more homes and drive up prices even further, they now have an exquisitely reengineered tool, single-family rental secularization, whose detritus – the actual bonds – will end up in people’s retirement funds and conservative-sounding bond funds. All along the way, fees are extracted, and risks are transferred, and down the line, when it all blows up again, it will complete the cycle of wealth transfer. Hallelujah, 5 years of unmitigated QE.

The Fed must have seen the relentlessly spiking margin debt. Leverage is a sign of investor confidence. The great accelerator. On the way up. And on the way down. And margin debt has a nasty, very consistent habit of peaking just when the stock market begins to crash. Read…. Stocks on Speed: Margin Debt Spikes, So Does Risk Of Crash.

 

Source: Testosterone Pit Friday, January 31, 2014 at 1:50AM

Bank-Run Fears Continue: HSBC Restricts Large Cash Withdrawals

HSBC is imposing restrictions on large cash withdrawals raising a number of red flags. The BBC reports that some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it. HSBC admitted it has not informed customers of the change in policy, which was implemented in November for their own good: ”As one customer responded: “you shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.”

Click here for a summary report posted in Zero Hedge

Yet Another Reason to Worry About Obamacare: Property Seizures?

Obamacare requires everyone to have health insurance. In more than half of the states in the country, that comes through an expansion of Medicaid, the joint federal-state program for the poor. Under a 1993 federal law, states can recoup the costs of Medicaid by seizing the property of deceased Medicaid recipients.

With the vast expansion of who can enroll in Medicaid under Obamacare, that could mean significantly more property.  Click here to finish this article posted in The Blaze.

Victims In Alleged House Thefts Could End Up Losers In Court

Donald and Nina Lewis spent $30,000 fixing up their retirement haven, an abandoned house they purchased in 2009 near Edwards Air Force Base.

All seemed normal until a year ago, when a sheriff’s deputy came knocking. He told them the home sale had been fraudulent and showed photos of a female suspect. The couple had never seen the woman, but they’ve spent each day since in fear of losing their house.  Click here for the full article published in LA Times.

Virtual Maps Predict How Earthquakes Will Hit Cities

A team of scientists working out of Stanford University have developed a technique that virtually maps the predicted ground movement and shaking of earthquakes, basically telling us how bad quakes are going to be for the surrounding communities. Their research focused on Los Angeles, where they learned that the next big one to hit the San Andreas Fault is going to be a whole lot worse than we thought.  Click here to watch a video and read more from Motherboard.vice.com

Chinese Oligarchs Quietly Parked Up To $4 Trillion In The Caribbean

The last time the International Consortium of Investigative Journalists made a splash in the financial media was in April of last year when it disclosed a trove of secret documents revealing a massive treasury of offshore wealth parked away from taxation-happy host governments.

Well, the ICIJ is back in the spotlight once again, this time revealing “nearly 22,000 tax haven clients from Hong Kong and mainland China. Among them are some of China’s most powerful men and women — including at least 15 of China’s richest, members of the National People’s Congress and executives from state-owned companies entangled in corruption scandals.”

Click here to read what the ICIJ have discovered.

Did Your CA Property Tax Go Up More Than 2%?

Most homeowners know that Proposition 13 limits annual increases in the base property tax to no more than 2%. However, sometimes those who buy at the height of a market cycle – as we saw in 2006 – will later see a reduction in the property value. This entitles them to a temporary tax reduction under Proposition 8. Now that property values are increasing, many homeowners who received the temporary reduction are seeing their taxes increase by more than 2% Click here for a video from CBS 13 in Sacramento who explains in more detail why this happens.

San Francisco Home Sales Plunge To 6-Year Lows

Among the epicenters of the echo-bubble in the US housing ‘recovery’ is the San Francisco (and Bay Area) region. Between the weather, the frenzied IPOs of non-profitable tech firms, and free-money-funded hedge fund speculation, prices have surged – as DataQuick reports up 23.9% YoY in December! However, it seems perhaps the laws of economics may just have some relevance; as this price spike has had the following impact:

  • *SAN FRANCISCO AREA HOME SALES FELL 12.7% IN DEC VS YR AGO
  • *DATAQUICK: SAN FRANCISCO AREA DEC HOME SALES DROP TO 6-YR LOW

Re-posted from Zero Hedge

Group Investment Insights

Commercial real estate professionals are pooling their real estate knowledge and skills with investors’ financial resources to act on the current market’s buying opportunities. Often referred to as “sponsors” rather than syndicators, they hope to create attractive group investment packages.  Click here to read the CCIM survey.  Click here for an update on recent changes and clarifications to securities laws summarized by CCIM.

Commercial real estate professionals are pooling their real estate knowledge and skills with investors’ financial resources to act on the current market’s buying opportunities. Often referred to as “sponsors” rather than syndicators, they hope to create attractive group investment packages. – See more at: http://www.ccim.com/cire-magazine/articles/group-investment-insights#sthash.5Dx9WVjU.dpuf

Operation Choke Point

The operation is headed by political operatives and career bureaucrats at the Department of Justice, the FDIC, and the new Consumer Financial Protection Bureau (“CFPB”). It appears to be the latest example of the Obama administration’s successful efforts to weaponize the apparatus of the federal government against people and industries it opposes ideologically.  Click here to read the article in Breitbart News.