Beware the False Idol

‘The housing market is improving…the housing market is improving’

Sadly, this is the banshee wail of the undereducated. Sadly, we have heard this non-fact based mantra going back to early 2009. Though accurately, on a broad-based view of the housing market, it remains mostly false. (this is not to say that there are some, but few pockets and areas of localized markets that are active with legitimate owner-occupied buying)

In what appears to be signs of improvement are in reality, just propped up indexes and figures. The Fed has financed nearly 3 trillion in bad loans and they continue to absorb the cost of defaults in nearly all of the FHA approved mortgages made today. (Read: Tax Payer money) Also, residential delinquencies are on the rise again, up 10.2% in Q4.

Approximately 80% of current delinquent residential loans were originated before 2008. In fact,
pre 2008 loans account for about 53% of all mortgage loans.

Then, there is the GSE’s one of the greatest scams are federal government had enacted- (guaranteeing private loans with public money) continues to dig a deeper and massive hole of debt- read: tax payer money to the tune of 190 Billion and counting.

A bit of historical data reveals that starts of multifamily housing stands at 15% below mean trends. Construction of single family residences is approximately 45%  below the long-term trend and demand for new homes is at 46% below the norm.

Additionally, there are approximately 14 million mortgages underwater. Mortgage net-equity has decreased in 4 1/2 years by a staggering 3.7 Trillion dollars.

There is a  massive amount of non-performing inventory sitting on the balance sheets of banks (in which the government and the Fed have ‘requested’ the banks not to release…) AKA, Mortgage-Stuffing, which has been ramping up in the past two years. There may be upwards of 5 to 7 million distressed assets not being disclosed by the banks. (part of the fraud-closure debacle)

Not too mention, the one trillion dollars of student debt, 16.7 trillion in national debt, 22% total under/unemployment, while the mean duration of unemployment is at 35.3 Weeks. (down slightly from a peak of 40.2, but up from last years average of 33 weeks)

The U.S. now has 48 million households on SNAP (UP by 17 million since 2008) all while housing subsidies have increased by a whopping 48%. Then there are salary and wages- (when adjusted for Real Inflation, are actually negative compared to the core rate) PCE, is flat and personal income is down -3.4%, the most in 20 years.

BUT! The big but…somehow, the average tax paying American has suddenly come up with new found disposal income to buy houses across the nation…amazing! Sadly, it is simply untrue. While there has been some activity in buying, it is mostly in the form of the governments ‘Central-Planning’ Reo-to-Rent programs, a flood of foreign buyers and phantom new start contracts.

And those “SA” Seasonally Adjusted prices you see? Fabricated. When all is said and done and you parse out the ‘noise’ prices are not truly appreciating and in fact in many states are declining once again.

“But the nar said so” Sadly, the nar (one of the largest lobbying groups in Washington) are nothing more than enablers of burden and debt to the tax payers. The nar are simply a fraud.

Question:
What is the primary job of a real estate person? If you think, buy and sell houses, sadly, you would be mistaken. The main function of any real estate firm and agent, is to act as a buffer between a buyer/seller and factual, relevant information. The industry itself is nothing more than a marketing-ministry of propaganda.

The agent acts completely in his or her own self-interest, despite the rhetoric they continually churn out. Upton Sinclair had a great quote- which explains the conflict that a real estate person inherently creates.  “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

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Housing Snapshot

By DataAnalytics

Admits the arm-waving and ramped up rhetoric being shouted by the msm/real estate/banking and finance industry, we would like to remind the stuffed-suits that housing is not improving, not recovering and will remain depressed for a long time to come.

Out of approximately 45 Million residential mortgage holders in the U.S. there are roughly 18 Million outstanding mortgages that are in negative equity territory. Previously, it was thought and published that there were 12 Million underwater mortgages, but as it happens, the two main firms who collect that data were incorrect. Turns out, that nearly 40% of all outstanding residential mortgages are actually  ‘underwater’

Counting all housing inventory; existing, new and both disclosed and undisclosed shadow assets (to the best of independent analysis), there is approximately 7.5-/+ Million homes available. That equates to a total absorption rate of approximately 24 months and that figure could be as high as
60 months

Housing is still unaffordable, despite the fact that overall, prices have fallen about 35%. In order for median prices to be on par with median incomes in the U.S. the median house price needs to be at approximately $144,000. Currently, the median price is about $164,000, which is +12% or +$20,000
too high. Forget affordability, forget the ‘talking-points’ that the real estate and banking industry perpetrate, they are grossly incorrect and deceptive.

The FACT is, that there is little to no borrowing and purchasing power.
One of the main causes is due to the extremely high unemployment rate of approximately 12% (U3). While the total underemployment/unemployment (U6) is about 23%. Wages are flat, credit risk remains elevated and household debt is increasing. The debt-to-income ratios for the majority of would-be buyers is above 35%- which places many potential mortgage borrowers at a high risk of defaulting.

The facts are indisputable, even though the real estate and banking muppets claim otherwise. Of course, all of their arm-chair analysis is predicated upon a paper foundation that crumbles under the weight of truth. Truth will always trump lies and deception, eventually the truth gets out. The truth triumphs.

The main take-aways here to remember: Diminished Borrowing/Purchasing Power AND Years worth of Inventory. An equation that nets very little market absorption. Plus, a myriad of ancillary factors; Including, but not limited to massive unemployment, elevated levels of household debt and
an eroding economy.

Foreclosures, Delinquencies and the Illusion of a Housing Recovery

DataAnalytics

While mortgage delinquency rates are showing signs of easing, residential foreclosures
are once again, on the rise. A  data-point worth noting, is that delinquencies did inch upward
from 7.2% in January to 7.3% in February. That key metric is certainly something to keep an eye on.

According to LPS and RealtyTrac, approximately 2.7+ million residential properties are
in some form of loan delinquency and as of February, approximately 800+ thousand
homes have been repossessed.  RealtyTrac CEO Brandon Moore said the “numbers point
to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

So while defaults do seem to be declining, 1-4 family forfeitures are now increasing and
according to leading broker-dealer Amherst Securities, “some 9.5 million homes are
still at risk of default.” much to the chagrin of the real estate industry.

 

 

  • 2.7 Million mortgage delinquencies (30/60/90-day)
  • 1.41 Million distressed assets (approx. 34% of all inventory)
  • 1.6 Million Shadow assets (possibly 3+m in total)
  • 26% +/- of mortgage holders currently ‘underwater’ (negative equity)
  • 5.4+ Million total housing assets (includes claimed shadow assets)
  • 13 -/+ Month Supply of total Housing Inventory

Overall “printed” housing inventory stands at approximately 4+/- million units in the U.S.
(as the industry and its contingent of boosters do not account for or care to acknowledge the
millions in shadow inventory) with 2.43m existing homes, 1.41m distressed assets, approximately 151k new homes and at least 1.6 million of shadow inventory, that is publicly disclosed.

(estimates for total inventory are as high 7+ million units, due to the very real possibility
that
many banks – at the urging of the FHA and the Fed are not disclosing all of their distressed/shadow inventory)

Another data-point in decline, is sales of foreclosed homes, which has fallen approximately 24.3%
in the first two months of 2012 from December 2011 according to LPS. This drop off is more rough news for the already over-supplied inventory of the U.S. housing market.

So while there is a glimmer of positive data with regards to mortgage loan defaults, the pace of  forfeitures are accruing and sales of all homes, existing, new and distressed has been slowing. Unfortunately, this trend will place even further downward pressure on already overall weakened home prices.

Which in turn, has the affect of creating additional negative equity for a portion of existing mortgage holders who are not yet ‘underwater’ but are barley maintaining current mortgage payments.

Thus, increasing the likelihood of additional loan defaults as well as strategic-defaults.
Negating any exaggerated  and so-called “housing recovery.”

Analysis from all of these key metrics and data points, reveal a sobering picture for the residential real estate market. Housing, may in fact not recover for another 5 to possibly 10 years.