Market Biz News is Bullish on Housing?

BUY BUY BUY Rental Properties

We at Market Biz News advise everyone who can read to buy buy buy  housing.  If you haven’t heard, there’s this whole housing bust that is going on.  Local banks are tightening their belts and allegedly all of the fraudulent lending practices leading up to 2008 are history.  Back are the days when you need 20% down on a 30 year fixed mortgage and a full sweeping credit check.  Be that as it may, for those that do past the muster, this is the time to buy rental property.  While most NINJA loans shook out what little money the poor had on them, it did a world of good for those interested in real live sound investing, i.e. getting property for cheap after the fall out.

One man’s albatross is another man’s morning lark.

The housing bust has presented a rare and golden opportunity, for those that can afford it.  It essentially produced more homeless in America than ever before.  Most Americans however, instead of consolidating their resources and moving back home with parents, still operate under the false pretense that they are owed their own place.  You as an investor can take advantage of this stupidity and buy rental property like hotcakes.  As fast as you can sign your contracts, would be the speed at which you can rent out those properties.

The new marketing psychology of creating a want and need in the populous has not gone away.  For 30 years now the public has been bombarded with the message that they are owed a house and their own private space on credit.  You as an investor can call in that ticket and cash in.  Buy up those rental properties and hornswoggle every doe eyed middle class homeless person you can lay a finger to.

This is the time to buy buy buy.

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Housing Recover False

Are the Housing Numbers True?

One of the key indices that have been looked at as an indication of whether the housing market is turning around is the S&P/Case-Shiller index. But one look at the methodology shows that it is in fact not an all inclusive index of the entire housing market. Why is this a factor? Because so many media outlets are drawing the conclusion that all housing markets are showing improvements based on this index.

Taken directly from the source about the methodology of the index:

The S&P/Case-Shiller indices do not sample sale prices associated with new
construction, condominiums, co-ops/apartments, multi-family dwellings, or other
properties that cannot be identified as single-family.

The factors that determine the demand, supply, and value of housing are not the same across different property types. Consequently, the price dynamics of different property types within the same market often vary, especially during periods of increased market volatility. In addition, the relative sales volumes of different property types fluctuate, so indices that are segmented by property type will more accurately track housing values.

Key among this the notion that the index knows the actual price of the houses it covers and has access to all of the data. The index however does not have access to housing that is removed from the market and not offered for sale by banks. Currently there is over $1 trillion in housing inventory that is being kept from the market, to prop up housing prices. The index readily tells you that it does not count this in its index.

To calculate the indices, data are collected on transactions of all residential properties
during the months in question. The main variable used for index calculation is the price change between two arms-length sales of the same single-family home. Home price data are gathered after that information becomes publicly available at local recording offices across the country. Available data usually consist of the address for a particular property, the sale date, the sale price, the type of property, and in some cases, the name of the seller, the name of the purchaser, and the mortgage amount.

For each home sale transaction, a search is conducted to find information regarding any previous sale for the same home. If an earlier transaction is found, the two transactions are paired and are considered a “repeat sale.” Sales pairs are designed to yield the price change for the same house, while holding the quality and size of each house constant. All available arms-length transactions for single-family homes are candidates for sale pairs. When they can be identified, transactions with prices that do not reflect market value are excluded from sale pairs. This includes: 1) non-arms-length transactions (e.g., property transfers between family members); 2) transactions where the property type designation is changed (e.g., properties originally recorded as single-family homes are subsequently recorded as condominiums); and 3) suspected data errors where the order of magnitude in values appears unrealistic.

What is really bad reporting on the part of the national media is that-

if you adjust the numbers seasonally, there was no increase.

So this is clearly a case of false reporting to begin with.

There is another metric: New Home Sales. They reported it at a 11% increase month over month. But, that is a seasonal number. However, the actual raw data shows you that, that is the second lowest number in the history of the index. It is just another case of bad reporting.

What is not being reported on is that credit is tighter today than it was during the credit boom i.e. housing boom. However, the truth is that the credit situation is completely in line with traditional credit transactions for housing, historically speaking. That is to say, a down payment of 20% is now expected. 20% is the traditional down payment and was so for nearly a century until the down fall of the Dot Com. After the Dot Com bust, interest rates were dropped and down payments were reduced to accept and accommodate a much larger market under the fair housing act. This 20% down payment has the effect of removing quite a few people out of the housing market altogether. It is like the U7 index of unemployment that is not reported on.

The truth of the matter is that the paradigm that your house is used as an investment has come back to reality. No longer can people turn around their house in a year and realize a 10% appreciation. Which is appropriate. The problem was that credit was so readily available that it created a bubble and housing prices were inflated and inflated and inflated. Many experts warned that housing prices were not based on any real factors. Current pricing is returning back to their 80’s highs. Experts warn though that the real value of the housing should be around the 80’s lows. And, that we need to return to the very real understanding that housing is not and never was an investment.

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The Federal Reserve is Against Main street

Unemployment a Lagging Indicator?

Charles Plosser, president of the Philadelphia Federal Reserve, coming from the Fed meeting, told CNBC in an interview that he sees some clear positives about the economy. CNBC, in their endless campaign to report only good financial news and to cheerlead falsified economic reports was right there with him. He completely dismissed unemployment and called it a lagging indicator of economic recovery.

I don’t know about you, but any practical economist knows that when demand picks up the very first thing you do is not order double your current inventory, but you instead opening up hiring in anticipation of the demand. You know your inventory is low, and you also know you’re understaffed. Efficiency, always tells you that being understaffed is just as economically dangerous as being low in supplies, if not worse. If you’re low on inventory, you can raise prices and recoup on the perceived lost value, but you can’t raise prices to account for understaffing.

Commericial Real Estate

He also dismissed commercial real estate defaults and said it was a “concern” only insofar as it relates to financial institutions. He said that there was stabilization in the housing market. Which is a complete lie.

• There are over $1 trillion in housing inventory which has not been put on the market.
• Banks stopped putting this inventory on the market to shore up cliff diving housing prices.
• The Federal Reserve lowered interest rates to stop the plummet of housing prices.
• Obama passed a stimulus bill which included a cash incentive to buy a house sort of like the cash for clunkers program.

What he is also leaving out is that ARM loans and Alt-A loan defaults have yet to hit the market, to the tune of $2 trillion. Along with this the commercial real estate defaults are said to hit the market to the tune of $1 trillion. There is no stabilization in housing prices. Housing prices have been halted by infusing trillions of dollars into the market. When that money is removed, housing prices will once again resume plummeting. They should be back down to 1980’s market prices, according to experts.

Exit Strategy of the Fed and Raising Interest Rates

Plosser completely dismissed the notion that the Fed would raise interest rates this year. He also dismissed inflation as plausible for over 2 years. He clearly lives in a glass bubble that has absolutely no balance sheets on the price increases for the past 2 years, since the first bailouts started hitting.

The Federal Reserve balance sheet has shot up since last year from $750B to a staggering $2.25T. It owns $5T in government securities on top of its current balance sheet. That is to say, the U.S. government owes yearly $8 trillion to the Federal Reserve. Every single tax dollar that it collects from commerce, imports, and personal incomes goes to just pay off the interest owed on that $8 trillion. To fund all of the welfare, medicare, medicaid, farm subsidies then, the government has to turn around and borrow more money from the Federal Reserve.

He did not admit that the Federal Reserve has consistently overstepped the bounds of actually making fiscal policy without any input or approval of congress. He did not admit that small and medium businesses, the largest employers in this economy, ever received any stimulus or credit or flow of capital that was said to have gotten to them to get the recovery going.

Plosser did say he did not expect a V shaped recovery, nor a W, but an actual L shaped recovery, meaning that he did not expect us to ever reach the former perceived levels. This is simply hedging his bets so that the Federal Reserve is off the hook come time for the real recovery to start happening and the Fed withdrawing the stimulus money and loans.

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