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Both Banks And Homeowners Are Reliant On Ever-Rising House Prices

A weekend topic starting with the Miami Herald in Florida. “Most real estate developers will cite scarcity of land as one of the biggest hurdles to building affordable housing around Miami-Dade County. But according to a new GIS mapping tool unveiled this week by the University of Miami, there are actually 500 million square feet of vacant or underutilized land scattered across Miami-Dade County. The land is either publicly or institutionally owned.”

“‘With LAND, you can ask questions you couldn’t ask before,’ said Jorge Damian de la Paz, the programs manager for CCE. ‘Real estate developers already have this data. But now community advocates can directly ask their commissioners ‘Why is this land not being used?’”

The San Francisco Chronicle in California. “Here’s a number that will make anyone trying to find a place to live in San Francisco frustrated: An estimated 100,025 households are sitting vacant. A study by LendingTree looked at the vacancy rates in the nation’s 50 largest metropolitan areas, revealing some interesting findings.”

“In Miami alone, there are some 428,000 empty houses and the city’s vacancy rate is 17 percent. It’s 16 percent in Orlando and 15 percent in Tampa.”

From KTNV on Nevada. “Las Vegas has the fourth highest housing vacancy rate in the United States according to LendingTree. According to the report, 15% of Las Vegas homes are vacant. That’s 127,759 homes.”

The Yakima Herald in Washington. “Last week, the Yakima City Council held a study session that outlined the affordable housing challenges in the city and what the city can do to tackle them. On paper, there is enough vacant land for new housing, but it doesn’t mean it’s available. The city is also at the mercy of property owners. For example, Congdon Orchards owns hundreds of acres of vacant land in West Valley.”

US News and World Report on Maryland. “Crews have started demolishing a derelict block as Baltimore tries to reduce its sea of boarded-up properties. Maryland’s biggest city is hardly alone in dealing with issues of urban decay. But Baltimore’s many vacant lots and roughly 16,000 uninhabitable row homes with weeds growing out of boarded-up windows have proven especially intractable in poor and racially segregated areas.”

“Baltimore overall has about the same population today as it did 100 years ago. Housing researchers say some 20,000 other city properties are unoccupied and pose a risk of becoming shells.”

The Burlington County Times in New Jersey. “U.S. Census data shows the number of vacant and abandoned houses has grown steeply in Burlington County — and even more so in Willingboro — over the last 10 years. From 2009 to 2017, the time period for which the census data is available, Willingboro’s vacant housing units increased from 416 to 1,171. Those figures include all vacant units, including units for rent and sale and vacation houses.”

“Willingboro’s ‘other vacant’ properties, the census category some experts use as a metric to measure abandoned houses, increased even more sharply. In 2009, there were 150; in 2017 there were 788, census data shows. Willingboro also has seen a decrease in total housing units, the data shows.”

“Willingboro real estate agent Harry Walker, however, said he believes education might be the most effective tool in preventing houses from being abandoned in the first place. ‘A lot of people just leave because they don’t know they have options,’ Walker said. ‘Most people think there’s nothing they can do if they are underwater. The bank harasses them, and they just leave the property vacant.'”

From City Metric on the UK. “Figures from the Ministry of Housing, Communities and Local Government released on Monday poured cold water on the widespread misconception that Britain’s housing crisis results from a lack of houses. Official stats revealed that the number of long-term vacant properties in England rose by 5.3 per cent in the 12 months to October, to a total of 216,186.”

“In London, where housing supply is scarce, the growth of empty homes was double the national rate, increasing 11 per cent to 22,481. This complements other evidence showing that housing stock levels have consistently risen at a higher rate than population growth, even in the past couple of decades – even in London.”

“In Britain’s financialised economy, homes are treated as a speculative asset, rather than simply as places to live. In an era of low business profitability for advanced economies like the UK, housing is often the easiest and safest bet for those looking to expand their wealth, as property prices seem almost guaranteed to rise at a higher pace than interest rates, which have remained historically low throughout the past decade.”

“Correspondingly, banks love lending money against houses. Both in the decades leading up to and following the crash, around half of bank lending flowed into property. Ultimately, houses are worth however much banks are willing to lend. Banks, which create new money simply by lending, are essentially unconstrained in the amount of money they can conjure to bid up property prices.”

“Both banks and homeowners are reliant on ever-rising house prices, otherwise they risk going into negative equity and becoming insolvent, with devastating consequences for the economy.”

“In the absence of productive investment, this housing bubble is driving the UK economy. To prevent it bursting, politicians create artificial scarcity. This means the state protecting the rights of existing property owners and speculators hoarding housing stock.”

“Property developers love the dominant housing shortage story as it means councils will often let them build luxury developments, in the misguided hope that simply building more homes – any homes – will ease the crisis.”

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This Post Has 68 Comments

  2. ‘In the absence of productive investment, this housing bubble is driving the UK economy. To prevent it bursting, politicians create artificial scarcity. This means the state protecting the rights of existing property owners and speculators hoarding housing stock’

    We should ask the shortage people, if the market is so strong, why hasn’t the government reversed the rules that let lenders keep defaulted shacks on their books without consequences?

    1. We can also ask our Keynesian central planners why we’ve had ten years of “emergency measures” from the Fed and central banks despite our supposedly robust economic recovery.

      1. Well, we have a perfect example of the shortage myth in play today. After years of being told, “we need to build more shacks so prices come down for the poor young people”, what’s the REIC doing in various real estate markets? “The gubberment has to lower rates, they have to ease lending so our shack prices stop falling!”

        What a big con this thing is.

        1. “What a big con this thing is.”

          This is the tail end of the con. The body of the con rests with the stupid educational system we have installed in this country.

          This con would not even come close to working if the marks er, the citizenry as a whole had any financial sense.

          2. I still think that it makes sense to see this as an inter-generational power struggle. Those who have the majority of the housing stock skew older in the age distribution and they have a lot to lose if housing falls. Those who do not have housing skew younger and they have a lot to gain if housing falls. The economy as a whole benefits from lower housing prices, but in the near term there will be some pain felt by speculators.

          3. it makes sense to see this as an inter-generational power struggle

            This view overlooks the fundamental problem/reality that Chinbabwe points out: a rigged system tracing back to Wall St. and the Fed.

          4. “This con would not even come close to working if the marks er, the citizenry as a whole had any financial sense.”

            I presume it’s simply ignorance that keeps people bent over for this endless schlonging. If the vast majority of people understood what was going on, I think there would be rioting in the streets.

          6. If the vast majority of people understood what was going on, I think there would be rioting in the streets.

            They are in France!

          8. it makes sense to see this as an inter-generational power struggle

            That would be a distraction from reality. 100 million people borrowed way too much and now we’re all screwed. Some more than others. The government in concert with the banks accelerated this and now it’s a generational struggle?

        2. “What a big con this thing is.”

          This whole rigged system can be traced right back to Wall St. and the Fed, with paid-off politicians doing whatever they say.

  4. ‘In Miami alone, there are some 428,000 empty houses and the city’s vacancy rate is 17 percent. It’s 16 percent in Orlando and 15 percent in Tampa…Las Vegas has the fourth highest housing vacancy rate in the United States according to LendingTree. According to the report, 15% of Las Vegas homes are vacant. That’s 127,759 homes’

    Everywhere I went to shoot video, I found foreclosures and abandoned shacks all over.

    1. I just don’t believe there are 428,000 empty homes in Miami. Or in any US city for that matter. These numbers are bogus.

      It’s like how 40% of kids are “food insecure”. Sure they are. Or my favorite the 45M people don’t have health insurance. And then you dig a little into that number and it turns out 45M includes people who have gone 1 day a year without insurance. So quit a job on Friday, start a new one on Monday, go 2 days without insurance, you’re counted as “uninsured”. Switch insurance plans but it takes a week for the paperwork, bingo you are UNINSURED!!! Also includes illegals. Also includes people who could afford it but don’t want it. Take all that out and the number of people who truly are un-insured, long term and who are uninsured due to economic reasons is less than 10M. Weird how that works huh?

      So I suspect this 428K “empty” homes is like that. It includes homes empty for a few weeks while it’s bought/sold. Last time I moved, I bought a house about 6 weeks before selling a house. So for that 6 weeks the new house sat empty. This happens all the time. My in-laws sold their home recently and their buyers don’t plan on moving in for another 6 months. It will sit empty. Virtually every rental has a little empty time between tenants. It’s rate that Tenant A moves out on Day X and the new tenant moves in on Day X+1. There’s time needed to clean the home, repaint, etc. When those houses are empty, are they included in this study? How many tens of thousands of homes in Miami sit empty 1/2 the year since their owners are Snowbirds and spend summers up north?

      Of course none of these questions are dealt with since the MSM no longer bothers with pesky things like facts or what’s that word…oh yeah…journalism. No mention of the methodology of the study whatsoever.

        1. /\ /\ Poster who has no counter argument so goes for the ad hominem. At least you didn’t call me a racist, so that’s something.

          Now let’s try again…..do those 428K “empty” houses count all the examples I mentioned or not?

          1. I like the discussion of methodology, that is when we know we are getting somewhere. The stats may or may not be accurate, but this is where we need to dig in and verify.

          2. With 25 million excess, empty and defaulted houses in the US, it’s no surprise 428k of them are in Miami.

  5. “In Britain’s financialised economy, homes are treated as a speculative asset, rather than simply as places to live.

    It never ceases to amaze me that 95% of the sheeple continue to passively acquiesce to the parasitism of the financier elites and their rigged system that is destroying the quality of life for the increasingly pauperized middle and working classes in all of the western democracies.

    1. It’s usually when studies point out the gluts that the public is even shown the reality. I had someone ask me about this once: why people get so mad about the idea of a bubble. I replied, it challenges their whole world view. “You’re saying I’m stupid! And you’re saying my wife is stupid!!”

      I didn’t say that, but that’s how they take it.

      1. I gave up on trying to educate stupid people, or protect them from themselves, a long time ago. Some people only seem capable of learning the hard way, and even then it’s always somebody else’s fault. “The bank should never have loaned me that money in the first place!”

  6. ‘as property prices seem almost guaranteed to rise at a higher pace than interest rates, which have remained historically low throughout the past decade’

    Who can deny that the cost of money has been massively manipulated to cause just this effect? Bernanke said it straight out.

    ‘Correspondingly, banks love lending money against houses. Both in the decades leading up to and following the crash, around half of bank lending flowed into property. Ultimately, houses are worth however much banks are willing to lend’

    I’ve been pointing this out for 15 years. For instance, why are shacks in Flagstaff 100k more than Phoenix? The federal loan limit. Prices always drift up to the loan limit.

    ‘Banks, which create new money simply by lending, are essentially unconstrained in the amount of money they can conjure to bid up property prices’

    ‘as property prices seem almost guaranteed to rise at a higher pace than interest rates, which have remained historically low throughout the past decade.”

    “Correspondingly, banks love lending money against houses. Both in the decades leading up to and following the crash, around half of bank lending flowed into property. Ultimately, houses are worth however much banks are willing to lend. Banks, which create new money simply by lending, are essentially unconstrained in the amount of money they can conjure to bid up property prices’

    https://en.wikipedia.org/wiki/Reserve_requirement

    ‘Some economists dispute the conventional theory of the reserve requirement. Criticisms of the conventional theory are usually associated with theories of endogenous money’

    ‘Jaromir Benes and Michael Kumhof of the IMF Research Department report that the “deposit multiplier” of the undergraduate economics textbook, where monetary aggregates are created at the initiative of the central bank, through an initial injection of high-powered money[clarification needed] into the banking system that gets multiplied through bank lending, turns the actual operation of the monetary transmission mechanism on its head. Benes and Kumhof assert that in most cases where banks ask for replenishment of depleted reserves, the central bank obliges. Under this view, reserves therefore impose no constraints, as the deposit multiplier is simply, in the words of Kydland and Prescott (1990), a myth. Under this theory, private banks almost fully control the money creation process’

    1. So you can see this whole sh$t-cart is a giant money creation scheme. Now we have cardboard companies like Quicken making most of the loans in the US. With government backing!

      1. “So you can see this whole sh$t-cart is a giant money creation scheme. Now we have cardboard companies like Quicken making most of the loans in the US. With government backing!”

        What I’ve realized over the better part of the past 20 years, the “enlightenment period” of my life so to speak, is that most successful businesses are thriving due to government cheese. If you can figure out how to work the system, you’ll do very well. For others, not so much…

        1. most successful businesses are thriving due to government cheese

          Which is why I suspect Tesla/Musk is backed by a lot of invisible cheese. You can double or nothing your way out of anything much more easily if you have a safety net that insures that nothing doesn’t really mean *nothing*.

    2. ‘Ultimately, houses are worth however much banks are willing to lend’

      And why not lend up to the loan limit, whenever possible, given the taxpayer-sibsidized federal guarantee?

      1. You can imagine what an average house would cost if mortgages didn’t exist and Joe Sixpack had to scrounge up the cash first to buy one. I would have to guess in the neighborhood of $10,000 or $20,000.

        1. Maybe not that amount per se, but it would definitely change what is built for sure and the financing terms. Builders would have to figure out how to build affordable in order to stay afloat.

          2. At $50/sq ft for lot, labor, materials and profit, it’s already affordable.

            Where is this???

          4. If we limited loans to 5 years with an adjustable rate we would have much more affordable housing in ‘Merica.

          5. It’s before layers of markup and hype.

            Holy bubble!!! Hubby’s telling me that construction costs are 3-4x that without the lot in our little universe.

          7. Is he in the construction business?

            Not construction but RE-related. Internet searches support those numbers.

          8. “Where is this???“

            Mexico? 6-8x that in my neck of the woods… building is more costly than buying an over priced shack but it is a dream of mine 🙂

          9. Manufactured and modular housing sells new for less than $50/sq ft on average without the lot.

          10. “Manufactured and modular housing sells new for less than $50/sq ft on average without the lot.”

            Shop built, transportation and erection is $30 a square. Same materials, same labor with efficiencies gained by not having to mobilize/remobilize, weather delays, etc.

          12. Bluesky, I have yet to fully vet the $300-400 per sqft cost I was referring to, it was a guesstimate given to me by my brother who is a builder. I wouldn’t be building a track or modular home, rather a more custom modest home. Even if I was to get it at say $200 a sqft, I think it would still run me past the current price to buy an existing. Either way I’ll comtinue eating my popcorn 😉

          13. it was a guesstimate given to me by my brother

            In 06 a close friend built a custom house for his daughter. He hired all the subcontractors and such and finished cost was $35/ft2. This is not the land. To get to $200 – $400 /ft2, you’re either doing something gold plated, grossly marked up or ridiculous land costs. The bubble prices we see today are not due to crazy building costs.

          15. Red,

            excerpt:

            “Exterior finishes: $40,000 – $60,000
            Exterior finishing includes exterior walls, roofing and adding windows and doors. The number and type of exterior finish, windows and doors will affect this price.
            Major systems installation: $30,000 – $50,000
            Plumbing, electrical and HVAC comprise most of your major system costs. The size and type of systems can affect the price of these installations. For example, installing an energy efficient system starts with something like a solar panel cost and grows based on its size, wiring and labor that connect it to all the fixtures, outlets and appliances in the house.
            Interior finishing: upwards of $85,000
            Interior finishing adds the comforts of home to your new build. This can include insulation, drywall, interior trim, painting, lighting, appliances, flooring and plumbing fixtures.”

            & etc. to get you to $200K.

            The site is ready to close the deal on you right now.

            Well, I didn’t build out solar panels. The three things above cost me a tiny fraction of what the website boasts, under 20K. I bought a framed out structure (gutted) and did insulation, roof, “systems”, thermal windows, bath, laundry, drywall, kitchen, & etc. 1700 ft2. Probably 1000 hrs of my own work. The thing is, once you accept this kind of story as reality, you don’t question any of it. BluePill stuff.

          16. The thing is, once you accept this kind of story as reality, you don’t question any of it.

            Thanks for setting me straight, gang!

    3. “Kydland and Prescott (1990)”

      Minnesotans = freshwater economists

      (Bernanke and Yellen are saltwater species)

    4. Also the reason college costs what it does. As long as the govt will lend up to $X, tuition will always be $X.

      College costs would fall 50% tomorrow if the govt announced a 50% cut to the cap of student loans it will guarantee.

    5. “For instance, why are shacks in Flagstaff 100k more than Phoenix?”

      Are median incomes higher in Flagstaff than Phoenix? I didn’t know Flagstaff had such great jobs, at a fraction of the size of the valley. Weird.

      1. Because the Federal Reserve is neither federal nor a reserve. IMHO, this simple statement cannot be emphasized or repeated enough. As The Original Anonymous noted above: “If the vast majority of people understood what was going on, I think there would be rioting in the streets.”

  7. I ran across this …

    “Squatting (Homes Not Jails) – San Francisco Tenants Union”

    (snip)

    “What Is Homes Not Jails?

    “Homes Not Jails was formed in 1992 to advocate for the use of vacant and abandoned housing for people who are are homeless. With people literally dying on the sidewalks in front of vacant buildings, housing advocates, homeless advocates, and people who were homeless came together to find ways to utilize vacant buildings.

    “HNJ operates on two levels:
    Public Actions and Legislative Advocacy
    To demonstrate the availability of vacant housing and to promote proposals to utilize the housing, HNJ will publicly occupy vacant buildings. These are civil disobedience actions. Over the years, there have been many such occupations which have been used to promote awareness of the need to utilize vacant buildings and to promote legislative solutions.

    “Squatting
    Since the government has been slow to act to utilize vacant buildings for housing, and people need housing now, Homes Not Jails simultaneously opens up vacant buildings and helps people who are homeless move in. Since 1992, hundreds of these “squats” have been opened. Many have lasted for years and Homes Not Jails filed for legal ownership (after paying the property taxes) of a squat opened in 1993, a process known as adverse possession.

    “Squatting” means finding some empty housing and moving yourself in without an agreement with the landlord. Squats can be just short term housing or they can evolve into long-term housing. Squatting has always been an option people have chosen to meet their housing needs. Sometimes this choice is made for political reasons by people who have a strong conviction that the idea of paying money for housing (and others making money off housing) is simply immoral. More and more though, squatting has become an economic necessity. The rise in San Francisco’s homeless population demonstrates how many people simply can’t afford to rent in San Francisco and have chosen squatting as the only available option.

    “Many people independently choose to squat and set out to identify suitable houses and move themselves in, doing so without much fanfare or organization. Recently, Homes Not Jails has developed an organized squatting movement which identifies and sets up squats for people who are homeless.”

    For more, go here …

    https://www.sftu.org/hnj/

  9. “Correspondingly, banks love lending money against houses.”

    😁

    “Both in the decades leading up to and following the crash, around half of bank lending flowed into property. Ultimately, houses are worth however much banks are willing to lend.”

    And however much pukes are willing to borrow, and how high prices pukes are willing to commit themselves to paying.

    “Banks, which create new money simply by lending, are essentially unconstrained in the amount of money they can conjure to bid up property prices.”

    Beats working. 😁

    “Both banks and homeowners are reliant on ever-rising house prices, otherwise they risk going into negative equity and becoming insolvent, with devastating consequences for the economy.”

    Only a population of totally dumbed-down ignorant pukes would perceive a situation such as this as being normal, even wonderful.

    “In the absence of productive investment, this housing bubble is driving the UK economy.”

    IOW, banks, which create new money simply by lending, powers price increases and price increases creates equity and this created equity creates wealth and this created wealth, in the absence of productive investment, is what is driving the UK economy.

    Truly, a nation of dummies.

  10. An Oldy, but not yet a Moldy …

    “Bold crooks renting out homes they don’t own, scamming tenants”

    Needless to say, I like it. 😁

    (snip)

    “‘They line up tenants in some way, and then will literally deliver possession to the people paying first month’s rent and security deposit,’ he said.

    “A crook gets the key out of the lockbox on the front door and starts showing the home to potential tenants. The tenants rent, pay cash, and then his company finds the unsuspecting tenants squatting – but not really.”

    Oh? And just why is that?

    “‘Possession does entitle them to rights,’ he said.”

    Bahahahahahahahahahahahaha. Is this a great country, or what?

    “Often he and the owner pay the tenant to leave, cash for keys it’s called, so they don’t have to go to court and legally evict them.”

    Here’s some icing for the cake …

    “Police said they typically don’t get involved because the matters are commonly civil in nature.”

    Bahahahahahahahahahahahahahahahahahahaha.

    https://fox59.com/2015/04/22/bold-crooks-renting-out-homes-they-dont-own-scamming-tenants/

    1. “What if you came home from vacation to find strangers living in your house ??”

      “Well that very thing happened to a South Carolina woman Katherine Lang of Beaufort, came home from an enjoyable vacation find that a new family had moved into her house.

      “When she got there she found a couple of dogs running around, a cat sprawled out on top of the washer, and food on the stove. Also she could hear people talking in the house, so as she ventured inside she found the couple and confronted them.

      “Lang asked ‘What are you doing in my house?’” It soon became clear what had happened.

      “22-year-old Tyggra Shepherd and her husband had moved into the house while Lang was away. The couple were apparent victims of a phony rental scam.

      “Shepherd and her family had come to Beaufort from Kentucky trying to find work and while trying to find a place to live they were taken in by a fake landlord offering to rent the home on Facebook for $850 a month.

      “’I was so crushed when I found out it was a scam,’ Shepherd said. ‘Finding a place to live in Beaufort is hard when you need something you can afford and still raise a family adequately.’

      “Shepherd burst into tears when she found out the home really belonged to Lang and that they would have to move out. The couple have apparently made arrangements with Lang to stay for a time and then move out.

      “It’s believed the fake landlord got access to the house using a spare key that was kept under the cover of an outside electrical outlet.”

      https://www.wqcmfm.com/came-home-vacation-find-strangers-living-house/

    1. Vacant homes are a positional good in some small sense. They derive their value in their proximity to employment options and for the shelter they provide. A vacant home in an area where there is low vacancy is detrimental to the economy as a whole. From a policy perspective, our tax law should be aimed at making sure the average person can afford to buy (or rent) 1 house before others accumulate 2, 3, 4+.

      1. our tax law should be aimed at

        If I understand, you suggest having the government fix a problem they created. If government would get out of subsidizing house speculation, then not so many people would want four houses. Some might. Let them bear the cost.

        As for consistency, you have money and are buying a very inefficiently made $50K scooter. Should we allow you to do that when we don’t have a $20K car? Your luxury car is subsided up the wazoo and my $20K car is not.

        1. If government would get out of subsidizing house speculation,

          Ding, ding, ding! Fix the problem, not the symptom.

        2. you have money and are buying a very inefficiently made $50K scooter. Should we allow you to do that when we don’t have a $20K car?

          I fail to see the inconsistency. Vehicles are not a positional good in economic terms. But in any event, in my state we do have an age-based taxation at the DMV. Newer vehicles cost more to register. After 10 years, the registration price drops precipitously. The thinking here is that those that can afford to buy a new car can afford to pay more in taxes. So yes, the tax code is used in a specific way to drive a value judgment which is, as far as I can tell, is just to get more revenue. I will pay more in taxes, which is the price of buying a new car. In my view it would be better if the taxation policy for vehicle registration was tied to the amount of pollution emitted by a vehicle, a negative externality which is born by everyone.

  13. “Baltimore overall has about the same population today as it did 100 years ago. Housing researchers say some 20,000 other city properties are unoccupied and pose a risk of becoming shells.”

    Until Baltimore and many other once great American cities get their crime problems under control, they are destined to continue their present day existence as hollowed out hell holes.

    Feature
    The Tragedy of Baltimore
    Since Freddie Gray’s death in 2015, violent crime has spiked to levels unseen for a quarter century. Inside the crackup of an American city.
    By Alec MacGillis
    March 12, 2019

    On April 27, 2015, Shantay Guy was driving her 13-year-old son home across Baltimore from a doctor’s appointment when something — a rock, a brick, she wasn’t sure what — hit her car. Her phone was turned off, so she had not realized that protests and violence had broken out in the city that afternoon, following the funeral of Freddie Gray, the 25-year-old man who drew national attention eight days earlier when he died after suffering injuries in police custody.

    As she saw what was happening — fires being set, young people and police officers converging on the nearby vortex of the disorder — she pushed her son, Brandon, down in his seat and sped home. “Mom, are we home yet?” Brandon asked when they pulled up at their house just inside the city line, where they lived with Guy’s husband, her grown daughter and her husband’s late-teenage son, brother and sister-in-law.

    “Yeah,” she told him.
    …

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