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Too Many Made A Lifestyle Based On An Economy That Wasn’t Sustainable

It’s Friday desk clearing time for this blogger. “In September, prices in the housing sector fell 1.6% — the largest single-month drop for the sector since Zions Bank began measuring consumer prices along the Wasatch Front in 2010. Prices for hotels and motels also had their largest month-to-month decline ever recorded, falling 13% in September, while apartment rental rates dipped 0.9% in the same period.”

“Builders are currently planning to build more residential units across the Wasatch Front than at any other time. According to Randy Shumway, chairman at Cicero Group, there are good indications that housing supply is starting to catch up to pent up demand. ‘The fact that builders are rapidly bringing so many units to the market and that housing prices appear to be moderating signals that prices will be friendlier for future home buyers,’ he said.”

“For a second straight week, buyer activity in Arlington’s fall real estate market has performed more like the summer doldrums. Redfin indicates that the bidding wars have significantly dropped nationally in the last year. The robust U.S. housing market may be losing its edge. What can you do to create a bidding war on your home? The homes are updated and in pristine condition, like new with nothing left to do. The homes are priced properly, or maybe even a bit low to attract more buyers.”

“Zillow, which has delved further into home-flipping this year, has failed to convince many investors. Losses for the business grew sequentially with further deterioration expected in the third quarter. Reality seems to be sinking in. Zillow has shed 42% of its market value since its last quarterly report. The KeyBanc report noted Zillow’s frequent discounting makes for current listing premiums below what it spent on renovations in each of the last two quarters. KeyBanc analyst Andy Hargreaves concluded the company likely isn’t targeting margin expansion but rather ‘over-paying owners to drive volume.'”

“Countywide sales of previously owned single-family homes and attached properties both fell by nearly one-sixth from August to September, according to the Greater San Diego Association of Realtors. Single-family home sales fell 14.3% from 2,094 in August to 1,795 in September while attached-property sales fell even more, 16.5% from 1,061 in August to 886 in September.”

“GSDAR President Kevin Burke suggested the housing market’s fall is due in part to fewer houses being put on the market. ‘Despite the turmoil on the political field, the housing fundamentals continue to show stability,’ Burke said. ‘There may be fewer homes popping up on the market, but the fall and winter months usually mean less competition — good news for buyers.'”

“Consumer insolvency filings in the Fort McMurray district climbed 39 per cent in 2018, the largest percentage increase in Canada, federal data show. Claims against property, the first step in the foreclosure process, surged almost tenfold over the past three years, according to court records. Home prices remain 44 per cent below the recent peak.”

“John Hickey is content with the slowdown. A mechanic who works on used oil-industry vehicles, he lost his house in the wildfire. Two years ago, a builder quoted him $500,000. The offers keep moving down, and he’s waiting for one to get to $200,000 or so before going ahead. He still has work and has always lived within his means, a lesson for places like Fort Mac that can see the money go as quickly as it came, he said. Too many, he said, ‘made a lifestyle based on an economy that wasn’t sustainable.'”

“For an anxious owner of an enormous mortgage, I’m going to say something unexpected: the lack of meaningful growth in house prices over the past year is a wonderful thing. I do worry about house prices actually falling (as they have done in London already) – particularly if a sharp drop accompanies a no-deal Brexit and raises the spectre of negative equity.”

“Buying a home when house prices are high, even if interest rates are low, means homeowners spend a larger share of their income on monthly mortgage payments. That has a direct impact on our living standards, as the Resolution Foundation demonstrated in a report. ‘If households are spending an increasing proportion of their income on housing in a period of earnings growth and record-low interest rates, something must be going very wrong indeed,’ the report said.”

“But hang on, don’t rising house prices benefit the economy by making homeowners feel richer and encouraging them to spend more? The Bank of England has looked into this so-called wealth effect and concluded it doesn’t really exist. Over the longer term, the change of pace in house price growth should mean we’ll all treat our homes as just that – a secure and comfortable place to live – rather than a get-rich-quick scheme.”

“The desperate attempts to privatize Air India continue with new developments in the seemingly never-ending saga. Alleging a market slowdown Air India officials are having a hard time selling a large property in Mumbai even after a 25 percent price reduction.”

“Beijingers are notorious for their complaints about sky-rocketing property prices in the city. After this 13sqm apartment without electricity or running water sold for RMB 3.6 million, we say they have a full right to. While the prices of new apartments are still on the up, rising 4.2 percent year-on-year in August alone, secondhand housing prices have dropped 0.2 percent year-on-year. A more significant fall of 11 percent was recorded in February this year. Back then, one square meter in a secondhand apartment would set you back almost RMB 60,000.”

“Residents of the evacuated Mascot Towers are being forced to consider two options to fund urgent remediation works at the 132-unit complex, but fear they won’t be able to afford either. One resident, who did not want to be named, said ‘the options presented to us as owners are like choosing a preferred execution method.’ Another owner said both options are ‘very bad,’ adding he had spoken with a bankruptcy lawyer on Wednesday morning.”

“Resident Brain Tucker said the uncertainty of the situation is ‘at the back of your mind all the time. It’s the first thing you think of in the morning, and the last thing you think of at night – just how am I going to get out of it. It’s a nightmare, there is just no easy way out. Just to see Mascot Towers boarded up, it’s just horrible memories.'”

“‘The way we got here this time is way different than the way we got here before.’ Those assuring words from Tom Blanchard, the President-elect of the Greater Las Vegas Association of Realtors, as median home prices move to within $5,000 of the all-time high before the crash more than a decade ago.”

“‘This runup has been different,’ said John Restrepo of RCG Economics. ‘It’s been based on more solid growth, and it’s cooling off, it’s just cooling off to be a more normalized housing market here in Las Vegas.'”

“‘The 2006 runup, in terms of the housing demand, was really driven by a lot of foolish lending practices that let a lot of people that shouldn’t have bought homes buy homes,’ said Restrepo. ‘There were a lot of flaws in the home financial system. Those have been pretty-much fixed.'”

“‘We’ve learned from our mistakes in the past,’ said Tom Blanchard, ‘And we’re all doing it right this time, and we’re all doing it correctly.’ Blanchard says homeowners who bought near the bottom are in much better shape, but also warns, ‘For those that were able to buy really well, you have plenty of equity, and hopefully you’re not refinancing and taking money out of your house and doing the home-churning ATM which got a lot of people in trouble the last time.'”

This Post Has 115 Comments
  1. ‘For those that were able to buy really well, you have plenty of equity, and hopefully you’re not refinancing and taking money out of your house and doing the home-churning ATM which got a lot of people in trouble the last time’

    Why not Tom? Shirley prices won’t fall?

    Oh…

  2. ‘the uncertainty of the situation is ‘at the back of your mind all the time. It’s the first thing you think of in the morning, and the last thing you think of at night – just how am I going to get out of it. It’s a nightmare, there is just no easy way out. Just to see Mascot Towers boarded up, it’s just horrible memories’

    Gosh Brian, you almost make it seem like Sydney airboxes don’t always go up?

  3. ‘having a hard time selling a large property in Mumbai even after a 25 percent price reduction’

    Mumbai, Sydney, London – all at one time or the other the hottest residential real estate on the planet.

  4. ‘GSDAR President Kevin Burke suggested the housing market’s fall is due in part to fewer houses being put on the market. Burke said. ‘Despite the turmoil on the political field, the housing fundamentals continue to show stability’

    = Orange Man make San Diego shack prices fall.

    1. GSDAR President Kevin Burke suggested the housing market’s fall is due in part to fewer houses being put on the market.

      File under Realtors Say The Darndest Things or Realtors Are Liars.

      SD inventory is about 20% higher than two years ago.

    2. ‘GSDAR President Kevin Burke suggested the housing market’s fall is due in part to fewer houses being put on the market.’

      As usual, a used home seller has mixed up economic cause and effect. Falling market values naturally limits the number of homes that are put on the market, at least up until the point when sellers realize those prices aren’t ever coming back.

  5. ‘Builders are currently planning to build more residential units across the Wasatch Front than at any other time…there are good indications that housing supply is starting to catch up to pent up demand. ‘The fact that builders are rapidly bringing so many units to the market and that housing prices appear to be moderating signals that prices will be friendlier for future home buyers’

    Eeee-bola Utah!

    1. Eeee-bola Utah!

      This is an article from the local news joint reflecting on “Silicon Slopes” since Adobe’s Omniture acquisition about 10 years ago:

      https://www.ksl.com/article/46653864/how-a-18b-acquisition-10-years-ago-turned-the-point-of-the-mountain-into-what-it-is-today

      Here is a comment regarding the “inevitability” of housing prices to keep going up around this area (Lehi):

      “Housing prices in Lehi have doubled since 2011. They will come close to doubling again in the next decade, then prices will taper off to a more sustainable rate long-term. What most don’t realize is that tech salaries (though much higher than the local average) still have plenty of room to grow. Instead of $106K as stated in this article, you’ll see average salaries approach $200K in the next decade. That will be hard for anyone outside the tech sector, but there’s not much you can do about it if you allow a free market. Sanpete county will still offer the rural lifestyle for years to come if anyone needs an idea for where to move to avoid this growth.”

      As Ben would say, “To the moon, Alice!”

      1. Instead of $106K as stated in this article, you’ll see average salaries approach $200K in the next decade.

        This person is going to get an education at some point in specialized engineering technology boom/bust realities. Just my opinion.

        Remember to save your bonuses.

        1. Yeah. If they can create a bunch of inflation maybe. But otherwise no. Not based on productivity increases and rarity of skills at today’s dollar.

      1. Actually Providence is way up at the northernmost end of the Wasatch Front, near Logan and Utah State University, not really part of the Greater Salt Lake City metropolitan area. My SIL and her family own a little slice of paradise there.

  6. “Consumer insolvency filings in the Fort McMurray district climbed 39 per cent in 2018, the largest percentage increase in Canada, federal data show. Claims against property, the first step in the foreclosure process, surged almost tenfold over the past three years, according to court records. Home prices remain 44 per cent below the recent peak.”

    “No one, but no one, could’ve seen this coming.” — Every MSM “expert”

  7. “For an anxious owner of an enormous mortgage, I’m going to say something unexpected: the lack of meaningful growth in house prices over the past year is a wonderful thing.

    I’m going to give you more practical advice, FBs: starting looking for a sturdy cardboard box and a shopping cart with straight-rolling wheels for your new, more mobile phase of life.

    1. “…For an anxious owner of an enormous mortgage…”

      The financial equivalent of a STD. Easy to get, hard to get rid of.

      The term “going viral” is starting to take on a whole new meaning.

  8. ‘Claims against property, the first step in the foreclosure process, surged almost tenfold over the past three years, according to court records. Home prices remain 44 per cent below the recent peak…Two years ago, a builder quoted him $500,000. The offers keep moving down, and he’s waiting for one to get to $200,000 or so before going ahead’

    Remember when I could find dozens of single-wide trailers up there listed for 400,000 Canadian pesos?

  9. ‘If households are spending an increasing proportion of their income on housing in a period of earnings growth and record-low interest rates, something must be going very wrong indeed,’ the report said.”

    I bet the author of this report looks dashing in his Captain Obvious costume.

  10. REALTOR, I have so much money left after “throwing money away on rent” every month that I don’t know where to throw it.

  11. “But hang on, don’t rising house prices benefit the economy by making homeowners feel richer and encouraging them to spend more? The Bank of England has looked into this so-called wealth effect and concluded it doesn’t really exist. Over the longer term, the change of pace in house price growth should mean we’ll all treat our homes as just that – a secure and comfortable place to live – rather than a get-rich-quick scheme.”

    – So central bank policies are ineffective. We don’t need them. The (nonexistent) wealth effect applies to stocks as well. Think about what that means for future stock prices when mean reversion kicks in.

    1. this so-called wealth effect and concluded it doesn’t really exist.

      It does. I’ve had friends who bought a second house as an investment because they thought their equity was making them rich. I have a friend who retired early because he was “making more money” in stocks than by working.

      1. Let’s see how that works out at the completion of the cycle. Right now at midway through it, everyone’s a genius and everything’s awesome! 😎

        1. We’re not midway through. After 11 years of central bank “accommodative monetary policy” these asset bubbles and Ponzi markets are at or near near apogee. The Fed’s 180 reversal from Jerome Powell’s “rate hikes on autopilot” to pumping $60 billion daily of liquidity into the overnight repo market into perpetuity clearly indicates frantic efforts to plug growing holes in the dike.

          1. – 1) Agreed. We are closer to the end than the beginning.

            – 2) Yes, the Fed has started QE again. They’re calling it “NOT QE”, but it’s QE. Restarting QE is necessary, because “everything is awesome!”

            https://twitter.com/htsfhickey/status/1182737550387101698
            fred hickey
            @htsfhickey
            When Fed began money printing in ’08 Fed had to call it something else (QE) due to its disastrous consequences over all prior attempts (thousands of yrs.) Now that QE has failed (no exit, fin’l system struggling again), QE has a negative connotation-thus the new name: “Don’t Call It QE”
            12:19 PM – 11 Oct 2019

            https://twitter.com/htsfhickey/status/1182740337074327552
            fred hickey
            @htsfhickey
            Whatever the Fed calls it, its effects will be the same. Fed prints money out of thin air, buys assets (this time t-bills) from investors, who will then pour into other assets – causing more debt, malinvestments, misallocation of capital, ever more wealth inequality&social conflict.
            12:30 PM – 11 Oct 2019

            https://twitter.com/zerohedge/status/1182672378767314946
            zerohedge
            @zerohedge
            “NOT A QE” starts: FED TO START BUYING $60B TREASURY BILLS PER MONTH FROM OCT. 15
            8:00 AM – 11 Oct 2019

            https://twitter.com/NorthmanTrader/status/1182673247017541634
            Sven Henrich
            ‏@NorthmanTrader
            That’s $720B per year for anyone counting..
            8:04 AM – 11 Oct 2019

          2. They’re calling it “NOT QE”, but it’s QE.

            The term I heard WSJ throwing around this week was “quantitative teasing“.

      2. Blue
        In 1999 people quit because they were going to trade stocks /sell crap on EBAY for a living So they really didn’t need to work.
        Yes, I am sure it is different this time.

        1. were going to … sell crap on EBAY for a living

          I knew a guy who tried to do that. Needless to say, it didn’t last.

  12. “Too many, he said, ‘made a lifestyle based on an economy that wasn’t sustainable.’”

    – Bingo! From bubble to bubble. Debt is not wealth. If it was there wouldn’t be so many BKs.

  13. “For a second straight week, buyer activity in Arlington’s fall real estate market has performed more like the summer doldrums. Redfin indicates that the bidding wars have significantly dropped nationally in the last year. The robust U.S. housing market may be losing its edge. What can you do to create a bidding war on your home? The homes are updated and in pristine condition, like new with nothing left to do. The homes are priced properly, or maybe even a bit low to attract more buyers.”

    Eat yer crows taxpayers

  14. “‘The 2006 runup, in terms of the housing demand, was really driven by a lot of foolish lending practices that let a lot of people that shouldn’t have bought homes buy homes,’ said Restrepo. ‘There were a lot of flaws in the home financial system. Those have been pretty-much fixed.’”

    I’m sure everyone that brought recently put 20%, 25% DTI max, 700+ FICO, and have 6-12 months of emergency savings.

    Oh wait,
    https://www.bloomberg.com/news/features/2018-05-24/small-time-bankers-make-millions-peddling-mortgages-to-the-poor

  15. “Back then, one square meter in a secondhand apartment would set you back almost RMB 60,000.”

    It’s perhaps worth mentioning the per capita income in Beijing is a paltry 78,000 RMB per-tax per year.

    So a good 100 years of savings to buy a standard 3 bedroom, 120 m^2 apartment. Good thing everyone in China allegedly saves 50% of their income!

        1. All I know is that as a small business owner in Shanghai my wife pays much less taxes than I do working in tech in the USA. And she’s paying what they tell her to pay. Seems to be some sort of flat rate thing for small business owners…maybe around 10% plus a little more for the employee’s “social insurance”? And no stress about keeping business and personal separate. She just pays them and doesn’t worry about it. Seems pretty low stress unless you annoy the police or The Party.

          1. Then it’s off to the Chinese gulag. Maybe they’ll harvest your kidneys, maybe not. All for the greater good.

          2. Every district is different. In the Pearl River Delta city I lived income tax plus social insurance was about 30% total before recent tax cuts in 2018.

          3. Carl, as before check the China Law Blog.
            IIRC, IF you pay your workers properly, the taxes (for retirement, health, unemployment, etc) are about 50% of salary, so a lot of workers would rather get paid more by arranging to be paid under the table, skipping the taxes.

            Further IIRC, China doesn’t have property taxes, so that’s one less expense. Also, business taxes might be less onerous than the US. And, yes, there are substantial regional variations.

    1. Found that to be a thought-provoking, albeit balanced article:

      One excerpt that I liked:

      “In fact, driving is one of the most dangerous things most adults do. It killed 40,000 Americans last year and 1.4 million people globally. And yet we’re all pretty complacent about it. In 1974, in the name of fuel savings, the U.S. capped highway speed limits at 55 mph. One study found the change cut highway deaths by at least 3,000 in its first year. But people like driving fast, and Congress later removed the cap. A few years ago, traffic deaths began inching up, a development experts attribute to distractions from smartphones. Still we drive, and text, and drive.”

      Food for thought:

      “Autonomy promises to preserve our car-centered lifestyle but eliminate the estimated 94% of crashes caused by human error. Viewed from that angle, the self-driving car could be a lifesaver in the same class as penicillin and the smallpox vaccine.”

      1. Despite the inherent risks in driving, I fail to understand the need to provide Tesla and Google with a license to kill people while testing self-driving cars on public roadways. Let them first test it to perfect the technology off road, and use their employees as Guinea pigs if necessary, rather than externalizing the risk to the general public.

        1. Let them first test it to perfect the technology off road, and use their employees as Guinea pigs if necessary, rather than externalizing the risk to the general public.

          The vast increase in automotive death is what what cell phones and text messaging introduced to the public, and yet it just happened without so much as a shrug.

          The article discusses the paradox that the march to self-driving creates. Basically self-driving can’t get safer and nearer to perfect without testing extensively in the real world:

          “The more experiences they have, the smarter these machines get. That’s part of the problem, Kalra argues, with keeping autonomous cars in a lab until they’re perfect. If we really wanted to maximize total lives saved, she says, we might even put autonomous cars on the road while they’re still more dangerous than humans, to speed up their education.”

          “Qazi has done the math: He says autonomous cars will someday save 3,000 lives a day. By his logic, anyone standing in the way of that progress has blood on their hands. “Imagine someone delaying the software by one day,” he says. “You are really going to end up killing a lot of people.””

          Sounds extreme, but I think he’s right.

          1. They keep saying that it’s inevitable, yet there are so many scenarios under which the sensors don’t work, even things as simple as bug splatter or the lane markers being covered in snow.

          2. Qazi has done the math: He says autonomous cars will someday save 3,000 lives a day…I think he’s right.

            I think he’s just talking his own book. Deaths of passenger vehicle occupants has dropped steadily over the past 40 years to about 20,000/year in the US. That’s 50/day.

            Most of them weren’t wearing seat belts…

          3. “The vast increase in automotive death is what what cell phones and text messaging introduced to the public, and yet it just happened without so much as a shrug.”

            Don’t know about Utah, but cell phone use and driving has been illegal in California for years, unless hands free.

          4. talking his own book

            FWIW, Omar Qazi may not be the only one using that Twitter handle. Recent court filings are revealing Elon’s PR machine.

          5. I think he’s just talking his own book. Deaths of passenger vehicle occupants has dropped steadily over the past 40 years to about 20,000/year in the US. That’s 50/day.

            Take your number and double it:

            For 2016 specifically, National Highway Traffic Safety Administration (NHTSA) data shows 37,461 people were killed in 34,436 motor vehicle crashes, an average of 102 per day.[1]

            Also, I think the 3000 deaths per day is worldwide. But still, 37,461 deaths per year in the US is astounding. Regardless of whether they were wearing their seatbelts or not, it still represents an astonishing (and preventable) loss of life.

          6. Take your number and double it:

            Actually, take your number and halve it. The other 20K are pedestrians, people on bikes, motorcycles & etc.

            Is selling the luxury EV about saving lives, now that the saving the planet BS is debunked? Why not shorten commutes to work? Pretty low tech. We can’t all afford a luxury EV. How about wearing your seat belt?

          7. The other 20K are pedestrians, people on bikes, motorcycles & etc.

            So those people don’t count? Kind of like that mom with two kids in a jogging stroller who were hit the other day close to me?

            2018 saw over 40,000 traffic deaths (e.g. deaths caused by a vehicle). That is sobering. Apparently its the 3rd straight year over 40,000.

            Is selling the luxury EV about saving lives, now that the saving the planet BS is debunked?

            Not debunked. They are significantly better for the environment. Here is something that might help you:

            Are Teslas actually better for the environment?

  16. The article refers to difficult questions the technology raises. I don’t see the difficulty with deciding whether to use it. It will be easy to demonstrate when it works and is safer than human driving. The more difficult question will be whether we will be required to use self-driving. I think the answer will be yes because, as alluded to above, the savings in human life and costs are compelling. Driving will be relegated to an amusement at approved tracks.

    1. Very good points. I think the main thing to keep in mind is that while we fret about the inevitable deaths from self-driving, the status quo is extremely dangerous, and more dangerous than it used to be. No one took a vote when cell phones became ubiquitous and the texting along with it and said, “Will we allow people to operating vehicles going 60, 70, 80 mph while being distracted?” People just started doing it, even though against the law, and we’re dealing with the consequences.

      Having worked in an ER and having held my breath was Life Flight helicopters arrived with infants ejected from car accidents whose life was hanging by a thread, I am firmly in the camp of moving away from human drivers. I would like to see the car pool lanes transformed into computer-only driving lanes.

        1. I think you’d fill up the prisons, but I don’t think you’d reduce distracted driving. Technology and social media is a compulsion and is addictive, and the urgency of the moment will override peoples’ good sense.

  17. President Trump’s trillion-dollar hit to homeowners
    by Allan Sloan 8 hrs ago
    Trump reaches ‘phase one’ deal with China, delays tariffs
    DIII champs forfeit title over broken-down old car
    In recent weeks, President Donald Trump has been talking about plans for, as he put it, a “very substantial tax cut for middle income folks who work so hard.” But before Congress embarks on a new tax measure, people should consider one of the largely unexamined effects of the last tax bill, which Trump promised would help the middle class: Would you believe it has inflicted a trillion dollars of damage on homeowners — many of them middle class — throughout the country?

    That massive number is the reduction in home values caused by the 2017 tax law that capped federal deductions for state and local real estate and income taxes at $10,000 a year and also eliminated some mortgage interest deductions. The impact varies widely across different areas. Counties with high home prices and high real estate taxes and where homeowners have big mortgages are suffering the biggest hit, as you’d expect, given the larger value of the lost tax deductions. But as we’ll see, homeowners all over the country are feeling the effects.

    Click name/website to read in full.

    1. Ya know Mike, ridiculous high housing prices makes most people poor. It’s because they don’t have anything left to live on after securing housing. You seem to think it is the job of the government to subsidize this creation of poverty.

      1. “You seem to think it is the job of the government to subsidize this creation of poverty.”

        Did knot the gubermint $ubsidize the failing Mega.Bank$ & a$$ociated industrie$ waaaay back in 2008? How many Billion$$$$$$$ x 1000 did that put on the back$ of Taxpayer$?

        The poor poor Wanker.Banker$ & 1% & .1% & .01% & .001$ … $ad!

    2. I understand where the writer is coming from and I sympathize to an extent because assumptions about taxes were made about these purchases and then the rules of the game were changed in the middle. And these taxes do tend to hit blue democratic states harder. But that doesn’t make them wrong. I wish the mortgage interest deduction would have been completely eliminated. That would have been huge!

      The way to understand this is that it negatively impacted one constituency while positively impacting another constituency. Housing prices that are not as high as they would have been are bad for the owners of the (inflated) asset, but good for future buyers. It’s a zero sum game, but the policy is probably right because it slowed down the unearned equity game and cooled the bubble.

      1. The deduction was eliminated for like 90% of people (those that don’t itemize). For the remaining people, capping it at 10,000 is trivial. So it was essentially eliminated.

        1. The deduction was eliminated for like 90% of people (those that don’t itemize).

          Are you saying that people no longer itemize because the standard deduction is more generous? ($24k for married couples). This may be true, but I’d like to see the data. I still think itemizing for couples buying $500k to $1.5M homes still are getting a big tax benefit above and beyond the standard deduction when they itemize everything.

        1. Seems like the tip of the iceberg of falling home prices has come into plain view in San Diego County. It should get quite interesting by next spring, with the real estate wreckage of the 2019 holiday season visible through the rear view mirror.

    1. Jim Cramer: ‘You are out of your mind’ if you have conviction in this stock market
      By Shawn Langlois
      Published: Oct 11, 2019 3:55 p.m. ET
      ‘I am describing an unfathomable market’
      Rusty Jarrett

      Jim Cramer:

      Markets are hostage to events that are not only totally out of our hands, but I think totally out of the president’s hands.

      That’s how CNBC host Jim Cramer views the recent action in the stock market, which has been vulnerable to each twist and turn of the U.S.-China trade war.

      Tweets like this probably aren’t helping:

      Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House.
      — Donald J. Trump (@realDonaldTrump) October 10, 2019

      At last check, the Dow Jones Industrial Average (DJIA, +1.21%) was up triple digits in afternoon trades after having lost more than 300 points in overnight trading on word that the talks might come to an abrupt end.

      “I am describing an unfathomable market, where if you have conviction, you are out of your mind,” Cramer said Thursday. In other words, go ahead and throw everything you thought you knew about the market out the window.

      Even though the bulls have the upper hand in light of optimistic headlines, Cramer says there’s still plenty of time for the next report to send stocks lower.

      1. That’s my first order take-home.

        But then some nagging questions pop into mind:

        1) If quantitative whatever is a magic bullet, then how come it couldn’t save the Japanese markets from endlessly cratering, beginning in the early 1990s?

        2) If the great and powerful Fed has it all contained, how come they let things crater so badly in the 2007-2009 episode?

        3) Given that quantitative whatever is already underway with the stock and housing markets near all-time highs, what kind of rabbits will the Fed have left to pull out of the hat when markets once again crater?

        1. I$ it a crime of any $ort’s for the Great & Mega.Fed’$ to manife$t monie$ & credit$ for an un$pecifed repayment$ date? I$ there a penal code violation for “exceeding” a certain dollar amount of distribution$ … Seems like they exist within a $hield of ab$olute indemnification$. They real que$tion is this: “why is they such $hrinking violet$?”

          Fa$ter!, fa$ter!, fa$ter!!!

          1. Their day of reckoning i$ of $tocha$tic, though finite, duration. Only God knows the eventual pound of fle$h repayment date.

      1. The index is fine as far as it goes. It’s intrinsically months out of date and only reflects the prices of homes that sold twice. Current price levels are not captured, especially for homes that won’t sell because of owners who prefer to keep their asking prices above market value forever rather than dropping it to a price where the home will sell. Hence the Case-Shiller Index is an upwardly-biased measure of market value and a lagging indicator of turning points.

        This is probably ideal for a used home seller who doesn’t want to spook his clients with scary real estate news during the chilly Halloween sales season.

    1. 25 million homeowners were bailed out through mortgage forbearance to prevent them from getting foreclosed and kicked out of their homes.

      How many renters were offered similar largess?

    1. So when is the MSM going to admit that there was no real recovery under Obama? The Fed is not trying to save the US economy it is trying to save the globalist’s economy. Despite the Boeing cutbacks, and the GM strike, and Chinese trade war when the final numbers come in the US will probably have grown more than the average 1.5% growth under Obama, certainly the average for the year so far will be well above that growth rate. The 737 max will fly again, the GM strike will end and the Chinese will in the end will be forced to trade with us on a more level field. The push for impeachment is not due to Trump’s failures but the fact that the US first policies are working and soon it will be undeniable that the globalists’ policies are Bush I, Clinton, Bush II and Obama were responsible for the decline of the middle class in the United States. Trump is headed for reelection so the globalists much remove him to keep globalism moving forward. He refuses to step in the bear traps they set for him war with Iran, war with Turkey and before that being forced to accept more immigration etc.

  18. “Redfin indicates that the bidding wars have significantly dropped nationally in the last year. The robust U.S. housing market may be losing its edge. What can you do to create a bidding war on your home? The homes are updated and in pristine condition, like new with nothing left to do. The homes are priced properly, or maybe even a bit low to attract more buyers.”

    What a national dearth of bidding wars indicates is that market values have dropped significantly across the nation in the last year.

    “Losses for the business grew sequentially with further deterioration expected in the third quarter. Reality seems to be sinking in. Zillow has shed 42% of its market value since its last quarterly report.”

    It almost sounds like Zillow is sitting on a massive pile of losses which the Zestimates can’t hide, thanks to jumping in to the flipping business at a market top. I hope short sellers make buckets of money off their share price collapse. Swooping in with Wall Street monies to drive home prices out of reach for Mom and Pop buyers on Main Street is morally reprehensible and fully deserving of the comeuppance that is underway.

    1. “What can you do to create a bidding war on your home?”

      This is a complete no brainer. Ask a few local used home sellers what they think your place will sell for, then price it at 10% below the lowest estimate. I can pretty much assure you that you will have multiple offers within a heartbeat of when you list your place for sale.

    2. It sounds like Zillow is making the very same stupid mistakes that individual single-family homeowners often make, of overpaying to purchase homes at a market top, then paying for renovations at a cost which they won’t be able to recover from selling the house. And their business model has landed in a very crowded space, with essentially no barriers to entry.

      Good night and good luck with keeping their flipping business line from flopping.

      From the Wall Street Journal article:

      ‘A report out earlier this week from KeyBanc looked at purchase and listing information on 140 Zillow-owned homes in 15 markets, concluding that Zillow doesn’t seem to be making money on its home flips. The report noted Zillow’s frequent discounting makes for current listing premiums below what it spent on renovations in each of the last two quarters.

      KeyBanc analyst Andy Hargreaves concluded the company likely isn’t targeting margin expansion but rather “over-paying owners to drive volume” and testing market elasticity to inform future selling processes. Zillow “is still early in the learning phase,” Mr. Hargreaves concluded, cautioning investors to approach it as such.

      The good news is that, if Zillow can figure out a winning formula, the iBuying opportunity continues to look massive despite a crowded market landscape including names such as OpenDoor and Redfin.’

    3. LOL, as if everyone’s house absolutely has to have multiple buyers bidding on it now, because that needs to be the new normal in real estate. Pump that bubble up even further beyond what incomes realistically support.

      1. Looks cool. Something I might spend $100/night to stay in on Airbnb. But not my dream house by any stretch of the imagination.

  19. “Countywide sales of previously owned single-family homes and attached properties both fell by nearly one-sixth from August to September, according to the Greater San Diego Association of Realtors. Single-family home sales fell 14.3% from 2,094 in August to 1,795 in September while attached-property sales fell even more, 16.5% from 1,061 in August to 886 in September.”

    I guess San Diego is not immune to eee-bola after all!

    1. Sounds like our landlords are fooked, along with many others in San Diego, due to not recovering the return on their investments before the onset of cratering.

      San Diego Home Sales, Prices Fall In September
      Thursday, October 10, 2019
      By City News Service
      A ‘For Sales’ sign in front of a home in San Carlos in this undated photo.
      Photo by KPBS Staff
      Above: A ‘For Sales’ sign in front of a home in San Carlos in this undated photo.

      Median sales prices of both property types dipped from August to September, according to the GSDAR. Single-family home prices fell 2% from $656,029 in August to $643,000 in September while attached property prices fell 4.8% from $436,000 in August to $415,000 last month.

    2. It’s time for San Diego investors to cut bait.

      An Entire Town In Southern California Is for Sale (One Hour from San Diego!)
      In 1994, Campo was placed on the market for a selling price of $1.75 million which inflates to over $3 million today
      By Georgia Slater
      October 11, 2019 03:26 PM

      The small, historic town of Campo in San Diego County, California is officially on the market.

      The 16-acre village, which about an hour away from downtown San Diego and the ocean, is available to purchase in its entirety, however a price has not yet been advertised, according to the Los Angeles Times,

      “This is a very unique opportunity for an investor to own the downtown portion of a small town,” listing agent Conor Brennan told the outlet. “It’s a very unique opportunity that doesn’t come around often.”

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