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A Once-Unthinkable Turn In The Market

A report in the Washington Post by Jared Bernstein, Jim Parrott and Mark Zandi. “The nation is in the grip of an affordable housing crisis. A severe shortage of homes for working-class and low-income families is pushing up house prices and rents across the country, putting homeownership increasingly out of reach. The cost of constructing houses has risen significantly since the financial crisis and builders have struggled to make the economics work to construct housing that most Americans can afford. To cover these costs, builders have been focused on putting up houses in the top end of the market where they can still make a profit.”

“The country now has a glut of luxury apartments, high-end condos and large residences, and a dearth of workforce and affordable housing. In recent years prices for the lowest-priced houses have grown consistently twice as fast as prices for the highest-priced houses and now exceed what many families of modest means can pay. This wouldn’t be such a problem if wages kept up. But they haven’t.”

“The nation must address this housing crisis in earnest, lest an entire generation of families whose parents found in housing a critical path to building wealth, find it now blocking the way.”

From National Mortgage News.”Home sellers may be losing their clout in the market. Home sellers in some neighborhoods may have missed their chance to dictate the market. The number of real estate agents around the country who say they are in a sellers’ market slid below 50% for the first time in years, according to a fourth quarter survey by HomeLight. ‘It’s still a seller’s market across much of the country, but agents report a noticeable shift toward more balanced conditions,’ HomeLight reports. Agents said the biggest challenge facing U.S. home sellers in the coming year will be the tendency to overprice their properties.”

“‘As prices flatten or even decline in some areas, sellers will need to be aware of market conditions in their area and how that impacts their pricing strategy,’ the report warns. ‘Price the house wrong, and you look at price reduction after price reduction (which could attract lowball offers down the line) and months of extra costs. It’s not a fun road to go down.'”

From Curbed Boston in Massachusetts. “Sales prices in the Boston housing market—especially for condos—were trending downward toward the end of 2019. That is according to data tracking closed deals during November from the Greater Boston Association of Realtors and real estate research firm the Warren Group. The data back up a wider trend in the wider region: a once-unthinkable turn in the market toward buyers’ favor.”

“There also might be a psychological explanation for the slump in sales and the dips in prices. Prospective buyers could simply be done with years and years of escalating prices in the Boston market. Call it a correction or a rebalancing then—a trend borne out by months of data now, not just the November-into-December numbers.”

“‘There is less of a sense of urgency among today’s buyers, and they’re showing more sensitivity to price and condition as the market has showed signs of cooling,’ said Jim Major, president of the Greater Boston Association of Realtors. ‘As a result, homes are sitting on the market longer and owners need to be more realistic in their pricing if they expect their property to sell in the desired timeframe.'”

The Miami Herald in Florida. “The supply of single-family homes for sale decreased from 7,091 to 6,526, bringing the months supply of inventory to 6 months, making it a sellers’ market. The difference in pricing of houses and condos has pushed some buyers who would prefer single-family homes to opt for condos instead, said Ron Shuffield, CEO of Berkshire Hathaway HomeServices EWM Realty. The luxury condo market led the uptick in activity, with a 4.1% increase in sales year-over-year. That was good news in a market that has been saddled with an oversupply of new luxury units.”

“Total home sales decreased in Broward by 5.3%, from 2,460 to 2,330 sales. Danny Hertzberg, a sales associate for The Jills Zeder Group, said his colleagues in Broward credit the decline to ‘a misalignment between the buyer and sellers’ expectations’ — meaning sellers are asking more than buyers are willing to pay.”

The Atlanta Intown Paper in Georgia. “The real estate market in Atlanta’s Intown neighborhoods has seen a lot of changes over the last decade. Overall, they’ve been positive. Since 2010, home prices have skyrocketed. Over the last two years or so, however, things have leveled off a bit. ‘Homes are selling an average of 2% to 3% below list price, which is a fantastic statistic, but many properties had a price reduction prior to going under contract,’ said Alison Sternfels, Compass Atlanta.”

“Six months of inventory indicates a normal market regarding supply, she explained, and ‘we’re still below six months of inventory in all price ranges except $2 million and above. This is good news for sellers, and the moral of this story is to price right from the beginning.'”

The Ukiah Daily Journal in California. “Jeff Kram of Luxe Place ~ International Realty estimates baby boomers make up about 25-30% of homeowners in the county, and the family home may be lost due to reverse mortgages. Following a sea of predatory lending in previous years, many homeowners pulled out more money than what the house is currently worth. ‘When the property owner passes away, their heirs inherit that. There’s nothing left, and the home goes back to the bank,’ says the realtor. He has seen an increase in foreclosures in the last year and a half.”

“‘Right now, it’s about one percent of the market share. The average is about half-percent of market share,’ explains Kram. ‘The notices of default are through the roof.'”

This Post Has 110 Comments
  1. Right now, it’s about one percent of the market share. The average is about half-percent of market share…The notices of default are through the roof’

    This guy is right. But the REIC scum will tell you a 3 or 4% nationwide rate is normal, and that’s where we’re at when they admit to it.

    Yes that’s right, foreclosures are off the chart and have been for a long time.

    BTW, I’ve got a lot to say about this Zandi piece. It’s gonna take me a while to sum up what I think about this commie bashtard and the WP rag that prints his slop.

    1. Let me guess.

      What would actually get America affordable housing:

      1. Get government completely out of the mortgage and loan market
      2. Banks eat their bad loans
      3. Bankers actually go to jail for fraud and GAAP violations
      4. Interest rates at least at 5%
      5. Deportation of 30 million illegals

      What this guy is proposing:

      Bigger government
      More government programs
      Even more government meddling in the housing and mortgage markets
      More government help with more free money

      1. I am Jack’s complete lack of surprise. “Affordable housing” is the most lucrative Democrat racket of them all, surpassing even influence peddling.

    2. I first read the word subprime in October 2004 when researching for a blog post. I had to look it up. Of course it is part self explanatory – less than prime. Prime being the standard, which was why shack loans/prices had generally been stable decade after decade. Naturally I looked into subprime. Subprime had been allowed for certain benefits to “society”. Veterans for instance. Gotta let them own shacks.

      OK, so how many subprime loans were around in 2004? 2% or less of loans outstanding. And what was the default rate? 14%. But this was considered the price we pay for “society”. Default rates more broadly were under 1% and had been forever. In 2004 subprime shot up to 30% of loans. Why? Prime lending had dropped like a rock – they had run out of buyers! And as the FHFA has said this year, loans are crappier now than last decade. That’s right, we got more subprime loans now than ever. They just don’t call them subprime. Note that over 90% of foreclosures last decade were prime loans. Which goes to show subprime doesn’t cause bubbles but is an indication of them. And what was the single determining factor in those foreclosures?

      When they bought. Meaning at the highest prevailing price. Loans made at the top of the market were overwhelmingly the majority of defaults, and were until the past two years or so. Now we’re seeing the majority of defaults are much more recent loans. And this at a time when these guberment loan outfits will give you better loan terms if you stop making payments! Think about that.

    3. BTW, I’ve got a lot to say about this Zandi piece. It’s gonna take me a while to sum up what I think about this commie bashtard and the WP rag that prints his slop.

      Where does one even start with that lie-filled POS of an article.

      1. “Where does one even start with that lie-filled POS of an article.”

        Jared Bernstein, Jim Parrott and Mark Zandi…it is an honor to introduce you to The Invisible Hand of Economics.

  2. ‘‘It’s still a seller’s market across much of the country, but agents report a noticeable shift toward more balanced conditions,’ HomeLight reports. Agents said the biggest challenge facing U.S. home sellers in the coming year will be the tendency to overprice their properties’

    Another installment in the “my BMW payments ain’t gonna make themselves” from the UHS.

    1. Agents said the biggest challenge facing U.S. home sellers in the coming year will be the tendency to overprice their properties.

      HMMMMMM where did they did that idea???? Oh thats right: SHORTAGE!!!

  3. “The nation is in the grip of an affordable housing crisis. A severe shortage of homes for working-class and low-income families is pushing up house prices and rents across the country, putting homeownership increasingly out of reach.

    Of course, the WaPo Real Journalists adhere to the usual Oligopoly media omertà when it comes to any mention of the central role of the Fed in making housing so unaffordable.

  4. “There also might be a psychological explanation for the slump in sales and the dips in prices.

    A well-founded fear of getting brutally schlonged could serve as a deterrent for overpaying for shacks on the cusp of the bursting of the Everything Bubble.

  5. ‘The nation is in the grip of an affordable housing crisis. A severe shortage of homes for working-class and low-income families is pushing up house prices and rents across the country’

    ‘The cost of constructing houses has risen significantly since the financial crisis and builders have struggled to make the economics work to construct housing that most Americans can afford. To cover these costs, builders have been focused on putting up houses in the top end of the market where they can still make a profit’

    ‘The country now has a glut of luxury apartments, high-end condos and large residences, and a dearth of workforce and affordable housing. In recent years prices for the lowest-priced houses have grown consistently twice as fast as prices for the highest-priced houses and now exceed what many families of modest means can pay. This wouldn’t be such a problem if wages kept up. But they haven’t’

    The crap is getting knee deep.

    ‘The nation must address this housing crisis in earnest, lest an entire generation of families whose parents found in housing a critical path to building wealth, find it now blocking the way’

    Building wealth. Shacks as investments. Long time readers may remember that when prices cratered last decade, Zandi was one of the first a$$-hats to say (over and over) “guberments gotta save shack buyers!” That’s not economics, it’s commie propaganda. It’s not that he is influential, but was one more layer of MSM support of what prevents shack prices from finding their own level.

    I did some thinking on the “law of supply and demand” statement yesterday. Let me explain. In economics, as I remember it, plotting supply and demand curves was a way of learning the complicated mechanisms of how relatively free market participants behave. If this happens, this will result, sort of thing. The over-riding tendency is for markets to find equilibrium. They are constantly striving for this through supply, demand and most importantly – price!

    So how do we get gluts and shortages Zandi? This so-called economist should know we got rough equilibrium in pencils, cars, gasoline, apples, etc. How can shacks and airboxes supply and demand get so crazy out of whack?

    It’s because the PTB are screwing with the mechanisms of the market. And this is primarily by intervening in the lending market and interest rates AKA the cost of money. So bray on Zandi, but you are an interventionist fool and are just one of the people responsible for so much misery that you cry about. Cut the lending gravy, get the guberment out of the shack lending biz, and watch prices sink like a turd in a well. And don’t stop it when it does.

    Cuz what we’ll find every time – supply and demand haven’t been outlawed. Artificially elevated prices tell the market to build, and build they will until you have oversupply. Cutting lending standards will result in defaults, as directly as turning a faucet. And both are what we’ve seen year after year.

    1. Allow one family homes occupied by empty nesters to be turned into 2-3 units, with income for the owner, and the affordable housing problem goes away in most of the U.S.

      Accessory rental units were far more common before the federal government got involved in financing one family homes and the suburbs started zoning out everything else.

      There are more bedrooms than people in this country, and post-1980 housing was built with lots and lots of bathrooms too. What would be the cost of adding an additional entry, kitchen and electric meter, and putting up a wall between the new unit and the rest of the house? Not too much, I’d guess.

      1. It is not as easy as that.

        The homes would need complete renovations to make it suitable for two separate families. To include fire code updates. Fire walls. Additional supports. Additional exits. Etc.

        Can the sewer or septic systems handle? Can water system handle? Can gas lines handle? Etc.

        You want them to live like 1920s tenement immigrants?

        Ok – no problem then.

        1. A lot of old mansions from Rochester NY’s glory days actually WERE converted into 4-5 unit rentals in previous decades. Now the city has banned the practice…

        2. I don’t know about handling gas and sewer, but our area certainly can’t handle the TRAFFIC. These houses and roads were meant for 1 car/household. Now it’s 3-5 large vehicles — trucks and white vans with associated trailers — clogging the street parking. And some of those houses have 3-4 kids each, not to mention apartment complexes with enough kids to fill a school bus. That’s a lot of kids to support on one unit worth of property taxes.

      2. Good idea! Many, many Victorian terraced homes in London that were formerly SFR are today ground and second story flats.

    2. Builder just south of Raleigh still advertising $59 per square foot Under roof. On your land of course.

      1. Builder just south of Raleigh still advertising $59 per square foot Under roof. On your land of course ??

        Please provide link…Thx

        1. S Dave
          Google home builders in Sanford

          Sign for 59/sq foot is on the highway several places.
          Earlier in the year sign said 55/sq foot.
          2 years ago they advertised a 2000 sq foot home for 120,000.
          That is 60/sq ft. Been advertising for years so they must be making money

      2. What’s making shacks stupidly unaffordable is the land. A quick look locally shows quarter acre lots in town asking as much as $200K. This will correct itself once the bubble pops

    3. Since we’re bashing WaPo (fine w/ me), let’s please add the Fed, since they’re the primary driver of housing bubble 2.0, along with the GSEs + FHA/FHFA.

      https://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110307372.html
      What the Fed did and why: supporting the recovery and sustaining price stability
      By Ben S. Bernanke
      Thursday, November 4, 2010

      “This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, [1] lower mortgage rates will make housing more affordable and allow more homeowners to refinance. [2] Lower corporate bond rates will encourage investment. And [3] higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

      – (1) – Housing is no longer affordable once again and we’re in an asset bubble. Similar script to housing bubble 1.0.
      – (2) Essentially free money via ultra-low interest rates allowed corporations to fund stock buybacks instead of capex. Corp. bonds are in an asset bubble. IG bonds are really HY bonds (wink, wink!). Result is wealth inequality from huge C-suite compensation distortions and lack of productivity gains and associated wage growth. No capex, no productivity gains.
      – (3) – Stock markets are incredibly overvalued and in an asset bubble. “investors” believe that the Fed has their back and will always backstop any >1% correction. Similar script to 2000 dotcom bubble.

      – Free markets have been transformed into a centrally-planned, command economy. This is largely driven by the Fed, via wildly unconventional monetary policies, including QE/Debt Monetization, and by Government debt-driven artificial “growth”, which is demand pulled forward, leaving “air pocket” somewhere out there in the future. This has adversely impacted these (3) primary markets of the economy (i.e. houses, corp. bonds, stocks). This market capture can be categorized as one big-a$$ bubble, aka “The Everything Bubble” and is asset inflation, pure and simple.
      – Healthcare and Higher Education are also experiencing enormous asset inflation; Both of these due to lack of free markets and government interventions. No price discovery, no free markets.
      – Overall inflation via CPI is claimed to be muted, but when the major categories of household budgets (i.e. housing, healthcare, education) are or becoming unaffordable, someone’s a lyin’.
      – Command and control economies have always failed. This is just another fancy way of describing Socialism/Communism (is there really a difference?), so we know this won’t end well, but timing, at least to me is unknown. I’ll hazard a guess and say 2020 is a good a time as any, based on where we are currently.
      – It goes without saying, but for any improvement, we need a) (much) less/smaller government in all areas, including the economy, b) living within our means, and c) actual consequences for bad behavior, or an end to our two-tiered justice system (“laws for thee, but not for me”, “know your place, peasants”, etc.).

      2banana is on the right track:
      2banana
      January 2, 2020 at 7:56 am

      Let me guess.
      What would actually get America affordable housing:
      1. Get government completely out of the mortgage and loan market
      2. Banks eat their bad loans
      3. Bankers actually go to jail for fraud and GAAP violations
      4. Interest rates at least at 5%
      5. Deportation of 30 million illegals
      (not sure on #5)

      As to Fed policy:
      “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” – Milton Friedman

  6. Australians elected a globalist quisling who presided over one of the biggest housing bubbles in the world as he served his sole constituency, his billionaire donors and financial sector speculators. Now that natural disaster is striking in the form of raging wildfires, the same Aussies who voted such quislings into power are berating them for failing to pay heed to preparedness in a region prone to such disasters. Someone bring me the world’s tiniest violin, please.

    https://www.bbc.com/news/world-australia-50973232

    Australia’s PM Scott Morrison had to cut short a visit to a town ravaged by fire after angry locals heckled him over the government’s response.

    Locals said he had done very little to help Cobargo in New South Wales (NSW), where two people died earlier this week and many lost their homes.

    “How come we only had four trucks to defend our town? Because our town doesn’t have a lot of money but we have hearts of gold, prime minister,” one woman called out.

    Others joined in as Mr Morrison turned away, calling him “an idiot” and saying he was not welcome.

    “You won’t be getting any votes down here, buddy. No Liberal [party] votes – you’re out, son,” heckled one man.

    1. The inflation adjusted price for gold hit $1985.20 in Nov. 2011 just before the takedown of the price began. It was $868.13 in Oct. 2008. Remember these are all inflation adjusted. Thus, I want to see a rise to $2000 soon. Then, I will believe the PTB are losing control. As long as they can print money and suppress gold prices with paper sales the globalists are in control. Control means, they are raising asset prices without people fearing general inflation.

  7. WAPO, of course, blames the housing shortage on Trump. [Not surprising, one of the authors was a Biden staffer.] We can’t get the illegal labor that we need to build the houses. Tariffs are driving up the costs of materials. etc. And of course, their solutions are… more tax breaks, more tax credits, and denser zoning.

    1. So the illegals do not create demand for housing only new affordable housing? Lol Orange man bad

      1. Yeah, wages are not keeping up so we gotta let in Guatemalans who keep wages down to build shacks we can’t afford. Or something.

        1. Further to the point, materials in all 18 divisions are lower now they they have been since the early 2000.

        2. Brought to you by the same people who scream “living wage” and “bring back the unions” at every opportunity. Never mind that illegal immigrants are the best scabs out there.

          1. Caesar Chavez understood that fact. He fought against illegal immigration because he knew they would be used as strike breakers.

          2. this month the county will assign assessed values- estimated up 2.3% here in fxco.
            Zillow showing 4% yoy

        3. FWIW this is one of the arguments that the CA “high speed rail” and LA Metro management have made when the project costs come in multiple times higher than what was promised during the bond propositions.

          It’s such a dumb, jingoist argument that only the LA Times seems to repeat it in print with any conviction.

  8. “In recent years prices for the lowest-priced houses have grown consistently twice as fast as prices for the highest-priced houses and now exceed what many families of modest means can pay. This wouldn’t be such a problem if wages kept up. But they haven’t.”

    Note: The rising prices of houses is interpreted as the creation of wealth. This “housing crisis” is seen by many to be “building wealth”. Keep this in mind as you read on.

    “The nation must address this housing crisis in earnest, lest an entire generation of families whose parents found in housing a critical path to building wealth, find it now blocking the way.”

    So the high prices of houses builds wealth but these high prices also shuts out people from building wealth thus in order to allow “an entire generation” to build wealth the crisis must be alleviated, but the only way to do this is to lower prices, but this process of lowering prices ends up destroying wealth.

    Please, somebody just shoot me.

    1. If the attractiveness of buying houses is the building of wealth due to the ever rising prices of houses then one should not want these prices to ever fall because falling prices would destroy the attractiveness of buying houses.

      This is a screwy way of looking at this, but there it is.

    2. “In recent years prices for the lowest-priced houses have grown consistently twice as fast as prices for the highest-priced houses and now exceed what many families of modest means can pay.”

      This statement needs a bit of finishing. Here …

      “In recent years prices for the lowest-priced houses have grown consistently twice as fast as prices for the highest-priced houses and now exceed what many families of modest means can pay WITHOUT BECOMING DEBT SLAVES.”

      Debt slavery is the solution! Build wealth by becoming a debt slave.

      I like it.

      😁

      1. Bahahahahaha … If the period of time for this VOLUNTARY debt slave period needs to be extended then this is all to the good – to me.

        What? thiry-year mortgages will no longer allow a puke to “afford” a house? No problem; We’ll just extend the period of time to fifty years.

        Pukes work gheir asses off for fifty years and all during these fifty years they mail to me each and every month some very healthy chunks of their paychecks.

        Like it, love it, want some more of it.

    3. Bringing low skill low wage workers just makes the affordability crisis worse. They rent affordable housing bought up by wall Street to create rentals. What WAPO is saying would actually be funny if it wasn’t destroying desperate people’s lives. Indirectly illegals even drive up the million dollar homes since people flee the areas they inhabit to find safe areas and good schools to avoid private school tuition. As long as they can convince people the equivalent of war is peace, they can keep the war on affordable housing going.

    4. The just shoot me sentiment is all I feel lately as my husband BELIEVES this bull. Like, deeply. He can’t believe I’m stopping him from building wealth by tying up our actual money in a shack for which we’d pay almost what we pay in rent as monthly nonrecoverable-til-you-sell-for-profit-over-interest-and-transaction-costs. He refuses to look at the numbers and here is his friggin wife trying to show it what hope does the fool being sold a bill of goods from realtors and mortgage officers have?!
      I think part of the frenzy as the bubble gets so big it’s about to burst is that the bag holders who’ve made a little pretend “wealth” talk it up like they’ve actually realized some of it, or maybe they have via home equity or cash outs and then talk about it and some dudes are just envious and impressionable. I can’t stand it. This is going to be sooooo hard. To not buy a giant debt I’m going to have to pay 80k too much for that crappiest shack because all the big houses few can really afford, so the price for the tiny crappies or badly located get bid way up. But the mid level is also bid up because the tiny crappies have sold for outrageous recently plus foreign and speculation investor buy some of everything. So paying 20% over reasonable for mid level or 40% over reasonable for craptastic or 20%-40% over reasonable for badly located hard to pin down exactly for that variable are my “choices”

      1. May I ask which state you live in? Sounds like California or one of the CA equity locust states out West (Idaho, Washington, CO, etc).

        1. Redpilled Redhead is correct and Ann Arbor is similar if a little less pricey than those equity locust states closer to CA. But we have 2.5% property taxes so while valuations are a bit lower the ever important monthly payments are similar. We have a range of prices depending on specific neighborhood or satellite town nearby similar to the spread of pricing in those western states, but just compressed over space distribution wise relative to those places. Price per SF is similarly high oftentimes to those states and we are a little 100k person town you know, and nearest “city” is um Detroit which hardly counts with it being an hour away on potholed highways and I guess it’s so cool kid now but I go every once in a while to see a show or game and I’m not holding my breathe on the great rebirth. I don’t fish but if I did I couldn’t eat what I catch in many of the local lakes because of industrial contaminants. And Pulte and Toll and M/I and the few local cruddy builders are Building new subs all over the region and condo infill is advertising to coastal people with UM alum ties who want to try retiring here and see games at “the big house “ and so we actually are very locust-ridden. A downtown pretend luxury condo for a mere 800k seems a bargain to theSe folks they can eAt at the overpriced mediocre restaurants downtown every night and the most adventurous are buying little SFHs near downtown at 400k for 1000sf cuz isn’t that cute all cash. Chinese buyers too. Commutes to the outskirts within or just outside city limits are silly hell because the infrastructure can’t handle it and regular people can’t afford these new prices but they work At the U or hospital or new tech companies some of whom are hiring highish paid employees, some with west coast equity to lay down on shacks. The farmland just outside of town is quick becoming more sprawl and oceans and mountains are nowhere about though the great lakes are nice a couple hours in 3 directions. I feel like we’re sort of a novelty act with cheaper craft cocktails and so are getting a rush of interest that may take longer to dissipate than I’d like given that husbands job seems likely to be here for foreseeable future. But he just doesn’t want to wAit a little longer. It will give
          Me no pleasure to “I told you so” so I hope he’s correct in claiming it’s fine to buy now, it just seems so totally stupid. That he won’t even let me run the numbers in front of him to show him how some things is very annoying. I sometimes try and show him news too and he gets like bill crystal in the princess bride… “I’m not listening Valerie!”

          1. “I don’t fish but if I did I couldn’t eat what I catch in many of the local lakes because of industrial contaminants.”

            We have a reverse osmosis water filter system in our house, and we’ve always relied on bottled water away from home. We don’t trust most seafood either.

  9. ‘Growing problems at South Africa’s state-owned enterprises are pushing major companies toward bankruptcy and subjecting the continent’s most developed economy to rolling blackouts that are choking growth.’

    ‘Earlier in December, flagship carrier South African Airways narrowly avoided collapse after the government loaned it 2 billion South African rand ($137 million) and ordered a restructuring. The cash injection came as South Africans watch eye-popping testimony from a national commission where witnesses allege corruption at the airline and other state-owned companies under former President Jacob Zuma.’

    ‘The airline’s plight reflects the broader malaise of the country’s mismanaged and heavily indebted state-owned companies that new President Cyril Ramaphosa has pledged to fix. His government also recently provided a 59 billion rand bailout of state-owned power utility Eskom. The inability of the company to generate sufficient power has left parts of major cities like Johannesburg and Cape Town without electricity for up to 8 hours a day. The government also placed the state-owned Passenger Rail Agency of South Africa under administration, a form of bankruptcy protection.’

    ‘The escalating crisis and its impact on the public finances is a threat to South Africa’s economy, which contracted 0.6% in the third quarter. The country has but one remaining investment-grade credit rating. Eskom’s debt—about 450 billion rand—represents almost 9% of South Africa’s gross domestic product.’

    “Now we’re on the cliff’s edge,” said Peter Attard Montalto, head of capital markets research at Intellidex, a South African research firm. “It’s really gluing sentiment to the floor.”

    https://www.wsj.com/articles/south-africas-scandal-hit-state-firms-put-economy-on-cliffs-edge-11577790000

    1. So even though globalists want South Africa to succeed at any cost, it isn’t happening. I’ll bet that while multi-nationals have been paying lip service to the SA economy that their investments in it have slowed to a trickle. Why build a factory there when you can’t repatriate your profits, assuming you have any?

  10. “A severe shortage of homes for working-class and low-income families is pushing up house prices and rents across the country, putting homeownership increasingly out of reach. The cost of constructing houses has risen significantly since the financial crisis and builders have struggled to make the economics work to construct housing that most Americans can afford. To cover these costs, builders have been focused on putting up houses in the top end of the market where they can still make a profit.”

    “The country now has a glut of luxury apartments, high-end condos and large residences, and a dearth of workforce and affordable housing.”

    Wow! After Ben and other HBB contributors have posted on the lux glut for upwards of half a decade, it is now oficially happening, as Mark Zandi has pointed it out. You’re a little late to the party, Mark.

    In other news, have any MSM economics pundits connected the dots between the Fed’s decision to dump helicopter drops of cash on the housing market in the post-2012 period in order to reflate prices and today’s affordable housing crisis?

    1. If they connected those dots, the globalists would keep them from using their news outlets to tell people. Gold is moving up, still need to see $20 silver or $2000 gold to start to believe the globalists are losing control but starting to have some hope that they may lose control again as they did between 2009 and early 2012 when they couldn’t cause a meaningful recovery. As I said I am not convinced they lost control in 2008, a crisis is a terrible thing to waste, they and their figure head wanted to make fundamental change.

    2. Well the gluts got to where they couldn’t deny it anymore, so they twisted into a pretzel of ill-logic to supposedly explain it. There’s no economics in this entire piece.

      Here’s another Zandi: we are just finishing a 40 year high in multi-family construction. (62 year high in Boston, 72 year high in San Francisco). Yet rents have never been higher in nominal terms and in percentages of incomes spent. And as we read in the Inland Empire recently – apartment firms are not making any money! Explain that Zandi. Why buy apartments? As we’ve seen over and over, they’re gonna flip em! Sounds kinda greater foolish to me.

      And why is it almost everything being built, for years, is – ta-da! luxury! Student, senior, you name it. Why that’s cuz of the land don’t you know. I documented to doubling and tripling of land prices all over the country starting in 2012. CRE in NYC doubled between 2014 and 2016. Explain that Zandi!

      The most obvious explanation for all this is financial mania. But the MSM, politicians, academia, economists, pretty much the entire establishment have blacklisted the term.

  11. I was listening to Yang talk about the 1000 dollar Universal Income idea. Yang states in essence that this will be necessary with the displacement of millions of truck drivers and other jobs based on upcoming artificial intelligence.

    Firstly, why this notion that the Government has to pay for the loss of jobs.

    The Companies that replace workers with robots should pay. For every robot that replaced a human that robot won’t pay Medicare or federal taxes. So the Company gets the benefit of a unpaid robot worker and the profit from, yet that robot doesn’t pay into the system, and Industry ecpects the government to pay the costs while Industry gets the greater profits.

    So, it should be that every robot is taxed to pay for their displacement of human jobs.

    The trick with industry is they try to get Government to pay for the mayhem that they cause in the name of excessive profit.

    Like with health care , that Cartel wants the government to pay their price fixing price.

    The price of college and real estate goes up based on Government backing loans on fake high prices

    People should rebel against the rigged markets, but Communism isn’t the answer. Government needs to get out of being in bed with any industry.

    If you. notice so many of the Politicians answers are for the government to pay for what would usually be a expense of industry.

    Excessive profits from Big Business is the direct result of political policies that need to be altered.

    Industry should pay a high tax for a robot, yet politicans are talking about the government paying for it, when Industry should pay for it. All the freebies just prop up the fake price sitting of these industries.

    1. Bill Gates Says Robots Should Be Taxed Like Workers
      By David Z. Morris
      February 18, 2017

      In a new interview with Quartz, Microsoft founder Bill Gates makes a rather stunning argument—that robots who replace human workers should incur taxes equivalent to that worker’s income taxes.

      Gates argues that these taxes, paid by a robot’s owners or makers, would be used to help fund labor force retraining. Former factory workers, drivers, and cashiers would be transitioned to health services, education, or other fields where human workers will remain vital.
      —————

      https://fortune.com/2017/02/18/bill-gates-robot-taxes-automation/

      1. Not only should robots be taxed, they should pay for the lost Medicare payments from the displaced workers.

        But, in spite of how much artificial intelligence will replace the pay into system from real humans big business will try to get government to pay for the damage they cause.

        Just like all the damage from lost jobs from Globalism, industry reaped higher profits from same with no penality.

      2. I’ll admit up front that I’m not knowledgeable about the man vs robot issue, but I’m firmly against Luddism.

      3. How does one define a ‘robot’? Because automation doesn’t require a C3PO like android body or even one of those robotic arms that have become ubiquitous on assembly lines.

        1. Good point about what defines a robot. This issue really needs to be defined. If 11million truck driver jobs are lost by computers or robots , the cost is displaced workers in the millions all at once.

          Actually automation in one form or another has been replacing jobs in every decade. I guess a new definition needs to be made on profits on a non human work force.

        2. That’s a good point. The auto makers didn’t pay a tax to support the buggy whip makers. Xerox didn’t pay a tax to retrain hand-copyists. Nobody paid a tax to millions of typists and shorthand secretaries who lost their jobs to Word Perfect. Not to mention self-checkouts at grocery stores or bank tellers replaced by ATMs. That’s already a lot of job destruction. If that didn’t trigger a tax, then what will?

          1. Same concept with every job lost to outsourcing and moved manufacturing by Globalism.

            In short the USA is a system that requires people and Industry to pay into the system so it works. Big Industry wants all the benefits of the system without fair share of paying into the system . This is why excessive profits are being made by industry while they expect Government and the masses to pay for the downside.

          2. Let’s talk about Netflix for a second. Because of the improved tech to make movies at all stages of production, content is being produced like crazy. This employs hundreds of thousands of creative types with weaker skills than would have been picked up by the big oligopolistic studios in the past. Before, those people were doing other jobs. They migrated into the film industry. Dont you think these truckers have some other latent skills they could develop to transition into another industry? I do. They’re not all sub 80 iq deplorables. The idea of comparative advantage tells us that we all are better at enough other people at something to make a living at it. And if someone would pay for that service or skill, its valuable and should be respected. Stop pretending people are helpless, you elitists.

    1. If a Realtor would shut fire in a crowded movie theatre no harm would be caused. Nobody believes a Realtor anymore.

      1. Initiating lying subroutine….
        2% complete….
        Please wait.

        Answer:
        Now is a good time to buy!

        Press any key to restart Realtor.exe.

        1. My dear husband ordered me to contact a realtor. We’d been working with someone before but he just disappeared 6 months ago or more lol. I liked him because when I walked into his open house he said their asking price is too high . We’d been getting listings from this woman recently whose open house we went to a long while ago and she recently emailed something like “ with prices falling and interest rates low,now is a great time to buy! “I thought hmm maybe If I say well things seem really tippy top lately but husband wants to buy she’d admit that yea things are tricky right now but noooo she said it’s a great time to buy because interest rates are “at historic lows”, no mention of falling prices. They must be rising again!! All’s well here! We are getting all those AI writing and wiring jobs what with the university and all the autonomous vehicles people!

    1. You see, this blog and its loser readers don’t understand the power of real estate.

      According to the listing, the seller has planning and zoning approval for a 10-unit apartment building, and the property is “exempt from rent control for 15 years!” This is in reference to California’s new rent cap law that will take effect in 2020.

      Apparently, this same lot sold just in October for a mere $580,000 — albeit without the swanky new permits advertised.

      This wise investor listened to the REIC experts and brought this cheap investment. He/she/it then went on to ascertain (means acquire to all you dropout readers here) a building permit to build a 10-unit apartment in 2 months to increase the value of the property. BAM! 1.2 millions in equity right there! He could have build the luxury apartments and flip it but for some reason deciding to sell the property. There is no bubble here. Just bears looking for bubble END OF STORY!

  12. A bear can smell a dead animal from twenty miles a way. The bears on this blog can smell the dead housing bubble from their computers. You can put some perfume on the corpse but we can smell death and we will not be fooled. By the you inquire from the real experts and ascertain the truth, you will be eating the maggots from the kill.

      1. Not in my nabe. Housing is selling pretty well for 25% above what it did when I moved in 7.5 years ago. Maybe that Minimalist Millenial Gray casts some kind of magic spell that separates buyers from their senses.

      2. 2315 S Williams St, Denver, CO 80210

        $569,900 and you would burn your @ss getting water from the kitchen sink with a stove top burner on.

    1. Thats pretty fascinating ABQ Dan. Did you know realtors can smell Ramen (still in the package) from 50 miles away!!!

      1. You mean fake instant Ramen, because real Ramen served in Japanese restaurants isn’t cheap.

      2. Sally Struthers will have to do a misty-eyed fundraising ad for Save The Realtors to feed destitute shack sellers.

        “Get over here and buy a shack! I’m hungry G— Dammit!”
        -Realtors

      1. That is for me the final kicker in my husbands idiocy. We are old, Xers, will get slimed by the dying Boomers in EVERYTHING including the demographics. They’ll all want out of this wintry polluted potholed state just a little before we do and block the equity exits. Reason number 2000 not to buy right now. Quality of life here is only « better «  because housing is cheaper by a little at least for now than bubblicious coasts and south. When the differential slips, the Ann Arbor gears will get rough I would think. Also if China recalls its cash students and investors from here it will have impact

        1. Oops, I should have read until the end before asking where you live. I didn’t know Michigan had gotten bubbly. And yes, I’ve heard about the Chinese students invading all the American schools — and btw, they cheat their way through the degree. At least China is now recalling their students home after graduation, instead of staying in the US.

          1. I thought it was just Ann Arbor that had gotten bubbly because we are prone to it. With the U hosting so many and a regional hospital with national level reputation (though staff is often unhappy and we have shhhh hospital acquired infection problems shhhh) and med school and a new start up culture blah blah Ann Arbor has always been inflated on rents for transients with money who need to be close to the action. Then on home prices too once endless credit started happening. But when bubbles get crazy inflated the outlier areas get way pushed up too, because lower taxes make the monthly payment easier. Now there is also more employment more widely distributed in surrounding areas like Detroit and Burbs thereof and also I can tell MI has been played up as a good place to buy up cheap homes and flip. So many listings indicate this. Property taxes are surprisingly high statewide maybe flippers forgot that part. And realtors say things to new buyers like oh yeah Ann Arbor is so expensive you should buy in these surrounding towns some of which have shockingly high tax rates because houses had recently been selling for so little they had to do *something* to pay the teachers and firefighters.oops. Now when I look at surrounding towns the prices are sometimes just a little lower than Ann Arbor itSelf which is new to me and feels like it reflects a national bubble and that people are going to be on the edge big time because it really seems unlikely to me that median incomes in these communities can support those prices unless everyone buying these things works the good jobs in Ann Arbor and autonomous vehicles and such

    1. Don’t forget depreciation: plywood boxes sitting outdoors in the rain tend to lose value over time.

    1. Jeebus Chrysler, why did i just watch that! Olick starting off the new year with more phony boloney house shortage / FOMO

    2. “Spring has historically been the busiest buying season, but as competition for homes heats up across the country, January is the new April. Spring starts now.”

      They’re really pimping the Fear Of Missing Out.

    1. ABC has been in the back pocket of the warmists for decades. Back when there was still international programming on shortwave radio, they were devoting entire broadcasts to it.

    1. The Fed can’t print oil. It also can’t print enough to cover any wrong-way derivatives bets if oil and gold prices soar.

      1. The last Commitment of Traders (COT) report from December 27 showed commercial speculators, aka “Da Boyz” had taken out huge short positions on gold. Usually these commercial traders act in concert with the bullion banks and the Fed to suppress the price of gold (and artificially prop up the value of the dollar) through selling paper gold and naked shorting. Of course if the price of gold soars due to geopolitical risk, i.e. a regional conflict involving Iran vs. the U.S., Israel, and Saudi Arabia, anyone who shorted gold is going to get their face ripped off, and the years of rigging and manipulation in the gold markets might finally end with a bunch of bankrupt traders and massive derivatives payouts (or more likely, defaults).

        http://www.321gold.com/cot_gold.html

    1. A noted economist stated, “If you have to borrow for 15 or 30 years, you can’t afford it nor is it affordable.”

      Bullshit.

        1. Maybe for you it is. Renting versus buying is an individual decision, and everyone’s circumstances are different.

          I couldn’t touch a comparable lease around here today in a good, desirable location for what I’m paying in principal and interest, which hasn’t gone up like rents have.

          Just going to agree to disagree, and let it go at that.

  13. Simple 1950s solutions do not work. People from other countries expect to vote for benefits and they do. The Koch brothers refused to see the obvious. Thus the reason socialists have a real shot at becoming president.

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