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A Situation Of Too Much Money Chasing Too Few Assets

A weekend topic starting with CNBC. “‘The housing sector’s a disaster,’ said CNBC’s Jim Cramer. ‘We’re building about half the houses we did when the country had half the people, and we still can’t sell them. KB Home does a huge amount of housing in California. They can’t sell them.'”

“The U.S. housing sector is falling apart, and the Federal Reserve is all but ignoring the damage as it prepares for what many expect to be three rate hikes in 2019, Cramer warned Friday.”

From MarketWatch. “Chicago Federal Reserve President Charles Evans is sticking with his projection that interest rates could comfortably run above the so-called neutral rate. That means the Fed could hike rates up to four times next year, Evans said Friday at the Fixed-Income Forum in Chicago.”

“Evans said even with rising rates, there’s little on the horizon to derail the economy. Evans even offered a nod Friday to stock-market confidence: ‘Business people are really smart and must know what they’re doing. If they’re giving away capital as [share] buybacks, they must feel pretty optimistic.'”

From DS News. “Natalya Vinokurova’s dissertation on mortgage-backed securities (MBS) investigates how the use of analogical reasoning facilitated both the development and the collapse of the market for these securities in the United States.”

“What are the lessons that the financial services industry still hasn’t learned from the 2008 mortgage crisis?”

“The issue of systematic risks comes to mind immediately when we speak of lessons that the financial industry has still not learned from the crisis. One of the underlying causes of the 2008 crisis was the market participants’ failure to appreciate that some risks, including the interest rate risk and the credit risk, affect the economy as a whole and, thus, could not be insured by private actors. And yet, the attempts to offer private insurance for these risks, for instance, through use of self-insurance devices such as tranching continue despite the failure of tranching to protect investors from prepayment risk in the early 1990s and default risk in 2008. The failure of the private mortgage insurance companies in the aftermath of 2008 as well as the Great Depression also seems to be fading from memory.”

“One of your papers looks at how MBS issuers convinced investors that they were bonds. Can you share your findings from this study?”

“In the 1970s and 1980s, MBS issuers succeeded in changing the definition of a bond to include securities that exposed investors to prepayment risk, made variable monthly payments of principal and interest, and did not constitute debt obligations of their issuers. Through my research, I found that such an expanded definition allowed MBS issuers to sell their products to a much wider range of investors than the individuals and institutions who were willing to invest in mortgages directly.”

“Which factors are likely to cause the next housing bubble?”

“There are three factors that are likely to cause the next housing bubble—liquidity in the system, lack of transparency both within and across the institutions, and, finally, the governance of the institutions. The liquidity comes in part from the quantitative easing policies adopted to ease the aftermath of the 2008 crisis. These policies created a situation of too much money chasing too few assets—a key prerequisite to a housing bubble.”

“There has been a failure in the aftermath of the 2008 crisis to remedy one of the fundamental causes of the crises—a lack of transparency about who owns what assets. Such lack of transparency means that instead of relying on information both regulators and financial institutions have to base their decisions on educated guesses as to who owns what. These educated guesses translate into governance problems.”

“Most people frame the fact that some of these institutions are ‘too big to fail’ as an incentive problem. An issue that does not get enough attention is that ‘too big to fail’ is a governance issue—these institutions are too big to be governed effectively, not just by the external regulators but by the internal top management teams.”

From The Havana Times. “Ravel’s Bolero begins with a soft melody and increases its tone until it becomes an unbearable noise. So have decisions been made in Nicaragua’s financial crisis. The bankers were rising the tone with each decision, responding to the consequences provoked by the human rights conflict.”

“First, the banks cut credits by invitation, that’s to say they stopped offering them, and those who had accepted were told that conditions had changed. Afterwards, they cancelled those already approved and so on until they reached the point of practically restricting all loans. The flight of capital continued, and they tried to slow it at least with those that had certificates not yet expired. These combined decisions by bankers, investors and savers describes the first phase of the financial crisis.”

“Very few are surprised that in the middle of the banking collapse a new crisis appears, the real estate bubble. By June, all properties had lost 30% of their value. The valuation chamber of Nicaragua determined that month to reduce by that percentage the value of all real estate in the country. In parallel, the Superintendence directed banks to update appraisals of thousands of mortgaged properties.”

“The closing of this accounting process will quantify the explosion of the bubble. All the banks are affected, since they keep as loan guarantees granted the now devaluated real estate.”

“The banks have two options, request the thousands of debtors to make deposits to compensate the new premiums or to be realistic and automatically issue complementary loans for this purpose. A credit issue of this magnitude is in line with the latest Central Bank reserves reported on September 30.”

“The rescue of the financial system could be in the order of US $3.5 billion. It is unlikely that the Central Bank will lead this rescue to the financial system. It does not seem to have the same reserves that in a transparent way it published a month ago, and tends to focus more on the fiscal stability than monetary stability.”

“The government cannot come to the rescue either, the risks related to financial sanctions, derived from the human rights conflict, have distanced it from access to multinational funds.”

“The crisis facing the banks in Nicaragua is unprecedented in financial history. It was provoked by a conflict of human rights, aggravated by the explosion of the housing bubble, lacks national institutions that can lead the rescue and, therefore, does not have access to multinational funds either.”

“It is very difficult for the external partners of each bank to calculate how much they can contribute to salvation, without being contaminated by the fallout and even more complicated is to determine how much time is left for the solution to the conflict. Without approximate amounts or expected times, any banker in the world already has their answer.”

“Private banks still have access to the international financial market, a rescue bonds issue could well find investors. However, the requirement for the timely placement of these securities is the parallel issuance of some slight signal, that this conflict envisions a solution.”

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  1. ‘Very few are surprised that in the middle of the banking collapse a new crisis appears, the real estate bubble. By June, all properties had lost 30% of their value’

    It’s interesting that this news doesn’t come from the MSM.

    1. Investing In Nicaragua: The Five Main Sectors | centralamerica.com
      https://www.centralamerica.com/investing/business/investing-in-nicaragua/

      Feb 19, 2018 – Investing In Nicaragua: A Fertile Land For Growing Business. It’s no secret Nicaragua has an uneasy past. But foreigners are discovering Nicaragua again. The government knows the importance of foreign investment in Nicaragua. New opportunities ahead. Tourism. Real Estate. Agriculture. Light Manufacturing. Outsourcing.
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      https://vianica.com/go/specials/31-investment-opportunities-in-nicaragua.html

      The government recognizes the value of foreign investment in furthering the country’s socioeconomic growth, and therefore offers many incentives to invest in Nicaragua. The Economic Picture. Investment Incentives. Fiscal Incentives. Free Trade Agreements. The Labor Force. Labor Market Risk. Textiles and Light …
      Invest in Nicaragua – International Living Countries
      https://internationalliving.com/countries/nicaragua/invest-in-nicaragua/

      Investing in Nicaragua affords investors an opportunity to participate in an early-in investment real estate market. Ideally, you want to invest in any real estate market at the right time and in the right place.
      How to buy and invest in Nicaragua real estate – Nomad Capitalist
      nomadcapitalist.com/2014/02/05/buy-invest-nicaragua-real-estate/

      Invest In Nicaragua | Investing In Nicaragua
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      property-nicaragua.com/why-invest-in-nicaragua/

      There are a variety of reasons why Nicaragua is a great place to live. … These are a few of the reasons why we believe investing in Nicaragua is the right option …

      2. I have a coworker from Nicaragua who loves the place, but says “don’t go there right now…there will be a revolution soon”.

  2. ‘One of your papers looks at how MBS issuers convinced investors that they were bonds’

    ‘Business people are really smart and must know what they’re doing. If they’re giving away capital as [share] buybacks, they must feel pretty optimistic’

    DONG!

  3. ‘We’re building about half the houses we did when the country had half the people, and we still can’t sell them. KB Home does a huge amount of housing in California. They can’t sell them’

    Statements like this are intriguing. There’s a sort of impossibility. It’s suggested there’s not enough shacks. But the new ones are sitting unsold. In California no less!

    And so it goes with the housing bubble. Media people left to ponder the unthinkable. Crying out for more central bank gravy, when these are the people who set up this impossible situation.

    1. “Gosh, if only we had more inventory, we could sell every house that comes to market!”

      — Every Realtor Everywhere, circa early 2018

    2. “‘The housing sector’s a disaster,’ said CNBC’s Jim Cramer. ‘We’re building about half the houses we did when the country had half the people, and we still can’t sell them. KB Home does a huge amount of housing in California. They can’t sell them.’”

      “The U.S. housing sector is falling apart, and the Federal Reserve is all but ignoring the damage as it prepares for what many expect to be three rate hikes in 2019, Cramer warned Friday.”

      Guys like this total hack need to be relieved of their duties. To solve a problem and find a solution you first need to understand the problem – cause and effect – in order to rectify it. You cannot simply treat the symptom, you need to get to the root of the problem. It’s like if you have water pouring in from your drywall ceiling, you don’t just keep replacing the drywall, you get your lazy azz up on the roof and fix the leak.

      The reason houses are not selling is because people can’t afford them. The problem is high housing prices. The solution is lower housing prices. The Fed, by raising rates, is actually helping the problem – a problem they are 100% responsible for – albeit WAY too late. But nobody talks about that on TV. It’s loud-mouthed shills like screeching bald boy who get airtime.

      1. I know Ill keep saying this to the new posters, its amazing how the digital revolution means we can live in 1/3 or1/2 the space we needed 10-15 years ago. yet where are the normal size starter houses being built?

        1. It’s good to keep saying this, as it needs to be repeated. Condos are the new starter homes. For some, living in an RV is a way to bypass the housing scam and the luxury apartment rent life. I saw quite a few of these people on my run this afternoon. The move their RV every so often and stay within city limits. Kind of sad and kind of ingenious.

          1. “It’s good to keep saying this, as it needs to be repeated. Condos are the new starter homes.”

            No, no they’re not. There’s no “new” anything. Condos suck, and most people don’t want them. It’s just that when you have massive distortions in prices, people end up settling and buying the cheapest thing possible, which is what a condo is. It’s not even real estate – you don’t own any land and you have dues and all sorts of other nightmarish things.

          2. I just finished reading Nomadland by Jessica Bruder. It’s a good peek into a segment of society that lives without ‘sticks and bricks’ as they put it. There are other segments, like the RV dwellers that camp, but don’t actually go anywhere, around Seattle – a mix of local homeless, drug dealers, and others like the opportunists who exploit the city to put towed RVs on the streets and rent them out.

            Bruder spent her time primarily among older ‘vandwellers’ – people living out of vans, small trailers and the like and explored work situations like Amazon’s CamperForce and the Sugar Beet industry. Most were people who had a tenuous grip on being in middle class in their prime, and fell out as they aged and suffered at the hands of the ‘modern economy’ which we like to document a part of here.

            We could probably spin this topic off into entire 50-post discussion of it’s own.

            Why yes, I was checking out new 5th wheelers before going to the 21 Pilots concert last night…

          3. It’s cold and it rains enough in the Pacific Northwest that someone could rent a small warehouse and configure a “penny hang” for the street people. Entrepreneurship!

          5. drumminj I got it working by manually installing the plug-in again. Haven’t checked to see if it’s still not auto updating. I have 3rd party cookies blocked if that might be the problem.

          6. I have 3rd party cookies blocked if that might be the problem.

            The extension doesn’t rely on cookies, so that shouldn’t cause any issues. Is this on a desktop PC, or mobile device? Firefox or Chrome?

          7. I have successfully installed and used the JoshuaTree 4.7.3 extension on Firefox. Looks like Ben’s “reply textbox” for WordPress has its “quote-editing” features working properly too.

          9. Still @ latest 4.7.3

            Just pushed a new version (4.7.4) with a minor bugfix. Not sure how often Firefox auto-checks for updates, but you can trigger it manually by going to the hamburger menu in the upper right, select “Add-ons”, then from the ‘gear’/settings drop-down button choose “check for updates” at the top. Should grab the new version (that’s the process I do to pull the new version immediately to validate it)

      1. They are. It starts with concessions and then discounts. But that puts recent buyers underwater.

        Recall there were recently 3,300 finished, unsold shacks in Orange County CA alone.

        2. “But that puts recent buyers underwater.”

          Nobody put a gun to these people’s heads and forced them to buy at the second peak of an historic mania. They assumed the risk of going underwater when voluntarily signed the mortgage contract.

    4. I think population growth, household formation has more to do with housing demand than absolute numbers. If we had 400 million people but negative population growth. We wouldn’t need new housing at all, or only to replace what fell down.

      1. US internal fertility is presently a 1.7, replacement is 2.1. So we are facing a population decline except for immigration (Oh well maybe not) . That isn’t a good long long term driver for housing demand.

        Of course investing in retirement homes and funeral plots might still work as the pig hasn’t quite exited the python.

        1. Speaking of population declines, I read in The Economist today that deaths are outnumbering births by 400,000 annually in Japan. They have more women in the workforce and something like 3x the number of 65+ year-olds in the labor force. They also have tons of surplus housing. Japan is us in about 10-20 years.

          1. The leaders and elites sure don’t like anything that casts their need for perpetual economic expansion in a bad light. (Cue the current love of open immigration from the 3rd world)

          3. The leaders and elites

            Rant coming….

            Lately I’m finding myself taking serious umbrage at the term ‘elite’ used to describe people or groups. You see it a lot with celebrities, sports professionals, government employees, and those with a lot of money.

            ‘Elite’ presumes one is better. For sports pros, it makes sense — they are elite in their field. But some random youtube streamer? Or just because someone managed to ride the wave of our sham economy to amass a large amount of funds? Use of this term feels like propaganda.

            Am I alone in this? “Self-styled elites” perhaps?

          4. No, I’ve been agin’ it for a long time. The MSM got this crap started a few years ago. It used to be a derogatory term.

          6. drumminj

            I totally get you umbrage – I use the term to refer to people who consider themselves that – heads of state, national govt members, Wall street ‘titans’, etc. People who can and do influence things on a national or greater level that impact all of us and view the world through ‘what’s best for people them themselves’ glasses.

            I don’t use it for celebrities, generally rich, or sports figures and so on (though if a running back gains 2000 years in a season, I’ll call him that 😀 )

    5. KB Home does a huge amount of housing in California. They can’t sell them’

      Sure they can sell them. All they have to do is lower the price.

      1. Might not be an accurate statement that if they lower the price they can sell the homes.
        Today is different in that so damn many young people are carrying big educational loans, and want all of the electric devices to entertain themselves.
        What with starbucks, new cars, and they good old I need things, they may be so overwhelmed with rent, etc., that there is not enough income to cover the expenses of home ownership.
        Rather room together and have fun then buy a home and work at maintaining it
        This , combined with the influx of legal and in-legal immigration of of lower income humans has resulted in a low number of people who can even afford to live in California
        My idea of a solution is to deport all non-legal residents and drive the population of lower income residents down
        Hell I don’t expect that to happen, but if it doesn’t it will get worse.

  4. “The U.S. housing sector is falling apart, and the Federal Reserve is all but ignoring the damage as it prepares for what many expect to be three rate hikes in 2019, Cramer warned Friday.”

    The housing sector isn’t falling apart. Housing Bubble 2.0 is imploding under the weight of its own fraud and ludicrous valuations. Big difference, Jimbo.

    Should I protect my wealth by buying and holding Bear Stearns?

  5. Where do inflated home appraisals come from?

    Inflated Home Appraisals Drain Billions From Government Insurance Fund
    Federal Housing Administration says it expects to lose $14.4 billion in coming years, potentially raising premiums on mortgages insured by the FHA
    By Cezary Podkul
    Nov. 16, 2018 2:10 p.m. ET

    Inflated home appraisals are fueling losses at the Federal Housing Administration, which said this week that it expects a $14.4 billion drain from its mortgage insurance fund in coming years.

    The shortfall stems from the FHA’s portfolio of reverse-mortgage insurance, but the agency’s chief, Brian Montgomery, says he fears inflated appraisals may also be lurking in its much-larger portfolio of traditional mortgage insurance.

    If…
    To Read the Full Story
    Subscribe
    …

    1. In a population of appraisers there are many groups to consider. As an appraiser for 30 years way back when, and working for a state agency, I can tell you that there was no incentive to raise valuations as my income did not depend upon the sale of the home. As an FHA appraiser, separate income stream, because my basic income was firm, I could live without the necessity of complying with the wishes of the parties to the sale of the home.
      Away from that security an appraiser is subject to the pressure of complying with the requests of the parties as his income is dependent on meeting the wishes of the parties otherwise his repeat appraisal work disappears.
      It is hard to be honest when you income is so tentative
      It really depends upon the honest of the review appraisers in the loan agencies to control the problem.
      But the same problems exist there.
      Perhaps the solution is governmental employees being used for appraisals to determine if the loan is to be backed by a governmental agency.

      1. The formula used by appraisers needs to be weighted by median household income of the neighborhood in addition to that of the hopeful buyer. Relying on sales prices driven by wildly optimistic debt donkeys is not due diligence.

        2. That is a very sensible recommendation. I would also add that I’d like to see government backed loans limit housing financing to 2-3x the income of the applicant, and a sizeable down payment.

          1. The Democratic politicians will never agree with you on that one. How will they get a new class of predatory lending victims to vote for them if they don’t enable gargantuan loans to poor people?

          2. I would also add that I’d like to see government backed loans limit housing financing to 2-3x the income of the applicant

            Why even 2-3x?

            I would think what specifically matters is the DTI of the buyer with the mortgage (presumably to be reviewed annually or some such to ensure if not exceeded, or put requirements on banks/lenders to not lend to someone with a gov-backed loan if they’d exceed the DTI ratio), as well as ensuring a minimum 20% down payment, clearly drawn from the borrower’s savings.

        3. Bad idea.

          The definition of ‘appraisal’ is “An objective and detailed cost of materials, labor and profit less depreciation.”

          The sooner the phony appraisals(which are crimes I might add) go away, the sooner the real estate business will recover from their disastrous reputation and develop public trust.

          1. Why even 2-3x?

            A cap on DTI would be good. My feeling though is that any mortgage security which is backed by quasi governmental agencies should have limits tied to some multiple of median area income. In any event, yearly incomes can fluctuate for some professions, which is why tying financing to some reasonable multiple of 2x-3x would prevent ridiculous valuations, especially those we’ve seen when interest rates were pushed down. Private mortgages could go their own path and could conceivably convince lenders to be less judicious, but they wouldn’t get the backing of the state-sponsored lending agencies.

      2. “Away from that security an appraiser is subject to the pressure of complying with the requests of the parties as his income is dependent on meeting the wishes of the parties otherwise his repeat appraisal work disappears.”

        Most remarkably, government does some things better than the private sector.

  7. ‘One of the underlying causes of the 2008 crisis was the market participants’ failure to appreciate that some risks, including the interest rate risk and the credit risk, affect the economy as a whole and, thus, could not be insured by private actors’

    ‘ And yet, the attempts to offer private insurance for these risks, for instance, through use of self-insurance devices such as tranching continue despite the failure of tranching to protect investors from prepayment risk in the early 1990s and default risk in 2008. The failure of the private mortgage insurance companies in the aftermath of 2008 as well as the Great Depression also seems to be fading from memory’

    When the topic of lending comes up, the matter is usually brushed off with “there aren’t negative am ninja loans, bahhh!”

    There are actually, but this ignores that 90% plus of defaults were prime. And this environment described above still exists! Why? Government guarantees. The market has never had such a percentage of guarantees as today. So when risk increases, such as prices rising far beyond wages for year after year, rates aren’t adjusted for the risk. When risk increases with easing lending standards, year after year, rates weren’t adjusted for the additional risk.

    There’s the crazy lending. Completely detached from risk and no real skin in the game. Sound familiar?

    1. There was an opportunity during the last economic meltdown to do the right thing by indicting and imprisoning all the top bankers who committed fraud – the S&L crisis paled in comparison – and allow all the large insolvent banks to fail, distributing their assets to the innumerable smaller banks which didn’t engage in the fraud.

      Further, there should have been an in depth assessment of why things unraveled the way they did, and a responsible course of action set which would have prevented such an occurrence from happening again. Instead, the government and big banks doubled down on the same failed policies to save themselves and all their rich buddies. It’s reprehensible.

      2. The Crash That Failed
        Robert Kuttner
        November 22, 2018 Issue
        Crashed: How a Decade of Financial Crises Changed the World
        by Adam Tooze
        Viking, 706 pp., $35.00
        William Powhida/Postmasters Gallery
        William Powhida: Griftopia, 2011; a ten-foot-wide ‘visual translation’ of the 2008 financial crisis based on Matt Taibbi’s 2010 book of the same title

        The historian G.M. Trevelyan said that the democratic revolutions of 1848, all of which were quickly crushed, represented “a turning point at which modern history failed to turn.” The same can be said of the financial collapse of 2008. The crash demonstrated the emptiness of the claim that markets could regulate themselves. It should have led to the disgrace of neoliberalism—the belief that unregulated markets produce and distribute goods and services more efficiently than regulated ones. Instead, the old order reasserted itself, and with calamitous consequences. Gross economic imbalances of power and wealth persisted. We are still experiencing the reverberations.

        In the United States, the bipartisan financial elite escaped largely unscathed. Barack Obama, whose campaign benefited from the timing of the collapse, hired the architects of the Clinton-era deregulation who had created the conditions that led to the crisis. Far from breaking up the big banks or removing their executives, Obama’s team bailed them out. None of the leading bankers whose fraudulent products caused the economy to crash went to jail; criminal prosecution took a back seat to the stability of the system. Obama’s tepid program provided just enough stimulus, via a modest public-spending program and cheap unlimited credit for bankers, for a slow recovery. But the economic security of most Americans dwindled, and the legitimacy of the system was called into question.
        …

        1. “Far from breaking up the big bank$ or removing their executive$, Obama’s team bailed them out.

          Makes it $ound like the Wanker$ter Bank$ters where poor & $uffering up until the very moment the Kenyan arrived.

      3. pinion The Weekend Interview
        Why Central Bankers Missed the Crisis
        The lesson of 2008, a top economist says, is that monetary maestros don’t pay enough attention to financial markets. Are they making the same mistake again?
        By Joseph C. Sternberg
        Nov. 16, 2018 6:41 p.m. ET

        Basel, Switzerland

        It’s been a rough decade for most developed economies, as businesses, politicians, policy makers and voters have struggled with the aftermath of a global financial panic and deep recession. So it’s a good time to ask what we’ve learned—especially about the causes and cures of the financial instability that caused so many problems. Claudio Borio’s answer is sobering: We know less than we think we do, and our ignorance could cost us.
        …

      4. Wall Street is very entertwined with the pinnacles of the U.S. power structure, including top investment bankers forging close ties to U.S. presidents of both parties as well as financial regulators (e.g. the Fed). It is hard to see how this could fail to yield favoritism at a point of crisis when bailout monies are distributed.

    2. I love when analyses equate prepayment risk with default risk as if they are equally bad. This was mentioned a lot in 2008/9 bubble recaps, trying to justify reckless practices. A generation of money managers spent the bubble falling all over themselves trying to mitigate prepayment risk (oh no, we might get repaid too soon!) without the slightest thought to actual default risk. Return on capital vs. return of capital, definitely not the same thing.

  8. ‘We’re building about half the houses we did when the country had half the people, and we still can’t sell them. KB Home does a huge amount of housing in California. They can’t sell them.’”

    Wasn’t that back in the day when people were having large families and immigration was running amok? Last time I checked, we were tightening the borders, young people were buried in student loan and credit card debt, and young ladies were delaying the decision to start families, often indefinitely. Where is this hypothetical demand for new houses priced north of $500K supposed to originate?

    “The U.S. housing sector is falling apart, and the Federal Reserve is all but ignoring the damage as it prepares for what many expect to be three rate hikes in 2019, Cramer warned Friday.”

    Won’t rate hikes help bring housing prices back into alignment with incomes?

    1. US Fertility Rates Are Collapsing Across The Country, And No One Knows Who to Blame
      ARIANA EUNJUNG CHA, THE WASHINGTON POST
      20 OCT 2018

      As 2017 drew to a close, House Speaker Paul D. Ryan (R-Wis.) urged Americans to have more children.

      To keep the country great, he said, we’re “going to need more people.”

      “I did my part,” the father of three declared.

      Ryan’s remarks drew some eye rolls at the time, but as new data about the country’s collapsing fertility rates has emerged, concern has deepened over what’s causing the changes, whether it constitutes a crisis that will fundamentally change the demographic trajectory of the country — and what should be done about it.

      Women are now having fewer babies and at older ages than in the past three decades, a change that the Centers for Disease Control and Prevention’s National Center for Health Statistics (NCHS) reported this year, and which was confirmed this week with the release of additional data that shows that the trend holds across races and for urban and rural areas.

      The CDC said Wednesday that the total fertility rate — a theoretical figure that estimates the number of births a woman will have in her lifetime — fell by 18 percent from 2007 to 2017 in large metropolitan areas, 16 percent in smaller metro areas and 12 percent in rural areas.

      A similar downward trend holds for white, black and Hispanic women.
      …

      1. Meanwhile, household debt in the US hit an all time high of $13 trillion. I’m not surprised that a nation of debt slaves is not able to churn out enough children to keep the economy growing.

      1. ” …trying to ju$tify reckle$$ practice$.”

        What would bee the “lesson.learned”, if yer parents left you a sticky notes on yer door that said:

        ” Billy, we know you took x9 homemade cookies from grandma’s jar, please refrain that sort of behaviour in the future” … your disappointed parents, love Mom & Dad

    5. More seniors carrying student loan debt into retirement than ever before
      Nicole Vowell
      9:24 AM, Nov 16, 2018
      2:33 PM, Nov 16, 2018

      WASHINGTON D.C. – The cost of education can last a lifetime, as many people into their 50s and 60s are finding out.

      According to Federal Reserve, 2.8 million people in the U.S. over the age of 60 are sitting on some amount of student debt, a number that quadrupled from 700,000 in 2005 and continues to grow.

      “This is really a sledgehammer against the older generation in more ways than one,” says Alan Collinge, creator of online advocacy group for borrowers Student Loan Justice.

      Collinge has been campaigning for change surrounding laws for student loans since 2005, after trying to figure out a way to pay off his own crippling college costs.

      “It’s a really devastating phenomenon, and I’m seeing it destroy, literally wreck, families across the country,” Collinge says.
      …

      1. I thought the phenomenon was older people co-signing student loans for their kids or grand-kids.

        Penury should be a deserving lesson for older debt donkeys.

      1. US Credit Card Debt: Locked and Loaded at $1 Trillion
        Brian Riley by Brian Riley
        November 8, 2018
        debt

        It is less than exciting to report a slowdown in credit but it comes at a good time as interests rise, gross writeoff settles, and unemployment sits as record low levels. Good news often has a wrinkle. If you consider loss rates in aggregate, the credit card industry is performing well, with the latest Fed numbers indicating 3.65% chargeoffs. It is indeed 11bp worse than 2Q17, but it is 1bp better than the prior quarter.

        To see the issue, you need to peel back the onion. Large banks are doing very well and drive the number with their portfolios. Chargeoff performance at the top 100 banks ended 2Q18 at 3.56%, but for those not in the top 100, the metric is a whopping 7.78%. Simply put, write-offs at small credit card issuing firms is twice that of large issuers.

        Ouch.

        There is a downstream issue brewing. Large banks are running at 2.41% for 60+ delinquency; smaller banks are almost three times higher at 6.15%.

        It is likely to expect the large bank delinquencies to surge around 2Q19 when you consider the most recent trend in U.S. consumer debt reported by the Fed yesterday. Slower growth and rising delinquency will disrupt both the nominator and denominator used to express portfolio ratios.
        …

        1. I wonder if the discrepancy between small and large banks can be chalked up somewhat to adverse selection. Small banks might be in more rural areas their economies have stalled out. Large banks might be in urban city centers where jobs and economic prospects have excelled relative to their rural counterparts.

  9. KB Home does a huge amount of housing in California. They can’t sell them.

    My wife would like a new house in El Dorado Hills. But the builders only want to build her a $900k house. That’s not what she wants. They’ll sell houses as soon as they build what people want for a reasonable price. The speculators have left the buy side of the market.

    2. The new homes in our area are all listed as “from the $1 millions.” I can’t imagine there are nearly as many unsheltered millionaires hunting for new shacks in our area as there are homes going up in that price range.

      1. I drove by a new development where the sign said “from $699k.” I think median household income in the area is like $55k, and they just started building a few months ago. Good luck with that…

  10. Forgot about the Las Vegas real estate radio show on this morning, catching the last half hour. They’re discussing how mortgage lending requirements are loosening, “unconventional” mortgages becoming available e.g. 5% down up to a million $, no mortgage insurance…Zillow is next topic.

  11. I follow Doug Noland, a macro analyst. His latest makes a great deal of sense to me. Leveraged loan funds at a 2 year low, CDS rates for Goldman and the other PigMan banks are rising, weaker Eurozone countries 10 year yields are rising and there are $3T in BBB corp bonds.
    If the Fed stops raising rates, the front runners (who buy ahead of anticipated Fed policy moves) will have to cover their UST short positions (created to profit from declines in UST prices as the Fed raises rates). This means less money to buy corp bonds, a sector already under distress ($3T in BBB corp bonds, a few steps away from junk)
    If the Fed is not at check mate already, they are closer than ever

      1. upgraded

        A charade of recovery based on increased debt should have those debts upgraded, but we’ll see.

  13. I haven’t been on here in years. It’s funny to think how much my life changed since I first found this resource. I’m still a MMM/Dave Ramsey skeptic about debt and the hedonic treadmill and think buying expensive housing is stupid. That said, prices on small single family in my area with ESOL heavy schools have risen steadily since 2010. And prices on houses in the country have fallen as boomers downsize or die and their kids have no savings or kids or marriage.

    I sold my old cape cod for a lot more than I’d have ever thought and bought a much better house with tiny “10” rated public elementary and great youth lax for cash with some of the big pot I’d saved up. Middle and high schools are good too but kids will go to Boys Latin when it’s time for upper school. Area is 80% red, low taxes, laughs at shitl*bs, and is mostly zoned for farms and preserved forest. I don’t think a single male in my neighborhood voted for Her. Not a redneck area, just outside of Bel Air, MD. A+ place.

    1. Also worth pointing out 2 other things.
      1) the guy who bought my house is a white retiree but he had to compete with prices being driven up for to all the central Americans who can buy homes in Baltimore City now (sanctuary City, very lib, schools are very good at esol to the point they’re bad for other kids even in a “nice” area). Bc of MD and Balt policies, these immigrants all have some type of documentation, licenses, quasi legal status. Sad, IMO. More are coming to Maryland all the time and it’s the only demo growing in the city.

      2) after our house and schools search, my wife got redpilled and voted straight R the other week. She realized how stuff works after looking at zoning, schools, QOL, prop taxes, county govt. She eventually realized Harford County is way better than Balt County and that even though this is “unfair” to kids, it’s what she wants for her sons. Being a 3rd grade teacher started pushing her that way in 2015-16 but it took picking a new house/school zone to drive it home. My wife grew up fairly poor with a single hippie mom and never voted R ever prior to this, fwiw.

      K I’m off to take care of kids.peace.

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