The Never Ending Case-Shiller Bummer
It's been a rough few days for housing statistics. First and foremost, the Standard and Poors Case-Shiller Home Price Index, issued on March 29, 2011, was downright depressing. As indicated in the press release, January 2011 home prices slipped below December figures in all but 2 of the 20 major cities tracked in the report. Economists crunch numbers for a living and I have no real doubt about the accuracy of the calculations. But after more than three years of unrelenting doom and gloom in the housing market, one starts to wonder what it all means for the owners of those homes on which the data is based.
Housing's Dirty Little Secret
Even if the housing market starts to improve throughout the country in the next few months, and actually begins an upward trend, the damage done to middle class homeownership can't be estimated even by using the most sophisticated algorithms. As a result of changing business models, many Americans looked to the equity in their home as their 401K plan and the foundation for retirement. For many homeowners, equity equaled net worth. With that equity evaporating, and an inability to sell a home even at drastically reduced prices, lives have been so dramatically impacted financially, that a "housing recovery," if and when it happens, may not really matter.
The Migration is on Hold
Remember those 80 million baby boomers who were about to retire and move all over the country? In places like Arizona, Florida, Nevada and North Carolina, builders counted on that wave of retiring boomers to sell their homes in high property tax states and to move to cities with lower taxes, attractive lifestyles and better weather. But if you can't sell your home, and if your equity has disappeared even if you can sell your home, you won't be relocating any time soon and the oversupply of inventory can't be absorbed. That inability to sell has resulted in a paralysis taking over the housing market that the monthly movement in housing statistics doesn't really capture. Unfortunately, the gears of the real estate economy that have always been counted on to churn out the jobs are now frozen.
New York Goes "Crazy Eddie"
That's not to say that all markets are suffering the same fate. At least in the New York metropolitan area, the data shows that trading volume has improved and the market appears to have stabilized. One could even argue that the upward trend hoped for by the City's real estate professionals may have started to materialize. But market stability has been achieved through deep discounting. Paraphrasing the guy in the Crazy Eddie commercials, the housing prices in New York "are insane!" As Vivian Toy's recent article in the Times pointed out, the prices of studio apartments have plummeted to a point of absurdity, creating a window for entering the New York market that is unprecedented in recent memory. Celebrity real estate does not fare much better. Although the glitterati continue to throw millions of dollars at a small number of high end properties, the pricing in many cases is as depressed as more modest properties. There are just bigger winners and losers. And a few large transactions can't revitalize the market and incentivize continued buying and selling. So even in New York, the cycle of immobility continues.
And Now for A Double Dip...
Just to make things interesting and add to the woe pile, Robert Reich in his Huffington piece on March 31, asked why Americans "aren't being told the truth about the economy?" Citing a gaggle of scary statistics, he took stock of the dismal state of things and dared to speak the phrase that haunts the policy makers: the double dip recession. Although the double dip alarm needs to be sounded, I have to ask, are Americans really that dumb? After more than three years of catastrophic unemployment, a decimated housing market and the downward spiral of dwindling net worth, is anyone really counting on the truth being told about how badly things are going? I don't think so. Just ask any homeowner... they already got that memo.
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The solution to the housing mess is going to be painful. But the pain isn't being shared. Either do a region by region reset of ALL the mortgages, property values and property tax rates or expect more of what we have so far. But the crash is coming. Eventually those people paying mortgages on houses a mile underwater will give up. Then what will we do?
The core fallacy underpinning this crisis was the notion that housing should somehow continuously increase in value by just sitting there and sheltering its occupants from the weather. The car in the driveway, the furnace, the big screen HDTV on the wall and every other commodity in the house depreciates as they age; but supposedly the house itself should steadily increases in value the more it is used. The general hope seems to be that the 'normality' of endlessly increasing house values can be restored. The phantom value created by this fallacy fueled the bubble.
Warren Buffet just invested another $600 million dollars with WFC, bringing his total to $10.8 billion dollars with Wells Fargo Bank. Doesn't Wells Fargo Bank own almost all the houses in the United States? Wait, you mean the Government now owns almost all the houses in the United States? Wait, who owns your mortgage, Wells Fargo? Warren Buffet? President Obama? What Trust is your Mortgage in? Actually, You want to buy my house? I don't think I want my house. You can have my house. Warren Buffet invested $10.8 billion with Wells Fargo? Maybe he will buy my house? Oh, He wants to foreclose on my house. I Get It!!
When the first medical malpractice suit was won, and a brilliant lawyer fought for a life lost, fought for someone who could not fight for themself, the first asbestos case? What do we have here? What are the punitive damages? We have towns wiped out? Families wiped out, humiliated, crushed? Dreams destroyed. How is that measured in Punitive Damages? When a Bank fraudulently locked homeowners out of their own home, did they take the furniture out? Did children look at their toys through a window? How does a parent explain that to a child? What does this do to a creativity of a Child, our next generation?
Are all our Best Attorneys working with the Banks?
And it is NOT going to end any time soon.
Even if employment rises, many well paying jobs with good benefits are gone.
More people will be working lower paying jobs with few benefits.
Welcome to the new reality for most working people..
And staging and other suggestions may help sell a house.
However, when you are underwater on your mortgage or few houses are selling in your area, all the suggestions in the world won't help much.
Often, people will be forced to stay in a house indefinitely if they are lucky to have and keep their homes.
Tax the fat cats, seize the bankster casinos, massively invest in green energy, infrastructure, and free education and the social safety net.
Till then, the economy crashes.
"For the public sector to be in deficit implies that the private sector (domestic and foreign) is in surplus. An increase in public indebtedness must necessarily therefore correspond to an equal decrease in private sector net indebtedness.
In other words, deficit spending permits the private sector to accumulate net worth."
http://en.wikipedia.org/wiki/Deficit_spending
F&F
I clicked on the article.
I just picked myself up from laughing.
Those prices are still absurd.
When did the first one end?
It only ended for the banksters, Wall Street warriors, and the politicians.