Don’t Believe the Housing Hype
If you are looking to buy a home, the one thing I would say to you is this: don’t believe the hype.
In this week’s Indy, Jessica Mayrer has an article about the housing market in Missoula: Real Estate Market Rebounds, For Now:
Missoula real estate experts are hopeful that the era of lackluster sales and flat property values that set in when the economy tanked six years ago seems to be ending.
“We’ve, I think, turned the corner,” says John Herring, president of the Missoula Organization of Realtors. “We’ve definitely seen an increase in activity.”
For real estate agents, there’s reason for optimism. Median home prices in Missoula increased from $198,750 during 2012’s first quarter to $207,500 during the same period this year, according to MOR numbers. City data, meanwhile, shows that 98 new single-family home construction permits were issued through April of this year, or up more than 50 percent from 2012.
If you read the whole article, there is some skepticism about “underlying factors” like the potential for rising interest rates, but it’s not enough.
I say that because the entire “rebound” being touted by industry insiders is a massive fraud, something even the New York Times is finally reporting on:
“Wall Street played a central role in the last housing boom by supplying easy — and, in retrospect, risky — mortgage financing. Now, investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest…..
While these investors have not touched many healthy real estate markets, they are among the biggest buyers in struggling areas of the country where housing prices have been increasing the fastest. Those gains, in turn, have been at the leading edge of rising home prices nationwide…..
Nationwide, 68 percent of the damaged homes sold in April went to investors, and only 19 percent to first-time home buyers, according to Campbell HousingPulse.” (NYT)
For Michael Whitney, who has been closely tracking this, the NYT reporting is too little, too late. If you want to understand the dynamics at play, please read Whitney’s latest article, The Big Investment Firms Driving the Housing Market.
Actually, the dynamics are pretty simple. They are called “fundamentals” and when the “fundamentals” aren’t strong, housing markets won’t be strong.
If you don’t read the whole article, at least read Whitney’s conclusion (with corroboration from Fitch Ratings):
There’s no demand in housing, not really. It’s all smoke an mirrors. Existing home sales were down in March even though the Fed is buying $40 billion in Mortgage Backed Securities (MBS) per month, even though interest rates are at their lowest level in history, even though Obama is providing “no doc” refis to people who haven’t paid a dime on their mortgage in two years, and even though the banks have reduced their foreclosures by 24% in the last year and the nation’s 3 biggest banks have stopped foreclosures altogether. Even with all the rate-stimulus, all the freebie mortgage modification programs, and all the stealth inventory suppression; demand is still weak, weak, weak.
Why? Because the fundamentals are weak, that’s why. Here’s how Fitch Ratings agency summed it up in a recent post at Zero Hedge:
“Fitch Ratings believes the recent home price gains recorded in several residential markets are outpacing improvements in fundamentals and could stall or possibly reverse…..Several factors are combining to form an environment supportive of brisk home price growth, but few are capable of providing long-term support to sustain the recent pace of improvement….
Demand is artificially high … We believe this level of housing demand is likely to abate once the pent-up demand is satisfied. …The supply is also artificially low….
The supply-demand imbalance is even more pronounced in regional markets that are seeing strong institutional and retail bids for rental properties. The low rate and steep drop in prices, coupled with the decline in homeownership, have attracted an estimated $8-$10 billion of new capital to this sector.” (“Haunted By The Last Housing Bubble, Fitch Warns “Gains Are Outpacing Fundamentals”, zero hedge)
Finally some one is talking about fundamentals. And what are the fundamentals that traditionally drive the housing market?
Low unemployment and good paying jobs mainly, the two things that are sadly lacking in Obama’s bogus economic recovery. Until those improve, buying a house is just a crap-shoot. But don’t expect the Times to tell you that.
Yeah, the media. That group of sycophants who are suddenly concerned about an out-of-control administration steering the massive ship of our out-of-control federal government toward a fascist surveillance state where not even loyal sycophants will be safe from Big Brother’s long gaze.
The NYT editorial board said Feinstein’s defense of the surveillance state was “absurd” and declared the Obama administration has no more credibility.
That the sphere of absurdity includes once credible media titans like the NYT goes unnoticed by the purveyors of propaganda that spews from this administration on a daily basis.