Housing Recovery Barred by Foreclosure Inventory PLUS New Sellers

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Editor’s Comment:

Crowd mentality is a double edged sword. On the way up in the boom, the myth was that the inflated prices were somehow explainable or justified and that the “real estate market never goes down.” history shows that housing prices always even off at housing VALUE and that deviation from value is what we call “prices.”

On the way down, the fall of housing prices could be and was easily predicted by reference tothe Case Schiller Index tying median income (the ability to pay for housing) with housing prices. The value of homes had remained the same while prices skyrocketed because Wall street had flooded the market with money and hired anyone willing to lie in order to close another loan deal.

Remember that 50% of the loan deals were refinancing. That had nothing to do with new purchases bigger than the pocket books of the buyers. These were people solicited by the banks with tag lines “I can reduce your payments” and I can get you money you can use for investing.

Many deals were new financing on older homes that were fully paid for on the promise of securities scames (see Merendon Mining) where the lenders posing as banks (but at the bank’s behest, holding trillions that investment banks collected from pension funds and other “qualified” investors) not only validated the illegal investment Ponzi scheme, but actually used PROJECTED INCOME from the Ponzi scheme to justify the loan making it appear that the inčome from the PROJECTED INVESTMENT PROCEEDS OF THE UNNEEDED LOANS was in fact to be counted as current income and therefore demonstrating the ability of a borrower to pay when the actual current income was a small fraction of the total income of the borrower reported by lying loan originators and mortgage brokers on the loan “applications” where the loan was both pre-approved and pre-funded.

There was no rush of buyers to flatten out the curve of declining prices because everyone knew the market was črashing. The masses were headed for the doors. Under the spectre of inventories of foreclosure properties (illegally obtained through false “credit bids” and robo-signed deeds on forclosure) and shadow foreclosure inventories (not yet put up for sale) only those with inescapable “reasons” were buying homes. The demographic explanations of demand for new housing demand that fueled the construction of new homes was all based upon lies. Migrations of large numbers of people into an area simply never happened and could therefore neither explain the housing boom nor stop the crash because it was all a myth.

In the article below, the further point is made that when the market actually shows signs of recovery — a long way off — many private sellers will be eyeing numbers they think are closer to their perception of value of their homes. Thus any upward movement is going to be met with a torrent of new inventory from both the banks and private ownership. For every blip that makes it appear that the market is improving, there will be a correction.

Housing Recovery a Long Way Off

By Michael Yoshikami

Housing starts were surprisingly strong this week, while there was improving sentiment from home builders. So should we start to breathe a sigh of relief that the housing market is returning to health? The short answer is no. The headlines say that housing is stabilizing and there are signs of life in the real estate sector. This is true but is only part of the story. Signs of life is far different than a return to healthier times.

While KB Homes and Toll Brothers are reporting sales increases, this does not erase the fundamental problem with the real estate market today; there are too many people wanting to sell and not enough buyers. In some neighborhoods in the United States, every other house is for sale and sitting stagnant with no takers. But this is the obvious sign that the real estate market is troubled; there are deeper problems below the surface.

What is more troubling is in every block in neighborhoods across the United States, there are huge numbers of potential sellers that would sell their house if they could get the price they believe their house is worth. This huge reserve of sellers creates a supply waiting to flood the market when any sign of recovery in real estate capital values returns.

Additionally, banks continue to hold huge inventories of foreclosed properties waiting for a rebound in the market before placing these properties into the real estate market. …

In addition to supply issues, the U.S. economy is far from healthy. While we are in the midst of an uneven recovery, unemployment remains stubbornly high and the prospects of a more normalized employment rate are far off in the distance.

Housing starts see biggest drop since 1984

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EDITOR’S NOTE: That we have ANY housing starts is nearly preposterous considering the number of homes that are unoccupied — mostly because the banks don’t want to report on the financial outcome of selling them. In truth, the banks are taking these homes with “credit bids” which is to say that they are buying the home at auction with a fabricated piece of paper instead of cash. It is a net gain to them for whatever the home is worth. THEY GET THE FREE HOUSE.

But the way they have reported it, for purposes of establishing the level of capital they in reserves, you would think that they own the homes, when in fact, they don’t. Worse yet, they are showing the homes at “principal due” on the defective notes that were used at closings with borrowers, when the real value, if the notes were real, would be a small fraction of the amount on the books of the bank. So the sale would require them to report a loss that never really occurred, while in truth they realized a gain.

If you read this article a couple of times, it will dawn on you that the TARP and other bailout programs totaling more than $7 trillion had nothing to do with bad mortgages. But by making it appear as though they had those losses, they were able to play the Chicken Little game and the US Treasury and the Federal Reserve fell for it, intentionally or not, hook, line and sinker. All that money legally, ethically and morally should be back in play IN the U.S. economy and not in the pockets of Wall Street. Our current policy is the equivalent of providing safe haven and encouragement to terrorists.

Biggest Drop in 27 years may be followed by larger declines

Wed, Mar 16 2011

WASHINGTON (Reuters) – Housing starts posted their biggest decline in 27 years in February while building permits dropped to their lowest level on record, suggesting the beleaguered real estate sector has yet to rebound from its deepest slump in modern history.

Groundbreaking on new construction dropped 22.5 percent last month to an annual rate of 479,000 units, according to Commerce Department data released on Wednesday. This was just above a record low set in April 2009 and way below the estimates of economists, who had been looking for a smaller drop to 570,000.

January’s figure was revised up to 618,000 units from 596,000. But that did not change the tenor of the report, which confirmed that the sector is failing to recover despite interest rates near record lows.

Building permits, a hint of future construction demand, fell to a record low of 517,000 units from a revised 563,000, and were down by about 20 percent from levels seen in February 2010.

Housing was at the epicenter of the financial crisis of 2007-2009.

One key impediment to the sector’s recovery is a vast backlog of unsold inventory, while a shaky job market has also made consumers reluctant to embark on any major new financial commitments. Making matters worse, a glut of foreclosures, stalled in recent months by revelations of improper loan documentation, is depressing the market.

(Reporting by Pedro Nicolaci da Costa, Editing by Chizu Nomiyama)

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