What’s behind the upswing in the housing market? — 10 Comments
A lot of people are paying cash, and buying properties as investments.
I’m currently arranging financing for a house, and the interest rate being advertised is 4% for 30 years fixed. I’m looking at some pain short term, but I keep telling myself that it’ll pay off down the road.
It’s exactly as I thought.
Move along, move along there is nothing to see here its only another Federal Reserve bubble. No big deal, its all to big to fail… just ask Uncle Ben.
No surprise. They contribute to breaking the system, then they capitalize on the destruction they have helped to wreak.
Had my real estate agent also mention (complain) that banks are not as anxious as they once were to dump foreclosed properties on the market.
Federal Reserve ZIRP and QE are distorting the market through unprecedented excessive stimulation. It is difficult to blame the “bad guys’ on Wall Street. While the housing market is getting reinflated in most viable markets, the most depressed areas that still have long-term demand prospects will naturally see investment by anyone who calculates that they can turn a quick profit including businesses of all sizes.
Central bank manipulation of the money supply and interest rates leads to bad decision making by both businesses and consumers. The Blackstone Group and Colony Capital may, or may not, end up happy with their big investments in single family units that are driving prices up in some areas. Flippers generally need rapidly increasing demand, and investors need a sustainable business model that maintains a cost competitive balance and an attractive product.
Time will tell who wins and loses when interest rates inevitably increase. With our low and sluggish labor participation rate, robust organic demand may be slow to develop.
This is actually not a new story. It is called bottom-fishing. With record-low interest rates, a net 10% return is not bad. Of course, all the institutional buyers will stampede for the exits together.
The Fed’s monthly purchases of T-bonds and mortgage backed securities is staggering. This enables DC to spend 25% of GDP on an annual basis and keeps risky investments afloat until the next crash. Yes, some benefit from this pumping, at least for a while, but this will not end well.
Had the government encouraged investors to start buying houses back in 2009 (Enhanced depreciation and lower capital gains taxes for any property held more than five years), the housing market would not have gotten in as bad a shape as it did. But, no, somebody might make some money and the Obamaites just couldn’t stomach that. Now the investors see these properties as income investments as well as hedges against inflation. They have deep pockets and can hold on for ten years, if necessary. However, the Fed may manage to ruin them in spite of the help they are providing to the real estate market.
The Fed has painted themselves into a corner. Just a hint that they might start tapering off their QE buying in the fall has creamed the bond market, raised interest rates on mortgages, and has the equity markets on a roller coaster.
If they taper or end QE, the real estate market tanks, the bond market crashes, and stocks will go in the dumpers. Because there is no growth in the economy, they have to keep bailing like a boater with a huge hole in the boat. The only way out is for the federal government to actually embrace pro-growth policies. They must quit writing more stringent regulations, embrace oil and gas drilling wholeheartedly, lower taxes, repeal Obamacare (it’s acting as a dead weight on the economy), and hold federal spending at the 2013 level for five years. Otherwise the Fed must keep bailing (QE) just to keep the economy barely afloat.
If GDP growth could get above 3% for several quarters and confidence was restored in the future of investing in the U.S (For bankers, businessmen, homeowners, and investors.), it would provide a real recovery, not this stagnation, doom, and gloom that we have right now. Which, IMO, is mostly the result of Obama’s anti-business, anti-energy, anti-low taxes, and pro regulatory stances.
In part, the Fed and the other central banks are pumping to prop up a rotten global financial system. The system is way over leveraged; much like a compulsive gambler who keeps betting in hopes of winning enough money to keep paying the vigorish. The other motive is to prop up governments that ‘need’ to spend way more than their revenue stream.
This will end one day.
Maybe people are doing what they did back in the Depression, when more American millionaires were made than at any other time.
Buying up precious metals. Waiting until it skyrockets. Cashing out on metals and other goodies to avoid currency inflation, buying up property when it is cheap. Then waiting for the crash. Selling the property once recovery is complete and fiat print currency has been destroyed.
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A lot of people are paying cash, and buying properties as investments.
I’m currently arranging financing for a house, and the interest rate being advertised is 4% for 30 years fixed. I’m looking at some pain short term, but I keep telling myself that it’ll pay off down the road.
It’s exactly as I thought.
Move along, move along there is nothing to see here its only another Federal Reserve bubble. No big deal, its all to big to fail… just ask Uncle Ben.
No surprise. They contribute to breaking the system, then they capitalize on the destruction they have helped to wreak.
Had my real estate agent also mention (complain) that banks are not as anxious as they once were to dump foreclosed properties on the market.
Federal Reserve ZIRP and QE are distorting the market through unprecedented excessive stimulation. It is difficult to blame the “bad guys’ on Wall Street. While the housing market is getting reinflated in most viable markets, the most depressed areas that still have long-term demand prospects will naturally see investment by anyone who calculates that they can turn a quick profit including businesses of all sizes.
Central bank manipulation of the money supply and interest rates leads to bad decision making by both businesses and consumers. The Blackstone Group and Colony Capital may, or may not, end up happy with their big investments in single family units that are driving prices up in some areas. Flippers generally need rapidly increasing demand, and investors need a sustainable business model that maintains a cost competitive balance and an attractive product.
Time will tell who wins and loses when interest rates inevitably increase. With our low and sluggish labor participation rate, robust organic demand may be slow to develop.
This is actually not a new story. It is called bottom-fishing. With record-low interest rates, a net 10% return is not bad. Of course, all the institutional buyers will stampede for the exits together.
The Fed’s monthly purchases of T-bonds and mortgage backed securities is staggering. This enables DC to spend 25% of GDP on an annual basis and keeps risky investments afloat until the next crash. Yes, some benefit from this pumping, at least for a while, but this will not end well.
Had the government encouraged investors to start buying houses back in 2009 (Enhanced depreciation and lower capital gains taxes for any property held more than five years), the housing market would not have gotten in as bad a shape as it did. But, no, somebody might make some money and the Obamaites just couldn’t stomach that. Now the investors see these properties as income investments as well as hedges against inflation. They have deep pockets and can hold on for ten years, if necessary. However, the Fed may manage to ruin them in spite of the help they are providing to the real estate market.
The Fed has painted themselves into a corner. Just a hint that they might start tapering off their QE buying in the fall has creamed the bond market, raised interest rates on mortgages, and has the equity markets on a roller coaster.
If they taper or end QE, the real estate market tanks, the bond market crashes, and stocks will go in the dumpers. Because there is no growth in the economy, they have to keep bailing like a boater with a huge hole in the boat. The only way out is for the federal government to actually embrace pro-growth policies. They must quit writing more stringent regulations, embrace oil and gas drilling wholeheartedly, lower taxes, repeal Obamacare (it’s acting as a dead weight on the economy), and hold federal spending at the 2013 level for five years. Otherwise the Fed must keep bailing (QE) just to keep the economy barely afloat.
If GDP growth could get above 3% for several quarters and confidence was restored in the future of investing in the U.S (For bankers, businessmen, homeowners, and investors.), it would provide a real recovery, not this stagnation, doom, and gloom that we have right now. Which, IMO, is mostly the result of Obama’s anti-business, anti-energy, anti-low taxes, and pro regulatory stances.
In part, the Fed and the other central banks are pumping to prop up a rotten global financial system. The system is way over leveraged; much like a compulsive gambler who keeps betting in hopes of winning enough money to keep paying the vigorish. The other motive is to prop up governments that ‘need’ to spend way more than their revenue stream.
This will end one day.
Maybe people are doing what they did back in the Depression, when more American millionaires were made than at any other time.
Buying up precious metals. Waiting until it skyrockets. Cashing out on metals and other goodies to avoid currency inflation, buying up property when it is cheap. Then waiting for the crash. Selling the property once recovery is complete and fiat print currency has been destroyed.