Monday, February 11, 2013

HOUSING:What Happens Next...When?...L&C

According to every report concerning housing, the bottom has been reached and the slow, steady, upswing engineered by the Fed is under way. Really? Well, if that is so, what happens next?
I won't waste your time with the endless litany of positives, but I will remind you that it was the Fed in its policies that is the root cause of the housing crisis. It was "Helicopter"Ben who said that housing has never declined on a national scale. It was Ben who said that the Fed does not see a recession in 2008 and again, Ben who stated that the apparent crisis is contained in 2007. It is now the same Fed who takes the bows with this so-called recovery. By the way, the Fed does not see a new recession.
New Home
prices start on average at $304k, while existing homes sell at a national average of $231k. That is a nice spread and hedge funds are jumping all over it. In fact, one-third of all sales are from the foreclosure category. Buyers like the Blackstone Group are spending upwards of $100 million a week in 2012 and with eleven million homeowners underwater, the pickings are steady, especially when you do the math and of course, with the help from the Fed.
policy keeps rates low and the unintended consequence of their actions are forming a neo-serf society. You see, the old homeowner and now renter for the hedge funds, had a mortgage at 6% or higher. Losing his job, he could not afford the payments at around $1200 plus per month for piti(principle,interest,taxes and insurance). Blackstone and others buy on a short sale for $90k and with a low mortgage, have payments at around $350 per month. They rent to the former owner and now a serf for the corporation at $1,000 per month. The company says, "hey, your saving over $200 per month and you still get to reside in "your" home". Everyone is happy. I know Blackstone is with a 65% return which will last until the spread gets more interesting and or the rates begin to climb. Why? Because the Fed does not have an exit strategy. They are creating a new feudal society.
Corporate Flippers
If the rates rise, these same hedge fund groups will sell, flooding the market and at present, they have a $140k cushion, and rising with every price rise and it was 7% for 2012. This is bubble level.
They will also try to securitize their portfolio. In addition, when rates climb, bonds will suffer, causing another credit crisis because bonds have gone up for 30 years in a row which is the technique the Fed uses to hide our national deficit. You see, dear reader, as I state in my unpublished book, all things are related.
averages for home-price rises are from 2 to 4%. The excessive present rate is forming a new bubble if it continues. Bonds are also in danger and of course, this leads to our national deficits. Oh yeah, there is another by-product problem on the horizon. Because people are feeling better about the value of their homes, they are starting to use these same houses as ATMs to buy cars, which on average are 11 years in service. All things are related. This cannot end well...
Liars and Crooks:see book recommendation. Companies like Comcast and Time Warner have gotten government to give them exclusive control over our internet to the point where cities cannot get funding to supply their own network(if they wanted to add it along with electricity, water and sewerage). Modern society needs access just like every other utility. This is corruption!...and as always End the Fed!