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US Home Prices Still Too High

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Interesting read on the US market. Predicts another 30% drop...

See Link here for full article

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<h3 class="byline" style="margin-top: 0px; margin-right: 0px; margin-bottom: 0.583em; margin-left: 0px; padding-top: 0px; padding-right: 0px; padding-bottom: 0px; padding-left: 8px; font-size: 1.2em; font-weight: normal; font-family: helvetica; line-height: 1.3em; color: rgb(102, 102, 102); ">By PETER D. SCHIFF

Most economists concede that a lasting general recovery is unlikely without a recovery in the housing market. A marked increase in defaults and foreclosures from today's already elevated levels could produce losses that overwhelm banks and trigger another, deeper financial crisis. Study after study has shown that defaults go up when falling prices put mortgage holders "underwater." As a result, the trajectory of home prices has tremendous economic significance.

Earlier this year market observers breathed easier when national prices stabilized. But the "robo-signing"-induced slowdown in the foreclosure market, the recent upward spike in home mortgage rates, and third quarter 2010 declines in the Standard & Poor's Case–Shiller home-price index—including very bad October numbers reported this week—have sparked concerns that a "double dip" in home prices is probable. A longer-term view of home price trends should sharply magnify this fear.

Even those economists worried about renewed price dips would be unlikely to believe that the vicious contractions of 2007 and 2008 (where prices fell about 30% nationally in just two years) could return. But they underestimate how distorted the market had become and how little it has since normalized.

By all accounts, the home price boom that began in January 1998, when the previous 1989 peak was finally surpassed, and topped out in June 2006 was extraordinary. The 173% gain in the Case-Shiller 10-City Index (the only monthly data metric that predates the year 2000) in those nine years averaged an eye-popping 19.2% per year. As we know now, those gains had very little to do with market fundamentals, and everything to do with distortionary government policies that set off a national mania for real-estate wealth and a torrent of temporarily easy credit.

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Lets buy US property with our parity party winnings.

Emboldened by the soaring local dollar, Australians invested about $600 million in US residential property last year, according to the Washington-based National Association of Realtors, as overseas buying of US housing doubled.

But consumer advocate Neil Jenman predicts thousands of Australians will lose their money after unwittingly buying undesirable property.

''It's going to be a calamity, for sure and certain,'' he says.

Many investors are being lured by agents promising unrealistic rental returns of up to 20 per cent.

Investment experts who spoke to The Sun-Herald, warn that swaths of properties for sale are in bad neighbourhoods where it would be almost impossible to get a tenant, and even harder to get your money back if you later decided to sell. In the past six months, Australian companies that help investors buy US residential property have reported a surge in interest.

Vincent Selleck of Byron Bay-based buyers' agent 888 US Real Estate says his business has grown five-fold since June.

''Some of the properties being offered are in ghettos and you need a bullet-proof vest and an armoured Humvee to collect the rent in there,'' Mr Jenman says.

''Tenants also have more rights in the US and if they don't clear the garbage up, it can be the landlord that gets fined - there are a lot more legal issues.''

Sydney woman Kathy Graffiti bought three properties in upstate New York in 2005 and estimates she has lost between $300,000 and $400,000 on her investment.

She bought two properties in Rochester and one in Buffalo for a total of $250,000, expecting rental yields of between 22-23 per cent.

The rental income stopped in 2007 and Ms Graffiti was forced to sell two of the properties at a significant loss. She has been offered $10,000 for the third property.

Mr Selleck warned of a further 3 million foreclosures during 2011

http://smh.domain.com.au/real-estate-news/buyers-warned-of-risks-in-bargain-us-homes-20110101-19ciy.html

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Careful you don't fall prey to the local RE agent's spruiking ....:drool:

Great house. Pity the previous owner was the agents cousin Vinnie "the butcher of Manhattan beach" Bisignano. He personally murdered 6 people in that spa bath.

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http://www.calculatedriskblog.com/2011/02/housing-for-many-cities-another-season.html

In the last year, Seattle homeowners experienced a bigger price decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.

Megan and Ryan Dortch tried to sell their one-bedroom Eastlake condo for $325,000 two years ago. They rejected an offer of $295,000 as inadequate. A year later, they relisted it for $289,000, then $279,000, which was less than they paid. ... They are now renting out their old apartment at a small loss every month ...

[W]henever the market finally does pick up, all those accidental landlords will want to unload, putting another burden on the market. “So many sellers are waiting in the shadows,” said Redfin’s chief executive, Glenn Kelman. “The inventory is going to expand and expand and expand. I don’t see any basis for significant price increases.”

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http://www.nytimes.com/2011/02/14/business/economy/14dip.html?_r=1&pagewanted=all

SEATTLE — Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping.

The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.

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God forbid the disease spreads across the border to Vancouver.

I did a crazy thing one day. I contacted one of the online betting companies a couple years ago asking them to put a bet on if London 2012 would be cancelled due to bankruptcy. They replied that they appreciated the suggestion but didn't wish to do so.

I am itching to ask them to put a bet on if Sydney or Vancouver housing will crash first.

Edited by sydney3000

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As Celente says, when people have nothing to lose they lose it.

I often wondered why the National Guard was under the control of the state Governors and not Dept of Defense. Makes sense now.

There are currently about 9,600 members in the Wisconsin National Guard.

Thats 2 brigades. 1 Infantry the other Arty.

http://en.wikipedia.org/wiki/Wisconsin_Army_National_Guard

The 115th Fighter Wing is Wisconsin Air National Guard. F16 Fighting Falcons.

http://www.115fw.ang.af.mil/units/index.asp

Would Gov Walker use them? You betcha...

MADISON, Wis. — Gov. Scott Walker says the Wisconsin National Guard is prepared to respond wherever is necessary in the wake of his announcement that he wants to take away nearly all collective bargaining rights from state employees.

Walker said Friday that he hasn't called the Guard into action, but he has briefed them and other state agencies in preparation of any problems that could result in a disruption of state services, like staffing at prisons.

Walker says he has every confidence that state employees will continue to show up for work and do their jobs and he's not anticipating any problems.

His plan would require higher pension and health insurance contributions and remove bargaining rights except in a limited way over wages.

http://www.chicagotribune.com/news/chi-ap-wi-budgetwoes-nation,0,771747.story

You thought workchoices was bad? :shocking:

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i dunno man any time public servants are higher paid than private workers you gotta think the unions have had it too good too long. i mean all that money and less actual work, and no getting fired when you suck at your job?

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I often wondered why the National Guard was under the control of the state Governors and not Dept of Defense. Makes sense now.

Thats 2 brigades. 1 Infantry the other Arty.

http://en.wikipedia.org/wiki/Wisconsin_Army_National_Guard

The 115th Fighter Wing is Wisconsin Air National Guard. F16 Fighting Falcons.

http://www.115fw.ang.af.mil/units/index.asp

Would Gov Walker use them? You betcha...

http://www.chicagotribune.com/news/chi-ap-wi-budgetwoes-nation,0,771747.story

You thought workchoices was bad? :shocking:

Bernie,

If the National Guard start firing on their own citizens, that part of the country will erupt.

You know the US has the highest gun ownership percentage of any country.

Who knows what else some people have stashed in their barns and garages.

6,000,000 people live in Wisconsin. Home of the Ojibwa, Saux and Fox indian tribes as well.

And have a look at the states around her - Minnesota, Iowa, Indiana, Illinois, Nebraska.

We are talking northern wild west here.

I doubt these would be peaceful protests - once anything like that happened.

God! He would be some courageous/stupid governor to send in the troops, and try to impose some kind of martial law.

But hey - I don't put anything past the yanks!!

They've done more stupid things than this.

From my reading of localised commentary on some blog and news sites, the pressure is building.

Now its hard to know whether such voices reflect the main-stream, (often only fringe individuals like us post on these boards), but there seems to be a ground-swell of discontent in some states.

I thank you Bernie for taking the time to post your findings.

I was wavering there for a while, (recovery, improving, things bottoming out, etc) but I've come back to thinking that the real crisis is looming ahead.

And strangely, may be in the welfare quarter, when pensions and hand-outs are cut.

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i dunno man any time public servants are higher paid than private workers you gotta think the unions have had it too good too long. i mean all that money and less actual work, and no getting fired when you suck at your job?

Fair call on some jobs.

But, to name a few, cops, fireman and nurses are state public servants and I want them well remunerated, motivated and competent.

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Fair call on some jobs.

But, to name a few, cops, fireman and nurses are state public servants and I want them well remunerated, motivated and competent.

i can't talk about cops or fireman but there's something wrong when a nurse can work as a bureaucrat, 9-5 and earn more than doing clinical shift work. and less than a tradie. most RNs, CNCs and NPs are badly paid, not motivated but highly competent.

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If the National Guard start firing on their own citizens, that part of the country will erupt.

It wouldn't be the first time the U.S. government fired on its own people who were political protestors.

http://en.wikipedia....wiki/Bonus_Army

That's not to mention the assassinations during the 1960s or events like Ruby Ridge, Waco, etc.

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It wouldn't be the first time the U.S. government fired on its own people who were political protestors.

http://en.wikipedia....wiki/Bonus_Army

That's not to mention the assassinations during the 1960s or events like Ruby Ridge, Waco, etc.

Thank-you Mr Medved.

That was an interesting read.

I had heard something similar somewhere in my travels.

In the race riots of the 1950's - 1960's there were some shootings as well.

So could we see history repeating itself, as people march on their bureacracies.

I still think in the current environment there is less chance of such happening.

But....

I did say, I couldn't rule it out with the yanks.

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Thank-you Mr Medved.

That was an interesting read.

I had heard something similar somewhere in my travels.

In the race riots of the 1950's - 1960's there were some shootings as well.

So could we see history repeating itself, as people march on their bureacracies.

I still think in the current environment there is less chance of such happening.

But....

I did say, I couldn't rule it out with the yanks.

If the republicans allow the states to declare bankruptcy, the pension obligations etc are void.

So here is a senior cop (Captain in lieu of Superintendant to use their ranks) with 35 years and NO Pension. The 10 and 20 year fireman, nurses and cops have voided retirement plans. Hows this going to play out you think?

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If the republicans allow the states to declare bankruptcy, the pension obligations etc are void.

So here is a senior cop (Captain in lieu of Superintendant to use their ranks) with 35 years and NO Pension. The 10 and 20 year fireman, nurses and cops have voided retirement plans. Hows this going to play out you think?

Oh I don't think it will be pretty.

That's why I'd be worried if I was a governor of a state, thinking about going down that road.

They would surely be the primary target.

I sincerely hope it doesn't pan out, like you are predicting TP.

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Oh I don't think it will be pretty.

That's why I'd be worried if I was a governor of a state, thinking about going down that road.

They would surely be the primary target.

I sincerely hope it doesn't pan out, like you are predicting TP.

Well Sol, they are broke. Sure China is buying US national debt to keep the customer happy but state debt?

California's economy is twice as big Australia's and the 7th biggest economy in the world. It has 38 million people. Its broke.

Where do they fit?

http://en.wikipedia.org/wiki/Comparison_between_U.S._states_and_countries_nominal_GDP#2009_data

Its not going to be pretty.

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so you pay cops and national guard their money and screw the nurses and school teachers.

always gotta keep the military paid

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