Housing has never been more unaffordable than under Joe Biden and the Democrats

 

Distressed debt reaches $271 billion after five straight weeks of growth

 Growing Pile of Distressed Debt Signals Coming US Default Wave

(Bloomberg) -- A heap of distressed debt is expanding in the US corporate bond market and investors worry that a burst of defaults will follow. The amount of dollar-denominated bonds and loans trading at levels indicating distress is the largest since September 2020, reaching $271.3 billion last week after five straight weeks of growth, according to data compiled by Bloomberg. ... the supply of distressed debt is still a fraction of the almost $1 trillion peak level in 2020 . . ..     

With long-term Treasury investments down 32% year to date, and long-term investment grade down 30%, you can imagine what's happening downstream and behind the scenes.

Bloomberg cites Carnival Corp. as an example, which had to pay 6% for loans in 2021 but is paying 10.75% now. That's 79% more expensive for Carnival.

Have you tried to buy a house?

A 30-yr fixed rate mortgage would have cost you on average 3.14% one year ago. Today it'll cost you 7.08%, an increase of over 125%.

US home price plunge is ‘just beginning’ as housing market rapidly cools: economist

Do you own stocks?

You are still down over 18% year to date despite the 7% rebound in October.

 

The recent stock market rally can be rightly viewed as part of an orderly selling process which has been underway all year. The March high failed the January high, and the August high failed the March high. The current rally is unlikely to succeed the August high. It has to be remembered this is all occurring in the context of a rising interest rate environment, which is negative for stocks, housing, and bonds.

Bull market advocates, who have stocks to sell to you, don't forget, have persistently ignored the distorting effects of Fed interest rate suppression. In fact, they've counted on that suppression. They call it the Fed Put. They laugh at these puny Fed rate hikes, and make gazillions off the inflation trade. Now they're ignoring the unwind, too, which is affecting all debt. Stocks are debts, too, don't forget. Up or down, they make money off the direction. The bull market cheerleaders are worse than used car salesmen.

October 31 marks the end of the fiscal year for investment companies, who have dividends to distribute by calendar year's end to avoid taxation as registered investment companies. In an already down year, they have had a huge incentive to finish the fiscal year on as strong a note as possible. That may account for the strong October for stocks.

Normally the investment companies would be selling their losers by October 31 for tax-loss harvesting purposes. If that's happening you wouldn't know it from the monthly view of the S&P 500 in October. The DOW and the Russell 2000 were up even more. Even the NASDAQ is up in October.

But the S&P 500 low of the year did occur on October 12 at 3577, ringed by heavy selling on Sep 30 and Oct 14, after which it has been elevator up. That was probably the tax-loss harvesting for fiscal 2022.

In any event rising interest rates remain negative for the bond market, the housing market, and for stocks. The consequences of massive debt repricing are only just beginning to be felt. Stocks will hold out the longest because they can. First the bonds, then the housing, then the stocks. The rest of us are just collateral damage.

The expected 0.75 point Fed interest rate decision is Wednesday, November 2, less than one week before the election. Don't expect the Fed to do more than this, even though they damn well ought.   

Sunday morning comedy from CNBC

 

There are only 4 U.S. cities where the average American can afford a starter home

 

Detroit, Tulsa, Memphis, and Oklahoma City

 

Pack the bags, honey! We're moving! 

US homes were at least 84% overvalued in 2021

 Rounding out the Unholy Trinity of Big Ticket Asset Inflation, Housing joins Stocks and Bonds in similar overvaluation territory in 2021 at about 84%.

In Feb 2012 when housing bottomed after The Great Financial Crisis, a previous inflation-adjusted Case-Shiller home price index chart no longer updated for present years showed that prices had fallen into the top range of US house prices which had prevailed throughout the post-war from the 1950s to the late 1990s. Mind you, the top range of those inflation-adjusted prices.

Thanks to Democrats and Republicans, including Bill Clinton and Newt Gingrich, the American Dream, the nest of the American future, was turned into a mere commodity in the late 1990s, to be churned in the markets for profit.

Long-suppressed long term interest rates have conspired with commoditization to produce valuations which have exploded, making houses unaffordable as nests, which is why your kid is still living in your basement.

The chart below shows the nominal price figures, on an average annual basis through 2021. The blow-off tops in 2022 are even worse (the index topped 308 in June), and are not shown because the year ain't over, and prices are falling.

At an average index level of 260 in 2021, prices were inflated from 141 in 2012 by about 84%, not far below the overvaluation of stocks and bonds at 90% and higher.

 

 

 

 

Housing in America in 2021 has never been more unaffordable

Median household income in 2021 bought just 17.8% of the median sales price of houses sold.

 

When interest rates effectively went to zero in 2009 and stayed there, no one could figure out where the inflation was going lol

 

Ann Coulter goes off the rails, blames the Tea Party for Obamacare

 She forgets that Obamacare was passed in March 2010, months before the "Tea Party" swept the US House in an historic win with the help of Freedom Works & Co.

. . . the Tea Party candidates lost us a lot of races and Senate seats. We would not have Obamacare if it weren't for a lot of the Tea Party candidates running against incumbent candidates. 

Here.

Hello. Republicans won the US House in 2010, and the US Senate in 2014, the year Obamacare went live.

Methinks Ann is jealous that Republicans actually won that 2010 election because of indignation over mortgage bailouts instead of over something else. The Tea Party's origin was in 2009 after all, not 2010.

Recall that Rush Limbaugh blamed the faceless conservative "base", too, when McCain lost. But Ann names names, calling out Trump himself over and over (he has deserved it), Mitch McConnell (perennially), and now the Tea Party. Yeah, the Tea Party got co-opted for sure, but she's rewriting history here because she's pissed so many Trump aligned candidates have won their primaries, believing (hoping?) they will lose in November, you know, like they "lost" in 2010.

Well I sure hope so.

Ann spent years saying Obamacare was the number one issue before coming to prioritize immigration, maintaining as she did that illegal aliens were the number one beneficiaries of Obamacare. Now she blames everyone else for saying so, too.

Her irrational outbursts and ad hominem arguments are her own best case for repeal of the 19th Amendment.

Make up your mind, woman.

The Fed is all talk and no action fighting inflation

 The effective federal funds rate stands at 2.33% and $8.85 trillion remains on the balance sheet while Powell makes speeches.

Borrowing is still very cheap for the big boys and the Fed's finger on the scale makes it impossible to know the true value of its mortgage backed securities and US Treasuries.

Meanwhile inflation rages at 8.5% in July.

The market "rout" is merely another yawn as Americans get punished at the grocery store and the gas station.

Current GDP of $24.883 trillion, reported 8/25, implies a fairly valued market level of around 1,600 not 4,057. The S&P 500 remains 153% above that.

They remain rich, and you remain . . . the reason why.

 

Institutional investors have bought up 20% of mobile home parks and jacked up the rents on the low income residents, devouring widows' houses

 The plight of residents at Ridgeview is playing out nationwide as institutional investors, led by private equity firms and real estate investment trusts and sometimes funded by pension funds, swoop in to buy mobile home parks. Critics contend mortgage giants Fannie Mae and Freddie Mac are fueling the problem by backing a growing number of investor loans. ...

Driven by some of the strongest returns in real estate, investors have shaken up a once-sleepy sector that’s home to more than 22 million mostly low-income Americans in 43,000 communities. Many aggressively promote the parks as ensuring a steady return — by repeatedly raising rent. ...

George McCarthy, president and CEO of the Lincoln Institute of Land Policy, said about a fifth of mobile home parks, or around 800,000, have been purchased in the past eight years by institutional investors.

He was among those singling out Fannie Mae and Freddie Mac for guaranteeing the loans as part of a what the lending giants bill as expanding affordable housing. Since 2014, the Lincoln Institute estimates Freddie Mac alone provided $9.6 billion in financing for the purchase of more than 950 communities across 44 states. ...

Soon after investors started buying up parks in 2015, the complaints of double-digit rent increases followed.

More.

CNBC story blames capitalism's law of supply and demand for inflation: 92 million millennials caused it, not Federal Reserve interference with interest rates and mortgages

... too many people with too much money chasing too few goods ... millennials are still making up the largest chunk of the homebuyer market by generation ... 

More.

Meanwhile, this housing bubble dwarfs the last one, and we're supposed to blame millennials for it.

Sounds like a repeat of the excuse for the last one: greedy Baby Boomers.

Just forget about Zero Interest Rate Policy artificially driving down borrowing costs for over a decade, and forget about the crappy low-yielding $2.7 trillion in MBS still on the Fed Balance Sheet nobody wants, because millennials are to blame!

The chutzpah.

This is as good a day as any to remember that Ben Bernanke's Fed under Obama bailed out the banksters and hung 6.5 million homeowners out to dry

 Bloomberg, August 21, 2011, here:

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley, got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress. ...

Homeowners are more than 30 days past due on their mortgage payments on 4.38 million properties in the U.S., and 2.16 million more properties are in foreclosure, representing a combined $1.27 trillion of unpaid principal, estimates Jacksonville, Florida-based Lender Processing Services Inc. ...

Congress required the disclosure after the Fed rejected requests in 2008 from the late Bloomberg News reporter Mark Pittman and other media companies that sought details of its loans under the Freedom of Information Act. After fighting to keep the data secret, the central bank released unprecedented information about its discount window and other programs under court order in March 2011.

 

I wonder from which of the three houses he's owned since 2016 Bernie the greedy government bureaucrat issued this statement yesterday calling for punishment which will do nothing for consumers at the pump

 

This story blames climate change for homeless deaths, never once mentions the families who abandon them and the role played by drug abuse in their homelessness

 Sweltering streets: Hundreds of homeless die in extreme heat

 

One family, which presumably lived in a home where they presumably wrote the obituary and where the woman could have stayed temporarily, blames "the system" for the death of their homeless sister:

 

When a 62-year-old mentally ill woman named Shawna Wright died last summer in a hot alley in Salt Lake City, her death only became known when her family published an obituary saying the system failed to protect her during the hottest July on record, when temperatures reached the triple digits.

Her sister, Tricia Wright, said making it easier for homeless people to get permanent housing would go a long way toward protecting them from extreme summertime temperatures.

“We always thought she was tough, that she could get through it,” Tricia Wright said of her sister. “But no one is tough enough for that kind of heat.”

 

Housing market conditions update, now vs. then

 Housing market conditions, now vs. then:

Average borrower FICO score today: 751

In 2010: 699

Underwater today: virtually none (2.5% with less than 10% equity)

In 2011: more than 1 in 4 underwater (25% plus)

Today: 2.5 million ARMs (8% of mortgages)

In 2007: 13.1 million ARMs (36% of mortgages)

Facing resets today: 1.4 million ARMs (56%)

In 2007: 10 million (76%)

Mortgage delinquencies today: 2.1%

In 2010: 11.3%

 

Housing remains as unaffordable as ever. The cost of the median new one is up a whopping 45% in April 2022 vs. April 2020, to $450,600. 

More:

Here’s why this housing downturn is nothing like the last one

Housing predator Blackstone says housing affordability is comparable to the 2007 housing bubble, but it isn't

Here:

Blackstone’s Joe Zidle calls homes almost as unaffordable as the 2007 peak. Yet, he believes a crash is unlikely due to a major difference: Most owners aren’t using their homes like an ATM.

That's a total smokescreen. Look! Over there! A deer!

Peak unaffordability was actually in 2014, when Blackstone was buying up all the inventory individual homebuyers couldn't afford.

Housing was actually more affordable during the 2007 housing bubble than it is today. The read then was 20.5 but in January 2022 it's more like 17.3, much worse. People who are paying these high prices are nuts. If it all blows up again you can bet firms like Blackstone will be waiting in the wings to acquire bargains you have to sell at a loss.

Meanwhile Blackstone today remains a huge buyer of commercial and multifamily rental real estate, especially student housing:

80 percent of the firm’s real estate holdings are in sectors with shorter-length leases that will allow Blackstone to benefit from rising rents . . ..

Median household income now buys about 17% of the median sales price of a house, a new low: Joe Biden is the Barack Obama of unaffordable housing, only worse

 Housing affordability has never been so bad.

The median sales price in 1Q2022 climbed to $428,700.

Median household income in January 2022 is estimated at $74,099, which buys 17.3% of the median house sold in the United States.

Official annual figures through 2020 are indicated in this chart.

 

 

LOL, according to this stupid definition by a university pinhead, there are only 23.8 million middle class workers

“If you are holding a position that is non-managerial, non-executive level, doesn’t have a lot of decision power, you would have been classified in our study as working class,” Addo says [here].

In February 2022 there were 128.2 million total private employees. 104.4 million of them were "production and nonsupervisory".

 

That's a ratio of workers to supervisors of about 4.4:1 in the private sector. In the federal government, the ratio's much worse, somewhere between 7-10:1. That's probably closer to the truth also for the entire government sector,  which is 22.2  million strong.

 

The supervisors are the elite minority, hello. 

The best proxy for middle class has always been homeownership: house, condo, whatever. It's one of the most basic things which has defined us and more importantly united us for generations. There was a time when everyone said, rich and poor alike, that they were middle class, it was that strong of an American ideal. 

Now we're stuck with a bunch of eggheads trying to divide us by overthrowing definitions.

Total households in 2020 numbered about 128.5 million in the United States. Roughly 84 million were owner occupied at the time, 42 million renter occupied, a ratio of 2:1.

 

The average size of a household in 2020 was about 2.53: (84 + 42) 2.53 = 319 million (a relatively small additional number of Americans lives in subsidized housing, military housing, and institutionalized housing).

A broad swath of Americans, 66%, lives in an owned home, with about a third distributed at the top and the bottom renting out of either convenience or necessity.

 

And most of them are by definition nonsupervisory employees.

Housing affordability turned down again in 2020 as housing prices climbed ever higher and incomes fell

The key to joining the middle class has always been the full-time job, without which you cannot afford a house.

The rich have taken away the keys.