The Insiders:
Bad news is good news for the Obama economy
By Ed Rogers, Updated: August 26, 2013
The Obama administration is stuck in a surreal world, where bad news is good news for the economy it has created. Trickle down from the stock market and artificially low interest rates are the only drivers of the economy. The second-estimate gross domestic product report this week will be vital to the life-support system that President Obama has constructed for the 1 percent. If the revised GDP numbers are good – relatively speaking – it will suggest that bond-buying by the Federal Reserve will be tapered in the near future. If the tapering begins, the stock market is going to fall. If the stock market falls, the wealth effect and the trickle-down that stock market boom has produced are going to dry up.
Pretty amazing if true, I know we are in no position to pay cash for a home, and I’ve made right around 100,000K for a few years now. Our newest car is a 2006. At 15,000 I paid more for that car than all the others I’ve bought combined. We own our home and two quarters of land. Last child is a junior in college.
Who is it that has enough cash to buy a home?
In my area investors have been scooping up low priced homes for cash on speculation. They have pretty well cleaned out the inventory of low priced properties and have moved up to to properties priced a little higher, driving the reported average sale price up slightly.
That has the local politicians giddy and predicting an end to the Obama depression.
The unemployed and marginally employed aren’t buying houses and they certainly aren’t paying cash.
But the administration is doing its best to create another bubble with its mortgage programs.
Whole lotta short selling goin’ on aroun’ h’yah!
Not surprising. People want to have something of real value before the dollar is totally worthless.
Wall Street bundlers using bailout cash from the taxpayers, again ?
I’m a Realtor and had 3 cash deals last month. $600,000, $340,000 and $235,000. Very unusual.
“More Americans are buying homes in all-cash deals, according to several recent studies. But real- estate experts say this increase may not be a good sign for the health of the housing market.”
So, the issue isn’t home sales - it’s financing that drives the economy. Sounds just like the drive to buy around Christmas time.
Up until a couple of years ago, I would not have thought people would have the cash. Then the oldest members of our family started dropping like rocks. A couple of million dollars transferred to our generation. (Not all to me...unfortunately).
As the executor of the estates, I can tell you there are five folks in New England who could walk into 90% of the homes on the market and plop down cold hard cash.
It could also mean people are downsizing. A lot of boomers are empty nesters and don’t near as much space as they used to. When we sold our four bedroom, half-acre, two car garage home and moved into a two bedbroom condo in 2003, it was a “cash deal”, using the equity in the former to pay off the latter.
That’s how I bought my dad’s house. It pays to save :^)
In the nicer parts of CaliforniataxyourA$$off land, property values have been soaring the past year. Many homes are selling for more than they were valued before the Soros meltdown in 2008.
Cash buyers from Texas, NY, Canada and Euro countries are ponying up the cash. Buyers from Texas and NY are leading the herds. Apparently, the buyers from Texas who have and still are making good money, are looking for some California living. Since NY City and NY in general have declared a tax war on their upper class citizens. They are voting with their feet by running from NY City and the state.
Many of the sellers are retired or close to retired, and they are opting to cash out and buy a smaller home for cash. There is apparently some way people can use a reverse mortgage to cash purchase a smaller home.
I wonder if refiing your home counts as a home sale? There are a lot of us seniors doing this as we like our homes, and we need some money to fix them up until we are carried out feet first.
West Coast higher-priced areas... mostly Chinese coming here with cash (The good ol’ People’s Republic may soon run out of Commie Party Officials and Factory Managers?). West Coast, lower-priced areas ... mostly a few large investment banks buying to turn them into rentals (but this buying appears to be slowing greatly).
Sustainable?
I don’t know about the Chinese, China is a big country so as long as they allow (or encourage?) their rich to take their money and leave....?
The rental model turns out to have greater operating costs and difficulties than some of the investment bankers may have considered. (And if they bid up prices in an area, they may not always be able to increase rents to match...)
We will see...
My observations from some recent relocations are as follows:
Some markets like Vegas and the Phoenix Valley had such a market fall, from artifically high to bust, that hedge-fund guys, with cash they wanted out of stocks, came in and bought up houses.
Some older folks, around the various markets in the nation, took money out of retirement accounts and paid off mortgages so job issues couldn’t cost them their homes.
What happens then is those folks buy down sized for all cash.
The other end is that there are a corresponding large number of 3% FHA buyers. They don’t have to do the 15% down for conventional finacing which with the “full docs” requirements is terrible now, and they are buying at 3% down for simplicity.
We also see finacial institution holding back foreclosure sales. They know flooding the market will only cost them in the end, so those houses sit empty or are rented.
Some markets like Phoenix or Vegas you can rent what was a 300k home with a pool of 2000 to 2600 SF for 1200 to 1500 a month — unheard of a few years ago.
Just owners waiting for “the market to come back.”