Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
Is Political Betting on the Rise? - 27th Mar 17
US Stock Market Consolidation Time - 27th Mar 17
Russia Crisis - Maps That Signal Growing Instability and Unrest - 27th Mar 17
Goldman Sachs Backing A Copper Boom In 2017 - 27th Mar 17
Foundation – Fall Of The American Galactic Empire - 27th Mar 17
Stock Market More Correction Ahead - 27th Mar 17
US Dollar Inflection Point - 27th Mar 17
Political Week Presurres US Stock Market - 25th Mar 17
London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - 25th Mar 17
Will Washington Risk WW3 to Block an Emerging EU-Russia Superstate - 25th Mar 17
Unaccountable Military Industrial Complex Is Destroying America and the Rest Of The World Too - 25th Mar 17
Silver Mining Stock Fundamentals - 24th Mar 17
A Walk Down the Dark Road of Bad Government - 24th Mar 17
Is Stock Market Flash Crash Postponed Until Monday? - 24th Mar 17
Stock Market Bubble and Gold - 24th Mar 17
Maps Of Past Empires That Can Tell Us About The Future - 24th Mar 17
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

What U.S. Housing Market Recovery?

Housing-Market / US Housing Oct 30, 2013 - 02:51 AM GMT

By: Mike_Whitney

Housing-Market

"4,594,000 Mortgages Going Unpaid in the United States."

Buying a house is a lot like buying a car. If you don’t look under the hood, you could wind up with a lemon. Only with housing, it’s not as simple as checking the dipstick or looking for oil under the rear axle. No, smart home buyers check the data to see what’s really going on. That’s the best way to cut through the hype and separate the fact from the fiction.


Lately, interest rates have been inching higher while prices have been rising. The combination of the two has put the kibosh on sales leading to a more generalized slowdown. But sluggish sales and higher rates don’t tell the whole story. For that, we need to take a peak under the hood and see what the cheerleaders in the media have been hiding from view. And what they’ve been hiding is nearly 5 million homeowners who’ve stopped paying their mortgages altogether. That’s no small matter. Here’s the story from DS News:

Lender Processing Services provided the media with a “first look” at the company’s mortgage performance statistics for the month of September….LPS counts a total of 3,266,000 mortgages nationwide that are 30 or more days past due but not yet in foreclosure. That tally represents 6.46 percent of all outstanding mortgages…..

Of the more than 3 million delinquent loans, LPS says 1,331,000 have missed at least three payments but haven’t started the foreclosure process. Another 1,328,000 mortgages are currently winding their way through foreclosure pipelines, according to LPS’ data….

All-in-all, there are 4,594,000 mortgages going unpaid in the United States.” (“Number of U.S. Mortgages Going Unpaid = 4,594,000″, DS News)

Yikes. Now, that doesn’t necessarily mean that it’s a bad time to buy a house, but one should at least be aware of the fact that there’s a gargantuan stockpile of backlogged homes just waiting to flood the market once the banks get their act together. Of course, maybe that day will never come, right? After all, we’re already 5 years into this thing and the banks are actually dragging the process out longer today than ever before. Maybe you don’t believe that. Maybe you think that there’s actually a shortage of supply which is why prices have been going up for the last year or so. Okay, but why not withhold judgment until you check this out. This is from an article at Housingwire titled “Prolonged liquidation timelines shake up home prices”:

“Timelines on distressed inventory continue to drag on, while elevated mortgage loss severities continue to offset positive gains on home prices…..

Liquidations increased 32.2 months for the third quarter, up from 31.1 months for the second quarter, and also up from 28.3 months a year ago. In aggregate, timelines have increased every quarter since the fourth quarter of 2008 and remain at historical highs…

Nonetheless, the most seasoned inventory continues to prove difficult to liquidate, skewing aggregate timelines higher.

“The percentage of distressed mortgages that are five or more years delinquent has tripled just in the last year,” Nelson said.” (“Prolonged liquidation timelines shake up home prices”, Housingwire)

Read that last line over a couple times and let it sink in: “The percentage of distressed mortgages that are five or more years delinquent has tripled just in the last year.”

That doesn’t sound like the “Happy days are here again” refrain we’ve been hearing in the media, does it? It sounds like the banks still haven’t even dumped the subprimes they’ve had on their books for 5-long years. In fact, the article alludes to that very fact. Here’s the money-quote: “Subprime loss severities have remained flat with timelines in excess of 34 months and home price gains lower than the national average.”

The banks are still writing down the losses on subprime mortgages? What a farce.

Now, I know the article was written in opaque business-journal-type gibberish that makes it hard to understand, but just consider what the author is saying: “Liquidations increased 32.2 months for the third quarter… up from 28.3 months a year ago.” So the banks are actually taking LONGER to process the gunk on their books than even last year. Why would they do that? Why would they drag out the process longer than they had to?

Three reasons:

1– Because they don’t have the money to cover the losses.

2–Because they don’t want to dump more homes on the market and push down prices.

3–Because the Fed is lending them money at zero rates so they can roll over their prodigious debtpile at no cost to themselves.

So, you see, the whole system has been rejiggered to accommodate a handful of underwater, zombie institutions who wouldn’t know how to make an honest buck in a normal business transaction if it was staring them in the face.

Back to housing: So there’s a humongous shadow inventory of distressed homes that have yet to reach the market. And the banks are dragging their feet to keep prices artificially high. Everyone knows this now, in fact, even CNN ran a story on the topic last week. Here’s a clip:

“Foreclosure sounds like the end of the line, but actual eviction can take months or years — even after the bank has repossessed a home. RealtyTrac estimates that 47% of the nation’s foreclosed homes are currently occupied. The percentage actually tops 60% in some hot housing markets, like Miami and Los Angeles.

Those still living in repossessed homes include both former owners and renters. Either way, their time in the homes is mortgage and rent free….

And banks may be in no rush to kick people out. They will take their time in markets with a lot of homes for sale and depressed prices. Plus, letting homeowners stick around can help protect homes from abuse.” (“Half of nation’s foreclosed homes still occupied”, CNN Money)

What’s funny about this article is that the banks have been fighting tooth-n-nail for the last year for the Consumer Financial Protection Bureau (CFPB) to ease lending standards on their Qualified Mortgage (QM) rule so they can blow up the system again and leave us all with another 5 or 6 million foreclosures. What’s that saying about “old dogs and new tricks”?

There’s no point in going over the same material over and over again. People who follow the market already know that mortgage applications are down, rates are up, sales are down, prices are up, etc, etc, etc. But potential homebuyers should at least know that this is the weirdest housing market of all time. The extent of the manipulation is simply mindboggling. It’s a stretch to call it a market at all since the fundamentals have been tossed out and replaced with fake rates, fake inventory, fake mortgage modification programs, and fake demand. For example, get a load of this from RealtyTrac:

1—”All-cash purchases nationwide represented 49 percent of all residential sales in September…..

2–September had the highest percentage of institutional investor purchases of any month since RealtyTrac began tracking in January 2011. ….

3–“The housing market continues to skew in favor of investors, particularly deep-pocketed institutional investors, and other buyers paying with cash,” said Daren Blomquist, vice president at RealtyTrac. (“Institutional Investor Purchases Reach New High in September with 14 Percent of all U.S. Residential Sales”, RealtyTrac)

Does that sound like a normal market to you?

Whatever happened to firsttime homebuyers who used to make up the bulk of housing sales?

You know what happened to them, don’t you? They’re either buried under a mountain of student debt from which they will never emerge or stuck in crappy part-time jobs that don’t pay enough to even meet the monthly rent, right? These people will probably never own a home; it’s just not in the cards, which is why firsttime homebuyers are following the Dodo into extinction.

And the same rule applies to “move up” buyers, too. Move up buyers are the folks who use the equity in their first home to buy a nicer home in a better neighborhood. Move up buyers used to be the second biggest buyer of homes in the US, but not any more. They’re struggling too, mainly because housing prices are still below their 2006 peak (which means many of these people are either still underwater on their mortgages) or because they have zero equity in the homes.

So, who’s buying all the houses?

Speculators. People who have no intention of moving into the homes they buy. That’s what keeps the recovery going. And that’s what low interest rates and QE-pump priming achieves; it transforms markets that are a critical part of a thriving economy into an annex of the Wall Street Casino where houses are flipped in a frenzy of speculation like credit default swaps or some equally dodgy debt instrument. This is the world Bernanke has created, a topsy-turvy world of lightening-fast trades that blows up every 5 or 6 years.

I mean, think of it: 49 percent of all residential sales in September were all-cash purchases.

That’s ridiculous.

And where are all these deep-pocket buyers coming from?

Wall Street, of course. The big boys have switched from junk bonds and farmland to housing, which should be expected given the ocean of liquidity the Fed has pumped into the financial markets. Naturally, there’s been some spillover into housing which is creating a new regime of credit bubbles. Booyah, Bernanke, you’ve done it again!

Are you surprised? Are you surprised that institutional investors are snapping up these foreclosures like hotcakes even though there are 4.5 million more in the pipeline? That must mean that the banks made some kind of deal with the PE guys that they wouldn’t dump their houses on the market without giving them a heads up first, right? (wink, wink)

Of course, it’s right. It’s all rigged. You know it, I know it, everyone knows it. The whole bloody country is owned by a credit monopoly that never gets tired of fleecing us.

That’s just what they do.

By Mike Whitney

Email: fergiewhitney@msn.com

Mike Whitney lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. Whitney’s story on declining wages for working class Americans appears in the June issue of CounterPunch magazine. He can be reached at fergiewhitney@msn.com.

© 2013 Copyright Mike Whitney - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife