May 24th, 2017

Wild examples of the mania in real estate: $200,000 for permits? Crap shacks galore? The mania is reaching a fever pitch.

The housing market is deep into mania.  You can see it in the eyes of the house lusting buyers and the overweight Taco Tuesday baby boomers drooling at their mouth trying to justify why their World War II built crap shack is worth $1 million.  The market has gotten unhinged and in this environment you keep hearing things like “crazy” and “insane” and “what the hell is going on?” over and over.  That sure inspires confidence and stability!  Yet people want to commit to a 30-year fixed mortgage on a dump.  In a time when flexibility is key and being nimble in your mind is paramount, you have old thinking boomers trying to infect people with this old paradigm of how business is done.  And the telling thing is what is happening right now is not any different from what happened in the last crisis.  Mortgage debt is down because a large part of recent buying has come from investors!  Of course mortgage debt in aggregate is down when many investors pay in cash – that is why the homeownership rate is also down.  Duh!  But overall household debt is up thanks to people loading up on student loans, auto debt, and credit card debt.  Yet this is somehow better?  Just look at some of the wild examples in the real estate market.

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May 17th, 2017

The housing bubble must go on: 5,497,000 properties are still underwater. Number of equity rich properties grows as well.

The lap dogs of the housing industry are getting louder and louder as each day goes by.  There is now a wide consensus that housing values only go up and the mania is losing all perspective.  Crap shacks are still selling as beer belly cubicle slaves buy into the cult-like mentality and go against their common financial sense.  “Well this area might gentrify soon and it might be the next Santa Monica!”  The notion that by you buying a crap shack you are living the dream is somewhat hilarious.  No, you are not living in Bel Air just because you “own” real estate.  There is so much “all hat and no cattle” in Southern California that it is hard to believe.  Yet this housing mania is nationwide.  So it is hard to fathom that you have over 5,497,000+ that are underwater right now with a good number seriously underwater.  And this is in a hyper-crazy market.  You also have a large number of equity rich owners but they need to sell to uncork that wealth.

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May 11th, 2017

Nearly 40 percent of 18 to 34 year olds live with mom and dad in California. Most are working but just do not earn enough to rent let alone buy a home.

A record number of young people are living at home with mom and dad in California even in the midst of a very low unemployment rate and record in the stock market.  Millennials in particular are carrying large levels of debt and many are still struggling to get out into a rental, let alone purchasing a home.  There is a housing apocalypse for young Americans and in California, many Millennials are simply waiting until their baby boomer parents kick the bucket so they can own a piece of the California Dream.  But Taco Tuesday baby boomers are not going away and many are angry that their offspring are unable to buy a home like they did when housing wasn’t consumed by house horny buyers and prices were actually affordable.  The numbers are startling because when we brought attention to the issue a few years ago the number was at 2.3 million young adults living at home.  Today it is now up to 3.6 million – if we combined these people it would be the third largest city in the U.S.

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May 3rd, 2017

Orange County condo prices hit record level: Can’t afford a home? Time to move into a sophisticated apartment with a mortgage.

The last hurrah in the previous housing bubble included a massive desperation of people to buy any sort of real estate.  Forget about crap shacks, let us go with crap condos!  That is the point we’ve now reached as well.  A recent report shows that condo prices in Orange County have now reached a record level.  This makes sense given the blistering horny buyers that can’t get enough of the tiny amount of inventory out in the market.  The same shtick is being pumped out there from last time including “condos are a great way to build equity so then you can buy a home.”  How convenient!  Of course people got massively burned by condos in the last bust because condos in many cases are apartments with 30 year mortgages.  And in Orange County, you have absurd levels of HOAs that actually can go up.  Buy that condo now or be priced out forever.

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April 26th, 2017

Living the California dream in Compton: In a competition to find the smallest “home” we visit a 378 square foot property.

One gut check that you need to do when markets reach this fever pitch in mania, is simply look at the product.  People get fully disconnected from value and simply assume that every crap shack is going to sell because every single second a sucker is bred into our economy.  There is now a blind consensus that prices will not drop.  And if they drop, it will be a tiny drop.  What is telling however is that virtually all large US metros are seeing price increases.  This is a nationwide trend despite house humping beer belly cheerleaders acting as if it is only happening in their tiny niche market.  So the euphoria is running rampant across all areas.  This brings back the idea of decoupling.  The markets are as coupled as an old Taco Tuesday baby boomer couple that is building up heart disease on a massive cruise ship.  There is too much bubble psychology in the current environment.  Have people already forgotten that the unexpected tends to happen (just look at our President!).  Yet people just forget about Black Swans and keep on trucking forward taking on mega risk.  Let me show you what is happening in Compton.

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