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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April 19th, 2017

California housing looks cheap in comparison to some Chinese Cities: $25.5 Billion Invested into California by China since 2000.

Foreign money has been a key ingredient in propping up home values in many cities across the United States. There is no doubt about this.  If you look at places like Irvine, many new home communities are being sold largely to investors from China.  This also applies to house mania happy San Francisco.  Yet even if you question your own sanity regarding California crap shack prices, things may look affordable to certain people abroad.  The amount of investment flowing in from China into the United States is amazing.  A large part flows into real estate.  This is how you get lower homeownership rates and also a drop in mortgage application volume yet somehow, you see home prices surging on low inventory.  In a global market money can flow in and out of systems easily.

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