April 11th, 2018

The Housing ATM is back – Cash-out share of all refis hits pre-crisis levels.

It was only a matter of time that people started using their homes as ATMs.  It is clear that the housing cheerleaders are drinking a mega dose of housing Kool-Aid and somehow think that people are immune from repeating past mistakes.  But here we are seeing cash-out refis hitting pre-crisis levels.  And this assumption is based on the underlying mentality that yes, a home is really worth that amount and now people are locking in these high price levels.  But guess what?  You have to pay that money back on your glorified crap shack.  This was one of the many reasons for the last housing bubble where people believed the hyped and went into deeper debt because of this notion that a home was an ATM with a roof on it.  The overall tone is incredibly housing positive even though there are major issues in the housing market.  For example, the homeownership rate is near generational lows and much of the household formation since the bubble burst has come in the form of rentals.  Now homes are being used as ATMs.  What can go wrong?

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March 23rd, 2018

Total value of U.S. homes is $31.8 trillion – Los Angeles homes now valued at $2.7 trillion, the size of the U.K. economy.  Chinese home buyers in the U.S.

Housing values in the U.S. have reached a new peak.  In total, U.S. homes are valued around $31.8 trillion according to Zillow.  That is 1.5 times the GDP of the U.S. and close to three times the GDP of China.  Crap shacks in Los Angeles are now worth $2.7 trillion, which is more than the United Kingdom’s GDP. What is very telling is that real estate values across the country in virtually every large metro area are near peak values.  In places like San Francisco, they are in a new stratosphere.  The allure of real estate is now fully engulfing the nation and flipping rates are at decade highs.  People want to get a piece of the action.  You also have many ex-pats now taking their money abroad and retiring in more affordable countries where they can stretch those Taco Tuesday dollars while money from China is flowing the other way and boosting prices in some areas dramatically.

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March 5th, 2018

Median home price in San Francisco hits $1.42 million:  A standard condo in San Francisco is now selling for $1.15 million.

San Francisco housing has entered into a new reality.  Tech money and foreign cash continues to flood the market and pushing prices to astronomical levels.  The typical San Francisco crap shack now will cost you $1.42 million, a new record high with condos going for $1.15 million.  The city is entering into escape velocity of gentrification.  You have older Taco Tuesday baby boomers with rudimentary tech knowledge that bought decades ago living next to a new generation of wealth and tech savvy professionals.  You see this as well in Los Angeles.  Some real estate “experts” barely have a working understanding of tech but definitely know how to navigate to Zillow to view their inflated prices. San Francisco is such an odd case study.  A city that outwardly states it supports the poor but when you look at prices even making $100,000 a year makes you part of a new high income poor – at that income level a sizable amount of your net income is going to go to simply paying for housing unless you want to be part of the mega commuting culture that is now emerging in California.  What is going on in San Francisco?

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February 17th, 2018

The future of California will be with rentals:  California’s homeownership rate will remain stagnant for the next decade.

While indicators of the economy seem to be doing well, the homeownership rate in California is telling a different story.  The unemployment rate looks healthy, the stock market is still very high even with the recent correction, and people seem to be spending beyond their means once again with credit card debt solidly above $1 trillion.  Euphoria is oozing out of Taco Tuesday baby boomer beer guts and the saliva is dripping when they pull up their Zestimates on Zillow.  Yet somehow, the homeownership rate remains stagnant.  Millennials are living at home in record numbers especially in California.  The recovery started in 2009 almost a decade ago yet people aren’t out buying homes in droves (yet inventory is pathetically low).  The future of California will be with rentals.

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