Forget about a lost decade, a lost generation has occurred when it comes to household incomes: QE forever and rising rents.

The Fed surprised markets on Wednesday with their taper head fake.  Was it because the economy is booming?  No.  Was it because household incomes were growing?  Not exactly.  Was it because inflation is non-existent?  Not if we look at rents or medical care.  In fact, going through the Fed’s statement it is largely holding back on the taper because of fear of budget negotiations in Congress.  That is, we are hitting our debt ceiling yet again and the Fed wants some leverage here.  Yet the larger signs all pointed to a taper if we consider that rents are rising at nearly twice the rate of the overall CPI.  Also, the Census figures for 2012 were released and household income adjusting for inflation is now back to levels last seen in 1989.  Lost decade?  Try a lost generation.  Also, recent data highlighted that the wealthiest in our country are capturing most of the income gains and given this trend and the Fed’s taper-less September, the feudalism trade is fully on.

Household income

The Fed is the housing market.  Investors are dominating the market and this is their number one client.  It is no surprise that a moderate rise in rates has essentially clobbered the “normal” home buyers out in the market.  Regular buyers need every piece of help buying a home because household incomes have done this:


The above chart shows a full lost decade (24 years of weak income growth).  Even in real terms, household income has plunged since the recovery started in 2009:

2007: $55,627

2008: $53,644

2009: $53,285

2010: $51,892

2011: $51,100

2012: $51,017

The Fed is largely playing the market and ironically, these moves are likely to continue the wealth disparity in the US further as investors once again plow into the real estate market to chase yields.  For regular households, more income is going to go to housing on the rental front:

Rent vs CPI

Keep in mind that rising rents with falling incomes is not exactly a good combination.  Rents are rising at nearly twice the pace of the overall inflation rate.  This divergence has accelerated since 2012.  The Fed has made a one way bet here.  The Fed is operating under a QE forever scenario.  Take a look at the Fed balance sheet and tell me if you think a taper is in serious consideration:

fed balance sheet

The Fed is largely playing one big confidence game.  The too big to fail are even larger today.  Real estate investors are virtually half the market in 2013.  Even in expensive California nearly one-third of all home sales are going to investors (in Las Vegas it is closer to 60 percent).

Reconcile all the facts coming out this month:

-Household incomes adjusting for inflation are back to levels last seen in 1989 (24 years ago – a lost generation)

-50 percent of income generated in 2012 is going to the top 10 percent of earners (highest ever since the early 1900s)

-Rents are rising much faster than overall CPI

-Investors are gobbling up an incredibly large share of all real estate purchases

There has been a serious disconnect going on since the recovery hit and these kind of divergent data points suggest we are in a mania like mode.  Investors are largely chasing yield even on many deals that simply do make sense (i.e., cap rates are simply not panning out in many markets).  The Fed taper is merely a magician’s trick.  The Fed can’t taper to any large degree.  It is an end-game in the mortgage market.  The Fed is the housing market.  The Fed is largely focused on helping member banks so it is no surprise that banks are doing exceptionally well and many financial institutions are the largest real estate buyers in the current market.  For now, the investor trade will continue to play out even if people with common sense realize this is simply one giant shell game and the Fed is on its way to a $4 trillion balance sheet.  Doesn’t seen so farfetched that we are entering a modern age of feudalism.

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information.

92 Responses to “Forget about a lost decade, a lost generation has occurred when it comes to household incomes: QE forever and rising rents.”

  • I am interested to know what conservative Republicans think of the government’s fiscal policy of the last 5 years, in particular its influence on the housing market:

    1) The Fed’s lowering of mortgage interest rates;
    2) The government guarantying the vast majority of mortgages;
    3) The government’s tax shelter on mortgage interest up to $1.1 million borrowed.

    If you eliminated these three items, the housing market would fall off a cliff and the economy would go into a tailspin way beyond what we saw in 2008. The government is propping up the stock market and the economy. They have saved the wealth of the nation. Most of it is going to the upper classes, who own stock, who earn good salaries, who own expensive houses.

    I am not looking for food fight here — save your petty accusations. I consider my own politics moderate. I’d like to see these policies ended, which will happen eventually, but not fast enough.

    Most of my Republican friends (I have many of them) have money. They complain about big government but they cry when the government takes away their benefits. They have benefited from massive government. It seems hypocritical. I’d appreciate it if someone would straighten this out.

    • Saying “they cry when the government takes away their benefits” when referring to a desire to end a tax deduction, must mean that you believe that any income that I earn first belongs to the government…and I deserve only what’s left over after they decide how much to tax me. This is a collectivist attitude…that all income earned by our citizens needs to be allocated for the “greater good”. This is the type of attitude that annoys the hell out of me….and usually arises out of the envy of the success of others. Our whole tax code should be scrapped and replaced by either a single level flat tax with no deductions other than an exemption up to the poverty level income, or a consumption tax like the Fair Tax.

      • There are many of us who feel as you do – we have worked hard to make money and do not need it re-distributed. Our taxes our more than enough to say nothing of the Obama(so called care).

      • Well said

      • I’m a Democrat and I have money, left to me by my parents, also life-long Democrats. Thanks to Bush, I pay lower taxes on the dividends that I earn from the stocks my parents left me, money that I earn by sitting on my derriere, than I do on the money I earn by, you know, working. I’m not complaining, I just think it’s unfair to others. Only in the Bizarro world of the Republicans does this sort of thing make sense.

      • Marie- Its democrats who want to tax so much of the money you earn by, you know, working. Oh, and maybe some of DG1’s “republican” friends…

      • Every time I read about a flat tax I wonder if the people pushing it have any idea how incredibly unfair it would be to low income people and an incredible boon to very high earners. The rich push for it all the time because it is in their benefit (as are deductions which they themselves put into the law). Think about it. A 10% flat tax for example means that people earning $25,000 pay $2500 leaving them without enough to live. On the other hand someone earning $250,000 gets to keep $225,000 -nice deal but those come out with $2,250,000 – the best deal of all. All a flat tax will do is enrich the super rich and completely finish off the poor and lower middle class. Better perhaps to enforce the taxes we now have. Make the super rich pay their fair share and get the big money out of politics. As it is the rich make the laws to favor themselves and hurt everyone else. Why make that worse? You know high earners are not smarter nor do they work harder. They are just plain lucky.

      • Bobi…….The vast majority of those who push the flat tax have been brain washed into believing the top 1% are taxed too much and the poor are taxed too little so the fact that a flat tax would be beneficial to the upper crust and a disaster to the working poor is a mute point to them. They want the working poor to pay more tax!

        The problem with this economy is not enough demand because the 99% has too little money yet the right runs around like a chicken with their heads cut off worried about the income of the top1% who have very little to do with END demand. Yes, you heard that right! THe top 1% has very little to do with END demand. 100 people can buy 100 cars but if they are all broke except for the 1%, (who might buy 3 cars) the car factories will lay off if we only worry about the 1% and that is exactly what half of Washington is doing.

        In simplistic terms, the game of monopoly always comes to an end when one person has all the money and the others can’t pay their bills. To keep that game going the winning player can literally give money to all the other players and all that money the winning player gave away ends up coming back to him but in the mean time the game kept going and the other players could pay their bills.

        Simplistic for some, rocket science for others!

      • We Don't Make Those Drinks No More

        Bobi wrote “You know high earners are not smarter nor do they work harder”.

        I really dislike these type of generalized statements.

        The ER doctor who saves a flatlining patient, the nurse responsible for a preemie in NICU, the engineer who designs aircraft, the pilot who flies the aircraft, heck, the people who designed the electronic device you’re using…they’re not smarter, don’t work as hard as a cashier? Gas station attendant? Burrito maker? Would equal compensation be fair? Unreal.

    • DG1, did you not read my reply to you on DR. HB’s last post. Regarding the mortgage interest deduction, it largely goes to people inhabiting wealthy coastal metro areas. The majority of these areas are largely democrat. Simple logic tells you that Democrats are benefitting greatly from the MID. Flyover country is largely Republican with mostly cheap housing where the MID doesn’t come into play.

      Your assertion that your Republican friends all have money so that MUST mean all Republicans have money ridiculous. Here is a question for you, don’t you think all this manipulation and money printing by the Fed has helped the Obama administration…I think it greatly has. Magically creating trillions of dollars out of thin air every year can mask lots of REAL problems. As we all know, this chicanery can only go on for so long.

      • I so agree with you !!

      • Hasn’t everyone caught on that Democrats and Republicans are the same. Look at our president. The parties don’t make any difference. The Democrats joined the Republicans many years ago when they realized without the green no more seat in Congress. The Tea party is another story – psychopaths in office – total insanity. All the ‘We should do this” or “We should do that” is a waste of time. As long as the rich and multinationals control our government it is only gong to be much worse for the vast majority of people and better for the 1% – so to speak.

      • Right again Bobi…..How many times do I need to argue with my Right Wing brother about how his life is literally the SAME no matter who runs Washington. There is a difference between the parties but the difference pale in comparison to the similarities.

        Bush created the prescription drug program and Obama passed the health care program the Republicans themselves created in the early 90’s but came to hate once Obama embraced it.

        Both of these claims are fact so before anyone disputes them, educate yourself.

      • Exactly!
        LB you have hit this nail on the head, we’ll cover this mess with money. Just exactly what they are trying to do. If we were not the worlds reserve currency our money would have been trash long ago. We will devalue the currency as long as we can, this way the average american won’t notice.

    • There is no standard definition of a republican, just as there is none for a dem; its all on a continuum. However, just bc you have rich republican friends, our poorest states are republican, like Mississippi, Alabama, Louisiana, Arkansas, etc. Many of the rich people are dems living in NYC or Cali, no? I think you start with a false premise of all republicans are rich and greedy and love banks and big corporations….when based on the voting of dems and obama’s actions, it would seem dems love them some banks and big campaign donating corps too. But to boot, dems also love spending my money on the ‘poor’ too. So vote dem and get bled by the rich n the poor. Sounds grrrreeat! To answer your questions from an independent, who will never vote dem and is falling further right by the day:

      1-f the fed. They shouldn’t be lowering interest rates because they shouldn’t even exist. They should be abolished and may be the biggest plague on our society.

      2-the govt should not be in the mortgage business. They distort market prices and no one is owed the right to own a home in this country. There is no such thing as ‘the govt’ and I think that’s the problem people have sometimes when looking at problems as they view it as some independent helpful third party with a lot of money it earned. We should just call it ‘tax dollars earned by workers.’ This way, better decisions would be made. Its the same thing as QE. Call it money printing or dollar devaluation or the transfer of your tax dollars and your kids future earnings to banks today in hopes of a wealth effect and watch how the people change their minds to its continued use. My tax dollars have better things to do than backstop loans to people that think they can afford a home yet can only pay 3% down. Buy when you can afford something per the market, until then rent.

      3-fck the mortgage interest tax deduction. As lordb has noted (twice) it favors NY, NJ, CT and CA the most by far, all four of which are blue states. Does it help me? Yes, bc my house was a little under $700k, but AMT should fck me anyway. Most real republicans/conservatives would prefer cleaning up the tax code. Keep in mind, its not dems or gopers who want it to stay per se, rather, like most things in life, its humans wanting to keep there’s regardless of party affiliation.

      Btw, last time I checked, it was the dems in the White House and senate since 2008 so wouldn’t it be dem policies that have helped destroy the middle class in favor of your rich republican friends, and lets not forget the poor as well who under obama have grown and get free food, free or affordable housing, cell phones, unemployment benefits for two years, etc (all of which cost the middle class money and make them fall into lower class).

      • You make some valid points, but when you repeat erroneous rumors like Obama phones, your credibility as a whole takes a hit.

        # # #

        Q. Has the Obama administration started a program to use “taxpayer money” to give free cell phones to welfare recipients?

        A: No. Low-income households have been eligible for discounted telephone service for more than a decade. But the program is funded by telecom companies, not by taxes, and the president has nothing to do with it.

      • “There is no standard definition of a republican, just as there is none for a dem; its all on a continuum.”

        A contimuum of what, exactly? Economic? Social? Moral? All the stereotypes (“greedy,” “dependent,” “tax and spend,” “patriotic,” “Christian Nation,” etc.) have fallen by the wayside as we’ve seen both parties co-opt and betray their so-called mantle to these labels.

        What you really have are baskets of monied interests (labor unions, AARP, NRA, International Corporations, LBGT, Big Oil, Big Pharma, etc.) that hedges their bets on the duopoly that occupies 2 if not 3 branches of government by bidding up the price of elections.


        We live in a Democracy that nobody who is paying attention would deny is bought and paid for by baskets of monied interests.

        The baskets of monied interests are the REAL constituents, not the citizens of the U.S.A.

      • Actually dfresh, if you read the words of my comment carefully, I never once said Obama started the free cell phone program. I said that and lets not forget the poor under Obama have grown (fact) and they get free food, housing, phones, etc (all facts). Its not a question of who started these programs, its a question of them growing and expanding instead if being capped or lowered. The program is not funded by telcos companies either, you and I and everyone who pays a telecom company, pays for the cell phones by being charged a universal service fund fee. Where do you think telecom companies get their money from, charitable donations?

        I don’t know how to answer your question about continuums because you assume everyone, including me and yourself are part of a monied interest apparently. Just like not every person has the same intelligence or beauty or skills at poker, its all on a continuum from brain dead to super genius, or troll to supermodel, or beginner to card shark, with humans falling along the middles somewhere, rarely on the ends. Hence same with politics, you have an issue, say size of govt with banish the fed govt to make it as big as possible. People fall in different places on the continuum. Its not black or white. The continuum is every shade of gray. Now dovetail that with taxes and its a new continuum. Thoughts on abortion is another continuum. And you could go on with other issues like financial regulations, fossil fuels vs green energy, etc. We all look at the same factors, but then we value them differently and then, due a two-party system, are forced to figure out if dems or GOP best fits our overall sum of our continuums.

        You also complain of money interests voting as blocs in elections. I agree its bs that corps are now people per the SC; however, these groups you complain of are made of up US citizens entitled to their opinion on an issue important to them, no? Also, does it have to be monied? People in many states vote based on religion as well, no? Complaining about lobbying by money interests is one thing, but we still have one vote per one person in this country.

      • Dfresh-I wrote a rebuttal, but it disappeared so ill rewrite part of it and forget the rest as I have no time. ill just say read my words again carefully, I never said Obama started the cell phone program. I said the poor have grown under Obama (fact) and they get free food, housing, phones and other Bennies (fact). It wasn’t about so started the programs, its about growing them, rather than trying to contain or shrink them. Also, the program is funded by telecom companies? I don’t know telecom companies were so generous and charitable. The cell phones are funded by those that pay for cell phones through a universal service fund fee on their bill. Personally, do I care if its the govt or a cell phone company (a semi utility that is closely aligned with the govt) that my fee/tax goes to, or do I care that each month I pay for someone else to have a cell phone? I’m going with the latter.

      • Also, dfresh, take a quick read of Wikipedia next time.

        Telecom companies are actually forced by the govt to pay fees into the universal service fund, so it is a tax from the govt onto telecom companies. Telecom companies then basically said f this, and passed that tax onto our phone bills. Hence its a tax, a fee, a charge; call it whatever makes you feel better, but its coming from the govt and finds its way into my bank account.

      • Here Here, FTB and Lord!!!

      • “Its not a question of who started these programs, its a question of them growing and expanding instead if being capped or lowered.”

        @FTB: Well, duh. Of course programs that are designed to serve people facing hard times will grow during a recession, when a lot of more people than usual are, um, facing hard times. Complaining about more people getting food stamps during a recession is like complaining about airbags deploying during a car accident – it’s supposed to work like that, that’s what it’s been designed to do. Besides, a lot of people who receive government assistance are seniors and families with children. Can you really begrudge them food? It’s not like they’re buying filet mignon with their food stamps.

    • Bernanke is a moderate Republican appointed by George W. Bush.

      Let’s get the Fed out of the interest rate-setting business (rates will rise to 7%).

      Let’s get the government out of the mortgage guarantying business (mortgages will be hard for most people to get and they’ll be vastly more expensive).

      And let’s end the mortgage interest deduction as soon as possible (this benefits the wealthiest 3% of the population).

      House prices will plummet -33% to -50%, which is where they should be.

    • DG1- Tell your “republican” friends they’re confused. If they truly consider themselves republican, its no wonder so many of us have been looking to leave that label.

    • I agree with Doc that we are looking at a lost generation. Except, they won’t really be lost, they’ll just be in permanent debt bondage. Pretty soon we’ll see license plate frames…”My debt slave is cuter than yours.”

    • Can I answer even if I am not a Republican?
      There is a problem with government policies that treat homes as investment assets in which the government interferes to try an make them go up in price.
      One main reasons for QE is to force the prices of homes higher.
      Getting people to moving in and out of ever more expensive existing houses is no way to create a “sustainable” economy.
      Nothing is created other than price increases.

      • wrote “…One main reasons for QE is to force the prices of homes higher…”

        This is correct.

        This is so that the Federal Reserve’s member banks can offload overpriced foreclosures from 2004 to 2008 at close to face value (no losses). Allowing interest rates to float would mean interest rates creeping above 6% and heading towards the historical average of 8% to 9%, and thus real losses of up to 50% by the Fed’s member banks on all that shadow inventory.

        Forget the official explanations for continuing QE, i.e. high underemployment and sluggish GDP. The real reason is to protect member banks by allowing them to dump their foreclosures on investors, all-cash buyers and buyers with excellent credit.

        Once the shadow inventory declines to a sustainable amount, only then will the Federal Reserve cease QE. The Fed will keep the printing presses running, i.e. QE, until their member banks have depleted their shadow inventory.

  • Unless American sheeples don’t wake up and go on the streets this robbery and destruction of our country won’t stop.
    In any other country people would be on the streets by now, but our trained sheeples and debt slaves are still worshiping and protecting this system.
    What are you protecting? The system that makes you a debt slave for life. And then at the end you just die. Ownership class and the rich are getting richer and richer but the rest of us are paying with blood and debt slavery for this.

    We need to dismantle Wall Street and all the Banks. Banks should be run like the utility companies and they should not be allowed to exploit our citizens and turning them into a debt slaves.

    • It appears to me that the eventual outcome of a total collapse is baked in the cake at this point.
      This has been orchestrated for decades and it looks like the final touches are now
      in place.
      I say the sooner it collapses the better.
      This drip, drip, drip of corruption and being screwed by a bunch of predatory eight legged sociopaths is akin to being racked and sucked dry of all bodily fluids.
      Trying to stop them at this point is like trying to stop a charging bull elephant by throwing marshmallows at it.

    • We Don't Make Those Drinks No More

      No revolt.

      Ultra rich benefitting mightily from Obama policies, middle class eroding, rapidly expanding lower/poverty class. Ironically Obama elected by youth vote/lower class, who have been hammered. Repub candidates unappealing; old rich white guys. Cool to vote Obama. Dems adored by wealthy Hollywood elite.

      Growing lower classes pacified w/consistent govt bennies. Not happy, not miserable. Revolt could mean possibility of losing bennies. Many overweight, not a warrior mentality. More interested Honey BooBoo, who’s the Daddy DNA reveal on Maury, son’s new neck tattoo, teenage daughter pregnant again.

      Young people won’t revolt; live with Mom/Dad, okay with it. Stay on parents insurance, Live in ‘hood they couldn’t afford on their own. PT job pays for electronic gadgets, lifestyle. Smoke some pot, hang w/childhood friends. Not ideal but comfortable.

      Middle class grits teeth, smart enough to fret about never ending QE and potential layoffs but won’t revolt out of fear of losing what they have. Conservative middle class beaten down. Propositions, laws they vote in thrown out by judges; their votes outnumbered by growing poverty class. Liberal elite control media.

      Ultra rich doing very well. Buy another trophy property, take another vacation. Use hundred dollar bills as toilet paper and post photos on Facebook to delighted followers.

      Print, Ben. Print. China and Russia laugh.

      No revolt.

      • Hilarious, depressing, and probably spot on. Nothing but genetic engineering of our babies will save us I think. Bring on Gattaca!

      • Republicans and Democrats are cut from the same cloth to divide and conquer the populace. There is a ruling class and a working class, simple as that. Politics is nothing more then smoke and mirrors to give the illusion we have some control. The whole game is rigged, possibly can be saved on the state level but the Federal Govt is corrupt beyond repair in my opinion. Clean house!

      • Very true.

        a) The poor lower class, get freebies: (food stamps, section 8, assisted downpayments, affordable income restriction housing, other welfare benefits) RESULT: not living the dream but things are good…

        b) Middle class college educated and hardworking blue collars get shafted: (still paying student loans, cycles of layoffs, increased competition from someone in India, decreasing wages and benefits, you don’t like it “tough”…. Result: Do not want to lose what you’ve worked so hard for, almost want to give up.. but keep paying bills, and working 60 hours a week. take a quickie 1 week vacation to Caribbean or Mexico.. and keep grinding… the American Dream is just and illusion…

        Can’t qualify for income restricted housing… to bad. you’re income is too “high” to qualify for it, but low to actually no spend 40-50% of your take home in housing… it sucks for you, you are in a gray area… no programs for you.

        c) Super Rich folks and their friends, keep getting richer… no worries, be happy, life is good… donate some money here and there…for appearances sake, and god blessed the United States of America, home of the rich and home of the keep making those payments or lose it all…

        Meanwhile people in France and Brazil revolting in the millions, and these are dictator countries like in the middle east or Africa… These are democracies who are collective as opposed to the USA individualism.

        So No Revolt, No March, No Complains

      • There only needs to be a single once-in-a-lifetime leader to spark a revolt. Has nothing to do with everyone playing not to lose. There will be many out there that has lost everything, and has nothing to lose as well

  • HomeGnome wrote on Sun, 5/6/2012 – 4:10 pm (in reply to…)

    black dog wrote:

    (accelerating) decline real wages + “rents soar” = ?

    Boggles the mind; don’t it?

  • For what it’s worth, America was never truly a “middle class” nation. For a few decades (1945-75) we owned enough of the world’s GDP–thanks to our primary economic competitors being devastated during WWII–that even our working class could expect unlimited rising incomes. But, it was inevitable that our devastated competitors would rebuild and eventually reclaim a rightful share of global GDP. Now the American working class is seeing its income right-size against the global market, which means they must abandon the “middle class” style of consumption they enjoyed (or learned from their parents). The politicians on both sides of the aisle are doing everything they can to supposedly “save” them from this fate–mostly by encouraging endless housing debt, which is only making it worse for everybody. Owning a house is the very definition of being “middle class,” right?

    Anyhow, as someone who grew up in a working class household and has seen this dynamic play out first-hand (and who has a passion for macroeconomics), I think it’s always good to consider the wider/global context in order to understand the particulars of local/national economic policy. My humble GenXer theory is that Americans are going to have to move from an income-based assessment toward a quality-of-life-based assessment of their lifestyles. (Lower income doesn’t have to mean a lower standard of living.) Then we’ll have to bend government policy to that end as well. All we can do in the mean time is try not to get dragged down by the undertow of a sinking working class and all the disastrous policy that is attempting to stop it.

    • +1 Chris D for one of the most intelligent posts I have seen in some time. Could not agree more.

    • Clearly we need another war. That’s why I was rooting for bombing Syria, it would get big enough to wipe out a lot of GDP again. It would also vastly increase Aerospace work in SoCal. It’s a win-win.

      • Papa now was that a joke? You are as bad as the banksters wanting their gov’t goodies wrapped up for them in a nice neat package. War is only good for the economy if you are not in the war but supplying what other countries need for war. We are in this mess because of two unfunded wars and tax cuts at the same time so everyone feels good. Throw in cheap interest rates and loose mortgage standards and you have a real witches brew from the devil.

        I am tired of the California defense industry and their entitlement mindset. War is destructive in every way but as long as it keeps California defense industry “kill machines” jobs safe and chugging along…we need a another war like we need a bullet in our head.

        Why do you think the banks loosened mortgage standards? They saw it as a path to make more money despite what was good for the economy. So sad that if it makes people money they don’t need to think about the repercussions of their actions…money is their god! War is never good and I’m sad that your think that California defense workers jobs justifies more American men killed in battle for their paychecks.

      • Christie, you seem to be forgetting the reason you can even sit here and type what you are typing. The MIC keeps your arse free. Heck they invented the Internet to boot out here in Cali (ARPANET) too. How dare you disrespect the troops and engineers that make this happen?

        Do you have any idea how many billions the Defense contractors pump into SoCal’s economy? How good the benefits are? Even lawyer services are free for most employees along with everything else. Get pulled over? Show your security clearance. Done.

        The South Bay, 105, Green Line, and all those cities out to Norwalk were created FOR aerospace workers. And quite frankly most people don’t care about war, they care about a paycheck.

        It’s not entitlement, it’s called ‘higher on the food chain’. Special.

      • Christie, you seem to be forgetting the reason you can even sit here and type what you are typing. The MIC keeps your arse free. Heck they invented the Internet to boot out here in Cali (ARPANET) too. How dare you disrespect the troops and engineers that make this happen?

        Do you have any idea how many billions the Defense contractors pump into SoCal’s economy? How good the benefits are? Even lawyer services are free for most employees along with everything else. Get pulled over? Show your security clearance. Done.

        The South Bay, 105, Green Line, and all those cities out to Norwalk were created FOR aerospace workers. And quite frankly most people don’t care about war, they care about a paycheck.

  • QE has nothing to do with helping people getting jobs- its all about creating asset bubbles in the stock and real estate markets. The misguided idea is that it creates a “wealth effect” that helps grow the economy. It does nothing of the sort except line the pockets of the people in a position to take advantage of low rates.

  • This is the definition of Fascism at it’s finest folks. Why the people are not rising up and revolting is beyond me. I guess we all like getting whipped by our masters.

  • Once again, the participation rate in US employment is telling the long term trend. You get into your 40’s and that may the last time you work for anything resembling a livable wage. But, people need to eat and sleep. So supply and demand will still keep rents up. There’s just too many people around these days.

    This will cause our political system to change radically in the next 4 years as many people that new what a good life was and now see no light at the end of the tunnel will all of the sudden decide it’s time for real change…change the two party system talks about, but NEVER delivers.

  • unfortunately this has been a bankers plan all along we need to stop the debate between Republicans and Democrats because we are all debt slaves unless you’re in the top 10 percent you are a debt slave. You are right where they want ya. This was all planned and executed. some people have been paying attention and have been writing about it and blogging about it and doing videos about it and trying to warn people for at least a decade that this is happening and it is accelerating and we will be a third world country within a few short years if people don’t just stop stop contributing your hard work and labor for peanuts just say no just don’t do it we have the power we can make it all stop if we would just say no you could even say no thank you but stop allowing it.

  • speaking of middle age and boomers, i have several male friends now in the late 50’s who were laid off from well paying jobs the last few years and cannot find work. I guess their grey hair and slight liver spots (or other signs of aging) are resulting in losing out to younger people who can be hired for much less.

  • Interesting article on Generation Y yuppies are unhappy, surely lack of good jobs and housing affordability must be part of this.

    • What a silly article – blame the individual not the economy or society. What’s wrong with wanting good things in life as long as they are not overly unrealistic? It would appear the most materialistic and irresponsible are the baby boomers not Gen Y or later.

    • I love this. It is spot on. I’ve known quite a few of these Lucys who believe they are truly “special snowflakes” and therefore should only be working at the jobs of their dreams or making unreasonable amounts of money doing a job that is less than their dream. Thank you so much for sharing.

  • What we have in the US is a very traumatic regression to the mean in terms of standard of living. The US worker and economy were never “exceptional” enough to justify its profligate affluence for the middle class. As stated above, this was just a fleeting moment in the grand scheme of things, about 1950 to 1975. The US is on the down elevator while the BRICS et al. are going up. The catastrophic side to this is that the oligarchy sees only complete collapse as a response to the situation rather than leveling with the people. That is what the Fed printing is all about, destruction of the currency. The rich are already rich, they do not need more printing but the collapse cannot occur unless there is a crisis of debt and full blow currency degradation. Do not ever underestimate man’s capacity for evil. Take another hard look at the Fed “asset” chart. Do you really think there is any other purpose than collapse behind this? Remember that the next time you see that cute, little smile on Obama’s face.

    • I disagree. We ARE exceptional, with exceptional opportunity and morals, and output to the world. It’s the bleeding heart liberals that are taking us down, if we could keep kicking the worlds arse without all these war rules, we would dominate everyone and stay on top. If I were Prez, I’d napalm everyone.

      • Indeed. “9, 9, 9!” was catchy, but, “Napalm everyone!” might get even more votes.

      • PapaNow, please remember to use the tag at the end of your comments. My head hurts when I read one statement that says “bomb Syria” so that SoCal defense contractors get their $, then the next comment that says the US has “exceptional morals”.

        You can’t be serious.

  • Democrats and republicans, Same Shit, 2 different piles….

    As we follow Ben and his cronies into the debt abyss…be prepared….that is all you can do

    • Hah! I was going to make a similar anology: Two ends of the same stinking turd. (Which has the tapered end, I leave up to others.)

  • August Southland home sales data from DQNews:

    Interesting tidbits:

    # units sold down:
    “Last month’s sales were 12.8 percent below the average number of sales – 26,452 – in the month of August since 1988, when DataQuick’s statistics begin.”

    Median price up:
    The median price paid for all new and resale houses and condos sold in the six-county region last month was $385,000, the same as in June and July and up 24.6 percent from $309,000 in August 2012. The $385,000 median over the past three months is the highest since April 2008, when the median was also $385,000.

    Cash buyer % down:
    “Buyers paying with cash accounted for 27.6 percent of last month’s home sales, down from 30.0 percent the month before and down from 32.3 percent a year earlier.”

    FHA loan as % down:
    “Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 19.1 percent of all purchase mortgages last month. That was up a hair from 19.0 percent the month before and down from 27.1 percent a year earlier.”

    (Still) low monthly payment:
    “The typical monthly mortgage payment Southland buyers committed themselves to paying last month was $1,545, up from $1,537 the month before and up from $1,124 a year earlier.”

    I thought all cash buyers (mostly investors) and FHA buyers were moving the prices up. This seems largely driven by low inventory, and correspondingly low rates (monthly payment).

    • Thanks for providing the hard numbers. The fact that condo prices are the same today as in April, 2008 speaks only to lower interest rates environment.

      Some posters have pointed to historical data showing that RE prices go up when interest rates are rising, but those were in the days when economic growth correlated somewhat with median income growth, which clearly hasn’t been the case for at least 30 years.

  • VOTE THEM ALL OUT. Or at least the vast majority of them. Regardless of party affiliation, the folks in Washington do not represent you. Strict public financing of campaigns – no exceptions – would be a start, but would be dead on arrival in the current Congress. There is extraordinary untapped power in the Internet. It is possible to run and win a truly democratic campaign on a shoestring budget by harnessing the power of the Internet. Ask Jesse Ventura. Regardless of what anyone thinks of his politics, he proved it can be done.

    • Public financing of national elections might have a chance if a few states were to take it up first for their own state-wide elections. California is just too entrenched. Maybe a New Mexico, Minnesota, etc.

  • How do so many folks confuse crony capitalism with collectivism? When did macro theory get so propagandized as to turn it upside down?

    Collectivism does not equate to stimulus dollars propping up banks and investment institutions.

    What depth of reactionary understanding does it take to compare the earning potential of a fast food cook and an ER doctor? Those kinds of arguments level the playing the field to the lowest common denominator without adding fact or weight.

    Thanks Doc. Keep up the fine work.

  • My wife and I are trying to buy a home here in Las Vegas. We are trying to decide between buying a home that is around 100k and older (like 1960’s-1980’s) but with modern interior, or a 150k newer home (2000 or newer). The older homes are in OK neighborhoods, but closer to the university, which is where both of us will be attending during the next few years. The newer places seem to be a ton of flips that were purchased when prices were 70k-90k. We really don’t want to put money into the hands of these profiteers, but since we’re eager to buy a home at regular market value, this might be the only choice. I prefer buying an older home for under 100k, then selling it a few years down the line when we can afford something better. Also, by then, the home prices might have gone down a bit.

    If you are kind enough to give any advice here, please leave out all the “move out of Vegas because it sucks!” comments. I have been following this blog for several months, and it seems that most of those who post negative comments on living in Vegas have never been beyond the Strip, and therefore do not have a good idea of what living in the city is actually like. I grew up in a wealthy area of Los Angeles, and I have also lived in NYC, Seoul, and Tokyo for many years. So, I am able to compare and contrast the advantages and disadvantages of living here better than some. We like it here enough to stay for the next four years.

    • I’m with you. Don’t give away your hard earned money.

    • I would not invest in that housing market right now. If you plan to stay for four years or so and have school to deal with (house repairs take time) just find a nice apartment complex to rent in that is safe. And keep saving your money until you are ready to buy into a nicer neighborhood there.

      I lived there for 3.5 years and I would stay away from neighborhoods at the price points you have mentioned. I saw new neighborhoods totally decay just in the time I was there.

      • Prediction Reality Check

        @ JasonB – I concur with The Jackal. I have no specific comments to make about living in Vegas but, buying a home when your ownership window will likely be less than 5 years generally doesn’t make sense.

        Selling costs are substantial. Usually 6% to the agents, often some time and money to prep the house for selling, more money to fix things from buyers inspection report and, often, the buyer wants you to pay thousands of their closing costs.

        The way I figure it is: when you get up from the closing table as a BUYER, you are 8 to 10% in the hole because of the costs detailed above. And that’s assuming your sale price is no less than what you paid. PLUS there are maintenance costs while owning. These last 2 are risks you don’t have while renting.

        Think carefully because it can be a very ILL-liquid and costly investment.

    • Jason your problem is that u don’t want to hear the truth and the truth is Las Vegas is a terrible place to live. Las Vegas is full of transients and uneducated folks chasing broken dreams and running from the past. Everyone is involved in some kind of scam, everyone. People in that city just think about materialistic things 24/7.
      Those ugly cookie cutter homes that are build very close to each other are worthless

      You can put lipstick on a Pig but it’s still a pig
      Please, any sane person knows Las Vegas is just for people who can’t afford to love anywhere else. I bet 80% of Las Vegas residents would leave that city tomorrow if they could, but they can’t and most of them are trapped in that ugly depressing city.

  • I am no monetary expert, but it sure seems to me that if the Fed does not taper, then they will have less weapons at their disposal (less powerful, less able to smooth out a downturn), should another market crash occur, which will make the next crash deeper and more severe.

    It seems to me they should taper now, so that they have some ammo left in case of another bust. But what do I know, I did not attend an Ivy league school where they apparently teach classes on how to defy economic gravity.

  • Recently, I remember reading an article and discussion (I think here or could have been somewhere else) that discussed how the wealthy were utilizing ARMs in a very creative way.

    I was wanting to re-read this article. Does anyone know where I can find it?


  • The divide between conservatism and liberalism is growing exponentially, and in the end, the social issues that skew public opinion will ultimately result in a great divide (timing unknown). Fuel to this emerging fire storm IS monetary devaluation resultant of government dependency policies the great Martin Luther King Jr. so feared. Both he and JFK would be regarded as right wing nuts… that was only a 1/2 century ago.

  • I recall on this site the sentiment that anyone who bought a house in 2010 was a sucker, then in 2011 home buyers were also suckers who were going to be left holding the bag ‘just wait until 2012’…. ‘just wait until 2013’…
    Perhaps in 2015 people who purchased in 2013 will have been the suckers, but with QE infinity even that guess is not guaranteed.

  • CB, this “redistribute income” meme is propagandist code for “communist/socialist.” In fact every tax (tax, tax credit, tax haven, tax exempt status, etc.) is a form of “income redistribution.” Nobody ever seems to mention it when it comes to capital gains, GE, Exxon, or the church down the street.

  • I think those of you crying about I earned my money government shouldn’t get any don’t realize how little opportunity there is for class movement in this country these days. Couple that with the fact that the rich are taking more and more of the economic pie while college cost, medical costs, and rents continue to rapidly outpace inflation and you have effectively destroyed what made innovation in this country possible. A 16 year old super talented kid form a poor family doesn’t have the chance or opportunity to make use of his talents in this society. Its all dead because the rich decided they shouldn’t have to pay a high share of taxes anymore. Compare what they are paying now to what they were paying 50 years ago as a percentage of income and its laughable that you now suggest we do a flax tax and make them pay even less. I’m not poor nor do I desire to be rich, but I would like to live in a country where everyone has the opportunity to live up to their full potential, where no one goes hungry, where people don’t die from treatable illnesses because they lack insurance, and where people don’t go bankrupt because they get ill. This craziness will probably only end when the 50% of the people getting screwed in this country rise up and violently revolt against the rest of us.

    • You’re right Dan G. A lot of people don’t see that the system that has been created in America is what helped people get rich. They don’t want to pay taxes to support this system because in their eyes, our social, economic and judicial system did nothing for them. But it did, it created stability, rule of law, recourse to wrongs, safety and opportunity. America is exceptional because of the things you mentioned. Without those things, we’re just like every other crappy country.

      I have relatives in a developing country that basically has no tax or real government. On paper there is a government, there are elections, and in theory taxes are collected, but basically everything runs on bribes. The more money you have, the more wheels you can grease. Everything is a financial negotiation, even court cases – whoever pays the judge the most wins. It’s basically a libertarian’s paradise – he who has the gold rules! And everything is just fine there, if you can overlook massive poverty, stone-age infrastructure, lack of decent healthcare, lack of justice system, constant blackouts and water shortages, lack of safety regulations, horrendous pollution and crime, crime, crime as far as the eye can see.

      The country of which I speak has educated people, but could never invent the internet, the airplane, the computer, the telephone, the transistor – basically everything that America has invented because no entrepreneur there could defend patents. They won’t spend money on infrastructure because each individual thinks,”Why should I spend money on a public good that won’t be totally mine?” Libertarian thinking. Life sucks there, but for some reason it’s what some people here want.

  • Great thread guys! I am so pleased to see a number of people here who actually understand the real world:

    1. Political party affiliation and what party is “running” the country is irrelevent – the wealthy will always win, and wealth will continue to consolidate.

    2. The battle line is between the lower class and the middle class. The wealthy are above the fray.

    3. The concept of revolt is comical – you are absolutely nuts if you think the fat apathetic slobs are going to put down the clicker, get off the couch and revolt. Give ’em another Iphone799 (or is it #800 now?), reality tv, video games and Lindsey Lohan channel and they will continue to rot. Revolt? HAHAHAHAHAHAHAHAHA!!!!

    4. Money from around the globe is pouring into SoCal. Homes in my neighborhood are selling beyond ’06 peak values to the Asians. SoCal coastal RE is some of the most desired RE on the globe – best of luck waiting for prices to crater in La Jolla, Del Mar, Corona Del Mar, Newport, etc. You are competing with huge local, statewide, regional, national and international dollars to get into that market.

    5. The middle class is dying by 1,000 paper cuts, living on credit, can’t control their spending, gotta burn that cash on gadgets and when the cash is gone break out the plastic. Farewell middle class, you are a dinosaur.

    Now get off the internet and get out there and SPEND SPEND SPEND!!!

    • Falconator and Drinks hit the nail right on the head. There ain’t no revolt coming. The status quo is pretty good for most. That’s another reason there won’t be a relevant third party anytime soon. As disgusting as D&Rs are, upsetting the status quo could be worse for many.

      Until then, keep spending and keep the economy going. 🙂

  • I don’t understand it. Obama was suppose to be for the 99% and NOT the 1%. Looks like I was wrong. He is just like all the rest.

Leave a Reply

Name (*)

E-mail (*)



© 2016 Dr. Housing Bubble