Housing will never, ever heal. Well... not in my lifetime.
Anybody that buys a house is giving away their money... by extension, anybody that pays a single dime in mortgage or property taxes on a upside down mortgage is giving away money.
(Actually, there are exceptions. Locales with low-priced homes with land and low property taxes are probably very much worthwhile... as a percentage of the land mass, these are the majority... as a percentage of assessed or perceived value these are the extreme minority.)
The Banks do not want the properties back. Why would you continue to pay them?
I am not offering advice... I am asking a rhetorical question.
Most student loans will absolutely, positively default. Why should you be one of the few that pays your student loans back? (Again, that's a rhetorical question - not advice.) If I were in hock for a couple $100k in student debt I would emigrate by any means necessary... good luck trying to collect student loans internationally. Especially after I emigrated and changed my name and formed Cayman LLC's to hold my assets... (if I was able to rebuild my life). And if I was not able to rebuild? If I were a senior citizen or someone on Disability (5% of the adult population is on Disability... over 1/3 of them for "mental illness!! ROFL!!!!!) I would relocate to Panama as a Pensionado.
Life is short. Fighting lawyers and government agents and banks and student loans.... is a fool's errand. If you are in bad financial shape why would you cause your own death from stress? If you are a highly educated or trained professional or a millionaire with modest overhead... good for you! This does not apply. If you are struggling to pay the bills and wolves are at the door ready to tear you limb from limb... there should be kettle drums playing in the background this time tomorrow.
Don't want to learn Spanish? I would disappear into the black market... but property taxes, debts, interest... would all be yesterday's business.
So what's this got to do with housing?
Housing is dead. DEAD. And its dead despite the Federal Reserve (and the U.S. Treasury) throwing everything they had at it. At some point they will stop shooting... if not, they will eventually shoot themselves. Oil is not going to let them off of the hook. It is over.
The U.S. economy is based on a fractional reserve banking ("FBR") system run as a cartel controlled by the Federal Reserve. FBR needs a functioning real estate market to work. We don't have a functioning real estate market. The vast majority of the total value of properties is on the coasts (The New York Metro region represents the biggest lie that statistics can provide. If you believe the reports there, housing is "only" down 25% there versus 35%+ for the rest of the nation. Here's the thing: New York has a huge inventory of defaulted homes that the banks are not foreclosing. When the sheer size of the problem catches on with the rest of the population, and given the size of the mortgages and the aggregate lost value of property there... along with the outrageous property taxes - KABOOM!) ... the very places where property taxes assure that real estate will NEVER come back. Not EVER.
(Think about it: Purchasing property in these regions is placing yourself on the hook for outrageous future pension liabilities. Why would any rational person do that to themselves? No doubt a very few will trade one set of local liabilities for another (be the lucky outlier that sells their home and buys another in the same neighborhood, for what ever reason). This is what appears to be happening in Metro New York. But as de-leveraging and de-financialization run their course the banking and finance industry will continue to contract and with it the incomes and jobs of that regions best paying industry. Who in their right mind would pay $1 Million for a home in Westchester County, NY with $40,000 per year in property taxes? $400k every 10 years to pay into a pension system that will most definitely default?)
The pension systems of the municipalities demand property taxes that the property owners cannot afford. Those pensions will default and those municipalities will cut deeply into services.... and Oil won't let them off the hook, either. Chindia is going to keep out-competing the West for the declining pool of exported Oil... the producing nations are going to continue to export less and less... yea, they will need food for Oil... not to worry... they will get it... and they will be on the winning end of that trade. Plenty of poor farmers around the world to trade with... it does not have to be the U.S. There is a lot more food, and a lot less Oil, and a lot fewer people in Saudi Arabia than in China or India... the Saudi's will get fed... and they will consume more and more of that Oil... until they can't.... but between here and there it won't matter a lick to you.
Does deflation win? Or do the Central Banks finally overwhelm deflation with deficit spending/printing/bond buying? I don't know. Does it really matter? It will be one or the other. And the timing? I have no exact idea... except that "timing" doesn't matter either. We are in "it" now. "It" is happening as we speak. A multi-millionaire professional probably won't even notice for another decade (or two). Most of those already broke and being chased by the wolves will not be able to advance their position relative to past expectations - and that's more than 3/4 of the population.
I have been noodling this pretty constantly since Staniford's post about stagnate Oil production for the past 5 or 6 years... Peak Oil is here. Total employment in the U.S. has not improved since 2000. But the demands on the working population to provide for the elderly, the retired government worker, the poor, the Disabled (Snicker), the military... has been growing exponentially... and Peak Oil is here... and I am repeating myself... but Peak Oil is here.
Peak Oil could not have shown up at a worse moment. Housing's disaster had little to nothing to do with Peak Oil, but the housing disaster will absolutely, positively be exacerbated (terribly) by Peak Oil. People are not stupid. When they see that people stay in their home for 4 years without paying the mortgage or property taxes... and then 5 years... and then 6.... then 10 years....
Say goodnight, Gracie.
"Good night, Gracie!"
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10 comments:
What could I or anyone add to this perspicacious post?
Query, though: will "they" attempt to use the fog of war to cover up the issues, deceits, and looming anti-bank, anti-debt revolts?
The main resources for we the living will be skills, resources, and relationships. Don't let red-blue politics get in the way of forming the alliances with people you can trust.
I sure won't.
Something that has been amusing me - our leftist green faction has done us a big favor. By holding back drilling in the US, they've managed to keep significant resources untapped. We have used other countries' oil instead, and so have ours available now on the peak oil downside, when it's more valuable.
Publius:
I don't see much hunger for any more War... though Israel/Iran might not care about our hungers...
Tweel:
Yes, they have. It would be best if we stopped ALL exploration, but any resistance does in fact help the future transition.
Like Publius said, 'can't add a thing to this.
The turkey is ready for the fork.
Stephen B.
Not a great idea to suggest to not pay back student loans:
http://www.fff.org/comment/com1106j.asp
Scott:
I did not suggest anything... I said that if I owed $200k for a history degree, and that debt held me back from a full life that I would emigrate - by any means necessary.
Argentina, The Trombriand Islands, Brazil, Ireland, Greece, Israel... Enforcing judgments in foreign lands is no piece of cake.
The larger point is this - the vast majority of folks ain't paying it back... if it were me, I would not be one of those that do. BUt that's me. This is not advice.... we are speaking in the rhetorical.
You want to see a real depression, look no further than Japan. They have shut all but 2 of their 54 reactors down which account for 30% of electricity production. They are now importing more oil and NG, both drags on GDP with a debt load that would scare a mule at 230+ of GDP. Chris Martenson has a nice article that is also linked at zerohedge. Wait till that sunken corpse of a economy realizes they already hit the ice berg and there are no life boats for an economy that size.
Dex
I still believe there will be a renewed push to bail out student loans this Summer.
I look for most of them to be forgiven and in fact I bet Obama makes that a campaign promise this Summer.
Dex,
It will be interesting to see whether Japan restarts their reactors; they are screwed if they don’t. However, none of the current reactors are safe. Given what we know about Fukushima and the Fort Calhoun nuke Plant it’s probably safe to say all current reactors will melt down if they lose power. Ft. Calhoun lost power for a while during the floods last year and the spent fuel pools were gaining temperature at the rate of 1°/hr. Not Shure which scale but given the size of the pools that is a stupendous amount of energy even on the smaller Fahrenheit scale.
The big danger I see is a repeat of the solar flare on 1 September 1859. The sun throws out coronal mass ejections of that size regularly, just not aimed at earth. Eventually it will, as time goes to infinity so does the probability. If it happened tomorrow we would be looking at 435 simultaneous meltdowns, with a few days of generator power at best and no communications.
Best,
Dan
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