Another Housing Bubble?
By S. Lane (7/6/13)
Editor’s note: This was written on July 4, 2013.
It may be the fourth of July… but we’re not free.
I’ve always considered myself a relatively well-informed individual but recent events have made me realize that prior to this past year I’ve been living in a dream world.
A year ago if you had told me that I would soon understand the viewpoint of my hardcore Republican relatives or the mindset of a gun-hoarding survivalist I would
have scoffed at you. But now I can say with certainty I understand both their points of view.
What catastrophic life-changing event has destroyed my liberal delusions?
I have been trying to buy a house, in Los Angeles.
What’s happening in the housing market right now is absolutely criminal and makes me question the very underpinnings of our democratic society.
Welcome to a situation where Wall Street and banks set the rules, manipulate the market, and reward themselves and other rich investors, while the hard working, tax paying individuals who bailed them out of the subprime mortgage crisis sit on the sidelines and watch as housing prices and interest rates climb and the limited number of properties on the market go to all cash investors or the wildly highest bidder.
January through March 2013, it was not uncommon for the few prime properties on the market to have 60-85 offers at a time. Through a series of tactics, such as stalling on foreclosures, selling blocks of foreclosed properties to investors, like the Blackstone Group, and offering underwater homeowners a series of questionable (sometimes criminal) loan modification options, the street and the banks have created the illusion that the housing market is on the mend. It isn’t.
A combination of historically low interest rates and low inventory has helped create a seller’s market and drive housing prices upward. But what’s really happening here?
I posit we’re in a bubble, and the current market is not sustainable. As interest rates and prices climb, investors will drop out. In fact, investor interest already started to decline in May for exactly this reason. We now have a market of overvalued homes and interest rates right back at where they were a few years ago, and historically low inventory. Some individuals are still fighting over the few viable properties on the market while the slightly less desirable properties that would have sold quickly a few months ago are beginning to sit for weeks and weeks now that they’re no longer priced to flip.
People speculate the market will continue to rise … but I have to wonder, who’s going to buy all the overvalued houses now that the investors are pulling out? What’s going to happen when investors from afar decide they’re tired of being in the housing market and dump blocks of their properties? What will happen when underwater homeowners can finally re-enter the market? And what about all those foreclosures that are still being processed?
When I see what’s happened as a result of the subprime mortgage crises and the subsequent manipulation of the housing market, it’s difficult to explain the extent of my despair.
Yes, I know, it’s just a house. But really, it’s more a way of life that I see being destroyed for millions of Americans. I voted for Obama. Like many, I thought things were going to be different. But to paraphrase a popular bumper sticker: Same shit. Different day.
It has been difficult to wrap my mind around how the subprime mortgage crisis and subsequent bailout could occur and good people could be punished for it … How can banks post record profits and the criminals who run them collect bonus checks, while tax paying citizens who made good on their mortgages and now want to buy a new house are systematically marginalized and squeezed out of the market?
I used to think only crazy people believed in a new world order that called for the destruction of the middle class. But this is the most logical explanation I can find for what I’ve seen occurring in the housing market these past few years.
I don’t want any part of it.
I have dropped out of the housing market, dropped out of the Democratic Party, and will soon be dropping out of the mainstream banking system and putting my money in a credit union and cancelling all my credit cards, save one. I am spending less money than ever on material goods and trying to contribute as little as possible to this bogus economy (if you knew me, you’d know how shocking this is).
These are small steps for unprecedented times, but it’s a start.
Power to the people – even the middle class ones.
For more on the current housing situation, visit:
Dr. Housing Bubble: http://www.doctorhousingbubble.com/
Hanson on Housing: http://mhanson.com/blog