Is the Air Coming Out of Housing Bubble 2.0?

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Peter Schiff put it pretty bluntly in a podcast last week. We don’t have a booming economy. We have bubbles. And it looks like the air is starting to come out of some of those bubbles. We see signs of trouble, particularly in interest rate-sensitive sectors such as real estate. As just one example, home sales in California have hit the lowest level in a decade. And it’s not just California. We’re seeing declines in many of the “most splendid housing bubbles” in America. Even more troubling is that we’re seeing these tremors and interest rates aren’t historically high.


But they are rising quickly. According to an article in Wolf Street, they may soon hit 6% and that could be the real tipping point.

Mortgage rates have eclipsed the 5% level. According to the Mortgage Bankers Association, the average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment rose to 5.17% for the latest reporting week. That marks the highest rate since September 2009.

The next stop is 6%. As Wolf Street notes, that was the mortgage rate in December 2008.

Of course, rising rates are by design. The Federal Reserve has nudged the rate upward, and it is also shedding Treasuries and mortgage-backed securities. Here’s the impact we’ve seen since the beginning of the year, according to Wolf Street.

  • The 30-year mortgage interest rate has risen 95 basis points, or nearly 1 percentage point (from 4.22% to 5.17%).
  • The 10-year Treasury yield has risen 71 basis points (from 2.46% to 3.17%)
  • The spread between the two has widened from 176 basis points on at the beginning of January to 200 basis points now.

In other words, mortgage rates are climbing faster than the 10-year Treasury yield, now that the Fed has begun the shed mortgage-backed securities. This is expected. It’s part of the QE unwind – it’s part of the Fed exiting the mortgage market and pulling its support out from under it.”

Keep in mind, 6% is still historically low.

Here’s another disturbing piece of the puzzle. Home prices have risen precipitously and have eclipsed levels seen just prior to the housing bust. Average home prices nationwide have surged 11.5% above the crazy peak of housing bubble number one. In a nutshell, we’re looking at housing bubble 2.0.

As Wolf Street notes, even at relatively modest 5% mortgage rates, we’re seeing an impact on the housing market with significant pressure building on the margin, “with some potential buyers being locked out and others scared off as they’re finding today’s inflated home prices don’t mix well with even slighter higher mortgage rates: What was barely affordable for them, with a good amount of stretching, has become unaffordable.”

Wolf Street predicts the real pain will kick in as the mortgage rate approaches 6%. And that is likely less than a year away at the current rate.

Six percent will block enough potential buyers from buying at current prices to where sellers will have serious trouble selling their homes unless prices drop enough. The cure for this market will be lower prices – even if it means rising defaults and considerable problems among mortgage lenders, particularly the non-bank lenders (the “shadow banks”) that have very aggressively moved into the mortgage market over the last few years. Quicken Loans has now become the largest mortgage lender in the US, ahead of Wells Fargo. These shadow banks are less regulated and have taken more risks than the banks. The Fed is already worried about them but worrying is all it can do since it doesn’t regulate them.”

This is just one sector of the economy, but it’s indicative of what’s going on more broadly. While the mainstream touts the “economic boom,” there is underlying rot that rising rates are about to expose. As Peter said, the housing market is a leading indicator of the impact of rising interest rates.

If the US economy is really going to stay strong and if interest rates are going to keep rising, how is it possible that the economy can continue to stay strong with high interest rates when the economy, or the strength of the economy, is predicated on debt?”

by SchiffGold

Posted by The NON-Conformist


The End Really Is Near: Here’s a Play-By-Play of the Coming Economic Collapse as Predicted by 5 Economists

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Recoveries generally don’t die of old age. So what’s going to kill ours? Five economists call it like they see it Since June, 2009, the pit of one of the biggest recessions in American history, the U.S. economy has been growing, slowly but steadily. That’s just over nine years of uninterrupted growth.

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Image: YouTube


Since June, 2009, the pit of one of the biggest recessions in American history, the U.S. economy has been growing, slowly but steadily. That’s just over nine years of uninterrupted growth. If the good times roll for another year — and most economists expect they will — this expansionary period will go down as the longest ever in American history, surpassing the 120-month-long period during the ‘90s tech boom. But don’t be so quick to pop bubbly and send the confetti raining down. There’s precedence for unprecedented growth: It always ends. The economy, of course, moves in cycles.

And no matter how you slice it, it would seem there’s only so much more climbing before a fall. But what will set off a downturn? How bad will it be? And when will it actually happen? To answer these questions and more, Salon consulted with five economists, three of whom (Peter Schiff, Steve Keen and Dean Baker) predicted the 2008 financial crisis before it hit.


— Read on

Posted by The NON-Conformist

One California City Stands Up To Wall Street

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Image: AP

If you liked Occupy Wall Street — or if you liked their message but not their disruptive tactics — you’ll love what’s happening in Richmond, California. No, folks aren’t pitching tents in the parks or marching in the streets to protest banks’ predatory practices. Instead, in this blue-collar city of 103,000, local officials – with support from residents and community groups – are demanding that banks sell their portfolio of “underwater” mortgages to the city so it can make them more affordable for local homeowners. If Richmond succeeds, many other cities are likely to follow its example, which has Wall Street up in arms. In this David versus Goliath battle, odds-makers might just place their bets on the kid with the slingshot.

Since 2007, when the speculative housing bubble burst, home prices have plummeted across the country. Homeowners have lost more than $6 trillion in household wealth. Almost 10 million American families–about one fifth of all homeowners with mortgages — are underwater. Often through no fault of their own, they owe more on their mortgages than their homes are worth. Many are at risk of joining the five million Americans who’ve lost their homes to foreclosure.

The blame for this predicament lies almost entirely with Wall Street’s risky, reckless and sometimes illegal lending practices. Banks targeted working class and minority areas, often pushing borrowers into high-interest subprime loans, even when they were eligible for conventional mortgages. Not surprisingly, the nation’s worst underwater “hot spots” are disproportionately black and Latino areas.

One of those places is Richmond, where home prices have plummeted by 58 percent since 2007. Thousands of homeowners have lost their homes. Nearly half of remaining homeowners are underwater. The city has lost millions in property tax revenues, leading to cuts to vital services and infrastructure repair.

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Posted by Libergirl

‘We were told to lie’ – Bank of America employees open up about foreclosure practices

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Employees of Bank of America say they were encouraged to lie to customers and were even rewarded for foreclosing on homes, staffers of the financial giant claim in new court documents.

Sworn statements from several Bank of America employees contain a number of damning allegations, the latest claims entered as evidence in a multi-state class action lawsuit that challenges the bank’s history with foreclosures.

According to testimonies obtained by journalists at ProPublica, supervisors at various Bank of America branches across the United States encouraged employees to regularly deny loan modification applications with no reason. At times, they were told to make up excuses to customers who risked losing their homes.

In one of the sworn statements, an ex-bank staffer said he would be directed to deny upwards of 1,500 loan modification applications at a single time with no apparent reason.

“To justify the denials, employees produced fictitious reasons, for instance saying the homeowner had not sent in the required documents, when in actuality, they had,” William Wilson, Jr., a former underwriter for the bank, wrote in his statement.

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Foreclosure Activity Jumps in Troubling Sign for Housing Recovery

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The housing market has shown some promising signs of late, but a fresh batch of foreclosure data offers a reminder that any recovery from the housing bust will likely be slow, spotty and painful.

RealtyTrac reported Thursday that foreclosure filings rose by 9 percent in May from a month earlier, to 205,990 total properties that were subject to default notices, scheduled auctions or bank repossessions.

The jump in foreclosure activity was likely because lenders are finally getting to a backlog of homes they might have started foreclosing on last year if they weren’t facing criticism for cutting corners and pushing foreclosures through too quickly and without adequate controls, said Daren Blomquist, a vice president with RealtyTrac.

By Allison Linn,

Posted by Libergirl



I still think Bill Clinton is one of the worst presidents ever; from his many extramarital issues to his mishandling of the economy. Have you noticed how he has the tendency to back track? He was the single cause of the housing bubble. Don’t get me wrong individuals got themselves ensnared in the trying to make money part e.g., flipping homes.

Clinton is now back tracking from being loyal. He’s starting to look more like Cory Booker who was correct in what he said, but it isn’t really about that, it’s about solidarity. If you want to be able to fly off the cuff, change parties; maybe try the Libertarian or Green Party. Clinton suffers from got beat syndrome, I think it still lingers a bit from Hillary getting it handed to her when she ran against Obama. The Obama campaign is going after Romney’s record at Bain Capital yet Bill wants to give glowing compliments on that record. Bill, it’s easier to disrespect the man outright, stop saying how much you’ve done for him. It’s a bit insulting, especially when you’re undermining him. Thanks for staying classy.

Romney has to be a lonely man. He doesn’t have many real friends that go way back. Many are only in his camp because they hate the black guy. Romney doesn’t help his cause with all the flip- flopping either. One gaffe he made kinda made me sore. In 1994 he said: “It was not my desire to go off and serve in Vietnam, but nor did I take any actions to remove myself from the pool of young men who were eligible for the draft;” But in 2007 he said: “I longed in many respects to actually be in Vietnam and be representing our country there, and in some ways it was frustrating not to feel like I was there as part of the troops that were fighting in Vietnam.” This is so insincere, if he wanted to serve he could have severed. Why play this game, it doesn’t make sense. The Obama camp will simply continue to put out what he actually said. If you think about it, it’s a bit disturbing.

What can we say about the mishandling of the election that took place Tuesday in Wisconsin? Not much, Scott Walker was voted back in. Don’t worry too much, there will be other elections. Walker was the first governor out of three to ever win a recall. Sure it adds to his credibility as a de facto leader and Wisconsin is mentioned as a possible swing for the President. The economy has turned for the better which is good news for the President. Wisconsin still has time to get it together.

Obama’s National Defense Authorization Act(NDAA) is one of his biggest fails, especially when it comes to America citizens. This is walking over what some hold on to so dearly.

The NON-Conformist

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