That was an interesting day!
The markets held our levels pretty well and we had to be quick on our feet today but we had a great time working our way into stage on of our FrankenGoogle play, which I will detail on the weekend for members and non-members alike once the members get a chance to fill.
The dollar held just over 76 but gold was not too impressed and closed at $810 and money flew out of treasuries, causing rates to climb at the day's end and that money had better find it's way into the markets or we will not be having a good week.
Also not having a good week are 50,000 homeowners who got foreclosure notices in the past 7 days. This is not a special event; for the months of August, September and October, 635,000 foreclosure notices were filed. While we like to think of them as statistics, the average US household has 3 people in it so that's 1.9M PEOPLE per quarter or 158,000 people a week or 22,678 PEOPLE PER DAY being thrown out of their homes right here in the USA!
Trena Bond runs a housing advocacy business in Milwaukee that helps people get home loans and — most recently — hold on to the ones they have. The crush of foreclosures has doubled her business in six months. Bond, executive director of Housing Resources Inc., said her typical client is a black single parent and first-time homeowner with an average annual income of $35,000 to $40,000. "I see people who, for one reason or another, fall behind in their payments — they lose their job, there's an illness, they accumulate credit card debt. Then they refinance," Bond said. Perhaps one-third of the people who come to see Bond can hold on to their homes. Many, she said, "just walk away" from them.
A report from the University of Wisconsin-Milwaukee showed that the number of homeowners with mortgages in Milwaukee increased to 74 percent in 2006, up from 68 percent in 2000. At the same time, the report said the percentage of people paying at least 50 percent of their income on housing has nearly doubled, to 19 percent. Homes as a percentage of income in this country have never been higher, workers have been sold a bill of goods for the past decade that they didn't need wage increases because inflation was low and a shell game of a tax refund only shifted the tax burden down to the local level in the form of property taxes and higher state taxes while commoditiy prices have risen out of control and foced what used to be the middle class of this country into a class that is barely making ends meet. Lack of health coverage for 15% of our population means 50M people are just one incident away from bankruptcy, even on a good day.
From 2001 to 2005 home prices in Southern California grew at eight times people's median income, in Seattle four times as fast, in Denver twice as fast. The only way this nonsense could continue was with the willful cooperation (the politest way to say conspiracy) of the realtors, the lenders and, according to the NY Attorney General, the appraisers who all gleefully participated in an orgy of home price ratcheting, telling homeowners they were getting a bargain (despite the insane prices), working out exotic finanical arrangements (for huge fees) to "help them buy the American dream" and, now we find out, getting appraisers to misrepresent the home's true value in order to justify the madness.
Why would the realtors, banks and the title companies want to rip off the American people like this? For money, of course! In addition to the realtors, mortgage companies and title insurance companies get paid a percentage of the deal but the fees are regulated so there are just 3 ways they can improve their revenue stream:
-
They can compete in a fair market, offer better services to the consumer and win market share
- America used to be good at this, but not lately
- Also, this costs money and takes hard work so the returns are low
- They can get more people to buy homes
- Increase the price of the homes
Guess what they chose? Since large corporations control large chunks of the market, it's a very simple business plan to push the government to push for more home ownership while, at the same time, engaging in a steady program of pushing home prices higher through listings and appraisals, which becomes a self-feeding mechanism because appraisals are based, in part, on recent home prices as are home prices so it doesn't take much of a push to drive prices up 1-2% per quarter. Think about what you do when a neighbor gets an extra $25K for his home – you immediately increase the price you would sell your home for by $25K.
It is a realtor's job to find you a home for a good price, it is the appraiser's job to determine the reality of these prices for you, it is the mortgage company's job to lend only against a reasonable value and it is the title company's job to insure that value. What chance does a homebuyer have when, rather than acting as a system of checks and balances, they all get together to screw you over?
Very much like the oil industry, this oligopoly relentlessly pressed the price of their commodity higher and higher, costing US consumers Trillions of dollars just so they could make Billions in fees. With a 6% realty fee the realtor makes twice as much selling you a $500,000 home as a $250,000 home. You didn't WANT to pay $500,000 but "that's what they're going for now." The same goes for the fees charged by the mortgage company and the fees charged by the title company. Ironically, YOU pay these people and they have a fiduciary responsibility to look out for your interests but, instead, they sold you down the river in order to boost their fees.
Motive, means and opportunity.. Guilty, guilty, guilty!
Of course, knowing you've been violated and being able to point a finger at the people who sold this country down the river does little to address the problems. Look at the hundreds of Billions in profits that have been booked by homebuilders, realtors, brokers, mortgage companies, title companies, insurance companies, financial firms who move all that money around. So many people made money off this scam there was no one left to complain but, like many cons, they pushed it to hard and broke the mark. In this case the mark was the American people and they are left holding the bag, paying those record mortgage rates even as housing prices begin a slow, relentless reversal.
Where will the next suckers come from? In the 1980s the Japanese came in and took all of our bloated commercial real estate off our hands. Back then, when money was worth something, Japanese investors poured $300Bn into US realty and then, when that bubble burst, were lucky to go home with half of that money as Trump et al bought their properties back for dimes on the dollar. That was all a good laugh for us but it bankrupted Japan and they are still recovering.
Our markets have no Japan to bail us out. Heck we're not even allowing immigrants in so who's going to buy these homes? No we've been mugged, beaten and left for dead on the side of the highway by the "housing industry" and 158,000 people a week are becoming the new homeless (which is actually great for the current administration because they probably won't vote now).
So what's it going to be nation? Are we going to continue to try to bail out the banks, who've made Billions and cry poverty from their windowed offices, or are we going to actually do something for the people, who took everything they had and put it into a home that the experts they hired told them was fairly valued, who were coerced into signing onerous contracts with complex financial terms that were explained to them by the same "experts" who stood to benefit from their agreement to those onerous terms and fees.
Homebuyers entered into a game where all the tables were rigged and everybody around them was running a con yet the media (who are paid by the real estate industry and not these poor people) tries to vilify the victims. In theory, this is what government is for, to prevent exactly this type abuse but we are practicing laissez faire capitalism to such an extreme these days that we've killed the goose (the US consumer) that lays the golden egg.
