New York Bathroom For Rent: Just $1,100

New York Real Estate InvestWithAlex

I have been fortunate enough to live in some amazing places in my lifetime. And in many of those places I could rent quite a nice place for $1,100. In some places, this much money would get me a penthouse and I would even have enough money left over to hire a full time butler.

Not in NYC. There, you could live in a bathroom. Literally. 100-Square-Foot Upper West Side Rental Is So Sad It Hurts

And I am expected to believe that there is no secondary real estate bubble or as I call it “Dead Cat Bounce”? Sure. I think I will stick to my real estate forecast for the time being. Real Estate Collapse 2.0 Why, How & When

New York Bathroom For Rent: Just $1,100 Google

June 4, 2014October 24, 2014

The Shocking Downside Of American Real Estate Bubble 2.0

As Wall Street Journal reports…. Half of Americans can’t afford their house

Over half of Americans (52%) have had to make at least one major sacrifice in order to cover their rent or mortgage over the last three years, according to the “How Housing Matters Survey,” which was commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation and carried out by Hart Research Associates. These sacrifices include getting a second job, deferring saving for retirement, cutting back on health care, running up credit card debt, or even moving to a less safe neighborhood or one with worse schools.

If you need someone to blame I have got a few people for you. You can start with Greenspan, Bernanke, Yellen, Clinton, Bush, Obama and everyone in the US Congress/Senate over the last 20 years. All of them were, more or less, directly responsible for perpetrating this massive financial crime against the American people.

While you might have enjoyed your house going up in value 500% over the last 15 years you will not enjoy what happens next. As the chart above illustrate, the “Dead Cat Bounce” in real estate prices is almost over and the market is rolling over. As predicted here, Real Estate Collapse 2.0 Why, How & When the real estate market is about to suffer a massive Stage #3 correction. By the time it’s over, most Americans should be able to afford a house…again. I can’t wait.

The Shocking Downside Of American Real Estate Bubble 2.0 Google

February 5, 2014February 6, 2014

Why Is Donald Trump Freaking Out? He Knows What Will Happen In The Real Estate Over The Next Few Years. It’s Time You Find Out As Well.

Today’s 5-10 Minute Podcast Covers The Following Topics:

Reader’s Question: “I am thinking about buying a house, the prices are up significantly in my area over the last few years, should I do it now or wait?” – Lili, Maryland.

The Secret Behind Today’s Real Estate Prices.
What The US Government Doesn’t Want You To Know About Real Estate.
What Will Happen Next. Trust Me, It Is A 100% Certainty Now.
What You Should Do To Save or Make A Lot Of Money Over The Next Few Years.

Please tweet me your questions @investwithalex

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February 2, 2014February 2, 2014

Why Is National Association of Realtors Trying To Destroy America …..Again

CNBC Writes: Pending homes plunge, surprising economists

evil realtos investwithalex

Signed contracts to buy existing homes dropped 8.7 percent in December as abnormally cold weather hit much of the U.S., according to a new report from the National Association of Realtors.

The plunge caught economists by surprise. Economists polled by Reuters had forecast pending home sales would tick up 0.3 percent.

This pending home sales index fell to 92.4 from a downwardly revised 101.2 in November. These signed contracts are an indicator of sales in January and February, and are at the lowest level since October 2011.

“Home prices rising faster than income is also giving pause to some potential buyers, while at the same time a lack of inventory means insufficient choice. Although it could take several months for us to get a clearer read on market momentum, job growth and pent-up demand are positive factors,” said the association’s chief economist, Lawrence Yun.

There is close to 1 million Real Estate Agents in the US. I think it’s time we give a serious consideration to rounding them all up and shipping them to Siberia. Maybe we can make some sort of a deal with Mr. Putin in exchange for oil or natural gas. For all I care, let them sell pine trees to hungry bears in Taiga and get paid with berries. We should start with Lawrence Yun.

Come on!!! Does anyone even believe NAR fools anymore. Keep in mind, NAR is the same organization that was cheering the housing bubble all the way until it blew up and killed all of those poor souls in Florida, California and Nevada who couldn’t fog a mirror yet each had 10 houses to their name. Now they are blaming the “cold weather” for a severe plunge of 8.7%. Jesus Christ, I guess it was too cold for all of those Chinese investors and hedge funds with bags full of money to buy real estate in southern states.

Unlike NAR, dear reader, I will not insult your intelligence. You see, in my October post “I am Calling For A Real Estate Top Here“, I clearly outlined a case for why the real estate market is finishing its “Dead Cat Bounce” and is about to roll over to continue its bear market that started in 2007.

What is a dead cat bounce? Allow me to present a powerful illustration I worked on for 2 days.

Such bounces exist, once again, to fool the masses. They act to suck people back in with the promise that the worst is over. Fools rush back in only to have the trap snap shot right behind them. On Friday I wrote about Hedge Funds funneling money to plumbers and dentists so they can become “landlords”. If that doesn’t scream out “Market Top”, nothing else will and you are on your own.

Today’s real estate market is not the function of economy, jobs, supply/demand, family formation or any other crap real estate propaganda machine (aka NAR) would like you to believe. It is a function of credit and speculation.

It is has been artificially driven up by over $3 TRILLION of monopoly’s money being pumped into our economy by Uncle Ben. No, not the Uncle Ben that sells rice, but the one at the FED.

When the credit bubble goes, you will find the real estate bubble collapsing along with it…..again.

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Why Is National Association of Realtors Trying To Destroy America …..Again Google

January 3, 2014January 3, 2014

4 Scary Reasons You Should Run Away From Real Estate…..Right Now!

Yahoo Finance Writes: 4 Reasons You Shouldn’t Worry Over Rising Mortgage Rate

An amazing puff piece from the Real Estate Industry. Please see my comments below. Also, please note that I have called for the Real Estate top back in early October of 2013. You can see it here. I Am Calling For A Real Estate Top Here. I am still sticking to that forecast. The market is already rolling over, although, a little bit slower.

If buying a new home is on your list of goals in the New Year, don’t let talk of rising mortgage rates derail your plans just yet.

As the economy recovers, the Federal Reserve tapers, and home values rise, experts predict we are well on our way to seeing mortgage rates crack 5% in late 2014.

Rates for a 30-year fixed-rate mortgages already hit 4.69% this week, up from 4.63% the week prior, according Bankrate.com. In May, the 30-year rate was 3.52%. Fifteen-year fixed mortgages were up as well, from 3.70% last week to 3.73% this week.

But rising rates don’t necessarily spell doom for house hunters. Here are four big reasons not to worry.

1. Mortgage rates are getting higher but not drastically so.

“I don’t think there’s any reason to panic,” says Keith Gumbinger, vice president of mortgage rate tracker HSH.com. “Buying a home will be somewhat more expensive, but I don’t think it’s going to be a matter of ‘Oh, I’m losing so much ground that I have to go out and buy [a home] right now.’”

Historical context is important. A little over a decade ago, the lowest average rate for a 30-year fixed rate mortgage was around 5.24%, Gumbinger notes. It’s easy to forget that when rates fell so dramatically following the housing crash.

“Even if we do start to see 5% rates appearing in 2014, rates will absolutely remain favorable [to buyers],” he says.

When someone in the industry says “I don’t think there’s any reason to panic”, you MUST panic. While in historic terms rates are still low they are still up over 100% in the last 1.5 years. That is a huge move within a short period of time and it will take its toll. It is already happening. Don’t let anyone fool you that it doesn’t matter.

2. Housing inventory is on the rise.

Nationwide home values have soared over the last year, with year-over-year gains of 13.6%, according to the Dec. 31 S&P/Case-Shiller Home Price Indices. That marks a seven-year high and the 17th consecutive monthly increase.

But new-home construction has picked up in the last few months and is expected to ramp up more, which should help lift supply. New housing starts were up 30% year-over-year in November 2013, according to the Commerce Department. On top of that, more homeowners will likely sell this year to capitalize on rising home values, contributing to an inventory boost.

I am not sure how this positive for the housing market, but they are absolutely correct. There is too much inventory out there. Too much hidden inventory for that matter, still sitting on bank balance sheets. Eventually all of that will come to the market and drive the prices lower.

3. There will be less competition from investors.

Real estate investors were notoriously greedy in the wake of the housing crash, snatching up cheap properties and elbowing out individual home buyers before they knew what hit them. But Jed Kolko, chief economist for Trulia, predicts that competition from investors will die down now that the market is recovering.

Last year “was the year of the investor, but 2014 will be the year of the repeat home buyer,” he says.“Investors buy less as prices rise. Higher prices mean that the return on investment falls, and there’s less room for future price appreciation.”

In other words, the author wants retail buyers to come in and purchase inventory from investors before market declines. This occurs in the stock market all the time. Again, I am not sure how this is a positive for the real estate sector. It predicts its inevitable decline. Don’t be that FOOL buying from investors at or near the top.

4. Fed tapering isn’t all bad news.

All eyes are now on Janet Yellen, the incoming Federal Reserve chairman who will be charged with phasing out the bond-buying program that has helped to steady interest rates over the last five years. It will be a delicate process. If Yellen moves too quickly, investors could get spooked and send mortgage rates soaring, notes Bloomberg’s Kathleen Howley. If she moves too slowly, rates could fall and the market could get flooded with home buyers.

But there’s a silver lining, Gumbinger points out: “Mortgage rates have started to firm up again not strictly because the Fed has started to taper but because the economy has gotten better,” he says. The fact that they’re considering winding down quantitative easing is a sign that the sluggish economic recovery is at least making some headway.

You joking, right? The economy has NOT gotten better. It has gotten sicker. A distinction must be made between real economic growth and a “drunken” credit driven speculative party. What we have seen over the last few years is the later. When it comes to an end in 2014 (based on my timing work) and the bear market resumes, this will be made very clear. Again, this is a horrible position to be in for the real estate market. As I have said many times before, the 3rd leg of the real estate decline will be a severe one. Position yourself now.

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4 Scary Reasons You Should Run Away From Real Estate…..Right Now!

October 14, 2013October 14, 2013

Warning: Real Estate Red Alert

Reuters Writes: Nobel Prize U.S. winner warns of ‘bubbly’ global home prices

(Reuters) – One of three American economists who won the 2013 economics Nobel prize on Monday for research into market prices and asset bubbles expressed alarm at the rapid rise in global housing prices.

Robert Shiller, who shared the 8 million Swedish crown ($1.25 million) prize with fellow laureates Eugene Fama and Lars Peter Hansen, said the U.S. Federal Reserve’s economic stimulus and growing market speculation were creating a “bubbly” property boom.

This was the case in the collapse of the U.S. housing market, which helped trigger the 2008-2009 global financial crisis. Markets are at risk of committing the same error now, Shiller told Reuters after learning he had won the Nobel prize.

“This financial crisis that we’ve been going through in the last five years has been one that seems to reveal the failure to understand price movements,” Shiller said.

“When asset prices are getting way out of line it should be cause for alarm. The monetary authorities should lean against extreme asset price movements,” Shiller said.

The bubbling housing market is not mainly the result of central bank policy, but reflects a shift toward “a more speculative attitude,” Shiller said. “We cannot expect monetary policy to cure all of these problems.”

Read The Rest Of The Article

I have a lot of respect for Mr. Shiller and I am happy that he won. My respect is not necessarily based on his economic work(even though it has been accurate), but on his ability to take sides. Most economists don’t do that. Most talk out both sides of their mouth without as much as saying anything worthwhile. That is academia for you.

I agree with everything Mr. Shiller states in the article above. Indeed, we are in the midst of a “Global Real Estate Bubble”. This is a unique situation that we haven’t seen before on such a massive scale. The culprit is easily identifiable here as well. Cheap financing on a global scale perpetuated by the FED. The outcome is clear as well, an eventual collapse in credit, real estate and financial markets on a global scale. Anything other than that would defy the laws of physics. For now, it is only a matter of time.

In my previous post I Am Calling For A Real Estate Top Here, I have made a gutsy call that we are indeed topping out here. I firmly stand by that analysis as we continue to get more concrete evidence that the real estate market rally from the 2010 bottom has indeed peaked.

As such, I once again caution you against speculating in real estate at this time.

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September 12, 2013

Why The USA Housing Market Is About To Collapse

(Quick Note: Dear reader….. I can drop a substantial amount of economic and statistical data on you to support the points below. However, if past is any indicator any such economic data would put most readers to sleep within 10 second. Plus, a volume of data/analysis can be published in regards to every single point below. As such, I offer only a quick summary and my conclusion for your reference. Should you require any additional information about the thesis below, please contact me directly. )

Yes, I called it perfectly in 2006-2007 and now I am saying that it is not over.

Before we can understand where we are now and where we are going in the future we must understand where we came from. The Real Estate run up that we have experienced between 1997-2007 has no historical precedent. Real estate data going all the way back to 1790 clearly shows that the US housing market basically appreciated at the rate of inflation. Yes, there were some bubbles and substantial declines, but overall, appreciation at the rate of inflation is an appropriate way to look at the US real estate sector.

A QUICK HISTORY LESSON:

All of that changed in 1997 when Bill Clinton signed The Taxpayer Relief Act into law, basically allowing $250,000 in tax free capital gains in real estate. While real estate was already appreciating at a good clip at that time, that law added fire to the trend.

Later, fearing significant economic slowdown in 2002-2003 the Bush administration added a huge amount of jet fuel to the Real Estate Bubble by cutting interest rates and making mortgage finance available to everyone (even to the dead people). As people used to say, if you can fog a mirror you can get a mortgage. Of course, all of that led to the largest finance bubble in the history of mankind that “kind of” melted down in 2007-2009. I say “kind of” because most of those excesses are still in the financial system and will have to be worked through in the future.

WHERE ARE WE NOW?

Issue #1: US Home Ownership Rate Is Plunging

On historical basis, home ownership rate in the US is in free fall. Take a look at the chart. I think it speaks for itself.

Issue #2: Real Estate Affordability Is Plunging

Take a look at the chart as it speaks for itself. The affordability index is in free fall as well. Most likely due to higher interest rates and rising prices.

Issue #3: Interest Rates Are Going Up

The trend has shifted up and the 10-year rate is up 100% over the last 12 months. I gave detailed interest rate analysis here. Please take a look here.

Issue #4: US Economy & The Stock Market Is About To Turn Down (Big Time)

Please read “The Long Awaited US Stock Market Decline Is Likely Here” as to why.

Issue #5: Who Is Buying All Of These Properties For Cash Today?

Chinese buyers, hedge funds, banks themselves, investors, speculators, etc….. Who cares!!! Remember all those Japanese investors buying everything they could in California and Hawaii in the late 1980’s. I wonder how that turned out for them.

On a more serious note, notice that I didn’t say Average American Family. That is the only category that we should track if we want to accurately predict the future trend in the US Real Estate market. Every other category is irrelevant over the long run. And guess what? They are not buying. See the charts above.

Issue #6: Bear Market In Real Estate (sucks people back in)

As I have said here before (US Real Estate At A Turning Point), this is how the bear market works. This is the stage #2 bounce, before the big decline (stage #3). The bear market tends to suck people back in, offer them perceived safety and a high return before slamming the door, ripping their head off, drinking their blood and taking all of their money. The US Real Estate market is topping in Stage #2 run up here. That is why you are seeing so many divergences. The market should turn down soon. Beware.

FUTURE OF REAL ESTATE:

Real estate is not made of Gold. There is a tremendous amount of land available in California, Florida and all over the US. There is no housing shortage. As such, expect real estate to decline significantly in order to revert back to its natural inflation adjusted mean. It might take a few years, it might be different for various cities, but one way or another the market will get there.

HOW FAR DOWN?

Let’s do very simple math for the San Diego market. It doesn’t have to be exact for our purposes.

Setup:

San Diego Median Family Income: $61,500
As Per Various Financial Guidelines Families Shouldn’t Spend More Than 30% Of Their Income On Housing. That means a $1,500/monthly payment.
Median Home Price in San Diego: $500,000 (pushing that level again as per Trulia.com)
Interest Rates: 30 Year Mortgage 4.72% (Rates as of 9/4/2013)

With such fundamental input variables median house value should be $290,000 -OR – A 42% DECLINE ($1,500x360month@4.72%)

What if interest rates go to 7% over the next 5 years, which can easily happen?

The fundamental value of the median house drops further to $225,000 -OR- A 55% DECLINE

Also, don’t forget that markets oftentimes overshoot to the bottom, just as they set blow off tops. In such a case I wouldn’t be surprised to see a median price of $150,000- 200K -OR- A 70%-60% DECLINE

You say impossible….. I say study financial markets. Nothing is impossible.

Now, I understand and agree that there are various market forces at play that make the picture a lot more complicated. Interest rates, timing, mortgage finance, cash buyers, the FED, foreign buyers, speculation, location, supply/demand, etc…. However, fundamentals will always prevail over time. Everything else is just temporary bullshit.

ADVICE:

Your house is not an investment. Don’t be confused. It is the place you live and raise your family. If you are happy with your house, have a fixed interest rate, can afford your monthly payments and don’t care if your house depreciates in value, I would stay put.

If you find yourself in a contrary situation……..I would consider various options.

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