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Tuesday, May 6, 2014

Housing Recovery? Yes.. and No

Five-plus years after the stock market crashed, can we say we're enjoying a housing recovery?

The answer as the headline gave away is yes and no..

It really all depends on what side of the fence you fall; which of the two Americas do you belong to..

For instance in March, purchases of homes costing $1 million and up rose by 7.8%

On the other hand, sales of homes costing less than $250k plunged 12.8%
And its not just wealthy Americans buying US housing.. Its also foreign buyers looking for a 2nd or 3rd home and/or a good investment opportunity and/or a means of hiding their wealth from the tax agents in their home nation.

Interesting tidbit which we've told before..

Did you know there is one exception in the Patriot Act where large amounts of wealth can enter this nation from abroad and there is no background check to see just exactly where this money came from (drugs? terrorism? etc)

That one exception is real estate purchases..
You see what you like.. $5 million home?..  $10 million?   Sold..   Write a check..  Receive the title..  All done.. no questions or income verification sought

As for the other America..  if you bought property in the last few years, good luck turning a profit..

House prices like wages are stagnant..

Mortgage rates are also rising.. 30 yr fixed today is 4.33%..   last week it was 4.25%

What's the big deal right?

Well, let's get our amortization calculators and find out..
$250k mortgage at 30 year fixed..

At 4.25%, the monthly payment is $1,229.85 and by the loan is paid off in full, $192,745 in interest alone will be paid on the mortgage...

At 4.33%, the monthly payment is $1,241.59, an increase of $12 or so which doesn't seem much.

But once the loan is fully paid, the person with mortgage at this rate will have shelled out an extra $4,000 or so ($196,971 in interest)

Meanwhile the Fed keeps the interest rate the banks lend to each other and which helps the stock market artificially rise at less than 1%..  It has remained unchanged for a long time...
We are conditioned not only to not envy or resent those who are very rich, but to feel admiration and cheer on their continued wealth accumulation..

Perhaps its the belief a person will one day be that wealthy themselves..  Or maybe just brainwashing thanks to public school education..  who knows..

And when we hear these celebrities or athletes receive these super-large paychecks it just doesn't fully seep in how blatantly unfair an economic system we have in place.

Let us say from the age of 18 until your 70th birthday (52 years), you were paid a salary of $225,000 annually...     Not counting any taxes, in that time span you would have received $11,700,000 in wages for all those decades..
LeBron James was paid $19,057,000 for the 2013-14 season which means he made in 50 NBA games what the person in our example took over 5 decades to accrue...

And we know the Vast majority of people will never see anything close to the money our example made..

And yet they cheer and admire with such doe-eyed devotion..

Scum like Donald Trump, Bill Gates and Warren Buffett get idolization too..

Why?  For crushing upstarts and other competition to build near monopolies?
In their world, it is perfectly acceptable to go bankrupt in their business numerous times when a venture doesn't turn a profit and do so without the slightest care or concern

In our world a person is supposed to feel grief and inadequacy and shame because they had to file once..

In their world, they make money off other's money..  They rarely if ever foot the bill, instead finding suckers i.e. investors to put up up-front cash consideration

In our world, the rule of bank loans is the more you are in need of a loan, the more likely the bank will turn you down then wish you well

So is there a housing recovery..  Yes..

And No..