Chris Martenson
by
Chris Martenson
Executive Summary
- The data shows first-time home buyers already beginning to throw in the towel
- But house "flipping" by amateur investors is coming back into vogue
- Why we're back in a housing bubble
- Big funds are beginning to exit retail housing due to too much "stupid money"
- The risks every home buyer (and homeowner) needs to be aware of right now
If you have not yet read Part I: Housing Prices are Being Dangerously Distorted by Big Institutional Money available free to all readers, please click here to read it first.
The Impacts
As noted in the Salt Lake City anecdote above, one obvious impact of all this institutional money is that it is preventing ordinary people from buying a home because they cannot compete with the big money firms:
Blackstone, other investors snap up thousands of Tampa Bay rental homes
Ken and Susan Beran embodied that old idea of the American dream. They married. Built a house. Raised a daughter within its walls. But after 30 years, as Ken eyed retirement, the Berans envisioned a different dream.
In December, they moved to a new home — this time, to rent. Ken said he can't imagine ever buying a home again. Susan, a first-grade teacher, hasn't felt so calm in years. "I'm leaving a building I had to maintain, had to stress over," Susan said. "I'm taking all of my memories with me."
Bad credit, ravaged savings and evolving attitudes are driving more Americans to rent houses, and big-money investors are waging war to win their business. Few are mightier than the Blackstone Group, which dropped $150 million to buy 1,000 Tampa Bay homes — in just the last six months.
The New York-based private equity giant has already bet $3.5 billion across the country that the housing crisis has fundamentally changed the way many families live. Once-proud homeowners like the Berans, they believe, are beginning to reject home ownership altogether.
It seems entirely wrong to me that the Fed bailed out big banks and made money excessively cheap for institutions, and that this is being used to price ordinary people out of the housing market. Said another way, the Fed prints fake money out of thin air and some companies use that same money to buy real things like houses and then rent them out to real people trying to live real lives.
Recently it was shown that the number of first-time homebuyers has fallen by 25% as these typically low-end buyers have retreated in the face of higher prices.
Not exactly the sort of 'spin' you usually read on that story, but it's more honest than trying to claim that the recent price hikes are due to improving consumer confidence and an economic recovery…
And the Smart Money Is Already Withdrawing
PREVIEW by Chris MartensonExecutive Summary
- The data shows first-time home buyers already beginning to throw in the towel
- But house "flipping" by amateur investors is coming back into vogue
- Why we're back in a housing bubble
- Big funds are beginning to exit retail housing due to too much "stupid money"
- The risks every home buyer (and homeowner) needs to be aware of right now
If you have not yet read Part I: Housing Prices are Being Dangerously Distorted by Big Institutional Money available free to all readers, please click here to read it first.
The Impacts
As noted in the Salt Lake City anecdote above, one obvious impact of all this institutional money is that it is preventing ordinary people from buying a home because they cannot compete with the big money firms:
Blackstone, other investors snap up thousands of Tampa Bay rental homes
Ken and Susan Beran embodied that old idea of the American dream. They married. Built a house. Raised a daughter within its walls. But after 30 years, as Ken eyed retirement, the Berans envisioned a different dream.
In December, they moved to a new home — this time, to rent. Ken said he can't imagine ever buying a home again. Susan, a first-grade teacher, hasn't felt so calm in years. "I'm leaving a building I had to maintain, had to stress over," Susan said. "I'm taking all of my memories with me."
Bad credit, ravaged savings and evolving attitudes are driving more Americans to rent houses, and big-money investors are waging war to win their business. Few are mightier than the Blackstone Group, which dropped $150 million to buy 1,000 Tampa Bay homes — in just the last six months.
The New York-based private equity giant has already bet $3.5 billion across the country that the housing crisis has fundamentally changed the way many families live. Once-proud homeowners like the Berans, they believe, are beginning to reject home ownership altogether.
It seems entirely wrong to me that the Fed bailed out big banks and made money excessively cheap for institutions, and that this is being used to price ordinary people out of the housing market. Said another way, the Fed prints fake money out of thin air and some companies use that same money to buy real things like houses and then rent them out to real people trying to live real lives.
Recently it was shown that the number of first-time homebuyers has fallen by 25% as these typically low-end buyers have retreated in the face of higher prices.
Not exactly the sort of 'spin' you usually read on that story, but it's more honest than trying to claim that the recent price hikes are due to improving consumer confidence and an economic recovery…
by
Chris Martenson
Executive Summary
- Corporate junk bonds: All-time highs
- Equities: All-time highs in Germany and U.S.
- Other equities: Spiking upwards (Japan, Greece, Australia)
- Margin Debt: Second highest on record
- Excuses: Consistent with bubble territory
- Timing: When reality will likely express itself
If you have not yet read Part I: Four Signs That We're Back in Dangerous Bubble Territory, available free to all readers, please click here to read it first.
In Part I, we discussed four signs that we are in bubble territory – in both stocks and bonds – plus all of the usual rationalizations that accompany bubbles. In truth, there are many more signs which we'll discuss further here, and I want to go deeper into the data exploring the warning signs in the equity and bond markets.
I want to spend time cataloging and explaining my reasoning because when bubbles burst, it's traumatic for everyone, but especially those that aren't prepared.
Further, these bubbles are so large that it's useful to employ historical analogues to weigh them against and parse for clues as to just how bad developments could get.
The Big Picture
What we do at Peak Prosperity is track the big picture. We look at the macro risks and trends, and try to figure out what's coming next. Over the long haul. we have very little doubt that several decades of debt accumulation partnered with structurally higher oil prices will result in anything other than reduced standards of living for most people.
And that’s if everything goes smoothly.
At the other end of the spectrum lies the potential for currency, political, and fiscal crises, the likes of which have never been seen before, given the global nature of the situation.
Leaving oil prices aside for the moment, in purely economic terms, living beyond one’s means now necessitates living below one’s means later on. Whether that period of negative adjustment is the same length and depth, shorter and deeper, or longer and shallower is open to question. But I'm leaning towards ‘shorter and deeper’ because history shows that bubbles tend to burst more rapidly than they form.
That is, we could view this as a bubble in financial assets, particularly credit (debt), but we could just as easily view it as a bubble in living standards. We overdid things and now it's just a question of figuring out who is going to eat the losses. Historically, that answer has always been 'the little people,' but today we have dropped such disparaging terms in favor of the more politically palatable 'taxpayers.'
To understand the current predicament, the most important chart to look at is the ratio of total national debt to GDP (debt-to-income)…
Protect Your Wealth in Advance of the Bubble’s Bursting
PREVIEW by Chris MartensonExecutive Summary
- Corporate junk bonds: All-time highs
- Equities: All-time highs in Germany and U.S.
- Other equities: Spiking upwards (Japan, Greece, Australia)
- Margin Debt: Second highest on record
- Excuses: Consistent with bubble territory
- Timing: When reality will likely express itself
If you have not yet read Part I: Four Signs That We're Back in Dangerous Bubble Territory, available free to all readers, please click here to read it first.
In Part I, we discussed four signs that we are in bubble territory – in both stocks and bonds – plus all of the usual rationalizations that accompany bubbles. In truth, there are many more signs which we'll discuss further here, and I want to go deeper into the data exploring the warning signs in the equity and bond markets.
I want to spend time cataloging and explaining my reasoning because when bubbles burst, it's traumatic for everyone, but especially those that aren't prepared.
Further, these bubbles are so large that it's useful to employ historical analogues to weigh them against and parse for clues as to just how bad developments could get.
The Big Picture
What we do at Peak Prosperity is track the big picture. We look at the macro risks and trends, and try to figure out what's coming next. Over the long haul. we have very little doubt that several decades of debt accumulation partnered with structurally higher oil prices will result in anything other than reduced standards of living for most people.
And that’s if everything goes smoothly.
At the other end of the spectrum lies the potential for currency, political, and fiscal crises, the likes of which have never been seen before, given the global nature of the situation.
Leaving oil prices aside for the moment, in purely economic terms, living beyond one’s means now necessitates living below one’s means later on. Whether that period of negative adjustment is the same length and depth, shorter and deeper, or longer and shallower is open to question. But I'm leaning towards ‘shorter and deeper’ because history shows that bubbles tend to burst more rapidly than they form.
That is, we could view this as a bubble in financial assets, particularly credit (debt), but we could just as easily view it as a bubble in living standards. We overdid things and now it's just a question of figuring out who is going to eat the losses. Historically, that answer has always been 'the little people,' but today we have dropped such disparaging terms in favor of the more politically palatable 'taxpayers.'
To understand the current predicament, the most important chart to look at is the ratio of total national debt to GDP (debt-to-income)…
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