I’ve been following closely the recent attempts by the domestic oligarchy in charge of the corporatist-facist state we call America to create a new housing bubble for several years now. For a little while, I was merely confused as to how prices were starting to rise when college graduates have no jobs and are six figures in debt, while at the same time real incomes are dropping for the rest of the populace. Rather quickly, the pieces starting falling into place. It became clear that the primary demand in the market was not from new families or recent college grads. Nope, it was pretty much all financial oligarchs with private equity firms buying up properties in bulk as “investments.” An entire asset class of “buy to rent” was born. I tweeted the following a few days ago:
I can sum up the housing market like this. Rich baby boomers with PE firms outbidding each other as they enter the dementia phase of their lives.
I firmly believe that the above statement sums up what is now the primary backbone of the latest housing bubble. Alas, there is more. On top of these boomers that know nothing other than real estate and financial speculation, there is a flood of foreign money, in many cases criminal money, being laundered into U.S. real estate. We discover that this foreign cash is now preventing regular citizens from buying or even renting in the San Francisco Bay Area. From Mercury News:
Many homes that would be purchased in a normal market by average buyers are ending up in the hands of cash-paying absentee owners, typically investors, according to the real estate information company DataQuick. That’s especially true of foreclosures and lower-priced homes and condos.
David Yang, 36, who works in solar power, is moving into a home in South San Jose — the 10th one he bid on in five months of looking. “Every house in a good neighborhood probably will receive 20 to 30 offers,” he said. “It’s really crazy.”
His agent, Sharmila Banerjee, said that “cash is coming from China, India, Russia, but there can be difficulties transferring money from outside the country.” When one such deal fell through, another one of her clients had his offer accepted, she said.
In February, 1,044 houses and condos — 28 percent of the sales — in the counties of Santa Clara, San Mateo, Alameda and Contra Costa were bought by absentee buyers. That is the highest percentage since DataQuick began tracking them in 2000. In Contra Costa County, absentee buyers were 35 percent of the sales.
Real estate agent Melissa Haugh said everyone in her office was stunned at the price, paid in cash, for a Santa Clara fixer-upper.
“The house had a rat infestation, there were holes in the walls, windows that leaked, mold around windows, water damage to floors. It needed $100,000 in work,” she said.
Haugh, of Keller Williams Realty, said she priced the house based on recently sold homes in the neighborhood, including one that was a version of the same home that had been completely remodeled and landscaped. The fixer-upper, listed at $419,000, sold in a week for $629,500.
“We ended with 69 offers, all but five for cash,” she said. “It’s mostly foreign investors. I’ve never seen this much cash, ever.” The home went to a couple buying the home for their daughter.
And renting is no solution, said Shannon Masse-Winks, the Oakland designer. “It doesn’t make sense to rent,” she said. “Rent has been skyrocketing. I think that’s really sad. It shouldn’t be that only if you are a corporate executive you can live here. That’s not what the Bay Area is all about.”
Actually Shannon, that is increasingly what America is all about thanks to Bernanke and his crony capitalist Wall Street masters. Mission Accomplished.
Oh, but this story gets even better. A lot better. So what do you think is the Obama Administration’s response to the fact that average Americans cannot afford to buy or rent homes thanks to financial oligarchs and dirty foreign money crowding the space? Yep, you guessed it. They want to force banks to lower lending standards so that the broke citizenry can enter the bidding wars in the latest housing bubble. Actually, this works out great since it provides the oligarchs with a sucker to flip their homes to before the whole house of cards cones crumbling down again. Even better, it will all be backed by you the taxpayer! Sort of like how Wall Street always suckers retail into stocks before the market crashes. We learn from the Washington Post that:
The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit, an effort that officials say will help power the economic recovery but that skeptics say could open the door to the risky lending that caused the housing crash in the first place.
President Obama’s economic advisers and outside experts say the nation’s much-celebrated housing rebound is leaving too many people behind, including young people looking to buy their first homes and individuals with credit records weakened by the recession.
In response, administration officials say they are working to get banks to lend to a wider range of borrowers by taking advantage of taxpayer-backed programs — including those offered by the Federal Housing Administration — that insure home loans against default.
Housing officials are urging the Justice Department to provide assurances to banks, which have become increasingly cautious, that they will not face legal or financial recriminations if they make loans to riskier borrowers who meet government standards but later default.
Assurances to banks that they will not face charges! As if they needed any more?
Officials are also encouraging lenders to use more subjective judgment in determining whether to offer a loan and are seeking to make it easier for people who owe more than their properties are worth to refinance at today’s low interest rates, among other steps.
“We need to align as much as possible with IG and the DOJ moving forward,” FHA Commissioner Carol Galante said. The HUD inspector general and Justice Department declined to comment.
The effort to provide more certainty to banks is just one of several policies the administration is undertaking. The FHA is also urging lenders to take what officials call “compensating factors” into account and use more subjective judgment when deciding whether to make a loan — such as looking at a borrower’s overall savings.
“My view is that there are lots of creditworthy borrowers that are below 720 or 700 — all the way down the credit-score spectrum,” Galante said. “It’s important you look at the totality of that borrower’s ability to pay.”
Government bureaucrats deciding who should get credit and who shouldn’t. I mean, what could possibly go wrong?
Full Mercury News article here.
Full Washington Post article here.
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