Of all the screwed up, misallocated parts of the U.S. economy, the housing market continues to be one of the biggest potential train wrecks. While the extent of the insanity in residential real estate should be clear following the article I published yesterday, there are other potential problems just on the horizon.
One of these was written about over the weekend in the LA Times. In a nutshell, the next several years will start to see principal payments added to interest only payments on a large amount of second mortgages taken out during the boom years. The estimate is that $30 billion in home equity lines will reset next year, $53 billion in 2015, and then ultimately soaring to $111 billion in 2018.
I’m not a real estate expert by any means, so comments are encouraged and appreciated.
From the LA Times:
Some mortgage and credit experts worry that billions of dollars of home equity credit lines that were extended a decade ago during the housing boom could be heading for big trouble soon, creating a new wave of defaults for banks and homeowners.
That’s because these credit lines, which are second mortgages with floating rates and flexible withdrawal terms, carry mandatory “resets” requiring borrowers to begin paying both principal and interest on their balances after 10 years. During the initial 10-year draw period, only interest payments are required.
But the difference between the interest-only and reset payments on these credit lines can be substantial — $500 to $600 or more per month in some cases.
So about that whole drone debate in the USA…
It seems the feds decided to simply skip over such a quaint notion and deploy them without telling anyone. Back in December of last year, I highlighted a press release from the Electronic Frontier Foundation (EFF) about current drone flights in the U.S. They disclosed that:
Today EFF posted several thousand pages of new drone license records and a new map that tracks the location of drone flights across the United States.
These records, received as a result of EFF’s Freedom of Information Act (FOIA) lawsuit against the Federal Aviation Administration (FAA), come from state and local law enforcement agencies, universities and—for the first time—three branches of the U.S. military: the Air Force, Marine Corps, and DARPA (Defense Advanced Research Projects Agency.
That story was big news to me at the time, and it was particularly disturbing in light of the fact that Congress has cleared the way for the Federal Aviation Administration to allow 30,000 drones in the nation’s skies by 2020. Well it appears that the whole drone debate was over before it even began, with the FBI having used drones domestically for at least seven years. From the LA Times:
WASHINGTON – Operating with almost no public notice, the FBI has spent more than $3 million to operate a fleet of small drone aircraft in domestic investigations, according to a report released Thursday by a federal watchdog agency.
The unmanned surveillance planes have helped FBI agents storm barricaded buildings, track criminal suspects and examine crime scenes since 2006, longer than previously known, according to the 35-page inspector general’s audit of drones used by the Justice Department.
The article below from the LA Times is both extremely interesting as well as depressing from a cultural standpoint. For four decades now, the General Social Survey has asked Americans how they identify themselves from a class perspective. While it was always quite common for less fortunate folks to identify themselves as “working class,” there has always been a reluctance to identify as “lower class.” Until last year that is, when a record amount of Americans identified as such.
I believe the reason for the change has to do with how the less fortunate view their future opportunities for upward mobility, and the idea that they are stuck in their position for good. This is very bad and it is a direct result of millions of Americans seeing the oligarchs bail themselves out while leaving the rest of society to rot. It’s also why there will be no sustainable recovery until the crony “elites” in power are removed from their positions of influence and the rule of law is restored. From the LA Times:
Roquemore is among the small but surging share of Americans who identify themselves as “lower class.” Last year, a record 8.4% of Americans put themselves in that category — more than at any other time in the four decades that the question has been asked on the General Social Survey, a project of the independent research organization Norc at the University of Chicago.
Unemployment surged during the downturn. Millions of homes were repossessed in the years since, and millions more people slipped into poverty. And years after the recession ended, the U.S. Department of Agriculture reported record shares of households were still struggling, at times, to put adequate food on the table.
I first started writing publicly about how the U.S. government was going to ultimately switch the “war on terror” to an internal focus and demonize American citizens that express dissent back while I still worked on Wall Street, five or six years ago. While I was mocked and accused of hyperbole at the time, it has become quite clear that this is exactly the direction we are headed in…and fast. Let’s not forget that the FBI classified peaceful Occupy Wall Street protestors as terrorists as that movement was gaining momentum. Furthermore, why else would the Department of Homeland Security be buying ammo in such enormous quantities unless the U.S. oligarchy saw its real enemy as the American public itself? The 99.99%. From the LA Times:
Finch teaches police and public officials around the country how to deal with self-described “sovereign citizens” like Wright. Finch and his partner, Det. Kory Flowers, have trained nearly 15,000 police and 5,000 public officials to combat sovereigns, zealots who refuse to recognize government authority in virtually any form.
Violent confrontations are rare, but the FBI says at least six police officers have been killed by sovereigns since 2000. A man tied to the movement shot and killed a California Highway Patrol officer who stopped him in Contra Costa County last year. A responding officer shot and killed the assailant.
The agency calls sovereigns — who number between 100,000 and 300,000 — a “domestic terrorist movement.”
You’ve gotta love the FBI. They can’t recognize or jail any of the financial terrorists that have already pulled off the greatest heist in American history and continue to plunder, but once an average citizen complains about their government being criminal and corrupt, THEY are somehow the terrorists.
“To them, a police officer is just a man in a Halloween costume,” Finch said.
From what I have read about Monsanto over the years, I have a very negative opinion on the company. Not only do I think their products are doing more long-term harm than good to the environment, but I find the way they attack small farmers to be ruthless and morally indefensible. As of yesterday, many of the controversies are coming to a head with the case Bowman v. Monsanto coming in front of the Supreme Court. Fortunately for the company, Clarence Thomas was a former Monsanto attorney and the Obama Administration is also actively siding with them. Banana Republic 101. From Think Progress:
Monsanto is notorious among farmers for the company’s aggressive investigations and pursuit of farmers they believe have infringed on Monsanto’s patents. In the past 13 years, Monsanto has sued 410 farmers and 56 small farm businesses, almost always settling out of court (the few farmers that can afford to go to trial are always defeated). These farmers were usually sued for saving second-generation seeds for the next harvest — a basic farming practice rendered illegal because seeds generated by GM crops contain Monsanto’s patented genes.
Monsanto’s winning streak hinges on a controversial Supreme Court decision from 1981, which ruled on a 5-4 split that living organisms could be patented as private property. As a result of that decision, every new generation of GM seeds — and their self-replicating technology — is considered Monsanto’s property.
Unfortunately, second- and third-generation seeds are very hard to track, which may explain why Monsanto devotes $10 million a year and 75 staffers to investigating farmers for possible patent violations. Seeds are easily carried by birds or blown by the wind into fields of non-GM seeds, exposing farmers who have never bought seeds from Monsanto to lawsuits. Organic and conventional seeds are fast becoming extinct — 93 percent of soybeans, 88 percent of cotton, and 86 percent of corn in the US are grown from Monsanto’s patented seeds. A recent study discovered that at least half of the organic seeds in the US are contaminated with some genetically modified material.
Good thing there is no inflation, you know, except in every single thing every single American needs to buy to survive that is! The hits just keep coming for California, America’s very own Greece. Remember the article I posted a couple of days ago titled: Payday Loans in California: School Districts Owe $1 Billion on $100 Million Borrowed.
Now we find out from the LA Times:
Health insurer Blue Shield of California wants to raise rates as much as 20% for some individual policyholders, prompting calls for the nonprofit to use some of its record-high reserve of $3.9 billion to hold down premiums.
In filings with state regulators, Blue Shield is seeking an average rate increase of 12% for more than 300,000 customers, effective in March, with a maximum increase of 20%.
This trend first broke onto the scene several months ago when it was reported that NYC was preparing to change its housing code to allow for “micro” apartments. Basically very expensive jail cells. I covered that story in my piece Back to 19th Century Living in NYC: Bloomberg Proposes “Tenement Sized” Apartments for $2K a Month.
Unsurprisingly, the trend is now coming to San Francisco and will soon emerge everywhere else in the country. From The LA Times:
At a minimum 150 square feet of living space — 220 when you add the bathroom, kitchen and closet — the proposed residences are being hailed as a pivotal option for singles.
On Tuesday, the Board of Supervisors will consider tweaking the city’s building code, which requires newly constructed units to be at least 290 square feet.
The micro-units will probably go for $1,200 to $1,700 a month, Wiener said. According to the real estate service RealFacts, an average studio apartment in San Francisco now goes for $2,075.
One Yelp reviewer dissed the condos as “no bigger than most hotel rooms” and only three times larger than “the average U.S. prison cell.”
So let me get this straight. Three and a half years into the “recovery” we have record numbers on food stamps and two of the most prominent cities in the nation are changing their housing code to allow for apartments that in the past we found to be inhumane. That’s called poverty folks. Just open up the FEMA camps already and get it over with.
Full LA Times article here.