Here is a link to the page Real Estate Collapse – Sell Your House Now.
This was a load of fun and they invited me back. I have no date or time.
Thanks Phil!
I suggested a half-hour or hour phone-in show with calls from listeners on the economy.
Mike “Mish” Shedlock
Hi Mish, followed you for years and thanks for your great articles. Your ‘sell now” advice is timely. I have a condo in San Jose that has been rented out for years. Good time to sell and it’s right next to eBay. If I sell and 1031 exchange it…I’d be forced to buy in an already inflated market! Or if I don’t 1031 exchange it – downside of paying huge taxes to State/Fed on gains, but I guess I could sit on sidelines and wait for the crash in stock/real estate and buy back in at new ‘lows’ I guess….any advice? Others in same situation I bet!
I wish a transcript were provided. I could read it in a copule of minutes; I don’t have 21 spare minutes to listen to this.
If sessions deports all the Mexicans in California it will ground zero
Good interview, Mish. I wish I knew when the collapse was coming as I am living in a crummy apartment and would like to buy a house. I didn’t like what preceded your part in the recording, though – some BS about Daylight Savings Time.
We bought land in Montana with the intention to build. We may sell this house or rent it out. Instead of buying a new home, we will likely rent at places close to national parts – a year or two at a time.
Ah yes, skin in the game – I have no mortgage, no debt, and for now we need to live in Illinois where overvaluations are nowhere near what they are in California – I am not worried about a crash and will not be tied down if there is one.
Your part was good to listen to.
That program is a lousy venue. Maybe more people, but questions are not that greeat.
Re Monatana: I just got back from Big Sky and home/condo prices near the resort are insane, Seems like more $$ than in Colorado. I checked home prices on Zillow for Bozeman and they are about 60% higher than comparable homes in MI and not a nice either I think Montana is beautiful to visit buy can’t figure out the attraction to live there and why home prices would be so high in general compared to MI.
I had an appraisal on my house in 2007 of 911,000. It was on the market at the time, but didn’t sell. We’re in a mountain resort area in Montana. It probably went down by at least 25% during the “crisis”. Homes in the area have been selling at higher prices recently. We just sold it for 800,000 to a Californian. Most of the people moving here are retiring and getting out of California. You won’t believe how happy they are. We’re staying in the area, but downsizing now. My analysis was that it would probably take a few more years to get back to that higher number, but I don’t have confidence that the market or buyers will be there in the future. We’re relieved to sell at this price. We built the house 20 years ago, and my annualized return is around 2.5%. Home ownership is nice, but we’ll be renters in the future.
Misch was excellent but I didnt care for the simpletons on the show.
link to fred.stlouisfed.org
link to fred.stlouisfed.org
link to fred.stlouisfed.org
link to fred.stlouisfed.org
From a monetary perspective I can’t see how it can be any other way. It’s true that savings hasn’t climbed with the new issuance of credit in checking accounts (M1): the ratio of M2 to M1 has gradually declined to four. See:
link to s3-us-west-2.amazonaws.com
I do expect that because of record low returns on savings accounts, money has been chasing all manner of colorful institutions in the financial sector that offer an alternative. Nevertheless, even accounting for that reduction in conventional savings, the numbers still can’t add up. You need those unique commercial banking powers in order to expand property market cap by any significant degree. Property is simply to monolithic for any other kind of institution to make a dent in.
link to fred.stlouisfed.org
It was to my understanding Mish that non-banks derive most of their funds from banks; that’s why they call it financial intermediation. It’s not self-evident to me that the banks should be significantly less exposed to a property crash than they were in 2007. The bubble-cap is much the same, and the central bank has much less room to intervene this time around (not that they intervened very swiftly last time), short of drastic hyper-QE.
From the BPEA article:
“On the origination side of the business, the main vulnerability of nonbanks is their reliance on a type of short-term funding known as warehouse lines of credit. Access to these lines is a crucial aspect of the nonbank business model. For the most part, these lines are provided by commercial banks and investment banks because warehousing requires scale, sophisticated risk management systems, access to capital markets, and personnel.”
link to s3-us-west-2.amazonaws.com
“The number of dollars on warehouse lines at any given time implies a much higher volume of originations that flow through these lines over a period of time. Inside Mortgage Finance estimates that mortgage originations are funded on warehouse lines, on average, for about 15 days (November 30, 2017). Scaling up the $23 billion in warehouse utilizations in the Y-14 data to the Inside Mortgage Finance benchmark suggests around $40 billion in total warehouse outstandings at the end of 2016, which translates into about $ 1 trillion in loans funded over the course of a year.17 To put this number in context, total mortgage originations in 2016 are estimated to be around $2 trillion, indicating that around half of mortgage originations in a given year cycle through these warehouse lines.”
“Typically, the warehouse lender will only fund around 95% of the mortgage balance, so that the nonbank originator has some “skin-in-the-game” for each loan. The collateral on the loan is the mortgage on the house, and the nonbank in turn transfers the “mortgage” to the warehouse lender to collateralize the draw on its line of credit.”
Well done! Phil was good at dumbing it down for some of us so it was well balanced.