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One-third of American renters expected to miss their August payment
- kache_ 6y agoHousing market correction? Nah, that's never going to happen
- wonderwonder 6y agoHousing prices will drop, rich individuals and companies flush with profits from the federally propped up stock market will swoop in and buy them at a discount. Stocks will drop as cash leaves it for housing, negatively affecting retirement accounts and lower net worth individuals. The new landlords will rent them out, housing prices will rise again. The current system works perfectly for what it was designed to do. The cycle repeats endlessly funneling money from the lower class upwards.
- bluedevil2k 6y agoStock market correction? Nope, keeps going up. Defies logic.
- snarf21 6y agoWell, the Fed is currently propping up the market with trillions of purchases, not just of treasuries but even things like corporate bonds.
- deleted 6y ago[deleted]
- whatshisface 6y agoAm I wrong in thinking this is directly handing value from holders of dollars to holders of corporate debt and equity?
- omgwtfbyobbq 6y agoI think that's an accurate statement. The transfer would be the delta between what the Fed buys that debt/equity for and what it sells it for later. At the same time, it could also be accurate to assert that without some organization propping up the economy, short term losses, and possibly long term harm, would greatly exceed whatever the delta ends up being on the Fed's purchases/sales.
- jfengel 6y agoWell, yes and no. Thus far, dollars have not decreased substantially in value, except in the equity market. Consumer prices have been steady for many years[1], with a small (under 2%) annual increase. What's happening instead is that money is funneled almost directly from Federal Reserve accounts into equities markets, making only a brief appearance in the hands of consumers. There, it mostly seems to prevent deflation -- which keeps people buying stuff and avoids massive unemployment (and causing even more deflation). At some point the market will correct, and the outflow will go... somewhere. A lot of that money will simply vanish, leaving us with massive debts owed by the government to the banks and large bond buyers. That will be a whole different kind of crash. [1] https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm https://www.bls.gov/charts/consumer-price-index/consumer-pri...
- axaxs 6y agoGood point. At this point I wouldn't be surprised if the fed started renting empty units.
- deadalus 6y ago* People don't have work, they are using the stock market like a casino. * Big Tech use skyrockets taking the market higher. * Fed pumping trillions inflates asset prices.
- _jal 6y agoDon't worry, patriot. The five year plan accounts for it. Once the Fed owns the entire market, capitalism shall overcome!
- doopy-loopy2 6y agoCash is trash. That's why.
- rolobio 6y agoIts long overdue, and I hope it happens (even though I am a home owner). It seems to me all the stimulus money ends up in the realty market. It looks great for home owners (but money printing isn't good for anyone). It really hurts the people just getting started in the economy.
- revnode 6y ago> It really hurts the people just getting started in the economy. Yes! A dollar is a good just like any other. If there is more of it, it is worth less. If you print more money, the dollars that people hold and have are worth less. That said, the US has gotten away with printing dollars for a very long time with very little inflation in basic consumer goods. It seems to mostly end up in real estate, stocks, etc. where most are happy to see prices shoot up. Except, of course, those who are just getting started and can't afford to get in on the inflated prices.
- rolobio 6y agoAlso, because most of the currencies in the world are backed by dollars, we are inflating everyone else's currencies. So the US is able to offload it's inflation on the rest of the world. I doubt the world will take that much longer.
- wonderwonder 6y agoIssue is there is not really an alternative. What can they use except dollars? The euro? The yuan? I doubt they are going to go back to the gold standard.
- axaxs 6y agoIt happens, but rarely. We should really ease pressure by putting in laws to keep prices lower. In three cities I've lived, every 'good deal' is snatched in cash by landlords or flippers. Why not regulate the amount or at least the velocity of how many homes a person can own? My current landlord has 16 houses, that's ridiculous.
- swiley 6y agoOr ease the pressure by encouraging more and denser development, especially of less profitable low income housing.
- CabSauce 6y agoWouldn't that drive rental prices up? I don't think high housing prices will be solved on the demand side.
- WealthVsSurvive 6y agoYes, but only because the landlords would sell or default, which would drive the homes back into the bank's hands. The banks would then let most of the homes rot rather than sell them, so they can milk the build&mortgage finance&insurance teat and leave the citizen taxpayer on the hook for overpriced housing & through literal artificial scarcity. This is exactly what occurred during the last housing bust, and it's genuinely sickening that it isn't discussed more in the media: more perverse incentives. We need to go after these people hard because they are collapsing our civilization. There need to be punitive actions that correct the market and drive it back to something that actually produces people living in homes for a low price and development moving in a resilient, frankly boring manner. This in turn produces a populace with more free time, a requirement for training & education, something that will have to be done with increasing frequency as time goes on. This drives wages up naturally, as more people can choose to work less or not work. This shrinks sustenance & panic borrowing, which is another reason FIRE likes keeping us on their hook. This stops much property crime, which shrinks the need for police forces, jails, & the circus of pornographically perverse incentives that surround our criminal justice system. In no uncertain terms let me say this: if we tanked the price of housing, tanked the rental market, and got humans into houses instead of some wealth-dreaming deluded landlord or scummy bank that wants to reap what they never sow, we could easily transition into the future we desire. The loss people fear with this action isn't actually a fear of the loss of wealth, it is the fear of losing the ease-of-mind and projected future peace associated with ownership of the asset. We would do well to begin considering how to provide that for one another without harming one another.
- jeffreyrogers 6y agoIt's funny, I've been hearing since at least 2011 that a stock market correction is going to happen any time now. For the past few years I've heard the same thing about housing. But there is so much money out there looking for a return, and so few good places to allocate it, that it is hard to see what the catalyst could be for causing a correction. Obviously things can't go on this way forever though.
- im3w1l 6y ago> it is hard to see what the catalyst could be for causing a correction. If inflation comes and it becomes necessary to raise interest rates, that would cause a correction.
- UncleOxidant 6y agoBut there was a rather large correction in both home and stock prices in 2008. That's not so long ago.
- jeffreyrogers 6y agoSure and the catalyst for that was people couldn't afford their mortgages, but current property and stock values are pumped up by an excess monetary supply caused by quantitative easing and a lack of real innovation which would offer actual good investments. Since there is so much cash floating around and no good places to put it, when people have to exit the market new money floods in, keeping asset prices up. In January PE firms had 1.5T cash ready to invest. I'm sure that will get deployed as bankruptcies start to happen.
- mdorazio 6y agoTo be fair, the correction was happening in March, and then the government stepped in and basically signaled it would write as many blank checks as needed to prop it back up. 100% agree that there's a stupid amount of money looking for returns with very few places to get them, though.
- colinjoy 6y ago2011 - 9.6 trillion. 2019 - 15.4 trillion. 2020 - 18.3 trillion and growing... (M2 dollar volume)
- nugget 6y agoIt would seem obvious that housing prices should drop in the near term (and I hope they do), but I can't totally square that with falling mortgage rates and rising asset inflation. If the Fed rate stays at 0% then I've been told to expect 30-year fixed mortgage rates should eventually drop to between 1.5-2%. Rates that low increase buying power and could be a powerful form of stimulus for the housing market. Beyond that, rental real estate is not immune to the current inflationary multiple expansion seen in financial assets. The lower the yield on something like $SPY falls, the more attractive the yield/rent from real estate becomes by comparison.
- UncleOxidant 6y ago30 year is already down to like 2.8%. More stimulus to the housing market means prices go up as well. Incomes are the limit here. If mortgages to to 1.5% prices will go up as well, but incomes aren't rising nearly as fast.
- cmrdporcupine 6y agoThe housing market is delusional in the US but it's even crazier here in Canada. We never had the 2008 correction that the US had, and things just continued to climb. In southern Ontario housing prices are so out of wack of what earning potential is that it just boggles the mind. I thought the COVID crisis would blow this all up, but it hasn't. In fact rural land values keep climbing because of wealthy Torontonians now seeking to have cottages and the like outside of the city. I don't even know what to say about it at this point. Admittedly the economic situation isn't as dire here because the gov't has spent freely to help keep people afloat, but it just seems so irrational to me that housing prices continue to go up at almost 10% a year when the economic fundamentals are so messed up.
- bradleyankrom 6y agoIsn’t a lot of that related to foreign investments? Or was that mostly limited to Vancouver?
- adventured 6y agoNo, it wasn't mostly foreign investments, although that added fuel to the fire. You can see the Canada housing bubble represented in that Canadian households are among the most indebted on the planet (it's heavy with mortgage debt). Here's a chart showing the prominent split with the US, where they go different directions after 2007-2008 (Canada's bubble and debt accumulation kept going and the US began deleveraging and improving its household fiscal condition and debt to equity ratio in housing): https://i.imgur.com/gCAsd5Y.png https://i.imgur.com/gCAsd5Y.png
- doopy-loopy2 6y agoWhat are the implications (if any) of this?
- gentleman11 6y agoCanadians end up owning a decent amount of wealth by the time they retire compared to many nations. That debt isn’t like credit card debt. Median wealth per household is about 200k vs 77k in the USA. Edit: used per-household stats instead
- troughway 6y agoAre we going to have another thread where the top comment is “this is completely normal and everything is fine”?
- swiley 6y agoThis is expected, most people who were paying attention have been wondering when it will happen and the corona virus gave us the answer.
- Shivetya 6y agoWell Congress needs to get reasonable with the boost per week for unemployment rather than the $600 a week boost; a number likely chosen for that 600/40 magic number. The $600 isn't sustainable let alone on top of the $1200 per house hold plus $500 per dependent. Worse is the stuffing of the bills with defense appropriations and more items not related to COVID19. Worse is the attempt to feed the state governments between five hundred to a trillion dollars to shore up budgets of states that are not even trying to clip their expenditures, most of this is routed towards shoring up their pension systems and again, not COVID19 related. The real pandemic is the debt bomb that Congress is foisting on the American public, remember, no serious crisis can be allowed to go to waste. It is time for the money to flow to friends and family.
- rescripting 6y agoThe $600 a week number was chosen because the average American makes $900 a week, and the average unemployment amount is $300. $900 - $300 = $600 to make up the shortfall and get everyone to the average. This is obviously flawed, and the initial idea was income replacement so your income remained the same, but the state of the IT infrastructure in unemployment offices across the US is so dismal there was no way they could cope with that requirement.
- germinalphrase 6y agoWhat is a “debt bomb” when we talk about federal spending? Suddenly, overnight - we’re seeing 10,000 percent inflation? Hyperbolic.
- peteradio 6y agoYou're the only one saying 10,000 percent inflation. Maybe its "only" being saddled with such high taxes to service debt our country is crippled. How would it be to have taxes comparable to Norway + nonexistent government services?
- germinalphrase 6y agoThe phrase “debt bomb” fees hyperbolic because it suggests our national spending is about to have some kind unpredictable/explosive problem. We have had persistently low inflation despite significant money creation since 2008. Inflation is typically the reason we avoid creating money to fund national level spending. If someone who knows better wants to breaks down the scenario for me, please do - but as is, calling short term emergency spending a debt bomb seems overblown.
- NDizzle 6y agoWe need to open everything up.
- gizmo385 6y agoNo, we need to help individuals and people who are struggling with economic assistance. Economic assistance isn't sacrificing people onto the alter of capitalism.
- AbrahamParangi 6y agoReopening is an illusion - behaviors change rationally in response to the environment. Bars will have patrons, but won't be as busy. People will travel, but not as much. Restaurants will still serve food, but half will be delivery. The govt. has little control over real economic productivity except by handling the pandemic and the economic shocks produced by it.
- shadowgovt 6y agoExactly. While things are closed, there's a reason for restaurants to demand support from the government. Everyone suffers, but homogeneously and less. If we open up, support from the government zeroes out and bars and restaurants will find themselves in two circumstances: they will be partially full because people are scared to be in public (and will struggle to make ends meet and maybe fail), or they will be plenty full until someone brings in COVID-19, a bunch of folks get sick, contact-tracing tracks it back to the bar or restaurant, word gets around, and business at that place crashes because it's a plague vector. Some businesses will win in this circumstance. Most will lose. It's a bit of a prisoner's dilemma deal.
- matz1 6y ago> they will be plenty full until someone brings in COVID-19 Someone will bring covid 19, sure, that is fully expected, we know that since the virus spread easily, but we also know majority of them will be not get stick or only have some mild symptom. no need contact tracing, no need to get panic.
- matz1 6y agoGovernment need to reasonable, still have the lockdown while we know the virus is not that dangerous ? paying people extra unemployment money to not working ?
- SketchySeaBeast 6y ago> still have the lockdown while we know the virus is not that dangerous ? Does the graph presented of those most likely to have issues with rent match with those states that locked down the hardest? > paying people extra unemployment money to not working ? I'm confused - are you implying that by giving some people money (for some more than they would earn while employed), that prevented them paying rent? If any, it would seem like a failure in the dispersal of said money.
- FriendlyNormie 6y agoAre you STUPID FUCKS ever going to acknowledge that the Federal Reserve and BlackRock are both 100% Jew-controlled organizations Where the former prints infinite money and gives it to the latter to buy all the property in the US and rent it back to us because it states in the Talmud that Jews must own all property on earth before their messiah will come? Kind of seems like an important fucking factor to consider if you are trying to predict a “housing correction”, don’t you think? I’m tired of you stupid assholes on this site pretending you’re smart when you ignore such basic things. Fuck you all.
- AbrahamParangi 6y agoUnemployment was and still is a mistake because it creates perverse incentives. It should be UBI instead. The government has spent $10,000 per US resident propping up banks, hedge funds, dog-shit junk-grade corporate debt, etc. Do you think that money was well spent propping up braindead investment funds, or would you have used it better?
- eloff 6y agoWhy is it that whenever the government does something, it takes me about ten minutes to come up with a better plan? I've considered that I could be wrong that my plan is actually better, or that I'm missing something (I surely am) but I don't find that compelling. I'm starting to think that the outcome of our political systems in the West produces suboptimal compromises engineered by politicians who are quite frankly ignorant, incompetent, corrupt, and really just not good specimens of the species. It's like the system is designed to be mediocre. What's the alternative though?
- cheschire 6y agoIf you're a software developer, consider how the first 90% of any project is the easiest.
- ceejayoz 6y ago> Why is it that whenever the government does something, it takes me about ten minutes to come up with a better plan? Because the edge cases often take more than ten minutes to reveal themselves? See: "Tough on crime/drugs" policies, lead in gasoline and paint, etc.
- jlnthws 6y agoCould someone knowledgeable in this topic maybe tell us which international financial institutions will be mostly impacted by this kind of defaults (short or long term). Any CDS-like turmoil possible?
- Lavery 6y agoTurmoil, yes, but internalized to the corporations impacted. One of the major impacts of the financial crisis a decade ago was the massive increase in private equity ownership of real estate. Groups like Blackstone (BX), the largest residential landlord in the US, may take a hit. Not covered in the article (but referenced elsewhere on HN lately), you're seeing even worse trends in retail-focused commercial mortage backed security portfolios. REITS like Simon (SPG, a mall operator) have been cut in half since pre-COVID. Your question, though, is presumably around whether we'd expect problems with systemically important banks. Highly unlikely, for two reasons: First, regulatory changes to their capital structures largely prevent them from holding things like CMBS on their balance sheet unless they reserve significant amounts of capital against it. This is what facilitate the rise of private equity landlordship: banks exited the business. Second (and this has, largely, already happened) the Fed and other central banks learned their lessons well, and were swift and comprehensive about backstopping the financial markets.
- ls612 6y agoThird, Dodd-Frank domestically and Basel III rules internationally make banks hold far more safe capital on their books precisely to cushion against a shock like this. Turns out those rules work.
- barryrandall 6y agoHere’s the question I’m trying to answer: Do current stress tests contemplate a scenario of the same magnitude as 1/3 of US renters simultaneously missing payments?
- credit_guy 6y ago
- snissn 6y agowhat percentage was it the year before?
- fortran77 6y agoAs a commercial landlord, I've seen all sorts of assistance offered, but no local government I know of is offering property tax deferrals. I have a $60,000 property tax bill due, and tenants who can't pay their rent (I've discounted them 75% to help them out.)
- ed25519FUUU 6y agoState governments are totally MIA here. There’s not even a hint they’ll defer state or local taxes, let alone forgive. In fact in some states they’re proposing the highest income tax hikes in their history.
- skuhn 6y agoMany states are facing insolvency, because expected revenue has declined by as much as 30% [1]. States have "rainy day funds" to cover unforeseen events, but most have between 5-10% of general fund expenditures set aside [2]. States cannot create new money and they cannot declare bankruptcy. Most states also have balanced budget requirements [3]. If you want government support, the federal government is the only entity uniformly capable of creating money and running deficits. [1] https://www.ncsl.org/Portals/1/Documents/fiscal/Rev-Projection-Page-Data-Visualizations-7.7.20.pdf https://www.ncsl.org/Portals/1/Documents/fiscal/Rev-Projecti... [2] https://taxfoundation.org/2020-state-rainy-day-funds/ https://taxfoundation.org/2020-state-rainy-day-funds/ [3] https://www.taxpolicycenter.org/briefing-book/what-are-state-balanced-budget-requirements-and-how-do-they-work https://www.taxpolicycenter.org/briefing-book/what-are-state...
- MisterBastahrd 6y agoMany state governments aren't constitutionally allowed to borrow money or run a deficit. The people who supported these features are largely the ones who will be impacted by the results.
- fortran77 6y agoThey can cut programs.
- abstractbarista 6y agoThis isn't real surprising. On a good day, a ridiculous percentage of people don't pay their rent when it's due. This doesn't mean they don't pay their rent. They just pay it late. Chronically.
- dingaling 6y agoA notable example of how omitting a word from a headline introduces ambiguity. One-third had expected to miss, but managed to scrape together the payment? Or One-third are expected to miss? Brevity is valuable but not at the cost of clarity.
- hammock 6y agoIs your confusion around the verb tense in the headline? I.e. "renters did expect to miss" (past) vs. "renters are expected to miss" (present)? In either case it doesn't make much difference. It was a survey done in July for August rent. One-third of renters DID EXPECT to miss August rent; and now, August rent being past due, we EXPECT that one-third of August rent was missed (lacking actual data around August rent payments made). You tried to add in a bit of non sequitur / additional unsubstantiated info in your interpretation which was about the "scraping together" - there's nothing about that in the data
- nitrogen 6y agoYou tried to add in a bit of non sequitur / additional unsubstantiated info in your interpretation which was about the "scraping together" - there's nothing about that in the data That kind of thing's usually added by people as just a bit of color for storytelling purposes.
- deleted 6y ago[deleted]
- DoreenMichele 6y agoWe need to be making it possible for people to earn a living safely. We need to be focused on creating new work opportunities that work in the current climate. This "waiting for things to return to normal" looks pretty dumb to me. I think the stimulus checks and other relief funds are smarter than just throwing a third of Americans out into the street, but it's not really a long term solution. A long term solution is the economy needs to adapt and we need to create work opportunities and reshape work with more of an eye towards germ control. I've been trying to write down some of my thoughts about how we move forward in a sensible way. For example: Earlier this year I wrote about a work opportunity I know of and about my opinion that this model should be borrowed for other kinds of work. That piece is here: http://writepay.blogspot.com/2020/03/the-textbroker-solution.html http://writepay.blogspot.com/2020/03/the-textbroker-solution... I also wrote about my thought that more eateries need a contactless takeout option similar to Little Caesar's pizza portal: https://projectsro.blogspot.com/2020/07/pizza-portal.html https://projectsro.blogspot.com/2020/07/pizza-portal.html I'm very frustrated at the kinds of things I see other people saying. We need to stop framing this as an either/or thing: Either we protect ourselves from the virus or we go back to work. We need to do both. We need to figure that out. We aren't even trying. This assumption that we need to choose one or the other is part of the problem. It's not true.
- nickff 6y agoI agree with your sentiment, but the problem is that there is no "we", there are only a variety of different people with different interests and incentives, all muddled by a series of government actions intended to help. My opinion is that there are a number of business models which are simply untenable in the current pandemic and taxation climate, like water-front bars. Many people are 'sticking' to these troubled businesses, with hopes of improvement; the reality is that their tax obligations, facility costs (including rent/mortgage), and general cost structure will not allow them to survive.
- deleted 6y ago[deleted]
- smileysteve 6y ago