Turn On the Bubble Machine

[don]

The hipster mania continues in Silver Lake. Southern California is such an interesting place especially when you roam around Los Angeles. The entertainment industry being so close must create a slow moving cloud of manic optimism and apocalyptic failure whenever bubbles emerge. The oscillation between decline and bewildering dashes to purchase has been going on for well over a decade. People again seem to be fine that household incomes are stagnant yet somehow rents and home prices are all rising up. Did you notice gas prices in SoCal? They’re inching close to record levels. Notice the cost of the quality colleges in the area? Not exactly cheap. Of course all of this is being financed with easy money courtesy of Big Ben Bernanke. I had to post this property in Silver Lake because it shows the madness of the current market. Today we salute you Silver Lake with our Real Homes of Genius Award.

Gas prices and hipsters

First of all gas prices are near peak levels in California:



For commuting obsessed Southern California this is definitely going to put a pinch on the wallet. Yet when access to debt is easy, it doesn’t really matter that the cost of living is moving up because people are desensitized to go into massive debt. And by the way, we still have over 5 million Americans that are in distress on their mortgages:



Of course thanks to the Fed going all in on lowering mortgage rates, households are once again going into massive leverage to buy. FHA insured loans with the tiny 3.5 percent down payment requirement are the option of choice for maximum flexibility (aka households with little cash). They provide insane 30x leverage. What I sense in the market right now is capitulation. People get that incomes are stagnant. People get that the debt is out of control. Most understand that we have major demographic challenges ahead and many young Americans are struggling to launch their careers. Yet psychology and tribe mentality trumps most of this. People hear the stampeding herd, see a tiny shift in the wind and now are thinking they are going to be left out of California housing boom part two.

Let us go back to hipster Silver Lake since I am seeing properties hit the market with prices that bring back the memories of the mania. Take a look at this place:


2256 Earl St.
Los Angeles, CA 90039
Built 1961 – Square feet 1,344 2 beds 2 baths

This property was only put on the MLS a few days ago. I absolutely love the ad:

“Endless possibilities located up a long drive way on a large 9,000 SF lot. Resting atop 4 garages this unique offering features 2 bedrooms, 2 baths and wood floors both showing and beneath carpet. Purchased from the original builder some 40 years ago the current owner occupies the entire property as a SFR while tax records identify it as 2 units. A very comfortable home as-is or a great opportunity to think creatively and reap the benefits.”

Bwahahaha! Endless possibilities along a long drive way. I mean this is like reading Hemingway if he were to craft ads for the MLS.

So what is the going price? $750,000. A very comfortable as-is home?



Think creatively buster! Say you turn this into a duplex. How much are you going to get each month? Certainly nothing close to justify the $750,000 price. This is inching closer to ONE-MILLION-DOLLARS! People in California are so accustomed to nonsense pricing based on leverage. People have forgotten what it is like to save. A 20 percent down payment would require $150,000.

How many people in SoCal have that saved up? Not many and those that do are unlikely to have this property on their radar.
In the midst of all of this, there is one group that is winning big:

“Bloomberg: - Margins on sales of mortgages have widened by about 50 percent since the Fed’s announcement from the average level this year, which already was elevated, said Kevin Barker, an analyst at Washington-based Compass Point Research & Trading LLC.
“It’s very good to be a mortgage originator right now,” he said in a telephone interview.”

No wonder why I’m not hearing from mortgage lenders that often anymore. They are busy churning out refis, loan mods, and sales. Just like the early days of the boom, the big winners are in the finance industry and others are just trying to get some crumbs before the tide goes out again. Today we salute Silver Lake with our Real Homes of Genius Award.

http://www.doctorhousingbubble.com/r...r-home-buying/

[lektrode]

Re: Turn On the Bubble Machine

In the midst of all of this, there is one group that is winning big:

“Bloomberg: - Margins on sales of mortgages have widened by about 50 percent since the Fed’s announcement from the average level this year, which already was elevated, said Kevin Barker, an analyst at Washington-based Compass Point Research & Trading LLC.
“It’s very good to be a mortgage originator right now,” he said in a telephone interview.”

No wonder why I’m not hearing from mortgage lenders that often anymore. They are busy churning out refis, loan mods, and sales. Just like the early days of the boom, the big winners are in the finance industry and others are just trying to get some crumbs before the tide goes out again. Today we salute Silver Lake with our Real Homes of Genius Award.

and hey - guess 'the plan' is workin perty good, eh? (for some...)

• Oil Caps Third Weekly Drop as U.S. Oversupply Counters Jobs Growth
• Gasoline Prices Head for Record After California Refiners Ration Supplies
• Saudi Arabia Boosts Supertanker Charters to U.S. Gulf of Mexico

kinda-sorta funny... how its screwing Cali drivers

• Surprise Decline in U.S. Unemployment Gives Obama Election Boost: Economy
• Surveys Offer Differing Views on Size of U.S. September Employment Gains
• Fed Signals Move Toward Economic Thresholds for Keeping Record Stimulus

ooops.... things might not be so rosy?

• Jack Welch Says in Twitter Posting White House Manipulates Jobless Number
• Stocks in U.S. Reverse Gains as Jobs Optimism Fades; Treasuries, Oil Fall
• U.S. Consumer Credit Rise of $18.12 Billion More Than Economists Forecast

and the chinese are getting hip to the script....

JPMorgan $5.8 Billion Loss Shows System Too Complex, China Fund Chief Says

JPMorgan's Zubrow, Risk Manager as Giant Loss Mounted, to Retire

but there's 'hope for change'

How to Run a Hedge Fund From a Prison Cell

but not so much for the big O'mans (real) home state -
which apparently works the dept of energy like harry's does in NV

Illinois Swims in Atomic Waste With $1.9 Billion Paid and Dump Unbuilt

but no matter - things are lookin up, and look - the jobs/hiring picture is getting clearer by the day -
even jack welch sez so:

After setting off a minor social media firestorm with a tweet suggesting the Obama administration had manipulated the September jobs report, Jack Welch wants to get one thing straight: He meant it.
“I wasn’t kidding,” the pugnacious former CEO of General Electric said in an interview.
The 76-year-old retiree riled up the Twitterverse this morning with a tweet that said, “Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change numbers.”

The tweet came after the Labor Department reported the country’s unemployment rate fell to 7.8% in September, the lowest since President Barack Obama was inaugurated in January 2009. Mr. Welch had set up his skeptical take with an earlier tweet Thursday night.


“Tomorrow employment numbers for Sept. with all the assumptions Labor Dept. can make..wonder about participation assumption??” Mr. Welch wrote. He then added “at 7.9 it would be Chicago and labor Sec in action.”

A senior Treasury Department official said Friday that any suggestion the figures had been manipulated for political gain is “simply absurd.”

“I am doing nothing more than raising the question,” Mr. Welch said. “It’s fact-based.”

Here are Mr. Welch’s facts. To hold the unemployment rate even as the population grows, he said, the economy needs to add between 150,000 and 200,000 jobs a month.

“We haven’t reached those numbers at all,” Mr. Welch said. Employers added a seasonally adjusted 114,000 jobs in September, down from a revised 142,000 jobs in August. The economy, however, has added 143,000 jobs a month after revisions this year.

The former GE chief also raised questions about job growth shown in the household survey, which is the source of the unemployment rate. That survey showed a healthy jump of 873,000 jobs in the month, at odds with the 114,000-job gain in the survey of businesses.

“The economy doesn’t feel like it added 873,000 jobs in September,” Mr. Welch said. “There are a number of things here that are open to discussion.”

Still, several economists have pointed out exactly how the unemployment rate can diverge on a month-to-month basis from nonfarm payroll growth. Considering the household survey showed job losses throughout the last few months, September’s sharp gain could be a catch-up from those recent reports.

The establishment survey also tends to cover large and mid-sized businesses and doesn’t catch the small startups that are adding a few workers here and there, and whose hiring might be reflected in the household survey.

but wait!

one of the bigger CONtributors rides to the rescue:

Goldman: Government Not Cooking the Books on Jobs


Goldman Sachs chief U.S. economist Jan Hatzius isn’t buying the conspiracy theory.

“For the most part, this looks like a genuine move,” he says in a note to clients this morning following the employment report. “It comes alongside large increases in both the labor force (+418,000) and the tally of jobs in the survey of households (+873,000) of which 187,000 was due to government.”

but wait again!

over at ZH (or is that zero-cred? - i dunno, but they may have a less-spun POV than GS so...)

But what was the reason for this epic jump in Household survey jobs? Simple, and those who have read our series on America's transition to a part-time worker society know the answer. The reason is that the number of part-time people employed for economic reasons soared by 582,000 to 8,613,000, the most since October 2011, and the largest one month jump since February 2009, when "restoring" confidence in the economy was all the rage... and just before the Fed announced the full blown QE1 in March of 2009. Odd symmetry.

So putting it all together, what does this mean for the true state of the US economy? Recall back in September one of our Charts of the Day was the number of Unemployed and Underemployed for the month of August, which was 25.8 million. Readers may be surprised to learn that when putting it all together, in September this number increased to 26.2 million.



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so there you have it folks - the books might be cooked - but ole Cali's bubble machine is perkin up once again

time to break out the champagne!
or would that be champaign?

i dunno - but least its fryday and comin up on 5oclock somewhere....

[don]

Re: Turn On the Bubble Machine

It's 5 o'clock here, lek

[Raz]

Re: Turn On the Bubble Machine

On the main highway near my home there's so many banks you could drive blindfolded, toss out a can and hit one.
But about three weeks ago someone is building two more!

Yessir, a great scam if you can get it. Free money and a backstop for "mistakes" - if you buy the right CONgressmen.

What a country!

We're going down the tubes.