Is this a Housing Scam or What Exactly?

June 1, 2013
Ziad K. Abdelnour

Commercial Real Estate Insights and Strategies

This entry explores the murky waters of housing scams, detailing common fraudulent practices within the real estate market. It provides readers with critical insights on how to identify and avoid scams, emphasizing the importance of due diligence and skepticism in real estate transactions. The blog serves as a guide to safeguarding one's investments against deceptive practices that prey on uninformed buyers and renters.

We are told that there are only 1.74 million homes left for sale in this country and at current sales rates we’ll run out of inventory in 4.2 months….You better buy now and not miss the boom in the making and before it’s too late… Hilarious to say the least.

We must be running out of houses I guess. We need more houses built ASAP, before this becomes a crisis. The problem with this storyline for dummies? Existing home sales are falling. If there is an inventory shortage, why have new home sales fallen every month since May of 2012? Does this happen when you have a strong housing market? Do you believe the NAR inventory figure of 1.74 million homes for sale? The last time the months of supply was this low was early 2005 – during the good old days.

Let’s examine a few facts to determine the true nature of this shocking inventory shortage crap.

According to the latest U.S. Census Bureau:

There are 133 million housing units in the United States

There were 115 million occupied housing units in the country, with 75 million owners occupied and 40 million renters occupied.

For the math challenged this means that 13.5%, or 18 million housing units, are vacant.

Only 4.3 million are considered summer homes, and 3.9 million are available for rent. That leaves 9.8 million homes completely vacant.

The Census Bureau specifically identifies 1.6 million of these vacant housing units as up for sale.

Now do you want to know why housing prices have recently boomed?

Simply because (1) Lenders are artificially keeping vacant houses off of the market and 2) The Obama administration has thrown all sorts of artificial incentives at institutional investors to pump up prices…. Nothing else.

Even at the peak of the bubble in 2005, only 11.5 percent of homes in Los Angeles were purchased by absentee buyers — now 25 percent are.

It is a fact that much of the rebound in prices is attributable to institutional investors piling into housing — such players make up a much larger share of buyers than they did years ago, or should in a normal market.

Blackstone Group LP, the country’s biggest real estate investor–which has already invested $3.5 billion to buy 20,000 single-family homes. Meanwhile KKR & Co. just raised a $500 million fund for real estate investments. There seems to be no shortage of folks willing to provide money to invest in a housing upturn.

On the other hand and on the retail side, 12.6 million homes are still vacant and 1.5 million more homes are underwater. In other words, without artificial scarcity created by banks, there would be more available houses than there are underwater homeowners having problems paying their mortgage. There would – in a word – be a glut.

If this is the case, the housing recovery as it appears today could be nothing more than a mirage…same as the rigged stock market all funded with Quantitative Easing, Central Bank Purchases and Corporate Buybacks

Numerous institutional investors are already starting to cash out…. God forbids what will happen when they start selling in droves. Just watch out the mass layoffs coming in the mortgage finance industry already.

So it is clear by now that the government’s entire strategy is to try to paper over all of the real problems with the economy by artificially propping up asset prices in an attempt to hide the fact that big banks are insolvent.

It is unfortunately equally clear that all of the Obama administration’s “homeowner relief” programs are really just back-door bailouts to the big financial companies and are not even intended to help homeowners.

There’s no shortage of delinquent homes that will eventually be foreclosed. That means the process is being dragged out so the banks don’t have to fess-up to the losses on their fetid pile of nonperforming loans here’s a little more background from an article in Business week:

“About 6 million U.S. borrowers will lose their homes in the next five years because of inability to pay their mortgages, creating demand for as many as 4 million new rental households, according to Scott Simon, head of mortgage bonds at Pacific Investment Management Co. in Newport Beach, California….

Single-family rentals are priced to deliver unlevered total returns in the range of 7.5 percent to 8 percent, or about 0.5 percentage point to 1 percentage point higher than institutional-quality apartments, according to a June 8 report by Ray Huang, senior associate at Green Street Advisors in Newport Beach, California.

Despite the propaganda, hyperbole, and cheerleading from the corporate media at large, the fact remains that national homeowner’s equity is barely above its all-time low of 38%, down from 62% in 2000 and 70% in 1980.

The NAR shills, Federal Reserve drug pushers, Wall Street shysters, and pliant media lured the middle class and still are playing those idiots out there into the false belief that housing was and remains an asset class that could make you rich.

Despite the destruction of middle class hopes, dreams, and net worth, the ruling plutocracy has decided the best way to revive their fortunes is to lure the ignorant masses into more student loan debt, auto debt and mortgage debt.

This other house of cards and illusions cannot last as all is being revealed by the day.

Now you know what is real and what is fiction.

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