Housing and Real Wealth Declining

Hi and welcome to some very interesting data.

The article I am attaching below has some upsides too. So read this article first to know why I am saying what I am saying below it. 

 

On Wednesday, October 29, 2014 3:46 AM, The Economic Collapse wrote:

Does This Look Like A Housing Recovery To You?

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Does This Look Like A Housing Recovery To You? Posted: 28 Oct 2014 01:06 PM PDT We just learned that the home ownership rate in the United States has fallen to the lowest level in 19 years.  But of course this is not a new trend.  As you will see in this article, the home ownership rate in the United States has been in a continual decline for more than 7 years.  Obviously this is not a sign of a healthy economy.  Traditionally, home ownership has been one of the key indicators that you belong to the middle class.  When people define "the American Dream", it is usually one of the first things mentioned.  So if the percentage of Americans that own a home has been steadily going down for 7 years in a row, what does that tell us about the health of the middle class in this country? The chart that you are about to view is clear evidence that we are in the midst of a long-term economic decline.  It shows what has happened to the home ownership rate in the U.S. since the year 2000, and as you can see it has been collapsing since the peak of the housing market back in 2007.  Does this look like a housing recovery to you?... So many people get caught up in what is happening on Wall Street, but this is the "real economy" that affects people on a day to day basis. Most Americans just want to be able to buy a home and provide a solid middle class living for their families. The fact that the percentage of people that are able to achieve this "American Dream" is falling rapidly is very troubling. There are some that blame this stunning decline in the home ownership rate on the Millennials. And without a doubt, they are a significant part of the story.  They are moving back home with their parents at record rates, and many that are striking out on their own are renting apartments in the big cities. This is one area where the decline of marriage in America is really hitting the economy.  Back in 1968, well over 50 percent of Americans in the 18 to 31-year-old age bracket were already married and living on their own.  Today, that number is below 25 percent. But that is not all there is to this story. In fact, the home ownership rate for Americans in the 35 to 44-year-old age bracket has been falling even faster than it has for Millennials... In the first quarter of 2008, nearly 67% of people aged 35-44 owned homes. Now the number is barely above 59%. The percentage of people under 35 owning homes only fell five percentage points, to 36% from 41%. So why is this happening? Well, it is fairly simple actually. In order to buy homes, people need to have good jobs.  And at this point, the percentage of Americans that are employed is still about where it was during the depths of the last recession. In addition, wages in the United States have stagnated and the quality of our jobs continues to go down.  As I wrote about the other day, half of all American workers make less than $28,031 a year.  Needless to say, if you make less than $28,031  a year, you are going to have a really hard time getting approved for a home loan or making mortgage payments. Things have been changing for a long time in this country, and not for the better.  Our economic problems have taken decades to develop, and the underlying causes of these problems is still not being addressed. Meanwhile, middle class families continue to suffer.  One very surprising new survey discovered that more than half of all Americans now consider themselves to be "lower-middle class or working class with low economic security".  While Wall Street has been celebrating in recent years, economic pessimism has become deeply ingrained on Main Street... Optimism may be harder to come by these days. More than half of Americans surveyed in a Harris poll released Tuesday identified themselves as being lower-middle class or working class with low economic security. And 75 percent said they're being held back financially by roadblocks like the cost of housing (24 percent), health care (21 percent) and credit-card debt (20 percent). And that's not the kicker. "The most disappointing aspect is that 45 percent think they'll never get their finances back to where they were before the financial crisis," said Ken Rees, CEO of the Elevate credit service company, which commissioned the survey. "And a third are losing sleep over it." The only "recovery" that we have experienced since the last recession has been a temporary recovery on Wall Street. For the rest of the country, our long-term economic decline has continued. When I was growing up, my father was serving in the U.S. Navy and we lived in a fairly typical middle class neighborhood.  Everyone that I went to school with lived in a nice home and I never heard of any parent struggling to find work.  Of course life was not perfect, but it seemed to me like living a middle class lifestyle was "normal" for most people. How times have changed since then. Today, it seems like we are all part of a giant reality show where people are constantly being removed from the middle class and everyone is wondering who will be next. So what do you think? Is there hope for the middle class, or are the economic problems that we are facing just beginning? Please feel free to share your opinion by posting a comment below...

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Now here are my comments to the above:

If you own a trailer park or a class c or b rental property, your good, because people have to live somewhere. The downside is this net change in value is deflation and if Harry Dent is right, (which he and some other informed people seem to be), we are going to see deflation back to 1986 levels for Real Estate.

The RE market peaked around July 2006 and has been on a steady decline ever sense. No matter that Houston is a micro bubble and is counter cyclical in certain classes of RE like in the $350-1M cost range and the very high end homes like 1.5M plus.

Trouble is the market is also saturated with this class of home as aging baby boomers sell off at the rate of 3-7 a month the 3-4-5 bedroom houses they once owned for much smaller living. Soon the typical home in Cinco Ranch can be bought for 500 pounces of silver. This will be the class to buy once the collapse happens, but wait....not now.  

What I want you to notice in this chart on Case Shiller Home Price Index is the drop in values of RE due to a correction in the Market (Wall Street). So as long as the FEDs pump money into Wall Street, RE values are good right? Well what will they do if the massive planned correction comes? I guess we will see QE5...or whatever they will call it. This further debases the money. God knows how much money they are actually "printing" we do not know about: like the 800 Billion that magically appeared as a loan on the Feds balance sheet earlier this year.  800 Billion??? Either way gold value will rise and RE will fall as it will take more green backs to buy the same thing. Rates will never go up because they are out of tricks to kick-start the economy.  Nothing is working. Actually the WH has a massive attack on small business which is the single largest job creator in this country...not big business. Big Business is sending jobs overseas...to even cheaper labor.

Priced in gold or silver, I suggest your "single largest investment" (your home) is depreciating at an alarming rate....actually the rate of true loss of purchasing power of the currency...about 10% per year. I know this because I did the calculations last year and found out I was actually losing in "real wealth" $400 a month, on a RE investment which was rising in price at the historical rate of 5% a year. Yes, real wealth and currency price of a home are different things. (Imagine That?)

Here is how to do your own calculation of the real value or anything over time:  

Look up the price of gold when you bought the home. Using that number, calculate the exact ounces of gold it took then to buy your home. Now using today's figures for gold, divide this new value into the current estimated value of your property on today's market. Note the difference of the two values "in ounces" and compare the two values. Oops/ Did it take more or less gold ounces to buy your home today or when you bought it...It's as simple as that. If you increase in gold value your home's real wealth value is actually increasing. If it decreases, well...thank the FED. QE19 anyone?

I am late and I know it. Now you know too. 

You could not pay me to own "mortgaged R.E." right now and that's why I am selling off my last property. The R.E. bubble is very much over and while I can I am trying to convert to something quickly that will hold value, not lose value.  Further, if I had a home, I would be looking to sell as soon and convert to gold or better yet, silver. The Millennial's don't have a job or any money, so how can they fuel a housing buy.  They can't....period. They are living at home with mom and dad.

When Wall Street tumbles down because of a major correction in some days to 4 months from now, people will run to anything solid as a means to get a foot hold on the free fall decline of their investments and 401K wealth. The same is true for precious metals when people look for a hedge on holding on to their wealth. 

Read this....

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

-- Alan Greenspan, "Gold and Economic Freedom" in Ayn Rand, ed., Capitalism: The Unknown Ideal (New York: Penguin Group, 1967), 101-108

Imagine 200 million buyers coming to a very small market which typically has only about a 1 million buyers at any one time, (including retail jewelry buyers), and even less coin and bullion buyers. It's going to send the price of the precious metals commodity through the roof. How much you ask will the demand push prices? Expect $10K/oz gold and $1K/oz silver, and these figures are conservative. Today we are at some $7,780 gold ounce when comparing to base money M3. Even higher when you consider the leverage of the actual credit issued on that base.

So is buying silver at $18 or 19 a good buy?...it's less than the cost of production so I would say a resounding "yep."  

So I am going to make this simple, a $1800 purchase of 100 ounces today will turn into $18,000 actual real worth almost overnight. What other investment have you made that is capable of this kind of returns. None....period.

Yes I am buying more. It's a no brain-er.     https://www.youtube.com/watch?v=GxKvTepymxs

People that know me are walking up about God's grant of unalienable rights...well what about the right to store "the value of your labor" in something that cannot be manipulated by some for the benefit of a very very few. 

BTW: Ayn Rand is an incredible author.

All the best...buy some silver.

Through 100 years of apathy and gradualism we have arrived at serfdom camouflaged as misplaced measures of success.  Ungodly politicians manipulate citizens into believing they are incapable of self government and should pay for the ever-expanding and tyrannical State. How soon they forget who furnished the labor, took the risk and provided the blood. They forget who is paying for the lifestyle and pensions they enjoy as our representative. They ignore the fact our hard earned wealth is being vaporized by fiat paper money: but can easily vote for more confiscatory theft from the many to serve the few. Why, at risk of loss of home or property do we tolerate paying 1% of the value of our home each year to a socialist public education system which: rewards poor teacher performance, ignores teaching critical thinking, preaches "there is no God" and drives home, from elementary to university, that utopian socialism (which has never worked), is better than God's design of free capitalism. I am not a revolutionary, but I do Trust in God and in the natural rights granted by Him. Those inalienable rights include exclusive use and perpetual property ownership, the rule of law, keeping the fruits of my labor without challenge and the liberty to self govern my actions. These rights and many others others I can name are the foundation of a free people. They are the rights I fought for, my father fought for and our forefathers fought for before him. They are what the world envies and many wish to tear down. Because of my faith, I know Man is not in charge. I also know if we repent and speak out and call God's name, He will restore this great nation as the Constitutional Christian Republic our forefathers designed. In silence, our democracy will end in either dictatorship or socialism. Both evils are close at hand and either can be implemented on a single pen stroke since the executive orders are in place to allow a complete takeover of the nation, your wealth, your property and your rights. However, in these last days of partial freedom "we the people" in a unified voice can change our downward slide to Gomorrah and perhaps even the world. It's up to you now. No one will take your place at the table of freedom. Are you willing to speak out and save what you love so much about living in this blessed and glorious country? 

Be a blessing to someone.

Truth is missing in politics

Through 100 years of apathy and gradualism we have arrived at serfdom camouflaged as misplaced measures of success.  Ungodly politicians manipulate citizens into believing they are incapable of self government and should pay for the ever-expanding and tyrannical State. How soon they forget who furnished the labor, took the risk and provided the blood. They forget who is paying for the lifestyle and pensions they enjoy as our representative. They ignore the fact our hard earned wealth is being vaporized by fiat paper money: but can easily vote for confiscatory theft to serve special interests. I am not a revolutionary, but I do Trust in God and in the natural rights granted by Him. Those inalienable rights include exclusive use and perpetual property ownership, the rule of law, the fruit of my labor without challenge and the liberty to self govern. These rights and many others others are the foundation of a free people. They are the rights our forefathers fought for and what the world envies. Man is not in charge and if we speak out and call to God, He will restore this great nation as a Constitutional Christian Republic. In silence, our democracy will end in dictatorship or socialism and both are close at hand. In unified voice, we can change the world.

Be a blessing to someone.

What is driving consumer spending

Update on a few outstanding economic indicators 

I woke up this morning and asked myself. “What is driving consumer spending?” I know I am weird that way, but the question has been cooking for a while in my greying mind. 

If you look at the chart above it appears that the average consumer is "completely consumed" by the media hype of a recovering U.S. Economy (pun intended).  Consumers are spending again in predictable record numbers and it shows mostly in durables goods. Apparently Mr. and Mrs. Main-Stream Consumer have “drank the kool-aid”, as the numbers shown above reflect a robust recovery since Q1 2010.  To me, the data shows spending, but it does not show a recovering economy. The real answer to whether the consumer is doing better is in wealth addition - “take home pay.”  If the unemployment picture is any guide to recovery, we can learn something.  

First, unemployment from the government shows everything is recovering nicely. Note the downward trend in the numbers.



Trouble is…the numbers are all a “big fat lie.”  The economy is not recovering…it’s tanking…and tanking across many sectors except financial. Here is the real unemployment.



Before you discount the blue line, understand it uses the original calculation created by the government and used for years - before they monkeyed with the formula and dropped out sector by sector in the calculation, looking for ways to simply make the numbers appear better.  Not quite the rosy picture we a being told is, isn’t it.

The only reason why 22% unemployment and soup lines are not the discussion of the day is that the government has found a way to hide the soup lines…they issue EBT Cards…digital transfer of your wealth from the now Chinese financed coffers, to the recipient. We don’t need soup lines when the recipient can eat at Olive Garden.  Here is one chart to show the real data.

The “tell” that the recovery is on the ropes is the rise in unemployment, the lack of jobs being added each month and the increase in the number of food stamp recipients.  1 in 6 in this country are receiving food stamps.  I don’t know about you, but after a while, I find myself beginning to say to myself, “I want some free stuff - I am paying for it” …how about you. I see it in the lines at the grocery store almost every time I am there.  Someone is buying cokes and chips and all the stuff in the “like to have” bucket and paying for it all with tax payer money.

I mentioned unemployment.  Just think for yourself…at 100K jobs a month being added to the “employment role” and approximately 220K “jobs lost” per month in the economy, (mostly to outsourcing U.S. jobs by non-tax paying mega-companies who are figuring out its more profit to have a person in New Delhi make that part, then someone here. All this globalization means the unemployment numbers are going to go up, not down.  

So basically we have more people going out of work and consumer spending is increasing. Great. Then why are they all out buying new cars, going deeper into debt and deeper into a debt filled lifestyle? Simple answer: Low interest credit. Low interest credit allows people to but things they could not afford if a real interest rate of some 7-10% was applied.  Cheap money is why everywhere you look someone is building a commercial building. We don’t need them…but developers are banking on (Big Time) the recovery will take place soon and people will fill them up…I can tell them the gamble is a at best a 50/50 shot. There is no data to support we will pull out of this depression.  In fact it looks like nothing is going to happen until 2016-2017.

Let’s dive in a bit. Momma is working, daddy is working and there is less spending power today, than yesterday.  This is not good…less “bread” to buy bread.  Want proof?


 
Inflation adjusted pay is simply going down, not up. This means the buying power is also going down. I frankly believe this chart is not completely accurate as it uses “FED inflation numbers” which we proved earlier are a bold faced lie.

We switched the world economy from Gold to the Petrodollar so watch the Petrodollar.

Here is gasoline for the last few years and the prediction for pricing in the future. Just understand that in 2014 we are right on target with the curve at $3.60/gal nationally.

What will throw this chart into a higher gear is if we have continued destabilization in the Middle East – like Iran and their ambitions to destabilize the world.  If Iraq and Iran move further towards totalitarian Islam: and there is nothing I can see that will stop them short of boots on the ground, we will pay a larger share to the accumulative 13 trillion dollars to basically “finance terrorists.”  Yep, after the GOV takes a pinch, a large part of your gasoline dollar goes directly to those who hate us and want us all dead.   

I bet you’re asking, “Where did Jim get 13 trillion dollars sent to terrorist? 

This sum is the estimated amount of wealth sent by US Citizens to countries that certifiably hate us and wish us dead, really dead…including our good friends Saudi Arabia who convinced OPEC to use US Dollars to settle international crude oil accounts. These “sandbox” countries needed the wealth transfer initially in 1948 and beyond - now they don’t. They could buy and sell us 10 times over. Sadam was taken out because he would not play ball and threated to settle Iraq’s oil trade in some other currency. So was Gadfly, he was removed because he threatened to create a new gold backed currency. Can’t have anyone leaving the reservation can we?   

Take a deep breath. Politicians sold you down the river on crude oil and basically killed viable alternatives including solar and now HHO. Now, that sale of your future is going to come home to roost.

If we get a disruption in crude supply from the Middle East or some pirate blocks the Straits of Hormuz, (where 60% of Middle Eastern oil must pass), the U.S.A. will grind to a halt in less than 3 days.  

So we started with what the consumer is spending. And we have the largest single spending issue on the table as going up.  Let’s check another critical and larger factor - food.

Here a quote from Today Magazine written today:

“Two months of sharp increases in food prices show grocers are starting to pass along their higher wholesale costs to consumers.

Retail food prices rose 0.4% in March, the same as in February and the largest amount since September 2011. By comparison, the prices of all consumer goods rose 0.2% in March and 0.1% the month before, reports the Bureau of Labor Statistics.

Beverly Cabellon, 61, of Pleasant Hill, Calif., was taken aback by the $38 price for two steaks at Costco recently, up from the $27 she paid last September. "I will be grilling more vegetables and shrimp this summer," she says, adding that she and her husband will likely eat beef once a month instead of weekly. "And I may switch to pork and chicken."

Beef, pork, poultry, eggs and milk have had the most dramatic price increases as drought, a virus outbreak and rising exports have thinned U.S. supplies.

Overall consumer prices rose 0.2% in March, a bit more rapidly than in recent months, and annual inflation was 1.5%, up from 1.1% in February.

Annual inflation was 1.5% in March, up from 1.1% in February. That's well below the Federal Reserve's 2% target, as falling gasoline prices offset rising food costs.

But higher food bills are squeezing households still struggling with meager wage gains, and could crimp spending just as the recovery is expected to accelerate.

With all this talk of rising prices and the cost of milk some 2 times what it was just two years ago, you can bet, most people, and I am now including the middle class in that statement, are struggling to feed their family with a declining purchasing power.

Here is some more data to look at:

This chart compares the rate of interest to commodity prices over a long time scope.  

It shows when “real interest rates” are high, commodity prices should be low. It appears to do this time and again.  However, in the case we have today, interest rates are forcibly low by the Fed and commodity prices are predictably higher.  

Notice the commodity index is never below say 7%.  I think this fact is the “fundamental baseline inflation factor”: keeping commodities above negative or deflationary territory. The traders need to make money and in a declining market, no one makes money.  

It makes sense. If what you use to “measure everything” is decreasing in value year, over year, over year, prices will naturally go up with the changes. In fact it will never fall below the true inflation.  Let’s see the loss of measuring yard stick in two charts.

Or, expressed another way,

You don’t have to be a senior economist to understand the loss of purchasing power. You see it each time you go out to dinner or to the grocery store.  All your wealth, and the wealth of the rest of the world I might add who store their wealth in dollars, has been thoroughly robbed, as in stolen, and is now sitting in gold bars at the Federal Reserve for the benefit of about 50 unnamed people. Yes good people, gold bars…you don’t think they would use paper do you? The greedy thieves win and you, and the rest of the known world, lose. This is why there is a 1% who own 50% of the wealth of the country and its getting worse with each day. Not part of the 1%...so sorry…I am not either. 

So let’s wrap it up…

·         Rising commodity prices

·         Midwest, Texas and California draughts

·         Unstable crude supply, getting more unstable with each day

·         Declining purchasing power

·         Rising unemployment

·         Distorted government numbers

·         Your wealth being stolen each day in the form of inflation

What does it all mean?

·         Deflation…across the board.

o   Your home price is set to fall about 20% once the above knowledge of deflation and unemployment really kick in.

o   Your money is set to increase in value for a short while…maybe some 12 months

o   Your life savings withdrawal will suddenly be able to buy more…because you darn sure aren’t making any interest on those funds nor living off it.

o   You can financially bet on things that rise with the dollar

o   You can take that vacation to Europe

§  To see how many Muslims have taken over…

·         Why would anyone want to go where American kidnappings are routine I don’t know?

o   You can pay off your debts with cheaper money

o   You can sell your big gas guzzling car for about “half what’s worth” because if your car does not get 30 miles per gallon, it’s going to be declared “unsellable junk.” 

§  (Remember the big Excursions? When gas hit $4.00 a gallon they were offering 80 cents on the book value dollar at dealerships and they were flooded with walk away turn-ins.)

o   You can pay for your kids’ liberal socialist indoctrination into the new world order.

o   Your property taxes will go through the roof as they adjust you tax rate up to compensate for the loss of revenue from a declining asset class.

You will think everything is ok if we can just get to the other side…trouble is the other side is considerably different…and a paper for a different day.  What’s next: The other side of deflation…hyperinflation…and it going to make right now look like an all-expenses paid luxury cruise.    

Stay tuned.

Jim Rohr

jimships@yahoo.com