America the New Pottersville

We have heard about big surges in home sales. Hmmm. But there are all those For Sale signs and people are still upside down . So what is going on. Well. Like the stock market, the one percent is making a play and what they are doing is creating a new Pottersville. Lets go back to the movie It's A Wonderful Life. It was wonderful because George kept the Building and Loan going and they made loans to middle class people nobody else would lend to. In other words they developed a middle class.

But Pottersville owned by Mr. Potter were all renters. Nobody owned. Everyone "kept paying the rent in Potters slums" and that's why the Building and Loan drove Potter crazy because it  cut into his business. Potters renters became Georges buyers. Now. Lets take today. We have an incredibly depressed housing market (sans LA) with prices scraping bottom. Now a lot of middle class people cannot get a loan still. Bad Ficos. Homes upside down. But yet houses are being bought. They are being pot by our modern Potter.

Big companies. Investors from other countries are buying up homes at the clip of three hundred a day. Why? Because they are going to create  a vast rental market for  Americas beaten down middle class. People have to live somewhere and they will rent. And large conglomerates will rent them the  homes until the market moves up and they decide to sell or maybe they will just keep renting. Maybe the new normal is a Potterville where no one can buy but they rent.

A new twist on the American Dream turned upside down. Remember in the movie when George gets his wish and the world has turned into Pottersville? At least he could wake up and return to the old world before Potter. We are not so lucky

www.williamhazelgrove.com
 

The I Can't Move Generation

Everyone has their cross to bear and for the recession generation of homeowners it is this: they can't afford to move. It used to be you moved to improve your situation. In the old paradyme one moved to a bigger home to take advantage of the increase in equity from the market. Trading up. This was a no brainer. You found out your house had appreciated by a hundred grand and went house shopping. You  found your next dream home then sold your current home and took on a bigger payment but it all came out in the wash because you would get a bigger chunk of equity as the market moved again. Then it all came crashing down.

In the smoking ruins of the bust the housing market is on it's head. Take the homeowner today who wants to sell. He can't because his house is now in a negative equity situation. He owes more than it is worth. There is nothing to plunk down on the next house. But let's say the house is not underwater and he wants to sell. There is still no guarantee it will sell and worse there is no guarantee there is another house out there. This is the kamikaze element to moving now. You might find yourself out in the street because you cant qualify for the next house.

So nobody moves now. People move for a variety of reasons. The big one now is downsizing. No one wants the big house anymore. Most people want to cut costs, but here is the irony of the housing bust: you can't afford to move to a smaller home. The smaller home might cost you more because you will lose all the evaporated equity in your current house. Much like a stock you don't lose until you sell. There is a chance it might come back right? Right.

But lets say you are going full speed ahead. You literally have to proceed like a blind man. You don't even look at the new house. You can only concentrate on selling yours and make peace that you may not get a penny out of it. Then you look for a new home and you have to make peace with the fact you could well end up renting. Because qualifying with no down payment is just about impossible now. So nobody moves.

Who is moving then? The people who get foreclosed. The strategic defaulters who quit paying. The wealthy who walk from their home and buy the next one with cash. The rest of us sit and wait for the next bubble.

http://www.billhazelgrove.com/
Rocket Man...keeping your house shouldn't be this hard