Saturday, November 5, 2011

The Battle of The Upper End Housing Market

There are three separate battles that must be fought in the war against the Housing Bubble.

The first battle was the bloodiest and has already been fought. The banksters have carpet bombed the lower end of the housing market with foreclosures. The speed and thoroughness of the operation could be compared to the Blitzkrieg by Nazi Germany in World War II. Robo signers replace the Messerschmitts that reighed terror from the sky.

There is no loss of life of course, but lives have been destroyed all the same.

Mercifully the destruction is complete and the battle of home prices is over. The banksters are moving out, and on to greener pastures of exploitation.

Lower end areas like Antioch, Pittsburg and many parts of Oakland are selling below 2000 prices. It is time for the citizens of these markets to come out of their bunkers and rebuild.

The destruction has laid a foundation for growth. For the first time in 8 years young families are buying homes at affordable prices and investors are getting a fair return on their investment. The lower end housing market has wrested itself free of the tyranny of greed caused by the banksters and the bubble.

There is still some fighting in the middle tier of the market. This would be the Walnut Creek and Pleasant Hill areas. In these areas there is reasonable value for the discerning buyer but there is still a small cohort of overpriced resistance fighting back.

The banksters are using a different and more cunning strategy than in the battle of the lower end. They are strategically unloading just enough foreclosures in an attempt to keep prices in the bubble. This market manipulation allows for a slower more painful decline in home prices. It’s more like the punji stick booby traps in Vietnam.

But home buyers are on the offensive. They are purchasing homes at median 2002 value, so this battle is close to an end. Unfortunately for the buyers there are still a few homes that are listed at 2007 prices. These landmines can booby trap an undiscerning young family that is not skilled in reading the new terrain.

It is exactly like an explosion. The 2007 purchase price radiates mispriced value out amongst the surrounding area. A devastating event for the young families involved. Indirectly there is collateral damage to the market. But as time goes by this will happen less and less. The new buyers coming into the fray will learn from the mistakes of their fallen comrades.

Looking at the numbers it appears that Walnut Creek and Pleasant Hill buyers are learning to avoid the landmines. The pending sales numbers are starting to trend at 2001 values. Once these pending sales are closed, it will mean affordable pricing for comparable homes in the future.

As long as there are no new Covert Operations, like the Homebuyer Tax Credit by our government, the neutral zone between buyer and sellers will be drawn at 2001 prices. The white flag will be raised just south of the bubble and the battle will be over. Young families will be able to safely enter into the Walnut Creek and Pleasant Hill markets in 2011.

The final battle rages in the high end markets of Alamo and Lafayette with no hope of ending anytime soon. Overall the market is selling at 2005 prices, solidly in the bubble. Young buyers are totally outmatched in this fight.

There are many homes that are still being sold at 2007 prices. Each sale creates a comparable that enables other sellers to price their home at peak bubble price. These booby traps will continue to snare young families into a home that in all likelihood will be underwater in 5 years as prices slowly trend downward to 2002 values.

To make matters worse for the young buyers is that the banksters have allied with the sellers in this battle. The same banks that carpet bombed the homeowners in the lower end housing market, and used punji sticks to demoralize the middle tier buyers are now stockpiling foreclosures in the high end market. This stockpile of foreclosures could very well become a weapon of mass destruction in the future when they are unloaded onto the unsuspecting young people purchasing homes today.

Another powder keg that could explode is the pent up force of rising interest rates. There are many more interest only loans in the upper end market compared to the middle and lower tiers of the housing market. This trip wire has the potential to blow the whole high end market back to the Stone Age.

But what should be most distressing to young home buyers is that the Black Ops team at the Federal Reserve has helicopters in the air. Even though there is no chance of winning the war, The Fed is fiercely fighting free market interest rates in an effort to stretch out this battle for as long as possible. This Kamikaze mission by The Fed is meant to Shanghai young high end home buyers into joining their futile battle against our nation's free markets.

The high end market is like the fight between brothers on opposing sides during the Civil War. Except in this fight the rich older brother that started the war is borrowing money from China to continue the war and sending the bill to the poor younger brother that had nothing to do with starting the war in the first place.

War is definitely Hell.

For the next 3-5 years this battle will continue between the young and the old in Alamo and Lafayette. I don’t see how the young people that want to move into these markets have a chance. The high end home sellers have the money and the means to hold out for bubble prices. They have also formed an alliance with the banksters and The Fed.

The young buyers that enter this battlefield are set to become the cannon fodder that allows many rich sellers to escape from the bubble with all of their false profits as it imprisons an unsuspecting young family into an overpriced home in a very, very unsound economy.

If you are a young family looking to purchase a home, I would urge you to stay clear of this war zone.