Thursday, December 2, 2010

Real Estate Situation

 Youtube clip from Geroge Hemminger (aka George4title)



 George mentions flipping houses as a way in which corporations make money. They've been basically selling overpriced property to people that had no money. How does this translate into fortunes for wallstreet? How could this possibly make money for them, if people can't even afford them? It doesn't matter! Its' still making them billions through the bailouts. Taxpayers are left to pay for the bill.
Another way this makes money for corporations that George didn't mention is urbanization.  People get into debt, lose their homes, the home falls in price due to the crisis, then the entire area isn’t worth anything.  Right? Wrong.
These companies either buy it back for pocket change, huge extensions of real estate, put some makeup on it, start a new development and sell it all over again (at inflated prices of course).
While people think in days, months and years, these guys, board of directors, they can afford to think in terms of decades. They can capitalize on profit that wont even be made after these company owners are dead. They even make money out of projects that will never take place. Not that different from selling debt, is it?

FerFAL

16 comments:

Jason said...

My wife wants a house BAD. We are looking in Middle Tennessee, USA. I am trying to slow the process down and help her think in terms of, as you said, decades and not years. I am also not over eager to buy right now, as I am quite sure we have not reached a bottom in the housing market yet. Plus, I like the comparative freedom renting gives us over ownership.

Great, timely (for me, anyways) post!

Jason

Anonymous said...

Thanks for sharing that. The big question for Americans is "when will the collapse happen?"...George mentioned toward the end that when we go through a second collapse in Real estate that the Gov. won't be able to handle that (along with all the other debts) and then we'll have a societal collapse. I've never heard this point of view until now, but it makes sense. I will have my husband listen to this. He really doesn't like to talk about things going wrong in the world. He wants to believe he will always have his job as an insurance manager and that we will always be able to afford a 2700 dollar house payment (15 yr loan). I would like to refi to 30 yr loan, take possession of our retirement now, buy gold and silver, food storage, and other survival supplies, invest in commodities, etc. HOwever, it takes two to tengo. I suppose the by the time he "get's it" that it will be too late.

K said...

Jason watch the video again. George thinks that if the housing market collapses again that society will collapse soon after. You had best ponder what do about that before you buy a house and before the ball-and-chain sets her heart on a death-trap. Don't be like the fat idiot in the video-

http://www.youtube.com/watch?v=Ubsd-tWYmZw

DaShui said...

I always felt that corporations (including the state) have the worst attributes of people (greed), and few of the best attributes(guilt). If a corporation was a real person, would you wan't to live next to it?

Anonymous said...

Shout-out to Jason...Last July 4th weekend my family & I went to Columbia, TN to see my war veteran nephew get married. The area was beautiful, but when I asked my nephew he said that parts of the area become No-Man's Land as soon as it gets dark. That's what it's like now, during relatively good times. Something to consider.
Regarding real estate situation, basically the question seems to be, "Where do you want to be living at when the SHTF?"
Eric in MI

Jason said...

K - That is one reason I am dragging my feet with a house purchase. She has pretty much resigned herself to the fact that we are going to be renting for, at the very least, another year. I am in NO hurry.

Eric - I am originally from Dickson, very close to Columbia. Columbia can get fairly rough at night. Dickson, where we were looking at a house, is still very safe. One of the reasons I was even considering that house is that I would prefer to be in Dickson as opposed to Nashville if and when things get stupid.

Anonymous said...

I just found out last week that this George4title guy is shifty. He is involved with scamming people with penny stocks. Also I have seen a few of his other videos that other people saved before he took them down. He is a goofball in my eyes now.

Sad, because although some of his information may be relevant, the lies he put out there makes him a chump regardless.

Just look up his name and penny stocks and NIA. You will see what I am talking about.

Anonymous said...

wall street didnt make money from flipping houses...they made money off the securitization of mortgages. they packaged the mortgages into securities and sold those. not really the same because a home is a physical item that cant be copied while a security is something that can be copied to infinity....thats why we have such a massive amount of debt...it is all based on paper derivatives.

we are not in this mess because 'the government forced the banks to make subprime loans to poor people'....we are in this mess because of the banks derivative products.

Baja Publishing said...

I agree with George’s basic premise, though I do not necessarily believe that societal collapse is a likely outcome.

Those interested should read Steinbeck’s “Grapes of Wrath.” In “Grapes,” Steinbeck tells the story of Oklahoma dirt farmers who lose their farms because land speculators sold them “underproductive” land which bankers were more than willing to allow the “landowners” to mortgage to the hilt. The Okies couldn’t generate enough production from the land to survive, and so they took out new loans to make ends meet. These loans were the equivalent of today’s second mortgages, which were taken out to maintai an unsustainable standard of living.

The Okies eventually became refugees when their homes were foreclosed on and went to California to seek work. They were exploited by corporate farmers in California while the banks resold their Oklahoma farms to corporations who consolidated them and hired employees to run them. That’s the real story behind “Grapes” and it is eerily prescient of our current situation.

I suspect that what eventually will happen in the United States is that when prices eventually reach bottom, the bankers will NOT be bailed out by the Feds because the political will to do so will not exist. Instead, they will be incented to hold onto the inventory. We already see this with M2M revisions. These incentives will be an extension of the M2M lie, combined with tax breaks and perhaps other cash payments. Look for government to open the borders wide, arguing that we are in a demographic mess (true) and that the solution to all our problems is an influx of young, impoverished workers from around the globe who can keep the Social Security and Medicare ponzis running for another 30 years or more. These immigrants won’t be able to afford real estate, but they’ll need a place to live and they will rent from the bankers and corporate owners (China Inc.?) who will own the US housing stock.

I could be entirely wrong, but this scenario makes much more sense to me than a societal collapse.

Baja Publishing said...

I agree with George’s basic premise, though I do not believe that societal collapse is a likely outcome.

Those interested should read Steinbeck’s “Grapes of Wrath.” In “Grapes,” Steinbeck tells the story of dirt farmers who lose their farms because land speculators sold them “underproductive” land which bankers were more than willing to mortgage to the hilt. When no more loans were available, the farmers let the banks foreclose. The farms were consolidated into corporate agribusiness.

I suspect that what eventually will happen in the United States is that when prices eventually reach bottom, the bankers will NOT be bailed out by the Feds because the political will to do so will not exist. Instead, they will be incented to hold onto the inventory. We already see this with M2M revisions. Look for government to open the borders wide, arguing that we are in a demographic mess (true) and that the solution to all our problems is an influx of young workers from around the globe who can keep the Social Security and Medicare ponzis running for another 30 years or more. These immigrants won’t be able to afford real estate, but they’ll need a place to live and they will rent from the bankers and corporate owners (China Inc.?) who will own the US housing stock.

I could be entirely wrong, but this scenario makes much more sense to me than a societal collapse.

David said...

This blog's subtitle is basically "life goes on." Society will not collapse when housing resumes falling, nor will it collapse when the banking system is recognized as insolvent nor when the U.S. debt becomes recognized as insolvent.

People adjust. Wealth will change hands. Politics will get crazy (or crazier). Figuring out what to do now is tricky, however, and opinions vary. Some of those opinions will turn out to be wrong.

Choose wisely, but don't buy into all the hype. Fear sells these days, but prudence is never popular.

Anonymous said...

The shit will hit the ceiling.
Here in New England when have you heard of a man going to a Dominos Pizza to rob the cashier then after the employees taking the delivery mans car and a pizza with him...
People are recurring into more and the gun sales are up...
This is just the start of a long term recession and out of control that will take YEARS to fix.
Thanks for the post.

Jaycee

Anonymous said...

Jason - no rush on the house. When you can put down 20, 30, 40, 50, 60% it might be worth it.

Those who understand interest make it, those who fail to understand interest pay it.

Stay debt-free for a while. Avoid catching falling knives.

Peace

Anonymous said...

The Banks make money when the mortgage fails because they have made "bets" 80:1 that if a mortgage fails they will collect up to 80 times the principal balance.

Anonymous said...

The banks' bets are backed by the full support and faith of the US Taxpayer.


Heads they win, tails you lose.

Anonymous said...

I HAVE SEEN HOUSES SELLING AT LESS THAN 25 PERCENT OF THERE LAST SELLING PRICES AND HAVE TRIED TO GET IN TOUCH WITH EITHER THE GOVERNMENTS BROKERS OR THE BANKS BROKERS AND GOT THE IDEA THAT THE PEOPLE BUYING AT THOSE PRICES WERE THE BANKS BROKERS OR GOVERNMENTS BROKERS AS I WAIT FOR RETURN CALLS THAT NEVER COME, DESPITE MY RECALLS AND RECALLS... GUESS THAT THERE ARE NOT ENOUGH DISTRESSED PROPERTYS TO GO AROUND UNLESS YOU ARE AN INSIDER....AN INSIDER MOST LIKELY CAUSED THE PROBLEM OF DISTRESSING TO BEGIN WITH...