Phoenix real estate market being held up by all cash buyers – 47 percent of Phoenix sales were from all cash buyers in December. The $1 priced Detroit home.
The Phoenix real estate market has collapsed after reaching a price apex in 2006. It is hard to imagine another market with similar real estate fundamentals but Las Vegas is a mirror image of foreclosure ridden Phoenix. These desert cities rose up during the housing bubble with plentiful and cheap land to expand on. Builders were able to build at a feverish pitch with the sound of jack hammers cranking and skeletal frames of model homes for as far as the eye could see since demand for easy loans and second homes were pushing many of these markets upward. Las Vegas and Phoenix had enormous demand from eager wide-eyed California investors. It is hard to pinpoint exact figures but at one point over 40 percent of purchases in Las Vegas were estimated to come from California buyers. Home sales for these regions have perked up but anything looks higher when you are bouncing off the financial ground. Yet I believe something else is going on here. Many sidelined investors are now jumping into the market head first since they are merely reacting to lower prices. Yet many are not thinking about longer term fundamentals like rising oil costs that will likely stifle many of these desert communities. All that is being seen right now is insanely low prices that haven’t been on the radar for over a decade. To show investor demand let us look at all cash purchases for Phoenix in the last month.
Federal Reserve punishing savers in low interest rate environment – Since the 1960s 5-year Treasury Bills average 6.5 percent. Today a high yield money market account will get you 1 percent.
Saving money is usually pushed to the background in a debt induced economy built around spending. Marketing firms are designed with the intention of parting you from your hard earned dollar. The housing bubble was a manifestation of a system permeated by easy access to debt and promises to repay current purchases with future dollars. Even the modest historical down payments of 20 percent were removed to introduce new no money or low money down payments. It was as if money grew on trees. Credit cards sit in the wallets of many, right next to cold hard cash. Although not synonymous, people think of access to debt as if it were access to a permanent piggybank. Many thought of their home equity as trapped income needing to get out instead of a safety net. I used to hear so many throw in their home equity line of credit into their net worth equation. You have to pay debt back! That somehow escapes many and in this low rate environment, the Federal Reserve is punishing savers to get them off the fence and spend every little penny they got.
Federal Reserve openly aiming for inflation – The Fed looks for a sequel in punishing the U.S. dollar and hopes to inflate debt and the middle class away.
The Federal Reserve has painted itself into a very narrow and troubling corner for most of working and middle class America. The massive debt problems on hand have no realistic way of being paid off and the best path in the eyes of the Federal Reserve is to slowly inflate away the currency and debt. Yet that brings up some troubling dilemmas. Think of the cost of living adjustments (COLAs) that many on Social Security once received. Many of these people purchased homes pre-bubble days and many may have their home paid off. Yet because a large portion of the CPI is based on housing, the CPI has been falling for the last few years stunting growth in COLAs all the while food and other daily use items are surging in cost. The Federal Reserve has no allegiance to any country and is only concerned with the safety of the biggest banks. That is their main charter even though they claim to talk about a stable currency for a country. Let us see how well they are holding to that mission:
The downsizing of America – Oil production off 1980s peak and manufactures learn creative methods of repackaging inflation.
There is a slow burn going on and it is happening in your wallet and also in the gas tank of your car. The US Treasury and Federal Reserve have made it their mission to slowly cut the value of each one of those green dollars you have. Since many Americans are struggling to make the monthly bills, many producers realize that they cannot up the price on regularly bought consumption products. Places like Target have long learned to add a large section of produce and perishables in their stores since people have shifted from buying wants (HDTVs) to needs (bread and butter). What is interesting though is how the big jump in commodity prices was hidden for consumer goods. You may have noticed this merely by your own observation but creative packaging has hidden a large part of this inflation.