Your Heart May Belong to Daddy, But Your House Belongs to Wall Street

Sanford Rose banner

“Your neighbor is no longer that millionaire next door. He is quite likely to be a renter whose house, sold on a ‘short sale,’ was bought by real estate speculators with money borrowed from one of Wall Street’s gigantic ‘shadow banks.’Sanford Rose

Dolors & Sense

By Sanford Rose

Foreclosed, bank-owned, and for rent.

Foreclosed, bank-owned, and for rent.

Sanford RoseKISSIMMEE Florida—(Weekly Hubris)—6/3/2013—This is one of those ubiquitous “Yes, but” pieces. I try to avoid them, but I’m often unsuccessful.

“Yes,” the economic outlook has improved. But “No,” it can’t be described as buoyant, what with lackluster growth threatened still further by fiscal cliffs, sequesters and a global economic slowdown.

“Yes,” there is more money in the economy. But “No,” it isn’t being spent and re-spent fast enough. The ratio of income to money languishes at its lowest point in 50 years. Every dollar of readily spendable cash creates less than a measly $1.40 in output.

“Yes,” the official unemployment rate is down to around 7.5 percent. But “No,” that number is not representative. If you add workers employed part time who want full-time jobs and workers who have just stopped looking for jobs, the rate hovers at around 14 percent.

“Yes,” housing has bottomed and even turned up in many parts of the country. But, “No,” the improvement may not prove sustainable. Starts are faltering; lumber prices are down; and the cancellation rate on house purchase contracts has risen substantially.

“Yes,” the median home price has increased. But, “No,” the home owner can’t feel rich: prices have a long way to go to recoup their 33 percent drop from 2007 through 2012.

“Yes,” homes are much more affordable than they were in 2007. But, “No,” there is no mad rush to buy, at least by individual households. Home ownership is now widely viewed as a risky investment. The big push in demand in the last couple of years has come from corporate buyers of foreclosed properties who have promptly turned them into rentals.

Your neighbor is no longer that millionaire next door. He is quite likely to be a renter whose house, sold on a “short sale,” was bought by real estate speculators with money borrowed from one of Wall Street’s gigantic “shadow banks.”

About Sanford Rose

Sanford Rose, of New Jersey and Florida, served as Associate Editor of Fortune Magazine from 1968 till 1972; Vice President of Chase Manhattan Bank in 1972; Senior Editor of Fortune between 1972 and 1979; and Associate Editor, Financial Editor and Senior Columnist of American Banker newspaper between 1979 and 1991. From 1991 till 2001, Rose worked as a consultant in the banking industry and a professional ghost writer in the field of finance. He has also taught as an adjunct professor of banking at Columbia University and an adjunct instructor of economics at New York University. He states that he left gainful employment in 2001 to concentrate on gain-less investing. (A lifelong photo-phobe, Rose also claims that the head shot accompanying his Weekly Hubris columns is not his own, but belongs, instead, to a skilled woodworker residing in South Carolina.)
This entry was posted in Uncategorized. Bookmark the permalink. Follow any comments here with the RSS feed for this post. Post a comment or leave a trackback: Trackback URL.

Leave a Reply

Your email is never published nor shared. Required fields are marked *

*
*

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>