Prosper Australia

photo credit: Mike Licht, NotionsCapital.com

With over 19 million, yes 19 million vacant homes in the US, many suburbs are looking even more like a war zone than usual. The New York Times reports that:

City officials and housing advocates here and in cities as varied as Buffalo, Kansas City, Mo., and Jacksonville, Fla., say they are seeing an unsettling development: Banks are quietly declining to take possession of properties at the end of the foreclosure process, most often because the cost of the ordeal — from legal fees to maintenance — exceeds the diminishing value of the real estate.

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What is the solution?

The above picture is from Mike Licht, who comments on the fuzzy data promoted by US real estate agents, soon to be known as ffffantasy agents.

photo credit: country_boy_shane

At least Timothy Geithner is showing a little spunk with his new shared equity plan. The government puts in effectively 93%, and the lucky bankers chosen put in just 7%. How does it work? Both the government and the bankers put in 7% equity, then the government lends the other 86%.

When the price of housing starts to rise, the properties can be sold off with the government reaping a 5 to 1 profit over the banks.

This might prick up a few reader’s ears. The government sharing in land based profits?

One of the biggest challenges to this plan is that the US has 800,000 homeless (Jan 08, not 09) but 19 million vacant houses. Admittedly, there are many many families taking up medium-term accommodation in motels throughout America, the so-called hidden homeless. But there is still an insufficient demand to buy these properties off the government, despite the tour buses of Chinese buying up $900 properties in good locations.

Now that the speculative splurge is over and Mr Ponzi has well and truly left the building, the time for the land market to correct itself could be years. This is especially so as Obama’s other priority is to pump prime the economy with infrastructure projects. This will act to increase the value of land, countering the need for mortgage payments to drop back to average trends.
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photo credit: zachstern

Thanks to the many links within Steve Spadijer’s well researched article on a Betterment Levy, we bring to your attention this insightful piece from Time Magazine 1973, The New American Land Rush:

On Maine’s Moosehead Lake—frigid in winter, plagued by black flies in summer—300 ft. of water frontage is selling for $30,000, or double the price of two years ago.

In Provo canyon, Utah, raw land near the Sundance ski resort fetched $3,750 an acre in 1966. Today it goes for as much as $13,000—even though zoning restrictions prevent some buyers from building anything.

Near Orlando, Fla., a grove owner sold 30 acres of land 15 miles from Disney World last spring for $285,000. Two weeks later the buyer resold it for $375,000. One week later a subdivision developer bought it for $525,000. Several months later the developer turned down an offer of $750,000 for the property, upon which he is now constructing apartments.

Read More and remember – the banksters bailout is transferring public money to private hands in reward for excessive gambling on sub-primers. There is nothing on the policy frontier that will eradicate such boom-busts from occurring again.

When will we start to re-imburse the largest polluters on this planet for all their ‘hard work’ creating cancers that we then have to pay exorbitant medical fees to fix up? The high rents young homeowners are being forced into paying for the majority of their working life are the financial corollary.

Gen Z – welcome to a risk subsidised future within the most uncertain climate on record!

photo credit: Roger Lynn

The Age today ramps up the property lobby’s annual war against contributing to society in Land tax hike to hit tenants

Knight Frank managing director Paul Burns said landlords had been complaining about their 2009 land tax bills, and agreed that tenants on net leases would be the first to cop the extra charges. But he said competition for tenants would eventually see landlords absorb the cost.

“New tenants come in and look at net rent, plus outgoings. Ultimately, it will pass on to the property owner.

Why shouldn’t landlords contribute something to government for the massive capital gains they have received over the last few years?

We agree that there should be yearly land valuations to avoid these bi-annual spats by the property lobby. It’s also fairer and can’t be too difficult in an era of modern software such as google earth.

We support a higher flatter, land tax. This will fund the removal of payroll and stamp duty taxes. This is part of the move towards supporting the productive economy and deterring speculation. Higher land taxes should be encouraged to remove the incentive for land speculation, the pressure that has pushed us all into so much debt and delivered the GFC. Without speculation, housing will be come a human right again. At present it is a speculative right.
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photo credit: Mike Licht, NotionsCapital.com

Michael Hudson

It may seem odd, but the public outrage against $135 million in AIG bonuses is a godsend to Wall Street, AID scoundrels included. How can the media be so preoccupied with the discovery that there is self-serving greed to be found in the financial sector? Every TV channel and every newspaper in the country, from right to left, have made these bonuses the lead story over the past two days.

What is wrong with this picture? Is there not something over-inflated about the outrage led most vociferously by Senator Charles Schumer and Rep. Barney Frank, the two leading shills for the bank giveaways over the past year? And does Pres. Obama perhaps find it convenient that finally, at long last, he has been able to criticize something that he believes Wall Street has done wrong? Even the Wall Street Journal has gotten into the act. The government’s takeover of AIG, it pointed out, “uses the firm as a conduit to bail out other institutions.” So much more greed is involved than just that of AIG employees. The firm owed much more to other players – abroad as well as on Wall Street – than the assets it had. That is what drove it to insolvency. And popular opposition has been rising to how Mr. Obama and Mr. McCain could have banded together to support the bailout that, in retrospect, amounts to trillions and trillions of dollars thrown “down the drain.” Not really down the drain at all, of course – but given to financial speculators on the winning “smart” side of AIG’s bad financial gambles.

“The Washington crowd wants to focus on bonuses because it aims public anger on private actors,” it accused in a March 17 editorial. But instead of explaining that the shift is away from Wall Street grabbers of a thousand times the amount of bonuses being contested, it blames its usual all-purpose bete noire: Congress. Where the right and left differ is just whom the public should be directing its anger at!

Read More at Global Research

photo credit: eb0la

Will the FHOG save the housing market? A new report raises fresh doubts:

THE Australian housing market is facing the prospect of a “perfect storm” of financial pressures, including high mortgage debt, overvalued homes and rising unemployment, which could see prices eventually fall by as much as 30 per cent, investors have been warned.

The propaganda storm is building to extend the FHOG beyond its’ scheduled finish. If everyone gets $14,000 then land and house prices go up at least $14,000.

Latest figures showed that $8 billion of new home loans were taken out at the end of January, of which a quarter were advanced to first-time buyers who are driving a mini-revival in sales at the lower end of the market.

That has prompted the Sydney Chamber of Commerce to press the Federal Government to extend the level of cash support to first-time buyers beyond the current June 30 cut-off point.

Check why the FHOG is subprime-like or gob smack yourself with this. We have to step up to save hundreds of young people from being sucker punched by entering the market just as it is about to fall.

Please note that last weekend’s auction clearance rates of 74% were on one tenth of the stock at auction compared to last year. Repeat – one tenth!

The mounting stock backlog withheld from the market will soon see a cascade of properties hit the market, perhaps as the run up to the June 30 deadline approaches.

photo credit: The Joy Of The Mundane

Perhaps the recent US stock market rally is in expectation of the new free lunch Helicopter Ben is preparing. The derivatives market is now in the Quadrillions. Apparently that is worth $199,000 for every human being on the entire planet. Staggering.

Keeping up with the backroom moves are tricky, but this article by Mike Whitney at Information Clearing House delivers some sharp tongued warnings:

Fed chief Ben Bernanke’s new funding facility is a real doozy. In fact, if the Term Asset-Backed Loan Facility or TALF, which is set to launch on Thursday, doesn’t convince the American people that it’s time to take a wrecking ball to the Central Bank and start over, than nothing will. Bernanke and his co-conspirator at Treasury, Timothy Geithner, are planning to revive the shadow banking system by dumping $2 trillion into the same over-leveraged, derivatives-based garbage that blew up the financial system in the first place. All the blabbering about a “good bank-bad bank” remedy appears to have been a diversion.

Money supply and tax reform

Fred Harrison answers the questions flowing from last week’s mammoth viral episode with Michael Hudson, of which over 22,000 viewers have seen the clip so far in just over a week.

photo credit: h.koppdelaney

Bryan Kavanagh (LVRG)

11 March 09
As published in the Age today (Business Opinion page)

“Put to the vote: as many are of the opinion that a public tax upon the land ought to be raised to defray the public charge, say ‘yea’… ”
“… Carried in the affirmative, none dissenting.”
- Philadelphia’s first tax law, 30 January 1693

The above wisdom is timeless, but today’s very sophisticated rent-seeker knows better. Before the property market peaked, he demanded that council rates and land taxes be wound back because prices had been escalating and he’d been ‘slugged’ badly. But as the real estate bubble bursts, he now says that property-based revenues need to be wound back, because people holding real estate have been ‘hurt’ enough already, and the last thing they need is property taxes causing any more ‘damage’. Property tax relief is necessary both on the upside and the downside, it seems.

The truth is that the public capture of publicly-generated land rent never does harm to society. To the contrary; it may be dawning on policymakers and analysts that the real estate bubble was the inevitable result of inadequate land value capture. They may even consider extending and fortifying council rates and State land taxes in order to prevent damaging real estate bubbles from developing again in the future.

Unlike the late 17th century Philadelphians, much of local government doesn’t appreciate the ingenuity of the reasoning behind the rating system by which it is mainly funded. Therefore, it often won’t defend it against those hostile ratepayers who attack it because they can. (Ratepayers are rarely to be seen knocking on the door of the federal treasurer, protesting against their income taxes!) Meanwhile, State governments reduce State land taxes, acceding to powerful landed interests whose property values must apparently be allowed to achieve nosebleed heights unfettered by land-based revenues.
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