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Hoffman's Predictions (Almost) Have All Come True - Article: The Housing Panic of 2009
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The Housing Panic of 2009
(before you lambast me, you might want to read my other articles on the Political Gateway front page. So far every prediction has come true up to the writing of this article)
Political Gateway December 26th, 2008 - These are predictions of what I see coming our way in the year 2009 and part of 2010. On my site, Political Gateway, you can find past articles with economic and political predictions going to 2015. This article primarily focuses on the rental boom/crash, although other predictions are listed also.
This is a very complex issue and is intertwined with so many other issues, it is hard to just concentrate on the rental aspect.
What is a Housing Panic?
A housing panic is in effect for you and your family when a situation demands you move from your current home, either in a very short time or immediately. A housing panic means you need to drop everything else in life and deal with the emergency of finding a place to live, a home. A housing panic will be an 'any means necessary' event in your life to provide shelter for your family.
Anatomy of a housing panic, the rental boom and bust
The year 2009 will see a record number of residential foreclosures. Most of these foreclosures are of investment properties rented to families. 2008 has seen a huge slump in the number of new homes or apartments being built. These two things will lead to the Housing Panic of 2009.
The record number of foreclosures will mean many millions of families are going to be forced to leave their rentals by the action. Each home foreclosed is one less home available for rent and one more family looking for a home. Coupled with the slowdown of new homes not built, the demand for rentals will far outstrip the supply.
Although foreclosures can be sold, it takes time to find a buyer and to make it ready to rent. The massive number of foreclosures will far outpace the investors buying them.
Add on top of this the massive layoffs expected in all sectors in 2009, the prospect for renters to become buyers is not good. This leaves probably 10s of millions of people who will have to move to a rental in the next 12 months.
The Panic sets in
In the case of a foreclosure, a family is forced to move very quickly. Some may get a warning, some may get a 3 day notice, some will come home to find their belongings sitting in the rain or snow. This forces a family to a position of panic. They must, at all costs provide a roof for their family and a place to store their belongings.
Millions of panicked families needing a rental on short notice, even that day, coupled with an ever decreasing supply of homes to rent means only one thing. It means rental prices will skyrocket. A family in peril will do all that it can do to survive. That family will spend savings, will cash in stocks, will even outbid anyone else to get a roof over their kids heads.
Greed brought us to the housing boom, Lender’s greed fueling investor’s greed. Now, the greed will rear its ugly head in the rental panic and cause a rental boom. Rents will rocket and owners will get picky on who their tenants are. Large deposits, huge rent increases. It is not hard to imagine rentals in large urban ‘housing boom’ areas to go 2 to 4 times normal rent.
The REO boom begins
During this time, investors will see this as a time to buy the foreclosed properties. Investors will see high enough rental prices to cover the over priced foreclosures. Lenders, finally emptying the coffers of the Treasury and no longer needing to be nice to anyone, will see this as an opportunity to increase foreclosure sales so they can flip them to the investors. This will be the REO boom. An REO is ‘Real Estate Owned’ by the bank.
Alternative housing booms begin
Also during this time, alternative housing will be the only recourse for those without large savings or great jobs. Alternative housing can range from sleeping in one’s office, getting a camper or large vehicle and sleeping in a campground area, or even renting a Motorhome.
Additional alternative housing will be renting of people’s yards to camp out or park a motor home or vehicle in. Increases in homelessness will be quite shocking in urban areas. Manufactured homes (mobile homes) will become a savior to many and there will be a Boom in sales. FEMA trailers may rear their ugly heads at this time and be sold to investors. These investors will set up land in urban areas for people to live in those trailers. Due to the horrid landlords, the costs, and the neglect of regulation of these FEMA trailer parks, people will call them ‘Obamavilles’ as Obama is the President and he let the FEMA trailer problem happen. He should have let them be used for free.
Storage Boom begins
Also during this time, storage units will be at 100%. Moving trucks will be impossible to find. Moving, storage, and truck rental companies will become draconian. They will not give anyone a break and you can expect many people to lose their belongings to these companies. From this you can expect some retaliation in the form of shootings, arson, or other mayhem from people who have lost everything.
The Rental Crash ends the Housing Boom
By the end of the year, enough REOs will be flipped to investors to be able to flood the market with rentals. This amount of available homes, the use of all the alternative housing, and people moving to other more rural areas will cause a great rental price crash.
The rental price crash will bring the REO investors to reality when rents no longer pay their mortages. It will also signal the end of this last bubble of real estate in this era and the final fall to reality of even the most optimistic ‘expert’. The housing boom will now end as prices crash to the ground.
Foreclosure boom, again?
The investors who bought those REOs will now be facing foreclosure as people default on the unscrupulous rents. As a tie in to the commercial property bust that will be happening, apartment complexes that raised rents will pay that price and face extreme duress and in some cases violence. People will become squatters as they are unable to pay 3x or 4x normal rents and stop paying.
The 'Un-evictable' Era
Investors who had homes not in duress will find them heading there as the renters stop paying. They got greedy and overcharged for rentals during a depression and will now pay the price. During this time the courts will be slammed with foreclosure and rental eviction claims causing a simple eviction to last 6 months or more. Each tenant will realize they have rights too and the courts will find the landlords never followed the law with respect to the deposits or other simple matters.
And so it finally ends
By the end of the year, the housing panic will be mostly over as people get somewhat settled in and, as a nation, very mobile and ready to move if they have too. The housing market will finally bottom as will the rental market. If you want to buy a home, the end of 2009 might be the time to 'think about looking'. Just wait til the bust is over. Not sure when it is over? Then it is not over. You will know when it really ends.
Other aspects of the rental boom/bust
It is easy to see urban housing boom areas affected more than rural in the rental boom, but as in the housing boom people tended to fan out to the areas outside of those big boom counties. That increased prices everywhere and a rental boom should not be much different.
Zoning codes will make some people become criminals just to sleep with a roof over their heads. This will cause our jails, already over populated, to just be ridiculously filled. There is no need to do this, but you elected your local officials and now we all pay the piper for electing politicians and not leaders. Expect code and zoning violations to be straws on the camel to most people.
Although you may feel fine where you are, your neighborhood could soon have many homes with 10 to 20 people living there. Mostly poor folk too, many out of work. Do you feel safe now?
There should be many booms in all fields regarding storage, moving, temporary housing, etc and they will all crash. This comes with boom scammers too. Be wary, never use cash, ever.
Commercial properties that are hardest hit are the small office buildings. These small offices will be perfect places to store home belongings and even stay in to live. This will just be a reprieve for the investors and a nightmare for renters as the law does not protect them in this type of use of office space.
Animals will be massacred. We kill about 6 million cats and dogs a year in our county shelters. With 10s of millions of displaced families and landlords who refuse pets, you can expect millions of animals abandoned to die in the streets or starve, and many more just dropped off at a county shelter to be killed. I am talking MILLIONS of them. Millions of strays will be heading to die in the shelters too. People who breed animals will just kill them as their business dies. We are a great race of people, aren't we?
What we can do about preventing this
I doubt you are reading this back in 2008 when I wrote it, so it probably already happened. So not much can be done now. There are many things that could help, but I think I am the only one in the universe seeing this coming. Either I am crazy or we are all gonna be blindsided. Not much to do if no one sees the iceberg.
If anyone really wants to know, get me on your radio show or let me talk to your elected official. Otherwise just protect your family as best you can.
Other predictions of 2009
Gold, silver
As in my April 2008 article I said there would be a boom followed by a bust. Right now it appears that boom is about to happen. Companies have been buying gold for the last year and now you see the media starting to really say 'gold to 1200!! gold to 2000!!'. You see the ads to sell your gold, now you will start seeing the ones to allow you to buy it. When you hear the words 'hedge against inflation,' run from gold and silver as fast as you can.
This is a very manipulative time in business and with the Fed dropping rates to zero, and the dollar falling as a result, you can see how this walks us right into a gold boom. By April this should be over and gold will be at 100 to 200 an ounce and silver around 5 an ounce. This should be a quick boom and a very hard bust.
Adding to the continual move from one boom to another, the gold rush people will move their money into the 'real estate' boom of 2009 discussed earlier in this article. Please wake me up when this is over.
Oil
Its over, the drilling rights are set up to be used and the land and ocean areas already bid on and sold. The only remaining thing to see is if the new President and congress will stop it. If they try to, you will see oil spike. Other than that oil is done and will start sliding to the 20 dollar and stay there for a while.
Stock Market
We are ending an era that is made up of many things. Since 1995, there was heavy manipulation, mass speculation, massive overall push to use credit instead of cash, and our usual politicians who are elected by the media and business interests. Add all these up and you can see the market start to rocket around 1995.
I would say the credit standard is about to crash. It is the one over riding boom that has held up all these other booms and busts. As people resort to cash and barter, maybe force congress to write credit laws that make sense, and the obvious ramifications of the housing crashes, you can see credit is about to finally go too.
The market was around 4 or 5 thousand back then. Credit became king in the mid 90s and really started going up with the age of the internet. I would say if this credit theory holds water, then the Market would have to crash down to the 5000 mark or close to it.
Into this, you must look at the rental, housing, and commercial property crashes of 2009 as harbingers of people pulling money out of the markets en masse. That should show even more corruption in big business and bring down some invalid business types.
The Fed
They will finally have to raise rates. When they do the chips will start falling where they will. Nothing you can do but hold on, it will be ugly.
Unions
The fight will get worse to attack unions as listed in my October article.
Update: January 9th, 2009 - I gotta add, that although the DOW hitting 5000 is predicted, I really get a feeling that a drop to the early 90s price of around 3,000 may be the full bottom, a full 80% drop from the high in Oct 2007. I think of it as a fall through 'the floor' to 3000 and then come back up to 5000. I guess I would say 'the potential for a full fall past 5000 to 3000 is highly likely' and that should be the bottom. Buy at 3000 I guess...just make sure the company will be there the next week first.
http://www.politicalgateway.com/news/read/173347
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Peace!
