Fuel prices in "free fall."

CNBC reported Friday that oil prices were in "free fall." (Observers will note that gasoline prices at the pump are falling also.) While the article cited many factors, the main reason for the decline is the economy:

But the big driver is the concern that the U.S. economy is not strong enough to withstand a weak European economy and slower growth in China. The disappointing April jobs report Friday, showing just 115,000 nonfarm payrolls were added, was the latest catalyst for a second day of heavy selling.

The federal government has printed (or "quantitatively eased" or whatever they are calling it now) trillions of dollars in the last several years. Fuel prices have more than doubled since January 2009. The printing press has not stopped, yet prices are now falling. For the price of a basic commodity to fall while the printing press runs amok is an extraordinary circumstance. At a certain point, even a runaway printing press cannot make people spend money. We should remember this lesson when we consider the effect of lower mortgage rates or new federal subsidies on the real estate market.

"Equity Stripping" scams on the decline

Real estate scams are apparently on the decline as the real estate bubble continues its collapse:

“Equity stripping is largely a thing of the past because there’s no equity to strip,” said [DOJ official] Perez.

“Equity stripping” is a scam where con-artists persuade confused or ill-prepared people to sign home-loan contracts that transfer the property rights. Victims — often old or ill-educated — are left without their homes, but with much new debt.

Instead of equity stripping, the con artists are moving to new areas, Perez said.

H/T Daily Caller

The collapse of the bubble has created a situation where, at least as far as real estate is concerned, there is nothing left to steal.

Housing prices at ten year low and unlikely to recover for a generation

Recent news on the national housing market has been uniformly negative. A recent Yahoo news article reported January housing prices hitting a ten year low.                                                                                                                                                        
                                                                                                                                                                A more recent Reuters article predicts no recovery for a generation:

The Housing market is likely to remain weak and may take a generation or more to rebound, Yale economics professor Robert Shiller told Reuters Insider on Tuesday.

Shiller, the co-creator of the Standard & Poor's/Case-Shiller home price index, said a weak labor market, high gas prices and a general sense of unease among consumers was outweighing low mortgage rates and would likely keep a lid on prices for the foreseeable future.                                                                                    

"I worry that we might not see a really major turnaround in our lifetimes," Shiller said. . . . . . He said suburban areas in particular might endure further price declines as high gas prices increase demand for "walkable cities."

While regions like Central Pennsylvania have seen more price stability, the long term stagnation throughout the economy shall have residual effects in this region.

Rent control to be argued before the Supreme Court?

While rent control laws do not affect Central Pennsylvania at this time, investors should take note of a New York case that may shortly be considered by the U.S. Supreme Court. An article by Professor Richard Epstein from earlier this year identifies a pending challenge to rent control in which the Supreme Court has invited responses from New York City and the tenants directly affected:

Supreme Court Justice Antonin Scalia exposed the deeply antidemocratic nature of rent control in Pennell v. City of San Jose (1988). If the government thinks some high social end is served by allowing tenants to sit on someone else's property in perpetuity, then it should use public funds, after democratic deliberation, to buy or lease the premises for market value which it can then lease out to particular tenants. The correct way to handle this issue, he wrote, is by "the distribution to such persons of funds raised from the public at large through taxes," and not to use "the occasion of rent regulation to establish a welfare program privately funded by" landlords.

Mr. Harmon's grievance should resonate on social as well as personal grounds. Rent control and rent stabilization are inimical to the long-term health of New York City. Ordinary tenants paying market rents contribute their fair share to the public treasury. By contrast, rent-controlled tenants on lifetime leases who have a specially privileged legal status are a constant drain on the community, discouraging investment in residential rental real estate by posing a persistent if inchoate threat of subjecting future properties to rent control.

Hoover Daily Report, 1-4-2012

Renting vs. buying

Reuters provides an interesting discussion of the benefits of renting vs. buying one's residence. The article makes a strong case that renting is a better long term strategy. We may have to face the unpleasant reality that the bursting of the real estate bubble has permanently changed the way Americans think about real estate and home ownership.

Record gasoline prices

Associated Press reports that gasoline prices "have never been higher this time of the year." Even though rising gasoline prices are obvious to everyone who cares to notice, this news is particularly disturbing to those who are counting on a recovery in the real estate market. Do not expect a recovery in real estate while the economy is crippled by record gasoline prices (unless you are thinking about an increasing number of tenants due to continually rising foreclosures).

NAR reports that housing sales overcounted since 2007.

A disturbing item from CNBC and the NAR indicates that housing sales have been overcounted for the past four years:

Data on sales of previously owned U.S. homes from 2007 through October this year will be revised down next week because of double counting, indicating a much weaker housing market than previously thought.

The National Association of Realtors said a benchmarking exercise had revealed that some properties were listed more than once, and in some instances, new home sales were also captured.

This information has implications for our understanding of inflation data over the past few years. It would appear that the collapse of the housing bubble was more severe than we originally believed, despite massive federal government spending to prop up the market.