Goldtent TA Paradise

LUONGO ON CALIFORNIA’S “PANIC” MOVE TO PAY 20% DOWNPAYMENTS ON HOMES

1. pedro_deleon says:

   April 11, 2023 - 1:40 pm at 1:40 pm

   paywalled, yes.

2. Fullgoldcrown says:

   April 11, 2023 - 2:30 pm at 2:30 pm

   https://www.zerohedge.com/personal-finance/california-front-20-down-payments-0-interest-homebuyers-incomes-211000

   Morning Munchings: The Responses to the End of ZIRP
   ZIRP is dead. The Pivoteers, as Danielle Dimartino Booth puts it, refuse to accept this. Treasury Sec. Janet Yellen is fighting tooth and claw to reinstate it and is working against the Federal Reserve to make this happen.

   The above-linked story from Zerohedge about California should be considered one of these attempts by Yellen and her Davos cronies to stave off the collapse of our “E of the Pacific,” which is now in full effect with Jerome Powell pushing rates to 5% and having all the ammunition he needs now to go to 6%.

   The net migration out of California has only just begun. The San Francisco Fed has run cover for Silicon Valley and the Dept. of Defense for decades and because of the giant sucking sound of global capital into that area of the world built the fantasyland we have there today.

   California’s state government is living on borrowed time, literally. With Powell specifically going after San Francisco-based banks like Silicon Valley Bank and Signature Bank we have to assume now that the exodus out of California for not only ideological reasons but real economic ones will only accelerate from here.

   This is why the idea of the state subsidizing mortgage down payments is hysterical. This is literally a wealth transfer from the people through their tax burden to the banks by paying the down payments to bribe people not to leave the state.

   Even worse is this little ditty:

   While the state has long-offered homebuyer assistance through the state’s Housing Finance Agency (Cal HFA), a new program, the California Dream For All Shared Appreciation Loan program will give the state a proportionate interest in the property they’re helping with, according to KPBS.
   So, not only is this a bribe to stay in California to keep property prices from collapsing, it’s a way for the state to own a piece of your home, furthering the Commie dream of public ownership of everything.

   The state will not only get their down payment back when you sell, they’ll also get 20% of the appreciation as well. So, it’s not even a zero-percent loan, it’s a spec bet on home price appreciation.

   If passed it will turn the entire California property market into a gambling casino that will only stabilize the market for a few years and then the whole thing will come crashing down.

   The idea is to make mortgage rates attractive enough to outcompete the rest of the country. But this is a pure desperation move. It’s also another way to re-implement ZIRP by writing down 20% of a new home sale price to zero-percent.

   Here everyone! You too can have an ultra-jumbo loan at a subsidized rate, which either lowers your effective rate by a point or two or inflates housing prices by a quick 20% because the government is footing the bill.

   The new home owner will lose because he assessed value will go up, which means property taxes will go up offsetting much of the ‘savings’ and the whole thing just spirals out of control.

   And remember, if they do this and this is successful, it depresses the housing market in the states people were fleeing to, leaving the price differential in place if not making it worse.

   This will be one of those very typical stupid shitlib/commie programs that whoever gets into it first will be the big winners, scooping up properties at today’s prices, watching them pump up by 20% because of the subsidy and then they’ll dump them into the market for a quick flip (likely within a year to avoid the property taxes), take the 16% gain and then still go and buy a new place in Tennessee or Alabama or North Florida.

   Remember, with Homestead exemption here in Florida, the state can’t raise your assessed value by more than 3% per year unless you put on additional square footage. So, this is like locking in real savings every year if you expect greater than 3% price appreciation.

   What this program really is welfare for a banking system in California that is rapidly getting drained of reserves because of migration by not only individuals but also companies.

   Remember the lesson of FTX, which was that it was a Ponzi Hoover designed to suck up the cash in the ‘crypto-space’ and issue valueless magic beans like FTT as reserves. Well, what do you think this program is?

   It’s a way to push cash back into the California banking system shocked by the collapse of SVB and the constant drain out of the economy by the rollover in housing prices. Do you think this cash will stay in those banks? No, it’ll be used to cover their asses in the collapsing Commercial Real Estate markets as well.

   This is just another attempt to blow up a credit Ponzi scheme in California housing in a lame attempt to remain solvent with a massive shift in the cost of capital.

   It’s always California that is the problem folks, which comes right back to my criticisms of the centralization of the Fed by FDR, doing away with regional lending rates. This subsidized the growth of California by allowing it to attract capital at lower rates than they would have in a free market for money than other regions of the country.

   So, is anyone shocked that the Davos-controlled California Mafiosi would try to force a pivot back to the zero-bound? No, we shouldn’t be.

   The US was the test bed for this policy using California as the capital Hoover, building a fake economy built on fake money and fake dreams to fund fake businesses building a fake culture.

   It only went into overdrive with Yellen’s extension of ZIRP beyond all rationality.

   In the EU Germany has been their California with the ECB setting the rate for Europe and creating this internalized mercantilism which sucked capital into Germany at the expense of the so-called PIIGS.

   Have you ever noticed how shitlibs and Democrats always argue that California has the moral high ground because the Blue States pay net income taxes to the poorer Red States? This is a constructed talking point that is no different than the Germans calling the Mediterranean countries Club Med and deadbeats.

   It was a designed policy to concentrate wealth and political power through interest rate arbitrage.

   This is what I think is so important about what’s happening with Powell and the Fed right now. New York is telling San Francisco that the party is over, the punch bowl is empty, and we’re moving it to a new location.