Mainstream Media & Recovery Hallucinations

April 28, 2011

By John Titus
Two mainstream media stories today reflect the insanely dogmatic belief among hopium dopers that the partially decayed cadaver known as the U.S. housing market somehow indicates that a housing “recovery” is underway. Let’s compare the evidence to the headlines. 
First, the Chicago Tribune’s "By Zip Code: Little Growth in Home Prices" leads off with a quote from that most panglossian of job-holders, a realtor:
"My office should be like a deli counter with people taking numbers," Carlson said. " I would say people are in a wait-and-see mode. I think there's a recovery path here."
The recovery quote is wholly at odds with every single datum presented in the article, which notes that despite greasing the housing market skids with two years of federal homebuyer credits and ultra-low 4.8% 30-year mortgage rates…
• national home prices are down 7% from a year ago, with homes Schaumberg’s 60193 ZIP code taking a 21% tumble;
• foreclosure sales and short sales account for a staggering 35% of all sales nationally and 39% in Chicagoland; and
• one would-be seller in Homer Glen failed to dump his house when the only offer since last Fall on his $440,000 asking price was $370,000.
The data merely underscore the outright collapse in the American housing market, which will take decades to return to its 2005-06 levels. And yet a recovery porn fluffer in the real estate industry sees “a recovery path here”—and gets quoted in a major national newspaper.
I knew a heroin addict who once ingested a massive quantity of bromo-mescaline. His description of the resulting hallucination was frighteningly similar to this vomitatious dreamscape - but at least it wasn’t as ridiculous as describing the world’s biggest real estate implosion as “a recovery path.” 
That ought to give you some sense for the brain trauma caused by the giant syringe that has passed around among mainstream economic reporters for the last two years.
Second, CNBC's headline, "Four Years Later, Housing Market Shows Signs of Life" attempts to convince readers of a broad-based housing recovery by fingering a most curious demographic: the mega-rich. The article leads off with the story of a Chicago commodities trader who just bought a $1.2 million house and avoided a jumbo loan—by making a down payment of $500,000.
However, no story of subsidized mega-rich hot spots would be complete without lavishing attention on the new welfare capital of the world, Wall Street, and here the CNBC piece excels. We learn that sales of $10 million-plus luxury Manhattan co-ops have doubled in the first three months of 2011 over a year ago, at least for one property firm.
The article then lurches out into Wall Street suburbs of the rich and infamous with a slide show, "Where the Rich are Moving," which includes Rye, NY; Greenwich, CT; Scarsdale, NY; Darien, CT; New Canaan, CT; and Short Hills, NJ. Home prices in these places, like New York City, are staggeringly unaffordable for all but the financial elites.
That New York City might be experiencing—unlike the rest of the United States—a rebound in real estate prices comes as a surprise to no one who has kept up with that most visible metric of modern corporate welfare, Wall Street bonuses: $22.5 billion for 2009 (when Congress legalized accounting fraud by letting Wall Street firms price totally illiquid assets at whatever valuation they want to, rather than at their market price.  In 2010, it was 20.8 billion (when the SEC didn't even flinch when not one but four Wall Street welfare queens disclosed what, absent systematic theft is statistically impossible: winning trading days for an entire quarter. 
So New York City’s housing market reflects not one but two massive frauds, as well as one fraud derivative. First, there are toxic “assets” that are valued at price levels having no connection at all to reality. Second, there is the systematic shearing of Main Street by a handful of Wall Street firms, who get to front-run retail investors/suckers with co-located computers and flash orders. Trading is now an asymmetrical poker game—Wall Street plays cards face down, retail investors and pension funds play cards face up. In its true light, Wall Street’s winning streak is easy to explain: the financial authorities let them cheat every day.
Finally, there are the colossal bonuses that Wall Street rewards itself with for using trillions of dollars in bailout money to make these frauds possible in the first place. In short, New York City house prices are supported by purloined mountain ranges of $100 bills.
But don’t try introducing any New Yorkers to reality. They bristle when questioned about the source of their city’s wealth. I’ve given the  “Bailout” pitch—five friends stop paying mortgage to bailed-out banks and head for Vegas with the money—to people in at least 20 American towns. In nineteen, the response was the same:
“awesome.” The New Yorkers were, by contrast and in the words of one catcher there, “mortified.”
We must be onto something. But a housing rebound—unless you’re close enough to snatch crumbs from the great Wall Street Welfare Table, or stupid enough to take mainstream media economic reporting at face value—isn’t it.