• Welcome to AppraisersForum.com, the premier online community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Housing Bubble Bursting?

Status
Not open for further replies.
Austin said:
Answer: Inflation.

Two morning stories"
Vultures Are Circling Over Distressed Properties...
http://www.washingtonpost.com/wp-dyn/content/article/2007/10/19/AR2007101901089.html


[FONT=&quot]DC area sees slowest home sales in more than decade...[/FONT]

http://www.washingtontimes.com/article/20071019/HOME/110190016/1019
Click to expand...
Yes, inflation is happening but not all assets will participate at the same rate or during the same time frame. Money appears to be flowing into the world equity markets. Money is not readily available for asset backed securities other than government guaranteed.

To go along with your stories (above links), last night I was watching late night TV and along comes the commercial for auction homes, directly from lenders. SoCal is having a bonanza of homes offered at auction. The trouble is, not many are selling. Investors are demanding huge discounts, more than 60% from the last purchase price. There is no incentive to step up to the plate at this time.

Auction companies are sponsoring seminars to teach would be investors on how to make money buying and selling real estate.
 
Don't look now, the FED is lending to European banks again

Barclays and RBS line up Fed for £15bn


Barclays and Royal Bank of Scotland have lined up emergency funds of up to $30bn (£15bn) from the US Federal Reserve to bail out American clients caught up in the global credit crunch.

The Fed's board of governors wrote to both banks 10 days ago, granting them access to funds for customers "in need of short-term liquidity".

The letter to RBS made particular reference to investors holding mortgage-backed securities – which have been at the centre of the sub-prime crisis.

The request from the two banks is a stark reminder that the global liquidity freeze is far from over.

It is similar to those offered to Citigroup, Bank of America, JPMorgan Chase and Deutsche Bank at the height of the credit crunch.

Barclays has been given permission to borrow up to $20bn through the facility, while RBS can borrow up to $10bn. The banks would have to put up assets as collateral with the Fed to gain access to the cash. A spokesman for Barclays Capital said: "This secures another potential source of funding should our US clients seek it."

The move comes after a handful of Wall Street banks established a $75bn bail-out fund to buy assets from cash-strapped structured investment vehicles.

The US Treasury has backed the scheme, which it believes will prevent SIVs from being forced into selling good quality assets in order to stay afloat – which would run the risk of a fresh bout of contagion in global markets.
Click to expand...
Money, money, money, money,
Money, money, money, money,
Get a little, get a little,
Money, money, money, money,
Mark, a yen, a buck or a pound,

Money makes the world go around,
the world go around, the world go around,
Money makes the world go around,
it makes the world go round.
A mark, a yen, a buck or a pound,
a buck or a pound, a buck or a pound,
Is all that makes the world go around,
that clinking clanking sound,
Can make the world go round.
 
http://www.ft.com/cms/s/0/7c453090-7ff7-11dc-b075-0000779fd2ac.htmlUS loan default problems widen

By Ben White in New York
Published: October 21 2007 19:21 | Last updated: October 21 2007 19:21

Poor quarterly results from banks across the US over the past two weeks suggest credit problems once confined to high-risk mortgage borrowers are spreading across the consumer landscape, posing new risks to the economy and weighing heavily on the markets.
US banks have raised reserves for loan losses by at least $6bn over the second quarter and by even larger amounts from last year, indicating financial executives believe consumers will be increasingly unable to make payments on a variety of loans.
Banks are adding to reserves not just for defaults on mortgages, but also on home equity loans, car loans and credit cards.
“What started out merely as a subprime problem has expanded more broadly in the mortgage space and problems are getting worse at a faster pace than many had expected,” said Michael Mayo, Deutsche Bank analyst.



The plot thickens.
 
Last edited:
Austin - those are hilarious...if they weren't so close to the truth..
 
Couch Potato said:
Because general inflation and devaluation of the dollar will cover the rest of the discrepancy. (See Austin's last post for links to an excellent explanation of how things work. :rof: )
Click to expand...
I didn’t see anything in that article indicating that housing decline is going to slow down. It shows that the default and foreclosure will increase and will impact not only the housing and financial market but the whole economy so in that case, the CA home prices should decline 40% as the Goldman says not 4% that CAR says and that was my point.
 
Moh: I have really gotten a new education as a result of this crisis. Here is how to answer your question as to 4% or 40% value decline:

Here is the way the financial markets works, much like our health system that is the next looming crisis. You create a huge pool of funds. To protect the weak and vulnerable who can't stand alone from destruction by just blending in the loses into the pool, that way no one goes under and all share the loss. Every time there is a loser the pool is further diluted thus lowering the quality and raising the risk and profitability. Just like health insurance; take a pool of people with a healthy life style, insert a populations of people with a filthy life style and the pool absorbs the losses. In other words, the healthy people pay for the high riskers. That is why health insurance is so high and why interest rates are going through the roof, either that or inflation.

The problem with this is that it encourages risk and people to do stupid things, after all-heads we win, tailes the pool loses. m: That explains the 4% versus 40% value decline. If left to their own devices the market would decline 40% but the powers that be will not let that happen, they will just let the pool take the loss and prop up the market with a 4% decline.

PS: The water in the pool is so poluted at the moment that that we no longer can see the bottom. The pool in this instances is the collective value of our retirement system. :fiddle:

PS: Speaking of pools-would any one like to make book on how that fire in California started? I watched a house lterally explode last night. Went up as if had been soaked in gasoline. 100 high dollar homes on Lake Arrowheat, all burned to the ground. :new_all_coholic:
 
Last edited:
If I may interject, the problem is not the concept of sharing risk per say, it is the failure to adequately quantify the inherent risk in a particular pool.

This failure is often on purpose. As it pertains to the financial markets, there is intense pressure to minimize or ignore bad news. Bad news has a habit of spreading from company to company, sector to sector; better to keep it all away.

Market participants make lots of money when all news is rosy and and the status quo maintained. In theory, all these good times trickle down to Main Street.

This rosey outlook phenomena can be found in many arenas outside the financial markets too. It's scary looking at the tiger coming at you, better to look at the pretty mountains in the other direction.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at AppraiserSites.com
Back
Top