Housing Bubble Bursting?

[Terrel L. Shields]

Jan. 24 (Bloomberg) -- Sales of existing homes in the U.S. fell more than forecast.....sales of single-family homes declined 13 percent, the most since 1982, and prices dropped for the first time in at least four decades.

Why does Santora keep questioning if we are in a declining market if both price and volume "fell / dropped"? This isn't merely local, although there are pockets where there is no decline, its somewhere in every state in the union.

 

[Riick]

"Brother, Can You Spare a Billion?"

"Buy some Beans & Ammo" -- Starting to think this may be good advice
Click above to see what Mauldin has to say today,
.........and this guy has --since I began reading him in 2000-- always been very positive/conservative in his outlook!

 

[Big ole Boy]

Saturday night - Coast to Coast AM

TOnight in the first hour Catherine Austin Fitts will be on the radio ...... about the economic outlook ...... if you have the chance to listen .... I think you will appreciate ....... some deeper perspective on our situation ....

she comes on Live at 1:00 I beleive .....

 

[Randolph Kinney]

Why does Santora keep questioning if we are in a declining market if both price and volume "fell / dropped"? This isn't merely local, although there are pockets where there is no decline, its somewhere in every state in the union.

Maybe a perception problem?

If you are up close looking into a bowl of oatmeal and raisins, you see a raisin surrounded by oatmeal.

If you stand back and look into the bowl of oatmeal, you see many many raisins separated by thin boundaries of oatmeal.

At what point does one characterize the problem as a raisin surrounded by oatmeal versus oatmeal over loaded with raisins?

Santora is looking at the micro markets that are stable or increasing saying what problem?

 

[Randolph Kinney]

Winners and losers of the stimulus plan

See full Stanford report.

Nineteen metropolitan areas are likely to notice a direct impact from an increase in conforming loan limits included in the proposed economic stimulus plan, according to a Washington-based policy research firm.

The proposal, discussed by House Financial Services Committee Chairman Barney Frank (D-Mass.) this week, permits Fannie Mae and Freddie Mac to securitize mortgages up to 125% of the local median home price, according to the research firm. The limit is capped at $729,750.

 

[JSmith43]

I don't see it as a classic recession, but rather a classic bubble. And Austin saw it well before it peaked. I, too, think that in a highly computerized mobile society, these events are very compressed compared to decades ago. And Austin's suggestion that

makes sense to me. The government is responsible for this. First, by deregulating and unleashing the mortgage industry much in the fashion they did in the 1980's. Deregulate a long regulated industry and predicatably you get fraud, over-lending, and a crisis. We just repeated the same mistake we made in 1980's with deregulation of the S & L's. The S & L is now called a "Savings Bank"...I call them a "Spending Bank" as they lent excessively and buyers went on a drunken spree only to sober up when the payments come due.

I have to quibble with you on the presumption that the S & L's were deregulated. Regulation was built into their charter. Handcuffed they were, with the mandate to loan on residential real estate (long term loans) using short term funds. The bait to attract investors deposits to this potential folly during sustained periods of inverted yield curve: Government insurance of deposits, of course.

The business plan, set in stone by government had fatal flaws built in, but the deposit insurance (Govt) shorted out normal corrective action by market participants because it shielded investors from risk. Thus, minimal due diligence on the part of the investors. Regulators were stuck with the genetic Govt mandates of the S & L "profit model", and had no way to win, even if regulation was swift and efficient.

 

[MARK JOLLIFF]

"Buy some Beans & Ammo" -- Starting to think this may be good advice
Click above to see what Mauldin has to say today,
.........and this guy has --since I began reading him in 2000-- always been very positive/conservative in his outlook!

Thank You! I love reading Mauldin. I was on the phone with a buddy this morning and we were talking about the economy. he just started a new job at 40k a year after losing his house and last job. 40k a year in the Bay Area is poverty wages practically speaking. At one point in the conversation he said " I aint spending sh**". I told him that he just uttered the words that scare the Fed the most. Everyone I talk to is hunkering down. I am prepared and stocked with beans and ammo. Buy gold, short the market and enjoy life! Good luck!

 

[Terrel L. Shields]

Mentor
If I recall "Liar's Poker", a book about Wall St. shenanigans, one of the main points he made was that the S & L's were regulated lambs heading to a deregulated slaughter mainly by the big investment banks of Wall St. They were deregulated but didn't know what that meant....its like 'free enterprise'. It hasn't been "free" for a hundred years but the politicans and Wall St. insiders would like to make the average Joe think that.

Of course, Wall St. is good at that. Today no one would associate the Conoco Triangle with a man named Marland. The Marland Oil Co. symbol was the familar Conoco Triangle. The old Contenential Oil Co. of Denver was J. P. Morgans tiny oil company in the late 20's. Marland worked a deal with J. P. Morgan to finance his oil company with shares of stock. Within weeks Morgan took control of the Marland board, and stole the company from Marland and merged it with Continential. Marland ended his days living in the carriage house on his old mansion estate. He thought he was borrowing money from Morgan. He was selling the company for pennies on the dollar instead.

 

[JSmith43]

Terrel,

I like Milton Friedman's treatment of the S & L crisis, but the greatest belly laugh of all will come from reading the treatment the issue gets in the book, Parliament of *****s, by the political humorist, P.J. O'Rourke.

Liar's Poker sounds like an interesting read.

Yes, we can agree that "free enterprise" comes in shades of grey. But the S & L's were hobbled by a mandated game plan and only got government de-hobbling. They got shot in the other foot so that they limped more equally.

They didn't have the expertise to go wandering into the commercial sector, especially, getting that right only to enjoy the tax act of '87 with the passive income changes. Yanked back hard, were the swell tax write off schemes.

Great at market timing, those regulators. If they did a feasibility study, they might have figured out that the S & L's should have put gourmet coffee shops and Mac computers and laser printers in every lobby. F the SF home loans! We're talking a new brand of Kinkos merged with Starbucks and internet cafe that takes deposits and makes computer and car loans....maybe some regulatory relief like that enjoyed by credit unions.

 

[Randolph Kinney]

Raising the mortgage caps may not be the answer

Reality Check on Raising Mortgage Caps

"Without stated income for wage earners, it’s tough to qualify for a $700,000 loan.'' -- Is this move mostly cosmetic on the part of politicos? Probably. To loosen the market, the government would need to do more than securitize these mortgages: it'd have to guarantee them.

The reality is:
–New borrowers still have to qualify. Fannie/Freddie is full doc only primarily.
–Without stated income for wage earners, it’s tough to qualify for a $700,000 loan.
–In 2005 to 2007, 70% of all jumbos were stated income for a reason: Ninety percent of all stated income borrowers lied about their income to qualify.
–Refi’s will still have trouble due to values dropping in jumbo areas by such a large amount. These are the ones that really need the help.
-This loan limit raise definitely will not help all the lenders with all the old vintage trash loans on their books.