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Sun

14

Jan

2007

Housing Bubble Bloodbath
Sunday, 14 January 2007 10:49
by Mike Whitney

“The crash of the housing bubble will not be pretty. Millions of people stand to lose their homes and life savings. However, it was inevitable. The bubble created a fantasy world that could not continue. At the peak of the bubble, 160,000 people a week were buying a home, most at bubble inflated prices. The longer the bubble persists, the larger the group of people who paid way too much for their home. While it is not good that so many dreams had to be ruined, the number will be even larger if the bubble deflates slowly. So I make no apologies about hoping for the hasty demise of the bubble.”

Dean Baker, “Slow Motion Train Wreck” The American Prospect, Aug 2, 2006

“No question about it, the housing downturn is here now, and it’s big.” Jim Hamilton “New Home Sales continue to Fall”, Econbrowser Aug 25, 2006

I wonder if Alan Greenspan takes a copy of the business page along with him on the chair-lift at the Aspen, so he can read about the plummeting housing market before swooshing down the well-groomed bunny-slopes at his favorite ski resort. After all, no one played a larger role in inflating (what the “Economist” called) the “biggest equity bubble in history” than the retired Fed-master. His low interest-rate bonanza triggered a stampede of speculation in the real estate market sending prices through the stratosphere and setting the stage for the biggest economic bust in American history.

The whole catastrophe was cooked up Sir Alan and his coterie of brandy-drooling elites at the Federal Reserve.

Thanks, guys.

Greenspan has undoubtedly taken note of the sudden spike in foreclosures which have set off alarm bells from Wall Street to the American heartland. The effects of his “cheap money” policies are finally sending tremors through America’s fragile economic landscape. In September, 2006 the US Foreclosure Market Report released a statement that over 112,000 homes had entered some stage of foreclosure “a 63% increase from September 2005!?! September was the second straight month in which more than 110,000 new foreclosure filings were reported nationwide, evidence that the spike in August was not just a one-month anomaly.”

No, it is not a “one-month anomaly” and it is bound to get considerably worse as $1 trillion of ARMs (Adjustable Rate Mortgages) reset in 2007. The rising foreclosure numbers are the result of rising monthly payments on the new-fangled loans which have low introductory interest rates, but can unexpectedly double after a two or three year period.

Imagine mortgage payments that suddenly jump from $1,300 per month to more than $2,000 on a $129,000 house. That’s what many people will be facing in 2007 when their loans reset and they are suddenly forced out of their homes and onto the streets.

The housing bubble is actually an extension of the stock market bubble; Greenspan’s earlier swindle which cost American investors $7 trillion in retirement and life-savings. Both equity balloons can be attributed to the shabby and exploitative monetary policies of the Federal Reserve. By expanding credit and money supply via low interest rates, the Fed has kept the economy whirring along creating the impression of prosperity when it’s all just smoke and mirrors. America’s opulence is built on a mountain of debt that’s piled a mile high. Regrettably, that mountain is about to cascade-down on the American people sometime in 2007-2008. There’ll be no escaping the fallout from the $4.5 trillion dollars of new mortgage debt that’s built up in the last 7 years. By the end of 2007 we should be able to identify many of the painful trends that accompany a deep recession; prices of homes will steeply decline, GDP will fall, and Greenspan’s mighty Temple of Debt will crash to earth.

Don’t believe me?

The New York Times reported last week that “about 2.2 million borrowers that took out sub-prime loans from 1998 to 2006 are likely to lose their homes”. That translates into about 10 million people! But that, of course, is just the beginning of the bloodbath. The real fun begins when the whole, ugly ball-o-corruption starts to unwind and we get an insider’s-view of a system that is rotten to the marrow. The housing industry is saturated with fraud; the banks, the mortgage lenders, the Fed and the homeowners themselves have all played a major role in this sordid confidence game.

Consider this, for example:

In 2006 the Mortgage Brokers Association for Responsible Lending (MBARL) said that “Liar’s Loans” (those based on what you TELL the bank you are earning, rather than what you are REALLY earning) “shot up to an estimated 62% of mortgage originations…A recent sampling of 100 stated income loans by an auditing firm in Virginia (based on IRS records) found that 90% of the income statements were exaggerated by 5% or more, WHILE ALMOST 60% OF THE STATED AMOUNTS WERE EXAGGERATED BY MORE THAN 50%”!?! (Dan Dorfman New York Sun)

Are you kidding me? A majority of loan applicants are grossly exaggerating their income and the banks are handing out hundreds of thousands of dollars WITHOUT EVEN CROSS-CHECKING IRS STATEMENTS?

It’s mind-boggling!

The question is, how many of these “liars” will be unable to meet their mortgage obligations when the bill comes due in 2007-2008? And, how will their (myriad) defaults affect housing prices for everyone else?

Another indication of hanky-panky appeared in the back-pages of the New York Times last week under the appropriate title “A Phantom Rebound in the Housing Market” by Daniel Gross. The article points out that while the Commerce Dept was celebrating the latest rise in new home sales (in Nov) the reality was quite different. In fact, the government is overstating sales “by up to 20%”. The Commerce Dept failed to subtract the thousands of people who signed contracts but “simply walked away from their deposits when they realized they couldn’t flip the houses for a quick profit.”

Ooops! So the government is falsifying the figures to make things look better than they really are?

You bet. And, most of the high-end home builders like Toll Bros are reporting cancellations in the neighborhood of 37%!

The Times adds that, “Mr. Zandi of Economy.com estimates that the differential is even greater. ‘Given the rise in cancellation rates, it suggests that between 150,000 and 200,000 home sales are being counted that actually did not occur.’”

“Did not occur”! So, the government is beefing up their stats with an extra 200,000 homes a month!?!

Gadzooks!

Okay, so the homeowners are lying on their loans, and the government is lying about the sales (and inventory) figures; is that it?
No. In an earlier article (The Fed’s role in the Housing Crash of ’07) we already covered how the banks are loaning out as much money as possible through all kinds of “untested” Mickey Mouse mortgages so that unqualified borrowers can get-on-board the housing gold rush. These are the ARMs; the “no-down payment, “interest-only” loans which Business Week magazine called “the riskiest and most complicated home loan product ever created”. Many of these ARMs are timed to explode sometime in the next 2 years and the aftershocks from the defaults are expected to be felt throughout the economy.
Of course, the banks never would have exposed themselves to such extraordinary risk if they weren’t able to bundle-up these dubious loans and ship them off to Wall Street. Fund managers have been more than eager to take this “collateralized debt” and use it in the booming hedge fund industry. No one really knows what will happen to the stock market when foreclosures begin to skyrocket and the banks and hedge funds are unable to recoup their losses. But a major “correction” (meltdown) is certainly not out of the question.

Once again, all of these problems originated at the Federal Reserve where interest rate manipulation and the loosey-goosey approach to money supply have created the potential for an economic firestorm.

Bubble, bubble; toil and trouble

So, what can we expect when interest rates tighten up and the market begins to slump.

Well, first off, according to the Wall Street Journal, lenders will get “more cautious in initiating new loans and have been setting aside more reserves for potential loan losses.” The banks are battening down the hatches and preparing for the worst. This just confirms that the real hurricane hasn’t even touched down yet and that America’s over-leveraged consumers should try to straighten out their financial affairs as swiftly as possible. (Get out of debt, pronto!)

A USB study indicates that a “high percentage of borrowers with delinquent, defaulted and foreclosed loans have second mortgages. These borrowers are so overburdened by the added debt that THEY HAVE TROUBLE MAKING THE PAYMENTS ON THEIR FIRST MORTGAGES. This is an ominous development since 34% of all mortgages in 2006 were second mortgages.”

In other words, it’s not simply people in the sub-prime market who are feeling the pinch. Millions of Americans either have loans that will reset at significantly higher monthly rates (which they won’t be able to pay) or they are completely maxxed-out financially after draining every last farthing out of their home equity. In fact,falling prices have decreased the amount of money that homeowners are able to take out of their home equity. (Equity withdrawals decreased by 70% in the last year alone!) That means that there is $525 billion less fueling the overall economy (GDP). As housing prices steadily decline, we can expect that America’s growth will shrink accordingly.

The American consumer is hobbled by debt and has no way to increase his revenueas long aswagesremain stagnant. Additionally, US households are now showing negative savings. (minus .2%) When the home equity “punch bowl” dries up, it’ll be hard times for the average over-leveraged American consumer. He’ll have nothing left for his buying sprees but the plastic in his wallet. (Credit card debt is soaring)

It’ll be tough on the banks and Wall Street, too. After all, over 50% of all mortgages since 2003 have been these shaky, non-conventional loans which have ignored the standard criteria for loaning money (20% down payment, fixed interest rate, sufficient collateral and earnings) Now they’ll have to “pay the piper” and accept the dismal aftereffects of their profligate lending.

The banks should have spotted this disaster a mile away. Instead, they decided to improvise on mortgages so they could keep the money flowing and maximize profits. Now, there’s not a life boat big enough on Planet Earth to bail us out.
Glub, glub.

Once again, we need to remind ourselves that the housing boom was not created by market forces, but by cheap money pumped into the system (via the “creative financing” rip-off) by our friends at the Federal Reserve. They are responsible for this whole bloody boondoggle.

When the Fed cut short-term interest rates from 6.5% to 1% in 2001, they knew that they were simply leaping from one equity-bubble to another. In the next 5 years, total mortgage debt increased by a whopping 82% and total real estate value nearly doubled to $21 trillion dollars.

These are huge numbers and, of course, the Fed knew exactly where the money was going, just as they knew what the outcome would be in the long term. The effects of low interest rates and increases to the money supply are like the immutable laws of science. In this case, they act like gravity pulling the whole battered US economy into a bottomless black hole. It was entirely predictable.
So, what happens now?

What can we expect from the architects of this colossal rip-off in the next year or two?
Well, the Fed, the US Treasury and the Bush administration--the real axis of evil--would like to forestall the inevitable recession-depression until they carry out their forthcoming attack on Iran. That’s why Bush is sending another carrier group to the Gulf as well as a squadron of F-16s to Turkey. (It also explains why the US forces seized 5 Iranian hostages in Irbil, Iraq yesterday) The US is clamping down on transactions with Iran’s main banks (“unilateral sanctions”) and has coerced the Saudis into “discounting their top-line sweet crude by $1.75 to US customers” (Jim Willie “Golden Jackass.com”) to put additional pressure on Iranian oil exports. As Willie says, “This is the real story behind the falling (Gas) prices, not the silly (East Coast) weather”.

Uncle Sam is gearing up for another Middle East dust-up in Iran and the lower gas prices are (temporarily) averting a US recession.

The longer term prospects, however, are not so rosy. The “sunny Jim” reports in the media about a “soft landing” will have no affect on the impending housing collapse or on America’s downward economic spiral; the numbers are simply too enormous. By spring 2007, the Fed will have to lower rates to stop the hemorrhaging and to avoid a full-blown depression. When that happens, the last wobbly bit of scaffolding that’s propping up the greenback willbekicked-out and the dollar will slip into oblivion.
As long as the Fed keeps rates fixed, the pressure on housing will continue to intensify; pushing prices lower and inventories higher. GDP and home equity will continue to shrivel.

It’s all bleak, bleak, bleak.

I’ll leave you with a final comment from Michael Hudson’s “The New Road to Serfdom: an Illustrated Guide to the Coming Real Estate Collapse” (Harpers May 2006) Hudson, who may well be the foremost authority on the housing bubble says:
“Although home ownership may be a wise choice for many people, this particular real estate bubble has been carefully engineered to lure homebuyers into circumstances detrimental to their own best interests. The bait is easy money. The trap is a modern equivalent to peonage; a lifetime spent working to pay off debt on an asset of rapidly dwindling value. Most everyone involved in the real estate bubble thus far has made at least a few dollars. But that is about to change. The bubble will burst, and when it does, the people who thought they’d be living the easy life of a landlord will soon find that what they really signed up for was the hard servitude of debt serfdom…America holds record mortgage debt in a declining housing market. Even that might first seem okay—we can just whether the storm in our nice new houses. And in fact things will be okay for homeowners who bought long ago and have seen the price of their homes double and then double again. But for more recent homeowners, who bought at the top and now face decades of payments on houses that soon will be worth less than they paid for them, serious trouble is brewing. And they are not an insignificant bunch. The problem for recent homeowners is not just that prices are falling; it’s that prices are falling even as the buyer’s total mortgage remains the same or even increases. Eventually, the price of the house will fall below what the homeowners owe, a state that economists call negative equity. They can’t sell—the declining market price won’t cover what they owe the bank—but they still have to make those (often growing) monthly payments. Their only “choice” is to cut back spending in other areas or lose the house—and everything they paid for in it—in foreclosure. Free markets are based on choice. But more and more homeowners are discovering that what they got for their money is fewer and fewer choices. A real estate boom that began with the promise of “economic freedom” will almost certainly end with a growing number of workers locked into a lifetime of debt servitude that absorbs every spare penny.”

It can't be stated more succinctly than that.

Thanks, Michael Hudson, for your insightful analysis, but it may be too late.
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a guest said:

0
Blast from the Past, courtesy of Jimmy Montague
Mike Whitney: Have you seen this poem about crooked money-men from the Depression? Bucky Fuller used it in Chapter 3 of his book, "Critical Path." He said there that the poem was supposed to have been composed by Ogden Nash, but nobody knows for sure. Anyway, here it is:

"BUTCHER, BAKER, CANDLESTICK MAKER"

I'm an autocratic figure in these democratic states,
A dandy demonstration of hereditary traits.
As the children of the baker bake the most delicious breads,
As the sons of Casanova fill the most exclusive beds,
As the Barrymores and Roosevelts and others I could name
Inherited the talents that perpetuate their fame,
My position in the structure of society I owe
To the qualities my parents bequeathed me long ago.
My father was a gentleman and musical to boot.
He used to play piano in a house of ill repute.
The Madam was a lady and a credit to her cult,
She enjoyed my father's playing and I was the result.
So my Daddy and my Mummy are the ones I have to thank
That I'm Chairman of the Board of the National Silly Bank.
CHORUS:
Oh, our parents forgot to get married.
Our parents forgot to get wed.
Did a wedding bell chime, it was always a time
When our parents were somewhere in bed.
Then all thanks to our kind loving parents.
We are kings in the land of the free.
Your banker, your broker, your Washington joker,
Three prominent bastards are we, tra la,
Three prominent bastards are we!
In a cozy little farmhouse in a cozy little dell
A dear old-fashioned farmer and his daughter used to dwell.
She was pretty, she was charming, she was tender, she was mild,
And her sympathy was such that she was frequently with child.
The year her hospitality attained a record high
She became a happy mother of an infant which was I.
Whenever she was gloomy, I could always make her grin,
By childishly inquiring who my daddy could have been.
The hired man was favored by the girls in Mummy's set,
And a traveling man from Scranton was an even money bet.
But such were Mother's motives and such was her allure,
That even Roger Babson wasn 't absolutely sure.
Well, I took my mother's morals and I took my daddy's crust,
And I grew to be the founder of the New York Blankers Trust.
CHORUS: Oh, our parents forgot, etc.
In a torrid penal chain gang on a dusty southern road
My late lamented daddy had his permanent abode.
Now some were therefor stealing, but my daddy's only fault
Was an overwhelming tendency for criminal assault.
His philosophy was simple and quite free from moral taint;
Seduction is for sissies, but a he-man wants his rape.
Daddy's total list of victims was embarrassingly rich,
And one of them was Mother, but he couldn't tell me which.
Well, I didn "t go to college but I got me a degree.
I reckon I'm the model of a perfect S.O.B.,
I'm a debit to my country but a credit to my Dad,
The most expensive senator the country ever had.
I remember Daddy's warning—that raping is a crime,
Unless you rape the voters, a million at a time.
CHORUS: Oh, our parents forgot, etc.
I'm an ordinary figure in these democratic states,
A pathetic demonstration of hereditary traits.
As the children of the cop possess the flattest kind offset,
As the daughter of the floozie has a waggle to her seat,
My position at the bottom of society I owe
To the qualities my parents bequeathed me long ago.
My father was a married man and, what is even more,
He was married to my mother—a fact which I deplore.
I was born in holy wedlock, consequently by and by,
I was rooked by every bastard who had plunder in his eye.
I invested, I deposited, I voted every fall,
And I saved up every penny and the bastards took it all.
At last I've learned my lesson, and I'm on the proper track,
I'm a self-appointed bastard and I'M GOING TO GET IT
BACK.
CHORUS:
Oh, our parents forgot to get married.
Our parents forgot to get wed.
Did a wedding bell chime, it was always a time
When our parents were somewhere in bed.
Then all thanks to our kind loving parents.
We are kings in the land of the free.
Your banker, your broker, your Washington joker,
Three prominent bastards are we, tra la,
Three prominent bastards are we!
 
January 15, 2007
Votes: +0

a guest said:

0
WRONG WRONG WRONG
Where is this bloodbath? Housing prices are still at historic highs, the Q4 sales numbers were strong nationwide; You couldn't be more wrong. Do facts mean nothing to you? Did you see the December --and in fact all the 2006-- economic numbers for the US? They were great....again. They'll never be a shortage of ink or bits and bites for someone ready to sing a song of doomsday, you are proof of that.
 
January 15, 2007
Votes: +0

a guest said:

0
Hmmmmm
"a guest", would you like another cup of Kool Aid?

Why do people not get that the facts they have are wrong or inflated or even cooked? Regardless of what all the top economists say or what the truth tellers are saying, they refuse to believe. Right now in San Diego county in the city of Pacific beach they are selling at 2002 prices....get a grip on reality sir/mam. You are more than likely in the mortgage industry, and a believer of the lies and can't understand that your industry of free flowing cash to uneducated masses is over.

Sad.... :-
 
January 15, 2007
Votes: +0

a guest said:

0
...
US economic numbers?? ALL LIES, like everything else the US government says about war in Irak. LIES, LIES, LIES. The day of reckoning is here. The crash will get worse. Another world depression is just around the corner. Then? More war, more death and destruction, and.......world fascism administered by those who engineered the whole thing to begin with.
 
January 15, 2007
Votes: +0

a guest said:

0
Debt Inferno
There will alway be those that believe that the sky is the limit during market bubbles. My avocation has been the study of hyperinflations and deflations. The common thread linking both has been debasement of the currency. Regardless of what anyone thinks something is worth, it is worth only what someone is willing to pay for it.

Regardless of the market, speculative bubbles only end one way-with a bust. The NASDAQ is still down 50% from its bubble high. It will take a doubling of the index for those investors to recover their losses.

After the crash of 1929, the dow did not reach its pre-crash levels until 1952. The world is sitting on a number of insurmountable problems, debt, peak oil, climate change, overpopulation. Just because we live in the US does not offer us any special protection against an economic route.

I can easily see the US economy sliding into the abyss in a matter of months, not years or decades.

CWK
Houston
 
January 15, 2007
Votes: +0

a guest said:

0
yes but that's not the real threat...
the observations and conclusions presented above appear logical however ultimately the scenario outlined above is less about econmic collapse and more about western civilization collapsing ...

no one will be forced into into economic servitude... because the masses will simply revolt and wipe out the financial/governmental class ... think of it as major societal re-boot... and yes some chaos but in the end people need a place to live... and eat so things will reorganise to accomodate the needs... the big worry is will those who hope to profit ie. those who manufactured the event with intent of exploiting the majority can beprevented from using or threatening to use WMD... they are insane... so lets focus on solutions to prevent the worst from happening...
 
January 16, 2007
Votes: +0

a guest said:

0
Your numbers are way off
I agree, housing could get bad (ugly), but your numbers of "$1,300 per month to more than $2,000 on a $129,000 house" are extremely way off. Presently under a traditional mortgage its well under $1000 per month. Exotic Mortgage toxic time bomb loans it would be under $500 per month. Your numbers are pushing a 15-20% interest rate under a conventional loan??????????????????? Think before you speak......
 
January 16, 2007
Votes: +0

a guest said:

0
Who's behind the green door?
You must be in real estate, Guest No. 2.

Denial will keep you alive while the rest of the world
tanks.
 
January 16, 2007
Votes: +0

a guest said:

0
...
A $129K house? In many desirable yet 'affordable' metropolitan areas, $129K doesn't buy much.
 
January 16, 2007
Votes: +0

a guest said:

0
Don't you know that houses only go up in value?
Real estate never goes down! Happy happy joy joy!
smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif smilies/cheesy.gif smilies/grin.gif smilies/angry.gif
 
January 16, 2007
Votes: +0

a guest said:

0
aguest
Excellent article..all we need to realise is that afterall household income has to bear the brunt of Feds' mischiefs,let us all pray we work hard and pay for our foolish choices..once again thanks for the deep introspection of housing circus
 
January 16, 2007
Votes: +0

a guest said:

0
129k?
you couldn't buy a 2 week a year timeshare in this state for that much. good luck getting a house with a roof, or a condo bigger than 200 square feet with that.
 
January 16, 2007
Votes: +0

a guest said:

0
Up in dere
can this happen in perth
 
January 16, 2007
Votes: +0

a guest said:

0
Margin requirements for home mortgages?
You say; “It’s all bleak, bleak, bleak.” But I say; “Cheap money is not to blame.” We, collectively the 300 million consumers, owe more than $28.2 trillion, only about $9.5 trillion of that is home mortgage debt. To try to solve the problems you enumerate by increasing the cost of borrowing would be sheer folly.

But you are correct in pointing the finger at the Fed; but more importantly, at the irresponsible actions of lenders. The Fed did not create all the surplus money by “printing” it or by pumping reserves into the banking system. Charted here is the growth in total non-financial debt (money lent to the productive sector of the economy by the financial sector) and the cumulative holdings of the Monetary Authority (the Fed) since the Fed was created.

http://webpages.charter.net/prologue/images/Without_A_Printing_Press.gif

The Fed does have culpability in the growth of money through its support of chicanery in the financial markets.

As you note; “The housing bubble is actually an extension of the stock market bubble; Greenspan’s earlier swindle which cost American investors $7 trillion in retirement and life-savings. Both equity balloons can be attributed to the shabby and exploitative monetary policies of the Federal Reserve.”

But low interest rates should not be blamed; I suggest the failure had more to do with failure to properly manage “margin requirements” as provided in Securities and Exchange Act of 1934. (The Fed was given that specific responsibility in the 1934 Act.) An earlier Fed chief, William McChesney Martin chose to accept that responsibility when confronted with a disorderly market in 1968. Margins of 100% were set for those stocks where trading had become “irrationally exuberant.” Indeed, when the entire market seemed inclined to such exuberance, Martin raised margin requirements to 80% for all trading. When Greenspan faced an overly exuberant market, he placed the entire national economy at risk. As you noted, his swindle cost American investors dearly.

I’m not suggesting the Fed be asked to manage “margin requirements” for the housing market; I really think all FOMC members should be banished to the moon or to some more distant realm.

As to down payments on housing (margin requirements), I think that it is unrealistic to expect responsible action from lending institutions. They have been right up to their ears in creating that $28 trillion of lendable money, most of which was created artificially. We have a Congress that we elected; or do we?

TGoodwin
 
January 16, 2007
Votes: +0

a guest said:

0
Numbers Off
Yeah, your numbers are off for the $129k mortgage. The only way anyone is paying $2000 on a $129k mortgage is if they're paying an outrageous (more than 10%) interest rate on a 15 year term. Good article, but needs some basic fact checking
 
January 16, 2007
Votes: +0

a guest said:

0
the end game
And when this collapse happens, the elite who have adequately protected their assets, will re-patriate those assets and purchase the desirable properties. They will then thusly increase thier ownership of our country. (Currently the top 10% own 70% of the assets)
 
January 16, 2007
Votes: +0

a guest said:

0
58K can buy ...
... a 1000-sqft house, 2.7 acres of wooded land, 24/7 access to a scenic, navigable river and affable, well-armed neighbors. It did for me, and no I'm not saying where smilies/tongue.gif
 
January 16, 2007
Votes: +0

a guest said:

0
greedy greedy greedy!
I agree: "a guest" is most likely a "realtor" or something similar...Just a huge Ponzi scheme...cheeeeep money, greedy "realtors", predatory mortgage companies, greedy hopeful buyers (be they flippers or otherwise)....People got suckered BADLY on this one..... smilies/grin.gif
 
January 17, 2007
Votes: +0

a guest said:

0
Chumps
You guys kill me. End of the world, are you drunk. This equity bubble will stall, prices shrink nationally 10%, even 20%. WHo cares. On the average, that doesnt do anything to average bob who owns the average house. Its the coasts that get hurt on that kind of drop, where the average house is quite a bit above the national average. But in the end, its the average that counts. SO again, who cares. A bunch of realtors, and mortgage brokers wont be able to pay there mortgages. Screw them, Every one else will suffer thru, and this will be a localized problem just like texas in the 80's. Stop worrying.

P.S. if you really believe in the end of the world, currency crisis and all, then you better own realestate as we would shurly enter a period of hyperinflation. Look it up.
 
January 17, 2007
Votes: +0

a guest said:

0
Just because you can, doesn't mean you should.
I am not an expert on economics or the real estate market, however, it is obvious to me that the people (consumers) that purchased a house with a creative mortgage loan (i.e. arms that will reset, or interest only loans) during the periods of rapid appreciation only have themselves to blame for their problems if they cannot afford to make payments when they come due. They knew the terms of the loan when they signed the papers. They had to know that at some point they would need to begin making principal payments on their loans. If they were banking on the idea that home prices would contiue to skyrocket forever and ever and they could just refinance then they were taking that risk (gamble) when the took out the loan and purchased the home. Whatever happened to good common sense. Just because you can get a loan from the bank and purchase something you can't really afford, doesn't mean you should. I think the best and most important lesson to be learned here is for the consumer: Don't over extend yourself, try to stay out of debt as much as you can, and don't take a risk without considering the worst case scenario and determining whether or not you can handle it, if the answer is no, you are only asking for disaster at some point when your luck turns, and when you get it you have only yourself to blame, not the Fed, the government, or even President Bush. I get tired of people that think everything is somebody elses fault and won't step up to the plate and except responsibility for their own choices. Just because you can do something doesn't mean you should.
 
January 17, 2007
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a guest said:

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look at the UK
I read articles about the US housing bubble and think to myself "well, it all looks totally engineered to me". UK interest rates rising, people still totally oblivious to the debt they are getting in to,they think that housing is a commodity of investment rather than think of it as a home. The interesting thing to bear in mind is that the housing market bubble appears to be a universal oddity and anyone with an ounce of common sense knows that we are all going to pay the price eventually for such an over priced commodity.
 
January 17, 2007
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a guest said:

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All I know is this...
I do not feel sorry for any of those fools who bought houses they can't afford just because their friends bought one. They let their desire to compete take over their common senses and they will surely suffer when they have to pay the piper. Many of them can't eat nor heat their homes... is that the glory of owning a McMansion? NOT!
 
January 17, 2007
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a guest said:

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Re: All I know is this
Preachin' to the choir, Brother (or Sister)...Also, Kudos to whomever left the comment not to blame the Fed, or Dubbya, or the Real Estate "industry"....

The people who lose their shirts truly have nothing else they can blame besides their inability to pick up on the bubbliness.....They knen full well what prices their local market would command long term....
 
January 18, 2007
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a guest said:

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dont blame me for the crash
exactly right- whenever the government or the road contractors refue to stripe the middle of the road or move the marking so that they intersect in the middle of the road it is the fault of the damn fools who believe their interests are being respected if they crash head on with those in the other direction or drive off the side of the cliff- i say america is NOT one for all and all for one- it is the greed of the 80s that will prevail in the long run in any endeavor -so get your's even if you need to use shaddy or illegal avenues to get it- after all those poor trusting souls are just chumps asking to be taken n'est pas? Let them eat granite.Those who satand alone in the face of the evil crowdsdemanding justice are just those too slow to escape to the foreign welcoming shores. [I pitty the poor fools who believe this as they will surely have no refuge.]
 
January 18, 2007
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a guest said:

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The worst is yet to come
The housing market downturn will begin to gain downward speed at the end of 2007. The economy is showing signs of a slowdown and the Stock Market is once again reaching overvalued extremes since the 2003 low. If you want to sell then get it done by June 2007. 2008 to 2010 look bad. Beyound 2010 people will wish they never heard of Real Estate ownership and speculation.
 
January 19, 2007
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a guest said:

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Splub One
Don't you understand? The housing boom was not unintentional. It was intentional. The Federal Reserve and Alan Greenspan are not "accidental" destroyers of the United States; they are deliberate destroyers of the United States.
 
January 20, 2007
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a guest said:

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U.S. Housing Bubble Bust
Great article Mike!

Apparently a lot of naïve people missed this recent article on artificial equity that has disappeared.

Make-Believe Home Equity Flies Away: $300 Billion Has Disappeared in the United States / Jan. 16, 2007
http://www.dailyreckoning.com.au/consumer-spending/2007/01/16/
 
January 20, 2007
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a guest said:

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...
[[The Federal Reserve and Alan Greenspan are not "accidental" destroyers of the United States; they are deliberate destroyers of the United States.
26]]

For what purpose are they destroying the US?


 
January 25, 2007
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a guest said:

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It's *almost* too late
I can't see this economy standing up much longer. By the end of this year at the latest a depression worse than the 30s will be upon us. The signs are already there: the housing market collapsing; the stock market beginning to teeter; CEOs and other executives cashing out as fast as they can. The only way to avoid personal catastrophe is to get into hard assets as soon as you can before the Asian super-economies drive up the prices of commodities. The US is in for some bitter, bitter times.

I've pulled all my assets out of the market and moved into a very small house that I own out-right. Other than some provisions and a minimal amount of cash, I've converted everything over to gold and silver bars which I keep in several well-dispersed locations.
 
January 25, 2007
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a guest said:

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all fannie mae and freddie mac should be in jail
you have no idea the corruption in these gse,s they lie about earnings so the upper fat cats get rich why isnt raines in jail the former ceo of fannie mae was a crook they are broke they know it and there days are all done.We the tax payers will have to bail them out they will loose 50 to 100 billon within the next 24 months they know it. But yet crooks get away at our cost of tax dollers.fannie mae and freddie mac will put this country in a panic when the truth really comes out.
 
February 27, 2007 | url
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a guest said:

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What's Next?
You thought subprime was bad? Wait until you see what's next.

http://infohype.blogspot.com
 
March 18, 2007 | url
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a guest said:

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Out Of Context
The Canteell oil field (second largest in the world) in Mexico is well past peak--in 2011 or so Mexico will have no oil to export. According to the "Oil Drum" web site, the same thing is happening to the world's largest oil field in Saudi Arabia. Available world oil supplies are dropping fast, but consumption and demand are rising fast--when will we be out of oil? How high will curd prices go? who knows, and it depends on where you live, but we're going to see many hungry people in many different big cities. it's not a question of "yes or NO", but of when.

Is this related to the housing bubble? You bet it is!
 
March 28, 2007 | url
Votes: +0

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