It’s Friday, and sales of Maalox must be brisk up and down Wall Street. The drops and rises this week were attributed to a decline in the Shanghai market, technical issues, economic reports, earnings results, Greenspan’s comments, Bernanke’s comments, and of course to Doom’s ongoing obsession- the housing market.
I have no clue where the market will close today, but I know John and I would appreciate your links, comments, suggestions and housing related anecdotes.
As always, this thread’s for you!
Bubble Meter
Ohio Fraudclosure
Mish's Global Economic Analysis
Northern Virginia Housing Bubble Fallout
UK House Bubble
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
Which market will blow up next? / juback
http://articles.moneycentral.msn.com/Investing/JubaksJournal/WillIndiasMarketBlowUpNext.aspx
no kidding! Goldman, Morgan Stanley Almost `Junk,’ Their Own Traders Say
http://immobilienblasen.blogspot.com/2007/03/no-kidding-goldman-almost-junk-their.html
minyanville/depew ” What American Need.”
plus the five things you need to know
http://www.minyanville.com/articles/index.php?a=12269
the daily show / cheney…could also be about cramer
http://immobilienblasen.blogspot.com/2007/03/daily-show-cheneycould-also-be-about.html
contrary investor on japan
http://www.contraryinvestor.com/mo.htm
….such an event should not have happened in the history of the known universe
http://immobilienblasen.blogspot.com/2007/03/such-event-should-not-have-happened-in.html
Beijing’s Olympic frenzy
Inflated by the Olympic spirit
http://immobilienblasen.blogspot.com/2007/03/beijings-olympic-frenzy-inflated-by.html
Schwarzenegger wants $500 billion to rebuild California / mish
http://globaleconomicanalysis.blogspot.com/2007/03/schwarzenegger-wants-500-billion-to.html
from denial to….a must see video!
http://immobilienblasen.blogspot.com/2007/03/from-denial-to-housing-subprime-etc.html
This is what I posted on Nouriel Roubini’s blog today:
All this is merely the playing out of the credit contraction which began in June 2006, when the Federal Government started backing away from the society.
Now you are going to see gridlock in the political system. It begins with conflicts between agents of the political system. A good example is institutional investors versus banks over the issue of mortgages. The institutional investors have no interest in going against judgment-proof homeowners, and they have no interest in the houses themselves. They want their money back, and they will accuse the banks of fraud, conspiracy, etc., in order to get that money back.
This means that two actors who were performing (highly paid and corrupt) services for the Federal Government have now stopped acting in that capacity. Now that it is clear that the Federal Government is backing away from the society, other deals will fall apart in the rush to liquidity.
The next step will be a crisis in political operations themselves. A good example is the current struggle over funding the War. It will be difficult to get a majority to support any funding bill, but more importantly, the struggle itself will reveal the emerging difficulty in finding a majority for economic legislation.
The result of conflicts between agents of (former) Federal policy, and in the political system, will be drastically reduced confidence, and investment, in the American economy.
This is the classic scenario when a central government liquidates its positions. Forty years of the Great Society have led somewhat stupid–and VERY poorly educated–Americans to believe it can’t happen here. But there was never–even in the palmiest days of the New Deal–a repudiation of the doctrine that government could liquidate its positions. It was urged at the time that this doctrine be firmly repudiated, but Roosevelt would not hear of it. He was too frightened of the bond market.
The above is why I say: housing eviction ban NOW. The eviction ban is the statement that the Federal Government cannot–under ANY circumstances–liquidate its positions. It is a rejection of the liquidation doctrine, once and for all.
Those who think otherwise are wishing a needless devastation on American society.
Jan-Martin (comment #6) -
Back in ’77 when we were discussing Measure Theory I found it a bit disconcerting that the probability of anything happening on the continuum, including that which had just happened, was identically zero.
Jryskmpr-
What do you think will happen to our banking system should an actual eviction ban be put in place? I worry a ban on evictions could cause a total meltdown of our lending system.
There are many homeowners who I know are struggling to make their mortgage payments. What happens to the cash flow of lending institutions when paying your mortgage becomes optional? There are more people with money in banks than money in real estate- wouldn’t more people be hurt by the collapse of lending institutions than just about anything else?
Like most Americans, I have seen my share of financial hard times- especially graduating from college in the recession of the 1980s. My husband and I survived on a shoestring for quite a while.
I’ve parted with cars, possions and a home in my time because they no longer made financial sense for me. I hated it, but I have been better off in the long run not being tied to assets I can’t afford.
If I owe 500K on a 300K home- I am not a homeowner. The big lie of our time is that wonky loans made more Americans homeowners. A 100% loan means that 100% belongs to the bank- I’m a “bank renter”- not an owner. Other renters have their landlords pay maintenance, HOA fees, taxes. “Bank renters” spend a lot of money sprucing up and fixing up- they sacrifice and pay over market for the priviledge of having a piece of paper that says the home belongs to them. It’s a lie- the house belongs to the bank- and always did.
Here’s what a foreclosure does for you:
You get a lot of warning, a chance to try a sale, a short sale, accomodations from the bank, or the chance to hand the keys back to your “landlord” and find a more affordable place.
You get a ding on your credit that stays there for years. This is probably a blessing- you won’t run out and make the same mistake soon. You’ll have time to reconsider your financial options and save money to make a wiser purchase. Eventually that ding will drop off if you stay on top of your bills.
Now if you were sensible, you are in a rental that isn’t eating up 60% of your income- and you aren’t spending another 10% at Home Depot to remodel the place. You are saving more money- you have more time, and less maintenance, less stress, more flexibility.
I am not a financial expert- I am a reformed idiot. My husband and I owned a large expensive home. It was more than we needed and should have bought, quite frankly. I was lucky to sell it at the peak of the frenzy- we made a nice profit.
It was a great house, I loved it. But I’m in a great rental, paying a rent less than half the price of my former mortgage. I am very grateful that I could make that change without a foreclosure on my record and with money in my pocket. I’ve had friends who couldn’t say the same though, and it hasn’t been the end of the world for them- they are better off now.
A lot of people bought homes they couldn’t afford, and to mandate programs to keep them in them, and to try and figure out how to keep them paying more than it’s worth sounds more like “debt slavery” to me. The other alternative I see is the government stepping in and paying these mortgages, resulting in “McMansion Housing Projects” and a huge hit to the American taxpayer. Large blocks of government run housing frightens me. If the government pays the bills, then the house belongs to the government- I’d rather my house belonged to the bank!
I concur that I would hate to see people evicted from HOUSING. I hope we have enough compassion for our fellow man to try and keep a decent roof over people’s heads. However, unemployment is currently low and rentals abound. The vast majority of homeowners being foreclosed on will not be in the streets- they will be moving to rentals that better suit their finances. Let’s not forget that they are currently just in overpriced rentals anyway- a change will be better for them in the long run.
I agree with twist, I have been fighting an internal battle over this because I have close family members caught up in this mess. My snakes eye view of the process makes it all the harder to point the finger in any particular direction. I do feel, however, that the best solution is to let each side of the equation share the consequences, no matter how painful, if only because this is the most likely road to prevention. And IMO, cutting off someone’s access to credit is not extremely punitive and is the best means of inculcating fiscally responsible behavior.
Housing evictions do nothing but cause more economic damage. Remember where the housing opportunity comes from in the first place: the Federal Government. So go back to the Federal Government and make it re-arrange the whole scheme around the policy of no housing evictions. It doesn’t take a genius to figure that out.
But it takes real ignorance not to see that the entire housing plant of the United States is based on POLICY. If the POLICY can include kicking people out, then the POLICY can include keeping people in.
It will simply require a much closer look at social policy, and a closer alignment of social services with the FACTS. What’s wrong with that?
Banks, shmanks. The policy which allows banks to participate in the housing market in the first place, is a Federal standard; the policy which places mortgages in trust funds, pension plans, and everywhere else, is a Federal policy. I mean, come on. How ignorant can you be? Don’t you know how housing works in this country? Does the home mortgage interest deduction appear from thin air? Do non-recourse loans (you give back the house, but they can’t come after you for any deficiency) come out of thin air? Do tax advantages for participating in the housing supply line–from initial financing through construction and beyond–come from thin air?
Just because you don’t know how intimately housing is connected with Federal policy, doesn’t mean you shouldn’t find out. You should. Don’t you think you should find out how life is actually lived in this country? I mean, not even now, when it’s all falling down around your ears.
Just readjust all your thinking around a policy which says “No housing evictions.” Remember, we also adjusted our thinking around a policy which says, “No slavery,” and “No gender discrimination.” Everyone had slippery-slope horror stories and worse case scenarios, when those policies were suggested. The only thing which actually happened was an improved society all around.
And that’s exactly what will happen once we have a ban on housing evictions.
You are cordially invited to come out of your cave.
Poet1-
As the mother of five, accountability is an ongoing concern for me. Sometimes the kids leave their homework home and want me to bring it to school for them, but I let them take their lumps. If I don’t, I’d spend half my life ferrying things to school. There are other times they’ve forgotten some report worth half their grade though, so I drop what I’m doing and cover for them.
There is no good “one size fits all” solution- for kids or for borrowers. Some people were hoodwinked, some were the “hoodwinkee” and some were honest people, both consumers and industry people, caught in the crossfire. It’s going to take years to sort out just who needs to be held accountable for what.
Now if you’ll excuse me, my son left his homework home- I’ve got to run!
Hey Twist,
Yeah its hard isn’t it, the acountability bit that is. I can’t say my family members were ignorant OR greedy, but when bad things never happen to good people (even when they do stupid things) their actions become self reinforcing. As you say, you want to allow your children the security of feeling your are always in their corner when the chips are TRULY down, but you also want them to walk around with the dread of knowing that Mom isn’t the great mitigator of all wrong that could possibly befall them. This is my primary reason for believing that this crisis should shake out to its logical consequence for everyone involved.
I feel that what happened with the REIC was that people started making lienient decisions about credit expansion and the sky didn’t fall so (guess what) it must be OK (or at least not that bad an idea). This proverbial attitude just rolled right downhill into what turned into the biggest ponzi scheme in US history.
The Dow suffers a 4% drop in one week, the worst week in four years. New Century Financial is off 7.5% today and NovaStar is off 11%+. This all started a few years ago but the spark that set off this explosion is the crashing of the subprime market. China and the Asian markets spill rhetoric that they will tighten credit standards and we have a rush to the exits. Not only that, but U.S. markets were in a massive sell off mode. Gold is down. Energy is down. Stocks are down. This was a minor panic.
We aren’t even at the end of Q1 and we still have nearly $1 trillion in loans resetting this year, many in the subprime market. Not only that but housing is in the worst shape in 13 years. What is going to happen this summer when folks try to unload their properties in a market saturated with homes? Not only that, there are many reports highlighting the fact that even though Americans own homes at the highest percentage, their equity to loan ratios are at all time lows. Not only that, savings is at an all time low as well.
Arizona is already at the precipice of going down in flames; the bastion of hope is this summer. Hate to say it but it won’t happen. Record inventory was reached last year at 54,500+ and we’re already near 53,600 in March.
It’ll be an interesting year that’s for sure. Take a look at other subprime lenders and try to short a few of these. Pull up their financial sheets and invest wisely.
Dr. Housing Bubble
http://drhousingbubble.blogspot.com
While I can’t say that I know exactly all the details as to what a “housing eviction ban” means (are we simply talking not allowing homes to be foreclosed if people can’t pay their mortgage debts?), on the surface at least I have to come out and say NO to the ban.
Yes, I know that innocent, nice people have been caught up in this mess. My goodness, almost every person I’ve every gotten to know well enough in my life qualifies as an “innocent, nice” person (once I’ve gotten to know them well enough). Everybody is somebody’s son/daughter, somebody’s good friends, and perhaps also somebody else’s brother/sister, etc, etc.
But that is no reason to incur weight of these people’s mistakes on all of us that had nothing to do with it.
Make no mistake: having a “housing eviction ban” would unfairly have consequences on many people who did the right thing to begin with, and did not invest at the peak of an unjustifiably crazy real estate market.
Headlines: “Housing bubble blogs make David Lereah’s Mother Cry”.
Film at 11!
http://www.salon.com/tech/htww/2007/03/02/david_lereahs_mom/
In the meantime, one has to wonder how many gullible investors, investor’s children, etc, Mr. Lereah’s lies are causing to not only “cry”, but be forced into bankruptcy?
jryskmpr-
I take it you’ve never been a landlord- I have. I had tenants that signed an agreement with me. They paid a monthly rent and agreed to take care of my property.
My first set of renters were prosperous people with good credit. The house was one of the more expensive rentals in Chandler at the time, and I was assured by the agency that handled it for me that these people should be ideal renters- they were in the process of building a home.
These folks allowed most of the yard to die- they didn’t reset the sprinklers for warmer weather, nor was anything pruned in the six months they were in the house.
They threw late night parties and left the beer cans in the neighbors yards. They owned a moving and storage service and used the house as a temporary warehouse. My neighbor who frequently worked nights said they once had three semis in front of the house transloading.
While we were told there would only be three of them, they allowed their married children and kids to move in with them as well.
The neighbors were calling having fits- the HOA was upset. I would have loved to have evicted these creeps, but eviction is not an easy thing to do- thank heaven they left when their six month lease was up!
The house was trashed- their $2000 deposit didn’t begin to cover it- they even stole the knobs off the stove. [Those things were $20/piece to replace- what in the world did they need my knobs for???]
I’m fairly confident that the people I rented to were at least as prosperous as I am. Why should people like that be handed a policy that says, “If you find paying your rent/and or mortgage inconvenient, if you do not abide by the terms of your agreement- that’s OK- no one can evict you!”
If your policy were in place, I couldn’t have moved back into my home, or have the necessary cash flow to maintain it. I would have had to find another place to live. That could be tough if people aren’t confident that I would pay them.
I find my rent payment inconvenient- there are plenty of other things I can think of to spend the money on. It would be awfully tempting, even for honest people to say, “Well the car needs new tires, the kids all need new shoes, and heaven knows I need a vacation!”
There was a blog post I read back in December called, Even God Does Evictions. I liked the post. I am a big believer in honoring contracts.. We face not only the destruction of our banking system, but a system where we require people to be honorable and keep their word with a policy that gives people carte blanche to ignore their commitments.
Blanket policies tend to break down- that’s why we have a court system, problem riddled as it is. There are evictions that should never happen- and there are some people who can benefit from the reality check.
I’ve been around long enough to be wary of absolutes. Statements like “All women are bad drivers,” “All Mexicans are lazy,” “All realtors are greedy,” “All evictions are bad,” don’t hold water- there are too many exceptions.
The other thing I’ve been around long enough to know is that it’s unreasonable to assume that anyone who disagrees with me must be ignorant, or hasn’t studied the issues. I find insulting people to be polarizing, and it rarely ads to the discussion. Were your barbs directed at anyone besides me, they would have been deleted from this forum.
MikeC-
If David Lereah were my son, I’d cry too!
jryskmpr:
I thought the cold war was over, and capitalism won already?
But mind you, I’m all for socialism, since that what you seem to want.
Why, under your “ban on housing evictions” plan I won’t have to work so hard at my job anymore! Yay! Heck, why bother even going in to work everyday? So what if they fire me?
After all, so long as I can sucker a bank into giving me a mortgage, I’ll be guaranteed a house and home no matter what I do, right?
And finally I’ll be able to get rid of all that money I have been foolishly “saving up” to pay off my debts. I should have known all along that all that tempting, expensive junk I have been avoiding was the right place to put my money in the first place! Big-screen TVs, over-priced designer everythings, here I come! Whoo-hoo!
Thanks to you, jryskmpr, I’m out of my cave, and I’m looooovin it! Caviar, anyone?
Wow, what a great comment string. Where to begin…
First, thank you twist for providing so much helpful perspective while running after your kids, and for maintaining the integrity of this sight while being personally attacked.
I was once a corporate banker and credit officer, and in my experience the motive for profits far outweighs the motive to insure your clients will have successful futures based on the decisions you have supported by lending them money. There are clearly fewer characteristics of a “profession” inherent in the banking business (and in government policy-making) than there are in, say, the medical or teaching professions.
Still, and in response to jryskmpr, I cannot reconcile how protection from bankers and policy makers is the same kind of “right” as is protection from being legally enslaved or discriminated against because of one’s race or gender.
Having spent my undergrad days as a sociology major with a Marxist perspective, and being married to someone who came of age in the Soviet Union, I know what it looks and feels like to play “social engineer” and to respond to those who disagree with you with violent contempt.
The downfall of any ideology is that you wind up becoming your supposed adversaries. The person I worry about the most in my family is a trader who worships Fox Network (yes, he is overleveraged on his mortgage); the person I (figuratively) worry about the most on this string is jryskmpr.
I feel the current housing market was creating by both parties to the deal. Questionable banker, broker and regulator motives were met, and likely outpaced, by the short-run and greed-based energies of the buyers and investors who engaged them…the friends and family of you and I. While I know many folks involved in bad housing investment decisions, I know of no one who entered into a bad mortgage deal and bought an overpriced home because they were “tricked” into it. This site is just one proof of the fact that we all knew this was going to happen (just like we did with the dotcoms), and the root causes are therefore widely shared.
What twist is saying precisely fits what my experience has been with friends who own rental property. Exploiting one another is part and parcel of who we are and recognizing that, without demonizing anyone, is precisely what competent adults do when they seek to regulate human enterprise or allow people to experience the consequences of their actions even though it is painful, sometimes horribly so, to watch.
The other thing I’ve noticed in this whole REIC is people’s lack of fear. People are not afraid they will lose their homes and the REIC isn’t afraid its imploding its own means to make a living. Why is that??? Maybe, as jryskmpr advocates, there is a “NO EVICTION” policy in the US when it comes to separating fools and their money, as long as they are trying to get rich of course. If you work for a living and your job is outsourced to India all the old rules apply.
the “cheap” market spin…relatively speaking…..
http://immobilienblasen.blogspot.com/2007/03/cheap-market-spinrelatively-speaking.html
the case for gold
nice $ cart from 1913-2006
good that the fed is tough on inflation…..
http://immobilienblasen.blogspot.com/2007/03/case-for-gold.html
When It Comes to House Prices, the Bloom Is Off the Cactus / nyt
make sure you click on the graph to see the sp/shiller charts by region
http://www.nytimes.com/2007/03/03/business/03charts.html