We’re in the homestretch folks- 2007 is coming to an end. We’ve gone from being told that "subprime is contained" to hearing that bailouts will save us.
What do you think? What topics and stories remain untold or "under-told"? We welcome your comments.
Mish's Global Economic Analysis
Ohio Fraudclosure
UK House Bubble
Northern Virginia Housing Bubble Fallout
Bubble Meter
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
Recession Hits U.S. Corporate Profits; Economy Might Be Next
An Irrelevant Fed: Thimbles of Water in a Forest Fire / Hussman
http://www.hussmanfunds.com/wmc/wmc071204.htm
Subprime Debacle Traps Even Very Credit-Worthy / WSJ
http://online.wsj.com/article/SB119662974358911035.html?mod=hps_us_whats_news
Including some very interesting charts.
This looks important. The Boston Fed Pres seems to want to break the weird positive feedback loop of ARM resets tied to LIBOR (which is spiking because US subprime paper is affecting UK banking system confidence — go figure!) so that Bernanke will have some control over the severity of the resets.
“Fed’s Rosengren says Libor surprisingly elevated”, Reuters, December 3, 2007.
hmmm … “absurd.” You can say that again, Igor
Moin John,
i really wonder how some of the Fed members have gotten their seat on the board…..
It´s frightening
My first post here. Interesting site.
I think the under-told story is that there would be a hugh crisis even if there weren’t a single “sub-prime” loan written yet somehow the word sub-prime has become synonymous with the entire problem instead of being referred to as just one aspect of it.
The combination of unsustainably cheap capital + ARM’s + pathetic regulation created this bubble/bust. Subprime was just more fuel to an already robust fire.
The other thing that I think is undertold, if what the housing market and economy will look when it emerges from several years of writedowns, bankrupties, mergers,
foreclosures, etc.
The scar tissue from this episode will continue for a generation in ways that will depress ROI’s on home investment. Risk premiums on mortgage loans will remain elevated, even for vanilla fixed rate 80% LTV first lien product.
The real untold story is the way our society has been rigged so as to prevent the best leadership from rising to the top. Control of wealth and mass media has been accumulated to a point where previous checks and balances have disappeared.
If it hasn’t already. America is on a path where it will lose it’s identity as a nation of citizens bound together with a common lofty pursuit of liberty. What we will be left with is simply a Machiavellian Marketplace.
(God bless the internet!)
I am still wondering why there is not more news about mortgage fraud and some sort of follow up prosecution. I read last week that there is simply not enough manpower or money to go after these criminals. It is if they are laughing at us and saying, “catch me if you can”. There are numerous examples of condos that were listed for sale for months and months, and then they suddenly sold at higher than list price. Sounds like fraud to me. The Third Avenue Lofts in Scottsdale and Regency House in Phoenix seem like clear examples. And now talk of bailing out these outrageously risky (read fraudulent) buyers seems insane. There should be more coverage and outrage from those of us that played by the rules.
I said a long time ago that the reason the economy is falling apart is corruption, and the reason there is corruption is because policy is failing.
The policy for all the decades after WWII was to build suburbia. Fine. But now suburbia doesn’t want to expand the middle class anymore (a report was just released detailing the abandonment of the underclass begining in 1980), and we don’t yet have a policy of preserving suburbia.
Suburbia, in case you haven’t noticed, is a damned expensive way to house 210 million people. So now we have this white elephant housing plant and NO policy guaranteeing it will be preserved.
So it’s falling apart day to day. Since we don’t have any policy for suburban preservation, the political process is rapidly stalemating. We’re in the initial stages of a terminal political crisis. That will deliver the coup de grace to the economy.
Where to start? Where I have always advocated we start:
BAN ALL HOUSING EVICTIONS.
That will at least give us one individually enforceable policy, around which to group all our other policies. No matter what, you can’t kick people out of housing–and this is a right they can enforce themselves.
I know all the “moral hazard” idiots will pipe up, but frankly, it is housing eviction which is the moral hazard. The “moral hazard” idiots are useful, however, because they prove my point: by opposing doing anything about the soaring number of housing evictions, they advance the political crisis.
And I do think we will have to have a socioeconomic catastrophe to force a housing eviction ban into existence. But that’s where we are headed.
Indeed, we are in the process of destroying the “scrutiny” regime (which has generated all this corruption since West Coast Hotel v. Parrish in 1937), and establishing the “maintenance” regime (which, oddly enough, is forecast in that same anomalous case). Here’s my study of the subject, using the anti-eminent domain movement as a case study in a shift in Constitutional regimes. I’m just sorry a lot of people are probably going to die to get this new regime in place, but I really don’t think anything can be done to prevent that:
The Eminent Domain Revolt: Changing Perceptions in a New Constitutional Epoch (HC) by John Ryskamp (Hardcover – Jan 1, 2007)
Buy new: $35.00
Get it by Tuesday, Dec 4 if you order in the next 3 hours and choose one-day shipping.
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I know all the moral hazard idiots will pipe up,
——————————–
Mr. Ryskamp
I take exception to the term, but I see where you are coming from. I read the Amazon blurb and I find your take on the 5th amendment to be intriguing. However, I still do not have aproblem with the foreclosures because these displaced people will find something to rent and could do so while foreclosure is happening saving their pennies all the while.
Still, nobody made them buy that house with that loan. What this might be is a case of a lot of stupid decisions made and unscrupulous mortgage brokers steering them into these toxic loans.
BTW I like Thom Hartman’s take on the 11th and 12 amendments to the Constitution that were culled to get it ratified. He argues that corporations should not be people.
They are laughing. They (could be anyone who is) know they are corrupt and they don’t care. Problem is this. When you sh** on your fellow country man or woman, (however you do it) your really just sh***ing in your own nest.
***[Slight edit- T.]
jryskmpr, not to be confrontational, but the idea of banning all evictions, viciously punishing the responsible and rewarding not only the irresponsible but those committing straight-up fraud, is downright immoral. (And before you start trying to draw lines, consider the percentage of those who obtained mortgages over the past few years who lied about their incomes…) If such a ban were to come to pass, I think it would be time for violence in the streets.
IMHO, a huge and untold part of the story here is how the politicians are making decisions not for the benefit of our economy or the people of this nation as a whole, but completely to the contrary, for benefit of their campaign contributing banks, Realtors, and related cohorts. The behavior of the Congress, the executive branch, and the Fed during the bubble’s inflation and deflation to date have shown all of the players in the system to have been utterly, utterly bought and sold.
The MSM do not print any analysis of how many of the proposals on the table benefit not the borrowers, who will be saddled with debt for decades to come, nor the next generation or other future buyers, but the banks and Wall Street players holding notes on underwater and devaluing property, and Realtors seeking to hold on to an outrageous commission structure. They print no opinion or analysis addressing how the average person’s income has not changed by a fraction of the change in housing prices, nor that not only is this not sustainable, but that the primary parties benefiting from it are Realtors, brokers, and other commission whores, and local governments who have racked up billions in windfall tax revenues, at the expense of everyone else.
So a second, related category of the “untold story,” I would suggest that it’s the media itself – the million times and ways in which the media itself has been shown to be utterly compromised and corrupted by both the direct influence of REIC advertising and indirect influence through the influence of the REIC on the political establishment.
I take exception to the term, but I see where you are coming from. I read the Amazon blurb and I find your take on the 5th amendment to be intriguing. However, I still do not have aproblem with the foreclosures because these displaced people will find something to rent and could do so while foreclosure is happening saving their pennies all the while.
Still, nobody made them buy that house with that loan. What this might be is a case of a lot of stupid decisions made and unscrupulous mortgage brokers steering them into these toxic loans.
BTW I like Thom Hartmans take on the 11th and 12 amendments to the Constitution that were culled to get it ratified. He argues that corporations should not be people.
THE HOME MORTGAGE INTEREST DEDUCTION ISN’T MORAL HAZARD? ALL THE PROVISIONS DESIGNED TO ASSIST THE HOMEBUILDING INDUSTRY AREN’T MORAL HAZARD?
WE ARE MIRED IN MORAL HAZARD. THE TERM HAS NO MEANING AT ALL EXCEPT FOR THOSE WHO WISH TO DENY INDIVIDUALLY ENFORCEABLE RIGHTS. WHEN THEIR POWER IS CONCERNED, IT IS NOT MORAL HAZARD. WHEN IT’S SOMEONE ELSE’S RIGHT, THEN IT’S MORAL HAZARD.
MORAL HAZARD IS THE NEW BUZZ WORD FOR A POLICE STATE.
BAG IT, AND WITH IT, THE FIFTH, ELEVENTH AND ALL OTHER AMENDMENTS.
FOCUS ON THE INDIVIDUALLY ENFORCEABLE RIGHTS. IF IT IS AN UNCHANGING FACT OF HUMAN EXPERIENCE, SUCH AS HOUSING, IT IS AN IMPORTANT FACT. IMPORTANT FACTS ARE MAINTAINED, AND THEY ARE MAINTAINED BY REMOVING THEM FROM THE POLITICAL PROCESS (LIKE EXERCISES OF RELIGION) AND TURNING ABSOLUTE POWER OVER THEM, OVER TO INDIVIDUALS.
AND LIKE IT OR NOT, THAT’S JUST WHAT’S COMING. HOUSING EVICTION IS THE NEW SLAVERY. IT WILL CREEP UP ON THE UNITED STATES AS A POLITICAL CRISIS. THEN YOU WILL HAVE TO TAKE A STAND: DO PEOPLE REMAIN IN THEIR HOUSING OR ARE THEY REMOVED FROM THEIR HOUSING?
THE MORTGAGE CRISIS IS JUST THE SHOT ACROSS THE BOW.
The one thing I want to know about the bailout is this…
Are the neg-am teaser rates on these loans going to continue to mount negative equity while the rates are locked in at the initial teaser? If so then I don’t see this helping matters any. Also what about the interest only loans; Will the “home owner” just continue to rent until the payment finally resets. With the loan only having about 20 years or so left what happens to the payment? Will it skyrocket even higher at that time then it would have otherwise? Just seems to delay the inevitable. Can someone fill me in here, am I missing something here?
I was told once there is no free lunch!
Cbass-
So far the details have been sketchy, and there could be all kinds of legal challenges- investors are unlikely to be happy.
I think Paulson is supposed to release the details on Wednesday. Several analysts have concurred with you that it only delays the inevitable- so do I. Prices will continue to fall, and the more underwater folks are, the less likely they are going to be to keep making the payments. Certainly the homeowners couldn’t sell without a short sale, and why keep paying way more than your neighbors?
John-
How in the world could they find the LIBOR being elevated “surprising”?
twist -
I think calling it “surprising” is disingenuous. Really, it’s simply inconvenient because it’s a part of the market no American authority can directly influence, which may be exactly why the lenders chose to use it in the first place.
Inconvenient might be too mild for a circumstance that means almost everyone in an ARM must default over the next couple of years, and therefore might as well pull the plug right now, like Cramer said.
Rosengren is correct in his assessment that something should be done about this charging bull elephant, but are there any bullets left in the Fed’s and the Treasurie’s guns?
John-
When the main problem is that prices are out of line with what people can afford, and that anything that the Fed or the Treasury does could only prolong the agony, there isn’t much they can do.
I guess it’s like some heart problems- a quadruple bypass isn’t pleasant, but it beats the alternative. The market needs to correct, and there’s no way to do it that isn’t going to hurt. I worry that the government, in its anxiousness to appear to be doing something, will ignore the Law of Unintended Consequences.
It’s still Monday …
So a second, related category of the “untold story,” I would suggest that it’s the media itself – the million times and ways in which the media itself has been shown to be utterly compromised and corrupted by both the direct influence of REIC advertising and indirect influence through the influence of the REIC on the political establishment.
Quoted for truth.
Comment deleted.
Why thank you Sandman – and here I thought I was all incoherent and ranting today… though I guess those are not necessarily incompatible with truth.
(Do you ever go back later and read your own posts while reading replies and wish for an edit button? Methinks I need to better proof my rants…)
Comment deleted.
JimAtLaw-
There are actually two ways to edit. One is to post an additional comment that reads, “Above post #__ should have read…
The other is to drop me an email and say, “Uh, Twist, about comment #__- could you edit it it to read, “______”- or just make it go away?
Yeah, it happens.
[Igor's word: screwup]
Comment deleted.
Comment deleted.
When the main problem is that prices are out of line with what people can afford, and that anything that the Fed or the Treasury does could only prolong the agony, there isnt much they can do.
I guess its like some heart problems- a quadruple bypass isnt pleasant, but it beats the alternative. The market needs to correct, and theres no way to do it that isnt going to hurt. I worry that the government, in its anxiousness to appear to be doing something, will ignore the Law of Unintended Consequences.
Removing people from housing is what prolongs the agony. You need to sit down and start thinking seriously about individual rights. It’s obvious you don’t know anything about the Constitution or the laws. You have been living off of the largesse of the scrutiny regime all your life.
Now you want to turn the tap off. It’s completely ridiculous and implicates you, and everyone else who suggests it, in violations of human rights–your own and everyone else’s.
Are your hands clean that you proceed to judge others? Nonsense. NONE of our hands are clean. But suddenly we want to make a clean break. We are implicated up to our eyeballs in what is going on. Be big enough to face it and respond to it responsibly, instead of with these ill-informed, undetailed pronouncements.
Jryskmpr-
I find your approach problematic.
I do not consider it a basic human right to live in a home that I purchased by fraud, or that I shouldn’t have bought because I couldn’t afford it. Should I be able to break into an empty house somewhere, change the lock, then scream that my right to housing was violated when someone tells me I have to leave? What if someone decides to move into MY house and say that if I throw them out, I have denied them their right to housing, they have nowhere else to go? In all of these instances, the properties rights of others have been violated, and I don’t believe it is necessary to become a socialist state that appropriates the property of others to house those who feel disinclined to move.
I’m not sure who’s list of human rights you are using if the implication is that individuals have the right to live in any home they want, as opposed to the idea that a civilized nation has a goal of adequate shelter for all of its citizens. I have read the Constitution a time or two myself, and have never seen this particular right listed.
When you tell someone that they need to vacate a McMansion that they are upside down on and tell them they need to find something more affordable, you have not denied them housing. They are moving from one house to another- they are not thrown into the streets.
We have a system in place to allow the market to correct- it is called the free market. When I can’t afford my McMansion, I move into a rental. The McMansion then goes down in price. Now I have reduced the amount I spend on housing, and have more to spend on other things people shouldn’t have to do without- food, education, transportation, savings. Not only that, the McMansion falls in price, forcing down the price of smaller homes. Eventually we live in a world where housing is not priced beyond people’s means- and keeping people housed becomes a lot easier.
For the life of me, I do not see what horrible thing happens, or what right has been violated, when people move from a house they can’t afford or meet their contractual obligations on, to one that they can.
I am not ignorant of this situation. I’ve had to move because I couldn’t afford where I was living. It was the best possible thing that could have happened to me. Because of my experience, I for one, will continue to oppose a government and lenders who try and convince people that this is some kind of tragedy, when in fact moving to a more affordable home is a blessing. This may bailout lenders, but it doesn’t help individuals.
I know because I’ve been there.
jryskmpr -
I’m not sure where I fit into your labeling system, but I’m sure you’ll tell me shortly.
Would you apply the same logic & passion you provided above to the following:
1. Should people who bought cars on credit and are now not making payments be allowed to keep them?
(ie: is transportation a “right?”)
2. Would you argue for allowing people who bought clothes & jewelry on credit to keep the items if they didn’t pay for them?
(is clothing a “right?”)
… also, would it matter if it was unsecured credit or if the loan was secured by the merchandise?
3. If I “buy” business equipment or farm equipment with a securitized loan, and don’t pay for them, should I be allowed to keep them… since they are crucial to my livelyhood?
(I can’t pay for my house, foode, clothes or jewelry without my business income.)
I’d be curious to hear your views on these issues.
Sorry boys-
I don’t have a problem with taking exception to the comments of others, but we need to limit insults to public figures or myself. [You can let me have it, as long as you keep it clean.] : )
Twist
Is Britain’s economy heading for the perfect storm?
Calculated Risk notes Fannie Mae selling preferred and warning on cuts to their dividend
SHORT SALES WITH MONKEYS!!
I could probably get more short sales accepted if I was dealing with trained monkeys that the dumb no-clue bank personnel I’m currently working with.
Yes, we have a crisis in our hands Sherlock and the banks don’t have a clue how to fix the problem.
Realtors are bringing buyers and sellers together to at least reduce the amount of foreclosures in the country. .The giant sucking sound Ross Perot spoke about a few years back. .it is the loss of your home’s equity when your neighbor’s house gets foreclosed. Good bye college fund. . hello Hillary (solve all your problems by just voting for her)
Are the banks helping out?
The answer is no!
Let me give you my solution to solve the housing crisis. . hire competent people,to make fast decisions and give a response in five working days.
You would reduce the amount of foreclosures by one third in the next six months. .
That would be a start . .
JUST VENTING! IT IS INCREDIBLE THAT SOME DEALS HAVE TO WAIT 30 DAYS FROM A BANK TO GET ACCEPTED. . .BY THEN THE BUYER GOT MARRIED AND NEEDED A BIGGER HOME!
Signed
The Short Sale “Specialist”
http://www.ReallyNiceHomes.com
Tigreroar-
Don’t ya love the “how to” articles in the paper that say, “work with your lender to do a short sale,” like you just pick up the phone, someone on the other end agrees to lop off $50K, and off you go?
I’ve heard of some buyers who liked the deal they got – eventually- but it’s not a fast easy process.
Surge in Auto-Loan Delinquencies
Is Latest Trouble for the Economy
@31 John
!!!!!
Well, I think the untold story is Alt-A loans and the second mortgage market. From what i’ve read, it looks like these two things are going to make the sub-prime look like a bump in the road.
Jan-Martin- (#34)
I thought this story was terribly important. It demonstrates that not only was lending too easy in the residential mortgage world, but in auto loans, consumer loans, commercial RE, etc.
That’s part of why “The Plan” won’t do much- it’s too small to even be a bandaid.