I’ve thought the same thing. America can’t keep building houses forever to drive the economy. It’s about time we accepted that this bubble has come and gone and focused on what we will do now for a living instead of throwing good money after bad.

Yes, I have talked to a lot of idiots like him, too. People forget the lessons of history. True, lots of money was lost in the stock market of October 1929. But even more money was lost in February through March… people thought prices had stabilized, and they hadn’t. They just kept dropping, and wiping out investors that thought they’d bought a bargain.

Phoenix is entering the first stages of a full-blown Depression. I’ve said it on this board a dozen times. The city ‘leaders’ have always counted excessively on homebuilding to lead the metro economy. It’s pretty much over with, now. And with it, go the a good chunk of the millions of fast food restaurants, soulless malls, absurdly distant housing developments.

Good riddance. We need to concentrate now, on repairing past mistakes.

Right.

Still going to rent for awhile…

The housing boom was an ill conceived orchestrated event aimed at spurring the economy and enabled by low interest, low qualifying standards and boat loads of inflationary money introduced to the secondary lending market.

So what went wrong? Wages did not inflate as they had in every past, purposely induced, inflationary scam. As the ARMs, negative amortizations and interest-only-resets matured; the all important wage hikes so heavily counted on, had actually gone negative.

When a county exports jobs and imports a foreign labor source, unbelievable as it may seem to some, wages are forced down, not up.

Just saw your posting to the sidebar of part 3 of Henry Blodget’s 3 part interview with Robert Shiller. The parts are as follows:

1. U.S. House Price Decline Could Be Worse than Great Depression, Economist Shiller Says
   • Shiller Called the Current Housing Crisis in 2005
     • House Prices Fell 30% During the Great Depression
     • Case-Shiller Index: House Prices Down 17% in the Top 10 Markets
     • Shiller: Corrected for Inflation, House Prices Currently Down 24%
     • Could Housing Prices Drop Below Great Depression Levels?
     • Negative Equity a Risk to Homeowners, Lenders
     • Zillow.com: 1/3 of 5-Year Homeowners Owe More than Their Houses Are Worth
     • Owe More, Spend Less
   • The Wealth Effect
     • How Will the Worsening Housing Crisis Affect Spending?
     • Stock Market vs. Housing Market Wealth Effect
     • Shiller: Housing Effects on Consumption Stronger than from Stocks
     • Shiller ‘Pessimistic’ About Consumption Demand for Next Few Years
   • Looking for a Bottom in Housing
     • No Sharp Rebound in Housing?
     • Shiller: No Such Thing as Historical Uptrend in Housing
     • Shiller: In a Boom, Production Follows Price
   • Boom Thinking in a Bust Market
     • 2005: San Francisco Buyers Expected Prices to Rise 14%/Year for 10 Years
     • Shiller: Homebuyer Expectations Still Unrealistically High
     • Shiller: Expect at Least Another 10% Drop in House Prices
2. Specualtive Bubbles Are Inevitable — and Valuable, Says Economist Shiller
   • Shiller Called the Market Top in 2000
   • Bubble-Proofing the U.S. Economy
     • Shiller: Bubbles Are Built on Misinformation
   • In Praise of Bubbles
     • Bubbles Are Easy to Call After They’ve Burst
     • Ben Bernanke — No Bubble Here: “House prices have risen by nearly 25 percent over the past two years. … [A]t a national level these price increases largely reflect strong economic fundamentals…” (2005)
     • Better Information for Investors = Less Catastrophic Bubbles
     • 17th-Century ‘Tulip Mania’ First Recorded Speculative Bubble
     • Fortunes Exchanged for Rare Tulip Bulbs in 17th-Century Holland
     • Mississippi Bubble Occurred in 18th-Century France
   • Shiller: Bubbles Can Be Valuable Learning Experiences
     • Shiller: Connecting Prices to Fundamentals Key to Spotting Bubbles
     • Stock Market, Real Estate Bubbles Two Different Beasts
     • Shiller: Latest Housing Bubble Due to Essential Misconception
     • Shiller Broke Down Real Estate Trends in a 2007 Paper for Yale
     • Learning (or Not) from Experience
   • Bubble-Hopping for Fun and Profit
     • Will We Ever Learn?
     • Consensus Hard to Build Amid Speculative Hype
     • Latest Real Estate Boom Unusually Wide-Ranging
     • Shiller: Global Economic Boom Lit Housing’s Fuse
     • A New Kind of Bubble?
3. The Solution to America’s Housing Problem
   • So Professor, What’s the Solution?
   • Shiller: Short-Run Solution (Price Correction + Federal Aid) is Underway
     • But More Help for Homeowners, More Fed Stimulus Needed
   • Shiller: Don’t Nationalize Housing
     • Don’t Fight the Market
     • Banks Should Write-down More Mortgages
     • Too Many People Were Lured into Bad Loans
   • Myths of the Housing Boom
     • Bad Lending Led to Boom/Bust
     • ‘Colossal Failure of Risk Management’…
     • And Regulators Were Either Asleep, Or Encouraging Bad Behavior
   • Shiller: The Long-Term Solution Is…
     • More Financial Innovation, Not Less
     • Housing Bust is Opportunity for Progress
     • Shiller Advocating ‘Continuous Workout’ Mortgages
     • Mortgages Designed to Manage Risk, Diversify Holdings
     • If Default Likely, Most Lenders Will Try to Help Borrower…
     • But Only at Point of Desperation
   • Shiller: ‘Contiuous Workouts’ Proactively Prevent Default
     • We Need to Plan for Workouts Before Danger
     • Workout Rates Should Be Indexed, Not Random
   • What About Risk to Lenders?
     • The Answer Is More Financial Innovation
     • Shiller’s Firm Creates Such Risk-Management Tools
   • But What About the Cost?
     • Shiller: Cost Not Great, “In Theory”
     • Workout Mortgages’ Lower Risk of Foreclosures…
     • Which Should Save Lenders a Lot of Money
   • Praise for Bernanke! And Congress!
   • Like Great Depression, Housing Bust Is Opportunity for Progress
     • We Need to Do More in Current Crisis
     • More Financial Innovation Is Long-Term Solution
   • Shiller: Election Year Brings Hope

The bullet points in the video make a sort of running PPT commentary and review, for what it’s worth (thank heavens for Dvorak )

I spent Labor Day weekend in Long Beach, and was struck by the number of repo-ed boats there were in the harbor. [I took a picture, but it didn't turn out very well.]

I wondered how many were financed by HELOCs, leaving owners underwater, or real estate industry people who thought the good times would go on forever.

There were condos for sale all over Long Beach- and more under construction. It’s clear the problems are going to keep on coming.

“The worst states are getting worse,” Brinkmann said, noting that overbuilding occurred in California and Florida, and their numbers will continue to drive the national ones. Those states, he added, also are the two with the most mortgage loans outstanding.
Brinkmann said he hasn’t investigated why states like Massachusetts, for example, showed marked improvement. But what’s happening there might indicate how markets without massive overbuilding problems might recover in the months ahead, he said.

THIS CONFIRMS WHAT MY WACHOVIA FRIEND SAID ABOUT CALIFORNIA–IT’S TOTAL B.S. TO THINK ANY CALIFORNIA HOUSING MARKET ISN’T BEING HIT, AND THAT THE HIT ISN’T INCREASING. THEY JUST WON’T REPORT THE TRUTH ABOUT THE “HIGH END” AREAS OUT HERE. THE CALIFORNIA ECONOMY IS TANKING VERY, VERY QUICKLY.

AND NO, PLACES LIKE MASSACHUSETTS AREN’T THE GOOD FUTURE OF HOUSING–THEY’RE THE BAD, BECAUSE THEIR HOUSING ‘STABILITY’ OR ‘RECOVERY’ IS ABOUT TO GET SIDESWIPED BY THE COLLAPSE OF THE OVERALL ECONOMY. THE ONLY REASON ‘BETTER’ HOUSING MARKETS HAVE SURVIVED IS JOBS. BUT EVEN A MAKE-WORK, TROUGH-FEED LIKE MASSACHUSETTS WILL GET HIT VERY SOON. FIRST THE SAFE JOBS LIKE STATE EMPLOYMENT WILL GO. THAT’S HAPPENING IN CALIFORNIA NOW BIG TIME.

JUST TRY TO GET THE REAL TRUTH ABOUT THE CALIFORNIA ECONOMY–ALTHOUGH THE MAFIA OUT HERE ATTEMPTS TO COVER IT UP AND SWEETEN THE POISON, WE ARE IN A VERY DEEP RECESSION IN CALIFORNIA NOW, AND WITHIN TWO OR THREE MONTHS WE WILL BE IN A DEPRESSION.

JUST COME TO SAN FRANCISCO AND LOOK AROUND–’FOR RENT’ SIGNS ON EVERY PRESTIGE BUILDING, ON EVERY BUILDING PERIOD.

CALIFORNIA IS ONE BIG CONSPIRACY OF SILENCE–A LIE, A PATHETIC JOKE.

Just like Tom Zimmerman said a year and a half ago, house price drops drive defaults (and vis versa). This is Roubini’s “vicious circle.”

Doomers have put up with my rants about accounting rule SFAS 140 ever since I came on board in July 2006, so they might want to join me in raising an eye brow at this amazing story.

“Fannie Mae Investor Sues Citigroup, Merrill Over Stock Drop”, by Patricia Hurtado, Bloomberg, September 5, 2008.

Citigroup Inc., Merrill Lynch & Co. and three other banks were accused in a shareholder lawsuit of failing to warn investors about proposed accounting-rule changes that lowered the value of preferred Fannie Mae stock.
…

FASB is considering changes to Financial Accounting Standard 140 that may require Fannie Mae and Freddie Mac to bring a combined $3.7 trillion in off balance sheet assets on to their books, which would substantially raise their capital requirements.

Losses

“When news about these new accounting rules and their possible effect upon Fannie Mae became public, the company’s stock dropped substantially,” Orkin said.

Tanta covered this 13 months ago for heaven’s sake. Was everyone outside of the blogging community asleep prior to 7/7?