Why won’t the Fed catch the sudden onset of deflation? Because they’ll look at past models and say, "Oh, it only comes on gradually." Past models aren’t working now. They don’t work. No reason why they should. So you have to be really cautious about a sudden deflationary impulse. Housing Doom is pleased to present the fifth installment of our unauthorized annotated transcript of the American Enterprise Institute’s March 17, 2009 seminar "The Deflating Bubble, Part V: Forecast and Policy Recommendations for the Next Six Months." [1] This is the presentation by AEI Fellow John Makin. The event site has…
Read more…

Banks made two major errors during the lending boom.  One was passing out wonky mortgages to noncredit worthy borrowers.  This caused the subprime debacle.  The other was lending large amounts of money on properties selling for speculative prices.  This allowed prices to rise beyond the means of the usual pool of buyers.  This is the new "prime debacle". The mortgages appeared to be, and were rated prime.  These so-called prime mortgages however, were just a different brand of wonky loans.  Sure, they weren’t negative am or adjustable rates, and they were considered low risk because the buyer had a large…
Read more…

Doomers please welcome Kat Sanders, who has been kind enough to submit the following general commentary on the Home Builders to Housing Doom.  Kat blogs at her Construction Management Degree blog and, within that site, at The Fixer-Upper Blog. She invites your comments and questions either below in the comments or at her email address katsanders25@gmail.com.   Problems in the Construction Industry by Kat Sanders It’s not a good time to be connected in any way to the real estate or construction industry. The recent subprime crisis and the disastrous consequences that followed have taken its toll on everyone connected…
Read more…