Posted on 12/07/2006 8:52:46 AM PST by GodGunsGuts
An Economic Pillar on the Verge of Collapse
By Steven Pearlstein Wednesday, December 6, 2006; D01
It's been more than a year since we've heard from those who denied there was a housing bubble.
Since then, the industry boosters, along with the "soft-landing" crowd over at the Federal Reserve, have coalesced around the idea that maybe the market got a bit frothy after all, but now the correction is almost complete, the unsold inventory's been worked off and the worst is behind us.
But just when you're feeling hopeful again, you get reports like yesterday's Wall Street Journal piece reporting that delinquency rates are suddenly soaring on all those loosey-goosey subprime mortgages. They are starting to cause real heartburn for pension funds and other investors who bought securities backed by those mortgages on the theory that they were no more risky than a Treasury bond.
"We are a bit surprised by how fast this has unraveled," Thomas Zimmerman, head of asset-backed securities research at UBS, told the Journal, removing his head from the sand. Trust me, Tom, you ain't seen nothin' yet. After the subprime loans come the 100 percent, interest-only loans, followed by the meltdown in the overbuilt multi-family housing sector....
(Excerpt) Read more at washingtonpost.com ...
It's already happening (see previous replies). How far it will go is anyone's guess. But the coming recession will be prolonged and deep...as bad or worse than any recession on record in the last four decades IMO.
Summary: Delusional
Oh you just don't understand someones circumstance. If you are plan on living someplace for 5 or less years, why not take a 5/1 Arm and save a three quarters of a percent on your interest rate. On the average house, that's about $6500 in savings. Really, most people do not stay in a house even 5 years. Why pay the extra interest rate?
Not true. Ex-Texan has maintained for the last 4 years that it is coming in the next 6 months and housing will fall 40%. Of course, 4 years and about a 3% drop later he is proclaiming himself right.
Maybe they should just refinance another 5 year fixed interest only loan... I hear rates are lower than ever....
Of course that would make the 20/20 lard-butt/couch-potatoes' theory of eminant collapse look as dumb as they are.
Why not just do another interest only loan? Say at 6% fixed for 5 years? Or why not refinance for a 40 year or even 60 year mortgage at 5.75%?
You don't understand a thing I asked do you? You act like you know, but you really don't understand any of it... stick to buying cars in cash.
LOL! That's a good one.
No offense, but do you realize you've paid over 150K in rent for that home with absolutely nothing to show for it?
Suppose you purchased that home 8 years ago for 250K and paid a mortgage of $1600 to finance that purchase. If you could sell that house today for 500K you'd pocket the equity appreciation of 250K tax free! That's not even counting the tax deduction the interest on the mortgage would have provided.
I realize hindisght is 20/20 but don't you see how much further along you would be if you'd chosen to buy the home rather than renting it?
Yeah, who wants $250K worth of appreciation. That's over $4K of appreciation he missed out on each month, which BTW is TAX FREE income. I think most of these bubble heads are just bitter non-homeowners.
Let's see, RobRoy rents. So does ex-Texan. I think GGG said he rents. If Willie Green rents, you've discovered their secret!
Nah, no comment. I have no comment.
;O)
Definitely no comment.
;OD
As soon as you are willing to leave your lard-butt-comfortable-couch-zone and seriously examine evidence that will change the color of your rose colored glasses...feel free to give me a ping. Until then, enjoy your ignorance.
review
They may be a lot more bitter than we first thought.
I was surprised when I looked at the OFHEO's house price index. Notwithstanding all the hype from the gold-peddlers, and all the anecdotes from somebody's brother-in-law, home prices are still going up.
OK, they might not be going up like they were, but they haven't been going down. Nationwide, on average, home prices this quarter are up.
The median-priced U.S. single-family detached home — half cost more, half less — fell 1.7% in August to $225,700, compared with a year ago. The decline is no doubt jarring to sellers, who haven't seen prices fall nationally since April 1995. The price drop was also sharp, the second-steepest in 38 years.
http://www.usatoday.com/money/economy/housing/2006-09-25-existing_x.htm
Here's something even more recent (in which home prices fell even further):
Prices of existing homes drop 3.5% from 2005
By Noelle Knox, USA TODAY
Prices of existing homes — which fell a record 3.5% last month from October 2005 — will likely drop further through year's end, delivering the bitter medicine needed to restore the health of the housing market, the National Association of Realtors said Tuesday....
http://www.usatoday.com/money/economy/housing/2006-11-28-existing-home-sales_x.htm
My company just renegotiated class A office space in a major US city. We are getting a 25% reduction in rent for the next five years..
I haven't researched what will happen to commercial rents, but I actually think residential rents will go down as a result of increased supply (from people who are forced to rent out their condos/homes).
"Prices of existing homes drop 3.5% from 2005 By Noelle Knox, USA TODAY"
That's old news. USA Today and FinancialSense like to show hype; if what's really going on isn't hype then they make something up. People who want to justify what they've already decided to think love those guys.
OK, sure, I use their stuff sometimes, I use everyone's sources. I don't have the luxury of just reading only what agrees with what I've decided is true. I only make money when I know what's actually going on. That's why I check everyone out. Then I compare credibility. I kind of like the "the OFHEO's house price index" that came out with "Nationwide, on average, home prices this quarter are up". You can see their take for all regions --here's the numbers.
Please forgive the length of this post but you did ask If I "was sure". FreddieMac's got a slightly different take with the same conclusion as comes with the OFHEO stats:
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Office of the Chief Economist |
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| All Entries Are Percent Changes | New England | Middle Atlantic | South Atlantic | East South Central | West South Central | West North Central | East North Central | Mountain | Pacific | The United States | |
| Quarterly Change | |||||||||||
| Q2 2006-Q3 2006 | 0.1 | 0.6 | 0.7 | 1.6 | 1.6 | 1.0 | 0.5 | 1.7 | 1.4 | 1.0 | |
| Annualized | |||||||||||
| Quarterly Change | |||||||||||
| Q2 2006-Q3 2006 | 0.3 | 2.5 | 2.9 | 6.4 | 6.7 | 4.0 | 2.2 | 7.1 | 5.7 | 4.0 | |
| Annual Change | |||||||||||
| Q3 2005-Q3 2006 | 3.7 | 8.8 | 9.5 | 7.7 | 8.0 | 4.1 | 3.1 | 10.8 | 11.7 | 7.9 | |
| 5-Year Change | |||||||||||
| Q3 2001-Q3 2006 | 59.5 | 73.2 | 69.1 | 30.8 | 29.5 | 34.6 | 27.6 | 55.6 | 95.7 | 55.2 | |
| Annualized | |||||||||||
| 5-Year Change | |||||||||||
| Q3 2001-Q3 2006 | 9.8 | 11.6 | 11.1 | 5.5 | 5.3 | 6.1 | 5.0 | 9.2 | 14.4 | 9.2 |
Send comments and questions to chief_economist@freddiemac.com
Although Freddie Mac attempts to provide reliable, useful information in this document, Freddie Mac does not
guarantee that the information is accurate, current or suitable for any particular purpose. Estimates contained in
this document are those of Freddie Mac currently and are subject to change without notice.
Information from this document may be used with proper attribution. Alteration of this document is strictly prohibited. © 2006 by Freddie Mac.
Something else that makes this stuff more convincing than USA Today is I can check how the numbers are figured:
1. What is the House Price Index?
It is a measure designed to capture changes in the value of single-family homes in the U.S. as a whole, in various regions of the country, and in the individual states and the District of Columbia . The HPI is published by the Office of Federal Housing Enterprise Oversight (OFHEO) using data provided by Fannie Mae and Freddie Mac. OFHEO began publishing the HPI in the fourth quarter of 1995.
Freddie Mac's Conventional Mortgage Home Price Index (CMHPI) provides a measure of typical price inflation for houses within the US. Values are calculated quarterly at three levels of geographical aggregation: Metropolitan Statistical Area (MSA), state, and Census Bureau division. A national index defined as a weighted average of the nine Census division indices is also available. The CMHPI is based on an ever expanding combined database that currently numbers more than 31.6 million.
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