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i´m not sure if this was postet before.
but when you missed it you really should read it.
i couldn´t believe that the survey was from mid september 2006.
really shocking
denial / hope/ brainwashed
Most expect their home’s value to rise in next few years
http://immobilienblasen.blogspot.com/2006/09/denial-hope-brainwashed-most-expect.html
It is time for people to come to terms with the ugly truth about our fellow Americans. Most “educated” Americans are B-a-BAD — Born-and-Bred American Dupes. They are bred to serve their economic masters — Bankrupters and Fraudsters of New York City (BFNYC) and Corporate Crooks of America (CCA). The best way they serve their masters is by buying Scams, aka stocks, and Scam Mutual Frauds, because by selling Scams is how our ruling elite make most of their money. In 1995, the stock market was turned into the current Scam Market via the device of what turned out to be Scam Options. Best examples of B-a-BAD are those who have a big mortgage and own Scams. They feed the Crooks with both hands!
Anyone who is optimistic about America’s future needs to get his, or her, head drilled.
Jas Jain
To say its a bad system will be an understatement. But what functioning alternatives are there? Almost all the world governments are off the gold standard.
The Gold standard, although desirable, is not the main problem right now. The problem, squarely, is bad leadership, which currently consists of Bankrupters and Fraudstes of New York City. They control the Fraudulent Reserve System. The whole econo-political system have succumbed to corrption of Money Men. Not that it wasn’t anticipated.
Jas Jain
The gold standard did not work because growth that outstripped gold mining led to terrible Deflation. The risk with fiat money of a currency crashing forcing people to start over is minimal compared to the wretchedness of constraining growth to mine output. People effectively threw the gold standard away a long time ago and it is never coming back.
I’m interested in anyone’s rebuttal to Mole Man’s point…
Mole man, some would disagree with your first sentence, including myself. Monetary theorists such as Fekete would advocate a bimetal standard of gold and silver. Google Antal Fekete, Real Bills Doctrine and do some research on the causes of the great depression as a result of Fed monetary policy. I’m sure you can dig up some of the stuff Fekete’s written on just this subject. Also, I posted this brilliant article yesterday and it’s worth reposting again:
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
Alan Greenspan
[written in 1966]
The full article is here:
http://www.321gold.com/fed/greenspan/1966.html
“The gold standard did not work because growth that outstripped gold mining led to terrible Deflation. The risk with fiat money of a currency crashing forcing people to start over is minimal compared to the wretchedness of constraining growth to mine output. People effectively threw the gold standard away a long time ago and it is never coming back. ”
The gold standard did not work because more debt was issued than the gold backing it. When the deflation hit - as it invariably does whether or not there is a commodity backing the debt or not - there would be a ‘run’ on banks by depositors to get their gold out before the banks collapsed.
Deflation is the inevitable result of inflation. Debt inflates until it can inflate no more:
John earns $2000 a month
John’s interest only mortgage payment is $2000 a month
Looks like John’s personal debt pyramid has hit the wall.
There is no money - all money is debt. Money does not exist until it is borrowed into existence. When the world debt pyramid was about to implode (and take modern civilization with it) during the great depression, Roosevelt confiscated gold from the citizens. That didn’t work, so along came Hitler and WWII to wipe out and the debt-saturated saps - all 50 million of them.
Thirty years later, when that debt inflation scam again hit the wall, Nixon closed the gold window for good.
Now, 35 years later, the last pillar of debt inflation, the real estate bubble of all time, is imploding.
Gold does not cause deflation - you can’t deflate what hasn’t inflated. ‘Debt inflates to maximum potential, then it deflates to maximum potential.’
It’s called the debt cycle - of the bloodsucking bankers, for the bloodsucking bankers, by the bloodsucking bankers.
“You ask if you can borrow 10 dollars and I say sure…then get you to sign a contract which states I will lend you $10 for 1 year at 10% so after a year you will owe me $11 in gold or silver…Then I pull out a napkin and write $10 on it and hand it to you…
You say this is a napkin it’s not money…Then I say you are in luck because I’m a banker and all the banks accept my napkins because I accept theirs…
Now get to work because you owe me $11…in gold and silver the Judges and police accept my napkins too and will enforce the contract you signed…
That is how banking has basicly worked for 300 to 400+ years…
Now we have a debt backed by debt system so forget the gold…
Elimination of the Gold standard allows banks to create almost unlimited amounts of debt out of thin air because money has been eliminated…But consumers have a finite ability to borrow it…once the borrowing slows or stops when the maximum potential is reached…the bubble will pop…
Bankers are just accountants with two sets of books and the power to create debt out of thin air…and call it money…
It is just a monumental ponzi scheme…everyone is paying interest on something that does not exist except in their imaginations…100’s of millions of people totally duped bouncing around in a debt inflationary bubble that is going to pop violently…Without the foggest clue as to why…”
Hypertiger
I like this quote dug up from somewhere:
“We are completely dependant on the commercial banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the banks create ample synthetic money (at the request of the consumer) we are prosperous; if not, we starve. We are absolutely without a permanent money system…. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.” –Robert H. Hemphill, Atlanta Federal Reserve Bank,1938…
How’s this stuff workin for ya chillidog? Glad we’re not on vacation here.
“But what functioning alternatives are there? ”
For a start, vote Libertarian. Since there usually are few Libertarians on the ballot, next-best is to vote against every incumbent on the ballot. Entrenched politicians will never, ever truly listen to what you want until they see their colleagues dropping like flies in elections.
Here’s a simple test for you (bag the fact that you may not really care about the issue): ask any politician for his/her specific solutions (traceable in the future) re: our outrageous “donation” of taxpayer money for foreign “aid.” They will look at you as if you are foreign. They will have no answer. They never have debated this question with any of the electorate and never will. Do you recall EVER, in your lifetime, being asked how (and whether) you wish to have your tax dollars spent on foreign “aid?” Bet not. If you think it is an inconsequential amount of money, check back in and keep this one going.
Public sentiment should undergo a sea change when the stock market crashes in the second half of October.
I expected a stock crash or correction last October and now the Market is at multi-year highs. I moved a lot of my money to International and Cash so I really didn’t miss any gains. International outperformed and cash now yielding 5+% isn’t too far behind.
Fine with me… can you explain?
Only 6% expect the value to decrease.
Maybe they will turn out to be the smart ones, if inflation spins out of control like in the late 1970s. Although everyone would lose this time thanks to the prevalence of HELOCS and ARMs (except for gold bugs and commodities traders), renters would lose more.
They HAVE been the smart ones for the last 6 years. Let’s face it, the dumber you are, the smarter you are, at least circa 2001-2005. It’s unreal how much money could have been made the last few years using debt. Of course, everyone on this blog already knows this.
Yep, but an economy will ultimately be unsustainable if based on stupidity, fraud, and bad financial investments. The question is how long the Fed can hold everything together. If they have a couple of unanticipated tricks up their sleeve, like this housing bubble which has brought us all together, things may continue for a few years yet. I guess we’ll see. Of course I hope for the correction and a return to an economy based on production, service, and fundamentals sooner than later.
Can’t happen until this system of Corporate/Elite rule is ended. Housing mania was just another method of moving wealth up the ladder. I thought the SERFS loan post the other day was apropos of what is going on.
The race to the bottom and 3rd worldization of the U.S. is well under way. The only jobs left will soon be service to the wealthy jobs.
some funny news from the uk where the banks are afraid that their bad loans will explode
Banks call for changes to debt advisory services
· Concerns rise over advice on ‘bankruptcy alternative’
· DTI and OFT told adverts may mislead customers
Leading banks are urging the authorities to change the way debt advisory firms are able to advertise and give advice on individual voluntary arrangements.
The banks are trying to persuade the Department of Trade and Industry and Office of Fair Trading that advertisements for IVAs - which allow people to repay a set amount each month in exchange for creditors freezing interest payments on the debt - may not paint a fair picture of their ability to help indebted customers.
Although IVAs were introduced as an alternative to bankruptcy by the Insolvency Act 1986, they have become more common over the last 18 months when changes to the law allowed individuals to be discharged from them after one year. As a result, people have increasingly used IVAs as a way to help with their payments on their spiralling debts.
Last month the government revealed that a record 26,021 people in England and Wales became insolvent during the spring while there were predictions from accountants KPMG that the number of insolvencies this year would breach 100,000.
The £1.1 trillion of debt owed by Britons is proving controversial. While IVAs are a topic of conversation among bankers, the banks’ lending policies have also sparked debate. Citizens Advice has said that rising debt was its number one problem and called for government action on banks lending to families that were unable to afford repayments. This week, figures showed that Britons owed one-third of all the debt in Europe. New lending on credit cards, loans and overdrafts in the UK reached £215bn in 2005 compared with a combined total for continental Europe of £600bn. In this environment of relatively easy credit, there are some in the industry who also believe it is also too easy for people to enter IVAs.
Eric Leenders, director of the British Bankers Association, which lobbies on behalf of the major banks, said the body was “looking to progress conversations” with the authorities about the way IVAs advertise and advise customers.
The Insolvency Practitioners Association is also calling for the review of regulations governing the handling of cases. The association is concerned that much of the initial advice and caseload is handled by unregulated call centre workers. Banks appear to share its concerns and are taking their argument directly to the DTI and the OFT, which regulates debt management licensing.
The BBA is targeting the advertising of IVAs and points out examples of debt management companies that claim an IVA could write off 95% of a debt. Banks are trying to establish how representative such claims are and argue that the rates may not make clear the level of the fees levied by the debt management company.
The banks also wonder whether customers are aware that they run the risk of needing to remortgage their homes. This is because a typical IVA runs for five years but can be reviewed in the year before it expires when property assets can be revalued - and are likely to have appreciated. This may mean people with IVAs would be required to pay back more.
Some of the high street banks have highlighted the impact that IVAs are having on their own business. This year, Eric Daniels, chief executive of Lloyds TSB, pointed out that when new bankruptcy laws were introduced in the US “there was a change in societal values … [which is] a little bit worrisome”. Lloyds is not the only bank to have tightened its lending criteria and improved systems for collecting unpaid debts.
FAQ
What is an IVA?
In an individual voluntary arrangement, creditors agree to freeze the debt - typically at around 30p-50p in the pound, which the debtor then repays over a fixed period, usually five years. The debt is then discharged.
How does it work?
An insolvency practitioner determines how much the debtor can afford to repay, and once a minimum of 75% of creditors agree, it becomes a binding agreement.
How do they differ from bankruptcy?
In a bankruptcy, the debtor’s assets are sold off and the person loses control of their assets, while an IVA lets the debtor keep his or her home.
Do I understand this clearly? You pay 30 to 50% of what you owe
and that’s it! And you keep the house although you only paid 30 to 50% of the mortgage?
Tell me I’ve got it all wrong, PLEASE…!!
i hope someone from britain can clarify this.
Actually during the Great Depression here in America the Banks made alot of arrangement with people to put off their normal payments until the economy improved .
Yeah, the government will bail out the rest of the uncollected money– taxes would be one way (that wouldn’t cause inflation but otherwise it would really suck), or reving up the crank on the money wheel would be another (that probably would cause inflation)… this is just a mechanism for the bank to extract as much cash as possible from FBs. 30 or 50% is better than nothing or 10 or 20%.
Yes, but bringing the property to foreclosure should be the only reasonable thing to do. Otherwise you would give the wrong signal to all owners with mortgages and buyers, which is: Oh give us 30 to 50% and we call it even, and you can keep the house. This would be the end of civilisation.
Survival of the stupidest!
The way I read this the fixed interest rate of the IVA is 3 to 5 %.
I do not think the British Government should cave in to the Banks. Would it not be better if the Banks performed better screening of loan applicants so as not to put people in this position to begin with? If the loan applicants are already up to their eyeballs in debt then don’t give them any more loans. (What a concept.) Then there would be no need fot the Banks to be lobbying the British Govt.
news from one of the top bubbles in europe. slowdown might be underway next year.
spanien / spain bubble world tour
Holiday homes account for about 30 percent of residential properties being built in Spain, according to DCM Securities, a London-based broker that finances property development. Half the holiday homes are for foreigners, with U.K. residents making up 52 percent of overseas sales, DCM’s data show.
http://immobilienblasen.blogspot.com/2006/09/spanien-spain-bubble-world-tour.html
Espagne: Quand le marché s’éssouffle!
(Spain: When the market runs out of steam!)
http://www.cafebabel.com/fr/article.asp?T=A&Id=2038
French translation of a Spanish article in El Mundo talking about
cancelation of big developments and a decline in home sales of 40%. It’s not mentioned from what date to what date and the link to ‘El Mundo(newspaper) brings you to the El Mundo homepage and not to the article of September 10th.
So if any Spanish speaking people could look it up for us, you’re
welcome.
” Loin de contester ce début d’essoufflement, Bautista Soler, l’un des plus grands promoteurs des 40 dernières années dans la péninsule, expliquait que les causes de ce retournement de tendance se trouvent dans l’augmentation des taux d’intérêts pratiquée par la Banque Centrale Européenne (BCE). ”
“Not at all contesting these figures, Bautista Soler, one of the biggest promoters for the last 40 years on the peninsula, says the reason for this downturn has to be found in the raise of intrest rates by the European Central Bank(ECB).”
Souns so familiar, doesn’t it?
you really wonder when a ecb rate around 3%-3,5% can break the real estate market.
that is proof that a big downturn is on the way.
tough to refute that point jmf
I’ve drunk a few pints of Guinness but still cant make head nor tail of this(see link). Its a Spanish website dealing with their bubble; might be of interest to any Spanish speakers out there.
hiccup!
http://www.viviendadigna.org/
Tomorrow there will be a manifestation in Barcelona:
No empty glasses…hiccup…euh sorry,… houses!
Seems like a mass manifestation against speculation in housing, while millions of speculative and holiday units stay
empty , the FB or first renters can’t afford a home.
Seems like something brewing in Europe.
No, no Guiness, hiccup…
In Ireland the housing market has shuddered to a halt, inventory is building and prices are starting to fall.
http://www.ireland.com/newspaper/property/2006/0928/1158591129810.html
Finally time for a Guiness break!
feels like the “bad news” for housing pcik up day by day
Only seven of the 43 houses auctioned yesterday sold either under the hammer or immediately afterwards - an abysmal result that will force estate agents and vendors to reassess prices. Altogether, it’s been a washout week in the auction rooms with over 70 per cent of properties failing to sell.
Not enough Guiness served in the auction room, maybe?
Don’t worry, the article assures us it’s different there.
U.S. AUG. PERSONAL SAVINGS RATE NEGATIVE 0.5%
U.S. AUG. COMPENSATION UP 0.1%, WAGES UP 0.1%
U.S. AUG. REAL CONSUMER SPENDING FALLS 0.1%
U.S. CONSUMER INFLATION UP 3.2% YEAR-OVER-YEAR
U.S. CORE CONSUMER INFLATION UP 2.5% Y-O-Y, 11-YEAR HIGH
U.S. AUG. CONSUMER SPENDING UP 0.1% VS. 0.2% EXPECTED
U.S. AUG. PERSONAL INCOMES UP 0.3% AS EXPECTED
AUG. CORE PCE INFLATION UP 0.2% AS EXPECTED
“U.S. CONSUMER INFLATION UP 3.2% YEAR-OVER-YEAR”
Either more Fed Funds rate hikes are in the near-term cards, or else the Bernanke inflation targetting program will lose all credibility. Pick your poison.
The most important part is that GDP was up 2.6% which means negative growth. Welcome to stagflation.
Excellent point!
I am in the process of getting a 20% raise, so I am contributing to the wage price spiral and hopefully higher interest rates if BB has any stones.
you’re getting a 20% raise for performing the same tasks for the same output at the same time period and location? WOW.
The reported GDP number is a real number, not nominal. Inflation is already subtracted.
I went to the BEA since they released the GDP numbers yesterday and their definition did not subtract inflation. I trust you but where did you find the formula that shows inflation is subtracted?
From the BEA:
“mainly reflected a downward revision to inventory investment and an upward revision to
imports of services:
There is no mention of price deflators that should be present if Infaltion were subtracted.
my head’s really starting to spin now. Earlier this week we learned that home prices have indeed declined nationwide on a y-o-y basis SIX TIMES in the last 38 years (and am I the only one who’s rolling this around and around and around in his head, knowing that BB actually reiterated the LIE?) Now, I had always assumed that the reported GDP numbers were real (adjusted for inflation), and now we find out they’re not? Was this changed a la the CPI, unemployment, etc. in the last 15 years?
Real number? Like the CPI is a real number?? LOL!!!
For those that think rents will rise as house prices collapse.
http://www.safehaven.com/article-5991.htm
“Anecdotally, the house I rented two years ago, and moved out of six months ago, sits vacant, despite its advertised rent being 15% below what I initially leased it for. In addition, when I first rented it in New Canaan, CT there were only about a half dozen single family rentals available there. Now there are over a hundred.”
peter shiff is really funny
It’s more likely that Mr. Lereah saw Elvis than a bottom in the housing market.
Last week, during an interview on CNBC, Dennis Gartman, editor of the highly regarded Gartman Letter, asserted that the storage currency of choice among drug traffickers, arms dealers, and the Russian Mafia had switched from $100 dollar US bills to €500 Euro
About two, three weeks ago there was an item on the French television, saying that 60 to 70% of all 500euro bills where in Spain. Investigators said it probably had something to do with maffia, drugs and criminal activity in housing. Since then, no more information.
this was kind of expected even before euro replaced the 11 currencies in europe. in fact, the frs was urging the ecb to make 100 euro as the highest bill to circulate for exactly this reason. but, the rest is history.
in my hood 22151 they are the same as 4 years ago- and I’m 3 lights from the Pentagon w bus service and whitey schools
that”s because everyone in greater nyc and greater boston is cashing in their equity and moving to north carolina. i’m thinking of moving to reading PA myself. i just heard that the median home price is $42,000. on another topic just read that the median home price in my metrowest boston town dropped from $356,000 to $336,000. and this place stinks.
spend a weekend in and around Reading before you decide to buy there…also, do you work from home? Not much of a job market out there.
- from a lifelong pennsylvanian
From today’s L.A. Times (and may I add, no duh!):
Mortgage fraud continues to escalate in Southern California, FBI figures show, raising concerns of increased defaults and foreclosures as the housing market cools down.
http://tinyurl.com/ez4ml
All of the loans had been made by National City Corp., a Cleveland-based bank that is one of the biggest lenders in the country, and had been insured by HUD.
I’ve been trying to tell people that Ginnie Mae, that is to say, the taxpayers, will take it in the shorts. A trillion here, a trillion there, oh well, it’s only money.
Nice that the LA TImes finally put a negative housing related story on the Front page.
How about a discussion on:
Who all, in order of culpability, are responsible for Mortgage Lending Fraud (MLF)?
Jas Jain
Mr an Mrs Greed-Envy
Planet Earth
It was me. Just me. I bought at the bottom and sold at the top. When I stopped playing the game, took all the marbles (not just my marbles) and walked away I started achain of events that eventually collapsed the worldwide housing market. I knew this would happen and I didn’t care. So there. Now you know. What can you do about it? Feel better now that you know? With the answer you sought can you reinflate the bubble? Would punishing me out of some misplaced emotional lashing out make things better? Or perhaps, just perhaps you need me. When the bottom hits I’ll be buying multiple properties and renting thm at fair prices. If instead you take all my ill gotten gains and give them to the nice govt will they do more good with the filthy lucre?
Hey Mr. Cote , I think you should just march right over to the bank and give back your marbles LOL .
It’s true that the market needs investors that can cash flow and provide rental housing . The current flippers turn landlords aren’t going to last at a minus 50% cash flow .
Which bank? Which account? Just give me your acct # and socsec # and routing # and I’ll arrange the proper transfer of the correct amounts deserved for such a brilliant idea. All in accordance with the laws and statute of the Commonwealth of Nigeria.
“The current flippers turn landlords aren’t going to last at a minus 50% cash flow . “
They are also not going to last when they have 6 properties in 6 different states where the landlord can’t supervise what going on and where each have different local laws applicable.
1) Greedy lenders. Lenders sought to shovel out loans so they could be resold on the MBS market. The only way this could be accomplished on the necessary scale was to relax underwriting standards to the point where they were effectively opening the vault door, turning away and whistling while borrowers (any borrowers) took whatever they wanted. The lenders gave loans which they should never have issued to people who never would have qualified in any realistic assessment of their finances. Immediately on issuing the loans, the lenders dumped them onto MBS investors. This is a fraud on the MBS investors, who believed they were getting legitimate loan packages fully secured by real estate. Accordingly, they bought more than they should have. It was a calculated, deliberate action which the lenders took, and this is why they’re at the top of the list.
2) Dishonest borrowers. Those who lied about their finances on their applications are number 2, even beyond the honest FB because they lied to obtain more than they should have been able to get even under the lax lending standards.
3) Con artists, hucksters and flim-flam folks. There has been an enormous amount of fraud and deception over the past few years, most of which is still not known to the general public. This fraudulent activity drove up and artificially inflated prices which then formed the comps for otherwise legitimate appraisals. They distorted the market process beyond recognition.
4) MBS investors. Lack of due diligence and lack of inquiry to the issuing lenders caused MBSs to be bought far beyond any rational or safe level. The demand brough on by these investors, and the profits they offered the lenders, inspired the lenders to relax the standards to permit the cycle to continue.
Mind you, numbers 2 and 3 would not have been possible at the levels currently seen if the lenders had not relaxed their standards so they could sell on the MBS market. Notice also that I have not put a “normal” FB on the list, nor have I placed any builders on the list. Why? Because they simply perceived what they thought was a legitimate opportunity to make money during a boom. Perhaps they miscalculated, perhaps they didn’t factor in as many variables or costs as they should have, but these were “honest” mistakes, not deliberate attempts to defraud people. As for the builders who provided financing and shoehorned folks into houses they couldn’t really afford, they placed themselves into category 1. The builders who gave enormous under-the-table rebates and incentives to category 3 because they distorted appraisals and “plastered over” the cracks showing in the process.
Well said Kia ,very good summary .The lenders are the front line screeners that breached their duty to make logical loans .
I have never seen anything like it in my life .
“Lenders sought to shovel out loans so they could be resold on the MBS market. The only way this could be accomplished on the necessary scale was to relax underwriting standards to the point where they were effectively opening the vault door…”
IMHO it is just not true. This is not to say the lenders are/were not culpable, but that the lenders acted in a manner deemed “prudent” by the Federal Reserve and by the FDIC. Go after the source not the mopes that followed the rules esttablished by Government and quasi government entities.
I do not believe the banks and lenders have been following the rules. Their actual reserves are FAR below federal guidelines, their mortgage exposures and recourse obligations are massive, and largely undisclosed, poorly understood and also far higher than the federal guidelines. This places the banks and lenders in grave peril. There was an article here within the past week explaining how Freddie might take a $22 billion (yes, billion) loss in a downturn. The second largest, Countrywide, has only about $22 billion in market capitalization to begin with. The potential for crushing losses and failures is hideously high right now.
Hoz,
Would you agree with the idea that commercial banks are owners of the federal reserve and act in concert with the federal reserve in terms of pushing credit creation into the U.S. market?
Do you think commercial banks do anything in terms of reserve requirements/credit creation without the implicit/explicit approval of the Federal Reserve?
If your answer to the above questions are yes and no then the commercial banks and their affiliates are equal in terms of culpability in regard to the serious mess that is now before us. I agree with you though that the federal reserve should be included in the list above for category No. 1.
Absolutely agree with you that the member banks own the Fed! I also am 95% sure that when I am on the golf course and should my put be short that the ball may not go in the hole. The reserve requirements are set by the FDIC - ((a) The Federal Reserve Act, as amended by the Monetary Control Act of 1980 (Title I of Pub. L. 96-221) imposes Federal Reserve requirements on transaction accounts and nonpersonnel time deposits held by depository institutions. The Board is empowered under the Act to determine what types of obligations shall be deemed a deposit. Regulation D–Reserve Requirements of Depository Institutions exempts from the definition of deposit those obligations of a depository institution that are issued or undertaken and held for the account of a domestic office of another depository institution (12 CFR 204.2(a)(1)(vii)(A)(1)). These exemptions from the definition of deposit are known collectively as the Federal funds or interbank exemption.) If any bank cannot meet the current reserve requirements I would be shocked. The reserve holdings requirements were greater in 1994 than currently even tho total lending is up 3000%. Blame anybody, but remember that this situation was set up in 1994. Personally if I owned a bank I would have taken advantage of the new reserve requirements of 1994.
So in answer to your questions: 1)Yes the commercial banks and allies directly influence the Federal Reserve.
2) the Federal Reserve does not set reserve requirements. The FDIC is subject to political pressure. This pressure can come from the street, concerned businesses, foreign governments as well as politicians.
3) Blame the Federal Reserve under Greenspan, Bernanke et al - But it is really hard to blame financial institutions when they are in compliance with Federal regulations. This is what makes it a great Ponzi scheme - who is guilty?
Hoz,
Under point 2 is it reasonable to conclude that the Federal Reserve could politically influence the FDIC and likely would try to influence the FDIC on reserve requirements if it would stave off a systemic failure in the financial system? This is the point I was driving at in terms of implicit approval of the federal reserve in my above post.
Vert
Hoz, Didn’t the Fed also improve the ability for banks to meet reserve requirements (thus increase loans) by allowing them to “sweep” checking accounts or other previously allocated accounts at the end of the business day?
The Fed eliminated reserve requirements, failing its primary duty to control the money supply. That is why I said not to blame the banks for taking advantage of an idiotic situation. The FDIC is a part of the Federal Reserve system and certainly are subject to the Federal Reserve influence.
Since commercial banks are the federal reserve it is akin to saying the banks loosened their own reserve requirements through their affiliate entity. It’s all one and the same. Plausible deniability in terms of when the Ponzi finance falls apart but nonetheless the commercial banks who created this credit bubble, in the end, are the ones truly liable as they are the Fed.
Auger, they call them “retail sweeps” deposits. It was just another way to push out more debt money and reduce required reserves.
thanks, I thought I remembered something along those lines. Just all part of the game that I try hard not to pay attention to as it diverts me from reality.
The mortgate brokers (incorporated) are long gone. . There is no proof of any wrongdoing, it’s the buyers who stated their incomes.
Everyone should have join in while the robbing was good and perfectly legal.
Also say thanks to Chinese MBS holders.
Amen. Just so.
KIA:
Nice summary.
I don’t see many national homebuilders that don’t qualify for category 1 or category 3. Do you know of an “honest” national homebuilder? Just wondering.
Vert
“Do you think commercial banks do anything in terms of reserve requirements/credit creation without the implicit/explicit approval of the Federal Reserve?”
Your right, all these folks worship the same faith!
Housing: ‘A bear market, not a crash’
http://www.nevadaappeal.com/article/20060928/NEWS/109280093
Goldinger said he is often at odds with Wall Street experts, and his Cassandra predictions embroil those in real estate. One real estate agent whispered “Shoot!” after hearing Goldinger’s advice that “you can’t prepare enough for what’s going to happen.”
It’s a bear market nationwide, said Bob Fredlund, an agent with Coldwell Banker Best Sellers in Carson City, in a phone interview.
“I believe it is a good time to buy,” Fredlund said. “People are buying houses in Carson City, and there are really good deals out there. There are reductions coming and reductions in the works because the market is slower.”
——-
So buy now before the reductions take place?
For the 3 months ending 8/31/2006 sales of homes in Carson City dropped by 47% year over year.
“If you don’t need the sale, take it off the market, he said.”
This advice mystifies me. How many people “casually” put their home on the market? How many people “don’t need the sale”?
I have at least three properties in my neighborhood where death or divorce DEMAND the property be sold.
How many of the potential sellers in a market have the luxury of choice? I’d bet virtually none and of those who merely “want” to sell I’d imagine their desire to liquidate only RISES as they see and hear the chorus of clearing declining prices around them.
Am I missing something here?
“Yes, you’re missing something. It’s not about the sellers’ needs or what’s best for the buyers, it’s all about us realtwhores. Please don’t forget that.”
Love,
David L.
Well…. some people who’ve held for a while and have sizable equity might have wanted to “test the market” but not truly been serious about the need to move. And some “investors” may or may not need to sell, but may want to sell.
Around here (greater Seattle) I think quite a few people are just testing the market, judging by the prices they put on the houses. There are only a few homes that say motivated seller, and sometimes even those are priced 20% over the current inflated market.
It is very frustrating to read so many stories of how prices are dropping and here we don’t have any, although the inventory is creeping up. It looks like our friends have found a seller for their house, which they bought in 2003 for 135K. It is at the bottom of the market for 3 bed homes, less than 1000 square feet, one bath, tiny bedrooms, tiny kitchen (about 8 X 12 feet) with old painted plain cupboards with the paint peeling off. Bathroom floor is rotting because the toilet has been leaking for who knows how long. Both the yard and the house are in worse condition than when they bought it and yet it looks like they will be signing papers to sell it for 225K, a 66% increase in 3 years, for a house in worse condition!
So many people around here don’t think we have a bubble, but the prices in this county (Snohomish) have gone up about 60% while the incomes have only gone up about 6%, so I guess I don’t understand what conditions would be classified as a bubble by these people if that isn’t.
I mean our friends have found a buyer for their house, not a seller.
Patience in Seattle. It’s clear you guys are at the very tail-end of this whole bust. Defcon 5 Level denial going on up there. But Seattle will not be immune, any more than any other “special” city (i.e., Manhattan, Boston, etc., where prices are already dropping).
Kim-
Do you check Zip for price reductions in Snoho?
It’s hard to believe ireductions are not happening there. If it’s really true that they’re not, then the only plausible explanation is that homes are cheaper than Seattle and since it’s the next county over, people think Snoho looks “cheap” in comparison.
But with prices coming down in Seattle, Snoho won’t be able to stay lofty for long.
This is because of the Realtor(R)/Brokers who purchased “investment” properties are now trying to get out while they can, and are trying to dissuade normal selles to sit out so they can unload their overpriced spec homes first. I think every vacant house I have seen for sale in central Florida is owned by someone in RE. Talk about insider trading…
I spent last week in and around Carson City. Amazed at the number of large-house new developments, including a completely insane development of HUGE houses with small yards, hard by Hwy. 50 in Dayton, a nowhere-place about 15 miles east of Carson. Every major street in that little town was under construction.
I was in Carson City last week too. I was just as amazed. Some of it being all about a lack of affordable housing but …damn, those NvMcMansions were not cheap!
This is what happens when you stop feeding the squirrels.
http://www.nbc11.com/news/9946298/detail.html?rss=bay&psp=news
Thanks Jim! That is classic.
roflow
high platue action
There, squirrels are a nuisance.
In the South, squirrels are dinner.
Watching the video makes me hungry! LOL
It’s hard to believe that people are so upset about killing the squirrels. I think it shows how easy we have it in this country that we have so much extra time and energy to go looking for something like that to spend time emailing about. Can you imagine someone in Africa, who may be worried about having enough to eat themselves, spending such time and effort?
I thought the mortgage ad (that was shown with the story) was more than a little ironic.
This is sloppy association. Back in the early nineties when I lived near there the market was crashing, there was a cute bungalow a short distance away with a for sale by city for $200k sign in front for more than a year, and these squirrels were a problem way back then. As the article mentions some progress has been made since then such as putting in the special garbage recepticles. This is California so you can’t just kill things unless you can demonstrate you tried everything else first. There is a similar issue with Mountain Lions, but people take them a bit more seriously.
In any case, it is important to understand that this is disinformation. Now that the bubble is known the same kind of poor logic that led people to think housing prices can only go up is being applied to the downturn. The lesson from the bubble is not that incorrect reasoning is okay as long as you are on the proper side of the wave. There is such a thing as objective truth and if you insist on playing a game of chicken with it there could be trouble. Squirrels bite in good property markets and bad, and the record of this in the local papers is not hard to track down at all.
There is something that I can not figure out. May be someone can explain this.
Big mortgage lenders like Countrywide, Wash. Mutual & others have been giving money to anyone who could sign at the X.
Where do the lenders get the money? Whose money is it?
How money (enormous amount of it) is injected to the system?
Do mortgage lenders borrow money from the Federal Reserve Bank (Central Bank) and then turn around and lend it to the borrowers, is this how it works?
I believe they “securitize” the loans. In other words, they bundle them together and sell them, according to the rating of the risk, in “packages” on the institutional market. The packages are bought by pension funds, mutual funds and other large investors.
When lending standards were relatively high and housing prices were/are steady or rising, they are considered relatively low risk interest bearing securities (because people, historically, pay the mortgage first and, with an historic 20% downpayment cushion, the default risk to principle was pretty minimal).
Naturally, with all the recent ridiculous lending standards, all that “conservative” stuff has gone by the boards. With “investors” chasing yields, spreads on these instruments (compared to treasury securities) fell to near historic lows. Because of the change in the underlying risk to these securities (due to lax if not fraudulent “standards” being applied) I don’t believe anyone knows what the “hit” will be to investors in these bundles.
My bet is it will be dramatic (if it hasn’t started already).
It’s pretty simple.
You depoist $100 in the bank. The bank can lend out the entire $100 because there are no “reserve requirements” - in other words, the bank is not required to hold a percentage of the deposited funds as “insurance” against a bank run, bad loans, etc.
This $100 the bank loans out, gets transferred to another bank, and they can lend out the same $100. Poof, $200 of loans have been made on the original $100. And it can go on forever because there are no reserve requirements. The banks make out like, well, bandits because they charge fees and interest on the money.
One of the greatest Ponzi schemes ever invented, and practically guarentees a huge explosion of money, where there was none before. The Fed used to control the money supply by raising or lowering the reserve requirement. Here’s a better explanation:
http://www.itulip.com/forums/showthread.php?t=292
No wonder that the feds stopped publishing M3 numbers last year, that explains it. Feds does not want the overseas investors to know that Dollar is much less valuable than before.
“the bank is not required to hold a percentage of the deposited funds as “insurance” against a bank run, bad loans, etc.”
Actually, the banks are required to carry a reserve for bad loans, but I don’t know how much. And when they lose money from the reserve because of a bad loan, then they have to take money from their profits and add it to the reserve.
They’re supposed to carry a dangerously low 10% as reserve. They’re actually carrying less than 2%.
Here is an interesting article about this:
http://moneycentral.msn.com/content/P127636.asp?Printer
“There’s been a battle inside the banking industry between federal and state bank regulators on one side and the SEC-backed accountants on the other. The bank regulators have argued, from their own experience, that banks must put aside extra reserves at the top of the cycle, while the accountants have argued that putting aside these reserves violates current securities regulations under Sarbanes-Oxley. And recently, after much struggle, according to my correspondents, the bank regulators have given in. “
Current regulations for reserve requirements are:
loans to 6.6 million = 0 reserve requirements
6.6 million to 45.4 million = 3% reserve
over 45.4 million = 1,164,000 + 10% of loan amount
2nd try
Here is an interesting article about this:
http://moneycentral.msn.com/content/P127636.asp?Printer
“There’s been a battle inside the banking industry between federal and state bank regulators on one side and the SEC-backed accountants on the other. The bank regulators have argued, from their own experience, that banks must put aside extra reserves at the top of the cycle, while the accountants have argued that putting aside these reserves violates current securities regulations under Sarbanes-Oxley. And recently, after much struggle, according to my correspondents, the bank regulators have given in. “
They get a large portion of it from investors on the secondary market. Remember that these lenders package up the loans into mortgage-backed securities (MBS) and then sell them off to investors (like pension funds)! So, this inflow of capital back to the lenders allows them to make more loans. It’s like a fully private example of the concept behind Freddie and Fannie.
Up to now there has been little perception of risk in the MBS market. But, rest assured, then the defaults rise and the MBS investors are holding the bag, they will stop buying their MBS and the Countrywides of the world will have to make less risky loans. When that credit cycle tightens, prices on homes will come down.
It’s my understanding that alot of Insurance Companies also invest in MBS’s .
Yesterday Ben posted a article about Countrywide funding 80 million in loans that where fradulent in Va. A investment group took Countrywide for a ride by using the names of church going people that were payed 2k for their names . These people found out later that the crooks used their names to aquire over 100 properties where the values were inflated . So the crooks took the money and ran ,than the properties went into default . The church going people found out later that they purchased many properties . Doesn’t sound like they read any of the papers they were asked to sign .
Since Toll Bros. (stock price & public statements) appear to be a popular subject, I thought readers might be interested in how they market in urban areas:
http://www.north8condos.com/
Toll is making a big bet in NYC with several projects in Brooklyn & Manhattan. Very curious to see if New Yorkers buy into it, particularly with the market falling.
Someone posted last week some ticker symbols for bear market ETF’s. Could someone repost? I don’t need the mutual fund symbols.
PSQ shorts the NDX
Did anyone catch the guy on “Coast-to-Coast” radio show last night (early morning), speaking the truth about the real estate market? He got a nice chunk of airtime to tell how the market is bust and why it will drag the economy in the coming years. Only a few interruptions by the host (rare), so he was able to list many of the points brought up here. It was a good listen, although I missed the first part.
Anyone know who the guy was? A blogger here maybe (Mitch something)?
I believe you are talking about “Mish” and his blog site is here:
http://globaleconomicanalysis.blogspot.com/
yep yep, I believe that’s the one. Thanks.
While listening, I was thinking about all the sleepless people out there laying awake worrying about their upside down mortgages, growing interest payments, and unsold homes…then this guy comes on to really scare the crap out of ‘em. LOL
Yeah I heard it in a cab last night. They were talking about the Plunge Protection Team! It was Mish but I don’t know what show it was.
Nice article over on the CS Monitor:
http://www.csmonitor.com/2006/0929/p01s02-usec.html?s=hns
Here’s my questions:
Is anyone watching the lenders to see if they are purchasing “insurance” in the form of political contributions?
Will the banking laws be changed once again to accomodate stupidity and greed by allowing them to form a new industry? Something along the lines of: MegaLender Real Estate and Rental
anderson forecast
dude, prices have already come down
8-10% from 5/5
any zips or counites otherwise ?
list em here
OT rental info request- is there anything better than craigslist for renting a place out ? it’s a small house in RI if that matters
tia
Russian market update:
I have liquidated almost 70% of my Russian portfolio (long positions) and today purchased the following December 15, 2006 puts to get some skin in the game (bears-r-us):
Russian Unified Electrical Sytems (UES):
Strike $0.76 Premium .071
Strike $0.60 Premium .02225
Gazprom
Strike $11 Premium $0.98
Strike $9 Premium $0.33
Lukoil
Strike $76 Premium $5.8
Strike $67 Premium $2.7
The puts were purchased on the Russian OTC market which has a killer spread between the bid and ask prices. Let the games begin!
Lot of hefty premium to bet on Gazprom going down. Especially with the foreign capital reserves of Russia.
…The ruble has also become more vulnerable to speculative attacks after the government lifted capital controls earlier this year, but the Central Bank said it had enough reserves to defend the currency against selling pressure.
The Central Bank has the largest foreign exchange reserves outside Asia, at around $261 billion, and typically buys dollars on the market to curb excessive appreciation by the ruble that would undermine Russia’s economic competitiveness.”
And as the largest holder of natural gas reserves and exports, if Gazprom decides to curtail supplies to europe… I would rather be short puts.
Nice ride on the upside!
Has anybody thought about the analogy between house prices and gas prices? End of 2001, they were hovering around a $1, last summer around $3 (200% appreciation), now close to $2.50 (15-20% “reverse increase”). Isn’t this the price dynamic for typical California house market in the last 5 years?
Hey is Ben Bernanke’s next move to improve the US GDP?
Prostitutes, smugglers boost Greek economy
Official: Illicit businesses to be added into country’s gross domestic product
ATHENS - Prostitutes and smugglers will give the Greek economy an unexpected boost as their illicit activities will now be counted in the country’s official ecomomic output, a senior official said this week.
Under pressure from the European Union to cut its deficits, Greece is revising its gross domestic product to include part of the booming black economy, boosting its output by at least 10 percent in 2006, the country’s chief statistician told Reuters.
“The revised GDP will include some money from illegal activities, such as money from cigarette and drinks smuggling, prostitution and money laundering,” National Statistics Service (NSS) chief Manolis Kontopyrakis said in an interview.
Greece’s economic output was 180 billion euros ($228 billion) in 2005 and is estimated at 194 billion euros this year, while the black economy is estimated at about 40-60 billion euros a year.
“Under pressure from the European Union to cut its deficits, Greece is revising its gross domestic product to include part of the booming black economy, boosting its output by at least 10 percent in 2006, the country’s chief statistician told Reuters.”
You see. With a little pressure even Greeks can boost up and target whatever required.
What a generation of nitwits!
Then they would have to take out the figures for GDP that they have already added. It now takes 2 individuals working to have sufficient income to buy a house, 50 years ago it took one individual. 50 years ago the other individual (generally the wife) was responsible for home cleaning, maintainance, garbage etc. Now with 2 working this has created a new class of workers - house cleaners - that are part of the GDP. There are a lot of examples of bogus GDP in a falling standard of living economy.
The New American Economy = Invent or redesign an old SCAM - Then SELL it!
WHO do you KNOW that wants to BUY a New or Used House ?
anybody noticed the 10 year yield.
maybe a little bit of a shotz squeeze?
I bought a 10 year note in mid-June with a 5.125 yield. It was pure dumb luck, since most of my Treasury purchases are 3 month T-bills and Series I bonds. I think the 10 year yield will be up again to 6% in early 2008, but will continue going down for a bit from now.
Just a little tidbit from up here,
Just saw yesterday on the back inside page of Seattle Weekly, condo ads for Epic Condominiums. Price reduced on 2bd/2ba condos from 425,000 to 359,900 and now with 2 parking spaces..15 percent price cut. I think these are brand new, not conversion.
Bri-
Epic did that more than 2 months ago (the 15% price shave and throw in an extra parking spot for “free”). Interesting that it apparently did not work to move those condos.
They also added on free HOA through “06, then through ‘07, then through ‘08. Apparently NOTHING is working!
And yes, they’re new, not conversions.
Guess they’ll be slashing again soon what with prime buying season over and all.
make sure you read this piece from ituilip
this by the way unmasked perfect the opinion/spinn that the revaluation will help the us. a masterpiece!
The Hard Way or the Harder Way
Two Options for Correcting Global Economic Imbalances
http://www.itulip.com/forums/showthread.php?t=466
“My Neighbor’s 4.5 Million Dollar Haircut”
Well, it’s not really a haircut, it’s a reduction in “wishing price”.
A while ago, I bought a lot in Florida on which I plan to build my retirement home. It didn’t cost that much…we were able to just write a check for it. It took a YEAR to close, while my laywer worked out zoning details with the county. Seems the lot was never split legally, etc. Since the seller had been trying for years to sell, they were willing to sign a contract giving us time to work out the legal issues.
When the “bubble” hit, the lots nearby started to change hands frequently. The ultimate silliness came in when a lot down the block–same size, and with similar legal issues that have NOT been resolved–came up listed in MLS for 8 MILLION. It was listed as a HOUSE even though there was no house on the lot…just swampland. You see, if you paid 8 MILLION for this, the seller would build a house for you! (Apparently, it’s legal to list non-existent houses in MLS).
Now the buyer (who spend around 400K for a lot that’s probably worth only about 50K) relisted it. It no longer shows as a “house”, just a lot. And the price is down to 3.5 Million. Such a bargain!
I don’t think this will sell until the price goes down to 50K….if he’s lucky.
This time last year, I’m sure the owner of the lot thought of himself as a mult-millionaire! As soon as he finds his buyer he could retire! Isn’t America great!
During the “boom” we got calls asking if we wanted to sell. We always said “no.”
I’m hoping for a crash, so I can get a good deal from a builder when it’s time to build my retirement home. (We wanted something OUTSIDE a development, so we can build a small, energy efficient house with solar panels, etc. You can’t get approval from that in a ticky-tacky HOA community.)
“ (We wanted something OUTSIDE a development, so we can build a small, energy efficient house with solar panels, etc. You can’t get approval from that in a ticky-tacky HOA community.)”
So you want a real retirement home, one that minimizes your costs and where you can actually take it easy instead of having to get a job at Wal Mart so you can afford your McMansion. Yep, it sounds like you would not fit in in a HOA community. You would probably be a trouble maker anyway and want to paint your house the wrong color or have a yard sale on the wrong day, HOA don’t like people who think differently.
Exactly! The sad thing is that HOAs are all but standard in new developments today. And they’re a TIME BOMB!
They can raise their fees without limits, and they can foreclose on your house if you don’t pay.
There were problems in Florida with HOAs fining people for flying the American Flag! One parcticular case got so much media attention that Jeb Bush signed a law forbidding HOAs from restricting American Flags.
Believe it or not, I like to fly the flag AND I was opposed to Jeb Bush’s tampering! Why? Because if two adults enter a concractual agreement for something, even something stupid, it doesn’t seem right for the government to tamper with that agreement. The home buyer agreed to have an HOA able to restrict what he puts outside his house. If he was dumb enough to do that, that’s his problem.
Jeb signed a similar law preventing HOAs and CC&Rs from restricting solar electric panels. Again, I’m opposed! IF the people who formed the HOA were so short sighted, they need to live with their decision! If their short-sightedness makes their development worth less (because, eventually, when prices drop enough everyone will have some solar electric), that’s their problem! Homeowners and developments that chose NOT to restrict should be able to PROFIT from their wisdom. With Jeb’s tinkering, that’s not possible.
The problem is that some counties in FLA have passes laws requiring new construction to have HOAs, impeding on residents right of association. These laws were created to counter the forced HOAs, and restore some rights back to individuals. I, personally, could never live with any HOA (I like my 30 acres of space), but I guess some people just like telling other people how to live their lives.
It took us a LONG time to find land in Orange County, FL that was unecumbered by HOAs and CC&Rs. The lot we finally found was actiually covered by a “village overlay” which meant it could have been anexed in. Before we closed, we spend a great deal on legal fees working out an agreement with the County giving permission for the development of 1 residence without having to become part of the CC&R-infested “village.”
Yeah many of the HOA’s are simply Condos without the adjacent walls. I visited Florida last year and visited a HOA development, it looked OK except the front yards of all the houses looked dead since there was no personality to them and nobody was allowed to do anything to or on the front yard. What was worse is that they had a community center but they had no sidewalks so anyone going to it had to either drive or walk on the streets. This is even though they had plenty of space to put in a sidewalk especially since the front yards were not being used for anything except for grass and shrubbery.
Also I agree with not forcing things on HOA’s, if solar electric drops in price to become competitive with grid electric then I am betting that HOA’s will be forced by their members to change the rules.
t looked OK except the front yards of all the houses looked dead since there was no personality to them and nobody was allowed to do anything to or on the front yard
Right you are! No swing sets! No basketball hoops! What are kids supposed to do? No wonder they’re all fat.
And if you want to be “green” and have a rock-garden (no watering, no pesticides), you can’t! Some of my neighbors here in northern CA have build low-maintenance lawns with “rock streams” some cactus, etc, and they look OK. And besides, if you don’t have the right to try out an “landscaping experiment” in your own yard, what’s the point of owning a house?
I haven’t posted in awhile but had to share this….
Here’s a find — my old house. I bought it in 2003 for $121,000. I sold it in Aug of 2005 for $265,000. It subsequently sold 6 months later for $326,000. Now it is being offered at $280,000 for a short sale!
This is in the Victor Vallley (High Desert) area of California.
It’s extra funny because the pictures included here are the original ones that MY agent took when I sold my house the first time.
http://vvmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=Victorvalley&PRGNAME=MLSPropertyDetail&ARGUMENTS=-N720518920,-N103274,-N,-A,-N4943845
Did anyone actually live in it after you sold it or was it just flipped? If no one lived in it, it might explain the old pictures, a house nobody lives degrades in condition and gets a look that is not appealing and your photos might be the best available.
A story from Roseville/CA. A FB maybe??
http://www.sacbee.com/101/story/31480.html
Spoof on Lereah’s comments
http://www.runutz.net/alliswell.htm
Enjoy
Here is a 2nd try
Here is an interesting article about bank reserves:
http://moneycentral.msn.com/content/P127636.asp?Printer
“There’s been a battle inside the banking industry between federal and state bank regulators on one side and the SEC-backed accountants on the other. The bank regulators have argued, from their own experience, that banks must put aside extra reserves at the top of the cycle, while the accountants have argued that putting aside these reserves violates current securities regulations under Sarbanes-Oxley. And recently, after much struggle, according to my correspondents, the bank regulators have given in. “
This is embarrassing. My only solice is knowing that this has happened to others here. Why do the posts take so long to show up sometimes when usually they show up right away?
Ben and everyone,
Here is the Federal Reserve’s office release on Guidance for Non Traditional Mortgage Products:
http://www.federalreserve.gov/BoardDocs/Press/bcreg/2006/20060929/default.htm
Wow, talking about closing the barn door after the cows have runaway. But I guess it will look good at the Congressional investigations, “Yes Senator, we have provided new guidance to the lenders”
“Management should: Recognize that many nontraditional mortgage loans, particularly when they have risk-layering features, are untested in a stressed environment.”
And are we, today September 29th 2006, in a ’stressed ‘environment?
I still see a number of comments here on how it’s “not nice” to make fun of others misery.
I’m generally a nice person, and I really feel bad (and try to help out with charity and volunteer work) people who find themselves without means.
However, it’s wrong to have sympathy for people trying to get rich quick by flipping condos. If they did get-rich-quick, they’d be gloating! Trying to elicit any “sympathy” when your get-rich-quick scheme fails, is a form of stealing! Your sympathy is underserved and unearned If you want upside, you have to accept downside.
La Times article on borrower fraud.
http://tinyurl.com/ez4ml
From the LA Times article…
But the FBI and industry experts say the trend also reflects growing deceit by average borrowers who overstated their income,
There’s a very simple solution for people who overstated their incomeL give them a choice:
1. They can either be held liable (criminal and civil) for fraud
OR
2. They pay the income tax (and penalties) on the Income that they said they had earned!
Pick one.
I am a “Bear’s, Bear” on housing and sold last year. But this snip from Richard Russell who I subscribe to tells you “the Plan”. Can they pull it off? I sure don’t think so, do you?
September 29, 2006 — Sept. 29 (Bloomberg) — The Federal Reserve will probably lower its benchmark interest rate in the first quarter of 2007 as slowing economic growth diminishes inflation pressures, according to economists at Citigroup Inc.
The biggest U.S. bank by assets previously forecast the Fed would keep its target rate for overnight loans between banks at 5.25% through June. The bank now predicts a quarter-point reduction by March, with the Fed holding the rate at 5% through September.
Russell Comment — Surging liquidity today and lower rates coming up. The Fed is doing everything it can — to keep the housing situation afloat. And it’s obvious that, so far, the stock market believes the Fed will be successful in creating a “soft landing.”
…………………………………………………………..
Richard Russell is generally right. I have wondered if the fed will lower rates to bail out all the homeowners with adjustable rate mortgages…but what if oil prices go up at the same time?
Don’t know if any has noticed this lately. If you do a search on Realtor.com and filter for only single family homes they now include condos in the found listings….
Anyone else think this is meant to make it harder for the layman to monitor SFH price drops ?
I’ve noticed that also in the past week or two. Thought it was just a couple of local realtors who entered incorrect information. Wonder what the deal is.
There’s a concept you’ve probably heard of “pushing on a string”.
Sure, the Fed can lower rates (I’ll bet it will before the end of this year) but if banks see their loan portfolio suffering, they aren’t going to be anxious to lend, even though rates fall.
Likewise, even though the Fed may reduce short term rates a quarter or so, that isn’t going to change the dynamics in the current real estate situation all that dramatically, is it? Prices are still not, generally, affordable, slightly lower rates will only help those on the very edge of the margin (of newly qualifing loan conditions as well as those exposed to variable resets).
The problem in real estate is the price, period. Without higher incomes, dramatic lowering of rates, dramatic demographic “improvement”, exactly where is the demand going to come from to absorb the supply?
At this point, if prices did appear to “stabilize” how many of those people we’ve seen “experts” counsel to “sit on the sidelines since they don’t HAVE TO sell” do you think just might consider said “stability” their “second chance” to bail out?
I may be wrong but what I know of investment (and bubble history), economics, finance and human psychology over the last 30 years studying such stuff, it just seems impossible for this real estate “situation” to be painlessly resolved.
Trust me, I look everyday for information that might change my mind. Unfortunately, I end up finding more and better information that simply confirms my, current conclusion. Personally, I’ll be a lot better off if I’m wrong so I don’t think I have a “bias” to be bearish on this subject.
Ditto for me on your last 2 paragraphs, including 20 years in the business. I keep trying to check myself, am I going crazy? I don’t see a way out, and it’s going to get ugly. I’m making arrangements and mentally reprogramming a future vision of life in the USA that will be nothing like the last 55 years. A lot of people are going to get what they deserve. I feel sorry for their dogs and cats.
The psychological shift is going to be dramatic. When people go from considering their houses solely as investments and nest eggs, back to thinking of them as cost centers (with taxes, repairs, upkeep, HOA, etc.), then what they’ll consider a reasonable price or % of their income for housing will change drastically.
Risky Mortgages threaten a squeeze
Risky Mortgages threaten a squeeze on Yahoo
http://news.yahoo.com/s/csm/20060929/ts_csm/avulnerable
Did you guys see this one: Seth at Motley Fool bags on Harvard Hyping Housing and then points out all the builder donors…
http://www.fool.com/news/commentary/2006/commentary06092914.htm?source=eptyholnk303100&logvisit=y&npu=y