A Synchronized Boom And Bust
Some housing bubble news from Washington and the Wall Street Journal. “President Bush, looking for ways to respond to the subprime-mortgage crisis, will outline a series of policy changes and recommendations today to help borrowers avoid default, senior administration officials said. ‘The president wants to see as many homeowners who can stay in their homes with a little help be able to stay in their homes,’ a senior administration official said. ‘We’re not looking for an industry bailout or a Wall Street bailout. The focus here is on the homeowner.’”
From Bloomberg. “President George W. Bush today pledged to help people with risky subprime mortgages keep their homes and tighten safeguards against predatory lending, while rejecting a bailout for ’speculators.’”
“‘I plan to help homeowners, the government’s got a role to play,’ Bush said. ‘But it’s not the government’s job to bail out speculators or those who made the decision to buy a home they couldn’t afford.’”
From MarketWatch. “Not everyone is keen on helping borrowers who got themselves into trouble by taking out risky loans that are about to ‘reset’ and sock them with higher payments.’
“Even Barney Frank, who chairs the House Financial Services Committee agrees. ‘You can’t just give people a free ride,’ he told the New York Times this week.”
“Housing has clearly become a political issue. But support for straightforward bailouts thus far appears to be limited to private observers, while politicians are suggesting more modest steps.”
“Even with reforms, some borrowers could be left out in the cold, says Alec Crawford, mortgage-backed securities strategist at RBS Greenwich Capital. In a note, he said that the FHA is apparently only considering breaks for borrowers with so-called ‘5/1′ and ‘7/1′ adjustable-rate mortgages, not ‘2/28′ subprime loans.”
“‘Any change of the type we expect would probably have a small impact on the subprime market,’ Crawford wrote.”
“There would also be political consequences if the White House didn’t act, argues analyst Richard Bove. Still, a bailout or expensive measures rammed through by either party might be unpopular with taxpayers who had no role in other peoples’ decisions to take out risky mortgages.”
The New York Times. “Ben S. Bernanke, chairman of the Federal Reserve Board, declared on Friday that the central bank ’stands ready to take additional actions as needed’ to prevent the chaos in mortgage markets from derailing the broader economy.”
“‘Obviously, if current conditions persist in mortgage markets, the demand for homes could weaken further, with possible implications for the rest of the economy,’ Mr. Bernanke told listeners at the Federal Reserve’s annual symposium.”
“Mr. Bernanke walked a very tight line between trying to reassure financial markets and locking the Federal Reserve into a rescue effort that could prove either unwarranted or unwise over the longer term.”
“‘It is not the responsibility of the Federal Reserve — nor would it be appropriate — to protect lenders and investors from the consequences of their financial decisions,’ he said.”
From Newsday. “A crisis-ridden mortgage industry maybe hoping for a bailout, but local experts awaiting President George Bush’s proposals to aid homeowners struggling to pay their loans say that that’s an unlikely scenario.”
“‘I don’t think that’s in the cards and I don’t think that’s a good idea because then it would validate some of the lending practices we’ve seen,’ said Pearl Kamer, economist for the Long Island Association.”
“Kamer said she expects the volatility in the credit markets continue for two or three months but said that there will be a return to traditional lending standards and an increased confidence on the part of lenders that borrowers will be able to repay their loans.”
“‘I don’t think we should ever return to the excesses in mortgage lending that we’ve seen over the past two years,’ she said. ‘It’s a dangerous phenomenon in a globally linked economy.’”
From Reuters. “While innovations in mortgage finance expanded home ownership around the world, they also sowed the seeds of the current U.S. subprime mortgage crisis, economists told a Federal Reserve conference on Friday.”
“‘Recent events suggest that … a revolution has produced a terror,’ professors Richard Green and Susan Wachter said in a paper presented at a conference organized by the Kansas City Federal Reserve Bank.”
“Green and Wachter said advances in computer technology, use of capital markets to funds mortgages, and low worldwide interest rates created favorable conditions for mortgage finance. Lower and more flexible borrowing costs, they said, helped spur housing demand and contributed to rising home values.”
“But the sophistication of some financial tools lulled investors into misjudging risks, the authors said.”
“‘The creation of structured finance for mortgage credit risk abetted the rise of the subprime market. For a time, capital markets seemed to have an appetite for almost any kind of risk, so long as it received sufficiently large yield in exchange,’ Green and Wachter wrote.”
“Green and Wachter said investors’ care-free attitude toward risks of subprime mortgages and the housing market defies explanation and may have further inflated the housing bubble.”
“‘When investors mis-price risk, the result is the artificial inflation of housing prices. The pricing boom of 2006 was likely in part due to this unsustainable credit boom,’ the authors wrote.”
From USA Today. “Mortgage brokers are leaving the business in droves as the crisis in subprime mortgages leads to fewer products to sell, tighter lending standards and a backlash from lenders who blame them for the meltdown.”
“Brokers don’t lend money, but they match home buyers with lenders in 58% of all home loans.”
“Darrell Sexton shuttered his Indianapolis brokerage, The Money Station, at the end of last year after sales plummeted from $5.2 million to under $1 million in three years. While Sexton’s firm also was a lender, much of the decline was in his subprime brokerage business.”
“Sexton says he had to put his own 7,000-square-foot house up for sale, though it has languished because of the housing downturn. He’s looking for a sales job in another industry.” “‘You begin to question your self-worth,’ he says.”
“Compounding the stress is that some lenders and lawmakers blame the crisis on aggressive brokers who they say pushed mortgages that customers didn’t understand or couldn’t afford. Brokers can earn higher commissions by steering borrowers to loans with higher interest rates.”
“‘Who made this mess? The short-term folks,’ John Robbins, who chairs the Mortgage Bankers Association, said in a May speech.”
“Brokers concede there are some bad actors but say they’re just peddling loans that lenders develop. ‘It’s like blaming the corner grocer for lung cancer because they sell cigarettes,’ says broker Marc Savitt of Martinsburg, W.Va.”
“The German state of Saxony’s Finance Minister Horst Metz will resign after state-owned Landesbank Sachsen Girozentrale got 17.3 billion euros ($23.7 billion) in emergency funds related to investments in U.S. subprime loans.”
“Metz will leave office Sept. 30, Finance Ministry spokesman Burkhard Beyer said in a telephone interview today. SachsenLB agreed to a takeover by LBBW, Germany’s largest state-owned bank, on Aug. 26 after its Dublin-based units couldn’t sell short-term debt on fears that bad U.S. mortgage investment would hurt their ability to repay.”
From Marketplace. “Scott Jagow: The credit rating agencies are taking a lot of flak for this subprime mess. Wall Street, Congress, other countries wanna know what in the world they were thinking giving their top ratings to garbage mortgages. Some heads are starting to roll.”
“Standard & Poor’s President Kathleen Corbet has stepped down. The official line is ‘pursue other opportunities’ but speculation says this may be just the beginning of the subprime fallout for credit rating companies.”
From NPR.org. “People in the real estate industry like to say that housing markets are local. When prices were rising, many argued that there wouldn’t be a real nationwide housing slump, or bursting bubble, because when prices fall in some neighborhoods, they rise in others.”
“This time, though, things are different, especially in larger metro areas.”
“Bill Cheney, chief economist for John Hancock Financial Services, agrees that housing markets are local. ‘But what’s so remarkable about this cycle is that we’ve had this synchronized boom and bust across so much of the country,’ Cheney says.”
“‘Almost all the big metro areas saw prices run up. And almost all of them have seen prices come down now,’ he said.”
“When Mr. Bush has a plan to rob Peter to pay Paul, he can count on the support of Paul.”
The housing market is a great symbol of our lack of moral integrity. Our leaders were silent when the bubble was inflating itself. “Everything is fine” they kept telling us. Even though very smart people, which count among them Warren Buffet, Robert Shiller, Gary Shilling, and countless others warned that we were in a credit and housing bubble that was not sustainable. What was Bush saying at the time? “Everything is fine.” Bernanke and Greenspan? “Everything is fine.” The talking heads on Wall St. and television? “Everything is fine.”
Now that everything is *not* fine, as the smart people predicted, we can fully expect our socialist government, headed by the Communist Bush and the Politburo Congress, to rob the significant tax dollars of those who chose to rent and further cut the taxes of those who “own” homes. People who chose to stay out of the housing bubble by saving their money instead of signing up to ridiculous loans that even a 5 year old could understand would collapse, are going to pay, and pay dearly, for the sins of the lenders, investors, and greedy and fraudulent homebuyers.
Further, we can expect more inflationary wars, excess government spending, and lower reserve rates to evaporate the value of the savings of those who’ve bothered to save their money.
“Democracy is an upside-down homeowner, a mortgage investor, and a tax-paying renter, voting on what’s for dinner.”
“‘Who made this mess? The short-term folks,’ John Robbins, who chairs the Mortgage Bankers Association, said in a May speech.”
“Brokers concede there are some bad actors but say they’re just peddling loans that lenders develop. ‘It’s like blaming the corner grocer for lung cancer because they sell cigarettes,’ says broker Marc Savitt of Martinsburg, W.Va.”
The Privately Owned Federal Reserve Bank Corporation is squarely to blame for the malignant cancer that has infected our economy. The gross mismanagement of our economy by the Federal Reserve Bank, has left many an American family in financial ruin. It is time to repeal the Federal Reserve act of 1913, and abolish the Federal Reserve.
Hear, hear!
I second that!
Ron Paul 2008!
But that will never happen unless we get into an economic miasma and the Fed destroys itself.
They have done a fine job of destroying average Americans, but they can’t seem to self destruct.
Just so we are all on the same page with where this is going.
http://www.agoracosmopolitan.com/home/Frontpage/2007/08/16/01689.html
Further proof that there is no such thing as democracy. Does anyone think they’ll actually get a chance to vote for the “Amero”? You’ll have as much say as you do regarding our war plans.
I don’t even think the military is running the war. There’s too much political meddling going on. Halliburton builds a bridge, it gets blown up. Halliburton gets the contract to rebuild the bridge, it gets blown up. Get the drift?
It’s time to repeal pretty much every piece of legislation passed in 1913, come to think of it.
The Wall St. boys, banks, lenders with all their fees, etc are the true winners in this game. This scam was set up , many fell for the con and now the “believers” are wondering what went wrong?
Now they are clamoring for the little people who pay the taxes to send them more moolah. “Let the little people who pay taxes eat cake.”
“Let the little people who pay taxes eat cake.”
I think that should read, “let the little people who pay taxes eat $hit.”
We taxpayers can fight back, you know. The less you earn, the less tax you pay. I’ve decided to stop earning and consume my savings, hopefully before the inflate it away.
I think this is one of those rare times when working hard to earn a lot of money is actually counterproductive. We can make the government smaller by starving it.
There is certainly some sacrifice involved, but the only real alternative, revolution, requires much more sacrifice, and would have a much less certain outcome.
Join the Slacker Revolution!
A man after my own heart. Start planting fruit and nut trees now, and in ten years you’ll be sittin’ purty.
Join the Slacker Revolution aka If you can’t beat em, join em.
Right on!
“I think this is one of those rare times when working hard to earn a lot of money is actually counterproductive. We can make the government smaller by starving it.
There is certainly some sacrifice involved, but the only real alternative, revolution, requires much more sacrifice, and would have a much less certain outcome.
Join the Slacker Revolution! ”
Russ, on another thread, I asked if you could make another t-shirt… “Join the Slacker Revolution” would be perfect.
DP
I think I’m going to run with this idea…I registered SlackerRevolution.com, and will put up a blog there. I’ll do up a logo an shirts and whatnot, too. Keep an eye on the bits bucket threads….I’ll announce when it’s ready to roll. Hopefully Ben will trade links with me.
AR~
You are on to something bigger than you think.
One of the major financial rags ran an article awhile back, on how there is this insidious growth of 40 to 50-something men who are just dropping out of the workforce exclusive of retirement.
The reasons varied.
The financial and emotional ravages of a nasty divorce, downsizing, illness, disillusionment with being sold the lie, “if you work hard-you will prosper”, et., el.
But the underlying message was that they’ve had enough of being exploited by voracious tax addicted governments and consumption crazed spouses and kids, the quotes from which offered no empathy…
IRRESPONSIBLE SLACKERS are what they were called.
GIVE US MORE!
Fits right in with your “Slacker Revolution”…
FWIW you can count me in.
I’d join the slacker revolution, but it seems like a lot of work.
The slackers sound interesting but what about going underground. Starve the gov and make $$$ at the same time.
I like you people, and I like your proposition. The older I get, the more responsibility looks like folly. Truly, recklessness and laziness are rewarded in the developed world. Thinking back on life so far, the funnest and easiest times in my life have been the most lazy and self-absorbed times. High school and undergrad education, when my biggest concern was whether I’d make it to the rec center in time to get my whole workout in. Since then, I’ve worked harder and given more of myself to work and to my relationship. Sure, I’ve got some money in the bank now, but what’s that worth? As I’m watching the news I’m seeing it devalued to prop up house prices for the reckless homedebtors and to pay the reckless lenders. Better to do what the f@ck you feel like every day and be another leech on the system I guess. I gotta quit my job and get an XBox 360 and a Hummer. And a house. Why not, really?
Tell the White House how you feel about the bailout-
comments@whitehouse.gov.
vice_president@whitehouse.gov
phone: 202-456-1111
fax: 202-456-2461
Treasury phone: (202) 622-2000
My comment:
Dear Mr. President:
As a saver, a taxpayer, and (due to inflated house prices in California) a renter, I am dismayed by your proposal that the federal government assist overextended mortgage borrowers. Simply put, anything that will tend to keep prices at their unsustainably elevated levels does me harm, and for the proposed assistance to make any use at all of my taxes adds insult to injury.
If the government will help people who’ve bought more house than they can afford, will it also help me buy more house than I can afford? I don’t mean to be cynical, but what’s in your proposal for me? By providing any support at all to an inflated housing market, you are effectively proposing to further delay the time when my children can enjoy a home of their own.
In my experience here in California, Mr. President, an obscene number of homebuyers lied about their income, using “stated income” loans, to obtain housing. At the very least, you need to make sure your proposal is balanced by measures to make sure these circumstances do not occur again. I propose extending the coverage of the federal False Claims Act (29 USC sections 3729 through 3732) to allow for private attorney general actions by citizens to help ferret out mortgage fraud. I am a government contracting attorney with extensive FCA experience, and I would be more than happy to assist your office in drawing up the appropriate legislation.
Very truly yours,
Thomas **
Newport Beach, CA
I e-mailed the Senate committee on banking, housing and urban affairs: http://banking.senate.gov/
Won’t the part of Bush’s proposed bailout help drive down the market - allowing them to Short Sale their homes without paying taxes? I think this will cause more of these idiots to give up their keys to the bank and further drive down prices? Also, most of the ‘tards here in California have loans well over the $417k limit. Plus he is only proposing to assist about 80,000 people - not many in the scope of things. I feel bad for old people I have read about that these GREEDY brokers tricked into refinancing their mortgages into time bombs. These people should be helped, but not the stupid speculators who got caught when the music stopped.
correction-
comments@whitehouse.gov
Just sent this to white house and housing committee. Any other suggestion for where to send it?
To Whom It May Concern:
I do not own a home. Why? Because I live in Los Angeles where the medium home price is just under $600K. Given that the median household income in LA is about $55K that means that the house price to median household income ratio is more than 10. Why is this important, well, lets pretend that my salary is about twice the median (say $100K). That still means that the average price is about 6 times my yearly salary. I’m no genius & I don’t work in the housing industry but I do have enough common sense to know that paying more than about 2-3 times your gross salary for a house is dangerous. Paying 6 times is bordering on irresponsibility and ten times is outright stupidity. These were rules I learned when my parents bought a house. These are the rules of thumb I thought everybody knew.
I’ve watched for several years as prices continue to go up 10% - 30% per year but my salary has only gone up 2-3% each year. Houses in LA are two to three times more expensive than they were less than ten years ago. Over those ten years I’ve had house “flipper” friends who have owned as many as four or five houses tell me how stupid I was to not “get into the market”. I’ve had realtors tell me “now is a great time to buy” despite the ridiculous price increases. And of course, there’s my all time realtor favorite: “House prices never go down”. I’ve had mortgage brokers send faxes and leave phone messages promising ridiculous loans requiring “no documentation” and with tantalizingly low teaser rates that ramp up about the same time you discover the hidden penalties and fees. Other friends told me how easy it was to lie on the forms and inflate your income (that was back in the day when they even bothered to ask about your income). In short, everyone seemed to view this as a game where you can lie and cheat to get rich quick. They would say, “don’t worry when the ARM resets you can just roll it over — and in the meantime you’ve made another 20% - 30% appreciation in your house”. I have a friend who has not had a full time job at any time during the past 30 years. He has no savings. He’s barely lived in one place more than 12 months. He gets by mostly with help from family and girlfriends. I just discovered that he got a loan for $180K, bought a condo and flipped it for a $20K profit. Enough is enough.
I’ve been fiscally responsible by carefully saving my money and NOT BUYING A HOME I KNOW I CAN’T AFFORD.
Guess what. People are “just now” figuring out that a lot of loans were made to people who can’t pay them back. Imagine that. Even more amazing, people are “just now” figuring out that those absurd loans made to people who would inevitably be insolvent might have contributed to the ridiculous rise in house prices. Boy, that’s a shocker. “Just now” homeowners are figuring out that you actually need more than a $30K - $40K income to buy a half million dollar house.
Wow, all those poor people might just lose a home (or two or three in the case of the flippers). Am I supposed to feel sorry for them? Every single person I know that played the flipping game or bought houses over their head, knew exactly what they were getting into. They took the risk, THEY SPECULATED, because they were absolutely sure their houses would go up 10%-30% per year every year FOREVER.
Now politicians are talking bailouts. A bailout would mean that taxpayers like me who showed fiscal responsibility would help subsidize fools and speculators. Or maybe, taxpayers would really be bailing out investors who originated the money that ended up becoming the loan. My taxes may even go to helping people who committed fraud on the loan forms by lying about their income. Too bad I can’t run out now and buy a ten million dollar home and wait for my taxpayer bailout. Or too bad I can’t send that million dollar check to a subprime hedge fund, get huge returns for several years, then get my bailout when the funds finally go belly up. But wait… I lost money in the dot-com bust– is it too late to ask for a bailout for that?
Besides, any bailout would send a message that there’s nothing wrong with the current, high housing prices (not just in LA, but also nationwide). Doing the same math as before, the national median household income is somewhere around $50K. Given historical house price to household income ratios of 2-3 that would suggest median national house prices should be somewhere around $150K, not $250K - $300K where they are currently. Supporting high housing prices with even talk of bailouts is just postponing (and compounding) the inevitable insolvency crisis caused by people buying houses they can’t afford.
I’m really hoping that politicians exercise some restraint. Please don’t make a terrible situation worse just to get votes. There is an awful cancerous rot in our financial system caused by a housing bubble run amuck. The only way to clear it out is to let the people who were foolish or greedy with their speculation pay the price. If you want to do something, try punishing the rating agencies (e.g. S&P, Moody’s and Fitch) who allowed garbage mortgage backed securities to be labeled AAA and sold to pension funds, etc. Perhaps, suggest to the Federal Reserve that it got “carried away” letting the mortgage business reinvent itself in dangerous and absurd ways over the last 10 years. Maybe even stop bragging about “record levels of home ownership” when that actually means people who can’t afford homes just bought them. Perhaps think about people whose pensions will take a hit, because their companies foolishly bought mortgage backed securities disguised as AAA investments. Maybe think about passing a law that says, if we can’t regulate your industry (e.g. the mortgage industry) in some meaningful way to prevent speculative bubbles, then we wont ever bail you out when the bubble bursts.
Always hopeful, but usually disappointed,
Ed Ascoli
Excellent!!! I’m going to send this in to my local paper.
invest3
Abolish the FED???
Absolutely!!!
A criminal organization (most likely run from Tel Aviv).
A criminal organization (most likely run from Tel Aviv).
Why don’t you take the moronic anti-Semitic crap elseswhere?
“Why don’t you take the moronic anti-Semitic crap elseswhere?”
Sorry, Dude, that anti-S propoganda dog don’t hunt no more. Welcome to the New World.
Good post> who the heck needs the fed? Oh yeah i forgot they are around to prop up the stock market into wild swings so the investors can make a few bucks in a day?
“Democracy is an upside-down homeowner, a mortgage investor, and a tax-paying renter, voting on what’s for dinner.”
Freakin’ brilliant!
I was telling a reporter the other day that a bail-out can’t work because this is a bursting housing bubble, not a subprime crisis or a foreclosure crisis, as many would have us believe. Home prices are simply at unsustainable levels, and only one thing can correct that.
Absolutely. And prices at those levels are NOT good for our standard of living.
Meanwhile, NYC Mayor Bloomberg said that borrowers are substantially to blame for their situation:
http://www.nydailynews.com/blogs/dailypolitics/2007/08/bloomberg_mortgage_mess_not_al.html
He said the same thing about people who lost money in the stock market a half-decade ago. I guess he really doesn’t plan to run for President!
I have very little respect for Bloomberg for other reasons, but when it comes to financial matters he seems to be very level headed. Maybe a good Fed chairman or Treasury secretary?
“‘I plan to help homeowners, the government’s got a role to play,’ Bush said. ‘But it’s not the government’s job to bail out speculators or those who made the decision to buy a home they couldn’t afford.’”
So how are they going to tell who was and wasn’t a speculator? This is a joke.I am sick of the bush cronies and their lousy administration. Socailized housing is what this is to me.Housing is unaffordable plain and simple.
“I’m from the government and am here to help!”
More importantly, who are they going to help?
Not those who bought more house than thy can afford….If you can’t make the payments, you can’t afford the house.
Not speculators…..wasn’t that 1/3 of the market in ‘04and ‘05?
Only one’s left are those who have financial trouble through lost jobs, divorce, health issues, etc. We’ve never helped these folks much before, who should we start now.
I hope to God in Heaven that this is all political hot air, and there is no action behind it. Based on Bush’s recent domestic actions, Hot air and no action is what we will see.
They made housing unaffordable so you will need to get a government handout in order to have a place to live. Now they own you.
A buddy of mine from the FAA told me what their new slogan is……
OUT-”I’m from the FAA, and I’m here to help!”
IN- “I’m from the FAA……we’re not happy, until you’re not happy!”
Could do worse. The fiscal consequences of this mess are going to kill the MTA (transit agency) and the state, but Bloomberg’s budget has factored in a decline in revenues as a result for the past two years.
Someone actually budgeted in a decline?? Haven’t heard that in a while. Here in the prosperous state of Michigan our governor is trying to ram tax increases down our throats AND increase spending 2.2 percent.
But she had a great time in Sweden, right?
Yep, she sure did. Even got to say she might have gotten 137 new jobs out of some company over there. That will more than offset the 1,200 more that are being lost from another Ford plant shutting down, I’m sure.
She gets these job promises by offering tax breaks, while at the same time trying to ram a tax increase down the throats of taxpayers in the new budget. Go figure!!!
Trying to keep politics out of it, and since I’m not in MI (just a few miles south of the border) I shouldn’t chime in about state politics, but didn’t Engler let the roads go to rot? I have to go to Detroit once on a while for work, and it always seemed that I-94 was crumbling before my eyes before they finally got around to paving it again. Other highways seemed to be in as bad or worse shape.
I’m sure that there’s more to it than meets the eye, but it seems that Jen inherited a situation that wasn’t great to begin with, but hasn’t made it any better. Of course, with an economic base that is shrinking by the week it seems, maybe there isn’t much anyone can do.
But at least Feiger says he ain’t going down with out a fight, so there’ll be lots of entertainment for you guys.
Bush thinks allowing buyers to get into a house with a lower down payment is a good thing? Isn’t allowing people into the market with no skin in the game what got us into the foreclosure mess to begin with? The president says this is not a bailout but if it looks like a duck, walks like a duck…
Credit bubble fed the housing bubble which fed the credit bubble which fed the housing bubble, which…
If credit didn’t get so easy (banks and investors practically throwing money at borrowers), house prices couldn’t have gotten so high. Without ever rising home prices, banks and investors wouldn’t have been so eager to losen up credit standards.
It was a positive feedback loop going up, and now we’re on the flip side. As Elmer Fudd would say, “Say your prayers, rabbit!”
If credit didn’t get so easy (banks and investors practically throwing money at borrowers), house prices couldn’t have gotten so high. Without ever rising home prices, banks and investors wouldn’t have been so eager to losen up credit standards.
Correction, lenders we’re throwing “other people’s money” at borrowers.
Remember back in the late ninties, when everything felt so good and looked so bright? Remeber how we all laughed at the Albanians, when right after attaining freedom from communism, the whole country was sacked and looted via a Ponzi scheme that a majority of Alabanians were involved in?
We all thought, “Wow, are they ever stupid. Their first enounter with capitalism and they lose everything via Ponzi investment schemes.” But we could understand, the free market was something brand new to them. You could see how that fast money might sucker them in.
Are the Albanians wiser? Are they now laughing at us?
“Tiptoe thru the tulips’ song is being played often in the Washington DC offices of the Fed, Congress, White House, after receiving thousands of free copies (sorry Tiny Tim) from the real estate and banking and wall street lobbyists and shills across this country, along with the panic message ‘now remember folks….never EVER say bubble, tulip mania, prices are too high……….just say borrowers and speculators may paid too much (implying of course that there is NOTHING wrong with house prices today), or it’s a ‘correction’, it’s a lending problem, your government leaders can handle it, yada yada yada, (fill in the other nonsense excuses you’ve heard of late). Just AMAZES me how they continue to ignore the obvious to Ben’s readers here…..House prices just got TOO HIGH in a classic economic bubble, and they must come back to earth before any of this is fixed!! Come to this blog for REAL answers Washington! Ben for President!! Dump the rest!!
I don’t think Shrub understands that the vast majority of people in mortgage trouble are not people that intend to live in the houses they purchased, they are flippers who wanted to make a quick $$. This ‘Bailout’ is a political ploy.
Maybe so with buyers, but there are a whole lot of people around LA who were existing owners and pulled out money to buy toys. Oh well, at least we know what Compassionate Conservatism means: compassion for lying mortgage brokers, freespending borrowers, greedy flippers, and wall street thugs. Oh, responsible middle class savers? Just shut up and pay your taxes.
Go to CNN.com homepage and vote NO to gov bailouts!
You are so right. Bu$h is really putting the dip in “dip$hit”.
I started running the numbers just using census estimates for 00-06, comparing PCI, MHI, and median home prices. I haven’t seen a chart yet where the wages have kept up with price increases and this is using returns that had almost anything useful modelled out of them!
On a similar note, a friend in my old research unit sent me a link to some free and low cost datasets through HUD. I know someone here will appreciate the link
http://www.huduser.org/datasets/pdrdatas.html
I agree completely Ben, and that is why I don’t worry too much about all the various bailout plans. Falling asset values and fundamental affordability issues are going render all of these plans ineffective.
If it is much cheaper to rent than own, and you have no equity in the house… time to walk away. No government program FORCE people to stay in their homes when they want to walk away.
The only bailout that would work would be to have the government make 50% of the mortgage payments for FB’s over the next 30 years… and that isn’t going to happen.
“I was telling a reporter the other day that a bail-out can’t work because this is a bursting housing bubble, not a subprime crisis or a foreclosure crisis, as many would have us believe. Home prices are simply at unsustainable levels, and only one thing can correct that. ”
I like that angle…I hope we see more of the talking heads using that as a talking point, because it is very relevant!
It also makes me feel a little better because this bailout stuff is really, really bugging me…
“Home prices are simply at unsustainable levels, and only one thing can correct that.”
Rising incomes would do the trick too.
it sure went from a topic mostly discussed on this blog to international news in a hurry…
Lost,
You see that KSL housing piece today? “Housing Values in Utah Skyrocket”. What it should have said was …Housing Inventories in Utah Skyrocket.
the problem with buying a house in Utah is that it’s hard to find anything with fewer than 6 bedrooms.
How are they divided? Three for the wives (one for each) and three for all the kids?
“Brokers concede there are some bad actors but say they’re just peddling loans that lenders develop. ‘It’s like blaming the corner grocer for lung cancer because they sell cigarettes,’ says broker Marc Savitt of Martinsburg, W.Va.”
OK, everyone who has ever gone to the corner store for fresh vegetables, been talked out of it by the grocer and sold cigarettes instead, please raise your hand.
Beautiful analogy. Nice twist on the truth, DC.
That’s great, DC!
What if you were told that you didn’t have to smoke them yourself, but that you could sell the cigs on the black market for twice the price? I bet a lot of folks would give up the veggies (and be blamed for everybody else’s lung cancer).
It’s about 90% dog and pony show. The number of people who will benefit from the actual changes announced today, as opposed to the plans, is pretty small. FBs who don’t recognize a political smoke screen will probably hold on longer and longer till they cannot see the sun through the water washing over them.
Agreed….window dressing to take the wind out of the Dem’s sails.
“See, we DID do something for y’awl”
As for the “Bush Bailout”, I don’t see why people are getting in such a tizzy…not much help for strapped borrowers, tightening lending standards (the market has already done this, the feds are too late), and temporarily suspending taxes on the loan amount forgiven…which doesn’t *stop* foreclosure, but makes people less screwed *afterwards*.
I don’t see this “bailout” as being able keep people from losing their homes, or propping up the housing market.
Just my 2 cents.
I agree it’s more fo a publicity stunt, but it sends a psychological message that the government will try to bail you out of a poor financial decision.
this is more political than anything else.
I disagree. It is a way for the president to kill anything larger from coming out of Congress. He says that he already implemented the appropriate amount of help and that anything any larger is just a bailout of the people who took inappropriate risks (investors, bannks, speculators, etc.) It gives him cover when he says he will veto anything else (like the plan that Schumer says he is going to release after the holiday). The president has the advantage of being able to do something quickly.
Congress shows up with a mop and he is already drying his hands and saying all cleaned up. Of course, 99.99% of the mess is still there, but he can say he cleaned up the parts that need it.
I am not a Bush supported by any means, but this is actually a formula for no real bailout. Don’t get too agitated over it.
Oh, and the good economic numbers from yesterday just might give Bernake the cover he needs to put off a rate cut for another month. Might. That one I am less sure of. Note that he only promised to do something if the credit crunch affects the rest of the economy. We are back to good news being bad (no rate cut) for stocks and bad news being good (rate cut may be coming) for stocks.
He’s proposing renegoiating the loans at lower values - that means the responsible that are waiting to get in the game won’t be able to because the FBs will get to stay in the house with new loans, no tax consequences at the new lower value. They’re not going to get stuck with the overblown price and loan.
That’s what he’s talking about, but who eats the difference between the existing value and the new value? The bank? Gimme a break! It’s gotta be you and me, JoeTaxpayer.
Now the house is worth less. Is it reappraised? Do the taxes go down? Who’s going to make up the difference?
The complexity of rebuilding New Orleans is simple compared to this plan. Imagine the unintended consequences of this plan. It gives me a headache.
Got Tylenol?
and N.O. is still a debacle…. my fear is that they end up doing what they did right after Katrina - indiscriminately throwing money at people - including non-residents not affected and for things like sex change operations, not housing or food.
Got Tylenol with codeine?
Remember there’s supplemental defense funding on the table for the wars. When you’re asking for that kind of moolah, it doesn’t take much more effort to throw a few scraps around through the FHA. The Dems were trying their best to set up a political ambush over the war this September - this is just one way to throw them off balance. Once that extra defense money is secured - today’s news will slowly fade away, with maybe a few NOLA-type publicity shots along the way.
The reason we have heard from the MSM about this is because of the August recess of Congress. Bobble/subprime coverage would have been reduced by 2/3 if the windbags in DC were not on vacation.
Now that they are returning, the press coverage will drop in 1/2.
Wouldnt that money they are not going to take from taxes on short sales help keep some people’s jobs? Something doesnt sound right if they need tax money but don’t take it. For me I am in a Tizzy because the stock market is acting like this is some great policy thats going to happen. Why is that if everyone else sees that its obviously not that much good. None of this makes any sense.
Which leads me to thinking if the market can go up without a rate cut, why would there be a rate cut?
The bigger issue is that if you don’t tax loan forgiveness, you’ve just created a HUGE loophole for wealth transfer. Corporations can start offering executives home loans, then conveniently forgive those loans in effect giving the executive tax-free compensation. Similarly Dad can loan junior $300k to buy a house, then forgive the loan to bypass inheritance taxes (if there are any inheritance taxes).
The market is going up because it THINKS there is going to be a rate cut. If BB doesn’t cut rates, the market will go right back down.
This “non-bailout” bailout ticks me off. If the government truly wants to help, they would let market forces sort this mess out as the end result will be lower home prices—lower prices are what will be beneficial over the long-term. But no—the government has to take action so they can look good. What a crock! I don’t wish for people to lose their homes, bet except in the case of blatant fraud, most of these people in trouble entered into a contract on their own accord and should assume full liability for the results. If they lose their home, they can rent or move in with family or friends.
Most of these people buying homes had no interest in doing so. A quote I heard on the radio from a troubled homeowner sums it up: “we found out that our income was overstated on the loan application, and before we knew it, our payments were more than we could afford” (paraphrased)
“Even Barney Frank, who chairs the House Financial Services Committee agrees. ‘You can’t just give people a free ride,’ he told the New York Times this week.”
Anybody want to guess how many things are wrong with this quote coming from a Massachusetts Democrat? Joe Momma, you can be first.
That’s a shocker coming from a nor’east liberal.
When Barney Frank is saying that, you know the world is now spinning in reverse.
The Dems will try to out-do Bush on the compassion thing. That’s the problem with Republicans today. They don’t stick to their principles and try to compete with Democrats.
Just think. Come February, some of us here will be rolling into our 4th “spring market.” And still, prices are ludicrous. I spend half my day now abusing realtors who I think are overpricing stuff.
“abusing realtors who I think are overpricing stuff.”
New Olympic sport?
“who I KNOW are overpricing stuff”
Fixed it for you.
I’m with you.
Our family is slowly growing and we are still in the same tiny apartment (rental)…trying to be patient. There is a house that we like that has been on the market for eight months (overpriced). Two other realtors starting this week are now trying to sell the same house for $100,000 higher. The other realtor is still listed with the older price. I wonder what sense this all makes.
Markets during trend changes do not make sense. Yes, the fundamentals are clear, but there is a story behind every participant, and each one makes a different decision at a different time.
Show me the money. When the trend becomes clear and no one can point to the examples of people overpaying, then we will see some logic in pricing. For many people (sellers and REIC nitwits), the trend is not yet clear.
Have you ever talked to a reator and just asked them “Why is this house worth $X?”
If I get to the point that I’m viewing houses with the selling realtor over the next 6-12 months, I plan to ask this question a lot. I expect some sort of directionless rambling about “market values, comps, owner paid so much…”
“Have you ever talked to a reator and just asked them “Why is this house worth $X?””
Yes. All the time.
Invariably, they answer “because that’s what houses cost here…it’s a nice area.”
When I bring up that houses were priced at HALF the current price in 2004 or so, they spout out “more rich people are moving here now, so houses are more expensive”.
All the while, out elementary school enrollment is dropping as young families move out of the area (”too expensive”), and our retiree feeder markets (Los Angeles and San Francisco) start taking price hits.
What you need to do is outright corner them.
“I see median houshold income in this area is $50,000. Historically houses don’t cost more than 2.5 times median income. Historically mortgage rates average 8+% so we’re due for rates to go up. Per statistics, the savings rate is negative in this country so no one really has any cash. Property taxes (and insurance if applicable) are way up. So, all that being said [now you're ready to ask your question] why is this house worth X amount?”
“What you need to do is outright corner them.”
Their easy out will always be “rich people are moving here, everyone wants to live here”…even if they have to get the rich people from Mars, that will always be their argument…all the way down…
Arm yourself with a few graphs.
I have one I bring with me now showing the % of population change for my area taken from USC estimates. I go out to 1996 which shows we (Sacramento) spiked in 00′ and have been steadily going downhill ever since. Then I explain how USC estimates are a lagging indicator of 12- to 18 months. So far my responses from listings agents to that have been “wow” then silence and just plain silence.
Some dumb@ss can only comprehend information if presented in pretty pictures. But at least they finally get it.
Charts or no charts, cornering and abusing Realtwhores is a sport, and should not be confused with action that will provide anything but enjoyment.
I’m with arroyo. I’ve spouted more data than I care to recall to friends and family on why it is a bubble and prices are out of whack. Even for those with some brains, it is almost impossible to make it through the thicket of denial.
Why yell at a agent, the sellers are the ones who want to make a killing even in this dead market, they think they are entitled, most agents want a fast sell they always low ball the sellers good or bad times?
Again, I think the SDCIA may be more your speed.
That is funny.
No i’m actually into the NFL, NBA, MLB, NHL?
Another unfortunate aspect of the bubble. Even people who know they are catching a falling knife get tired of waiting. A coworker of mine caved this week and bought a condo at the same time he acknowledged he’d be underwater soon (he may not appreciate how far).
Of course, even if everyone on this blog and those similarly situated caved in the next month, it’d be just a blip. This bubble is dead. The run can’t continue unless loans are given to those that can’t afford to pay them, which has ended for the indefinite future.
Saw an open house last weekend in Astoria, Queens. 2 family with a tenant living upstairs. $850K. The broker called us off the sign-in sheet on Monday and said they lowered to $799K. “Would we like to make an offer?” I did, $350K, told that’s what I thought it was worth.
“‘I don’t think we should ever return to the excesses in mortgage lending that we’ve seen over the past two years,’ she said. ‘It’s a dangerous phenomenon in a globally linked economy.’”
It’s a dangerous phenomenon in any economy. What makes it worse now is that the US has lost it lead in actually making enough things to pay its own way and tried to pump up its economy artificially by pushing up RE prices so people thought they were rich. However making yourself look rich by doubling housing prices in fact lowers the countries quality of life since now your cost of living is much higher while you wealth is tied up in housing which if you sell you need to spend that money finding a new place to live. Individuals can win at this, but overall the country loses since costs are higher while income is not.
Good point. I heard some one else put it this way:
The value of your house has not changed. It’s the value of your dollar that has changed and the change is downwards.
This is a great comment. Is there any other good in the world that people want to be priced higher?
Even if you are an owner it doesn’t do you any good, because if you try to cash out all the other places are more expensive anyway so you can’t trade up. Not only other houses, but everything will eventually inflate to nullify your gains.
A house should maintain it’s value, and that’s all. Just like commodities and other non-productive investments, it’s only investment value should be in it’s non-correlation, to be used as a hedge.
I posted this in another thread, but feel it is probably more appropriate here:
I think it’s a red herring. It sucks either way, but I bet he is just trying to draw attention off the Mexican trucking deal that is supposed to start next week.
“Oo, Oo… look over here. Nothing to see there.”
But if this is indeed true, and they are going to bail the mofo’s out, then I have to ask myself. Does it really pay to be responsible anymore? I mean, seriously. What does this mean for people like us on the blog? Are we just screwed no matter what we do so we should just hop on the George Bush gravy train?!
I fell a bit nauseous today.
“I fell a bit nauseous today.”
I’ll keep repeating this…to get any benefit under the Bush plan, you have to go through foreclosure. I agree it’s the wrong message to send to irresponsible people, but the “benefits” that they get for their reckless behavior would be severely limited…and it would *still* include having to give up their overpriced house.
I’m not too worried about this one. It’s a non-event, designed to look like El Presidente is doing something.
Maybe foreclosure will be the gateway to the detention centers where Americans are put to work making cheap widgets for the Chinese market.
Nice take
I don’t know…do you want to buy 1/2 million dollar+ wooden box with a attached utilites and wait/hope/sweat it out until Bush and Co. (”It’s a hurricane and we’re here to help”) bails you out??
Responsiblity offers personal rewards regardless if Rome is burning down. One huge one is being able to sleep at night. It might be in a shack, but it will be sound sleep nonetheless.
Vermonter,
Couldn’t agree more. I was trying to get to the bottom of these comments to see if I needed to say that myself. I sleep very well at night knowing that I didn’t contribute to this mess, and that my personal character and integrity are still intact. It seems to me most people who truly seek schadenfreude, even if they are responsible, are just as miserable as the people that are suffering the consequences of bad decisions.
Self gratification is all well and good. On the other hand, if somehow this market magically reinflates, (or even stabilizes) those of us who are responsible and prudent, and refuse to sell our souls to the bank are still screwed. We won’t be able to get a house.
I get no enjoyment from seeing others suffer (well, maybe a little in the case of ‘classy realtor’ Liz Seither & her Rolex). But housing prices and consumer spending MUST get back into line with incomes. The current trend is unsustainable. The economy is out of balance. Suffering is going to occur. Let’s get it over with.
Shall we pull that Bandaid off fast or slow?
Johnny BG,
I agree with you completely that the more fed/FED intervention takes place, the longer the suffering will last. No argument there at all.
But your other statement (”We won’t be able to get a house”) shows you’re just as much about self-gratification as I am, only in a different aspect. Your gratification would be owning your own home, and it upsets you to think you still might not be able to.
My self-gratification is less materially linked. Is this a value judgment? Not at all; it’s simply a statement of fact. Would I like to own a home? Sure. Will I work/save towards it, and try to get a good deal sometime in the next decade? Absolutely. But the true fact you state (”suffering is going to occur”) reinforces for me that someone whose gratification is linked to material things (even if that person is prudent) is going to suffer more than someone whose gratification isn’t linked as closely with material things.
President Push:
“‘I plan to help homeowners, the government’s got a role to play,’
Hey, Mr Skull & Bones…you mean like your forward looking planning with “Katrina”…couldn’t the Guberment play a role…before…the “homeowner disaster” … oh I forgot…your “brilliance” was being utilized in the “spread-Democracy-in-toilet-Islamic-countries” Iraq & Afghanistan Wars.
Where was the gov’ts role when all this fraud was happening, nice to try to shut off the valve now that the house has flooded?
And out comes Bu$h with a single roll of Bounty paper towels telling everybody that he can clean it all up. It is so hard with our government to tell where the line between stupidity and dishonesty lies. It is so blurry as to not even be a line any more.
“It is so hard with our government to tell where the line between stupidity and dishonesty lies.”
Very well stated.
“This time, though, things are different, …”
Finally this phrase is used correctly.
Take note of the following quote form Bush’s press conference this morning (from NYTimes):
“In remarks this morning at the White House, Mr. Bush said he would work to “modernize and improve” the Federal Housing Administration “by lowering down payment requirements, by increasing loan limits, and providing more flexibility in pricing.”
In other words, “Let’s put some lipstick on this pig and keep the party going people!”
LOL
“by lowering down payment requirements”
Isn’t this EXACTLY what got us into this mess?
Nah, that’s just the methadone. The heroin was guaranteed appreciation that exceeded the returns you could get in the stock market. At this point we’re just trying to avoid a near-death experience from going off the good stuff cold-turkey.
Classic and so true!
Anything to keep housing prices high and to punish savers/workers. What fun! They are selling $600K starter townhomes here in Maryland. Maybe I should buy one, play stupid, and wait for my bailout? Seems like a plan!
Sitting in the land of the Silent Bubble, laughing at 3/1 Post-War crudshacks without central air and on oil heat selling for $300,000, wondering when the madness will end…
I thought the same thing. There is no risk in being irresponsible. The FED and the government will save you.
This has me thinking about the next “bailout” down the road, when millions of people without pensions or savings will want to “retire” by can’t get by on social security alone. We will be hearing all the sob stories about our neighbors who spent all their money on luxury cars, expensive vacations and other toys and who just can’t get by on what SS pays out.
There is no risk in entering the country illegally either. The FED and the government will give you amnesty. There seems to be a pattern here……
“Anything to keep housing prices high and to punish savers/workers.”
As maddening as the bailout talk is, I don’t know that it will make any difference.
The secondary market for crap mortgage paper is gone. Banks will only hold loans with bigger downpayments, better credit and documented income.
The marginal buyer is gone. And it was all this marginal buying that drove prices up….the 0% downpayment / IO / Neg AM / Pick your payment / No Doc crowd….
If the new reality is more traditional lending standards, all this bailout talk won’t do anything to help sell off the massive amount of inventory that’s for sale. And I don’t believe for 2 seconds that many FB’s want a bailout….that gives them the priviledge of making 30 years of payments on a house that will never again be worth what they paid for it. I think these people are going to walk in numbers that will stun everyone except Ben’s HBB’ers.
I think everyone on this blog knows this problem is way, way too big to be “fixed” by anything other than market forces.
“I don’t believe for 2 seconds that many FB’s want a bailout….that gives them the priviledge of making 30 years of payments on a house that will never again be worth what they paid for it. I think these people are going to walk in numbers that will stun everyone except Ben’s HBB’ers.”
Bingo!
If an F’d buyer’s house is worth a lot less than what he paid for it but he can afford his payments because the good ol’ Gov is helping him, why should he walk away? The only reason to do that would be if renting is much cheaper than staying where he’s at. It seems like it depends on what happens to rents whether they’ll walk.
THe government is only helping people refinance into traditional loans. How many FB’s can afford a traditional 30-year fixed on their homes? There is a reason they opted for exotic mortgages.
This isnt’ a bad idea. When illegals we’re streaming over the border I should have just stopped by the local whatever and gotten myself and workers Fed ID and assumed two identies, mine and my illegal mexican id. Then bought a $600k house with no doc no down, as well as go to the hospital for free anytime I needed to. Then, whichever identity it looked like things we’re going to work out better for, just become that guy.
Gestapo: “Papers please.”
Me: “Sure, hold on, which set do you want?” LOL
Oh, so you saw the house on Dexter Ave in Silver Spring, too, huh? $299K 3br/1ba (2br with attic, the listing said) that hasn’t been updated since 1949 (some of the electrical isn’t up to code, etc etc).
300,000. The price of a fleet of 20 brand new Toyotas . . .
Manufacturing is the engine that drives the economy (look at China’s 10+% growth v. our what 1%) And financing is the gas. As we got higher octane gas(better financing) poepple confused the gas with the engine. So we shipped the engine to china and developed even higher octane gas, but now what happens when the well runs dry? We got no gas AND no engine.
Good point. We’re in manufacturing and it’s odd to me that people don’t realize what we’re giving away. The main product the US now manufactures seems to be housing.
Too bad its a non-tradeable good.
hey, maybe in a few years cheap housing will draw smart pople from abroad, especially if the dollar is cheaper.
We actually manufacture dollars and send them abroad. Real goods for us. Claims on our children to them.
you are exactly right.
yet another reason not to have them: imposed serfdom
Yeah but they are cute and if I raise’m right someone out there will feel guilty about not visiting me in a nursing home.
but now what happens when the well runs dry? We got no gas AND no engine.
We can continue to sniff the empty tank.
Looks like I picked the wrong week to quit sniffing glue.
Can’t we just send in the tanks to get the gas and ship it to the engine? I thought that’s what we were doing.
Has anyone ever seen a calculation the “real cost” of a gallon of gasoline? Does it exist?
“…Still, a bailout or expensive measures rammed through by either party might be unpopular with taxpayers who had no role in other peoples’ decisions to take out risky mortgages.”
As posted before with credit to Prof Bear regarding the % addition of the political subclass of consumers known simply as: “renters”
Re: “The Bailout Theory of Redemption”
Remember? (And as Prof Bear noted: include & add with that 34% group… those tax paying US of A renters!)
“Federal aid ‘would come at a cost,’ said Douglas Duncan, chief economist at the Mortgage Bankers Association. ‘It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?’”
There are the 34% of homeowners with no mortgage + 31% who (God forbid) rent. That’s 65% of all households who should be furious about this.
Stats say that 2,000,000 households will face foreclosure because of this bubble. There are about 120,000,000 households. That means that we will be bailing out about 1.6% of the total households. How many of those are speculators? How many just bought too much house? How many would go into foreclosure anyway?
The bailout is about the lenders, not the borrowers. If it’s not just hot air, it’s our job to continue exposing this scam as a bail out for the banks, not for J6P
“Darrell Sexton shuttered his Indianapolis brokerage, The Money Station, at the end of last year after sales plummeted from $5.2 million to under $1 million in three years. While Sexton’s firm also was a lender, much of the decline was in his subprime brokerage business.”
“Sexton says he had to put his own 7,000-square-foot house up for sale, though it has languished because of the housing downturn. He’s looking for a sales job in another industry.” “‘You begin to question your self-worth,’ he says.”
Poetic justice, we hope.
What in the Sam Hill is this guy doing with 7k square feet? Is there an Olympic-sized pool inside that house?
Incredibly, it’s not to uncommon here in indy. Last I checked there were about 150 houses around this size for sale in Hamilton and Marion counties.
I don’t know how he could question his worth, why not just find an appraiser that will tell him what he wants to hear.
LOL!
Amazing how many people question their self-worth (”find God”) after having ripped people off (rather than before).
Good to know that “smart investors” knew the housing bubble was the new Nasdaq bubble two years ago. Pat yourselves on the back.
http://www.thestreet.com/s/homebuilders-finally-nearing-the-bottom/newsanalysis/homebuildersconstruction/10377280.html?puc=_tsccom&
“Sexton says he had to put his own 7,000-square-foot house up for sale, though it has languished because of the housing downturn. He’s looking for a sales job in another industry.” “‘You begin to question your self-worth,’ he says.”
To bad, you should have seen it coming. Oh well welcome to the real world. Prehaps a career selling stuff on E-bombay will work for you!
“Sexton says he had to put his own 7,000-square-foot house up for sale, though it has languished because of the housing downturn. He’s looking for a sales job in another industry.” “‘You begin to question your self-worth,’ he says.”
Don’t worry, you’re self-worth is still intact. You’re the same stupid, shallow f$cked up, f$cking, c$ck-sucking, greedy, FB player bozo you always were.
don’t mince words, Andy - LOL
why mince words? these people have it coming in spades. i want public humiliation - spitting in faces, perhaps.
Yours or theirs?
“‘I don’t think we should ever return to the excesses in mortgage lending that we’ve seen over the past two years,’ she said. ‘It’s a dangerous phenomenon in a globally linked economy.’”
Which begs the question:
What is the next inflationary “instrument” i.e. teflon bubble…that can be rapidly increased by millions of people in denominations of +$100,000 USD chunks?
Lucy: “Charlie Brown…you’re such a Block Head!…here, I’ll hold the football…and you run up a give a good hard kick…
Charlie Brown: (running…kicking air)…AggggHHHHHHHHHHHHHHH!,…why do I always believe her?
the bailout is a non-event. a two-out single by the home team. come october, november, december it will be all but forgotten.
Yes. The housing disaster is like the Rangers’ drubbing of the Orioles 30 - 3 just a few weeks ago. The Orioles just got a bunt single and the crowd of drones is thinking, “here’s the comeback”. Too bad the next guy up to bat is blind in one eye and can’t see out the other.
Tony Snow is leaving his job he said his family can’t live on 168k a year he makes, and the gov’t wants you to believe that you can pay back on a loan on a house with the lousy pay most Anericans make?
I’d love to know the details of why someone can’t live on 168K/yr. I’d be doing cartwheels making half that right now.
No joke..
From what i understand Tony was making over 500k from Fox TV and Radio and speaking tours before he took the White House job, when asked today how much he will now charge on the speaking trail his reply “to much for you to afford” now that is the problem with this country in a nutshell what a pompus reply, and these people are going to bail out the avg Joe who may lose his house?
Well there goes the sympathy I had for him being a cancer patient. Just another a$$hole, it looks like.
Too bad they couldn’t treat his ego while they were in there.
That reminds me of the restaurants I hear about without prices on their menus…and the saying “if you have to ask, you can’t afford it.”
No, it’s more like “if I have to ask, that means you’re charging too f**king much. Just give me some water.”
Blano> Speaking of dinner houses where their are no menus and you can’t ask the price, my brother in law just had to try one of those trendy establishments and guess what bill he got, pasta no meat sauce, ( meduim bowl), 1 meat ball, no drink, no salad, $150. Needless to say he doesn’t want me to talk about it ever again, hope he doesn’t read this blog he is a big guy?
Good Lord….I’d have thrown them a 20 and said sue me for the difference.
He also has 5 kids.
“No price on menu” to me means “no sit down, go elsewhere”
Tony’s ARM is adjusting upwards soon.
The guy’s got cancer and won’t live that much longer. He figures putting away a few bucks for his wife and young children to live on after he dies is a good idea. I don’t blame him. He will probably go back to Fox news for a little while as an analyst of the 2008 election, which he may or may not personally live to see.
I think we all know that Tony is in bad shape i’m not after him because of his bad break in life, but when you stand up there and tell the world i can’t live on a $168K a year, then try to tell the people that the govt understands your problem and is willing to help knowing darn well they totally screw up a major city in crisis (NO) and now they are going to help the housing markert Greenspan was in on the folly.
I would think the Tony who doesn’t have long would have a little bit of a conscience in the end and forgot the party line?
Your not suppose to pay it back, that’s why they are now talking 40 year loans, they just want to try to make it so that you can pay year after year and at the same time keep RE prices up and the banks happy.
Many of those FB’s can’t even afford 7% interest only, much less a 50-year fully amortizing.
Folks, Tony Snow is really sick, maybe terminally ill. Maybe that has something to do with his reasons for quitting.
Bub-bye—-see ya!!
Our biography will always become our biology. I’ll pray for Mr Snow.
Bush also mentioned in his speech going after the evildoers of mortage fraud ,in so many words . I guess tht would cover about 60% of the mortgages made between 2004 and 2007 ,IMHO.
You would not have all these foreclosures if there wasn’t massive loan fraud on applications .Borrowers /mortgage agents were claiming 50 to 70% more income than they really made . Speculators were lying about intent to owner occupy ,and it was common practice to accept faulty appraisals .The no down payment /no doc. aspect to the lending created the situation of this high degree of speculation .These borrowers can’t be save by the Bush proposed bail out ,so a huge % won’t get help .
I think that if the Feds are going to do anything ,give a favorable interest rate to borrowers that buy foreclosures that put a 20% down payment .Start rewarding end-users that really have the ability to pay a mortgage and give them a incentive to purchase a foreclosure . Forget the sheep that purchased housing 50% beyond their means .
Has anyone else heard radio ads for FHA refinancing? Never heard a commercial for the FHA before and this was specifically targeting refinancing. Heard it for the first time two days ago.
GP,
I was going to ask you about this. Not sure if it’s what I heard, but I’ve heard a strange ad this week myself. There’s a mortgage company whose ad says “nothing much has really changed,” “get money for a refi, cash out, whatever you want,” stuff like that. As if nothing has changed. I’ve only heard it on 93.1FM.
Thing is, I know I’ve heard that guy talk re: a different mortgage company. Last name is Ross. I’m wondering if he folded under one name and restarted under another.
I think I’ve heard the one you’re talking about. I used to shake my head at Rock Financial ads last year touting I/O’s in a market with rapidly declining values. The one I heard was definitely an ad from Big Brother trying to get FB’s into FHA’s. The Detroit market has so many foreclosures I was wondering if they sent up a FHA bailout test balloon, to see if they can stop the bleeding. I’m an old fart so I was listening to the Cool Jazz station.
I’m a fairly old fart who listens to classic rock, unfortunately the Detroit rock stations suck. My favorite rocker station is in Grand Rapids.
What you said got me about the Rock ads too. Then David Hall comes along later and says “oh, those adjustable, I/O etc. loans are only 1.5% of our portfolio.” No way!! Not with all the advertising they did for those. Then in the last month or so those “our 5 minute interview can tell you the value of your home” ads made me want to tear my hair out.
I’ve heard lots of people say Rock/Quicken won’t be hurt at all by the credit crunch. I disagree. I had a title company gal tell me last Sunday she’d heard they had laid some people off and were trying to keep it quiet. Don’t know how they could, but I’m thinking that regardless, this whole housing/credit thing might keep them from moving to downtown.
In the “Weekend Topic Suggestion” thread, salinasron makes a very good point…that temporarily forgiving the 1099 taxes from short sales, etc., would actually *encourage* strapped borrowers to let the house go to foreclosure.
Eliminating the 1099 consequences would be one less negative for a strapped family to worry about, increasing the likelihood of them just mailing in the keys.
Is that the intended effect of El Presidente’s plan? Good pick-up, salinasron.
That’s my interpretation of this too. FB’s can just now ask for a short sale and walk, and the bank can write off the loss. Meanwhile, the formerly $500K house is now a $300k house, which is what we all wanted.
No, No, No, they’re going to renegotiate the loan at the lower value - you won’t get anything. Then again - the proposal is for “people with good credit” that lets out all subprime borrowers.
“No, No, No, they’re going to renegotiate the loan at the lower value…”
I don’t know that the banks have the authority to do this…remember most of them don’t hold the paper for the loans anymore, and they are not allowed to modify mortgage terms without the investors’ permission. Investors won’t like this one bit because suddenly the paper they hold is suddenly worth way less.
This is the whole wrinkle with “modifying” loans to “help” borrowers stay in their homes. No one knows who actually is holding any particular mortgage, and by the time they found out, I bet the FB would be long gone.
I’m just saying that it was quoted as one of the suggestions. I guess suggesting something that can’t be done isn’t much of a risk because most people don’t know it can’t be done and will lose interest in this story as soon as the next distracting story comes on board.
If the loan amount on the house has been devalued but the LTV remains the same, the house has been devalued.
I would like to see a public database of every person that gets this bailout, so you know what kind of offer to make when they sell - a “oh, you’re one of those taxpayer bailout people, my offer is 50% off your asking price”.
Why would the bank do that? At some point, “writing off the loss” becomes very large.
Or, it gives incentive to specuvestor to renegotiate terms with lien holder to lower principal, refinance and keep the property. Not tax to worry, about poof!
I meant, … no tax to worry about, poof!
this is exactly what is going on. You can’t foreclose because there are not enough new buyers to absorb the inventory. People will keep the house they will just owe a lot less. FB =happy , bank =happy, taxpayer/saver=screwed
Every article I’ve read mentions the tax-exemption of debt forgiveness on either “reworking loan terms” or “refinancing”. No mention even of short sales. There is no way this would apply to foreclosures.
I think prez is actually encouraging borrowers to go demand a lower loan amount from their lenders! If that happens for real, could you imagine how fast neighborhood comps for appraisals would drop?!
Freefall.
there will be no “freefall” By letting the fb stay in the house an artificial “price floor” has been put to the housing market. Inventory that would have come on line as a forclosure now will not add to the inventory which will keep prices higher - less supply to clear so price will not have to drop as much.
But the change in price happens with a refi that reduces principal. Anyone that does this will show up when pulling comps. Higher inventory and more REO won’t lower prices—- buyers giving up will.
As I said, what Bush has proposed is not a bad pallative thus far. The big financial sacrifice for the rest of us is just foregoing the tax on the 1099, which would be blood from a stone in any event.
The next issue is deficiency judgements and the new bankruptcy law. Allow those caught in the mania to walk free and clear as another “temporary” measure and the foreclosures will really roll.
Texas-style privately-financed affordable housing for all!
Countrywide Loan Servicing has 2500 California homes in its REO this week, up from 500 on 1/1/07. It totals $1 billion in value. At this rate of increase (4%/week) they will own 17,500 homes in 12 more months (less whatever they can sell). The total value will be $3.7 billion.
These homes will not be coming off the MLS in the winter months. Look for seasonally adjusted inventory records to be smashed in late 2008. You might actually see a true buyers market for Christmas that year. Sale prices should be 10 times the annual rent by then. $2,000/mon rentals = $250,000 purchase price. Back to 1995 ratios.
interested in what you think sf valley avg homes will be early 2009. no way 250… but i think less than 500k.
Bush could have just saved everyone the hassle 6 years ago when he was talking about the ownership society and just announced that the government was going to go ahead and hand out free houses and toys to illegals, the lazy and the greedy, as well as annoucing that current homeowners would continue to pay off their mortgage as well as subsidize all of this through taxes and inflation.
Would have just saved a lot of heartache all around. It just would have been easier that way instead of all this dragging his toe in the sand, beating around the bush sh$t about it for the past 6 years. LOL
In Bush’s Bailout he wants Congress to pass a law to “forgive the tax liabilities” if the house is sold in a short sale or foreclosure for less than is owed.
So liars and others who took HELOC and Refi money to buy cars , boats, take vacations and pay off CC bills would will get that money free !
I want 50K-100K free money too!
If I give any of my kids 10K they have to pay tax on it.
We ALL need to write letters and call our Congress people and do it every day.
The only Bail out I could support is if Banks and Mortgage companies could take their losses over a 5 year period instead of the year they book them. That would get things moving
Not trying to be political here, and I know a lot of you on here probably don’t like it, but maybe now might be a good time to get conservative talk radio all fired up against any kind of bailout. If they have as much influence as the left claims, then it seems that’s who you’d want on your team to get us unwashed flyover-country types all fired up against bailouts.
Good luck. As far as I can tell, there are no priciples or consistent theories to talk radio (on either side of the spectrum) other than propping up their political party.
As for the administration, it is obvious that Shrub has a tendency to favor the Wall Streeters and Big Oilies, but he also caters to the flipper/realtor types who think that as long as you spend like a “winner,” you won’t be a “loser” like all those liberal welfare douchebags. Same people that think they win from tax cuts to the uber-rich despite the fact they can’t even smell that tax bracket from where they’re at.
Actually, at least Rush and Glen Beck have come out against any bail-out. When I heard them talking about it, they want capitalism to work and capitalists to get punished when they make bad decisions.
This is money dropping helicopter
Forgive all the HELOCs!
“Sexton says he had to put his own 7,000-square-foot house up for sale, though it has languished because of the housing downturn. He’s looking for a sales job in another industry.” …
“‘You begin to question your self-worth,’ he says.”
You also might not want to look in the fractured mirror of your “net worth” either pal.
do you guys realize that temporarily forgiving taxes on a short sale is going to tank this market? think about it, so many people are probably only still paying their mortgage because they can’t afford to pay the taxes on a short sale because they are so underwater. now they can AND it looks like there could be a short window to do it! the herd is going to stampede out of the market before that gift goes away. people will say walk away while you still can.
i was thinking the same thing. especially if the qualifications for the exlclusion benefit higher income individuals. they will surely take advantage of any income tax exclusion.
Would this not kill the refi market, except for the artificially pumped FHA? Who would hand out a refi if they knew the FB could just walk away from the obligation?
I don’t think it would do much at all to the refi market. Refis are recourse- the bank (after a short sale) will not forgive the debt unless it has wrung every cent from the FB. At which point the FB would be so broke that even the IRS might drop the 1099 tax (it has happened, if one is broke enough). If I were a bank, even if I gave up on getting blood from a stone (from the FB), given recourse, I would either hold the debt until it could be forgiven for some tax or accounting advantage (at which point the 1099 would be written and the additional tax forgiven under the new scheme) or I would sell it to some sleazy agency for some cents on the dollar, in which case the former FB might get a midnight visit from Vito
In other words, I don’t see refis getting forgiven routinely enough for the tax break to matter. Now in non-recourse states and a first mortgage, this becomes a big deal…
‘I plan to help homeowners, the government’s got a role to play. Bush said, ‘But it’s not the government’s job to bail out speculators or those who made the decision to buy a home they couldn’t afford.’
Hey Dubya: the people who bought a house they could afford don’t need any help, by definition. So who exactly is supposed to get this help of yours?
it looks like the greater fools at the top were the Europeans.
“…see what happened was..I began to smell smoke…and then suddenly…someone…I’d don’t really know who…yells: Fire! Fire!…and well then…things really got real worse…very fast!”
*Narratives are linear by design.
*Scenes are set, characters identified and defined, actions unfold over time in steps that lead toward a resolution.
*Unfortunately, while narrative is convenient in helping us understand things, it is useless in predicting how things unfold. Why?
*Because history does not unfold in a linear manner.
and also,…
* It’s about discussing the most probable outcome of the central bank conintuing their policies of trying to maintain continued credit expansion.
*As long as credit expansion and demand for credit continues at an accelerating pace, the appearance of prosperity continues as asset prices increase.
* The one thing we do know, is that this credit expansion has a price.
* It must one day be repaid.
* How that day arrives is anyone’s guess.
Alfred Whitehead: “..the impossible I believe…it’s the improbable have have problems with…”
Minyanville
Five Things You Need to Know: Digging Ourselves a Deep Jackson Hole:
http://biz.yahoo.com/minyanville/070831/20070831fivethings_id.html?.v=1
from Marketwatch:
“Bush’s plan would reportedly allow about 80,000 homeowners to refinance their mortgage. Some groups have estimated that as many as 2 million homeowners are at risk of foreclosure.”
http://tinyurl.com/ypnkho
A bailout in name only, just enough to keep the US economy from tanking for a little while longer.
THis assumes that the 80,000 (1) actually want to refinance their mortgages; and (2) can afford the payments on a traditional fixed 30-year loan. Somehow I don’t think there will be a rush to the FHA even by those who are eligible.
There was a time when renters were not even allowed to vote!
Mr. Bush is just reading the script. I don’t think the President has any authority to implement these things, the Congress does. By the time they finish arguing we will be in the middle of the next boom (if we live that long). Pity the poor persons who are on the recieving end of government help in this mess anyway.
haha, I wrote this back in a thread on April 8. Still has meaning:
———————–
The image is too absurd. 600 members of Congress huddled on the deck of the Titanic all politely arguing about whether to start bailing out the water. Who should do it, where to do it, where the buckets should come from.. some are drawing up plans to punish the iceberg.
All the while the bow lurches upward, chairs sliding across the deck, people jumping off and swimming for the lifeboats. The FED conferring on the most precise phraseology to describe the leak, etc, etc.
Make a fabulous cartoon…
I say bring on the bail out. With this administrations track record it will only get worse. Think of Katrina, Iraq war, health care, homeland security and the countless other programs that have failed so far they are batting 1000.
I was really pissed until I read this post. Thank you.
I agree with Chris. This Administration probably couldn’t organize a pot-luck picnic sucessfullly, let alone a bailout. (Okay, we have 10 bags of ice water - we must be good to go..) No need to get angry until something actually happens.
I would worry. If there is one thing the administration is good at, it is shuffling money to their rich friends. Last month, Halliburton, this month, Lehman and GS… The image to keep in mind is the shrink-wrapped pallets of currency ‘disappearing ‘ in Baghdad.
Hey Chris, other than Anthrax at the US Capitol in 2001 no major domestic terrorist attacks since 911. VA Tech was just a looney tune nut not a muslim fanatical.
So with any of these new “Rescue Me I’m In Mortgage Trouble”, themes being discussed by the brilliant monds in Washington, let us suppose someone has a mortgage, but would like a lower rate, then what’s stopping them from NOT paying their mortgage and becoming 90 days late - then applying to one of Freddie or Fannie’s new government “Help Me!” programs even though, in reality, they can afford the payments? Nah! People will never do that. Would they?
Sounds to me like we have moral hazard run amok ahead of us.
FHA doesn’t have lower rates. it’s actually a little higher since PMI is priced into the loan.
YOU GOT to be kidding me? Bush is solving the subprime mess? HA!
Now the CIC and BB are a team. Great for Wall Street, and let Main Street eat cake.
August 31, 2007 2:07 P.M.ET
BULLETIN
Bush and Bernanke take Washington to Wall Street
Dynamic duo wind up bulls
Market gets its desired reassurances from the Fed and the White House.
http://www.marketwatch.com/
Dynamic Duo?
Ace and Gary?
Many people have made huge fortunes in the runup of housing prices, charge them (not me) if you want to tax subsidize (or any other form of rescue) those who lost money in this gamble - no bailout, and no tax benefit to walk away from this mess.
Any politician who endorses this should be drawn and quartered.
that’s a very good idea, I would add lower the 250k non taxable gain (500k if married) when people sell their home. they can back charge everyone who bought and then sold between 2000 and 2006 for all I care.
Just think come Jan. loans will be available to help buy that 1953 1200 sq ft 1 bath 1 car garage 750k house in beautiful Burbank Cal bet you all can’t wait?
Markets this week: “Yay, Bush and Bernanke will save us! Buy, buy, buy!”
Markets next week: “Wait a minute, neither plan will really do much, and both promise only vague generalities. Sell, sell, sell!”
Markets after Sept 18: “My god, those liars didn’t cut the rate! Panic, panic, panic!”
Keep in mind that going forward the “hanky panky” will not be allowed, so while this MAY help a few current FBs, it will do nothing to allow the next crop of FBs to take root. In the end, hundreds of thousands of houses already on the market in every big city need to be sold and occupied by end users, many of them vacant REOs.
And as far as “poetic justice” is concerned, think of the FB that was forclosed on and evicted YESTERDAY hearing this news today! “Um Mr. Banker, can I move back in and get the bailout?”
Good stuff:
http://www.minyanville.com/articles/GS-Citadel-Sowood-TGT-funds/index/a/13955
How in the world is Bush going to decide who gets bailed out and who doesn’t?
We going to see a new post, a “Mortgage Foreclosure Czar”?
Are we now entering the end of the War On Terror, and the beginning of the “War On Foreclosures”?
It’s been a war on the dollar since 1913, a war on savers since they closed the gold window, and now it’s a war on not having anything you want without actually working or having money. Now get out there and buy a condo conversion for the Gipper. And don’t pay the mortgage, that is Uncle Sam’s job.
From ft.com:
The move is targeted at borrowers on modest incomes and will impact only Americans with mortgages worth up to $362,000. A bill that will be taken up in the Senate this month would increase the limit to $462,000.
“Time is of the essence. Tens of thousands of Americans are falling behind on their mortgages each month and risk losing their homes as their interest rates re-set,” said Mr Fishbein, estimating 2m Americans were already delinquent and facing foreclosure.
Credit markets initially rallied as investors anticipated Mr Bush’s initiative would reduce the number of loan portfolios going bad.
Rising non-payments on high-risk subprime mortgages has triggered a crisis in confidence in credit markets in recent weeks, resulting in extreme volatility in financial markets and causing liquidity in some asset classes to freeze up.
The securitisation of US subprime mortgages has spread exposure to the American housing market throughout the global financial system.
Several economists said Mr Bush’s initiative would only have a minor impact on the outlook for the overall housing market.
The 362K & 462K will have minimal impact on the East & West coast where you have Jumbo loans and are Democrat regions.
I still don’t see how “modest income” households will be able to afford the 400K mortgages, unless they will only be charged 1 or 2% interest. This of course will cost taxpayers 100’s of billions a year to subsidize. Isn’t America great? Where else can an illegal immigrant buy a house he can’t afford, and have the US taxpayer bail him out via asubsidy?
They will have to charge those FB’s the going rate of at least 6.5% or else there will be a revolution among anyone paying more than 2%. Perhaps it will be a 50 or 100 year mortgage
I/O is basically an infinate year mortgage. $400K house at 6.5% is $2200 a month I/O. Add insurance and property tax.
So, you’re looking at $7K-8K a month minimum income = $84K-$96K. That is 20-30% of the population.
Haven’t read all the comments, but the first thing that came to my mind was, “Oh no, another Bush administration ‘plan’…” They’ve destroyed everything they ever touched. Will the FHA be next?
Damn these half measures anyway. They should just print up some new money and buy up all the mortgages…hell, just buy all the housing stock with government money. And while you are at it pay off the national debt with crisp new hundreds. Then fill every garage with stacks of cash. We can all be millionaires…and paupers. Only in America.
no bailout needed, shrub.
people are smart
This is going to be just like the Florida Tax relief proposal where we read about supersized tax relief from the govt., and then when we received our bill this year we saved $150. Big deal. When the Feds realize what kind of money they are promising, they will delay, Bush will be an even greater fool, and his proposal will be caught in committee. This whole thing is political overpromising that will never help anyone.
As usual, it is not clear what Shrub’s intentions are. Is he being deliberately disingenious or can we assume that its his usual inability to make a clear point?
“Sorry, Dude, that anti-S propoganda dog don’t hunt no more. Welcome to the New World.”
Ah, the New World™, where old dogs lie down, truth and justice prevail and wing nuts still spout propoganda [sic] about Israel controlling the Fed.