The Media And The Plight Of The Poor FB
Readers suggested a topic on media viewpoints and the housing bubble. “My weekend topic suggestion would be examining what other bass-ackwards terms the media is using that clearly favor The Plight Of The Poor FB.”
“The media shouldn’t assume that FB’s voices are the only ones that count and that a ‘crisis’ for them is a crisis for everyone. Falling prices don’t hurt the first time buyer hoping to break into the market.”
“First time buyers enable people to become second-timers and so on. Why do the media continue to use this word to describe people being expected to repay what they’ve borrowed, instead of using it to describe people who have been priced out of the market and seen their savings thwarted by mutant price runups?”
“In line with this questionable and flagrant overuse of the word ‘crisis’ in this situation, is the bewildering mention of a ‘moral hazard’ on CNNMoney this morning to describe our government NOT being more generous with FB’s.”
“Why are we using this term to describe government not bailing everyone out, when we should be using the term to describe lender/broker/agent/flipper/consumer greed pricing people out of homes?”
Another added, “The cheerleaders on the business news always twist everything that is said. For every one person that makes a honest comment, they have three people cheerleading to offset the comment or the host makes a final comment to sum up the cheerleaders point of view.”
“I have never heard a discussion by MSM about this housing boom being a outright mania of speculation in real estate, that was funded by fraudulent lending set up by Wall Street and that is why prices are crashing.”
The Atlanta Journal Constitution. “Mortgage market turmoil. A painful housing slump. Economic concerns don’t get any worse than they are these days in America, right?”
“Wrong. Try coming to Britain. After a decade of unprecedented economic growth, this nation of perhaps the world’s most overextended borrowers might finally be forced to pay the piper.”
“High debt ‘really snuck up on me without me realizing how bad things were getting,’ said Erire Obano, who had to sell her London home this month after she remortgaged her property — twice — in order to pay her rising debts.”
“As she fell behind on mortgage payments that rose from $1,200 a month five years ago to $4,000 a month today, ‘I was living off credit cards there for a while and it wasn’t a good thing,’ she said. ‘The debts just grew like crazy.’”
“As home prices tripled, with the average house price recently smashing through the $600,000 mark in London, owners borrowed against that value to fuel consumer spending.”
“The number of people declaring bankruptcy jumped 28 percent in the year ended this June, while the number of home repossessions soared 30 percent.”
From North Shore Sunday. “Last month, 4,527 homes went into foreclosure in Massachusetts. ‘Our toes are just getting wet,’ says Janet Hilton, a real estate broker in Rowley. ‘There’s a massive tidal wave, a tsunami that’s about to hit us on the beach.’”
“Just about everyone is pointing a finger at subprime mortgages. Those loans might have been the Titanic for many homebuyers, but it was the sagging real estate market that cut loose the lifeboats. A lot of homeowners found themselves locked into mortgages that were written for more than the price they could get for their homes if they tried to sell.”
“In hindsight, subprime lending looks almost like taking a kid who failed basic math and telling him he can still graduate as long as he passes calculus. ‘In many cases borrowers facing difficulties are those who may have entered into loan products they didn’t understand,’ says Dave Bernotas, president of East/West Mortgage Company in Peabody.”
“Hilton agrees that a much the responsibility falls on the shoulders of mortgage companies and lenders who were only too happy to write loans for virtually anyone who appeared to be conscious and breathing.”
“‘They made it so easy for those poor souls who didn’t have the money to buy a home,’ she says.”
“But Nancy DelMaro, a senior VP for Coldwell Banker, says you also have to look at the climate in which those loans were written.”
“Three years ago, people were thrilled with the red-hot real estate market. Lots of people, real estate brokers, lawyers, appraisers, movers, plumbers, electricians, carpenters, landscapers and newspapers that ran ads all made out when home sales were booming.”
“That atmosphere of prosperity probably affected a lot of buyers, who figured that even if their rates did rise in three years, they would be earning more and doing better, says DelMaro.”
“But now that the party is over, buyers with those subprime loans are left with the mess. And the toll on those people is enormous.”
“‘People have not only lost their homes, they’ve lost every dime they had,’ says Hilton. ‘And they are horrified because they think they have let their families down.’”
“DelMaro, who has been selling homes since 2000 and seen both the bubble and the bust in prices, agrees the personal costs of the mortgage mess have been enormous. Like other realtors, she has stories about couples and families who were devastated by the losses.”
“‘It breaks our hearts,’ she says. ‘It’s a tough time to be in real estate.’”
And before someone asks, FB is short for f*@ked borrower.
Or as we call them on Battlestar Galactica;
fraked buyers:-)
Isn’t that “fracked”? It’s a short “a”, isn’t it?
Wish sci fi would do reruns of that show instead of Painkiller Jane or Flash Gordon. Boring. Eureka is reasonably funny.
Totally OT, but the problem with the Sci-Fi Channel was the success of SG-1 — all the shows are a campfest now, too self-aware to be satisfying.
I agree and taking this further off thread… At least they are importing Dr. Who.
I used to love the SG series, now its too… formula and PC. Just the same things that killed off the Star Trek franchise. You need a Captain/Colonel who doesn’t give a hoot about the casualties and goes after anything 1/4 human female. A la the “captain” character in Dr. Who. 
Got popcorn?
Neil
just wanted to add that the SciFi channel were UTTER FOOLS for cancelling The Dresden Files after one short season! That show was really quite good.
Hiring Sir Derek Jacobi to play the Master wasn’t a bad move either.
I don’t mind the self-awareness when its suposed to be funny, and I think Atlantis is starting to work too - adding Sam might help that process or might be a disaster. We’ll have to see.
Oh, yeah. I really liked Dresden Files. Is it cancelled or on hiatus?
I like BG but can someone tell me how a civilization who has been traveling the speed of light for thousands of years cannot invent a better weapon than a 9mm?
I think using familiar weapons is supposed to make it grittier. Maybe because they don’t have to use funny noises to indicate that it has fired.
bears, beets, battlestar galactica
New one on BBC America. Called Torchwood. If you liked Men in Black you may like this show.
BTW, I’m a big BG fan.
Has there ever been a scientific study showing statistically significant correlation between being a Sci Fi fan and being a little smarter than the average bear? It wouldn’t surprise me. It also doesn’t surprise me at all that this blog attracts a lot of Sci Fi fans.
One study seemed to indicate a lot of male SF fans had a much higher amount of “unreleased tension”. Of course, that was an unscientific study over 30 years ago at a single college in Pasadena.
Most sci-fi dweebs would sleep alone in a women’s prison.
uhuh…huge scifi and very lady like…no prison here! (ew)
Using the MBTI personality model, I suspect that most sci-fi fans are NT types (see http://www.personalitypathways.com/type_inventory.html for an introduction to this model). NT’s are primarily motivated by knowledge, not fashion, status, or emotional issues.
Possibly true, tnovl. Almost all of my college buddies, including the females, were MB type xNTJ with a couple of xNTP. It was a very geeky school. Although many enjoyed SF, they weren’t all crazy about it. Most of them just read everything. I took the MBTI at a voc counselor’s office ten years after college - INTP.
Torchwood is very good. We’re eagerly awaiting season 2.
These days, it could be short for f@cked banker
It takes two to tango. Since we have FB, then we should have FL ( F**ed Lender) too.
FB-taxpayer,lender,investor,borrower,family member,pension holder,etc. All are victims. I’m beginning to feel sorry for myself. Time for a nap.
The poor FB sob stories are just a smokescreen for the real deal. The serious money is in trouble, but who is going to cry for the real players–ibanks, hedge funds and their investors and big money. No,
it’s like Hearst is alive and well again, and playing to the readers of yellow journalism. You always want the disabled worker, the poor grandmother, the overworked divorcee with 3 kids to feed. And do be sure to leave out the HELOCs used to pay off mountains of cc debt and the SUVs and designer duds for the kids. Focus on the hard luck side, not the greedy, party-like-there’s no tomorrow behavior of the “deserving’ FBs.
The WSJ has a story today on the Macklowe’s, a billionaire RE family in NYC, who bought commercial RE from Blackstone using 110% LTV, putting in only 50 million of their own money for a 7.6 billion dollar buy. There’s a 5 billion payment due in Jan., their tenants leases will not cover the costs, and yikes, it’s a recourse loan. They could lose a billion of their own cash.
Is this a sad, heartrending story? Naw, it’s popcorn for the crowd.
But this does not serve the Fed or Wall Street’s interest–so keep the focus on the tiny moguls, the baby greedheads, the stupid, the reckless n’er-do-wells. And, never mention the fraud scams…that could stem the tide of sympathy the Fed and the ibanks need to keep this game going.
RE: the overworked divorcee with 3 kids to feed.
Screw this “poor” divorcee crap.
She is in all likelyhood thought the $120k processor and$250k mortgage broker Bubbleland jobs were forever.
So she made the decision to grab the kids, the house, the dog, clean out hubs for what she could in divorce court, and move in the guy she’d been boffin’ at work.
I’ll weep tears for the poor SOB ex-husband who’s broke and livin’ in the 3rd floor flat for gettin’ soaked by the gender biased court system for and his -ex’s immature, emotional, fairytale decision to bust it all up.
So I’ll take a stab in the dark: this has happened to you?? (The ex-husband bit, not the $120K processor bit)
Lol, I’d have been inclined to say you’re either bitter or a bit daft, if something similar wasn’t about to happen to me (I think), and I’m 3 years out from my divorce.
happened to me also . . . except the ” perfect guy ” my ex fell for threw her out like a used diaper . . . hehe!
I kept tabs on her dating situation as time went by just for peace of mind that some biker azzhole wouldnt be beating my 8yr old son, if she went that route.
Of course she later some skinny dork whom she bosses around. At least he is a milqtoast & doesnt abuse my son. (I suspect my bad temper gives him pause if he was so inclined. I would gladly go to prison over anyone who touches my kid(s))
Hang in there HDman - we usually have the last & longest laugh.
I know I am.
hilarious, actually
RE: Hang in there HDman - we usually have the last & longest laugh
It’s like Blano’s comment…”I would normally think you bitter or a bit daft…” except…
You always think adultery and divorce happens to the other guy…then BOOM!
After a 28YO marriage your a fookin’ statistic.
Yeah, I was a basket case for about a year and half, but extraneous to the financial loss, I’m much better off.
However, I do feel compelled based on my experience to formulate public commentary contrary to the Oprah Winfrey line that all men are chronic cheats and domestic abusers while women are the poor innocents and downtrodden of the relationship system thereby “forcing” them to institute 85% of all divorces.
Geez you guys, is this a blog for housing bubble discussion or a blog for bitter ex-husbands to do their woman bashing?
You, sir, have violated the dogma that all single moms got that way through no fault of their own. Stand by to be pilloried for being such a heartless swine.
All you guys should have had Pre-Nupts. Saves alot of financial grief down stream.
S.P.Q.A.
People read stories about people “just like” them who have good stuff happen to them and people worse off than them who have tragedies. Since the stories are bad, you scare your audience if you report on the ones just like them. There are a few exceptions (large scale shootings of middle class white people), but the media is in business to keep readers, not scare them away.
Seriously, if your subscribers are largely two income families who over borrowed at least a bit for a house or thought about refinancing to pay off credit cards or bought a new car on a HELOC, are you going to write horror stories about people who borrowed just a bit more for the house or actually went through on the refi to pay off the credit card or bought just a slightly nicer car on a HELOC?
By writing about the fixed income grandmother, or the single parent with three kids or someone else who is sufficiently worse off to make people believe their outcome will be different, you get the emotional tie without scaring the heck out of your readers.
I do believe this is the first phase. Eventually they will have to report and explain the stats that show this disaster. But americans don’t do math, so most will skip those articles.
“poor souls ”
sniff, sniff
Thank you spike66 for the heads up
“Macklowes On a Wire” from the WSJ:
http://online.wsj.com/public/article_print/SB119041496907835832.html
Mr. Macklowe, 70 years old, has a reputation for landing on his feet. “Harry’s got three great things going for him. He’s got great real estate, he’s in a great city, and he’s a great magician,” says Bill Fryer, a partner with King & Spalding who heads the firm’s real-estate capital-markets group.
The only magical act of escapement this Houdini can perform is to find himself an even bigger fool. Otherwise he drowns.
It is now unlikely that anybody will loan him billions on property that has negative cash flow in spite of a 95% occupancy rate. Perhaps more likely earlier this year, but not now, and not for a long time to come.
Got 10% down?
this has the makings of a solid ABCP market, where the borrow short bleed the lend long players.
Its a scotch and kool-aid kinda night gettin the boys ready for liquidity actions on Sunday night.
It’s the fluffers on CNBC an the MSM that make me very angry. Smooth everything over and say everything will be just fine, while ignoring the fact that the big boys on wall street are being bailed out, at the expense of the working poor and middle class, who pay for it through inflation at the grocery store. Where is the justice?
I am starting to believe the fluffers on CNBC and the MSM are not smoothing everything over. I’m beginning to believe the majority of them are stupid.
I didn’t know intelligence was required for the job.
http://www.urbandictionary.com/define.php?term=fluffer
Given the pathological victimization that is a hallmark of our sick and pathetic society, why would anyone expect the FBs to take any personal responsibility for their plight?
Well, if it makes them feel any better, they can blame ME. Yes, all you FBs out there reading, I humbly apologize for creating the housing bubble and thereby victimizing all of you into buying what you couldn’t afford. I also apologize for using the collapse of the bubble as one never-ending stream of fodder for cracking jokes at your collective expense. I’m sorry.
Oh look! Day of Atonement, see ya suckers.
Well, good. We’ve found out who is responsible and they’ve apologized. This whole thing should be cleared up by Monday.
Thanks for your honesty, Ajas.
Jim Sinclair, a respected gold analyst at jsmineset.com, says that “Subprime mortgage problems” is a code word, or euphemism, that really is referring to a $20 Trillion-plus credit derivative mountain that is beginning to shake. So when you hear that term, “subprime,” realize that what we are really talking about is the entire paper-ponzi jive-ass financial system that has evolved, especially since 1990, involving trillions and trillions worth of derivatives.
great point. it’s really a subprime economy!
Yep. An imaginary economy based on paper money. If the rest of us weren’t tied to it, it’d be fun to watch the imaginary flames.
Tied to it like Nell on the train tracks. I hope Dudley Do-right can find his way to save us but I hear that train whistle getting closer and closer.
I’m waiting for Clint Eastwood to do a re-make of Pale Rider, which ends with him riding out of Wall Street, with all of the street signs changed to say “hell”.
I think that was High Plains Drifter.
It was. You are right.
if it takes 5 minutes to expain what it is properly (i.e. all ‘in vogue’ financial instruments), it is just another boondoggle pos scheme invented to suck blood from middle class rocks (and foreigners)
Well, I think I am going to have to wait for some other people to comment and keep me from going off the deep end; the portrayal of “poor homeowners” in the media is making my fooking brain boil it makes me so mad.
Where is our side? Why am I not being interviewed crying my eyes out about how some idiot got 10X 100% financing and “stole” my house from me. The media is playing right into the hands of the NAR and the helicopter Fed.
Home prices coming down is good for those of us that bought responsibly and for those of us looking to buy. The only person truly hurt is the overextended borrower. To portray these people as “victims” just kills me. I just don’t understand the slant of the media on this one; this is good for the responsible “middle America” people. Those most hurt are going to be speculators (who will, no matter what is done, likely lose it all and then some) and the Wall St cult. WHO CARES??
Why are we “happy” about propping up the prices and keeping the responsible buyers out of the market for a few more years? And, doesn’t anyone else realize that this is truly unsustainable. There is just no financial wizardry that can be applied to make a 500K home affordable (long term) to someone with a 50K income. The only way to fix that is to increase that person’s salary to 150-200K. End of story.
IMO, we have to assert that viewpoint back into the national discussion.
I agree Ben, but it’s too late and probably wouldn’t happen. It’s not politically expedient.
“In line with this questionable and flagrant overuse of the word ‘crisis’ in this situation, is the bewildering mention of a ‘moral hazard’ on CNNMoney this morning to describe our government NOT being more generous with FB’s.”
“Why are we using this term to describe government not bailing everyone out, when we should be using the term to describe lender/broker/agent/flipper/consumer greed pricing people out of homes?”
We are now in “Moral Hazard” territory, indicating a complete misread situation by the media. What a shock. I think Bernake used that phrase first.
What a bag of worms!
Additionally, I don’t know if you want to broach this subject on your blog but in the dot com bust there were numerous murder/suicides by people who lost everything. In the past 30 days in Orlando/Central Florida, I have seen an astounding and rapid change in attitudes of everyone touched by housing from Realtors to builders to retailers etc. The unraveling of the RE market seems to be gaining momentum, and we have probably two years to go. I see the same type of situation.
When a guy who owns a framing company goes from 100+ employees, driving a Porche’ and living in a million dollar house, to driving a 10 year old pick up, bankrupt and trying to find a job while his wife and kids live with her mom, this guys looking for options, a way out. I know this guy, by the way and many more like him, not yet in as desperate a situation, but close. This particular guy is the poster child for over extending your credit. Honestly, it’s hard to have sympathy for such a greedy dumbass, but he has desperation written all over him. I found talking to him unsettling.
On a different note, look for a lot of RE burning up. We’ve had several “suspicious” fires in nearly completed apartment/condo complexes. If you’re upside down, burn it. I guess that works best on wood frame structure. Sorry if yours is concrete.
I think crisis is the perfect word and we are at the beginning. A year from now, as foreclosures peak, what word will be appropriate then?
RE: Additionally, I don’t know if you want to broach this subject on your blog but in the dot com bust there were numerous murder/suicides by people who lost everything.
I talked to a guy who was employed by an air services company in the Texas Gulf during the Oil Bust of the early 80’s. Same thing happened. First it was the auto repo guy grabbin’ the wheels. Then the installment dudes takin’ the furniture. Then it was the cabbie takin’ the wife and kids away. And then it was the hearse comin’ for the suicide body.
Nothin’ has changed.
History simply repeats itself in various forms.
These FBer morons got themselves into where they’re at thru a combination of ignorance, greed, and gluttony.
They were only too glad to stick their McMansions and HELOC baubles into everybody’s face on the way up. Why should anybody give a rats azz what happens to them on the way down.
If it takes a bullet to the head to solve their problems-c’est la vie.
About time this society reverted to some form of social Darwinism to divest itself of those who seek a a solution to their poor decision making process from those who have demonstrated reserve, prudence, and restraint
This is why I have sent my congresscritters the following:
*****
It’s become very clear that there is one facet of the housing/credit implosion that Federal officials refuse to publicly recognize. During this past week I have witnessed stock market euphoria as the Fed dropped interest rates by 0.5% and I listened carefully to testimony before Congress by Secretary of the Treasury Paulson, Secretary of Housing and Urban Development Ron Jackson, and Chairman of the Federal Reserve Ben Bernanke. I listened as the members of Congress asked questions (rarely) and bloviated (frequently).
Everyone ignored the 800 pound gorilla in the parlor.
Housing is in trouble because the average American can not afford the average American home.
That is the real housing problem. Yet, we chose to ignore it.
For decades lenders used two basic ‘rules of thumb’:
1. A mortgage should not exceed from 2.5 to 3 times the annual income of the borrowers.
2. Monthly housing costs — Principal plus Interest plus Taxes plus Insurance (plus Homeowners Association fees) — should not exceed 36% of the monthly household take home income.
Those two limits defined the ability of the borrower to comfortably repay the mortgage. They still do; nothing’s changed. Modern ‘financial engineering’ supposedly reduced the risk to the lender from default, so lenders made ever more risky loans seeking ever higher returns and the rules of thumb used by prudent lenders simply went by the wayside. Money was made available, people borrowed the money, builders built in order to meet the anticipated demand, and prices rose exponentially.
That was your housing buble, and therein lies the problem, exposed and open for all to see, but ignored by all in Washington. Since consumer spending is over 40% of the economy, the American economy relies on the “Great American Consumer,” buying, buying, and buying even more. So, any move which could promote further consumer buying was good for Washington because it painted a great view of the American economy. Politicians of all stripes could rest easy as long as the public was buying an ever increasing flow of junk from Chindia. And, they could do that by using their newly purchased homes as ATMs. That is a cynical approach - relying on ever increasing debt burdens by the American consumer in order to avoid reducing government spending.
But, developers of modern junk financing neglected to ask one simple question, namely, “What happens when housing prices rise to the point where people simply can’t afford them and therefore quit buying?”
Congressman Ron Paul broached the subject of moral hazard. Certainly there is a strong moral hazard in developing and promoting lending products in which the lender is supposedly protected from risk – but which defy time honored rules which define the basic capbilities of the borrower. As Wall Street and the bankers – and the Federal Reserve is a bank – seek to absolve themselves of blame, the simple fact that toxic loans were made available to the public indicates that a large portion of the blame lies within our financial industry. And there is a great moral hazard in requiring private debt expansion to fund government operations, and that is just what has happened. It is simply an undercover way of increasing the tax on Americans.
The bubble has burst. It can not be reflated. Housing prices, relative to wages, must decrease to the point where the average American can afford the average house, and to where the excesses of the past several years must be written off and absorbed into the system. Bubbles do not reflate. Lenders aren’t going to suddenly promote no documentation low teaser rate loans simply because Ben Bernanke cut rates by half a point. The genie is out of the bottle.
Does it not seem strange to you that the median home price in various hot spots was equal to ten times the annual income of the median family, and that families had to commute for hours in order to find ‘affordable’ housing? Why did home prices in urban areas go up exponentially – while wages increased only slightly, and why did the wages of the average American lag far behind real costs of living as indicated by housing and food — but executive compensation and Wall Street bonuses defined a new class of the very rich?
Change is needed – and this change must be drastic. Home prices must come down. If we insist on reasonable and time proven credit standards for borrowers then home prices will decline to normal, e.g., affordable. Yes, people will be hurt when this happens, because a lot of people will lose homes. Lenders will lose a lot of money. These were the participants in the Ponzi scheme. The trillions of dollars that were generated because of housing price inflation must be returned to ashes, and this process is painful. But, we will survive, learn, and go on.
Affordability is not promoted by “solutions” involving increasing the conforming loan limit for Fannie Mae or Freddie Mac or by allowing these quasi-governmental institutions to buy more mortgages — without ever producing an error free balance sheet for years. The average American should have no interest in a $417,000 home, because the average American family does not make in excess of $140,000 a year. Prices are not made affordable by modifying the terms of existing mortgages, nor by papering over the massive fraud that arose in the housing markets. These are excesses, and excesses must be drained from the system.
Alternative solutions — such as shock lowering of short term interest rates — will inflate further. This is fruitless, we can’t inflate our way out of this jam. Of course these actions will help bail out those lending institutions which have adopted a policy of borrowing short term and lending long term. But they are no solution at all for the problem of housing prices which exceed the ability of the public to pay for them.
In passing, Kroger’s indicated that their cost of product rose over 21% in the 2nd quarter of 2007. That means our food bills are rising dramatically – a fact which can be verified at the market. The price of oil has risen to an all time record $83 a gallon. The cost of heating or cooling an average home has increased dramatically. Five or six years ago I could travel overseas; today the costs are prohibitive. I expect that my Social Security check will rise a meager 2% next year.
Secretary Paulson can proclaim the American economy to be strong, but I would like to see a government official who is willing to tell us the truth. The American economy is not defined by the salary some very few people command for running a company, nor by the excessive bonuses given to the Wall Street “geniuses” who concoct financial derivative schemes, nor by the constantly doctored numbers that tell us we have record low unemployment all the while ignoring those people who have been unable to find work and the PhDs flipping burgers. It is defined by the number of American people who are able to work productively, and bring home the money to provide a good roof over the heads of their children, to feed those children and to put money in the bank to pay for the future education of those children. The economy is very weak.
I urge you to place the vast majority of the American people and our long term benefit first. Housing prices must be allowed to come back to normal. Families must be able to afford homes. Forget lending institutions which devise ways of avoiding risk to themselves with the very cynical undertstanding that the borrower is toast, but they will have passed the loss on to someone else.
I urge you to reject any form of bailout, whether it be restructuring of housing conforming loan limits, expansion of GSE portfolios, or approval of reduced short term Federal Reserve rates that subject our children to spiraling costs of inflation.
Yes, this will result in families losing homes. I’m sorry. But, in the recent past homes have come to be looked on as an investment. If I suffer an investment loss I don’t see the Federal Government rushing to bail me out. They should not bail out housing ‘investors.’ Only when home prices become affordable and don’t inflate exponentially will housing be looked at as a disposable part of living, not something to buy on margin.
Please reject bailout and copouts.
Can I use this completely AWESOME letter?
Just shorten the darn thing if you use it. I lost interest after paragraph two and I read the HBB for fun. Your congressional staff member will thank you.
De ,that is a great letter ,awesome summary on a complex situation .
Free use.
Agreed, it need to be shorter. Don’t know how to explain a complex subject in 8 second sound bites.
“For decades lenders used two basic ‘rules of thumb’:
1. A mortgage should not exceed from 2.5 to 3 times the annual income of the borrowers.
2. Monthly housing costs — Principal plus Interest plus Taxes plus Insurance (plus Homeowners Association fees) — should not exceed 36% of the monthly household take home income.”
And this was when the U.S. had a manufacturing economy.
Manufacturing economy, service economy, drug abuse economy, it does not matter. The numbers are based on years of information about bankers exposure the mortgage losses.
It seems the lenders have decided to experiment with these numbers…..How’s it working for them so far?
Unfortunately, too many people don’t care or are unable to comprehend the situation. They think that if only home prices kept appreciating by 10% per year, everything would be a doozy.
De;
Lengthy, but true.
Honestly, the Govt. is pretty powerless here. We’re just going to have to hunker down and live through it.
I remember last year relishing the popping of the bubble because it would create great investment opportunities.
Now, I’m hoping we survive to the time when RE is a good investment and the economy is “back to normal” whatever normal is.
Ron Paul schools Bernanke on Moral Hazard.
http://www.youtube.com/watch?v=AeHWW5gbc0w#GU5U2spHI_4
Good post, but consumer spending drives more like 65% of the economy. Doesn’t change your conclusion.
Thanks,
This the best i have ever read in my entire time not just on this blog but in my life. You are brillant to put this together. I just can’t get enough of what you said. Congrats to you.
And you’re doing a damn fine job of it, Ben.
This blog really really awakened a lot of people, previously complacent and asleep at the wheel. We may preach to the choir a lot of the time here, but due to your blog and those who bring their immense wealth of knowledge here, that viewpoint IS in the national discussion…we just gotta keep hammering at it. I forward so many links, cut/paste opinions, etc. to my contacts…in turn, those get sent around, and I know of at least 10-12 people that have done a complete turn around on their financial views. And, they in turn, do their own friend/family education. This is grassroots stuff, and it makes a difference. I’m grateful.
Yes. reading this was my THEY LIVE moment when i put on the sunglasses
You are so right by spreading the word!!! If we all can educate a dozen or so about what is happening we all WIN!
This has to be spread among all groups, especially foreigners who are coming here thinking this is the land of
opportunity. It has to be spread in their languages as I see many who think nothing can go wrong in America.
yeah, right!
Marco from Italy
Ben is doing heroic work in informing Ameraic and the world about what is happening.
I’m pretty sure that the MSM and industry reads here. Ben’s method of summarizing that is said elsewhere lends a level of credibility that would be hard to justify in a normal commentary blog.
do you have a few good ways to do so? let’s discuss here.
pols areb’t exactly on our side - what other ways? letters to editors? theymay not print them
MBA,
I have written my congresspeople…I actually got a personal letter back from McCain, so I know he heard. Letters to editors can’t hurt, people read them, and they could have an…epiphany, who knows? My best method is, (because I get too emotional, then talk with a bunch of swear words, which is never a good way to convince people they are idiots) is to send people to various sites (besides this blog).
And, of course, there’s always our own personal responsibility. Being financially responsible is as critical to our culture’s success and our personal happiness as any other trendy, buzzword concern. Actually, being financially responsible completely goes along with all the other stuff.
Catherine,
I hate to burst your bubble so to speak, but there is almost no chance that McCain saw your letter. He has a staff to do that. There is a very small chance that he signs some of them without reading the original letter or the response. His staff probably prepares a report that summarizes what comes in each week (topics and which side of the issue it is supporting) for him, so it is not (repeat NOT) useless to send the letters. He may even be given a few representative samples to read. But it is very unlikely that your specific letter gets read and replied to by a member of Congress. Just not the way DC works.
Sorry, polly…but he already knows me and my family…he signed an emergency visa for our adopted daughter, and took a personal interest because of his own adopted children. His letter was genuinely real, with references to us. So, perhaps, you will feel a bit better about how DC works. I agree with most of what you assume, but there are exceptions.
I work for a federal agency. I once had to draft a reply to a letter that was sent to Hank Paulson (though it was never going to be signed by him). Your experience is the exception, not the rule. The help with the visa is standard constituent service though McCain may have set a policy for his people to pay special attention to adoption cases. The fact that McCain’s staff is good enough to catch your letter on another topic to set it aside for special processing is a testimony to their compenence, not the fact that he read your letter. Someone else wrote the reply. Sounds like he probably did sign it, but that was almost certainly the first time he had anything to do with it.
He is a senator and running for president. There are always a few exceptions, but too many people write to congress critters for them to read/reply to all of them. Not since the letters were written with quill pens.
snip:
Harry Truman is believed to have been the first United States President to use the autopen as a way of responding to mail and signing cheques. Autopen devices are used today by politicians and fundraisers to sign letters to constituents written by administrative assistants and clerical staff, and by celebrities such as movie stars, music stars and astronauts to sign photographs. A company named Studio Fanmail uses autopens to reproduce celebrity autographs onto pictures of the celebrity.
Today’s autopens are often used to allow someone to be in two places at once. A politician can be travelling while his staff sign letters on his behalf. Donald Rumsfeld admitted using an autopen to sign letters to the family of people killed in action. When questioned on the subject, he stated it was inappropriate and began to sign the letters personally.
http://en.wikipedia.org/wiki/Autopen
RE: pols areb’t exactly on our side - what other ways? letters to editors? theymay not print them
You never know how something will turn out today.
A few years ago I, along with other self-employed people, got my health insurance premium jacked 40%, with the increase approved by the state health insurance commissioner.
The local newspaper missed the story, so I called the business editor to give him some crap because I was pissed.
What other product in the world could have it’s priced increased 40% and remain competitive?
And the government went along with it!
He listened to my call, and subsequent ran a story about the exploding cost of health insurance with quotes from me in the article.
A week later I got a call from a NBC rep in NYC who wanted to “chat” about the issue. After about 20 minutes she said-I’m sendin’ up a camera crew from Boston, and you’ll be interviewed via telephone by one of our Washington correspondants.
Crew came up-I did the interview-whole thing took about 8 hours. I asked how much time I’d get on national TV, and the crew chief said-if your lucky…15 seconds.
However, the morning before the nightly airing, I got a call from an NBC rep who said the sudden air attack on Saddamn Hussein was gonna drastically pre-empt the segment and the editors decided to go with some elderly woman from DC who had a 104% insurance increase.
So thank you for your time…so sorry for the loss of your 10 seconds of fame.
Lost my 10 seconds, but it was a hellava an experience.
Gist of the story…never underestimate the impact of a simple phone call or letter in this day of instantaneous communication-you never know who will be listening or reading.
Right Ben ,good post by the way Michael Fink . I feel that the MSM is moving away from what the real discussions should be ,and this is in part due to the spin that is coming from Wall Street , and the government powers that are spinning right now .
When you hear stupid things like experts saying they really don’t know where the loss is ,it becomes stupid that at the same time the powers want to offer the answer in the form of a tax-payer bail out and inflation as a penalty for this rate cut .
Does anybody really believe that they don’t know where the loss is coming from ? If they named where the loss might fall , there would be no pity what -so -ever by the public .This spin about the poor home debtors is a joke .
Does anyone feel like we have a quick cover-up going on before the sins of the housing boom get shown for what it was .
A investment ponzi scheme was sold to the sheep by the REIC based on fear or greed . On a mass level borrowers were sold on the concept that RE appreciation would solve any potential problem down the road with borrowers going on toxic loans they couldn’t afford . I cant help it if people were stupid enough to buy all these myths of “real estate always goes up ‘,or “you can’t afford not to buy “,or “we are running out of lland”,”you can always refinance later “, on and on . It’s important to note that people believed these myths so much that they were in alot of cases willing to commit fraud and over buy in order to get in on this ponzi investment scheme.Lenders being willing to lend during this frenzy just reinforced the myths and made it more believable that it was a solid unending appreciation cycle where people couldn’t fail,(especially when lenders let people get in without a down payment and proof of income ).
I think the real problem is that it will hurt everyone. While I am all for free markets and such, anyone who thinks they can avoid the fallout this one is going to bring with it doesn’t get mob mentality. It’s rather apparent that housing is really *the tip* of the mess, and there isn’t going to be any soft landing long term. Looks like they are trying for “barely controlled crash landing” as their best option.
How many trillion in paper profits got spent (and that’s the real problem – people spent it and built other stuff off of it – now all of it unwinds – is anything untouched by the toxic paper in today’s markets?)? How much leverage is tied to failing loans (and does anyone even have a way to decipher the mess enough to know a reasonable guess as to how much is at risk?)? We all already know Soc Sec is broke and going broker… now we have to tell all the baby boomers “oops, you just lost the whole 401k we’ve been selling you on as a replacement for the non existent Soc Sec – and oh, ya, one last thing - your house ain’t worth the paint you plopped on it either…”.
That would go over really well with everyone. And the boomers have spent a life time avoiding reality – especially financial reality. Why change it now? Besides, a sympathetic q-public is less likely to be thinking revolt then a p*ssed off population is…
One third rent, one third owns free and clear. The FBs are some fraction of the other third. If we bail them out, we have to take from the prudent.
Michael;
Basically, I agree with you. I would challenge the 1/3 owns free and clear assertion. I would say 1/3 owns free and clear or has owned long enough to have sufficient equity in a deflating market.
You are correct that the FB’s are a small % of the actual homes owners. But, in fact they are a disporportionate % of the dollars.
There in lies the problem. A whole lot of money won’t get paid back. Some one will have to eat that and it will inevitably be the US taxpayer.
RE will depreciate (thats a good thing) and it will take years to absorb the REPO’s and overbuilding.
Remember I said this: There will be cases where houses will be given away for basically nothing. Look at the inner cities where derelict building were sold for $100 to people who peomised to live in them and fix them up.
Think about the housing developement with 75% vacancy where the builder goes broke and nobody wants it because RE is so devalued. Will the local municipality condemn it and sell the houses and lots for nothing? May happen.
Going to do some research on PMI this weekend. Trying to determine whether it’s a good bet to go long or short. Have to find their exposure and what their losses might be. With the 80/20 piggybacks there wasn’t much need for MGIC or PMI over the past 3 years. So, there may be more losses than premiums. One of Buffets reinsurance companies might have some risk. With the bail out coming, the Feds should make the F’dBs take out PMI.Too simple. What say the brethren? Satisfactory.
Michael, its time to get out some letters. Hit all the major newspapers and periodicals. You have a story that deserves to have a spotlight shown on it.
I do wonder, however, if the reason the MSM goes this way is because w/70% home ownership (and let’s face it most in the remaining 30% would never fall into home ownership category) you are in a minority.
There are probably way more FBs out there than smart renters sitting on a pile of cash. That being said, we need a campaign to get the intelligent renters’ side out.
See, I would be totally surprised if anythng else happened in the media environment of our society. The current administration considers marketing their political positions more important than coming up with good policies. An idea that takes more than 20-30 seconds to fully explain is doomed in the public discourse - 10 seconds is better.
I was watching the Ugly Betty marathon earlier today and the entire underlying idea of the toaster strudle marketing campaign is that children don’t like eating pop tarts!!! If advertisers think they can get away with that one, there are no standards at all of what can be used to “sell” an idea.
I admit it bothers me to see it in people who are actually supposed to be experts AND are not paid by the involved industry, but I assume that is because I am used to trusting that my past professors aren’t stupid or shills. Since Mishkin is one of those past professors, I guess I am doomed to be bothered.
we are dealing with a collective sociopath (the Fed, the congress, the MSM), who will defend to the death the inflated housing market.
a few years ago, (2004, the benjamin wells wallace(?) first big article about the impending bubble & crash), stated that a 20% average drop in home prices would have an earthshaking effect on the economy, the equivalent of greater than a 40% drop in the stock market, he wasn’t kidding.
i would be glad to have a 30% drop in the equity of my apt. if i knew it would keep inflation, which i see as the greatest threat to my economic future, under wraps.
but i don’t have much hope. a psychopath/sociopath, whether an individual or a whole debt-rotten society, will stop at nothing to protect their perceived interests, and knows no remorse whatsoever.
and, as flatffplan once remarked, “a debtor nation cannot under any circumstances, tolerate deflation.”
“but i don’t have much hope. a psychopath/sociopath, whether an individual or a whole debt-rotten society, will stop at nothing to protect their perceived interests, and knows no remorse whatsoever.”
Zealot leadership wrapped in war-monger patriotism?
If you are not already convinced that inflation is going to go back to 70’s style, the next two rate cuts will convince your pocketbook.
The media is a business. It is here to make money.
but a legitimate business makes money by actually performing some wanted or needed function. by that definition, the msm deserve to go out of business — as least as far as accurately reporting the real estate bubble.
They are peforming a wanted need. Feeding the masses with stories of Paris, OJ, Brittnay etc..
Sarcasm off
that’s fine, as long as they don’t title their articles, “explaining the housing bubble.”
“a legitimate business makes money by actually performing some wanted or needed function”
They are doing that. You just forget who the highest bidder is.
that is a dangerously fallacious argument, at the least putting the cart before the horse. it’s like saying “doctors are here to make money,” or “home builders are here to make money.”
doctors are here to cure you, and home builders are here to build houses. by performing their legitimate services — ethically! — it only then follow that they deserve to make money.
It is equally dangerous to assume that people provide a service for any other reason than making money. They provide the service or product to make money using skills or education they have.
Doctors may have the ability to cure you, and many do it for altruistic reasons. Would they accept 2000 patients and spend 5 minutes with each it the economics did not mandate it? No, from what doctors tell me.
Here’s a simple test: If you were the provider of the service or maker of the product, would you do it regardless of how much money you would make? If the answer is no, it’s Caveat Emptor: don’t expect that person to provide quality service or product. You might get it, but don’t expect it.
I think what you’re seeing in the media is the same thing that motivates the folks of questionable morals like Shumer and Dodd. It’s plain and simple pandering to their base. The media knows that it’s bread is buttered by corporations that rely on unsustainable consumption by overleveredged consumers. The debt snowball will be maintained at all costs. The media is in on this thing, they’re not even close to independent.
Folks with money in the bank, a reasonable debt to income ratio and who are happy living within their means are such a small minority that their voices are not heard. Most people want house prices to hold, those who run mass media are well aware of this. We have few friends in this fight, which is why I am not a mega bear on housing. I see trouble ahead, and I don’t think that renting your housing and having money in the bank is a guaranteed out. A close study of Argentina may be in order.
Argentina may look fiscally conservative compared to this country chalk-full of complete economic stooges.
“The media knows that it’s bread is buttered by corporations that rely on unsustainable consumption by overleveredged consumers.”
You nailed it right on the head. We have an “iron triangle” of media, home industry, and auto industry that keeps we “consumers” (not citizens, or people, or human beings, but consumers) locked into a very unhealthy, very destructive, and unsustainable lifestyle built on wasteful consumption. Time to say “No, thanks” and find a simpler way to live. Folks, this living arrangement we have did not evolve naturally, I’m sorry to say.
“Most people want house prices to hold, those who run mass media are well aware of this.”
I agree with this. Those who may be impacted by price drops don’t want to hear it. They want to hear that the market is recovering, or that Bernenke and the Fed are riding to their rescue. They want to hear how smart they were for buying, because housing alwys goes up, not how dumb they were for buying when they did because housing doesn’t always go up and they bought at the peak. If the media wants to tell them different, they don’t want to listen. They don’t want to read newspapers which explain they’re going to lose big time… they want Harry Potter.
Regarding the media, go back to the old line, “if it bleeds, it leads.” Suffering FBs bleed. It doesn’t make a bit of difference whether or not they are reaping the rewards of their stupidity or are being tossed out into the cold, cold winter snows. They can be made to look charmingly pathetic and helpless. Do you think a person telling the world his family is renting because the stuff on the market is overpriced paints a picture of desperation? Nah.
Look at the crap we watch on TV… OJ, Brittney, Paris.
How many people who don’t show up on this blog watched last week’s testimony by Paulson, Jackson and Bernenke, or watched Greensapn’s pathetic appearances on Bloomberg?
“Look at the crap we watch on TV… OJ, Brittney, Paris.”
Leave me out. I haven’t watched the boob tube for almost 2 decades.
Most of the time the Spice Channel is more informative than CNN, Fox News Channel or the network nightly news. At least Spice gives you some practical how-to tips.
Lets demonize the Savers. They are the enablers in this mess. If they hadn’t saved the poor FB would not be in this mess. Quick get me a reporter. I see a headline.
We have finally found somebody to make even Paris seem intelligent, in comparison…
“Last month, 4,527 homes went into foreclosure in Massachusetts. ‘Our toes are just getting wet,’ says Janet Hilton, a real estate broker in Rowley. ‘There’s a massive tidal wave, a tsunami that’s about to hit us on the beach.’”
Is Janet a relative to Paris?
There’s a massive tidal wave, a tsunami that’s about to hit us on the beach.’”
hehehe…all the “look at me” McMansion builders who won’t be able to bail from Mazzholeland as Deval Patrick taxes them on their commute to work and the dirtbag casino baron’s fight over how many to build.
Like frogs stuck in the fryin’ pan.
Boo-hoo, cry me a river.
The media, newspapers in particular…
Are in their death throes~
Down to one revenue stream, advertising.
Soon they will not have that anymore.
AMF
another great point! it’s no accident that the msm pull our heartstrings about fb’s, many of whom fully deserve their pain, while the blogosphere is well lit with the truth about the fiscal irresponsibility, fraud and plain greed that fueled this bubble.
and it will be no accident that the democrats, and many republicrats as well, will be (already are) making every noise possible about how to censor/silence the blogosphere, under the aegis of “fair and equal” requirements for any internet expression of political opinion.
the MSM are breathing their last breaths, and the advertisers (and the other ptb) are holding guns to their heads, threatening them from printing any other than the official fb ‘truths’ on pain of death.
add that to the fact that most of the leftist, msm journalists are all-too-willing co-conspirators in this bleed-it-and-lede-it, all too convenient soap opera.
Sigh, take a look at right leaning MSM journalists. They are also cheerleaders for this bubble economy. This is both a left and right lack of responsibility for telling it like it really is.
fine. i have no problem with any politicians, left or right, who can simply the allow the debate to roar free and loud, as it no longer does (and probably never did) in the msm.
and the only place it seems to be roaring is the internet. the msm finds that uncensored debate to be deeply threatening.
there is no question that the worldwide movement is increasingly toward censorship of the internet … something like 26 countries now actively do so. and evidently quite effectively.
i consider it most unfortunate that espousing a censorship-free internet has become taken to be part of a rightwing agenda.
that is true, except except that you don’t hear many rightwingers advocating internet censorship of the other side. that is almost entirely a leftwing enterprise.
that is true, except that you don’t hear many rightwingers advocating internet censorship of the other side. that is almost entirely a leftwing enterprise.
I now think of them as fluffers.
“High debt ‘really snuck up on me without me realizing how bad things were getting,’ said Erire Obano,
Last night my wife and I were walking over by Wall Street. I heard something coming up behind us so I turned around suddenly. There was nothing there. When you don’t have any debt you don’t have any debt that can sneak up behind you. Up yours, Wall Street.
You mean the spending she incurred to run up that debt wasn’t some kind of hint?? Did we export stupidity to Britain as well??
LOL. Can I get a picture? Sneaky ol’ debt, all perved out in trenchcoat and grimy fedora, flashing his willy and taking all your money! LOL.
How do you pronounce that first name? Like “arrears?!”
“DelMaro, who has been selling homes since 2000 and seen both the bubble and the bust in prices, agrees the personal costs of the mortgage mess have been enormous. Like other realtors, she has stories about couples and families who were devastated by the losses.”
“‘It breaks our hearts,’ she says. ‘It’s a tough time to be in real estate.’”
Call me jaded, but my first thought upon reading the last quote was that ole DelMaro was thinking about her own financial situation instead of other people’s lives.
Which she (possibly) has helped ruin.
Since when has someone who has been in ANY business seven years consider themselves “experienced” with market reversals? She got in right before the boom, and will undoubtedly get out soon. Hardly a “veteran” of market cycles.
http://www.nytimes.com/2007/09/22/business/22online.html?em&ex=1190606400&en=338d46fdcc2f9b78&ei=5087%0A
What ever happened to the concept of “rugged individualism”? I heard that term many times in grammar school. I bet you couldn’t find a kid nowdays that knows anything about the concept. But I bet they could tell you the income limits for food stamps and Medicaid.
you betcha. that rube sitting next to you looking all stupid and ignorant…IS….except they are idiot savants. They know very well all the rules to game the system and “get theirs”
You can be as much of a “rugged individual” as you want as long as you can do within school guidlines. Please no: expressing your ethnicity (unless it’s the politically correct kind) or religion, wanting to study a subject in depth, questioning of school officials or policies, wondering if it really is all that important to to college, or skipping getting that stupid little pass that lets you go to the bathroom. So that everyone can learn rugged individualism everyone will need to sit quietly in straight rows. If you can’t do that, the school will medicate you and tell you that *you’re* the screw up.
“What ever happened to the concept of “rugged individualism”? ”
Ahhh… we’re getting to the core of things with that one. You mean the language that the self righteous law and order chain’em to the ground mother-frickers like to use when castigating the least among us? Does anyone here have any idea the contempt the wealthy elite have for us wage earners? Well we’ve bought to that same contemptuous attitude toward the least among us when we use language like “rugged individualism”.
“The media shouldn’t assume that FB’s voices are the only ones that count and that a ‘crisis’ for them is a crisis for everyone. Falling prices don’t hurt the first time buyer hoping to break into the market.”
And it’s not just first time buyers….buyers who want a different house will be able to buy it without having to take on suicide financing and sky-high property taxes.
My first house (in ‘96) was on a little cul de sac of new homes. As the bubble inflated, no one could move, even families that had outgrown their first house…no one could justify the huge jump in mortgage & property taxes & insurance.
“And it’s not just first time buyers….buyers who want a different house will be able to buy it without having to take on suicide financing and sky-high property taxes.”
Except for the ones who bought during the bubble who will have to bring a check to the table to get out of the first mortgage - kind of like the downpayment they didn’t make at the start of the process. If they couldn’t save for a downpayment when they were renting, how will they do it now? Wait for baby boomer parents to die?
And with prices dropping ,in a number of areas, they will have to bring down the property taxes, which might save some owners that were being priced out of their house by property taxes .There are alot of people that just wanted to live in their home long term .
Will they lower the property taxes or just raise the rates? I can’t see these governments giving up the dope when their veins are crying out for more.
I hope they do that NYCB ,people can’t afford these high tax rates on inflated property anyway ,so better to get less from stable homeowners ,rather than pushing people to the cliff or throwing them into forclosure over taxes .
Must read column about the author of Trader’s, Guns & Money:
http://tinyurl.com/2vudd5
he says we are not yet in the first inning of a long, long credit unwinding, we are only about half way through the national anthem
it seem to me like when the MSM takes these polls on public opinion ,they don’t even ask the right questions .It seem to me they take these polls to see if the spin is working and if it isn’t ,they know they have to just spin some more .
A great poll question to the public would be .
(1) Would you be in favor of a bail-out for homebuyers in default if you found out they lied on there applications to get the loan by inflating their income by 50% ,and in most cases they didn’t put anything down to purchase the property they are in default on . Further ,would you want to bail them out if you found out they didn’t even occupy the property and it was a investment and gamble in a appreciating market .
Question # 2 Would you be in favor of interest rate cuts if your purchasing power went down by 50% in real dollars and you didn’t get a wage increase to compensate .
zing! wouldn’t that be great if some national reporter had the chutzpah to do that?
Benefits of property dropping in price :
(1) Property taxes will be more in sink with local incomes and some people who where being priced out of their houses because of property taxes won’t be forced to move .
(2)New buyers at lower home prices will have more income to spend on other things . We can’t have people putting 70% of their income toward housing and have a balance economy . People will get back to having a realistic debt ratio .
(3) Home ownership will no longer be a ponzi scheme of short term owners that are forced to sell and flood the market .
(4) If prices go down - Builders will no longer feel compelled to overbuild for speculators and end up flooding the market with excess inventory ,clausing home prices to fall in the final analysis .
Reasonable prices will stop the vacant house ills as well as the health and crime hazards associated with vacant homes and pools .
(5) Reasonable and affordable home prices will ensure long term ownership because of affordability ,which tends to build communities rather than ponzi schemes which destroy communities by foreclosures and unwanted vacant housing .
(6)Home ownership will no longer be a ponzi scheme but maybe only a slight hedge against inflation ,a tax write off ,and just a place to live, or perhaps forced savings for a mortgage free retirement .Not to say that real estate is the best investment ,but people tend to like this investment ,if the price is right .
(7)Speculators will no longer be trying to charge higher rents to cover over inflated mortages and renters will have longer term stability if their landlord can afford the investment . Ponzi schemes create either to few rental dwellings or to many rentals dwelling screwing up normal rental charges .
(8) Fraud will be less possible in a market that only appreciates in a more normal fashion .
(9) America will be forced to face the real problems that caused the Nations vunerability to a real estate ponzi scheme, which involves the eroding away of the middle class by wage inflation being behind the curve and exporting of jobs ,costing the Americans Job force jobs . A serious look might need to be made about the pros and cons of global markets .
(10) Americans might have to seriously look at the debt culture and the pro’s and cons of living life as a debt slave rather than living within ones means .
(11) First time home buyers that should be able to buy homes won’t be priced out of the market anymore ,and affordability in housing will be a good thing for our society in general .
(12) Interest rate will no longer have to be lowered at the expense of inflation to keep home prices inflated ,if we allow prices to fall and be in sink with affordability.
I could go on and on but these are some of the big benefits on property values going down .Do you think the MSM would ever push these concepts ? Of course there will be pain to get back to a normal market ,but no pain ,no gain .
“The Plight Of The Poor FB”
boo hoo hoo
“‘They made it so easy for those poor souls who didn’t have the money to buy a home,’ she says.”
There are so many things wrong with this one it makes my head spin.
First of all WHO THE HELL is THEY? And if they “didn’t have they money” how the $#% did they “buy”? And for Christs sakes, what in the flippin’ frig is a HOME??
Like other realtors, she has stories about couples and families who were devastated by the losses.”
“‘It breaks our hearts,’ she says. ‘It’s a tough time to be in real estate.’”
this makes me sick! all those people new what they were doing. i have two members of my family mixed up in this, and nobody can tell me that they were duped into those homes. they were flying high thinking they struck it rich. my nephew even quit talking to the family for awhile thinking he was better than everyone. but now that the bank took his piggybank away he keeps trying to crawl back into the family. and what about those flippers i dont here much about them anymore (but you can still see them on t.v.) people need to wake-up and let those homebuyers suffer the consequinces of greed!
All these realtor crocodile tears and expressions of sympathy for the FBs they pushed, Suzanne-style, into making the worst financial mistake of their life - how revoltingly hypocritical and cynical.
Lazy Suzanne and her ilk, left a lot of financial skeletons…
Oh please , this was a big investment RE ponzi scheme sold by the REIC and financed by toxic loans ,with talking points and everything .Remember DL at the NAR saying in essence that your not investing right if you don’t use leverage and buy buy buy real estate . Remember Gary Watts with “15% is in the bag “.
The whole idea was to get the most expensive house that a lender would let you finance on a liar loan at no down and it didn’t matter what kind of loan you went on because you could sell at a profit or refinance down the road and pull out money or get a better loan . The whole idea was to “buy now or be priced out forever “.
You know I’m not so sure that the bulk of FB’s asked for a bailout from the Feds or the lenders . I think the heat started coming from the NAR and other special interest groups like Wall Street and the Lenders and builders .Some homeowners started filing lawsuits attacking lenders for fraud in lending ,as well as a few suits were filed by homeowners that were pissed off that builders lowered prices and a number of pre-construction homebuyers were trying to get out of contracts .For most part, FB’s have been waiting around for the market to turn around, based on the spin from the realtors ,and the others have fallen into default .I think most of the FB’s knew they screwed up, and now rather then admit that screw up the MSM has given them talking points to all of a sudden be a victim homebuyer .I admit that they were a victim of buying into a mania that crashed .
If everything was just left to sort itself out, eventually you would start getting class action lawsuits filed in court by homeowners and MBS investors based on whatever Wall Street and the lenders did to fund this ponzi scheme .The NAR and Realtors are vunerable to suit also in this whole mix .
To me a person who saved 20% down and bought a house and will lose all their hard earned savings by a drop in real estate ,if they have to sell because of a job tranfer or job loss , is a victim of timing ,but not some clown who was flipping real estate or some no down buyer who wants to walk because their two year investment plan didn’t work out . I am also sure there are some people who were a victim of fraud by some loan company or loan agent .
The entire society has been victimized by appraisers who hit the numbers because of undue pressure from mortgage agents or realtors refusing to give them work unless they went along with the absurd appreciation .
I just think that the actions on the part of the Feds and members of Congress /Senate is to bail out the bad guys and keep what happened during this mania from having close scrunity .
So ,let the parties that engaged in the loan contract work out a deal ,(being the lender and the borrower ).If fraud was involved ,than thats a issue for the criminal justice system ,or the civil court system .
Also, where does it say that the government has to compensate for a tight money market . We need a tight money market right now to prevent more dumb loans and this will determine the real demand for housing at the right price . And why is the government so concerned about “old money” (meaning loans already made ) ,if they want to be of help, be willing to provide “new money” for qualified buyers at lower prices . The old stuff is a loss clause and I don’t want it paid for by my tax dollars .
I just want to add one point . People who want to keep their home and could qualify for a refinance have already done so in large numbers .
So ,that just leaves the borrowers who’s property won’t appraise out for a new loan or borrowers who can’t qualify, or speculators who can’t qualify .For the remaining FB’s that really want to keep their home (in spite of a mortgage that is lower than the value of the property ),the lender can make a deal with them if they want to avoid a foreclosure . All the rest of the FB’s don’t care about having property that doesn’t net them short term gains anyway and they would likely just play the system if any bail-outs are offered .
So I strongly object to FHA just buying up bundles of loans from lender bagholders with the objective of underwriting them later or accepting the current appraisals .
FHA can just put a number on the TV for FB’s to contact their approved lenders to process the new loan that they have to qualify for under terms that would not result in a default for tax payers .
Also , forget about lenders that hold huge bundles of bad loans ,because they have already shown inability to comply with underwriting standards ,so they shouldn’t be approved for underwriting the new FHA loans . Also they need to break this appraisal/mortgage broker corruption realtionship that was so necessary to inflate appraisals . The system needs to be purged .
IMHO.
I would like to talk more about the property tax issue. What are the odds that the tax man will ‘lower’ your property taxes and when does this take place? I would love to see my property taxes go down since I’m paying roughly 8000 grand a year.
Taxman “lower” property taxes? Ha Ha Ha, surely you jest?
I too wonder what will happen when prices come down and al the 500K buyers, who decide to stay in their homes, see 400K prices and DEMAND that their assessments be lowered.
I bet local gov’t will just raise the millage rate so as to bring in the same dollars. But again, how will people react to paying the same tax on a “cheaper” house?
I got a notice last week that the county was going to lower my property bill ,but they didn’t yet say by how much .
Can you say “Happy Meal”? O r maybe it will be enough to supersize those fries!!:)
But be polite to the new counter help because last week they were mortgage brokers or realtwhores or…..