I thought everything was ok!

Economist – Unlike American politicians; I don’t think Joe was thinking about reelection.

Well then I guess you think the government should just get out of the way and let this whole house of cards come down, right?

It seems like we are now in an era when the government wants to get rid of recessions from the business cycle entirely.

That’s what Joseph Stalin did. How did that turn out?

That’s the windmill they’ve supposedly been tilting at for a hundred years. If that were all, they’d save themselves some time by just reading their von Mises:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

Of course, bubbles just happen to be terrific vehicles for stealing from honest people and conferring the loot on the politically favored, without having to stoop to anything so obvious as taxation. I’m sure that has nothing to do with why we keep having them, though.

Have you ever heard of Peter Schiff? He’s the President of Euro Pacific Capital. He’s also renter. Care to call him a loser? I’m sure he could afford to buy 100 of your homes, but just won’t because it does’t make financial sense at this time.

He is a frequent guest on CNN and Fox (Faux) New.

http://www.europac.net

You, on the other hard are just a dick.

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[we bought at] “pre-construction pricing 5 yrs ago. The property has depreciated to 15% less than our purchase price”
————–

Something doesn’t add up here. I haven’t yet seen a neighborhood in King County or surrounding areas where prices rewound all the way back to 2003, like what you’re describing above. Do you want to disclose more specifics (perhaps just to me in e-mail?). Maybe you’ll even find a buyer in this forum.

We don’t save. If you want that responsible American crap go to Canada. People in Canada have a very well scrubbed practical approach to economic responsiblity, it’s called socialism. In Canada the government churns dollars into the economic system all day long. They collect taxes and spend those dollars on the social welfare of the people.

Here in the United States we have a corporate welfare system. Corporations provide basic services to our working welfare system. Workers, if they are good, get health care, 401Ks, pensions, and a promise of Social Security. They get just enough so that if they are very responsible they can save a down payment, go to a lender, and get a mortgage for a house.

Are those the responsible Americans we are talking about here? The working welfare recipients? Because if that’s the case our government has no choice but to bail out our corporate welfare system. Who’s going to pay for health care if they don’t?

SIncerely,

Congress

This is all a bunch of politcal crap. Prices will still come down….significantly.

As a renter and an American, this is frustrating. Mostly because of the unnecessary burdens the govt is putting on itself. The dollar will probably fall hard on this news.

For all the show-boating home-owners: GET A CLUE!!….The Real Estate crisis and price drop is far from over!!! Do you honestly think Congress would pass an emegergency bill like this if they didn’t think our economic situation is in grave danger. In Seattle, Inventory continues to rise….tick, tick, tick….hear that….the depreciation bomb is every so close to exploding. I’m not looking forward to an economic downturn, but its going to be nice to hear you all moan over the next couple years. Unfortunately, you won’t be on the board bragging then. You’ll be at your Bankruptcy Attorney’s office deciding between Chapter 7 and Chapter 13.

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Simplify the situation to a single homeowner who is about to be foreclosed.

Without the bill the foreclosure happens and he has nothing. No equity. No payments…….and a bank is stuck with a house and is receiving no payments.

With the bill he avoids foreclosure and he has (probably) zero equity and is still making payments…..meanwhile business as usual for the bank as it receives his payment.

Either way the homeowner has zero equity. Why is he the focus of your ire? Do you not see the true beneficiary? Really now. Fifty six of you……oh and the original blogger too….57.

Never mind. Ya’ll were having fun. Carry on.

How do you know that home prices are below where they should be? By what metric?

This law is going to make it more difficult for real estate to appreciate. In fact, the provisions are decidedly deflationary in terms of real estate.

It essentially kills the private securitization of mortgages, and diverts securitization to the .gov channels, which cannot originate enough to satisfy any meaningful demand. This will force prices down, which will only serve to increase the obligations of the .gov.

The main parts of this bill were to reliquefy the Federal Reserve in all the money it burned in the TAF/TSLF. That money was used to keep the banks from imploding over the past 8 months, and had it not been for this legeslation, the FED would have been BK by September. This gives the FED another 6 months to live.

This just bought the banks another 13 weeks. They needed to roll their CP from the BSC takeunder, and this gives their investors the confidence to extend the banks LOCs.

All the rest was eyewash to get the sheep/Congress on board for the real bailout. The workouts will drive down prices, and without the expectation of housing profits, the entire system is going to stall.

Enjoy.

Anyhoo, I wonder if this bill is going to be enough to stop the bloodshed. If they allowed the tax credit to apply to more buyers, I think it might have been far more effective..

Dr Doom (Roubini) states in part:

“This will be the results of a eight years of the U.S. household sector spending more than its income and running negative savings, the U.S. spending more than its revenue and running large fiscal deficits and the country spending more than its income and running massive and unsustainable current account deficits. The ensuing fall of the U.S. will make this fire sale of the best U.S. private asset a true bargain basement deal: with the dollar price of these assets now imploding and with the U.S. dollar now in free fall non-residents will be able to buy most of U.S. Inc. for the cheapest bargain. This ideology of reckless free-market fundamentalist financial and public policies is what has led great empires in the past to become colonies of new emerging powers…”

The rest of the URL (you may not be able to read it if you don’t register, that’s why I gave the conclusion above):

http://www.rgemonitor.com/roubini-monitor/253111/who_is_going_to_rescue_the_hundreds_of_busted_us_banks_dont_count_on_suckering_again_the_foreign_governments_the_sovereign_wealth_funds_and_the_biggest_fire_sale_in_the_history_of_humanity

The real question is what part of this bill is going to cause the next boom, as the creation of SIV’s and CDO’s by the government to solve the $160 billion S&L problem in 1991 caused the financial issues of today, so I imagine this $300 billion package has a loophole or clause or two that will cause the 650 billion dollar bailout in 2035. A 6 or 7 billion dollar green tech bubble will probably occur in between.

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Too Big to Fail, or to Survive
.

CRITICS of the Congressional housing package complain that we are now committing taxpayers to huge new outlays to rescue Fannie Mae and Freddie Mac. That view is wrong: Congressional inaction over the past 15 years had already committed taxpayers to the bailout.
.
Congress could and should have required Fannie and Freddie — which enjoy a peculiar and highly advantageous status as quasi-public agencies and quasi-private companies — to maintain more capital, but didn’t. Now the costs from Congressional inaction are becoming painfully apparent, and they cannot be avoided. To permit the two mortgage giants to default would set off a worldwide crisis. But we can decide what should become of Freddie and Fannie after this crisis. The best option is one getting little mention in Washington: get rid of them……
.

So don’t expect all the rentors to rush out and buy homes with checkbook in hand, most have a modest 401K, if they’re lucky, and using that for a house is retirement stupid. Most will be loking at 80% loans, with 20% down; even $150K homes that need $150K incomes to qualify. Ohhhh….job layoffs, I hope you have seniority, those should be coming in groves to at a theater near you too at the same time interest rates peak….

Use your delicious home equity to snap up bargains? What equity?

Its not just a fix Fannie/Freddie and give freddie the freeloader a handout, then we can go back to normal….its global kids….

This American subprime [and prime loans too] mess is in Great Britain, China, etc, etc….its hidden throughout the world’s banks in SUVs and a plethora of acronyms even the saviest of financial advisors don’t have a clue where the rotten paper is hiding. Its a witches brew stirred together and we the Americans owe them and with more $300B debt and lower dollar, guess what?

We in essence default on our world bank debt and give them dolalrs that don’t buy nothing.

What we they do?

Tank, they depend on us and we give them phony money back. China’s stock market has devalued 50% the last year….how long before they cash in their devalued American chips and then watch interest rates go through the roof.

This Bill makes it all far worse and Dr. Roubini predicts it too. If this keeps on, say hello to $150K average priced Seattle homes that need $150K incomes to qualify.

- They started from a lower base relative to us.
- Their government was willing to overlook massive insolvency of their banks.
- They have a strong work ethic and low expectations of standard of living, and their resulting trade surplus provided cash to hide a lot of problems.
- They still provide lifetime employment, and so unemployment is not visible.
- Their strict immigration rules reduce the tendency to unemployment.
- Their culture presumably would lean more to just keep on paying rather than admit the shame of bankruptcy.
- The value of housing was going to head down anyway with their falling population, whereas the economic force required to drive down real estate in the US, which is growing, would have to be greater.

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You can find a wide array of opinions on this blog.

I disagree with jon. Housing prices will continue to fall and it is likely that prices will actually swing below “equilibrium” before the market correction is complete. The easy financing is gone and the speculators feeding the “real estate always appreciates” fantasy have moved on. Increasing inventory coupled with reduced sales is predictive of downward price trends IMHO.

if our housing deflation plays out similar to japan, you can have 90% depreciation in real estate prices and just have a stagnant economy, but no severe depression.

Earlier Jon stated that the fall in home prices (or a return to affordability) would result from a “severe economic depression”. Is it true that the state of economy is so directly dependent on the value of the housing asset class? Can the value go down while the economy recovers? Who would be hurt–investors, the construction industry, homeowners looking to extract more equity out of their homes or sell them for retirement?

Forgive me if this has already been discussed here. I am just curious.

–only loans that were issued between January 2005 and June 2007
– all HELOCs and 2nds must be paid off before a primary loan qualifies.
In addition to:
–primary residence
–proof of inability to pay
–qualify for FHA loan (restrictive debt load)
–negative incentive for loan servicers to participate

So how many homeborrowers will actually qualify in the summer of 2009 when this finally hits the streets? And how far will home values have fallen by then?

True, they will build a house to fit your budget, whatever that is. They have two problems: one is the existing inventory already out there, and the fact that lenders will not lend in a falling market. When the market stabilizes, lenders will be willing to lend, sales will rise, and the months-of-supply that the existing inventory represents will drop. Without this bill, they would have to wait until the price is so low that buyers and lenders go ahead even if the price is still falling. The falling inventory of new construction indicates that has already started to happen. With this bill, there will be fewer foreclosures and so fewer distressed sellers driving the prices down.

With restrictions going back to what they used to be, the average affordable price will go back down. As we discussed previously, that will leave an oversupply at the high end that will take time to correct. Oddly, it seems to be the high end that is still in the best shape price wise.

Scotsman, thanks for the kind remark, but without further clarification will have to just agree to disagree.

For a short time I actually applauded The Chimp!

So wtf happened?

The Chimps handlers said “jump”……..

Unfortunately, the $3-400 billion minimum that this bill will cost won’t fix the problem. It’s not enough money to make everyone involved whole, it’s too late, and it doesn’t correct the underlying problem of affordability relative to income. It will, however, make a mess of the bond market, increase interest rates, increase government costs, lead to increased taxes that further depress the economy, and reduce American competitiveness in the world marketplace. It simply “kicks the can further down the road” (thanks, Eulea) before eventually pushing all of us over the cliff. It not only harms the economy, it redefines the values and parameters of American government.

While our politicians may think they’ve dodged a bullet, all they’ve really done is crack open a Pandora’s Box of unintended consequences. Better get ready to hold on tight. By next Spring we’ll be in for one wild ride.

Bubble sites love to show graphs of how the ratio of price to household income has gone up recently. For some reason there is not so many graphs of why people make the decisions they do: smaller average household size, preference for more space and amenities than before, preference for locations closer to jobs, etc. If people in aggregate shift their preferences, that will show up in the median price paid. That doesn’t automatically mean that they overpaid, although admittedly in some locations that did happen. The question is whether prices have fallen enough to correct for that. I always look to what the replacement cost is. Builders will adjust the size mix of the houses they build to match the market, but existing houses will comp themselves to the size they already are, as we discussed before.

“Put your money where your mouth is.”
It is.