My take is that the gov't will implicitly allow inflation to creep up. While the FED will continue its "inflation" fighting stance, but in reality it will continue to ignore inflation (by harping on the tameness of core "inflation") and abet it by cutting rates. Inflation will keep price of houses afloat while help out the US consumers who are in debt to either pay off the debt by selling their houses or refiance at a lower interest rate because FED will keep it low. Basically, the gov't will inflate people out of their debt problems. Thus, I see a braking action of falling home prices......
Only if they reinstate the "zero gravity" subprime and Alt-A liar loans will housing stay afloat...and I dont' see that happening.
I think the rate cuts are aimed at preventing the stock market from also crashing. The fact that it was .5 and not .25 show the seriousness and desperation of the situation....look what is happening in England.
Never mind that in doing so the dollar becomes toast so your stock gains (in dollar value) will at best be a wash....
Modern economies can continue to limp along with inflation/debt, but will collapse if deflation (i.e. reality) is allowed to bring things back to equilibrium. We need deflation, but what the banks/power elite want is eternal inflation. Hence the apparently irrational moves by the pirates (er I mean the FED).
But housing, barring a return to "casino loan" mentality, is toast no matter what. With wages stagnating and the dollar weakening, the cost of food, gas, etc. will erode whatever is left of the average paycheck and make high house prices even more likely...to crash.
It almost sickens me that I'm in agreement with the administration:
""The program should remain targeted to traditionally underserved homebuyers, such as low- and moderate-income families," the White House said in a statement on Monday."
While the democrats are busy trying to raise FHA limits to the 700Ks and reduce downpayment requirements for FHA insurance, the republicans are trying to focus on the poorer elements of society. Doesn't something seem wrong with this picture?
Luckily the senate will be a little more reasonable in their efforts and Bush will veto anything that looks like a bailout of MA/CA borrowers who want to keep their neg-am 700K palaces.
Ultimately though, we should keep in mind that regardless of what the FHA rule changes are, the borrowers that they'll help refinance will actually have to provide income verification. So these are NOT the people that signed up for liar loans, as they'll never be able to afford the normal loan anyway even with the easier terms for FHA insurance.
(By "normal" loan I mean one in which you actually pay back the principal over time. Weird, I know.)
The Office of Federal Housing Enterprise Oversight will permit Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac to increase their mortgage portfolios by about 2 percent a year beyond the existing cap of about $1.5 trillion.
2 percent is smaller than inflation, right? This doesn't look like a very big deal to me.
Comments
"SunTzu said,
on September 5th, 2007 at 2:51 pm
My take is that the gov't will implicitly allow inflation to creep up. While the FED will continue its "inflation" fighting stance, but in reality it will continue to ignore inflation (by harping on the tameness of core "inflation") and abet it by cutting rates. Inflation will keep price of houses afloat while help out the US consumers who are in debt to either pay off the debt by selling their houses or refiance at a lower interest rate because FED will keep it low. Basically, the gov't will inflate people out of their debt problems. Thus, I see a braking action of falling home prices......
I hope I'm wrong"
Watch the Fed lower rates to 4% if needed......
I think the rate cuts are aimed at preventing the stock market from also crashing. The fact that it was .5 and not .25 show the seriousness and desperation of the situation....look what is happening in England.
Never mind that in doing so the dollar becomes toast so your stock gains (in dollar value) will at best be a wash....
Modern economies can continue to limp along with inflation/debt, but will collapse if deflation (i.e. reality) is allowed to bring things back to equilibrium. We need deflation, but what the banks/power elite want is eternal inflation. Hence the apparently irrational moves by the pirates (er I mean the FED).
But housing, barring a return to "casino loan" mentality, is toast no matter what. With wages stagnating and the dollar weakening, the cost of food, gas, etc. will erode whatever is left of the average paycheck and make high house prices even more likely...to crash.
It almost sickens me that I'm in agreement with the administration:
""The program should remain targeted to traditionally underserved homebuyers, such as low- and moderate-income families," the White House said in a statement on Monday."
While the democrats are busy trying to raise FHA limits to the 700Ks and reduce downpayment requirements for FHA insurance, the republicans are trying to focus on the poorer elements of society. Doesn't something seem wrong with this picture?
Luckily the senate will be a little more reasonable in their efforts and Bush will veto anything that looks like a bailout of MA/CA borrowers who want to keep their neg-am 700K palaces.
Ultimately though, we should keep in mind that regardless of what the FHA rule changes are, the borrowers that they'll help refinance will actually have to provide income verification. So these are NOT the people that signed up for liar loans, as they'll never be able to afford the normal loan anyway even with the easier terms for FHA insurance.
(By "normal" loan I mean one in which you actually pay back the principal over time. Weird, I know.)
Fannie Mae, Freddie Mac Regulator Relaxes Limits
2 percent is smaller than inflation, right? This doesn't look like a very big deal to me.