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DEBT BE NOT PROUD (8/11/09): One school of thought says excess debt must be paid off or written off before we will acheive dynmaic growth. This "Low Debt" and "High Debt" chart shows that the magnitude of the excess debt could be far beyond reasonable. If this school is correct, then we may have years or decades of slow growth unless we take radical steps to massively reduce debt issued during a credit bubble. The outlook for real estate investment is negative based upon this school of thought.
NEGATIVE EQUITY -- TEN-TON GORILLA (8/13/09): How many homeowners would make money by walking away from their mortgage? Whether the number is 11 million or 25 million, the low and the high estimates in this graph, the risk factor is wildly high. It's exactly like Cheech & Chong on Spring Break in Cancun and they are going in to rehab after this last hurrah.
NEGATIVE EQUITY (8/5/09): Negative equity is a major risk factor for which no good research has been done. It's reasonable to suspect that we may experience a foreclosure wave as this variable worsens. Some owners will not pay on their mortgage if it will take five or ten years to get to break even. Social factors are believed to play a major role. And we could hit a tipping point -- after which all hell breaks loose. Bet your bottom dollar that the Fed and the Treasury have this at the top of their "freak patrol" chart.
NEGATIVE EQUITY (8/6/09): The graph shows half of all mortgages issued in 2006 have a balance greater than the value of the house securing the loan. What will happen to loan performance if 50% of all mortgages are worth more than their collateral? Nobody knows, and if nobody knows, then a wild massive risk factor cannot be forecast. If you think that is impossible, please note that Deutsche Bank issued a report in early August saying that 48% of all mortgages would be worth more than their collateral by 2011. This is unchartered territory adjacent to the galaxy beyond the next universe.
SALES - PRICE (8/5/09): THE FALL IN PRICES: There is a lot of good news in the stock market today, but sentiment would turn 180 degrees if it was known that property values would fall 60% from their peak. They have already fallen at 30%. If values fall according to the estimates in this graph, it is a certainty that banks and financial companies will fail en masse. There has been some good news about real estate prices lately, but the vast majority of indicators are still negative.
SALES - UNITS (8/5/09): Looking at the long trend, there has never been a serious problem in terms of the number of units sold. The quality of the sales is another question.
SALES - UNITS (8/5/09): NEW V. USED: A wide gap between sales of new homes and existing homes suggests the stress level in the property market remains elevated.
