Scorpio69er

High Likelihood of a Market Crash

Hyper-inflation is already here on the items that matter most to the majority of people: Gas, food and healthcare. Couple this with a still-long-way-to-go deflation of home values and the drying up of easy credit and you've got a combination punch to the gut of the American consumer-driven economy from which we're not likely to soon recover. The fact that the government still spends like there's no tomorrow as it piles up an ever-increasing deficit seals our fate. "Ugly" doesn't even begin to describe what's in store for us.

Moody's Sees Prices 10-25% Lower in 2009 - Housing Tracker

I told you so -- LAST YEAR.

letters.salon.com/tech...

Housing: A Government Solution Is Likely to Be Necessary

I must've missed that part where this magical "government funded solution" is explained.

As I wrote on Salon.com back in August of 2007:

"Any attempt to allow troubled homeowners/speculators to re-fi using government money is doomed to failure, becuase it ignores the simple fact that present prices are totally out of whack. This is even more true now that lending standards for would-be homeowners are tightening, returning to traditional requirements for down payments, income-to-debt ratios, etc. A return to traditional lending standards neccessarily means a return to traditional pricing. Thus, even if people can manage not to default on their home loans, they still will never be able to sell their place at today's artificially inflated prices because no one can qualify to buy it, nor will the source of lending that pumped prices up to the current level any longer be there."

letters.salon.com/tech...

And, as I wrote on MarketWatch.com back in January, regarding efforts to help troubled homeowners stay in their homes:

"All this does is delay the inevitable for these folks. Most people only live in a home 3-5 years before changing circumstances (divorce, job, etc.) compel them to sell and move. So keeping people in homes that were bought at inflated prices only means that they'll be foreclosed on when they try to sell it and find out they can't because the market has collapsed and they're in a negative equity position."

www.marketwatch.com/ne...

There is, in fact no solution to this problem, except to let this bubble deflate as it must. As with the Titanic, once it struck the iceberg no amount of bailing was going to stop the inevitable. This ship is going down, so head for nearest lifeboat.

February Existing Home Sales Fell 23.8%

Someone pointed out that February had 29 days this year -- thus a 3.4% increase in the number of days in the month! Neat trick!

Greenspan's Legacy: The Housing Bust

In order to understand our present situation, it is instructive to read this article from the WSJ from June 9, 2005:

In Treating U.S. After Bubble, Fed Helped Create New Threats

* Low Rates Bolstered Economy, But Housing, Foreign Debt Appear Out of Balance

* Greenspan's Legacy at Stake

"If I were a biologist I'd call this a perfect example of symbiosis," former Fed Chairman Paul Volcker mused in a February speech at Stanford University. "Contented American consumers matched against delighted foreign producers. Happy borrowers matched against willing lenders. The difficulty is, the seemingly comfortable pattern can't go on indefinitely."

Almost every economist agrees. The debate is over how, not whether, the global economy rebalances: Will it be smooth, through some combination of declining dollar and accelerating foreign demand? Or will it be chaotic, with a dollar collapse, much higher U.S. interest rates and perhaps a global recession?

Mr. Volcker thinks a crisis is likely. Investor confidence could fade "at some point," he said, with "damaging volatility in both exchange markets and interest rates."

www.andongkim.com/arti...

No, Pending Home Sales Index Did Not Rise

The housing market cannot recover until prices fall to (at least) their pre-bubble levels. Without the easy credit, no-qualifying, zero down type mortgages, what you are left with is a market relying on people who can qualify under tight traditional lending standards. Under such standards, almost no normal person can come up with the 10%-20% down plus meet the qualifying ratios on these hyperinflated homes. And even if they could, why would they want to, since it's clear prices are collapsing?

Greenspan: Large Losses Loom

In order to understand our present situation, it is instructive to read this article from the WSJ from June 9, 2005:

In Treating U.S. After Bubble, Fed Helped Create New Threats

* Low Rates Bolstered Economy, But Housing, Foreign Debt Appear Out of Balance

* Greenspan's Legacy at Stake

"If I were a biologist I'd call this a perfect example of symbiosis," former Fed Chairman Paul Volcker mused in a February speech at Stanford University. "Contented American consumers matched against delighted foreign producers. Happy borrowers matched against willing lenders. The difficulty is, the seemingly comfortable pattern can't go on indefinitely."

Almost every economist agrees. The debate is over how, not whether, the global economy rebalances: Will it be smooth, through some combination of declining dollar and accelerating foreign demand? Or will it be chaotic, with a dollar collapse, much higher U.S. interest rates and perhaps a global recession?

Mr. Volcker thinks a crisis is likely. Investor confidence could fade "at some point," he said, with "damaging volatility in both exchange markets and interest rates."

www.andongkim.com/arti...

What Should Today's Median Housing Price Be?

Months ago, in response to an article on Salon, I posted this:

"Any attempt to allow troubled homeowners/speculators to re-fi using government money is doomed to failure, becuase it ignores the simple fact that present prices are totally out of whack. This is even more true now that lending standards for would-be homeowners are tightening, returning to traditional requirements for down payments, income-to-debt ratios, etc. A return to traditional lending standards neccessarily means a return to traditional pricing. Thus, even if people can manage not to default on their home loans, they still will never be able to sell their place at today's artificially inflated prices because no one can qualify to buy it, nor will the source of lending that pumped prices up to the current level any longer be there."

Housing Bubble and Real Estate Market Tracker

Re: National Association of Realtors and their use (and your unquestioning regurgitation) of median home price data --

The seeming paradox that median home prices are increasing while sales are falling is strictly a function of the fact that <b>the median price metric reflects that home sales are now being skewed to higher-end homes<b>. It does NOT mean that average home prices are increasing, nor does it mean the market is on the upswing.

<b><i>"The low end is where you have all the inventory so the desirable areas are driving up the median. The numbers are misleading and they freak you out,"<i><b>... said Manuel De Neves, a real estate agent at Fireside Realty in San Jose's Willow Glen area.

realtytimes.com/rtcpag...

<b><i>"As the ratio of expensive homes to lower-priced houses sold increases, median prices over the entirety of the housing stock will rise even if prices on all individual houses are falling."<i><...

www.azcentral.com/blog...;title=median_home_pri...

The NAR has, of course, a vested interest in selling real estate. Hardly the best source from which to get REAL housing data.