ArnoldCountry

Housing Crisis Is Key to Economic Recovery

Great article! Best I have seen in some time. Thanks for the reality check!

Real Estate: Apocalypse Now

I think the analysis by Tim and Mr. Tan are extremely sound. One big problem with analysis is that it is a view of the past. Tim is one of my favorite contributors on here but I think even he would say that what will come to all of us in the future is, at best, an educated guess using the past and current data to assist with that guess. In some ways we have all created a perfect storm with this crisis. The combination of Wall Street, lending methods, guidelines, building, regulation, securities, insurance, and most anything else you can think of have all worked together to create this situaiton. The past tells us that when we hit bottom we will stay at bottom for a while, how long is anyones guess. My best guess at this point is that we are going to be in this perfect storm for a while and when the storm ends, we will hit a period of calmness and sometime we will recover. I have great respect for the opinions of many of the authors on here and whether I agree or disagree with any of them, they all make interesting points which help me craft my own opinions of which I make decisions on. I thought this was a good article in articulating good data to me. I liked it... but Tim still makes one hell of a great case. I suggest we take a look see each month on how this is all going. If you like roller coaster rides, this housing crisis wins.


On Feb 21 01:42 PM TKO wrote:

> Your interpretation is compelling at first sight, but I believe you
> are looking at the wrong variables here. When I choose to buy a home,
> I will look at my income level and determine the 'band' of home prices
> I can afford. We all need to live in a home, one way or another,
> and we will most often choose a home that is most desirable out of
> the homes in the 'band' of prices.
>
> The view that homes are investment vehicles are totally wrong. They
> should be viewed more as an alternative to rent, which is an expense.
>
>
> As for a better graph of the real estate picture: static.seekingalpha.co...
>
> I give credit to Tim Iacano for his article: seekingalpha.com/artic...
>
>
> If we take a totally different angle and compare median home prices
> to median household income, and factor in a historically low interest
> rate at this current time, real estate almost seems undervalued.
>
>
> The truth lies somewhere between your interpretation and Tim's interpretation.

Personal Responsibility and the Housing Bubble

At first, when I read this article, I thought it was a humorous piece, then I realize it is not. Being serious, I will address it. No question, it would be a better world if consumers were more educated on their finances and were given specific education in our schools regarding budget management and balancing their checkbook, but they dont. It would also be better that consumers should reject the closing pressure of being given a stack of legal documents an inch thick and given one hour to sign them. But they dont. It would also be better if the "educated" professionals around the consumers in the transaction, i.e. real estate agents, closers, mortgage brokers, lenders, explained the risks of what they are signing better. But they dont.

The entire gammit of consumer laws have been put in place because consumers are easy targets. Real Estate and Mortgage documents are way more complex than car documents or many other contracts yet consumer protections are required for those.

Buyer beware is alive and well. The first advice to all consumers based on this type of article is... do not trust anyone in the transaction, they are not protecting you.

Second advice, take all of your documents at a closing, do not sign them, take them home and read them for the several days it will take to understand them.

Third advice, all consumers should be required to take a debt counseling course BEFORE they buy to educate them on the pitfalls of the transaction.

Fourth advice, all consumers should be required to have the transaction reviewed by an independent party to advise them of all the negative aspects of the transaction.

That should get personal responsibility addressed properly and put a halt to this problem. Also will slow down transactions incredibly and more important... cause more than 50% of the transactions to be rejected.

Remember, the golden rule, he who has the gold makes the rules... the rules by real estate folks, mortgage brokers and lenders were bad. Personal responsibility would not be a discussion if they could not get those loans in the first place.

Housing: Barron's Calls a Bottom

No offense, but this is just a pipe dream. The problems have not even begun yet. The litigation machine is just getting warmed up. I know that I am involved in approximately 10 new lawsuit filings per month as we finalized a more standardized template to address hybrid mortgage products. My prediction? (of which I am no body) We have just entered a full fledged housing depression and things are about to get a whole lot worse.

I just drove around a relatively new neighborhood in the Sacramento, CA region (2005) and was shocked. In this pocket of nice homes that sold for 500k, 2 houses for sale but 8 houses had bad front yards and had the infamous Notice of Trustee Sale posted on the front door. I would say this neighborhood has about 50 homes in it. In effect, this is what I was worried about. Inventory is not going down, people have thrown in the towel.

Many many homeowners owe more than the property is worth even with putting 20% down and have resetting loans and have given up. We will never solve this problem as long as everyone is focused on getting to a bottom. A 300 billion package does not make a dent. I think we have about a 2 trillion dollar problem.

The Deflation/Inflation/Stagnation Debate

I agree with the article but think that the Fed could have done things differently that would have made for a softer landing. For example, on housing, they could have provided a homebuyer tax credit if anyone buys a home in the next two years of $10,000 to $15,000.00. This would have brought out buyers. While home prices would continue to decline, the rate would slow with the increased demand. Energy prices could get under better control with an inverted windfall profit tax... the higher the price for fuel, the greater the tax on the oil companies. That would create incentives to try and keep prices down. Oil should also be removed as a comodity in the open market and the Federal government should be the direct purchaser of oil from the suppliers and then reselling it the oil companies for refining and distributing. Now, we have so many middlemen speculating, that is more driving the price then true supply and demand. Finally, we should impose a food/fuel supplement. Food export cost has a percent to percent increase in relation to oil. If oil increases by 25%, all food exports increase by 25%. If the government is the purveyor of oil, the supplement can be be used to offset the rising cost of oil.