And I'm a-sensing a slight recession in the wind.
I also forecast smaller banks and mortgage firms that got all high on the "Housing Bubble Hooch" and made insanely stupid loans are going to collapse and consolidate.
That damn reality, always burstin' everybody's bubble.
Wait, are you saying capitalism is subject to a "boom-bust" cycle?
ReplyDeleteYou're kidding, right? I thought the Almighty Uber-Staat was supposed to protect us from this! That's what we were promised by the Left! Free health care! Social Security! Public education that kept the little yard ap...beloved children docile and smart at the same time! Flying cars! All the while The Poor would be uplifted while The Rich would be made aware of their "social responsibilities" to give...even at the point of a gun.
Until now, it looks more like a deflating bubble, doesn't it? Consumer spending showed no reaction yet. I don't know about historic housing bubbles, but, if it were a "bursting" bubble, shouldn't it have bursted already?
ReplyDeleteHo ho!!!!!
ReplyDeleteI've actually been contracted to research the housing market and then present my findings to a local banking outfit.
Based on my figures I seriously am salivating at just how severe this crash could end up being. Not that I want people to be poor you understand, but solely for the purpose of saying "see, I told you so" to a bunch of banks and credit unions in the area that just did NO market research before they lent out billions.
It will be one of those things where a bunch of middle aged guys (and gals) in suits who "thought they knew more" than the young punk kid.
And I will get to say those 4 sweet words;
"I told you so."
I think housing prices could fall another 10%.
If I may, I'd like readers to take a look at these comments (taken from National Review's The Hillary Spot), regarding the housing market, by Jim Geraghty:
ReplyDelete"I've been hesitant to blog about one of my recent rant-inspiring topics — real estate — but we can see the outlines of this mentality in this area, as well. (The thirty second version of my rant: There's a bubble, and it's popping. Housing prices went way up in recent years, partially due to a speculative market, partially due to "flippers", partially because real estate looked safe because of the dot-com crash, and partially because lenders made loans to people that they shouldn't have. Many buyers bought a lot more house than they could afford, using all manner of potentially dangerous agreements - interest-only mortgages, adjustable rate mortgages, little or no down payments (the typical down payment of a first-time home buyer in 2006 was 2 percent!) etc. Now the supply of housing is increasing dramatically, as demand shrinks. (Those who face foreclosure will not be getting approved for new mortgages for new purchases anytime soon.) You know what that does to prices; but many speculative real estate investors went into the game convinced that prices could only go up.)
Anyway - so significant number of Americans are going to find themselves in financial dire straits because they bought an overvalued house as the market was going up, they can't keep up with their monthly mortgage payments, and now cannot resell it for enough to even break even.
So what is Washington doing?
'Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., says he is working on legislation to prevent an "unprecedented" wave of subprime foreclosures and to give homeowners a grace period so they can get back on their feet. "This is a homeownership crisis of unprecedented proportions," Sen. Dodd told a group of mayors. He is planning to hold hearings soon, possibly in two weeks. The committee chairman indicated that the legislation might include a rescue fund. "That is a possibility, but it would have to be paid back," he told reporters. Sen. Dodd also told reporters that he wants to move quickly on GSE legislation to strengthen regulation of Fannie Mae and Freddie Mac and pass a bill in the next two months. He said the Senate government-sponsored enterprise bill will be a "little different" from the House bill. And he declined to take a position on raising the GSE loan limits. "I have to be careful about jumping into that," Sen. Dodd said after speaking to the mayors. "I want to talk with my colleagues first."'
A rescue fund, "but it would have to be paid back." Dodd is seriously considering having the federal government loan money to people whose primary problem is that they can't pay back the loan (mortgage) they already took out. (Fluuuuush! That's the sound of our tax dollars going into this rescue fund.)
Take care of me, Big Government! Save me from the consequences of my own decisions and actions!"
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If this goes through (and it will, in all likelihood), anyone else here remember the savings and loan scandals? I certainly do! Nothing's ever our fault in this scoiety anymore...
Hi Cap,
ReplyDeleteThis is a bit off topic, but related to housing. Wanted your advice... Last year I bought a house and have paid the mortgage down quite a bit. Based on current payments, I will pay the mortgage off in Feb 2011. Question is, should I pay it off now, or should I invest the money and continue to make the mortgage payments? Mortgage rate is 6.25, while investment return is less than that. I don't want high risk right now since I'm close to retirement.
Your thoughts?