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Housing has been deteriorating for the last two years.  News from yesterday indicates the market stands a very good chance of getting worse.

From the WSJ:

Among the latest trouble signals, the number of American homes entering foreclosure rose to the highest level on record in the fourth quarter of 2007. Meanwhile, homeowners' share of the equity in their homes fell to a post-World War II low.

Let's think about those facts for a minute.

1.) Foreclosures are at a record high.  More Americans are defaulting on their loans at the highest rate ever recorded.  That is not a good sign.    And that number stands a good possibility of getting worse. estimates 8.8 million homeowners, or about 10 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households will be "upside down" if prices fall 20 percent from their peak. The latest Standard & Poor's/Case-Shiller index showed U.S. home prices plunging 8.9 percent in the final quarter of 2007 compared with a year earlier.

Currently, the situation is already terrible:

According to the Mortgage Bankers Association, more than 2% of the nation's about 46 million mortgage loans were in the foreclosure process in the fourth quarter, and 0.83% of loans entered the process. Both figures are the highest since the industry group started keeping track in 1972.

2.) Homeowners equity is at the lowest level in the post-WWII era.  That means banks and financing companies now own more of the US housing market than private individuals.  

And this has led to a decline in individual net worth:

The total wealth of American households slipped about $533 billion to $57.7 trillion in the fourth quarter, the first drop since 2002, the Fed said. Central to the decline: The value of housing-related assets -- including those that are mortgaged -- fell by $170 billion to $20.2 trillion while the value of other financial assets, such as stocks, dropped by $254 billion to $45.3 trillion.

The Fed uses a home-price index compiled by the Office of Federal Housing Enterprise Oversight that some critics say understates the drop in home values. Using the popular S&P/Case-Shiller index of home prices, total household wealth would have dropped by $1.4 trillion during the quarter, said J.P. Morgan's Mr. Feroli.

According to the Mortgage Bankers Association, more than 2% of the nation's about 46 million mortgage loans were in the foreclosure process in the fourth quarter, and 0.83% of loans entered the process. Both figures are the highest since the industry group started keeping track in 1972.

This is what happens when you base your economy on record low interest rates leading to speculative excesses.  As the asset's increase in price everybody is fat and happy.  But when prices fall, you have problems.  Big problems.

And the problems are starting to spread into other areas to the economy.

Officials in Vallejo, California hammered out a financial agreement late on Thursday with police and fire-fighters that may allow the cash-strapped former Navy town to avoid becoming the first sizeable city in the state to file for bankruptcy.

Why was this California city on the verge of bankruptcy?  Like many municipalities, they rely on property taxes for their financing.

Blue-collar Vallejo's economy long relied on the U.S. Navy's neighboring Mare Island shipyard. When the Navy closed the base in the mid-1990s, Vallejo became a bedroom community.

Property taxes were healthy when California's housing market was running hot earlier this decade, but recently those revenues have been on the slide along with demand for housing.

Vallejo, with a population of roughly 130,000, now is in one of the region's hardest hit housing markets. Like other markets where home purchases were financed with risky mortgages in recent years, foreclosures are on the rise.

This Vallejo is alone?  Think again.  

So -- will this problem end soon?  Very doubtful.  Here is a chart of home prices according to the Case Shiller home price index.


Notice that in the 1990s -- which was a healthy economic expansion -- home prices increased about 10-20%.  This occurred primarily in the last three years of the expansion.  During this expansion, prices increased 80% nationally.  Also note that aside from record low interest rates, there was nothing different about this expansion that would warrant a price increase of that magnitude.  Now, prices are just starting to fall.

This won't end soon.

Update [2008-3-7 7:42:39 by bonddad]:: From IBD:

The share of delinquent mortgages rose to 5.82%, the most since 1985. Payments at least 30 days overdue are deemed delinquent.

Originally posted to bonddad on Fri Mar 07, 2008 at 03:53 AM PST.

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Comment Preferences

  •  Hey bonddad... (115+ / 0-)

    not to sabotage your thread/diary, but this is some business/economic related schadenfreude...  GHWB's former Carlyle Group's investment fund Carlyle Capital is headed for the skids...

    Well, actually maybe this IS directly related, no...; )

    Dudehisattva... <div style="color: #0000a0;">"Generosity, Ethics, Patience, Effort, Concentration, and Wisdom"&l

    by Dood Abides on Fri Mar 07, 2008 at 04:00:05 AM PST

  •  We are in for some rough sailing, and (45+ / 0-)

    it is already spreading to other sectors of the economy. the number of car loans that are in default is also rising. When you add the negative savings rate, the rising prices of necessities like food and energy, and the poor job creation rate, I think that we may be looking at the worst recession since the Great Depression.

  •  What about interest rates? (32+ / 0-)

    The shoe that hasn't dropped in the housing market skid is mortgage rates.  Credit has gotten tight, but with the dollar nosediving and inflation on the rise, interest rates are facing upward pressures at some point.  With the recession topmost in policymakers' minds it will take a while for rates to rise, but eventually the market will discount the dollar enough that long rates must climb so the US can sell Treasury debt.

    If anybody thinks things look bad now, wait till mortgage rates start a serious climb.  At that point the home price curve may resemble Japan's in the late 80's and 90's:  a fall back to pre-climb levels.  In Japan that took a decade. and they didn't even have inflation to fight.

    This won't end soon, and it's likely to get real ugly before it does.

    Hanoi didn't break John McCain, but Washington did.

    by Dallasdoc on Fri Mar 07, 2008 at 04:07:12 AM PST

    •  And they had a lot of savings... (15+ / 0-)

      The most pronounced aspect of that bubble was Palm Springs: Japanese businessmen bought that golf course for 1,5 billion dollars, and sold it to Clint Eastwood and his friends for 700 million dollars.

      Omne malum nascens facile opprimitur, inveteratum fit plerumque robustius. - Cicero

      by Dauphin on Fri Mar 07, 2008 at 04:18:12 AM PST

      [ Parent ]

    •  Debt relief through the back door... (15+ / 0-)

      but only for the liquid.

      The notion of home ownership is great until the home owns you.

      I am seriously contemplating telling my wife we should sell the house to someone and rent it from them, that the equity stake right now is too risky.

      That, and we could make some coin on the deal even at a deep discount from what the list value suggests...for now.

      That and I suspect prices will drop.

      Lynch mob partipants volunteered, too.

      by cskendrick on Fri Mar 07, 2008 at 04:30:36 AM PST

      [ Parent ]

      •  Who was that famous NYC prognosticator (0+ / 0-)

        Who essentially had the same idea as you 3yrs ago.

        That's right still renting and waiting.  He screwed up big time, NYC prices are still going up.  I don't know where you live but don't be like that guy no one can remember.

        A perfection of means, and confusion of aims, seems to be our main problem.- Albert Einstein

        by bldr on Fri Mar 07, 2008 at 04:51:06 AM PST

        [ Parent ]

        •  Reals estate's always a good investment (2+ / 0-)
          Recommended by:
          greenearth, StrayCat

          Over the long run. And its not for lightweights.  The upside of it is that you always have a place to live, even if it is overpriced. But it will go up over time.

          "... am seriously contemplating telling my wife we should sell the house to someone and rent it from them, that the equity stake right now is too risky..."

          I can't see how that would improve the situation in ANY way. I hope your wife can talk you out of it.

          If Liberals REALLY hated America we'd vote Republican

          by exlrrp on Fri Mar 07, 2008 at 07:01:16 AM PST

          [ Parent ]

          •  Nickeled & Dimed to death (2+ / 0-)
            Recommended by:
            StrayCat, RevenantX

            Is what this is shaping up to be. Trading a mortgage for a higher monthly rent

            Unless you live in Florida swampland  or Vegas and bought at the top of the market, why would you essentially pay a loan for some else?

            IT's all local for sure but I can't even think of a situation where that is wise.

            For the record NYC prices are escalating for several reasons one of which is the collapsing dollar, making asset investments in the US more attractive.

            A perfection of means, and confusion of aims, seems to be our main problem.- Albert Einstein

            by bldr on Fri Mar 07, 2008 at 08:06:44 AM PST

            [ Parent ]

          •  Real estate... (2+ / 0-)
            Recommended by:
            Alexander G Rubio, RevenantX

            ...tends to rise at the rate of inflation. That's it, really. What makes it a "good investment" is leverage: you control a $200k asset that will inflate against the entire amount. But that leverage f*cks you in a downturn: now you lose your whole downpayment and equity quickly and have nothing!

          •  Always? (2+ / 0-)
            Recommended by:
            Alexander G Rubio, ilex

            I mean really, always?

            This might challenge your perceptions of this axiom.

            Over 1200 homes, mostly bank owned, in the Detroit area available for less than $5000.  Only a few of the <$1000 properties appear to be fire damaged teardowns.  Most have yards and driveways.  Many are brick structures.  Almost all are pre- and post-war bungalos in the range of 700-1500 sq. ft. of living space.  Some are even cute.</p>

            in ur goverment. stealin ur monies rights dignities. monies.

            by j bopp on Fri Mar 07, 2008 at 10:06:16 AM PST

            [ Parent ]

            •  The Long Haul (1+ / 0-)
              Recommended by:

              Real estate on average tends to appreciate at about the rate of inflation over the long term.  Local variations exist, as Detroit shows.  

              Keep in mind that some of the increase in real estate value is offset by the maintenance costs.  In many cases investment in real estate is a wash if all the maintenance costs are taken into account -- but as noted above the equity held in real estate can provide leverage for doing other things.

              I've heard that for the average person the biggest lesson from the Great Depression was to always minimize debt and pay off any existing debts ASAP.

        •  Steve Roach (1+ / 0-)
          Recommended by:

          Roach's structural analyses have been correct.  His timing predictions, like those of all of us, have been premature.  Chickens sometimes circle the roost for a while before they land.  They are now landing.

      •  A Mortgage Isn't a Bad Thing (6+ / 0-)

        The bank is locked into into a deal where they get paid in dollars that are dropping in value. The house is an asset that has value which may drop, but not as much as the dollars you pay for it.  

        •  No way do we get an 80% decline (5+ / 0-)
          Recommended by:
          fladem, corvo, StrayCat, NearlyNormal, ilex

          People need to realize that declining percentages are based off a larger number.  If you have a 100% increase, then all you need is a 50% decrease and you're back at the same level.  Even a 30% decline puts us back at more reasonable levels, when you consider inflation, which will be high due to the Fed cutting so aggressively and the dollar weakening.  

          Don't like XOM and OPEC? What have YOU done to reduce your oil consumption? Hot air does NOT constitute a renewable resource!

          by Asak on Fri Mar 07, 2008 at 05:26:04 AM PST

          [ Parent ]

          •  I believe we are already at "30%" levels (1+ / 0-)
            Recommended by:

            At least in my area of Michigan housing prices are down about 30% over the past two years.  While I didn't buy at peak prices, this decline in value has already eliminated any equity gained since I purchased my home and it is eating into my downpayment now.

            This doesn't feel "reasonable" at all.  

            "Our lives begin to end the day we become silent about things that matter." ~ Martin Luther King, Jr.

            by givmeliberty on Fri Mar 07, 2008 at 12:25:59 PM PST

            [ Parent ]

            •  Our next-to-last house (0+ / 0-)

              We made 68% on one house we sold after living in it for 4 years. We did make some significant structural upgrades, so it wasn't all profit (like installing a new furnace, getting the heating system plumbed properly, putting on a new roof, replacing rotted windows, adding insulation, and so on.)

              The people who bought it from us took out an interest-only mortgage. The value went up, so they took out an equity line to expand it.

              The house has lost a whole lot of value in the last 24 months - rapidly approaching what they originally paid for it, before they took out the equity line.

              I imagine that the new owners are now upside down, but don't know for sure. If not, it probably won't be long. This is in the hot suburban Boston market.

              Beware the everyday brutality of the averted gaze.

              by mataliandy on Fri Mar 07, 2008 at 07:37:50 PM PST

              [ Parent ]

        •  Ugh, replied to the wrong person (1+ / 0-)
          Recommended by:

          Is anyone having trouble with replies linking to the wrong comment?  This has happened to me twice now in the last day.  I'll hit reply and then post and find that my comment attached to a different comment completely.  

          Don't like XOM and OPEC? What have YOU done to reduce your oil consumption? Hot air does NOT constitute a renewable resource!

          by Asak on Fri Mar 07, 2008 at 05:27:25 AM PST

          [ Parent ]

      •  for a second there... (7+ / 0-)

        ...I thought I read "I am seriously contemplating selling my wife..."

        and had to laugh. It got me to thinking how much could I trade my husband in for?   Are spouses an appreciating asset like a house or a depreciating asset like a car?


        The measure of one's life is found not in its Length, but in its Depth.

        by DawnG on Fri Mar 07, 2008 at 08:04:39 AM PST

        [ Parent ]

      •  i was lying awake at 5 a.m. thinking about this (3+ / 0-)
        Recommended by:
        mataliandy, cskendrick, Pluto

        yes, a home is a long term investment.  i understand that but i am also someone who is living on a fixed medical disability income.  my best opportunity for selling would have been two years ago to maximize my profit and have more money to live on.  to be honest i wasn't even sure if i would be alive when i bought the house eight years ago.  i just wanted some permanence, peace and tranquility if i was living the last of my years.

        i didn't give too much thought about selling since i figured that home prices would just plateau and I would still walk away with a nice profit if i ever HAD to sell.  even if prices dipped slightly i would still have sizeable equity in the home.  we had also been holding out on the probability of moving into an adult community in just five years but now i don't know if i can wait that long and hope that the market will come back by then.

        it has recently come to my attention from my lender when inquiring about a refinance that my home value has dropped about $60,000 from a peak value of about $350,000 and they hinted at another 10-15% drop in value.  i was NOT expecting my home value to have dropped that significantly.  now i'm wondering if i should sell right now and get what equity i can out of the home and wait it out in the rental market for the next five years until we can move into a 55-up community.


        I'm a blue drop in a red bucket.

        by blue drop on Fri Mar 07, 2008 at 11:28:25 AM PST

        [ Parent ]

      •  you'd be better off (1+ / 0-)
        Recommended by:

        renting a room to someone. Or renting out the house at a rate that covers your mortgage, taxes etc. and renting somewhere for less yourself.
        Those sell your house and rent it back deals are total scams.

        "America is the only country that went from barbarism to decadence without civilization in between." -- Oscar Wilde

        by expatyank on Fri Mar 07, 2008 at 03:35:22 PM PST

        [ Parent ]

    •  Fed rate cuts aren't lowering mortgage rates (22+ / 0-)

      There is an unprecedentedly large spread between available mortgage rates and the Fed rate, primarily because banks see the risk of default as much higher in this environment, and they are correct.  Fed rate cuts aren't translating into cuts in mortgage rates.

      -7.75, -7.64 "When the intellectual history of this era is finally written, it will scarcely be believable." -- Noam Chomsky

      by scorponic on Fri Mar 07, 2008 at 04:33:31 AM PST

      [ Parent ]

      •  Market perception of risk (10+ / 0-)

        Excellent point.  The credit market sees mortgage loans as risky right now, and with falling housing prices that's not likely to change anytime soon.  

        At some point mortgage rates are likely to stratify on risk assessment, with geographic and price-point differentials based on how the recession is hitting different groups.  But for now, house prices are likely to fall more or less across the board, so lenders have little incentive to draw those fine distinctions.

        Mortgage rates may lead the upward climb in interest rates, and prices will fall in tandem with rising rates.

        Hanoi didn't break John McCain, but Washington did.

        by Dallasdoc on Fri Mar 07, 2008 at 04:42:02 AM PST

        [ Parent ]

        •  Disagree, but not entirely (1+ / 0-)
          Recommended by:

          Perception of risk is right.
          But as mortgage companies are able to profit from the spread, they will make and continue to profit from lending money to the wise borrowers.

          This starts to unclog the lending machine, which will then start the whole cycle over again.
          But in the mean time the rates will come down overall due to competition, and especially for the best of the borrowers.

          Capital markets at work right?

          As homes sell or come off market, prices stabilize.
          I just don't see an 80% decline coming. maybe relative to the Brazilian Real/insert favorite currency here/and maybe in certain communities/ states but not overall.

          A perfection of means, and confusion of aims, seems to be our main problem.- Albert Einstein

          by bldr on Fri Mar 07, 2008 at 05:13:56 AM PST

          [ Parent ]

          •  No way do we get an 80% decline (3+ / 0-)
            Recommended by:
            Heiuan, StrayCat, RevenantX

            People need to realize that declining percentages are based off a larger number.  If you have a 100% increase, then all you need is a 50% decrease and you're back at the same level.  Even a 30% decline puts us back at more reasonable levels, when you consider inflation, which will be high due to the Fed cutting so aggressively and the dollar weakening.  

            Don't like XOM and OPEC? What have YOU done to reduce your oil consumption? Hot air does NOT constitute a renewable resource!

            by Asak on Fri Mar 07, 2008 at 05:27:48 AM PST

            [ Parent ]

        •  I'm glad someone is explaining this (3+ / 0-)
          Recommended by:
          mataliandy, barbwires, StrayCat

          so I can at least partway understand it.  I listen to BenB talk about why he's cutting interest rates to the banks, then I listen to the banks telling me how much mortgage interest I'm going to have to pay if I want to buy or build a new home.  It's made no sense to me that mortgage rates aren't coming down.

          Not that this explanation makes me feel any better that mortgage rates are rising while the prime rate is falling, but at least now I understand a little more about why.  Thanks to all for the explanations.

          "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

          by SueDe on Fri Mar 07, 2008 at 06:13:07 AM PST

          [ Parent ]

      •  LUNACY _They're not letting homeowners refinance (16+ / 0-)

        with terms that would let them STAY IN THEIR HOUSES and PENALIZING THEM with excessive fees if they try.....

        Countrywide is still collecting a fortune off fees which are hurting people - late fees, refinance fees - you name it....

        The irony is that EVERYBODY would be BETTER OFF if people could stay in their homes and pay off their mortgages

        Banks are writing off fortunes - yet if the interest rate drops were passsed on - and people were allowed to refinance WITHOUT stiff 'pre-payment' penalties, you'd have a good number of people staying in those houses....

        But NO.......

        The irrationality at work here is stunning.

        Better to put people on the street - kill off whole neighborhoods - some of which will end up getting bulldozed (after being looted and vandalized).....

        you almost think it's an organized plot to destroy a good part of the middle class housing stock in this country...... along with the former occupants

        yes some speculators got burned but there are plenty of real owner-occupants that COULD afford lower rate mortgages if they didn't get stuck with absurd fees

        Instead we have a few billion dollars worth of write-downs...... makes no sense.

        Better if somoene paid SOMETHING and stayed in a house than have it empty and eventually worth nothing - which is what's happening in lots of cases.

  •  What effect will Bond insurer (37+ / 0-)

    downgrades have on bankruptcies of this kind?

    Who will fund the bond initiatives for recovery if bond ratings drop through the floor?


  •  So, if I'm getting this correctly, (12+ / 0-)

    the prices will correct themselves downward - for another thirty or forty percent.

    What no taking head has done yet, to my knowledge, is to actually suggest a solution beyond interest rate cuts, which seem to be like applying band-aids to a missing limb.

    In my opinion, the state will, in the end, be forced to bail the companies and the homeowners out. The latter because, well, several million people who suddenly lose everything can get rather pissed off, and understandably so, and the former because, well, should the banking system collapse that might well cause a systemic collapse that will make post-Vietnam War recession look like a bad hair day. Of course, the smart thing would be to keep some finantial institutions nationalised and to introduce tighter lending standards and annual and thorough government audits.

    Of course, the US government is drowning in debt, so I'd expect the solution to be to print more money, which will lead to inflation, which will, in turn, lead to more expensive imports and less expensive exports... expect a drop in the quality of life.

    For anyone who likes schadenfreude, this will also really, really screw up China.

    In my view, the European policy of maintaining the value of the currency high while bailing out the financial institutions (although the problem - excepting thwe United Kingdom - is far less damaging here) is far better, at least in the long run. As is tight regulation, in the absence of something like Glass-Steagal (which Europe never introduced, which is why it compensated with tight regulation).

    Omne malum nascens facile opprimitur, inveteratum fit plerumque robustius. - Cicero

    by Dauphin on Fri Mar 07, 2008 at 04:16:41 AM PST

    •  Another possibility... (14+ / 0-)

      is that prices stabilize but then rise at lower-than-average rates over the next 10 to 20 years.

      Were this to happen it would probably be a net positive for the economy from a variety of perspectives:

      --People would stop viewing their houses as ATMs and not be led into the temptation of excessive debt;

      --People would stop relying on their home equity as a retirement fund, and would then start saving again.  This capital formation would enable a real economic expansion;

      --People would not have fears that they would be unable to purchase a home in the future due to rapidly appreciating home prices, and therefore would not be tempted to buy houses before they could truly afford them.  This would help keep foreclosure rates down;

      --If there was a steady supply of existing homes on the market, homebuilders would be incentivized to build houses that offered significant advantages over existing homes.  This would improve the quality of the nation's housing stock.

    •  would you prefer debtors prison or slavery? (14+ / 0-)

      In my opinion, the state will, in the end, be forced to bail the companies and the homeowners out. The latter because, well, several million people who suddenly lose everything can get rather pissed off, and understandably so,

      Or, there will be proposals and promises, to keep people quiet and waiting for their resolution and restoration, while those who have the means get the heck out of Dodge, leaving lots of people with a big mess that can't be cleaned up.  I would say we might be seeing the return of debtors prison, but I think the prisons are so full now, there's no room.  Perhaps just some form of slavery could be instituted to "help" people work out their debts, and maybe allow their children to eat and go to school.  

      As I reread this, it sounds pretty negative, but I don't think anything proposed in the heat of this election season can be taken seriously.  As long as the money people are taken care of, even if it is for only cents on the dollar, I don't think anyone is really going to care to help ordinary people solve their upsidedown equity problems.  And the prospect of roving bands of house poor debtors walking from town to town in search of paying jobs is just too abstract and is not something people can imagine.  Those who would feel threatened by that possibility are already building their castles and digging their moats--all while talking about how to "help" out the poor bahstahds.

      •  I've considered that possibility, yes, (2+ / 0-)
        Recommended by:
        corvo, jjellin

        but I doubt it will happen. These kinds of tactics work when you've got a relatively small, manageable affected population with whom other segments of the population cannot identify.

        There are, however, many affected homeowners, and all but the greatest sycophants identify with them. I believe - or, better, estimate - that the US' society has not disintegrated to the extent where the government wouldn't meet civil resistance if it tried to pull off something like that.

        And, of course, when you do some things - or displease some people - you cannot run far enough. Even if your scenario were to come true, I'd expect the culpable people to eventually end, well, like Trotsky.

        Omne malum nascens facile opprimitur, inveteratum fit plerumque robustius. - Cicero

        by Dauphin on Fri Mar 07, 2008 at 04:44:43 AM PST

        [ Parent ]

      •  Another problem with bailing out homeowners (3+ / 0-)
        Recommended by:
        mataliandy, corvo, Dauphin

        is that you can already hear the idiot conservatives yelling about borrowers who borrowed above their means, should have known better, why should I bail them out for their bad judgement?, they should accept responsibility for their own greed/bad judgment/stupid decisions.  It sounds like an echo of conservative talk radio or TV talking heads, but I'm not sure because I don't listen to conservative bloviators.

        So it's going to be politically difficult to help those stranded in the housing mess if conservatives think their own tax money is going to be used for a bailout.

        "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

        by SueDe on Fri Mar 07, 2008 at 06:26:08 AM PST

        [ Parent ]

        •  those feelings aren't tied to political ideology (12+ / 0-)

          I feel that way too.  I saw some of the last beautiful or sleepy areas of Florida turned into an overpriced soul-destroying architectural and ecological wasteland by greedy developers, wanna-be moguls, and people swept up in a mania and stoned on unearned money and cable television. In the meantime, I saved, even at 1.5% interest, and rented, because after the tech bubble I knew exactly how this was going to end.

          If anyone thinks I'm voluntarily going to rescue people and entities who thought they'd get rich quick and didn't, or who thought that real estate prices only went up, or who believed that consequences didn't apply to them, that person has another thing coming.

          •  Many, many folks didn't think (3+ / 0-)

            they would get rich quick.  They had no way of knowing - being told just the opposite by lenders - that their house wouldn't appreciate enough and money wouldn't be available to refinance their loans when the resets hit.  It's not that many of these people didn't know that "consequences didn't apply to them" but they had no idea what the consequences would be.  They were never told the bad things that could happen to the housing market, only the good things, and they weren't economically savvy enough to understand on their own the way markets work.

            I would be willing to help people out who are in this circumstance (if they could be separated from those you describe) if for no other reason than to keep them in their homes so that my neighborhood doesn't end up a ghetto.

            "In this world of sin and sorrow there is always something to be thankful for; as for me, I rejoice that I am not a Republican." - H. L. Mencken

            by SueDe on Fri Mar 07, 2008 at 07:57:22 AM PST

            [ Parent ]

            •  And many of them (6+ / 0-)

              bought houses at what the MARKET forced them to. They didn't WANT to pay $300,000 for a small house in a not so great neighborhood, but the loan terms were so good that they wound up playing LESS than they were for rent, because of the tax advantages to home ownership. And there WASN'T anything cheaper that was fit to live in.

              So they got a decent place, in a decent neighborhood, with decent schools, for LESS than what they were paying in rent.

              And people being people, they were thinking they'd get raises, and promotions, and they wouldn't lose their job or get sick, and the house would appreciate in value, as they have for the last 15-20 yrs.  

              The BANKS are the ones who are supposed to be thinking those things. Not the people trying to buy a house. The BANKS are supposed to look at their stability, their job status, their income, their debts, etc., etc. They WEREN'T. AT ALL.

              So I don't blame the people - unless, of course, they were buying something up to do some cosmetic stuff and resell it at a hugely inflated price. THEY can lose everything they own, for all I care.

              They're not the entire problem, of course, but they definitely contributed to it.

              •  Re (1+ / 0-)
                Recommended by:
                Break On Through

                bought houses at what the MARKET forced them to. They didn't WANT to pay $300,000 for a small house in a not so great neighborhood, but the loan terms were so good that they wound up playing LESS than they were for rent, because of the tax advantages to home ownership. And there WASN'T anything cheaper that was fit to live in.

                This is blatantly false. During the housing boom, rents didn't go anywhere, stayed more or less constant, while purchase prices went up and up. The reason for this is obvious: rent is tied to the amount of money you actually make in the real world, while mortgages are tied to the amount a bank is willing to lend you.

                The only way they could have been paying less than they would have for rent would be that they had an option ARM or similar time-bomb mortgage, in which case they should have known the risks.

                •  Sorry (0+ / 0-)

                  Don't mean to be so blunt, but I find it very difficult to believe that during the bubble they were able to buy for cheaper than renting without shenanigans.

                  •  Ha, ha. Rents didn't go anywhere. (2+ / 0-)
                    Recommended by:
                    mataliandy, Hear Our Voices

                    In what world?

                    They've gone up steadily in Seattle, as the occupancy rate has reached about 99% and the landlords can charge anything they want -- and they also demand you have good enough credit to buy a house as well before they rent to you.

                    •  It's geographic (1+ / 0-)
                      Recommended by:

                      For example I moved into my apartment in the East Bay (California) 8 years ago and a year later my rent topped out, then came the dot com crash and now I'm paying less than I did 7 years ago...  In inflation adjusted dollars I reckon that I'm actually paying less for rent now than when I moved in (assuming 2% annual inflation).

                      Meanwhile house prices have increased hugely, in the 60-100% range and as of a year ago I understand that rent vs buying costs were around their least favorable ratio ever.  The housing market has softened a little since then and the rental market is getting a bit tighter but it's still way, way cheaper to rent than to own.

              •  Uh (1+ / 0-)
                Recommended by:
                Break On Through

                Both parties are supposed to be thinking about those things when taking out a loan(borrower and lender). It is absolutely wrong to absolve people for not thinking long term and putting this at trhe foot of the banks. Credit practices were loosened but I find it hard to believe that any other than a dolt would not understand that deferred downpayments would eventually need to be paid in the form of higher payments somewhere along the line.

          •  Ah, now that is the real story. (3+ / 0-)
            Recommended by:
            mataliandy, jjellin, RevenantX

            Who will get bailed out?

            Home buyers or banks?  The haves will vote for banks.

            Who will pay for it?

            The haves (big business) or the have nots (U.S. Taxpayers)?

            I'm thinking that it will be us, the taxpayers.  It stinks like a dead dog and make me madder than hell.

            Fannie and Freddie are being loaded up with bad debt, the FHLB is handing out cash for crap, and the TAF is now running at $50 Billion a pop.

            There will be a bailout or at least and attempt at one.  All we can do is raise hell about who gets the bailout and who pays for it.

        •  bailing out home owners who took these stupid (1+ / 0-)
          Recommended by:
          Break On Through

          loans just reinforces bad behavior.  It is like saying "Oh, you have a drug problem?"  "Here, let me help you out, how much more cocaine do you need."

          Maybe the solution to this problems are parents and schools that teach kids how to balance a check book.
          Banks are making fortunes on bank charges just for overdrafts.  We have a couple of generations of people who have no idea of what "living within your means" means.  But, wait, the parents are teaching their kids how to spend beyond their means.  Never Mind!

          •  I have to say I'm more interested in seeking (3+ / 0-)
            Recommended by:
            mataliandy, Dauphin, jjellin

            solutions that are best for the Nation as a whole. I heard a lot of this 'teaching a lesson' crap during the bancruptcy debate.

            Love that "power of the purse!" It looks so nice up there on the mantle (and not the table) next to the "subpoena power."

            by Sacramento Dem on Fri Mar 07, 2008 at 09:21:40 AM PST

            [ Parent ]

            •  the problem is with greedy, mortgage brokers and (3+ / 0-)
              Recommended by:
              mataliandy, jjellin, RevenantX

              lenders feeding off of greedy borrowers. There is plenty of blame to spread around but just bailing out the banks without punishing the people at the top or giving the borrower a free ride is not right either.

              I think we need to go back to some sort of sensible regulation of the banking industry and junk the new bankruptcy law while we are at it.  

              •  I agree (3+ / 0-)
                Recommended by:
                Dauphin, jjellin, twinpeaks

                I am interested in returning our housing market to a more stable footing even if that means some homeowners get help that they don't really deserve (if the overall impact is better for America).

                Love that "power of the purse!" It looks so nice up there on the mantle (and not the table) next to the "subpoena power."

                by Sacramento Dem on Fri Mar 07, 2008 at 09:37:35 AM PST

                [ Parent ]

                •  There is no way to save the housing market (5+ / 0-)
                  Recommended by:
                  Detlef, Dauphin, Cliss, ilex, twinpeaks

                  without massive inflation.

                  Housing got overpriced in relation to gold, oil, food, clothes and everything else.

                  So if the fed inflates to keep housing at their overblown values, the price of everything else will skyrocket.  

                  •  I agree with Sacramento Dem on this (2+ / 0-)
                    Recommended by:
                    Dauphin, RevenantX

                    not to keep prices inflated but to do something to prevent total meltdown, which would be an extreme in the opposite direction (an anti-bubble?).  These things tend to over-correct, and since this is going to affect and is already affecting a lot of people--too many, we should encourage the govt to do something to prevent catastrophe.  I don't give a crap about the sleazy mortgage companies, nor do I care much about those involved in the flimflam of the packaging and rating operations, but I do not want to see their greed bring the country down.  And I think this is a real danger right now.  I'd like to see those who aided and abetted this travesty pay one way or another, but it may be that the best way they can pay is by giving a couple years worth of free community service since they clearly have enough to live on in the meantime.   As for the speculators who get out of this scot free, let the karma get them.

    •  Deficits (0+ / 0-)

      do not cause inflation.

    •  no bailouts needed (4+ / 0-)

      We don't need a bailout. People will lose their homes, and they will go rent. Banks will be stuck with underwater homes and lose money - which they deserve to. They've been soaking up massive profits writing subprimes, now it's time to pay the piper.

      Our government's goal should only be to make sure that banks that were wise enough to NOT drown themselves in the subprime bathtub have sufficient liquidity that they can make legitimate loans, so all the bankrupting doesn't stop the legitimate flow of credit.

      In the end, there's plenty of money out there. People will buy up the houses and start renting them, around the time they believe they've hit bottom. My area (SLC) is, afaik, one of the least inflated since it was late to the boom and still fairly balanced in terms of cost vs income, but I'd consider investing in a rental if prices came down to where rent was a reasonably attractive investment. (Annual rent tends to range between 5 and 10%, and at the top end, that's a pretty attractive investment when you're buying an asset like a house)

  •  Over that same peak (6+ / 0-)

    Well suggests our house's theoretical value dropped 8% since July.

    But officially home values are up 1.5% in that time where I am.

    Funny, how the government doesn't get it right and leaves itself so much room to be wrong.

    Lynch mob partipants volunteered, too.

    by cskendrick on Fri Mar 07, 2008 at 04:18:25 AM PST

    •  Explanation for discrepancy (4+ / 0-)

      I'm seeing that too in my parts.  It's easily explained.  There are less houses being sold than the prior year but the houses at the high end are still selling.  If you're doing an average which I avoid, the numbers skew upward.  The thing is, since there are fewer homes, even the median is skewing upward.  That's why you still get modest price increases or minimal decreases.  If you break it down by price grouping, you get an entirely different picture.  Homes at the lower ends and in the middle are dropping fast in price.

      •  Yes, but this is why you don't get a 50% decline (0+ / 0-)

        Most people who are underwater on their home and who are able to make their payments will just stay in it.  Once all the subprime ARMs and similar loans blow up, prices will stabilize because most people will just not sell if they are underwater.  

        Don't like XOM and OPEC? What have YOU done to reduce your oil consumption? Hot air does NOT constitute a renewable resource!

        by Asak on Fri Mar 07, 2008 at 05:33:24 AM PST

        [ Parent ]

        •  Alt A's are in danger (3+ / 0-)
          Recommended by:
          Cambridgemac, StrayCat, Cliss

          Mortgage Broker from California stated he was selling 95% mortgages classified as Alt A's on homes over one million. Since the owner only put down 5% then they will walk away when they are due to refi which most of them will be between now and 2011. If the values only fell 10% on a 1 million dollar home, the owner would still have to come up with 100,000 plus whatever additional downpayment is needed since the 5% down Alt A Jumbos will no longer be given plus the people who could afford the payments originally on the Jumbos may no longer be or feel secure enough financially to afford it.

          This is going dowhill for the next 4-8 years before there is a bottom. The same people in government, banking and the financial sectors we are asking for solutions, are part of the problem so whatever solution they may come up with short term may not work and certainly will never work long term.

        •  Maybe (6+ / 0-)

          But if someone who can make their payments sees the value drop 25-30% as it already has in certain parts, whose is to say they'll be willing to wait it out until the value gets back to where it was?  Even at a robust 5% increase per year, you're looking at 5-6 years of waiting it out before you can sell and make anything on the sale.  

          Also, alot of the buyers in the last few years were investors and people buying second homes.  What incentive will they have to keep paying on a house they might live in for a few months out of the year, if at all?  

          Something similar happened in the 80's and the result was alot of people DID walk away, rented and the banks got stuck with homes that they then sold for pennies on the dollar.  Many of these homes took ten years before the price rose to what it was prior to the collapse.  

          The point is, even if say 1% of homeowners do walk away it adds to the inventory and increases downward pressure on prices, basically exacerbating the problem.  Supply is already high and pressure is already there.  The last thing we need is to make it worse.

        •  Unless they don't have a choice (3+ / 0-)
          Recommended by:
          qwerty, mataliandy, StrayCat

          and some people don't.

          My daughter and her husband live in WV. They bought a house when they moved there. However, he's AF, teaching ROTC, and when his assignment is up they will be re-assigned.

          They don't have a choice - when he gets orders, they have to move. The only choice will be whether they sell the house or rent it out, and whether they buy again. The only other option would be for her to stay and him to move, and that's not really an option.

          There are plenty of people like that. Just because you live where you live doesn't mean you will (or can) stay there forever.

    •  I would not put much faith in zillow (1+ / 0-)
      Recommended by:

      just saying....

  •  It's just common sense! (5+ / 0-)
    Recommended by:
    corvo, Mz Kleen, greenearth, StrayCat, Cliss

    The housing market is running out of customers.

    Tired of white haired, old white men ruining the world. (Bald ones too!)

    by Stop Pandering on Fri Mar 07, 2008 at 04:21:19 AM PST

    •  Pillaged By Speculation (2+ / 0-)

      Pure capitalistic greed at it's worst.  Speculation, cheap credit, and irrational human greed have destroyed the housing market.  One man's life necessity (e.g. housing) is nothing but another's fresh meat to exploit in a speculative Ponzi scheme.
      Looking at the chart showing the national home price index, the period between 1990 and 1997 probably is the most realistic when related to income growth during the same period.  Extrapolate that growth rate out to the future, and it's a no-brainer to see how far prices MUST fall to get the train back on the reality track.  During that period, there's going to be a lot of families who wanted nothing more than a humble roof over their heads who will be financially destroyed.  It's really sad that what was done to them was calculated, deliberate, and inevitable.

  •  You just know that there's tons of (11+ / 0-)

    offshore capital just waiting for things to bottom out before swooping in and buying up half the real estate at bargain basement prices. Not just so-called Sovereign Funds, but anywhere that the economy's strong and exchange rates are favorable. China, Russia, India and others will pretty much own half the country in a few years.

    Thanks, George and Alan.

    "No matter what people say, what people think, if you do what you think is right, you're serving your country." - Senator Jay Rockefeller (D-WV)

    by kovie on Fri Mar 07, 2008 at 04:21:27 AM PST

  •  So what's a Kossak to do? (4+ / 0-)
    Recommended by:
    larrybutch, 123frenchwine, Cliss, SciVo

    Somebody's gonna get a hurt.

    What strategies can ordinary people employ to avoid damage?

    What opportunities will come as a result of this?

    •  Encourage government policies that... (8+ / 0-)

      smooth out the business cycle for housing.

      Essentially the price declines are being caused, as is usually the case, by a mismatch of supply and demand.  A much larger than usual number of houses are coming on the market due to several factors, and a smaller than usual number of houses are being sought by buyers also due to a number of factors.

      To reduce the supply we can:

      --promote economic policy whereby the unemployment rate does not continue to grow;
      --promote policies, such as government-assisted mortgage modifications, which keep people in their homes so that involuntary home sales are reduced;
      --promote tax policies containing disincentives so that people are less eager to sell in order to realize the capital gains in their homes.

      To increase the demand we can:

      --promote monetary policy that keeps mortgage interest rates low:
      --promote economic policies that increase overall employment;
      --promote incentives for first-time homebuyers (rather than just having increased demand coming from wealthy second-home purchasers).

      •  This sort of meddling is what caused the bubble (9+ / 0-)

        Keeping interest rates low to make mortgages affordable is just going to make it so the problems take longer to work out.  Low interest rates actually are not a positive for a home buyer.  

        The amount people can pay per month is fairly constant, so you end up with a house costing $200,000 at 10% interest, or $400,000 at 5%.  If you pay monthly it's the same, but if you make extra payments, you are in a worse position if you're buying at the low interest rate.  Also, the value of the house is larger compared to the individual's salary, which makes it harder to pay it off and makes it a larger liability if the price declines or the person loses their job.  

        The low interest rates have really helped no one out, it's just distorted the market and blew a bubble.  

        Don't like XOM and OPEC? What have YOU done to reduce your oil consumption? Hot air does NOT constitute a renewable resource!

        by Asak on Fri Mar 07, 2008 at 05:36:46 AM PST

        [ Parent ]

      •  I'd love to see (0+ / 0-)

        Something like habitat for humanity, but in the form of "rehab for humanity" in places like Cleveland. There are entire neighborhoods of well-built turn-of-the-century houses (crasftsman bungalows, Sears kit houses, etc.) that could easily be rehabbed into beautiful homes for retirees. With hundreds of homes  costing $3k - $4k each, it should be possible to buy an entire neighborhood, rehab it, replace a couple of the homes with a small park and a couple of small businesses to suply necessities (essentially creating a village).

        Beware the everyday brutality of the averted gaze.

        by mataliandy on Fri Mar 07, 2008 at 08:06:20 PM PST

        [ Parent ]

    •  Elect Democrats (8+ / 0-)

      The middle class is getting squeezed all around.  With Dems in office in overwhelming numbers we could get

      -universal healthcare or some form of healthcare which will lower costs
      -wage increases and more job protection
      -stronger unions which will also help in job protection and benefits
      -new jobs in new technologies which will help the middle class
      -more tax breaks, grants, and so on which will help the middle class financially and not the rich who don't need it.
      -More affordable college education which will lead to better jobs for middle class children
      -better benefits for vets, not to mention an end to the war which has taken away the primary breadwinner in many families
      -more regulation so greedy lenders can't do this again.
      -bankruptcy protection reform which isn't skewed towards protecting the banks.

      I'm sure there is alot more.  Many of the things won't help in the current crisis.  Others like healthcare and higher wages will be felt immediately.  

      That's the bottom line.  Republicans helped create this mess with their policies.  You want to help end it and prevent future messes, vote for not only Democrats but better ones.

      •  Unfortunately.... (6+ / 0-)

        My dreams of universal healtcare have gone out the window. As recently as six months ago even I thought it may happen but not anymore.

        Sure...a Democratic president may manage to pass some mandated, everybody has to purhase a policy from an insurance company crap ass plan and slap a universal healthcare label but it won't be the single payer system which is what we need.

        The cold hard reality is that, unless we make revolutionary changes in our budget this country is not going to have the money to implement any type of true unversal health care. It has been pissed away by the rightwing and the coming wealth destruction is going to hit government finances hard.

        Now, there is a way to get universal healtcare but it would require us to move to Canada...or beyond.

        "I am on nobody's side because nobody is on my side" -Treebeard

        by waf8868 on Fri Mar 07, 2008 at 05:50:36 AM PST

        [ Parent ]

        •  The president doesn't write legislation (7+ / 0-)

          he/she only approves it or rejects it.  No doubt the president can push towards a certain direction but congress is ultimately who decides.  That's why even though I think Obama's health plan is crap, I have some faith something will get done if he's elected with strong Dem support.

          It won't happen overnight but with a 80-90+ seat majority in the house (say 260-175) that will overcome plenty of Blue Dogs and DLC Dems objections as well as repubs opposition.  A 16-20 seat majority in the senate (say 59-41) won't hurt either.  

          The financing of it will be the real kick.  It will cost money but it can be achieved incrementally and if done with incremental cost cutting and new revenue elsewhere the hit won't be felt.  Bringing the troops home from Iraq alone will save a ton of money.  Fixing the Medicare prescription drug plan so the gov't can negotiate prices and so on will save a bit.  Every penny adds up in the end.

          The bottom line is that the repubs have cut too much into the fat with the tax cuts.  Taxes will have to go up without a doubt.  However, they can be done in a way that doesn't affect the average person.  If the Kardashian girls or Paris Hilton don't get as big an estate when mommy and daddy die I really don't think anyone will give a flying fuck outside of the dozen or so who watch their crappy reality TV shows.  If the cap is raised on income on which you have to pay your social security tax, I doubt many people will even notice considering not many people have over $90,000 in annual income.  The ones who do can well afford the extra pennies they'll be paying out, and Social Security will be secure for another 75 years.

          Bottom line is it won't be easy even with good Dems but with repubs in office it will be impossible.    

        •  Both of our "Democratic" candidates (3+ / 0-)
          Recommended by:
          jakbeau, waf8868, StrayCat

          want to increase the size and cost of the military, and their healthcare plans are -- to put it reeeeeealllly charitably, weak tea.

        •  Eh, we never really had the money anyway... (3+ / 0-)
          Recommended by:
          waf8868, ilex, SciVo

          ...we just had easy access to debt.

          But yeah, universal health care is pretty much dead.  Same with tax breaks, although McCain seems somewhat in denial.

    •  Re (7+ / 0-)

      What strategies can ordinary people employ to avoid damage?

      Rent unless there's a compelling reason to buy. Certainly if you're already renting, you should hold off maybe a couple of years before buying.

      Friends of mine bought a house in July (with 5% down, and they raided their 401Ks for that!). Zillow suggests that their house price has fallen $25k since they bought it. If they had just waited six months and bought then, they could have paid for a year of their future kids' college education with the difference.

      Also, stay the hell out of debt, especially credit card debt. If you can't pay cash for it, don't buy it.

  •  The cream always rises to the top (3+ / 1-)
    Recommended by:
    fladem, ManhattanMan, Break On Through
    Hidden by:
    Sorry to be an optimist, this thread is all sky is falling, all the time.  
    Better bond insurers will be writing and grabbing market share like they only hoped to 2 years ago.

    Better builders always do better.

    Better banks do better.

    Households with lower debt obligations will do better.

    Now is the best time in a long time to buy property/house,  will it get better? depends on where you're at, in the country and in your life.

    The cream will rise to the top in all of this.

    Home prices while on the way down over most of the country will not go down over all of the country.  The recent actions to raise the minimums for FHA & fanny & Freddie will soften the blow dramatically.  I would not  expect the prices to drop terribly further, In the Chicago markets we're down about 20% I don't see that going down more than another 5%, and only on crappier housing stock.

    Interest rates are great,  the higher loan ceilings will help move up buyers which will help move in buyers.  
    For the record I see this action as having a greater impact on first time buyers than you might imagine.  As move up buyers are able to buy at better prices and at better rates, the shock of making less on their homes will allow move-up sales to proceed.

    Should the mortgage industry be hung from it's toenails, you bet as well as every banker, broker, agent, inspector,appraiser that contributed to this meltdown is hung up besides them as well.  For the most part it's just the banks, and certain mortgage cos, and that is a shame.

    The cream always rises to the top,

    A perfection of means, and confusion of aims, seems to be our main problem.- Albert Einstein

    by bldr on Fri Mar 07, 2008 at 04:26:56 AM PST

    •  Psst... shit floats, too. n/t (21+ / 0-)

      Omne malum nascens facile opprimitur, inveteratum fit plerumque robustius. - Cicero

      by Dauphin on Fri Mar 07, 2008 at 04:35:36 AM PST

      [ Parent ]

    •  I want to smoke what you had for breakfast n/t (4+ / 0-)
      Recommended by:
      donailin, corvo, Dauphin, nathguy

      -7.75, -7.64 "When the intellectual history of this era is finally written, it will scarcely be believable." -- Noam Chomsky

      by scorponic on Fri Mar 07, 2008 at 04:37:14 AM PST

      [ Parent ]

      •  click the link (0+ / 0-)

        Bond insurer crisis: A golden goose egg
        Firms like FSA, Assured Guaranty are scooping up business at a time of trouble for major players in the industry. -
        link to optimism

        A perfection of means, and confusion of aims, seems to be our main problem.- Albert Einstein

        by bldr on Fri Mar 07, 2008 at 05:00:57 AM PST

        [ Parent ]

        •  Some people got rich during the Depression (9+ / 0-)

          So what?  The point is, what is happening, and what is yet to happen, are going to be a disaster for the wider economy and the average person. I'm truly ecstatic that there are some who are poised, by virtue of their wealth and savvy, to take advantage of a bad situation, but those outliers aren't cause for optimism, anymore than we should celebrate the fact that an epidemic's consequences are happy news for the mortuary industry.  

          -7.75, -7.64 "When the intellectual history of this era is finally written, it will scarcely be believable." -- Noam Chomsky

          by scorponic on Fri Mar 07, 2008 at 05:57:51 AM PST

          [ Parent ]

          •  This diary is as good an indicator as any (0+ / 0-)

            that it is a good time to buy, if you are a renter. Prices and interest rates are down.  Buy close in to a well-run city, passing up the builder subdivisions.  If you bought high, then you aren't liking it much.  If you want to wait, there's probably no great rush, other than not starting to build your net worth, pouring money down the drain each month enriching your landlord.  You will eventually get equity, you know, and pride of ownership.  

            •  It's a great time to buy if you're a renter (4+ / 0-)

              and if you trust your crystal ball when it tells you that you'll still have a job two or five years hence.

              Not the best assumption under the circumstances.

              •  I don't expect my comment to do well, (1+ / 0-)
                Recommended by:
                Break On Through

                given the delight in disaster prevalent in this thread.  I am speaking to those of you with faith in your own abilities to make money by whatever means necessary, who are able to recognize an opportunity to buy low, which is the key to any successful investment.  The fearful will most likely rent til they die, thus depriving themselves of a huge amount of "forced savings" over a 15 or 30 year span, not to mention their children of the inheritance they deserve for putting up with them during their lifetimes :^)

                •  And how do you know (4+ / 0-)

                  that you'd be "buying low" now?  What if prices collapse another 20-40%, dragging the economy down with them?

                  •  House prices are still way above their... (4+ / 0-)
                    Recommended by:
                    Sparhawk, corvo, ilex, RevenantX

                    ...long term norm as a multiple of income.

                    True, this year is probably better than the last 3 years as a time to buy, but....


                    "When the going gets tough, the tough get 'too big to fail'."

                    by New Deal democrat on Fri Mar 07, 2008 at 07:03:20 AM PST

                    [ Parent ]

                    •  I'm just happy (4+ / 0-)

                      that my house is more than half paid off, and that if I  broke a couple of real and virtual piggy banks, I could pay off the mortgage balance (even my partner's half).

                      This makes me no less alarmed for the precarious situation that millions of other Americans are in, and no more smug about my ability to feed myself in the event of a serious crash.  Even if your house is paid for, once you're out of work, making the property tax payments can become a challenge . . .

                  •  Housing always goes up longterm. (1+ / 0-)
                    Recommended by:

                    Always.  I wouldn't blame anyone for staying on the sidelines, given the wall of worry out there, but renting sucks.  Owning your own home is just way better, even if you didn't quite buy at the absolute bottom and your payment is higher than the market for a few years.   Interest rates can't get much lower, and of course cheap money is part of a good investment strategy.  A tip: go for the 15 year fixed at five and change, it will save you 100k in interest on a starter home and get your payment to 50% principle after a mere five years or so.  

                    •  Strange, that's exactly what we've done. (1+ / 0-)
                      Recommended by:

                      15-year mortgage in 2003; some extra principal payments, and the house is now 51% ours.

                      Curiously, mortgage interest rates are no lower now than they were in 2003!

                      •  I think that is very significant (3+ / 0-)
                        Recommended by:
                        side pocket, corvo, ilex

                        Ever since 1981 and Reaganomics, the middle class has only been able to increase/sustain their spending when they have been able to refinance at lower rates.  We haven't seen lower rates in almost 6 years.  Iirc, the last time it was that long was ~1991 with that consumer led recession.

                        Flow of funds came out yesterday. I'm looking for household debt %age if anyone knows how to read that better than I do.


                        "When the going gets tough, the tough get 'too big to fail'."

                        by New Deal democrat on Fri Mar 07, 2008 at 07:33:25 AM PST

                        [ Parent ]

                    •  The "long term" might be longer than u can afford (5+ / 0-)

                      Iirc, the California bubble of the late 1980s took 5 years to inflate and 5 more years to deflate.

                      If you ran out of funds, or had to take a job transfer during that time, the "long term" trend of real estate didn't help.

                      This time around, housing inflation started in 1995 when residences got more favored tax treatment.  10 years on the way up ....

                      Just supposing, hypothetically, that means 10 years on the way down, how many people can ride that out without having to move and take a loss due to increased family size/job more/retirement?


                      "When the going gets tough, the tough get 'too big to fail'."

                      by New Deal democrat on Fri Mar 07, 2008 at 07:30:06 AM PST

                      [ Parent ]

                    •  strongly disagree (10+ / 0-)

                      Take a tour of Detroit, or Gary, Ind., and tell me about how housing always goes up.  That's another myth foisted on us by shameful salespeople thinking only of their commissions and fees.  Median housing prices in the long-term are related to median incomes.  They went up when this country got richer, and they will fall as this country becomes poorer.

                      And despite the efforts made here to portray it as socially unacceptable, renting doesn't suck.  It the places where I grew up overseas, almost everyone, my family included, rented quite happily.  Anyone thinking of buying right now should try to buy some perspective instead.

                    •  As the population increases, the pressure on the (0+ / 0-)

                      value of land rises.  I have been encouraging my kids to look for a land purchase, quit buying stupid stuff like 37" TVs, save their money and wait for a few years to build.

                      The new houses that some of these builders have put up will be lucky if they are still standing by the time the mortgage is paid off.

                    •  Housing goes up less than 1% per year (3+ / 0-)
                      Recommended by:
                      Cliss, ilex, Break On Through

                      On average, over many years, housing goes up nationally only 0.4% annually (for the period 1950 - 2004), corrected for inflation, according to economist Robert Schiller. (This accounts for difference in square footage, etc.)

                      Because the house is often the only long term investment made by a family, they're very impressed by the rise in its price. However, if they took their money and invested it in stocks, bonds, etc., they'd be even more impressed with the rise in value, and their investment would be very liquid and would have less cost associated with buying and selling.

                      And the growth of population does not ensure that all areas will have housing squeezes. In a few areas, that's true, but in most areas, with the increase in gas costs and with other issues, the nation-wide population increase is irrelevant.

                      Some areas, of course, will have higher returns; some will have lower. But claiming that housing is the "best" investment or that prices "only go up" or that a particular area is going to be hot because "they're making no more land and the population is growing" make no sense.

                      Housing prices are now far above where they should be, according to the 1950-2004 trends; it's probable that they'll continue to fall until they're at least back to the trend line.

                      Besides, if a house isn't affordable without all sorts of financial gimmicks and liar loans, and if wages don't increase, and if there aren't suddenly more than two major wage-earners per household, who is going to buy it from you? No one will have the money, and the market will collapse except in a few very small areas (e.g., Manhattan, San Francisco) where the ultra-rich want to have an apartment.

                •  Ha (4+ / 0-)

                  My gf and I rent a condo for ~$1600/mo that would cost me ~$2700/mo to buy. Hmm, pretend to have a home payment of $2700/mo and make $1100/mo equity, or actually pay $2700/mo and make $300/mo equity.

                  This doesn't even take into account prices that are going to fall the next couple of years, which would make my actual equity from such a purchase negative, perhaps very negative. Not buying at the "absolute bottom" is one thing, but prices are likely going to fall another 20% or so, financially ruining people who buy. 20% of a $400k condo is $80k, meaning I can buy now, or I can more or less put my kids through college for free later. Hmm.

                  Not to mention this "buy when interest rates are low" claptrap. Since people can only make a certain payment level per month that banks know very well how to calculate, rising interest rates just tend to suppress real estate values to keep the total payment constant. You can always refinance your mortgage when rates fall again, but good luck "refinancing" your principal!

                  •  Condos are an underperforming investment. (1+ / 0-)
                    Recommended by:

                    Let's say you bought a house for 200k.  A 200k house rents for about $1200 a month.  About the same as your monthly would be to own.  I'm sure your landlord appreciates your contribution to his overall wealth, though.

                  •  Gross vs. Net (0+ / 0-)
                    That $2700 payment is mostly deductable. As simplifying assumptions, let's say that your marginal (federal + state) income tax rate is 1/3, and that $300 of the payment is for non-deductable items (principal, condo fees & insurance). Thus, the net payment would be:

                    $2700 - $2400/3 = $1700

                    That's a much closer call.

                    •  Not that much closer (0+ / 0-)

                      First of all, we all get a $9500 deduction just for breathing, plus I get to deduct half my rent off my Mass state taxes.

                      A $400k mortgage implies paying $24k in interest at 6% per year (note that I can live in a condo that sells for $400k for $19.2k/year right now!). This is before other condo fees, maintenance, principal on the loan, what have you.

                      That $24k is deductible to only $14.5k (because I elected not to use my standard $9.5k deduction that I get for free), so the mortgage deduction is only worth $4.8k/year to a buyer (assuming you're in a marginal 33% tax bracket, which I am not, which just makes the "buy" math even worse). Not to mention Mass's rent deduction, which is another ~$0.3k year, meaning that the interest deduction is truly only worth $4500/year, or $375/month.

                      So, I pay $2700/month for a condo to start. Interest is $2000/month. Fees and other non-value-add are $300-$400/month, leaving me with $300/mo for principal and another $375/mo due to the mortgage tax credit, leaving me with $675/mo of equity build up (assuming prices stay flat and no other unexpected expenditures come up, which they will).

                      But I save $1.1k/mo right now, and the added advantage which I think has some monetary value-add is that this money is totally liquid. So at the end of year 1, I can have something like $13.2k in my totally liquid, interest bearing bank account, or I can have $8.1k tied up in more or less completely inaccessible home equity. (This entire analysis assumes flat prices).

                      So, sure, the mortgage interest credit turns buying in the current market from a horribly, suicidally bad idea into a merely very bad idea, but the math is still horrible.

              •  Crystal Balls (4+ / 0-)
                Recommended by:
                Sparhawk, JuliaAnn, basquebob, Cliss
                All real estate/mortgage decisions are based on assumptions about the future. That's the problem now--both borrowers and lenders used assumptions that turned out to be spectacularly wrong.
            •  Not if LTV is >70% (2+ / 0-)
              Recommended by:
              Sparhawk, sd4david

              Buying is another form of renting -- you're renting money from the bank to live in a house.  The cost of renting is still way below owning these days, so it makes no sense to "buy now," especially when prices are expected to drop substantially over the next few years.  The best analyses I've seen suggest the drop in prices won't reverse until 2012.  A prudent buyer will watch housing data (local and national) closely to find the right time to buy -- at or near the bottom.  We ain't there yet by a long-shot.

              -7.75, -7.64 "When the intellectual history of this era is finally written, it will scarcely be believable." -- Noam Chomsky

              by scorponic on Fri Mar 07, 2008 at 06:39:49 AM PST

              [ Parent ]

              •  Your "best analysis" (0+ / 0-)

                Can predict all the way out to 2012?  Who is that?

                •  Here's one (5+ / 0-)

                  Mish on when to expect a bottom.

                  There are others by academic economists, etc., which assume a very orderly price correction over the next 2-4 years as prices reset to historical average.  The bottom could come sooner if the assumption of slow declines in price turn out not to be true, which I expect to be the case.  But that means the bottom will be very low, indeed, and an upward correction will be necessary before prices return to historical average.  Either way, this is not the time to buy, either because the bottom is a long way off, or closer but much deeper.

                  -7.75, -7.64 "When the intellectual history of this era is finally written, it will scarcely be believable." -- Noam Chomsky

                  by scorponic on Fri Mar 07, 2008 at 07:21:45 AM PST

                  [ Parent ]

                  •  Are there the same economists (1+ / 0-)
                    Recommended by:

                    who have been making predictions over the last several hundred years and getting it consistently wrong?  Not that I'm expecting an upturn all that soon either, my investment money is firmly on the sidelines until I get some good news.  
                    But buying a home is different.  It is not much cheaper to rent than to buy at all, when you factor in dead low interest rates and the tax deduction.  

                    •  No (2+ / 0-)
                      Recommended by:
                      Sparhawk, Knut Wicksell

                      They're the contrarians who have been poo-poo'ing the establishment economists who claimed "it was different this time" and tried to construct elaborate but fallacious arguments showing why the fundamentals supported insane, bubble-driven price increases.  They're out there if you look.

                      As for the price of renting vs. buying, one of the fundamentals that was askew during the last 5-6 years of insane price inflation was the huge and growing difference between renting and owning.  If you're in a house you've owned for a while, then it is cheaper to own, no doubt about it.  But if you're buying now or in the next two years, at least, then it's not.  That simple.  And if you buy now and your house loses substantial value, which is very likely, you've just made the stupidest financial decision of your life.  You could have rented instead and built up savings and other assets instead of throwing them away to a bank, throwing away less money to a landlord, instead.

                      Home ownership is great, I agree, but there's no need to get so romantic about it that one makes stupid financial choices that can have subtantial long-term consequences.  

                      -7.75, -7.64 "When the intellectual history of this era is finally written, it will scarcely be believable." -- Noam Chomsky

                      by scorponic on Fri Mar 07, 2008 at 07:40:20 AM PST

                      [ Parent ]

                      •  Show me a single renter who is able (0+ / 0-)

                        to save a dime.  You have got to be kidding.  A $150,000 mortgage will cost about the same monthly as a rent payment on the same house, hence the slightly positive cash flow on a well-purchased rental, please look it up. Those of you who want to keep renting, by all means keep it up, we owners need the income and the equity accrual and the writeoff.

                        •  Wow (2+ / 0-)
                          Recommended by:
                          Sparhawk, Break On Through

                          How exactly do you think people did it in the old days (by which I mean, until 10 years ago)?

                          People in their 20s rented and saved up for the downpayment on their first house, that they bought at ~age 30.


                          "When the going gets tough, the tough get 'too big to fail'."

                          by New Deal democrat on Fri Mar 07, 2008 at 08:16:33 AM PST

                          [ Parent ]

                          •  99% of them are buying 46" LCD TVs (0+ / 0-)

                            and spending $550 or more a month on a 72 month car payment, or trying to support two or three kids.  A riend of mine is 37, drives a Ranger pickup, owns his home and just bought his sixth rental for 165k at the auction, which will rent for over $1000 a month.  His net worth is over half a million, heading higher by the year. Rent or buy, the choice is up to the individual.

                          •  We all know... (0+ / 0-)

                            ...homeowners don't buy a house more expensive than they can afford, choose mortgages that include escalating interest rates, making the home even less affordable, and, when they had equity, use it as an ATM to buy flat-screens, jet skis and Hummers.  Homeowners are so much more financially responsible than renters, so we know that doesn't happen.  Ever.  And we know there are no homeowners that, having made these brilliantly prudent choices, are now walking away from their homes, which are worth less than their mortgages, sending the keys to the bank and, gasp, renting, because it's vastly more affordable.

                            -7.75, -7.64 "When the intellectual history of this era is finally written, it will scarcely be believable." -- Noam Chomsky

                            by scorponic on Sat Mar 08, 2008 at 01:09:14 AM PST

                            [ Parent ]

                          •  No they didn't (1+ / 0-)
                            Recommended by:
                            Brooke In Seattle

                            they didn't save the down payment. Often, their parents gave it to them, or they qualified for a VA or FHA mortgage that didn't require a lot of up front money.

                            I can't think of anybody our age (50s) who bought a house >10 yrs ago (which would have put them in their 30s/40s for first house) who had a substantial down payment.

                          •  And wouldn't it be nice to tap (1+ / 0-)
                            Recommended by:

                            some of your equity to be able to help YOUR kid buy her first house?  Does anyone think wages are going to go up for this generation so that they're able to save a down payment while paying $1200 a month on rent?   "Sorry, dear, I rented for thirty years and can't lend you any money."  My daughter will help herself to approximately a million at today's dollars upon my demise, mostly because I bought in the path of progress (Portland) twenty years ago.  If I have to go to an ALF, that will be cut back by 4 or 5 thousand a month, but there'll be plenty left after that.

                          •  We must have moved in different circles (0+ / 0-)

                            Everybody I knew scrimped and saved for a downpayment.  Ultimately they may have had some help from mom and dad, but nobody I knew was living high on credit.  Far from it!

                            I guess my old fogie status has just been confirmed.


                            "When the going gets tough, the tough get 'too big to fail'."

                            by New Deal democrat on Fri Mar 07, 2008 at 09:59:24 AM PST

                            [ Parent ]

                        •  150K (7+ / 0-)

                          Where are you living?  I live in SF.  The MEDIAN price on housing in SF was $730K the last time I looked.


                          I'm single.  How can I possibly afford that?  5 years ago I chased after a house here.  I visited 60-70 properties.  Placed bids on 3 properties and was overbid on every property by 150K.

                          I already make a six figure income for which I'm grateful.  But I am locked out of property here.

                          But thing is, I have a good job and live in a marvelous city.  I also rent an apartment that is rent stabilized at $1350/mo.

                          I save an enormous amount of money this way.  Had I won any of those bids back in 2003 -- that were all around $500k, I'd be absolutely broke and would likely have already lost my shirt, ruined my credit, and been screwed for at least 7 years trying to recover.

                          730K vs. 150K

                          If you tell me I should just move, I'm going to ask you to tell millions and millions of people the same  flippant and disrespectful thing.  And were that even possible, I'd enjoy you try to defend yourself from their very justified anger.

                          Been wiretapped lately?

                          by m00nchild on Fri Mar 07, 2008 at 09:18:26 AM PST

                          [ Parent ]

                          •  You have made the decision that (0+ / 0-)

                            Being in SF is more important than building your net worth, and I can respect that, it's a great town.  Here in Portland, also a great town, a 2 br 1 bath is available close to downtown for 165k or so.  With a bit of fixup  it would be worth another 20k.  And rent for $1000 a month.

                          •  What's the unemployment rate (0+ / 0-)

                            in Portland?

                            Something like 9%?

                          •  yep, that's about right (0+ / 0-)

                            Housing prices in PDX have gone through the roof to the point that renting is half the price of a mortgage payment.
                            The house we bought in NE for $35K in 1991 is worth god knows what now. Over $200,000 for sure. But to us it's just funny money, if we sold it, it wouldn't buy a slum hovel in the UK--which is what is was when we bought it so that would really suck. We don't have any other assets except my pension (almost 10 years so far, with me buying extra years) and never will, so unless and until we can turn it into a house for us here, it stays a (cheap) rental. We've kept it cheap so we can rely on having our renters stay for years, managing a property from overseas is pretty much impossible otherwise. We could have maximised it by renting the bedrooms out individually to students, but then you get tenant churn and damage.

                            "America is the only country that went from barbarism to decadence without civilization in between." -- Oscar Wilde

                            by expatyank on Fri Mar 07, 2008 at 03:57:27 PM PST

                            [ Parent ]

                          •  Renting is much more than half a mortgage (0+ / 0-)

                            payment in Portland.  

                            Go here:

                            Then here:


                            and check the high value on any of those properties.

                            Then here:


                            to see what the monthly would be.

                            If you buy a foreclosure, you can get a 15 or 25 percent discount from that price in most cases.  
                            A friend of mine bought a rental that Zillowed at 199k just last week for 165.  Get creative, it will pay big.

                          •  You can always find a job here. (0+ / 0-)

                            It may not be the one you want, or the payscale you desire, but if you're not working, you don't want to work.

                        •  i'll show you.... me! (4+ / 0-)

                          I'm renting, and saving money every month.  Some renters do actually have some self control.  No TV, a cheap car, bicycle to work, and only paying $850/mo in Seattle for an apt for myself and my wife.  Just TRY to buy something in Seattle for $850/mo.  Ha!  So, I'm only a single point of anecdotal evidence, but you did say "show me a single renter who is able to save a dime."  Done!

                          •  The no TV would be the deal breaker for me (0+ / 0-)

                            LOL!  The problem as I see it is that saving for a down payment on a home in a growing area like the NW is like trying to catch the train after it leaves the station.  You may be in for a further price decrease there, but I would doubt it will be all that worth waiting for.  My prediction: SF prices in Seattle in ten years.  I put my $3500 down  payment on my Visa (the Bluesman was broke and new in town at the time,)lo these 20 years ago and saw the value of my investment increase more than tenfold over that time.

                          •  who needs tv, when you've got Kos! (0+ / 0-)

                            I understand your prediction of SF prices here in Seattle.  That wouldn't shock me, but my crystal ball sees a different path.  The economy here is still very much tied to Boeing- and I think Boeing will falter.  Losing the tanker deal is a preview of the future.  Oil will keep going up, way up, and air travel will decline.  As Boeing fades, the economy here will fade along with it.  I know there is a diverse tech community here, and I believe this is what has prevented a fall thus far- but it's underpinned by Boeing.  I've also put my money where my mouth is- I sold my house 4 months ago and chose to rent.  Only time will tell which of the two of us is right- just don't assume that real estate always goes up.  Only one thing always increases, and that's entropy.

                        •  That would depend on the market (0+ / 0-)

                          I own for about the same I could rent here but in addition to the rent I have to pay taxes and I am responsible for any upgrades or any problems that occur to my property. In the short run I could be saving by renting, in the long run I will own my property in a couple of years and the extra I have had to pay out instead of save averages out. That said, I had the money to put down on my purchase, got a fixed rate and I didn't allow lenders to convince me to overextend myself(they were wiling to finance us for more than we spent). Once bitten, twice shy.

                        •  You are being way too absolute (0+ / 0-)

                          I've been renting and saving for a decade and now have enough for a deposit on a fairly small house.

                          As to a $150,000 mortgage...  Good luck with that where I live.  You want to buy a condo then look to almost double that, buy a low end house then triple it.  And low end often means that the house will need major work like a new roof and quite possibly a new foundation and many thousands of work in termite control.

                          Some areas of the country are very, very different from the situation that you are talking about.

                          For example this blog entry charts how mortgage payments in Marin California have more than doubled compared to rents between 1998 and 2005.  (I don't actually live in Marin btw.)

                          I can't speak for anyone else but I'm certainly renting a much smaller place than I'm looking to buy which further distorts the rent vs mortgage calculation.

                          So it's fine that you're smug about your situation, just realize that it bears no resemblance to the world that a lot of young people are growing up in elsewhere in the country.

                    •  Re (0+ / 0-)

                      who have been making predictions over the last several hundred years and getting it consistently wrong?

                      Yes, economists are idiots, the entire science of economics ever since Adam Smith has been total BS. I'm sure you know much better about it than people who have Ph.Ds in the subject.

                      •  of all the fields that might fall on the appeal (0+ / 0-)

                        to credential, economics is the least worthy. unfortunately, as a "science" economics is dominated not by thoughtful inquiry, but by dogma founded in ordinary political bias.

                        all those Chicago School PhDs are just cardboard masks disguising what is an agenda founded, not on reason, but on various moral assumptions that the "doctors" brought with them.

                        I am further of the opinion that the President must be impeached and removed from office!

                        by UntimelyRippd on Fri Mar 07, 2008 at 08:33:53 AM PST

                        [ Parent ]

                  •  what is the balance point (0+ / 0-)

                    between home pricing and the median wage in a 'service based' economy devoid of manufacturing jobs?

                    Orwell meet George the 43rd

                    by FreeTradeIsYourEpitaph on Fri Mar 07, 2008 at 10:32:28 AM PST

                    [ Parent ]

    •  I agree... (1+ / 0-)
      Recommended by:
      Calamity Jean number that gets ignored is Rents.

      Rents haven't dropped that much.  Many houses are now in the range where they are good investments versus renting.

    •  Better bond insurers? (2+ / 0-)
      Recommended by:
      bigchin, nathguy

      They're all hurting now, and trying to stay in business without their sky falling.

      If the people lead, the leaders will follow.

      by Mz Kleen on Fri Mar 07, 2008 at 05:14:43 AM PST

      [ Parent ]

    •  Yes, but the cream is bad (1+ / 0-)
      Recommended by:

      We've learned that in recent years.

      People with hatred in their hearts never live up to their full potential. It's very sad.

      by Nelsons on Fri Mar 07, 2008 at 05:51:57 AM PST

      [ Parent ]

    •  Assets Will Rise to the Top (0+ / 0-)

      When all is said and done, the banks and creditors will be holding all these properties and someone with mucho wealth will be there to buy them at firesale prices.

      The game is timing the buys when the prices are at the bottom.  Then it's in their deepest interest to fan the same speculative fires back to life which produced this problem to begin with.

  •  I'm reminded... (0+ / 0-)

    every time I read a post like this, of how all money is really just based on the faith of it being stong.  And how the price of oil spikes when there is a bombing somewhere that has nothing to do with the production of oil.  It spikes based on FEAR and DOUBT.

    No, ignoring it won't go away.  But the last time I checked, doing nothing but continuously saying "This won't end soon." didn't help the dollar gain any buying power.

    Way to add to the spiral.

    "Every man is guilty of all the good he did not do." ~Voltaire

    by The BBQ Chicken Madness on Fri Mar 07, 2008 at 04:29:41 AM PST

    •  The price of oil is not just based on fear (7+ / 0-)

      Just keep telling yourself that, and we can go around being deluded that there is no problem.  Certainly fear can cause spikes in the price, but the reason oil is at $100 today is not only because of market manipulation.  There are serious supply constraints, plus the weakening dollar that can account for it.  

      We need to address our oil addiction.  Long term that is a much more serious issue than the current housing/subprime mess.  

      Don't like XOM and OPEC? What have YOU done to reduce your oil consumption? Hot air does NOT constitute a renewable resource!

      by Asak on Fri Mar 07, 2008 at 05:38:50 AM PST

      [ Parent ]

      •  A suggestion... (1+ / 0-)
        Recommended by:

        And how the price of oil spikes when there is a bombing somewhere that has nothing to do with the production of oil.  It spikes based on FEAR and DOUBT.  -me

        The price of oil is not just based on fear just keep telling yourself that... -you

        Certainly fear can cause spikes in the price... -you

        Don't take what I said, make a generalization (I never said it was the ONLY reason), attack me for it, then say the exact same thing I did.  It's bad form.

        "Every man is guilty of all the good he did not do." ~Voltaire

        by The BBQ Chicken Madness on Fri Mar 07, 2008 at 06:05:13 AM PST

        [ Parent ]

    •  the opinions are based on facts, sir.... (4+ / 0-)

      every item is supported by statistics that I hope haven't been doctored with by the gov't.  Would you like to offer a different opinion besides, someone will increase their market share as a result of the failure of other companies?

      The conversion of manufacturing economies to financial (i.e. paper pushing, paper profit) economies are typically the last step before the economy goes into decline.  See Kevin Phillips.

      Can anyone tell me what's "centrist" about using the Constitution to wipe your ass? - ActivistGuy

      by billlaurelMD on Fri Mar 07, 2008 at 05:54:25 AM PST

      [ Parent ]

      •  I'm not disagreeing with you. (0+ / 0-)

        I know where you're coming from, and as a home owner I am of course worried about our situation.

        I don't discount the facts that say things may in fact continue to get worse.  That doesn't help anything either.

        I'm just saying that market panic can make the situation worse, and at best doesn't make the situation any better.  Talking about it is not the same as panic...but seeing every story out there saying nothing but "we're doomed" is heading that direction.

        It wasn't an attack on your diary, just an observation of the overall coverage of the crisis that we are faced with.

        "Every man is guilty of all the good he did not do." ~Voltaire

        by The BBQ Chicken Madness on Fri Mar 07, 2008 at 06:08:49 AM PST

        [ Parent ]

  •  but we got the non - recession 'jobs' to pay (8+ / 0-)


    let me see, for every 23 year old outta MIT / CalTech making bank as an engineer / programmer,

    we got a handful of highly credentialed barely technically skilled shuffling paperwork sueing or analyzing or powerpointing or pontificating / manageing,

    and we got 8 handfulls doing the target / costco / lowes / walmart / home depot CAREER (ha ha ha) path,

    ooops! there are some non white collar highly skilled well paid jobs, BUT, the pontificators / managers fire them ASAP when things slow down so the pontificator / managers can keep their worthless asess employed.

    this supposed non recession has seen what in job growth that benefits more than MIT / Caltech 23 year old propellorheads?

    not freaking much.


    Yond Cassius has a lean and hungry look; He thinks too much: such men are dangerous

    by seabos84 on Fri Mar 07, 2008 at 04:36:30 AM PST

  •  why do you support terrorists? (17+ / 0-)

    Bringing up all this negativity ruins our beautiful minds. You must be an Al Kayda sympathizer to drag down the American consumer with all this fake "bad news". The economy is good. I mean, look at Texas. We got $106 oil and strippers in Houston getting $20 for a lap dance that cost $5 a year ago. C'mon. This economy is good for everybody that matters. Oilmen and strippers, but mostly Texans.

    Spoon or no spoon, you still have to fight Agent Smith.

    by indeterminate cutlery on Fri Mar 07, 2008 at 04:46:33 AM PST

  •  My city of 50,000 (4+ / 0-)
    Recommended by:
    xanthe, oortdust, corvo, lgcap

    has found itself with a shortfall of $550,000 seemingly overnight and it looks much worse over the course of the coming year. They are working like crazy to make cuts without laying off anybody.

    All my peeves are my pets.

    by yinn on Fri Mar 07, 2008 at 04:53:59 AM PST

    •  The streets in my suburb outside (3+ / 0-)
      Recommended by:
      oortdust, corvo, truong son traveler

      of Chicago are so dreadful and we frankly don't have the money to fix anything -- just patch and patch.  Now - even though our houses have gone down in value - in this county, Cook - I will bet you there will be no lessening in property taxes - matter of fact, Chicago just passed some tax propositions having to do with sale of houses and our sales taxes have gone up.  We must learn to live defensively.

      Democrats, Make it Work. You have until November to bring your electorate in.

      by xanthe on Fri Mar 07, 2008 at 05:32:51 AM PST

      [ Parent ]

  •  Lou Dobbs checking in (1+ / 0-)
    Recommended by:

    Check out the article that incorporates this video.

    Here is the link.

    Patriotism lies not in blind obedience to authority, but in the desire to search for the truth. - Ramman Kenoun

    by truong son traveler on Fri Mar 07, 2008 at 05:01:03 AM PST

  •  Boom! (2+ / 0-)
    Recommended by:
    xanthe, Nelsons

    Join Hillary in Texas & Ohio for the "Speeches from the Big Chair Tour"

    by soros on Fri Mar 07, 2008 at 05:02:20 AM PST

  •  Something to add (5+ / 0-)
    Recommended by:
    oortdust, corvo, borkitekt, Cliss, RevenantX

    I've seen it touched upon but I think another issue which will rear it's ugly head in a big way is these houses which are underwater.  Right now the number of people who owe more on a loan than the house is worth is not huge.  

    As prices drop, and judging so far by the first two months this year and the last four months last year (prior six months) they are dropping, more people will be upside down.  

    At some point as times get rougher, due to job losses, inflation, property tax increases so on and so forth, many more people will feel it is not worth it and walk away from their houses essentially throwing the keys at the bank and saying 'sayonara'.  

    There is already web sites promoting doing exactly that and simply waiting it out for 2-3 years for it to not have a serious impact on your credit.  

    The effect this will have on the market in terms of additional inventory and increase downward pressure on prices will be tremendous if it escalates, which I see no reason why it won't.  

    Basically this year can be written off and I fear next year as well as far as the housing market.  

    We have in many parts up to a year and maybe more in terms of inventory.  While building has slowed (new permits) alot of the projects that were in the pipeline are still going up.  The slowdown in housing construction won't likely be felt in some parts til the summer.  

    Foreclosures are increasing which adds to the inventory and the economy is getting worse which means more pressure on more people to sell and sell at a lower price.  

    Not to mention that the number of potential and capable buyers has shrunk immensely because of the worsening times,  higher interest rates and tightening of lending.

    In basic economic terms it means that the signs are all there for lower prices through the rest of this year into next year.  

    The worst part is it is a vicious cycle.  Downward pressure on prices, means more people will be upside down which could mean more inventory and so on and so forth.

    As Bonddad said, we ain't nowhere near the bottom.

    •  "2-3 years" (0+ / 0-)

      In the 1960s somebody wanted to get a mortgage on a house in Boston's South End.

      The bank officer didn't want to give a loan because the bank lost money in the neighborhood during the "Depression."

      The applicant said that was over thirty years ago.

      The banker responded the losses dated back to the depression of the 1870s.

      "Did any applicant walk away from any mortgage debt at any time?" will become a standard mortgage application question.

  •  Question for Bonddad... (3+ / 0-)
    Recommended by:
    oortdust, borkitekt, lgcap wife and I are renters who have been looking at this as a good time to think about becoming first-time homebuyers. Generally speaking, is this a good idea, or should we consider waiting until conditions in the market improve?

    I really don't know what to think about all of this in terms of my own situation.

    I support Obama because he will smite the Republican nominee hardest in November.

    by Devin on Fri Mar 07, 2008 at 05:22:47 AM PST

    •  Old market addage "never try to catch a falling (18+ / 0-)

      knife".  Wait until either prices stop falling or you are 100% sure you can afford to carry the mortgage no matter what comes up.

    •  Every crisis can be a buying opportunity (6+ / 0-)

      If you have a lot of money saved up for a down payment, and you have good credit to qualify for a loan then this could be a good opportunity for you to enter the market.  I suggest not trying to wait to find the bottom, because that can be very difficult.  

      If you are in a good financial position, it doesn't hurt to start looking now, but there is no reason to rush into anything.  Just take your time and see if you find anything you really like.  When you buy, as SilverOz suggested, be sure to be able to stay in the house regardless of what happens.  Don't stretch for a loan or overspend by any means.  

      Don't like XOM and OPEC? What have YOU done to reduce your oil consumption? Hot air does NOT constitute a renewable resource!

      by Asak on Fri Mar 07, 2008 at 05:42:12 AM PST

      [ Parent ]

    •  Thanks for the advice (0+ / 0-)

      I don't want to do anything careless, but I also don't want to not do something that might be a good idea out of paralysis. Having no experience as a homebuyer, it's tough to know what to do, especially in these kinds of conditions.

      I support Obama because he will smite the Republican nominee hardest in November.

      by Devin on Fri Mar 07, 2008 at 05:53:07 AM PST

      [ Parent ]

    •  When prices start going up (1+ / 0-)
      Recommended by:

      it might take some time, but you'll miss the dead bottom.

      Even then, buy only if you can afford a 20% down-payment, the mortgage, interest, insurance, 3% annual maintenance, several months savings, and you plan to stay in the property for an extended period. If you can check all those boxes, go to a calculator to determine if buying is a better investment in your area than tenancy.  

      Good luck.

    •  Wait it out. (4+ / 0-)
      Recommended by:
      Devin, Dave925, venatrix, Cliss

      Save your money, tuck it away in something secure, like your pillow.  Prices ain't done dropping and it is far better for you if you buy it after it hits bottom than before.  If you buy before  you still might get caught up in the downward spiral.  If you buy it on the way up, you won't lose much as it won't climb as fast as it's dropping right now.  

      The key is to save money.  The more money you have walking into a deal the more power you have.  Banks will look upon you more favorably and you will have more say with the seller if you can pay more cash and are assured of a loan (get pre-approved before you even start looking).  You can get a good deal this way.

      Also, if you're renting and are in a good place now with good landlords and good rent, you really don't have a need to go rushing into it right now.  Be a spectator not a speculator.

    •  Some guidance (1+ / 0-)
      Recommended by:

      Know your market.

      If you are going to buy, be aware of the current and historic price to rent (for one year) ratio in your metropolitan area. Fortune had a good article last June about it, their chart is quite informative. If the price/rent is traditionally 16 and it is 20 right now, the housing is overvalued by 25% at the moment. That does not mean that prices will drop 20%, but it does mean that a combination of rent increases and price decreases will eventually bring housing prices back in line with the traditional ratio.

      Yes, it is possible for prices to go below rent for a period, as well, but then it tends to come back up.

  •  Well, we have to have foreclosures to get prices (3+ / 0-)
    Recommended by:
    side pocket, oortdust, sd4david

    down.  Prices went up because too many Americans bought houses they could never really afford and thus the only way to knock prices down is to remove those people from the market.  In the short term this is brutal, but in the long term its for the best.  

    On a side note, Bonddad could you check my commodity diary out from yesterday and let me know what you think about my theory.

    link to diary

  •  The property tax issue.,, (4+ / 0-)
    Recommended by:
    fladem, mmacdDE, Carbide Bit, glaser

    is going to be a long term problem. Many public service employees, schoolteachers, firefighters, ect, paychecks are funded from local property taxes. If housing values continue to fall how are the local communities going to make up the shortfall. The state of Illinois has been borrowing from state employees pension funds for years, falling property values will exacerbate the future problems.

    CHRISTIAN, n. One who believes that the New Testament is a divinely inspired book admirably suited to the spiritual needs of his neighbor. A. Bierce

    by irate on Fri Mar 07, 2008 at 05:31:55 AM PST

    •  They won't fall - they will (2+ / 0-)
      Recommended by:
      irate, corvo

      remain high for taxing purposes - and taxing purposes only.

      Democrats, Make it Work. You have until November to bring your electorate in.

      by xanthe on Fri Mar 07, 2008 at 05:35:55 AM PST

      [ Parent ]

    •  Housing values don't directly affect prop taxes (3+ / 0-)
      Recommended by:
      corvo, SeekCa, RevenantX

      Your taxes won't go down just because your house is worth less.  Local governments still need to fund their operations and if they fund them with property taxes the property taxes will stay the same. Your property taxes may represent a higher percentage of your home's value now that it's worth less but your taxes won't be reduced.

      •  Property taxes (1+ / 0-)
        Recommended by:

        What will happen is that property tax valuations will fall, but the local districts will simply raise the tax rate to try and maintain the revenue stream.
        Here in Texas, that will lead to a massive amount of bitching carping and bleating, since property taxes are high here due to the lack of a state income tax. Strangely, many people that moan to me about property taxes fail to see (or do not want to see) the effect that no state income tax has on other forms of taxation. They simply revert to the "taxes as socialism" slogan.
        The reality is that a large part of the economics of modern America was built on the idea that property values continually rise, much like capitalism is built on the idea of continual growth in economic activity. Falls in property prices acutely stress the economic system. Personally I am eliminating all short-term debt and working to save ca$h. In a recession, cash is king.

        •  Cash may be King but King George has... (4+ / 0-)
          Recommended by:
          Detlef, ohcanada, Cliss, RevenantX

          converted to US dollar to the American peso.  

          King George W-nomics

          1. Loot the treasury, transfer the loot to corporations  of W-friends. Treasury gold is replaced by mountains of IOUs.
          1. Drive to value of the dollar down 35% during W's term of office. Gotta punish those damn savers.
          1. End term of office and move to Paraguay. Don't want to stick around the US as is pitifully crumbles under the weigh of W's accumulated debt.

          Anyone for a quick game of Chess.

          by CitizenOfEarth on Fri Mar 07, 2008 at 08:28:38 AM PST

          [ Parent ]

      •  Nope, that's wrong in California (3+ / 0-)
        Recommended by:
        MrJersey, LillithMc, RevenantX

        Property taxes can move more quickly down than they can move up.

        You can appeal the valuation of your home to get the assessment reduced to market value - which can make a significant difference if you've bought recently.

        But proposition 13 limits annual increases to 2% per year.

        Also, it's very, very difficult to raise taxes, requires a 2/3 vote.

        To top it off, all that property tax money goes straight to Sacramento and they decide how much of it to send back.

        The overall effect is that California goes to hell whenever home prices fall, and there's a delayed recovery to property tax revenues after a housing shock.

        And you wonder why we have a $10 billion structural deficit.  What a fucked up state.

        We're pro-choice on everything! - Libertarian slogan

        by CA Libertarian on Fri Mar 07, 2008 at 08:25:10 AM PST

        [ Parent ]

    •  What you will get (1+ / 0-)
      Recommended by:
      New Deal democrat

      is a property tax revolt, a la Prop 13 in California.

      We are having one in Florida - with what I think will be disasterous results for schools.

      •  Schools were pretty much exempted (1+ / 0-)
        Recommended by:

        This revision proposes changes to the State Constitution relating to property taxation.
        With respect to homestead property, this revision: (1) increases the homestead exemption except for school district taxes and (2) allows homestead property owners to transfer up to $500,000 of their Save-Our-Homes benefits to their next homestead. With respect to nonhomestead property, this revision (3) provides a $25,000 exemption for tangible personal property and (4) limits assessment increases for specified nonhomestead real property except for school district taxes.
        In more detail, this revision:
        (1) Increases the homestead exemption by exempting the assessed value between $50,000 and $75,000. This exemption does not apply to school district taxes.
        (2) Provides for the transfer of accumulated Save-Our-Homes benefits.
        Homestead property owners will be able to transfer their Save-Our-Homes benefit to a new homestead within 1 year and not more than 2 years after relinquishing their previous homestead; except, if this revision is approved by the electors in January of 2008 and if the new homestead is established on January 1, 2008, the previous homestead must have been relinquished in 2007. If the new homestead has a higher just value than the previous one, the accumulated benefit can be transferred; if the new homestead has a lower just value, the amount of benefit transferred will be reduced. The transferred benefit may not exceed $500,000. This provision applies to all taxes.
        (3) Authorizes an exemption from property taxes of $25,000 of assessed value of tangible personal property. This provision applies to all taxes.
        (4) Limits the assessment increases for specified nonhomestead real property to 10 percent each year. Property will be assessed at just value following an improvement, as defined by general law, and may be assessed at just value following a change of ownership or control if provided by general law. This limitation does not apply to school district taxes. This limitation is repealed effective January 1, 2019, unless renewed by a vote of the electors in the general election held in 2018.

  •  You had me up to this statement (0+ / 0-)

    "This is what happens when you base your economy on record low interest rates leading to speculative excesses."

    Please explain why low interest rates and a speculative economy are bad things. I probably would agree with you because speculation is the disease in capitalism. I know I face confrontation when I say that, but I think speculation is exactly what needs to be regulated, and that doesn't make me a commie or a pinko or a fag.

    Oh, I think I get it: low interest rates don't encourage saving, but why is saving so important. I believe we should spend all the money we have "now," on the living. I submit it is wealth accumulation is a bad thing in today's world. Please tell me why I am wrong.

    •  I'll take a hack at it (3+ / 0-)
      Recommended by:
      Sparhawk, danz, Cliss

      This is what we get when government policy is geared toward encouraging consumption, as opposed to the formation of capital.  Savings are necessary in order for capital to be formed, borrowing alone can't accomplish that (we've been living off of the savings of the Chinese and Saudis).  My problem with speculation is twofold: first, it is  a symptom of excessive creation of liquidity without any creation of wealth (so this was wealth created by labor that didn't end up in the hands of either the laborer or the investors), and secondly it creates volatility in prices of assets that leave savers without any safe havens.

      I think the outlook for this country will be a macrocosm of what Ohio and Michigan saw over the last 25 years- capital will flee to wherever it can see the greatest long term return, and all the previously associated labor will be abandoned.

      "Better beans and bacon in peace than cakes and ale in fear" ~~Aesop

      by aztecraingod on Fri Mar 07, 2008 at 07:10:30 AM PST

      [ Parent ]

      •  Thanks for the info (0+ / 0-)

        you make a lot of sense. I obviously in a pre-9/11 world understand the value of savings, but in a post-9/11 changed everything world, I wish we could look at things differently. Like, for example, the notion that wealth accumulation is not necessarily a good thing in a global world.

        BTW, the 9/11 changed everything was pure snark.

      •  I also liked your definition of speculation (0+ / 0-)

        "wealth created by labor that didn't end up in the hands of either the laborer or the investors."

        I have said for a long time that the stock market does not "create" wealth and I think you prove my contention: "a symptom of excessive creation of liquidity without any creation of wealth."

        •  A little Marx passage: (1+ / 0-)
          Recommended by:

          In the simple circulation of commodities, the two extremes of the
          circuit have the same economic form.  They are both commodities, and
          commodities of equal value.  But they are also use-values differing in
          their qualities, as, for example, corn and clothes.  The exchange of
          products, of the different materials in which the labour of society is
          embodied, forms here the basis of the movement.  It is otherwise in the
          circulation M-C-M, which at first sight appears purposeless, because
          tautological.  Both extremes have the same economic form.  They are both
          money, and therefore are not qualitatively different use-values; for
          money is but the converted form of commodities, in which their
          particular use-values vanish.  To exchange L100 for cotton, and then
          this same cotton again for L100, is merely a roundabaout way of
          exchanging money for money, the same for the same and appears to be an
          operation just as purposeless as it is absurd.  [4] One sum of money is
          distinguishable from another only by its amount.  The character and
          tendency of the process M-C-M, is therefore not due to any qualitative
          difference between its extremes, both being money, but solely to their
          quantitative difference.  More money is withdrawn from circulation at
          the finish than was thrown into it at the start.  The cotton that was
          bought for for L100 is perhaps resold for L100+l10 or L110.  The exact
          form of this process is therefore M-C-M', where M'=M=^M=the original sum
          advanced, plus an increment.  This increment or excess over the original
          value I call "surplus-value." The value originally advanced, therefore,
          not only remains intact while in circulation, but adds to itself a
          surplus value or expands itself.  It is this movement that converts it
          into capital.

          From Ch. 4 of Capital

          "Better beans and bacon in peace than cakes and ale in fear" ~~Aesop

          by aztecraingod on Fri Mar 07, 2008 at 07:46:59 AM PST

          [ Parent ]

    •  Speculation Is The Cause (1+ / 0-)
      Recommended by:

      'Flipping' cheaply renovated houses and mortgage scams to people who don't stand a chance of ever being able to pay them off.

      All fostered by government trade, monetary, and deregulatory policies which insure the irrationality of it all continues for as long as possible before the inevitable collapse.

    •  Most people, even if they saved a good amount (2+ / 0-)
      Recommended by:
      mftalbot, 3goldens

      of their income, would not reach the point where they would have significant amounts of wealth.  Savings, for most people, is about being able to get through emergencies now, and being able to retire, perhaps comfortably if they're fortunate, at an age when they no longer wish to or perhaps can no longer work.

      The uber-wealthy aren't uber-wealthy because they saved a lot of money.  They just make way more money than they spend, even at extravagant, deny-themselves-nothing, spending levels.

  •  Did you see where (6+ / 0-)

    Citibank is in BIG trouble?

    Wow, Carlyle has troubles:

    If the people lead, the leaders will follow.

    by Mz Kleen on Fri Mar 07, 2008 at 05:33:15 AM PST

  •  I have a question. If all these Subprime CDO's (0+ / 0-)

    are insured, why are the companies that bought them booking losses on them.

    Shouldn't it only be the companies that insured this Junk that are getting hit by the losses?

  •  Another major concern related to housing.. (3+ / 0-)
    Recommended by:
    oortdust, LillithMc, mommyof3

    In our local county paper (I live in a growing rural area outside Research Triangle Park), there is a story about how building permits have almost stopped.  There were 186 new development areas for multi-family housing parks last year.. the report indicated that most of the completed ones are now remaining unsold, and all of the ones in development have discontinued work on new housing.

    This is a major local income source for thousands of people, and none of them are working now.  The people who build these houses are right on the border between lower middle class, and poverty, and require the housing development to keep working. The food shelter said demand for food in the county has gone up 500% this year.

    •  Wow, I just posted above about helping food banks (3+ / 0-)
      Recommended by:
      oortdust, Many Dogs Barking, mommyof3

      Which county do you live in - I'll donate to the food bank there.

      People with hatred in their hearts never live up to their full potential. It's very sad.

      by Nelsons on Fri Mar 07, 2008 at 06:06:46 AM PST

      [ Parent ]

    •  asdf (0+ / 0-)

      I moved to the Raliegh area a couple of years ago.  I thought it was a good idea at the time because my kids had graduated and I had two brothers and a sister who had moved to this area.  It was a poor decision on my part and I haven't been all that happy here.  Unfortunately the building in the subdivision I moved to has basically stopped.  They are only about 1/2 built out.  I am pretty stuck because I doubt I can sell the house even if I priced it low.  No one is buying.  

      * 3972 *

      by BDA in VA on Fri Mar 07, 2008 at 06:56:23 AM PST

      [ Parent ]

    •  Those people are basically screwed (2+ / 0-)
      Recommended by:
      Dave925, forgore

      It's unfortunate but alot of these people didn't plan ahead.  When times were good they lived large, thinking their income would be steady.  Now times are rough and they have no income or very little.  

      Another side of the housing problem I fear.  Crime will likely go up as people get desperate.  Drug and alcohol use will likely go up as well.  

      Also, other businesses that relied on housing such as the hardware stores, home furnishing stores and so on will suffer.  

  •  Just in (6+ / 0-)

    Jobs slashed by 63,000 in February.

    Also, consumer confidence down to lowest level in years.

    Oil hits record high of over $105 per barrel.

    Do Pavlov's dogs chase Schroedinger's cat?

    by corwin on Fri Mar 07, 2008 at 05:35:48 AM PST

  •  This goes back to income disparity (1+ / 0-)
    Recommended by:
    Calamity Jean

    As wealth became concentrated at the top, individuals, corporations, governments, banks needed somewhere to go to invest it. The mortgage market is relatively safe with a moderate return. Lots of money poured in, resulting in low rates. I'm sure Greenspan's policies had something to do with low rates, but still it's a market of its own. All of this money caused speculative inflation in prices. The result is an undesirable outcome, money invested in air and homeowners financially overstressed. This was inevitable with the transition from a manufacturing economy to a trade and finance economy.

    The real ultimate solution is fair income distribution combined with debt and wealth depreciation. Good luck in figuring out how to do that in a trade and finance economy!

    •  Wizard, what exactly do you mean by this (0+ / 0-)

      "All of this money caused speculative inflation in prices."

      I mean specifically, how does lots of money in a mortgage pool "cause" speculative inflation...oh, is it that other people see money being poured into a seemingly "good" investment causes the investment to cost more to purchase, is that it?

      •  Mortgage rates decrease because of supply (0+ / 0-)

        and demand. If more money is invested in the mortage market, then the mortgage companies have to lower rates to get it all invested. Apparantly they had plenty of money, reducing or eliminating qualification requirements, down payments and other "creative" mechanisms to write more mortgages.

        People will buy a house based on their mortgage payment. They don't stop and think, what if the market tanks and I have negative equity. Or in the case of variable rate mortgages, they do that to qualify at the lower rate. When it resets they are in trouble, but they rationalize that either they will own the house short term, that is they will be selling it, or they will refinance at a lower rate. Also, people buy the increasing price/value story, since it's the only story around. You pay more because that's the market price and it's worth more. If you had to put 30% down, really qualify and got a 9% rate there would be fewer buyers, cooling off the market. I refer to housing prices as speculative since a house that sold for $250,000 6 years ago, sold for $450,000 last year. It's the same house, same location, a a few years more wear and tear. It's also a price way above historic norms.

  •  It's important to know (8+ / 0-)

    what all is going on in the world's financial markets.  The Financial Times has another article about financial gloom and doom:

    There's not much in the way of good news coming from the financial sector, unfortunately.  And those that were hoping to scoop up some good buys are finding that is a sticky wicket too.

    I check the financial news from Europe almost daily, they're right on top of the news from all over the world.  Our newspapers are always a day behind, at least.  

    If the people lead, the leaders will follow.

    by Mz Kleen on Fri Mar 07, 2008 at 05:45:37 AM PST

  •  Are we being haunted by Kondratieff? (4+ / 0-)
    Recommended by:
    sockpuppet, oortdust, 3goldens, CanyonWren

    The Kondratieff wave cycle goes through four distinct phases of beneficial inflation (spring), stagflation (summer), beneficial deflation (autumn), and deflation (winter). Since, the last Kontratyev cycle ended around 1949, we have seen beneficial inflation 1949-1966, stagflation 1966-1982, beneficial deflation 1982-2000 and according to Kondratieff, we are now in the (winter) deflation cycle which should lead to depression.

    Is 2009 1929 all over again?; an oasis of truth. Truth that leads to action -1.75 -7.23

    by Shockwave on Fri Mar 07, 2008 at 05:46:27 AM PST

  •  2 questions: (3+ / 0-)
    Recommended by:
    corvo, Cliss, CanyonWren

    Economics is not exactly my field, so, here I don't get this:

    My sis and her fam recently bought a house in SF. She said that at the time she bought it, a neighbor died and the bank, in a rush to sell it- dropped $200k off the asking price. What's to stop my sis from walking away from her loan or asking her bank to re-valuate her home? Is that even possible? Or is it that since she bought the home, now, she may loose an incredible value in her home?

    Q2. How much of the current spike in the current price of oil is related to the devaluation of the Dollar? Gas prices don't seem to be going up too much in Europe, so, is this just America or those involved in buying/selling oil in the dollar?

    Another Proud Subscriber to the Mariachi Mama Candidate Bickering Moratorium!

    by borkitekt on Fri Mar 07, 2008 at 05:47:21 AM PST

  •  With every new fed rate cut (13+ / 0-)

    The price of oil rises, our cost of living soars and our standard of living declines but in gradual increments...

    all this just to make a case for "America's strong economy under Bush"
    until after the election.

    How is this not a con game?

    "Sen. John McCain has a lifetime of experience that he'd bring to the White House. And Sen. Obama has a speech he gave in 2002."- Hillary

    by crystal eyes on Fri Mar 07, 2008 at 05:47:40 AM PST

  •  Recession is accelerating. Huge job loss reporte (14+ / 0-)

    The Commerce department just reported (15 minutes ago) a drop of 63,000 jobs in the last month, biggest one-month drop in five years.  There isn't much positive force pushing against this trend.  The economy is starting to collapse like a soaked origami.  This is going to be very bad very soon.

  •  With the dollar zooming down, OPEC is jittery (6+ / 0-)

    That's why the Saudis won't up production even if they could -- the dollar's dropped so much in value that the "record-high" prices are probably closer to $60 a barrel in 2000 (pre-Bush) dollars.

  •  Just Like The Mob (12+ / 0-)

    Let the bust out begin.  Bush's administration has functioned just like any other organized crime family.  Why should we be surprised to find out how this story ends?  The only difference is that they've moved the money off-shore so they can be beyond the reach of the IRS.  Or, at least they think so.  

    "Love the Truth, defend the Truth, speak the Truth, and hear the Truth" - Jan Hus, d.1415 CE

    by PrahaPartizan on Fri Mar 07, 2008 at 07:02:23 AM PST

    •  It's called the Enroning of America or as (5+ / 0-)

      I like to call it the Die Hard plot to rob America blind. The plot of course is the terrorists (really thieves) plan to blow up a building to cover the theft of hundreds of millions of dollars. Enron executives destroyed Enron to hide billions in stolen assets. Since that worked so well, Bushco is doing the same to America.

      Of course, this idea could be nothing more than my paranoid delusions. But tell me this: Where did the money go?

      "Never have so few taken so much from so many for so long."

      by londubh on Fri Mar 07, 2008 at 07:35:49 AM PST

      [ Parent ]

  •  Remind me again why anyone wants to be (5+ / 0-)
    Recommended by:
    Sparhawk, nio, sockpuppet, 3goldens, CanyonWren

    President in 2008 and inherit this mess?

    Der Mensch irrt solange er strebt.....

    by Azdak on Fri Mar 07, 2008 at 07:43:32 AM PST

  •  I heard that to calculate (0+ / 0-)

    firefighters' and police officers' starting salaries they pay the same starting salaries plus 10% of the surrounding counties, which happen to be Contra Costa, Marin and Napa, these are very affluent counties which rake in a lot of tax dollars.  If this is the case it's just not very smart.

  •  Thank goodness for Bonddad (1+ / 0-)
    Recommended by:

    I appreciate a subsantive a-political diary for a change!  I'm trying to convert my 30 to 15 year fr mortage now.   The banks are really tight-fisted though.  Even though fed funds down and 10 year down, the rates for mortgages aren't really following....

    Advice now: go on a credit diet.  Best thing to do is pay down that debt.

  •  It's not that bad (0+ / 0-)

    Has everyone here forgotten the Ownership Society?

    "no, how dare you sir!"-Jack Ryan

    by Rudykip on Fri Mar 07, 2008 at 08:23:26 AM PST

  •  This is getting depressing........ (2+ / 0-)
    Recommended by:
    homo neurotic, ohcanada

    B D- I love your diaries but I am hating the subject.

    Fortunately I live in the Seattle east suburbs and we aren't getting hit anywhere near as hard as the rest of the country.
    These days I'm on the fence about whether to sell my home I've had for over 9 years. Lots of equity but a softening market.

    Recommended mournfully.

    I actually haven't focused on his appearances, so I am relying now on the media as to what actually happened.- Joe Lieberman

    by rickeagle on Fri Mar 07, 2008 at 08:29:44 AM PST

  •  Bonddad, you are a beacon of light in the (1+ / 0-)
    Recommended by:

    dark morass of candidate wars that dailykos has become.

  •  As Usual, You Are Correct, Sir! (0+ / 0-)

    There was a diary about Vallejo a couple of days ago. I wrote about the continuing mortgage crisis hereyesterday. Those comments work well here, too.

  •  Second hit (1+ / 0-)
    Recommended by:

    The busting of the housing bubble started the downturn.
    Now, we'll have the effect of the downturn on the housingm ,arket. That's assuming that the specifically-housing water has already been squeezed out, which is not terribly likely.

    The US has spent twice the amount in real dollars rebuilding Iraq than we spent rebuilding Japan after WWII. -- Vanity Fair

    by Frank Palmer on Fri Mar 07, 2008 at 09:04:40 AM PST

  •  Interesting thing happened yesterday (2+ / 0-)
    Recommended by:
    auditor, Cliss

    Fannie and Freddie effectively stopped bidding for hybrid ARMs which are a huge percentage of remaining mortgage production.  A massive percentage of those hybrids (3:1s, 5:1s, 7:1s, 10:1s) was sold through GSEs to investors, so that market was largely reliant on that method to generate liquidity.

    The way mortgage lenders responded was amazing, though.  A few jacked up rates, telling the market they had no appetite to write them, but most big players stayed in, basically deciding to write those loans to hold for investment on their own balance sheets.  It was a ballsy response, actually, but many believe smart, since default rates on hybrids aren't that much higher than 30-year fixed, and since folding the cards on hybrids would eliminate a huge option for customers who want to refi before the ARMs they're holding today adjust -- which could then send us into a deeper tailspin of defaults and foreclosures.

    "Some folks look for answers...others look for fights."

    by The Termite on Fri Mar 07, 2008 at 09:16:11 AM PST

  •  todays local newspaper, several auctions notices (2+ / 0-)
    Recommended by:
    3goldens, Cliss

    for forclosed homes. It was really something new to see in our paper.

    have we hit bottom yet?

    by eddienic on Fri Mar 07, 2008 at 09:32:14 AM PST

  •  To add to this (1+ / 0-)
    Recommended by:

    Home equity is actually less than 50%. That 50% mark is freaking huge. Average gas prices are 3.18 cent, up two cents from last week.

    Taking Daily Kos back, one anti-McCain diary at a time.

    by bhagamu on Fri Mar 07, 2008 at 10:00:21 AM PST

  •  MarketWatch covers this today, too (3+ / 0-)
    Recommended by:
    3goldens, Cliss, Break On Through

    Check out Rex Nutting's piece here:

    In coming months and years, the credit crunch that's now squeezing mainly the poor is likely to hit millions of middle-class homeowners who took out risky loans during the great housing boom earlier in the decade. More than 1 million families will lose their homes in the next few years, by one estimate. Another study predicts 2.2 million foreclosures.


    In the past, homeowners have generally lost their home to foreclosure only when they suffered a major life-changing event, such as loss of their job, a major illness or death of a family member. A big jump in foreclosures was unheard of outside a recession that brought high unemployment.

    But now, because of the recent popularity of loans geared to let people buy a more expensive home than they can truly afford, all it will take is the passage of time to trigger a default. At some point, all these loans are adjusted to switch from a low, subsidized monthly payment to the full amount required to pay off the loan.

    Never thought I'd be so happy to be a renter...right up until my landlord misses a payment.

    Only YOU can end the Metapocalypse. Join the mehvolution!

    by JR on Fri Mar 07, 2008 at 10:38:42 AM PST

  •  Bonddad, how about agency debt spreads? (2+ / 0-)
    Recommended by:
    Kestrel228, Cliss

    That to me is the really ominous data point.

    In the last 6 weeks, the spread between treasuries and Fannie AAA fixed rate bonds has almost doubled.

    Fed cuts mean nothing if spreads keep widening.

    Also, the ahistorical speed of the widening spreads seems to indicate that somebody, somewhere is expecting a shoe to drop.  A big one.

    Any ideas?

  •  interesting question... (0+ / 0-)

    Is... if the flood of housing hitting the market from foreclosures overtaxes the pool of buyers, then prices will fall below where they "should" be in terms of parity - so we could well see a quick rebound. It would seem to me they almost HAVE to fall lower than they "should" be, because we'll bottom out in a glut of supply.

  •  Hey, bonddad, are you still out there? (0+ / 0-)

    I am looking at a house in the L.A. area that is bank owned and for sale at a really low price pretty close to what it would have been about 2-3 years ago.

    So your news is telling me it will lose equity before it starts to build again?

    I.e., if I love it, buy it for the long haul but be ready for it to fall before it rises?

    "Balance" does not mean giving the same weight to a lie as you do to the truth.

    by delphine on Fri Mar 07, 2008 at 10:47:15 AM PST

    •  Most of bonddad's info is 3 months old (2+ / 0-)
      Recommended by:
      New Deal democrat, Cliss

      Most of his figures are for the fourth quarter of 07.  We're now a couple of weeks from the end of first Q 08.

      The bank just accepted my son's offer on one of their houses (REO).  The same house sold two years ago for $550K.  My son's offer was $290K (89% higher two years ago or figured the other way, a 47% drop from it's previous value).  The house is located in Antioch (near Vallejo, CA -- the city running out of money).

      An interesting point:  He was looking at REO that had been on the market for over a hundred days in some cases.  But one of the houses he was looking at last week had 4 offers in the same day.  He feels that the market here is turning.

      Bush Administration: Proving the saying, "You can fool most of the people some of the time, and 30% 24% 19% all the time."

      by Helpless on Fri Mar 07, 2008 at 01:36:52 PM PST

      [ Parent ]

      •  Depends on location (0+ / 0-)

        Antioch is one the cities in the Easy Bay that has been most severly hit by the pop of the housing bubble.  I believe its one the Bay Area cities with the highest foreclosure rates.  Its an outer suburb in Eastern Contra Costa County that's easily an hour plus commute to downtown SF.  It had more land available at lower cost than other areas and developers seized on it and way overbuilt, much like they did in areas around Vallejo in Solano County.

        Locations like Vallejo, Pittsburg, Antioch - they were bad locations to be building a lot of product - far flung suburbs, not very affluent, average schools, long commutes to the major job centers (SF & Silicon Valley).  The era of cheap credit allowed developers to stupidly partially decouple price from the traditional location factors.  It was like the dot com boom that allowed startups and VC to decouple valuation from things like net profits and having a realistic business plan.

        Liberals drive me crazy. Unfortunately, conservatives are even worse.

        by goblue72 on Fri Mar 07, 2008 at 02:29:48 PM PST

        [ Parent ]

        •  in the 80s those burbs (0+ / 0-)

          were where divorced moms moved to survive on lower women's wages, like El Sobrante etc.
          I knew it was time to get the hell out of SF when
          a) the secretary at my company bought a house in Stockton (I know, not uncommon now, but that would be a hellish commute's Stockton.)
          b) the flat I was living in went up for sale and all we could find for the amount we were getting a 2BR for was a studio.
          Time to go indeed!

          "America is the only country that went from barbarism to decadence without civilization in between." -- Oscar Wilde

          by expatyank on Fri Mar 07, 2008 at 04:08:59 PM PST

          [ Parent ]

      •  This one is in Los Angeles (0+ / 0-)

        in a pocket of interesting funky homes (Mt. Washington).

        It's near downtown but in canyon/hillside.  

        It's listed way under market and they've already had three offers.  

        Anyway, I'm putting in an offer - my RE agent wanted me to go big on the offer ($40k over asking) but I opted to go closer to asking - but over asking - because of the potential in the home.  

        "Balance" does not mean giving the same weight to a lie as you do to the truth.

        by delphine on Fri Mar 07, 2008 at 04:14:11 PM PST

        [ Parent ]

  •  thanks bondad (0+ / 0-)

    rec'd & tipped.

    Patriotism means to stand by the country. It does not mean to stand by the president or any other public official... ~Theodore Roosevelt

    by Pam from Calif on Fri Mar 07, 2008 at 11:09:33 AM PST

  •  Here the thing: (2+ / 0-)
    Recommended by:
    nio, 3goldens

    In the Bay Area, the relationship between the median price of a house, and the median salary, broke off their relationship a long time ago, ands are no longer on speaking terms: I make a decent living ($19 per hour, more or less) and can only afford a studio apartment that is practically smaller than my 20-year-old Toyota.

    I'll believe the housing/credit/consequences-of-greed crisis is over when the median salary can afford the median Bay Area non-"creative" mortgage, and not one minute before.

    "Only you and I can help the sun rise each coming morning. If we don't, it may drench itself out in sorrow." -Joan Baez

    by mftalbot on Fri Mar 07, 2008 at 11:10:27 AM PST

    •  $19 an hour (0+ / 0-)

      doesn't go very far in america these days, much less in SFO.

      You can't get away with the crunch, 'cuz the crunch always gives you away

      by dnamj on Fri Mar 07, 2008 at 02:15:40 PM PST

      [ Parent ]

    •  never gonna meet (0+ / 0-)

      I live in San Francisco and experience the same problem, although not as severe.  My rent is "affordable" due to rent control, but no way I can afford to buy even a small condo in SF.  I don't think that's ever going to change.  Much like Manhattan, SF is one of those "global city" locations where the demand is always going to greatly outstrip supply.  There are too many high income households with high paying jobs in Silicon Valley and the downtown SF financial district looking to live the 24 hour urban life combined with well to do folks from outside SF (either from abroad, or NYC or elsewhere) seeking a pied-a-terre in SF to ever see prices settle down to something affordable to the median.

      Every year zoning in many California communities gets more and more restrictive.  Every year environmental restrictions make more and more land deemed "undevelopable."  Every year, the NIMBYs get more and more powerful.  Its a strong brew leading to constricted supply.

      Now, if you do hop over the bay to the Easy Bay, there ARE some communities where the average person CAN find a good deal.  Even as close as Oakland.  Or Richmond, or San Pablo, maybe even El Cerrito or further afield like Pittsburg or Antioch.

      Liberals drive me crazy. Unfortunately, conservatives are even worse.

      by goblue72 on Fri Mar 07, 2008 at 02:19:09 PM PST

      [ Parent ]

  •  My house will be paid off in less than 5 years (0+ / 0-)

    I'm on track to do it.  That's my goal. People should buy a house, because they can be comfortable living there.  If it's a "status symbol,"  you probably can't afford it.  At this point, I wouldn't look at buying a house and thinking it's an investment, beyond being a place to live and one day own outright.  Still, with taxes, insurance and all that goes with a house, it's not free.

    Winning without Delay.

    by ljm on Fri Mar 07, 2008 at 11:41:20 AM PST

  •  We have a "JOBS/Employment" problem (2+ / 0-)
    Recommended by:
    Kestrel228, auditor

    Everyone is talking about a financial problem, but ask yourself one question WHY or WHAT is at the the core of the problem. The answer is quite simple and has been building the past 8-10 years,  the American Middle Class income has NOT grown significantly over the last few years, and over some recent years, has contracted.  This tells me/us that the American Middle Class does not have enough income to pay for its cost of living, including increasing health care costs, energy, and education, to say nothing of other inflationary pressures on food, etc., let alone any extra/left over income with which to repay the borrowed money it has been living off the last 5-6 years.  America's economic problem(s) will not be fixed/solved either soon or quickly. For America to extract itself from the race to the bottom will require some very strong medicine and some very significant structural reform of the way/manner by which America does business.

  •  tut tut (0+ / 0-)

    All we have to do is make Bush's tax giveaway to the wealthy permanent and all problems in the economy will magically float away.
    Shush now, be quite and go to sleep, eveything is just fine. Just keep repeating "there is no recession, there is no recession...."

  •  I wrote about this a couple of days ago (2+ / 0-)
    Recommended by:
    New Deal democrat, Cliss

    It's not just housing (as Bonddad has pointed out)

    If you have a minute, read my diary.  I would appreciate your comments.

    Kiss Your Life Goodbye

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