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Facing the next real-estate collapse
NY Post ^ | September 18, 2009 | Rich Lowry

Posted on 09/18/2009 3:33:06 AM PDT by Scanian

THE next wave of the credit crisis is about to hit -- a collapse in com mercial real estate and potential explosion of bank failures. With its resources tapped out by the first wave, what should Washington do?

Over the last year, the Federal Reserve doubled the size of its balance sheet, and took unprecedented action in monetizing government debt and extending credit to financial institutions. Now it must head off inflation and extricate itself from $5 trillion-plus in credit exposure from various bailouts. The Treasury, meanwhile, is issuing debt at the fastest pace in peacetime history.

Now comes the next crisis. The same factors that caused the residential bubble -- easy credit, lax lending standards and booming mortgage-backed-securities underwriting -- also drove commercial real-estate overvaluation. But the commercial market lags the residential one by about a year, so this bubble is still popping.

(Excerpt) Read more at nypost.com ...


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: commercialrealestate; fed; mortgages
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To: from occupied ga
So what? Obviously you wouldn't have houses selling for negative amounts.

No, no. Since it's relative change, the price will be positive unless it goes under -100%. The data is discrete time samples. To see the actual effect, you need to have the numbers. Just take a $1.00 dollar base. Multiply it by the relative price change in each quarter and you get the price. If the graph goes, say, {10 10 5 0 -10 -10} percent, the resulting price will be : 1.00 x (1.1) x (1.1) x (1.05) x (1.0) x (.9) x (.9) = 1.029105. The price change would have to negative and more than 100% for the price to go to less than zero.

Again, so what? If you look in centuries the trend is positive too, but the recent trend is downward, and probably won't go upward again until the middle of next year.

So what? Warren Buffet said if you're not willing to own a stock for ten years you shouldn't own it for ten minutes. A few down quarters in real estate or stocks doesn't mean the end of the world except for people with insufficent liquidity. If you are in the construction business you can expect tough times, but again, if you are in a cyclical business you need to expect that.

21 posted on 09/18/2009 6:04:18 AM PDT by Lonesome in Massachussets (Don't anthropomorphize the robots. They hate that.)
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To: from occupied ga

I should add a note: The U.S. Government now has insufficient liquidity to deal with a crisis and many, far too many, Americans are in the same boat.

During good times, instead of saving for a rainy day, some people and the government spent like drunk sailors. As I’ve said before in the new fable of the grasshopper and the ant, the ants get the government to take from the grasshoppers to give to the ants.


22 posted on 09/18/2009 6:07:57 AM PDT by Lonesome in Massachussets (Don't anthropomorphize the robots. They hate that.)
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To: Lonesome in Massachussets

I think you may have it backwards; now the grasshoppers use the government to take from the industrious ants...


23 posted on 09/18/2009 7:05:12 AM PDT by bt_dooftlook (ACORN = Another Communist-Overrun Rats-Nest)
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To: Lonesome in Massachussets
No, no. Since it's relative change ...

You are wrong. the median price of houses selling in the US has DROPPED look here the actual median selling price has decreased recently.

Warren Buffet said if you're not willing to own a stock for ten years you shouldn't own it for ten minutes.

Like he's some sort of font of absolute knowledge?

A few down quarters in real estate or stocks doesn't mean the end of the world except for people with insufficent liquidity

Well that's true, but unfortunately the market bubble was driven by people who should never have bought in the first place an now are whining that they are going to lose "their" homes. And the rest of us are going to have to pay for THEIR mistakes - socialism at its finest inspired by the "community redevelopment act" as enhanced by slick Willie.

24 posted on 09/18/2009 8:53:59 AM PDT by from occupied ga (Your most dangerous enemy is your own government,)
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To: from occupied ga

Prices dropping is different than a negative price (they pay you to take it).

John Maynard Keynes said, “In the long run, we’re all dead.”, so I agree, you can’t take too long a view. OTOH, you should never, ever, buy a home you won’t want to live in for the next ten years and which you cannot reasonably expect to pay for with money you have or are now earning.


25 posted on 09/18/2009 2:02:03 PM PDT by Lonesome in Massachussets (Don't anthropomorphize the robots. They hate that.)
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To: poobear

They were able to sell the property and buildings of the family hardware store last month, but for half of what it had been appraised for several years ago. I don’t think people realize that things are really bad for businesses.


26 posted on 09/18/2009 2:08:44 PM PDT by KYGrandma
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