Posted on 01/03/2011 5:37:16 PM PST by Chunga85
I’d like to start off the year with another piece on the US housing situation as it looks to be heading into 2011, and its relation to the overall economy. In an interesting quote I read, economist Patrick Newport at IHS Global Insight says: "The economy has to recover for the housing market to recover, not the other way around." Thought I'd throw that in there, because it seems to get lost in translation from time to time.
Talking of quotes, I was going through the material I read the past few days, and I couldn't find a proper way to cut short the quotes and still provide you with the story as I see it, in a way that would be both comprehensive and clarifying. In other words, I think it's the quotes that tell the story, and without them the story is just not there. So this is going to be a long one, and I think the least I can do is to say as little as possible, and just let you absorb the data. And I sincerely hope that after you've gone through them, you’ll see the story I’m talking about.
Many people claim Stoneleigh and I must be crazy, and doomers and all that, for predicting an 80%+ drop in real estate values, but we in turn can't seem to understand why home prices would fall "only" 20% from here, or why they would fall "just" 40%, as Mish suggested for instance. We think that more than 20% is in the cards just because of the bubble coming back to earth; we think 40% is certain because of the bubble bursting, and we think 80%+ will then happen because the bursting bubble will take the entire financial system down with it. Pretty simple really.
(Excerpt) Read more at businessinsider.com ...
Yeah that's what it is the ‘DEAD BEATS’ spending their mortgage payment instead of sending it to the bank!
But seriously when the lawsuits start mounting over MERS there won't be a solvent mortgage lender, realator, title company left and what will that do to the economy? Hell the Mortgage Lenders can't possible even cover the millions in fees that they have cheat the states out of! The only upside is for trial lawyers who now have a new 'cash cow' to milk!
Thing is, if this implodes (and so far it has been hanging on the thread of everything being made to appear normal ...for instance, MERS is being made to be seen as ok, foreclosures have to be made to continue as normal, etc). If that facade (and it is a facade) lifts, then the potential (and real) ramifications are greater than most people realize. Probably even you and me.
Yes, there are those who put their faith in gold (including the silly ones who put it in ETF paper-gold, like that will work out if the system freezes up; and for that matter if your bullion is in physical form in vaults, how do you know a federal order will not simply seize it? It has happened before), while others put their faith in guns (yet continue to stay in sub-urbia, which would be deathzones in a matter of days once people get desperate enough for food and other provisions and start going from house to house ...yeah, you may have 10 guns, but you better be like Vishnu and Shiva with ten arms, and better hope your raving neighbors are also not armed, nor have molotov cocktails, and are simply not too many). I have a nagging suspicion that there are some here that wish for the system to be re-booted, including some who may have survivalist fantasies of how they will live off the land while the 'silly grasshopers' pay for their lack of planning.
Reality will not be like that.
If housing falls 80% (or even anything more than 25% by my unofficial estimates), the impact on the US economy would be amazing. As in, amazingly bad.
Things are stronger than they appear. Things are weaker than they appear. There are heavy facades trying to hide the truth in amorphoous fog, and when that lifts the ground will either be a plain or some unfathomable chasm. We live (and have lived for the last 60 years or so) in an era of amazing peace and wealth (even with some of the things that have happened). We are living in an outlier that I hope will continue to persist.
I hope you are wrong. 100% totally wrong. You better hope you are wrong too.
It is just that, knowing what I know of that crap that was being securitized, there is a chance you are not wrong. To which I hope you are mostly wrong. I hope the facade lasts long enough for some real strengthening to occur. If the floor falls, there is no bottom (and no soft landing, not even for the guys with 'paper' gold and 10,000 rounds of .22 for hunting rabbits).
I hope you are wrong.
Bump
80% drop in housing prices would wipe America out. Most every one would default and say “evict me”. Free houses for all?
I don't have any romantic fantasies about how great things will be if the system re-boots.
But I am convinced that nothing good from continuing to prop up the "facades".
I might be able to sell my house.
(a) - a determined effort to restore integrity and transparency to our banking system.
(b) - the same boyz, making the same bux, in pretty much the same way.
How one answers this question is the key to whether or not one wants the facade kept in place.
“most if not all US foreclosures are illegal, and all MBS are unsecured debt that the issuers will have to buy back”
This is it in a nutshell.
I see no way possible for me to be wrong just as I see no way for me to be right. I don't understand this at all.
The disturbing trend I DO see is more and more private property landing in the hands of the govt. which doesn't seem healthy.
MERS aside, what about all the other properties where MERS is NOT involved yet has changed hands without even making believe a magic depository exists? Even in those situations the transfers are absent AOMs or if there are they are dubious at best???
The only thing I think I'm right about is that something is very wrong. I'm not alone.
There Are No More Criminal Laws
The Fall of Florida's 'Foreclosure King' Will Create Huge Waves
I’ve spoken to a number of Leftists who have bizarre ideas on how to deal with the housing crisis. Their ideas all seem intended to fail, and in the process remove ownership of the housing stock from citizens and transfer ownership to the government. Hmmmmmmm.
bfl
I hope you are wrong, because if you are not 'going Galt' for the vast vast vast vast (to the nth magnitude) majority will not be as linear as shown in some novel, will not be as short as some believe, and will not be as elastic (i.e. wrap it up and let's start over and make it right this time) as some anticipate. It will be a long-tenure, plastic, and nebulous event that will have (to channel Rumsfeld) many 'unknown unknowns.' The last crisis a couple years ago made me decide in 2006, well before it hit, that it made sense for me to leave the States, cash in, and go back to Kenya. Looking back it was a wise move (those I left got smacked silly by the economy, and I've managed to do quite well here). However, if you are right, what is coming will make that look like the tickles of a young lass.
Whether one is Rep or Dem, 'going Galt' with gold nuggets and bricks of .22 in suburbia (yeah right!) or some 'silly urban Amish' (or whatever the current cranial diarrhea that passes for intellect is on the forum), young or about to retire ...whatever the heck (unless you are a single chap, way past retirement, with no dependents) ....better hope Chunga is wrong. And if something happens to the US, then the world faces a situation somewhat analogous (at least in weak form) to what transpired after the collapse of the Roman Empire. The US has done a lot to be a moderating influence in the World. Without it ....well .....
(Problem is, while I can argue with some of your arguments, some of them are almost impossible to argue with ....without really pulling things).
BTW, did you know 'Chunga' means 'watchout' in Swahili? Have a blessed day.
However one chooses to characterize what happened in the securitization process is immaterial. The fact is the collateral that backs the security is no longer worth what it once was. It is only worth what someone will pay for it.
When an owner of a stock decides it's a dud, no big deal, sell it. In the case of an investment being a house it's different. It's where one lives. They are attached to it.
Summary judgment is often granted to an entity based on a dubious claim of standing only to see it sold for much less than what the original owner could pay.
Subtract all the costs of litigation to prove this dubious standing and you create more negative value.
On top of that another empty house sits vacant with a clouded and potentially fatal title flaw - further eroding it's value - as well as the values of adjacent properties.
Something is going on in the murky middle that likes this equation and wishes to stay in the dark.
IF you have the time, can you please explain to me how the steep rise in oil prices will bring about an 80 percent decrease in current housing values?
This is NOT an "argumentative" question ... rather, I'd like to learn more about this issue.... as even to someone as ignorant as I am about real estate, it does seem that house prices are starting to resemble those of the mid-1990s ------- BUT, an 80% decrease - wouldn't that topple housing values to something like 1950s/1960s prices?
OR... am I totally confused and not understanding the jist of the article?
Thanks!
——there may be more housing pain ——
Consider my poor slut ex neighbor.
She auditioned new husbands after being forced to leave her happy home and husband because she was unfaithful. She auditioned four live in friends, at least one of which sinned by going after her 17 year old daughter, but none proved suitable. She conned a Bronze Star winning postman stud she bought at an man auction into marrying her.
Thus were joined two dysfunctional families that include 5 children and the 17 year old who left immediately on turning 18. The two sons, both around 10 actually seem to get along. The two teenage daughters did not. One was paid many visits buy deputies and the other somehow got pregnant
But I digress. The house was small and actually owned by her father. To remedy that, tens of thousands of $$$ of improvements were made, all with no sweat equity. A parade of contractors came and went from the complete makeover including garage and swimming pool.
Alas, the slut being a slut couldn’t resist and sinned again. She was forced to leave. The house is up for sale. The first mortgage is on her father and the second(s) are on her and her new hubby stud. She and her collection of antiques ( old furniture) are gone. He is left living in the bag that is for sale. Alas, no one will buy the overpriced bag that includes all the superficial improvements because they are superficial.
The loss is going to be huge and the only way to settle the acrimonious divorce is to sell the property. Easy money led to very very difficult and very very costly divorce.
Houses in our region are selling and have not really lost value like other places. The easy money and need to sell a gussied up but small house are the problem.
The boys seem to take it all in stride.
The thread is concerned about further decreases. This must be examined in light of the current inflation. It has not yet got to real estate, but it will. The inflation will float the properties back from underwater. It may be a long time before the prices begin to inflate above original levels but losses will be mitigated. One purpose of the inflation by design is to resolve the housing problem.
“IF you have the time, can you please explain to me how the steep rise in oil prices will bring about an 80 percent decrease in current housing values? “
I don’t think I made that assertion and am NOT a financial guru. However, IMO our economy is based on oil. The price of oil effects everything in the economy.
The more we spend on oil the less we have to spend on anything else. That “anything else” also becomes much more expensive because its producers are spending more on oil and their supplies. So the costs cascade thru the economy.
As for the housing market; if the economy dies the ability to pay for housing will decline forcing prices down.
If transportation costs soar, like they have in the past with high priced gasoline, all consumer goods soar, not only those made with petroleum products.
I heard something on the radio about how..... with housing values plummeting that this will be a very very very precarious time, as most boomers & anyone older have most of their entire net worth tied up in ONE asset alone: the HOME they live in.
“I’m sorry - I didn’t mean to misinterpret your words, my understanding is minimal on these issues”
No apology necessary. I just didn’t want to give the impression that I was a financial expert. I made my original statement because I think oil prices are going to zoom up BY DESIGN which will in turn further destroy our economy.
Ironic that the boomers have been encouraged to use their homes as an investment for years and years.
I wonder why so many hundreds of thousands of condominiums and townhouses were built during the Bubble, as it seems that they are insuring the continuation of lackluster house sales.
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