This is OT CR, however I was wondering if you had seen PIMCO's Paul McCully's note on his Central Bank Watch newsletter that discussed in detail the unemployment puzzle and the Fed's lack of action.
So why hasnt the unemployment rate already risen? Its the great puzzle, in the words of San Francisco Fed President Janet Yellen. The short answer to the puzzle is that the labor force participation rate has fallen, accounting fully for the drop from 4.7% to 4.5% for the unemployment rate over the last year. But this doesnt make sense when you look at nonfarm payroll growth, which, again in the words of Ms. Yellen, has been gangbusters. The labor force participation rate is decidedly pro-cyclical, meaning that it goes up as tight labor markets induce new entrants into the labor market; and it goes down when soggy labor markets lead the discouraged unemployed to drop out of the labor force. So, the short answer to the puzzle is the right answer only if nonfarm payroll growth really aint gangbusters.
And new research by both Ray Stone4 of Stone and McCarthy and Sheryl King5 of Merrill Lynch suggest this is indeed the case. Please refer directly to their research for the exhaustive details, but the bottom line is simple. Detailed data in the Bureau of Labor Statistics (BLS) Business Employment Dynamics (BED) release, which comes out with a two-quarter lag, show employment growth of only 19 thousand in 2006Q3, while the nonfarm payroll tally for that quarter was over 450 thousand. More recently, the BLSs more timely Job Opening and Labor Turnover Survey (JOLTS) for April last month! showed job openings rose only 24 thousand, with this series essentially flat since last August. The JOLTS report also showed that new hires in March (this data subset is released with a one month lag) fell 29 thousand.
Something smells more than fishy here. Not that Im accusing the BLS of any skullduggery. None! Rather, it is a historical fact that nonfarm payrolls before annual benchmark revisions, which continue for six years! understate employment early in recoveries (leading to the inevitable contemporaneous label of "jobless recovery"), while they overstate employment late in expansions.
And a key reason is that the BLS, while very good at counting heads at existing firms, must make an assumption, in real time, about the birth-death rate for firms, so as to estimate the net gain/loss in jobs as firms open and close, a never-ending feature of a capitalist economy. In the early years of expansions, the birth assumption systematically is too low and the death assumption is systematically too high, which results in "jobless recoveries," which turn out to be not-so-jobless recoveries upon revision. The exact opposite holds in the late years of expansions and particularly in recessions. Such is the case, it would appear, at present.
Thus, in contrast to last August, when the job tally for the year ending March 2006 was revised up some 800 thousand, a stunningly large revision, the opposite is likely to unfold in this Augusts benchmark revision for the year ending March 2007. Not to suggest, I hasten to add, that a downward revision equal to last years upward revision is in the cards. The honest answer is that we dont know how big it will be. But available data, notably the BED and JOLTS data, point squarely to a downward revision.
So what, you say. Economists always bellyache about the quality of the data when they go against their forecasts. This is true. It is also true, however, that poor data can make for poor policy making, if and when the data is taken to be religiously true. This is particularly the case if the data is known to be lagging data of the business cycle, as is the case with the unemployment rate. Acting on the data, or refusing to act because of it, is the stuff of policy mistakes, sometimes known as recessions."
The question that comes to my mind is: Why in this computerized age does it take six months to compile accurate statistics? Within a little over a month after someone is hired or de-hired, the employer is filing reports to the IRS and the unemployment insurance authorities.
In the 16-year history of the modern Chinese stock market, an increase in stamp duty has always caused a market slump over the following few weeks or ended a bull ru
Well fuck, for someone looking to buy for the first time things sure are tricky. Prices are insanely high by any standard, but they are sloooooowly falling. So do you wait, or get in now. I know you're not supposed to base individual decisions on larger trends. But buying at the top of what seems to be a considerable downswing doesn't seem to make much sense either.
I'm in the same boat in AZ. I make enough money to buy a median priced home here, but I live in a one bed apt. I figure this market has a LONG way to go.
When the rents in my area aren't two to three times cheaper than buying a home... I'll start looking. Until then I'll listen to all the crap my co-workers and buddies give me about living in an Apt.
"SDCIA, I thought you'd like to hear an update of a newer development in the secondary market of
the mortgage industry and how it may impact your financing strategies.
Secondary market investors are ordering increasing numbers of Broker Price Opinions (BPO's) on loans before they are purchased. Currently it is about a 30% sample. This is doubly true for Alt-A batches.
Basically, a BPO is conducted by a real estate professional, chosen by the investor, who assesses the true value of the property. They factor in the appraisal value, cost of repairs needed to bring to fair market value, neighborhood data, external pictures, and 90, 120, and 180 day marketing time for the property. To put it more simply: How much can the property bring if we had to sell it as an REO?
As a result we are seeing an increased number of cut values. I am not seeing enormous cuts but in many cases we are seeing 10-15% cuts. These cuts can obviously have significant effects on financing pricing and options. How? Well, as a lender we want our loans purchased on the secondary market. The more they kick loans back for lowered value based on BPOs the more our underwriters squeeze appraisal reviews on the primary level.
Why do I mention this? Many of the investors on this board stay active in making sure their financing is optimized. Just make sure to keep in mind that if you are at critical LTV points such as 80% and 90% you may have to prepare for a cut appraisal.
We all know that most appraisers are pushing value, even when they are not asked to do
so. A BPO cancels out the push.
Hope this helps give an additional window into current real property financing issues. Good luck to everyone."
for someone looking to buy for the first time things sure are tricky. Prices are insanely high by any standard, but they are sloooooowly falling. So do you wait, or get in now.
Patience will pay in the long run. Wait at least six months.
I know you're not supposed to base individual decisions on larger trends.
...ummm... why not? Don't we base our individual decisions on larger trends all the time? We try to drive less because gas is so expensive, for example.
"vallejo and the bay area and the subprime mortgage crisis."
Grew up in Vallejo. Went back to the old 'hood for the first time in 20 years in January for a funeral. Everything looked the same, but about every sixth house had a security door, which we never used to need. Asked my cousin Steve if the neighborhood had gone to hell and he said, no, those are newcomers moving up from bad neighborhoods. "They think they need the protection here, because they used to have it in their old place."
I'm betting that a lot of them "moved up" with subprime loans.
My Girlfriend just closed on a FC in Chandler near Fashion SQ mall. 6 yr old house, she got it it for .50 on the dollar.
FC's & REO's initially were out in the boonies like Queen Creek & Avondale, FCs are slowly starting to creep into older, more stable neighborhoods while REOs are just showing up @ high end places ike Fountain Hills , PV & Scottsdale.
Avoid Gilbert, QC & Ahwatukee like the plague, as subsidence issues are major problems in many developments(and should make for a nice class action for a sharp lawyer.)
The most widely followed index (OFHEO House Price Index) will be released on Thursday.
I'm not a big fan of the OFHEO index. Maybe I'm being premature or overly optimistic, but I'm thinking that the case-shiller index is probably going to be the best measure of house prices if the house futures market hangs around.
Zheng Xiaoyu, the former head of State Food and Drug Administration, was convicted of accepting bribes from drug companies.
May 29 2007: 10:20 AM EDT
BEIJING (Reuters) -- China on Tuesday sentenced the former head of its food and drugs agency to death for corruption in a surprise judgment as the government sought to contain a wave of scandals over health safety.
Zheng Xiaoyu, former head of the State Food and Drug Administration, was convicted on charges of taking bribes and dereliction of duty, Xinhua news agency reported, citing the Beijing Municipal No. 1 Intermediate People's Court.
The sentence, which was unusually harsh, could still be reduced on appeal. But it reflects the weight China's top leaders are giving to the issues of corruption and food safety as they grapple with the fallout overseas after a series of safety breaches involving toxins in food and other products.
In China when they say 'heads are going to roll' they mean it.
It seems to me you both have a desire to own rather than rent. So act NOW! This is your life you are living, not some spectator sport. Time is the one thing you can't replace. Think the market is going down? OK, then buy with that in mind. Don't be shy. Find a place you like and offer a price that take into account your views on the future. All a seller can do is say no. But maybe you'll get lucky and find someone who's view is even darker than yours. If someone is asking $400k offer $300 or whatevever makes you comfortable. But do it the right way. Get all your financing in place, few contingencies and a short close. Dare them to say no.
Anyway, that's how I've had success buying property.
Anyway, that's how I've had success buying property.
I think banker is mostly right... if you are ready to buy, can afford it at current prices, then do it.
On the other hand if you can wait, aren't unhappy where you are now and think you'll have better prices and more selection in the near future then wait.
I mean trying to calibrate your life's clock to market high's and low's sub-optimizes the other things in life that really matter...
Just go in with your eyes open & have a realistic expectation.
But maybe you'll get lucky and find someone who's view is even darker than yours. If someone is asking $400k offer $300 or whatevever makes you comfortable.
Does offering a mere $300 to get lucky actually work? I'd be far more comfortable offering a dinner and a movie on the hopes of getting lucky. But hey, what do I know?
A freudian slip is saying one thing, but meaning your mother.
No offense intended. You make a great point. I love the dark humor. Sorry.
"Decline in Lending Standards
Ross argues that the current wave of buyouts will end badly because some private equity firms have stripped too much value from some companies, leaving them ill-equipped to operate their businesses. "Only about 11% of [high-yield offering] proceeds have been for capital expenditures to enlarge the business, with the rest going for sponsor dividends, stock buybacks, refinancing of existing debt or LBOsnot the most exciting uses of proceeds," Ross says.
He's also alarmed by the decline in corporate lending standards, which he compares to the subprime mortgage meltdown. "I believe that credit markets have been recklessly permissive to the point where instead of traditional risk-adjusted rates of return the market is dealing with what I would call risk-ignored rates of return," Ross said. "The rating agencies recently have begun to revise upward their forecasts for late '07 and '08 but are still a bit below mine."
Few would argue that defaults will remain at the current low level. The question now is how high and how quickly they'll rise, and how broad the problem will be."
"Despite reducing our work force by approximately 25 percent in 2006 and early 2007, we find it necessary at this time to further reduce overhead expenditures, including, unfortunately, reducing an additional sixteen percent of our jobs,"
even though Japanese prpoduction declined cause were headed to recession, our markets will rally based on the fact that greater fools currently live in China and are supporting higher valuations...
As for those so-called buddies at the office. I had the same thing during the dot com craze, as they day-traded from work and was kidded for not buying pets.com et al.
Concerning these mortgages in other currencies in Eastern Europe. This is old news. It was popular as far as I remember. When the interest rates in local currency were double digits, mortgage in euros or Swiss francs were very tempting. The new problem now is that due to exorbitant house prices the debt burden got really dangerous and many people would not be able to service the debt in local currency, even though the interest rate is now only 5.5%. So it is like those people with negative amortization but the negative "recast" is deferred until the next currency crisis (actually it was better because being short Swiss francs was very profitable). Maybe there will be none (in Poland it is unlikely in the nearest future but I think e.g. Latvia has high probability) but if there is, it will indeed be painful.
I think a similar process was happening in Argentina before the crisis and in Thailand before the Asian crisis.
The article contains some inaccuracies. In the text, it claims that 1/3 mortgages in Poland are in foreign currencies. It's not true, 1/3 of total household debt is in foreign currencies but for mortgages it is about 2/3. Last year (which was below average because the interest rate difference decreased a lot), 60% of new mortgages were in foreign currencies.
I mean trying to calibrate your life's clock to market high's and low's sub-optimizes the other things in life that really matter...
Well what really matters to me is having the highest possible net worth and disposable income. It would appear that to some other people having their name on a piece of paper called a "deed" means more. To each his own.
The consensus of us housing bubbleheads is that homes are still 30% to 50% overvalued. When home prices comeback to their longterm financial equlibrium, such as 4x median income instead of 8x to 10x. Rent to price ratios in alignment, instead of the ridiculous ratio Window discribes. Prices in line with Shillers 150+ years of data, instead of being 2x as it is today. Then it will be a good time to buy.
If you don't mind losing a good chunk of value in your home, to have a better lifestyle, that is a valid reason to buy now. If you want a house at a fair value, wait.
vallejo and the bay area and the subprime mortgage crisis.
Subprime loan crisis is hitting Vallejo hard / Report predicts nearly 1 in 4 will end in foreclosure
Some day this war is going to end...cure the psychodelic music....
Some day house prices will rise....
Some day the Chinese/US stock bubble is going to end....
Some day the dollar is going to drop like a rock....
Someday is coming!
But when....Keynes had it right.....
One could start buying real estate when Business week comes out with the cover on the death of real estate.
This is OT CR, however I was wondering if you had seen PIMCO's Paul McCully's note on his Central Bank Watch newsletter that discussed in detail the unemployment puzzle and the Fed's lack of action.
PIMCO - Global Central Bank Focus- May 2007 "Requiem For A Princess"
"The Great Puzzle
So why hasnt the unemployment rate already risen? Its the great puzzle, in the words of San Francisco Fed President Janet Yellen. The short answer to the puzzle is that the labor force participation rate has fallen, accounting fully for the drop from 4.7% to 4.5% for the unemployment rate over the last year. But this doesnt make sense when you look at nonfarm payroll growth, which, again in the words of Ms. Yellen, has been gangbusters. The labor force participation rate is decidedly pro-cyclical, meaning that it goes up as tight labor markets induce new entrants into the labor market; and it goes down when soggy labor markets lead the discouraged unemployed to drop out of the labor force. So, the short answer to the puzzle is the right answer only if nonfarm payroll growth really aint gangbusters.
And new research by both Ray Stone4 of Stone and McCarthy and Sheryl King5 of Merrill Lynch suggest this is indeed the case. Please refer directly to their research for the exhaustive details, but the bottom line is simple. Detailed data in the Bureau of Labor Statistics (BLS) Business Employment Dynamics (BED) release, which comes out with a two-quarter lag, show employment growth of only 19 thousand in 2006Q3, while the nonfarm payroll tally for that quarter was over 450 thousand. More recently, the BLSs more timely Job Opening and Labor Turnover Survey (JOLTS) for April last month! showed job openings rose only 24 thousand, with this series essentially flat since last August. The JOLTS report also showed that new hires in March (this data subset is released with a one month lag) fell 29 thousand.
Something smells more than fishy here. Not that Im accusing the BLS of any skullduggery. None! Rather, it is a historical fact that nonfarm payrolls before annual benchmark revisions, which continue for six years! understate employment early in recoveries (leading to the inevitable contemporaneous label of "jobless recovery"), while they overstate employment late in expansions.
And a key reason is that the BLS, while very good at counting heads at existing firms, must make an assumption, in real time, about the birth-death rate for firms, so as to estimate the net gain/loss in jobs as firms open and close, a never-ending feature of a capitalist economy. In the early years of expansions, the birth assumption systematically is too low and the death assumption is systematically too high, which results in "jobless recoveries," which turn out to be not-so-jobless recoveries upon revision. The exact opposite holds in the late years of expansions and particularly in recessions. Such is the case, it would appear, at present.
Thus
Thus, in contrast to last August, when the job tally for the year ending March 2006 was revised up some 800 thousand, a stunningly large revision, the opposite is likely to unfold in this Augusts benchmark revision for the year ending March 2007. Not to suggest, I hasten to add, that a downward revision equal to last years upward revision is in the cards. The honest answer is that we dont know how big it will be. But available data, notably the BED and JOLTS data, point squarely to a downward revision.
So what, you say. Economists always bellyache about the quality of the data when they go against their forecasts. This is true. It is also true, however, that poor data can make for poor policy making, if and when the data is taken to be religiously true. This is particularly the case if the data is known to be lagging data of the business cycle, as is the case with the unemployment rate. Acting on the data, or refusing to act because of it, is the stuff of policy mistakes, sometimes known as recessions."
The question that comes to my mind is: Why in this computerized age does it take six months to compile accurate statistics? Within a little over a month after someone is hired or de-hired, the employer is filing reports to the IRS and the unemployment insurance authorities.
China ups share tax to cool off market
CNNMoney.com: 404 Page Not Found
In the 16-year history of the modern Chinese stock market, an increase in stamp duty has always caused a market slump over the following few weeks or ended a bull ru
Prospects dim for quick home-price recovery
Investors appear to be betting against any rapid rebound in home prices.
Prospects dim for quick home-price recovery - May. 29, 2007
Well fuck, for someone looking to buy for the first time things sure are tricky. Prices are insanely high by any standard, but they are sloooooowly falling. So do you wait, or get in now. I know you're not supposed to base individual decisions on larger trends. But buying at the top of what seems to be a considerable downswing doesn't seem to make much sense either.
Window -
I'm in the same boat in AZ. I make enough money to buy a median priced home here, but I live in a one bed apt. I figure this market has a LONG way to go.
When the rents in my area aren't two to three times cheaper than buying a home... I'll start looking. Until then I'll listen to all the crap my co-workers and buddies give me about living in an Apt.
Andrew, thanks for the PIMCO article. I think the solution to the puzzle is the BLS missed the turn.
We will see.
Best WIshes.
From the San Diego Creative Investors board:
"SDCIA, I thought you'd like to hear an update of a newer development in the secondary market of
the mortgage industry and how it may impact your financing strategies.
Secondary market investors are ordering increasing numbers of Broker Price Opinions (BPO's) on loans before they are purchased. Currently it is about a 30% sample. This is doubly true for Alt-A batches.
Basically, a BPO is conducted by a real estate professional, chosen by the investor, who assesses the true value of the property. They factor in the appraisal value, cost of repairs needed to bring to fair market value, neighborhood data, external pictures, and 90, 120, and 180 day marketing time for the property. To put it more simply: How much can the property bring if we had to sell it as an REO?
As a result we are seeing an increased number of cut values. I am not seeing enormous cuts but in many cases we are seeing 10-15% cuts. These cuts can obviously have significant effects on financing pricing and options. How? Well, as a lender we want our loans purchased on the secondary market. The more they kick loans back for lowered value based on BPOs the more our underwriters squeeze appraisal reviews on the primary level.
Why do I mention this? Many of the investors on this board stay active in making sure their financing is optimized. Just make sure to keep in mind that if you are at critical LTV points such as 80% and 90% you may have to prepare for a cut appraisal.
We all know that most appraisers are pushing value, even when they are not asked to do
so. A BPO cancels out the push.
Hope this helps give an additional window into current real property financing issues. Good luck to everyone."
for someone looking to buy for the first time things sure are tricky. Prices are insanely high by any standard, but they are sloooooowly falling. So do you wait, or get in now.
Patience will pay in the long run. Wait at least six months.
I know you're not supposed to base individual decisions on larger trends.
...ummm... why not? Don't we base our individual decisions on larger trends all the time? We try to drive less because gas is so expensive, for example.
"vallejo and the bay area and the subprime mortgage crisis."
Grew up in Vallejo. Went back to the old 'hood for the first time in 20 years in January for a funeral. Everything looked the same, but about every sixth house had a security door, which we never used to need. Asked my cousin Steve if the neighborhood had gone to hell and he said, no, those are newcomers moving up from bad neighborhoods. "They think they need the protection here, because they used to have it in their old place."
I'm betting that a lot of them "moved up" with subprime loans.
Michael in AZ,
My Girlfriend just closed on a FC in Chandler near Fashion SQ mall. 6 yr old house, she got it it for .50 on the dollar.
FC's & REO's initially were out in the boonies like Queen Creek & Avondale, FCs are slowly starting to creep into older, more stable neighborhoods while REOs are just showing up @ high end places ike Fountain Hills , PV & Scottsdale.
Avoid Gilbert, QC & Ahwatukee like the plague, as subsidence issues are major problems in many developments(and should make for a nice class action for a sharp lawyer.)
The most widely followed index (OFHEO House Price Index) will be released on Thursday.
I'm not a big fan of the OFHEO index. Maybe I'm being premature or overly optimistic, but I'm thinking that the case-shiller index is probably going to be the best measure of house prices if the house futures market hangs around.
More OT nonsense following REBear's China entry above...
Here's THIS article...
China sentences ex-official to death
Zheng Xiaoyu, the former head of State Food and Drug Administration, was convicted of accepting bribes from drug companies.
May 29 2007: 10:20 AM EDT
BEIJING (Reuters) -- China on Tuesday sentenced the former head of its food and drugs agency to death for corruption in a surprise judgment as the government sought to contain a wave of scandals over health safety.
Zheng Xiaoyu, former head of the State Food and Drug Administration, was convicted on charges of taking bribes and dereliction of duty, Xinhua news agency reported, citing the Beijing Municipal No. 1 Intermediate People's Court.
The sentence, which was unusually harsh, could still be reduced on appeal. But it reflects the weight China's top leaders are giving to the issues of corruption and food safety as they grapple with the fallout overseas after a series of safety breaches involving toxins in food and other products.
In China when they say 'heads are going to roll' they mean it.
To the folks considering buying.
It seems to me you both have a desire to own rather than rent. So act NOW! This is your life you are living, not some spectator sport. Time is the one thing you can't replace. Think the market is going down? OK, then buy with that in mind. Don't be shy. Find a place you like and offer a price that take into account your views on the future. All a seller can do is say no. But maybe you'll get lucky and find someone who's view is even darker than yours. If someone is asking $400k offer $300 or whatevever makes you comfortable. But do it the right way. Get all your financing in place, few contingencies and a short close. Dare them to say no.
Anyway, that's how I've had success buying property.
CR,
How about the article in the WSJ today about Eastern Europeans taking out mortgages in other currencies! Now that's nutso.
Anyway, that's how I've had success buying property.
I think banker is mostly right... if you are ready to buy, can afford it at current prices, then do it.
On the other hand if you can wait, aren't unhappy where you are now and think you'll have better prices and more selection in the near future then wait.
I mean trying to calibrate your life's clock to market high's and low's sub-optimizes the other things in life that really matter...
Just go in with your eyes open & have a realistic expectation.
Please forgive the OT. Is this press release really publishing a comparison chart of default experience among a number of Alt-A vendors?
"Luminent Mortgage Capital Provides Seasoned Loan Level Credit Performance Relative to Alt-A Industry Metrics" 5/29
How about the article in the WSJ today about Eastern Europeans taking out mortgages in other currencies! Now that's nutso.
banker - you ready to do a start up? How about...
Sorry. Page not found.
Hope it hasn't been taken already...
banker,
But maybe you'll get lucky and find someone who's view is even darker than yours. If someone is asking $400k offer $300 or whatevever makes you comfortable.
Does offering a mere $300 to get lucky actually work? I'd be far more comfortable offering a dinner and a movie on the hopes of getting lucky. But hey, what do I know?
A freudian slip is saying one thing, but meaning your mother.
No offense intended. You make a great point. I love the dark humor. Sorry.
the looting of corporate America-
Private Equity's Big Debt Burden
"Decline in Lending Standards
Ross argues that the current wave of buyouts will end badly because some private equity firms have stripped too much value from some companies, leaving them ill-equipped to operate their businesses. "Only about 11% of [high-yield offering] proceeds have been for capital expenditures to enlarge the business, with the rest going for sponsor dividends, stock buybacks, refinancing of existing debt or LBOsnot the most exciting uses of proceeds," Ross says.
He's also alarmed by the decline in corporate lending standards, which he compares to the subprime mortgage meltdown. "I believe that credit markets have been recklessly permissive to the point where instead of traditional risk-adjusted rates of return the market is dealing with what I would call risk-ignored rates of return," Ross said. "The rating agencies recently have begun to revise upward their forecasts for late '07 and '08 but are still a bit below mine."
Few would argue that defaults will remain at the current low level. The question now is how high and how quickly they'll rise, and how broad the problem will be."
homebuilder concern-
Business & Financial News, Breaking US & International News | Reuters.com
Japan's Industrial Production Fell for a Second Month in April
- Bloomberg.com
Pulte to slash work force by 16%
Nation's fourth-largest homebuilder to take up to $50 million pretax charge in restructuring.
Pulte to slash workforce by 16 percent in restructuring - May. 29, 2007
"Despite reducing our work force by approximately 25 percent in 2006 and early 2007, we find it necessary at this time to further reduce overhead expenditures, including, unfortunately, reducing an additional sixteen percent of our jobs,"
REBear-
don't worry, we are decoupled from the world....
even though Japanese prpoduction declined cause were headed to recession, our markets will rally based on the fact that greater fools currently live in China and are supporting higher valuations...
"the we're not as bad as them theory"
Why is the data so bad? Reagan cut funding for the BLS and its never recovered.
http://www.thomaspalley.com/docs/articles/macro_policy/rewrite_economic_history.pdf
As for those so-called buddies at the office. I had the same thing during the dot com craze, as they day-traded from work and was kidded for not buying pets.com et al.
Give it a year.
banker,
Concerning these mortgages in other currencies in Eastern Europe. This is old news. It was popular as far as I remember. When the interest rates in local currency were double digits, mortgage in euros or Swiss francs were very tempting. The new problem now is that due to exorbitant house prices the debt burden got really dangerous and many people would not be able to service the debt in local currency, even though the interest rate is now only 5.5%. So it is like those people with negative amortization but the negative "recast" is deferred until the next currency crisis (actually it was better because being short Swiss francs was very profitable). Maybe there will be none (in Poland it is unlikely in the nearest future but I think e.g. Latvia has high probability) but if there is, it will indeed be painful.
I think a similar process was happening in Argentina before the crisis and in Thailand before the Asian crisis.
The article contains some inaccuracies. In the text, it claims that 1/3 mortgages in Poland are in foreign currencies. It's not true, 1/3 of total household debt is in foreign currencies but for mortgages it is about 2/3. Last year (which was below average because the interest rate difference decreased a lot), 60% of new mortgages were in foreign currencies.
I mean trying to calibrate your life's clock to market high's and low's sub-optimizes the other things in life that really matter...
Well what really matters to me is having the highest possible net worth and disposable income. It would appear that to some other people having their name on a piece of paper called a "deed" means more. To each his own.
This is an ongoing discussion over here:
The Housing Bubble Blog.
The consensus of us housing bubbleheads is that homes are still 30% to 50% overvalued. When home prices comeback to their longterm financial equlibrium, such as 4x median income instead of 8x to 10x. Rent to price ratios in alignment, instead of the ridiculous ratio Window discribes. Prices in line with Shillers 150+ years of data, instead of being 2x as it is today. Then it will be a good time to buy.
If you don't mind losing a good chunk of value in your home, to have a better lifestyle, that is a valid reason to buy now. If you want a house at a fair value, wait.