I expect that the long term trend will be down but the question is how long will it take. Looks like it hovered around 2% until 10 years ago. Ten years up, ten years down? Plus an overshoot on the downside for good measure? Not looking like short recession to me.
Well,
While HELOC money is getting cheaper (mostly pushed off the prime rate), the amount of credit available will most likely continue to decline from that insane peak of 05/06.
Further, as losses mount due to piggyback helocs crashing and burning, the lenders will contemplate more careful implementation of lines. In other words you had better be a 740 with plenty of assets and LTV under 70%.
Um, that leave out most of California and Arizona.
Someday this war's gonna end....but the homebuilders are still going up!!!
HELOC people must be spending it on something other than double half-caf, soymilk, no foam, extra cinnamon, carob shavings but no extra sweetener grande' lattes?
I guess lending standards haven't exactly become tight. Fearsome rally going on in the homebuilders again today. XHB is up nearly 40% off it's lows earlier this month, which is starting to go beyond a short-covering kind of move. If you go over to Econobrowser, they show a pretty strong correlation between fed rate cuts and a pickup in new home sales 6 months down the road. Maybe Q1/08 will be the nadir for new home sales this cycle? MEW on the other hand, I'm stunned can still be going up.
This is very bad news. If things are slowing down this soon after such a large infusion of MEW, we have a long way to go before we're out of the woods.
donna,
Yes that is some sad, harsh stuff. It is mindboggling how disconnected political debate is. Theoretical debates about free markets, complicated health care solutions, ill conceived and useless pathetic rebates. Discussion of making shrub's tax cuts permanent!
All of these idiots are going to get overtaken by political events they are not anticipating at all.
The average person doesn't understand what the hell these politicians are talking about, but they love their kids, and want a roof over their heads, food, and medical care.
Starbucks closing 100 stores is akin to the fat lady at the circus losing 2 pounds. Who cares? Is it an anomoly or a trend? Now if Starbucks closes 2500 stores and the fat lady loses 150 pounds, I might sit up and notice.
donna,
heart breaking indeed, all the more so as many of us were a bunch of screaming chicken little's in the boom times. not pleasant then, not pleasant still.
forecasting the future is not that hard with an eye on the past -
"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered."
Thomas Jefferson
The Debate Over the Recharter of the Bank Bill, 1809
"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn't want to go bankrupt."
Cicero (106 BC - 43 BC), 55 BC
and my personal favorite -
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. .... Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
I remember the days when taking a home equity loan was known as "borrowing against your house." This was helpful because people were very clear about the fact that a) they borrowing money, and b) if you did not pay it back you lose your house.
I think the whole concept of "equity withdrawal' was very misleading to people. People perceived equity like an bank account, and equity withdrawal was just taking "your" money out of the account. Some how the idea that you were borrowing money that would need to be paid back was obscured.
I wonder if we will see a come back of the old language.
Less equity extraction + decreasing real average hourly earnings = slowdown in consumption expenditures very likely.
e (2.718...)
CR,
I don't get it. Is it all existing HELOC that people just keep using as ATM ? or is it new cash-out refi taking adavantage of the BB Low rates ?
That's an amazing number and should explain how domestic demand held up in Q4, though slowing a good deal in December.
CR, or anyone, what is your take on the lag of the credit crisis impact on MEW? It seems like 4 months at least...
Sorry for the OT but related question, but did anyone catch the continuing claims number along with the spike in new claims?
I expect that the long term trend will be down but the question is how long will it take. Looks like it hovered around 2% until 10 years ago. Ten years up, ten years down? Plus an overshoot on the downside for good measure? Not looking like short recession to me.
LIBOR 1 month 3.14375
Coming down alot...
Well,
While HELOC money is getting cheaper (mostly pushed off the prime rate), the amount of credit available will most likely continue to decline from that insane peak of 05/06.
Further, as losses mount due to piggyback helocs crashing and burning, the lenders will contemplate more careful implementation of lines. In other words you had better be a 740 with plenty of assets and LTV under 70%.
Um, that leave out most of California and Arizona.
Someday this war's gonna end....but the homebuilders are still going up!!!
Yal, a large percentage of this MEW is from existing HELOCs (see the next post on CFC suspending HELOCs!).
I think this source of cash will dry up soon.
Best to all.
Check out this article and read the comments - it will just about break your heart....
All Aboard the Home Foreclosure Bus Tour - ABC News
Uh oh. Starbucks closing 100 stores?
HELOC people must be spending it on something other than double half-caf, soymilk, no foam, extra cinnamon, carob shavings but no extra sweetener grande' lattes?
I guess lending standards haven't exactly become tight. Fearsome rally going on in the homebuilders again today. XHB is up nearly 40% off it's lows earlier this month, which is starting to go beyond a short-covering kind of move. If you go over to Econobrowser, they show a pretty strong correlation between fed rate cuts and a pickup in new home sales 6 months down the road. Maybe Q1/08 will be the nadir for new home sales this cycle? MEW on the other hand, I'm stunned can still be going up.
This is very bad news. If things are slowing down this soon after such a large infusion of MEW, we have a long way to go before we're out of the woods.
Turbo,
I think it is just short coverying still but I am paying for this mistake.
donna,
Yes that is some sad, harsh stuff. It is mindboggling how disconnected political debate is. Theoretical debates about free markets, complicated health care solutions, ill conceived and useless pathetic rebates. Discussion of making shrub's tax cuts permanent!
All of these idiots are going to get overtaken by political events they are not anticipating at all.
The average person doesn't understand what the hell these politicians are talking about, but they love their kids, and want a roof over their heads, food, and medical care.
Some serious #%$& is coming soon.
Starbucks closing 100 stores is akin to the fat lady at the circus losing 2 pounds. Who cares? Is it an anomoly or a trend? Now if Starbucks closes 2500 stores and the fat lady loses 150 pounds, I might sit up and notice.
yes consumer have their money lock in backs but consumerism is what drives are economy here is a article for business owners
Lively Money: A true business takes money makes money!
donna,
heart breaking indeed, all the more so as many of us were a bunch of screaming chicken little's in the boom times. not pleasant then, not pleasant still.
forecasting the future is not that hard with an eye on the past -
"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered."
Thomas Jefferson
The Debate Over the Recharter of the Bank Bill, 1809
"The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced, if the nation doesn't want to go bankrupt."
Cicero (106 BC - 43 BC), 55 BC
and my personal favorite -
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. .... Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
Alan Greenspan 1966
hmmm, what do you think happens next?
I remember the days when taking a home equity loan was known as "borrowing against your house." This was helpful because people were very clear about the fact that a) they borrowing money, and b) if you did not pay it back you lose your house.
I think the whole concept of "equity withdrawal' was very misleading to people. People perceived equity like an bank account, and equity withdrawal was just taking "your" money out of the account. Some how the idea that you were borrowing money that would need to be paid back was obscured.
I wonder if we will see a come back of the old language.