Since it better applies to the NYT article, and coincidently Barney Frank even used my dieting analogy, I will repost my thoughts with typos corrected:
Taking a broad look at the problem we are in: In the past, when most home loans were paid down through the years, owning a home was the most common/efficient means of saving. That was because saving is the hardest thing to do for most people. They spend what they bring home. So the trick was to "take it out of the check" before it is spent. Before 401k's etc, the only way for most housholds to accumulate wealth was through the purchase and paydown of a house. It was a form of forced saving. Otherwise most people just wouldn't save/accumulate in any other way.
This through the years gave the false impression that owning a house was a great investment, rather than realizing it was just the most common way people were forced to save. When it came time to retire and move down, or when people inherited assets from mom and dad, it was usually in the form of a paid off house. They took the value of the house, subtracted the price paid, and assumed it was all profit. People forgot all the money they spent day to day on the house, and calculated the return of owning realestate without considering carrying costs. It wasn't necessarily the return of realestate that was a good investment, it was the way you had to buy and pay it off that made it the only way people would accumulate wealth.
The most recent version of forced savings has been the 401ks, 457's, 403b's, roths, etc. As wealth has built over the years in these, people mistakenly thought it was the stock market that was the best place to invest (however, it was again the forced savings that built the wealth, not the stock market per se, as historically, in the last decade, the market hasn't done that great in the form of actual returns on investment-as I have explained before).
After the 2000 bubble burst, an borrowed money became cheap, many people went back to the old standby, realestate, that worked for mom and dad, but they margined heavily. Ironically, the true way mom and dad built wealth, through the forced paydown of the margined debt, was thrown aside for neg-ams and IO's.
For the average joe, wealth is built by simply spending less than you make and investing the difference. The actual return on the money is less important (within reason). If you don't save, you wont build weatlth. There are no shortcuts or tricks.
Like dieting. Eat less, move more. It's been true from the dawn of time. No matter how many diet books, weight loss programs, etc promise shortcuts, it all comes down to this same formula. If you don't eat less and move more, you aren't going to lose weight. Period.
Whatever Average Joe can do to move more and eat less is an effective diet. Whatever he cando to save more and spend less is a great investment.
I wonder with the new 95% LTV will there be all sorts of semi-criminal activity that would loan people the needed 20K for 5% down payment ona $400K starter home.
Sort of a rambling (who knows maybe I simply cannot see the coherency in the transitions) article, but I liked this bit:
Homeownership declined for families in the bottom two-fifths of the income scale. In the lowest fifth where families make less than $20,180 homeownership was only 42.4 percent in 2005, which was 3 percentage points less than it was 25 years earlier and 26 percentage points below the national average.
So by the standards set by the mandate of Fannie and Freddie, these institutions are failures: they do not help the poor into the "home ownership society". They are a marketing agency for some other purpose.
In NYC and possibly the entire state, the influence of the wealth effect due to Finance, makes this piece a nice contrast to the recent one covering million dollar apartments that you'd better write a check for if you see one that appeals to you.
There is a ways to go before this coverage of the disparity in wealth catches up with reality.
Avg Joe, I'm going to take slight exception. "In the past" people didn't save but instead spent on themselves only applies if you use the past since, well, about 1970. Maybe 1980.
I've a suspicion - unprovable, but it feels right. I think the reason for spend overwhelming save has little to do with selfishness, and much to do with people understanding things at a coarse level. I'm referring specifically to inflation, here.
Somewhere in the time I mentioned it became common wisdom that inflation was a constant. And at the GUT level, inflation means money saved for tomorrow will buy LESS than money spent today.
Interest is 3-4% as a 'constant'. And for far too many savings accounts for far too many years, interest was about 3%. So when the interest rate went over 3%, savings lost purchasing power.
Worse, officially reported inflation has always seemed to be less than apparent inflation. As but one example compare inflation to the price of gas for the past decade.
The perception is that money saved is money lost. And as I've said a number of times in a number of places, perception matters.
It's not just the desire to have. It's the belief that you need to get now or get never.
yal - the creative types are already there, figuring out what to do for folks without down payments. I think this outfit was founded by someone who left Ameridream.
My father had 12 years education and he told me the smae thing:
"Buy a house and pay off the mortgage as soon as possible - that way you will always have a place to live."
Sometimes I feel that as an immigrant to the US doing what my father told me was almost unamerican.
Everyone around me always told me:
"But you can qualify for a larger mortgage"
I rather make money on stocks (and now on PUTs) than from streaching a hugh debt for a larger home. I could never understand this notion of making money from a house.
You say that one man could not have caused this mess.
I say, could one man have prevented it?
The answer to that latter question is a clear and unequivocal, YES.
If Greenspan had raised interest rates more aggressively, warned of the dangers of subprime lending, and balked at Bush's tax cuts, the country would not be in the complete mess it is in today.
If he could have prevented it, he caused it.
They clearly felt that way in Thailand and Korea...as Randall Forsyth pointed out.
What is more, these comments are filled with nostrums about paying your debts and the "old days". Well, if the Chairman of your central bank is singing exactly the opposite tune, then who do you blame when the well runs dry? Is the average man supposed to match wits with the "Maestro", the Chairman of the Federal Reserve?
I Don't necessarily disagree with your point(I think).
However, and a big point:
You said "And at the GUT level, inflation means money saved for tomorrow will buy LESS than money spent today."
Not true.
Money not saved tomorrow will buy NOTHING. It won't be there. So how can it buy less than money spent today.
My point is when you get to "tomorrow" and look around at what money you have. The only money you'll see is the money YOU DIDN'T SPEND! (regardless of what return it got.) Ex: If I dont save a dollar today because it will be 80 cents tomorrow. Then when tomorrow comes I won't have 80 cents, I'll have nothing.
Since in the past, when people got to tomorrow (today) and look around, the only money they didn't spend was the equity in their home. They therefore wrongly deduced that a home was a great investment (in the form of return on money). In actuality it was simply the most effective "net" at catching the money as it flowed through ones hands.
In essense. If you spend a dollar today because you fear it will only be 80 cents later. When you actually get to tomorrow, you will have 0 cents, you spent it all, when you could have at least had 80 cents. Anything that forced you to save that dollar yesterday, even if it's only worth 80 cents today, will look like the best investment you've made.
P.S. The advice the buyers of the last five years have been getting from their parents (who have arrived at tomorrow and see that their house was the only place where they accumulated wealth),
"Buy as big a house as you can afford". In other words: I wish a higher percentage of my money got caught in the house "net".
Kirk Spencer is right. The point is (setting aside depreciation) that if you pay 80 cents today, then a year from now, you have 0 dollars, but something worth 80 cents. If you buy it one year from now, you might only have 75 cents of purchasing power due to inflation, and just after you buy it, you'll have 0 dollars, and something worth 75 cents. So the fiscal virtue of saving is not at all a given.
professor poland and kirk are certainly right, that is if you decided to buy something today that you would still have tomorrow. Bout the only thing you buy today and have tomorrow (i.e. a long time from now) has historically been a house. Which is why houses, although they deteriorate like everything, have historically been considered an appreciating asset.
Just like cars are generally accepted as a depreciating asset, unless of course you are one of the few that still owned a good condition 67 mustang...which you could sell for more today than you bought if for new.
But these buyers are coming forward at the bargain prices. Accredited said it was selling the mortgages at a substantial discount. The company expects to take a one-time charge of $150 million related to the sale of the loans.
Accredited also is setting aside a reserve of $40 million to satisfy any future claims against the loans, including potential defaults. Secondary market buyers can require mortgage originators such as Accredited to buy back bad loans if they default early in their terms.
So they are selling thel oans at a deep discount and are still responsible for any defaults? Well, that explains why the Wall St investment banks would buy these loans.
They basically created the mess, profited from it all the way up, now will profit on the way down. The free market, gotta love it!
"For every flip like this, there's a hard working, young family who would love to buy this as a starter home, put down roots, fix it up, and become part of a community. Because this house is being kept empty by a greedy flipper, that means that somewhere there's a young couple wasting their money on a rental unit somewhere. The neighborhood suffers because they don't have that nice family living there."
Notice the quote "Homeownership also has a more problematic side: it locks people into an asset and ties them to a place. Too much homeownership might restrict mobility, and that may not be a good thing, Professor Gyourko said."
God forbid that people be tied to a place! Or develop friends, or family, or civic connections, or knowledge and comfort with one's surroundings!
People forget their function, which is to be a responsive Factor of Production, ready to be moved around at the will of employers.
Too much of the world lives like this already. I guess this is now in store for the American worker. It would sure help capitalism!
The investors/flippers helped create an artificial scarcity driving up prices, making those who wanted to actual "use" the property pay more than they had to. Scarcity is over.
Like those who steal and horde grain dropped from the sky in Rwanda only to sell it to those it was meant for in the first place.
As I review my comments over the last few days, I have come to realize I rarely offer any real data, and usually just say things that have been said many times before in other ways. I fear the I, and those like me may either drive the truly informative posters away, or drown them out by sheer numbers, turning this blog inot another one of the other housing related blogs out there.
I truly do not want to see that. This site is different.
I will refrain from posting useless musings in the future. I don't want to be excluded from the wisdom of so many on this blog.
Thanks for making me feel included up to this point.
Joe, I don't think your musings are "useless." Far from it.
We get to collective wisdom by musing aloud in the comments, and then having everybody and his pet kitty jumping in with the things we forgot to take into account. Everybody gets to alternate being the jumper and the jumpee.
Besides, you only feel as if you are musing too much because dryfly isn't here today to redefine the term "musing."
(Now dryfly gets to be the jumper and Tanta gets to be the jumpee.)
It's not the homeownership dream that's clouded - it's the homeownership freebie.
Hey people, please feel free to dream and to work towards that dream. Save some money. Build your credit.
But the total giveaways of the last few years are over. Giving a fool with no savings, bad credit and a bad work history a half million dollar loan is not the fulfillment of a dream. It's stupid and it's driven by short term greed.
But to the mainstream press the unworthy idiot with the the giveaway loan he can't pay back is a poor victim about to lose his dream. What a crock.
All this rhetoric about homeownership yet no one can state the one main reason for all the reason the economy is shifting; that people are addicted to credit! The only reason homeownership has increased to 70% is because we have lowered the bar so low that even homeless folks in Florida were able to buy homes. Not only, but the mentality of buy today and pay tomorrow is so prevalent it carriers into our national trade deficit.
But yes, homeownership isnt for everyone but what does Bush have to say about this?
Promoting homeownership has been a cornerstone of President Bushs ownership society. He has declared June to be National Homeownership Month.
Ownership society? What the hell kind of Orwellian double-speak is that? Okay, so I want to own an Abrams Tank, does that mean I should have one? We are in a vast bubble and the implosion of the sub-prime market speaks directly to that. Wall Street lenders margin called these folks and guess what, they were cash dry! So I guess they did get OWNED by someone.
Pretty good stuff, even if it doesn't include any "lies, damned lies and statistics".
CR's excellent at putting statistics into context, especially through all his wonderful charts. However, those who focus on statistics exclusively -- economists? -- tend to miss the boat. [And no, I'm not saying CR does this.]
Bubbles, just as with normal economic cycles, are largely psychological in nature. Only "irrational exuberance" can lead to such madness as pets.com and condoflip.com. It's foolhardy not to expect a equally irrational downside reaction as well, which is why I'm so bearish.
Remember the phrase "When you find yourself in a hole, stop digging!"? We've dug ourselves in so deep that we may not see daylight for at least a decade.
OK, brothers, don't start getting too nice to me, or I'll have to start that "breath of fresh battery acid" thing again.
Honestly, I try to remember that bad shit can happen to good people (as well as bad shit happening occasionally to bad people). It's why I have to try to take a balanced approach to questions of people struggling to make mortgage payments. Sometimes they're just good people dealing with unfair shit. That doesn't make them angels (and it assuredly doesn't make me one). It makes us fellow human beings, welcome to the world of.
End homily; return to regularly scheduled cynicism.
Between races at Santa Anita this afternoon, there was a horseshoe pitching promotion: ringer wins a million dollars, and closest gets five grand. No ringers, but a guy from Rancho Palos Verdes has a leaner worth the 5K. He's interviewed about what he was going to do with the cash. I imagined he'd say he planned on plowing it into some pick 6 tickets, but instead, he said that his mortgage had hit him hard this past year and he was going to put the money toward that...
Now that sentiment appears to have turned the corner and confidence is rapidly draining away from the colective consciousness, can I move 100 steps forward and ask when the recovery is going to take place? Looking into my crystal ball I somehow envisage that 2012 will be the year that things get going again after a deep recession. Am I being too contrarian and premature to think like this?
If Average Joe posts one more apology for posting apologies, I'm going to settle on the view that he is a wierd troll.
If arbo posts one more rallying cry to string up some single figure that is the cause of all this mess without considering the thousands of others who would be only too willing to do the same job, I'm going to start screaming. Please consider the nature of the participants in this bubble and see if they were not groomed for this heist. Consider those stagnant wages and what other options most people had for increasing their "earned income" to qualify for avoiding the landlord.
Thank you Sue for such a thoughtful post.
The interest deduction has had its day. Already a lot of pols anxious to sieze that loot. It'll come disguised in a help-the-poor bill some day soon. Expect limits on the deduction to interest on some figure that gets progressively smaller. Another nail in the coffin of the next RE bubble, perhaps the last one.
Looking into my crystal ball I somehow envisage that 2012 will be the year that things get going again after a deep recession.
Anthony, ever read about "peak spenders"? Several authors have shown a compelling correlation between the economy and the population of people in their peak spending years. Well... due to aging boomers, that age group will go into serious decline from 2010 until 2020.
TJ, Yes, I know about that theory. So what you are saying is that 2012 may only be near beginning of the pain, not the end of it. That sounds very painful...... unbearable even!
This economy is looking to be in more trouble all the time. Slower growth, higher inflation, and Sub Prime problems just beginning.....
Kass, on a roll;
Best of Kass: Subprime Bracketology | Active Trader Update | Financial Articles & Investing News | TheStreet.com
Since it better applies to the NYT article, and coincidently Barney Frank even used my dieting analogy, I will repost my thoughts with typos corrected:
Taking a broad look at the problem we are in: In the past, when most home loans were paid down through the years, owning a home was the most common/efficient means of saving. That was because saving is the hardest thing to do for most people. They spend what they bring home. So the trick was to "take it out of the check" before it is spent. Before 401k's etc, the only way for most housholds to accumulate wealth was through the purchase and paydown of a house. It was a form of forced saving. Otherwise most people just wouldn't save/accumulate in any other way.
This through the years gave the false impression that owning a house was a great investment, rather than realizing it was just the most common way people were forced to save. When it came time to retire and move down, or when people inherited assets from mom and dad, it was usually in the form of a paid off house. They took the value of the house, subtracted the price paid, and assumed it was all profit. People forgot all the money they spent day to day on the house, and calculated the return of owning realestate without considering carrying costs. It wasn't necessarily the return of realestate that was a good investment, it was the way you had to buy and pay it off that made it the only way people would accumulate wealth.
The most recent version of forced savings has been the 401ks, 457's, 403b's, roths, etc. As wealth has built over the years in these, people mistakenly thought it was the stock market that was the best place to invest (however, it was again the forced savings that built the wealth, not the stock market per se, as historically, in the last decade, the market hasn't done that great in the form of actual returns on investment-as I have explained before).
After the 2000 bubble burst, an borrowed money became cheap, many people went back to the old standby, realestate, that worked for mom and dad, but they margined heavily. Ironically, the true way mom and dad built wealth, through the forced paydown of the margined debt, was thrown aside for neg-ams and IO's.
For the average joe, wealth is built by simply spending less than you make and investing the difference. The actual return on the money is less important (within reason). If you don't save, you wont build weatlth. There are no shortcuts or tricks.
Like dieting. Eat less, move more. It's been true from the dawn of time. No matter how many diet books, weight loss programs, etc promise shortcuts, it all comes down to this same formula. If you don't eat less and move more, you aren't going to lose weight. Period.
Whatever Average Joe can do to move more and eat less is an effective diet. Whatever he cando to save more and spend less is a great investment.
P.S. This is relevant, because when this is understood on a broad scale by average joe.....housing drops like a rock.
Average Joe is beginning to understand and so is the NYT.
The mortgage interest deduction is a giant subsidy for the mortgage industry, not homeowners as a whole.
I doubt it promotes affordability- as homeowners bid house prices higher knowing they can swing a higher payment with higher after tax-income.
Ideally the mortgage interest deduction should be phased out, say over the next 10 years.
We taxpayers have subsidized all this mortgage madness. Who helped a subprime borrower buy a house in Riverside that they couldn't afford?
We all did.
This is almost as dumb as ethanol subsidies...
Loan sharks or gray market for money.
I wonder with the new 95% LTV will there be all sorts of semi-criminal activity that would loan people the needed 20K for 5% down payment ona $400K starter home.
So Typical of NYT to arrive at the wrong conculsion.
Instead of arriving to the conculsion that home prices are just too high they conculde that "home ownership is not for everyone"
Sort of a rambling (who knows maybe I simply cannot see the coherency in the transitions) article, but I liked this bit:
Homeownership declined for families in the bottom two-fifths of the income scale. In the lowest fifth where families make less than $20,180 homeownership was only 42.4 percent in 2005, which was 3 percentage points less than it was 25 years earlier and 26 percentage points below the national average.
So by the standards set by the mandate of Fannie and Freddie, these institutions are failures: they do not help the poor into the "home ownership society". They are a marketing agency for some other purpose.
In NYC and possibly the entire state, the influence of the wealth effect due to Finance, makes this piece a nice contrast to the recent one covering million dollar apartments that you'd better write a check for if you see one that appeals to you.
There is a ways to go before this coverage of the disparity in wealth catches up with reality.
Avg Joe, I'm going to take slight exception. "In the past" people didn't save but instead spent on themselves only applies if you use the past since, well, about 1970. Maybe 1980.
I've a suspicion - unprovable, but it feels right. I think the reason for spend overwhelming save has little to do with selfishness, and much to do with people understanding things at a coarse level. I'm referring specifically to inflation, here.
Somewhere in the time I mentioned it became common wisdom that inflation was a constant. And at the GUT level, inflation means money saved for tomorrow will buy LESS than money spent today.
Interest is 3-4% as a 'constant'. And for far too many savings accounts for far too many years, interest was about 3%. So when the interest rate went over 3%, savings lost purchasing power.
Worse, officially reported inflation has always seemed to be less than apparent inflation. As but one example compare inflation to the price of gas for the past decade.
The perception is that money saved is money lost. And as I've said a number of times in a number of places, perception matters.
It's not just the desire to have. It's the belief that you need to get now or get never.
My father was born in 1900 and my parents were married at the start of the Depression. His perspective on housing was basic and to the point.
"Buy a house and pay off the mortgage as soon as possible - that way you will always have a place to live." He had seen times when many had no roof.
Another piece of wisdom was : "The only way a poor man can get a loan is to prove he doesn't need one."
My Father was a railroad worker with an 8th grade education so his advice was the standard of the time and class.
When these bits of wisdom become standard again, then we will be at the bottom of the credit cycle.
yal - the creative types are already there, figuring out what to do for folks without down payments. I think this outfit was founded by someone who left Ameridream.
http://www.dpfunder.com/howitworks.htm
NC Jim,
My father had 12 years education and he told me the smae thing:
"Buy a house and pay off the mortgage as soon as possible - that way you will always have a place to live."
Sometimes I feel that as an immigrant to the US doing what my father told me was almost unamerican.
Everyone around me always told me:
"But you can qualify for a larger mortgage"
I rather make money on stocks (and now on PUTs) than from streaching a hugh debt for a larger home. I could never understand this notion of making money from a house.
Worried,
You say that one man could not have caused this mess.
I say, could one man have prevented it?
The answer to that latter question is a clear and unequivocal, YES.
If Greenspan had raised interest rates more aggressively, warned of the dangers of subprime lending, and balked at Bush's tax cuts, the country would not be in the complete mess it is in today.
If he could have prevented it, he caused it.
They clearly felt that way in Thailand and Korea...as Randall Forsyth pointed out.
What is more, these comments are filled with nostrums about paying your debts and the "old days". Well, if the Chairman of your central bank is singing exactly the opposite tune, then who do you blame when the well runs dry? Is the average man supposed to match wits with the "Maestro", the Chairman of the Federal Reserve?
Get serious.
Kirk,
I Don't necessarily disagree with your point(I think).
However, and a big point:
You said "And at the GUT level, inflation means money saved for tomorrow will buy LESS than money spent today."
Not true.
Money not saved tomorrow will buy NOTHING. It won't be there. So how can it buy less than money spent today.
My point is when you get to "tomorrow" and look around at what money you have. The only money you'll see is the money YOU DIDN'T SPEND! (regardless of what return it got.) Ex: If I dont save a dollar today because it will be 80 cents tomorrow. Then when tomorrow comes I won't have 80 cents, I'll have nothing.
Since in the past, when people got to tomorrow (today) and look around, the only money they didn't spend was the equity in their home. They therefore wrongly deduced that a home was a great investment (in the form of return on money). In actuality it was simply the most effective "net" at catching the money as it flowed through ones hands.
My answer was confusing.
In essense. If you spend a dollar today because you fear it will only be 80 cents later. When you actually get to tomorrow, you will have 0 cents, you spent it all, when you could have at least had 80 cents. Anything that forced you to save that dollar yesterday, even if it's only worth 80 cents today, will look like the best investment you've made.
P.S. The advice the buyers of the last five years have been getting from their parents (who have arrived at tomorrow and see that their house was the only place where they accumulated wealth),
"Buy as big a house as you can afford". In other words: I wish a higher percentage of my money got caught in the house "net".
Kirk Spencer is right. The point is (setting aside depreciation) that if you pay 80 cents today, then a year from now, you have 0 dollars, but something worth 80 cents. If you buy it one year from now, you might only have 75 cents of purchasing power due to inflation, and just after you buy it, you'll have 0 dollars, and something worth 75 cents. So the fiscal virtue of saving is not at all a given.
Has anyone seen anything on the origination dates of the bad subprime loans? Were they 2006 loans or 04-05????
Express an Opinion | U.S. Senator Christopher J. Dodd
professor poland and kirk are certainly right, that is if you decided to buy something today that you would still have tomorrow. Bout the only thing you buy today and have tomorrow (i.e. a long time from now) has historically been a house. Which is why houses, although they deteriorate like everything, have historically been considered an appreciating asset.
Just like cars are generally accepted as a depreciating asset, unless of course you are one of the few that still owned a good condition 67 mustang...which you could sell for more today than you bought if for new.
Heres a story Ben linked to: "Ailing Accredited to sell $2.7 billion of its home loans"
But these buyers are coming forward at the bargain prices. Accredited said it was selling the mortgages at a substantial discount. The company expects to take a one-time charge of $150 million related to the sale of the loans.
Accredited also is setting aside a reserve of $40 million to satisfy any future claims against the loans, including potential defaults. Secondary market buyers can require mortgage originators such as Accredited to buy back bad loans if they default early in their terms.
So they are selling thel oans at a deep discount and are still responsible for any defaults? Well, that explains why the Wall St investment banks would buy these loans.
They basically created the mess, profited from it all the way up, now will profit on the way down. The free market, gotta love it!
"For every flip like this, there's a hard working, young family who would love to buy this as a starter home, put down roots, fix it up, and become part of a community. Because this house is being kept empty by a greedy flipper, that means that somewhere there's a young couple wasting their money on a rental unit somewhere. The neighborhood suffers because they don't have that nice family living there."
http://bubbletracking.blogspot.com/2006/11/it-just-keep-going-and-going-and-going.html
http://bubbletracking.blogspot.com/2007/03/truth-in-advertisement-in-santa-monica.html
NYT: Promoting homeownership has been a cornerstone of President Bushs ownership society. He has declared June to be National Homeownership Month.
Mission Accomplished!
Notice the quote "Homeownership also has a more problematic side: it locks people into an asset and ties them to a place. Too much homeownership might restrict mobility, and that may not be a good thing, Professor Gyourko said."
God forbid that people be tied to a place! Or develop friends, or family, or civic connections, or knowledge and comfort with one's surroundings!
People forget their function, which is to be a responsive Factor of Production, ready to be moved around at the will of employers.
Too much of the world lives like this already. I guess this is now in store for the American worker. It would sure help capitalism!
Yal, Great point.
The investors/flippers helped create an artificial scarcity driving up prices, making those who wanted to actual "use" the property pay more than they had to. Scarcity is over.
Like those who steal and horde grain dropped from the sky in Rwanda only to sell it to those it was meant for in the first place.
Criminal.
As I review my comments over the last few days, I have come to realize I rarely offer any real data, and usually just say things that have been said many times before in other ways. I fear the I, and those like me may either drive the truly informative posters away, or drown them out by sheer numbers, turning this blog inot another one of the other housing related blogs out there.
I truly do not want to see that. This site is different.
I will refrain from posting useless musings in the future. I don't want to be excluded from the wisdom of so many on this blog.
Thanks for making me feel included up to this point.
Joe, I don't think your musings are "useless." Far from it.
We get to collective wisdom by musing aloud in the comments, and then having everybody and his pet kitty jumping in with the things we forgot to take into account. Everybody gets to alternate being the jumper and the jumpee.
Besides, you only feel as if you are musing too much because dryfly isn't here today to redefine the term "musing."
(Now dryfly gets to be the jumper and Tanta gets to be the jumpee.)
Billionaire Jim Rogers "This is the end of the liquidity party"
Blogger: Page not found
It's not the homeownership dream that's clouded - it's the homeownership freebie.
Hey people, please feel free to dream and to work towards that dream. Save some money. Build your credit.
But the total giveaways of the last few years are over. Giving a fool with no savings, bad credit and a bad work history a half million dollar loan is not the fulfillment of a dream. It's stupid and it's driven by short term greed.
But to the mainstream press the unworthy idiot with the the giveaway loan he can't pay back is a poor victim about to lose his dream. What a crock.
Just like Tanta, reaching out to others during a time when most would only be concerned with themselves.
You are an angel.
I know, like me, there are many here thinking positive thoughts for you.
I will compromise and only muse when it's simply irresistable.
All this rhetoric about homeownership yet no one can state the one main reason for all the reason the economy is shifting; that people are addicted to credit! The only reason homeownership has increased to 70% is because we have lowered the bar so low that even homeless folks in Florida were able to buy homes. Not only, but the mentality of buy today and pay tomorrow is so prevalent it carriers into our national trade deficit.
But yes, homeownership isnt for everyone but what does Bush have to say about this?
Promoting homeownership has been a cornerstone of President Bushs ownership society. He has declared June to be National Homeownership Month.
Ownership society? What the hell kind of Orwellian double-speak is that? Okay, so I want to own an Abrams Tank, does that mean I should have one? We are in a vast bubble and the implosion of the sub-prime market speaks directly to that. Wall Street lenders margin called these folks and guess what, they were cash dry! So I guess they did get OWNED by someone.
Dr. Housing Bubble
I'll second that, Joe. She's beautiful.
Pretty good stuff, even if it doesn't include any "lies, damned lies and statistics".
CR's excellent at putting statistics into context, especially through all his wonderful charts. However, those who focus on statistics exclusively -- economists? -- tend to miss the boat. [And no, I'm not saying CR does this.]
Bubbles, just as with normal economic cycles, are largely psychological in nature. Only "irrational exuberance" can lead to such madness as pets.com and condoflip.com. It's foolhardy not to expect a equally irrational downside reaction as well, which is why I'm so bearish.
Remember the phrase "When you find yourself in a hole, stop digging!"? We've dug ourselves in so deep that we may not see daylight for at least a decade.
OK, brothers, don't start getting too nice to me, or I'll have to start that "breath of fresh battery acid" thing again.
Honestly, I try to remember that bad shit can happen to good people (as well as bad shit happening occasionally to bad people). It's why I have to try to take a balanced approach to questions of people struggling to make mortgage payments. Sometimes they're just good people dealing with unfair shit. That doesn't make them angels (and it assuredly doesn't make me one). It makes us fellow human beings, welcome to the world of.
End homily; return to regularly scheduled cynicism.
Anecdotal indicator warning...
Between races at Santa Anita this afternoon, there was a horseshoe pitching promotion: ringer wins a million dollars, and closest gets five grand. No ringers, but a guy from Rancho Palos Verdes has a leaner worth the 5K. He's interviewed about what he was going to do with the cash. I imagined he'd say he planned on plowing it into some pick 6 tickets, but instead, he said that his mortgage had hit him hard this past year and he was going to put the money toward that...
dr strangemoney, "Mission Accomplished!"
Good one. LMAO!
Now that sentiment appears to have turned the corner and confidence is rapidly draining away from the colective consciousness, can I move 100 steps forward and ask when the recovery is going to take place? Looking into my crystal ball I somehow envisage that 2012 will be the year that things get going again after a deep recession. Am I being too contrarian and premature to think like this?
If Average Joe posts one more apology for posting apologies, I'm going to settle on the view that he is a wierd troll.
If arbo posts one more rallying cry to string up some single figure that is the cause of all this mess without considering the thousands of others who would be only too willing to do the same job, I'm going to start screaming. Please consider the nature of the participants in this bubble and see if they were not groomed for this heist. Consider those stagnant wages and what other options most people had for increasing their "earned income" to qualify for avoiding the landlord.
Thank you Sue for such a thoughtful post.
I don'think you can pull the rug out from people on the interest deduction.
Lots of sensible people that have taken out thirty year mortgages before 2000 would be crushed.
The stupid part was the >90% LTV stuff along with the dangerous ARMs out there.
The interest deduction has had its day. Already a lot of pols anxious to sieze that loot. It'll come disguised in a help-the-poor bill some day soon. Expect limits on the deduction to interest on some figure that gets progressively smaller. Another nail in the coffin of the next RE bubble, perhaps the last one.
The 1-time deduction is on a hit list too.
Looking into my crystal ball I somehow envisage that 2012 will be the year that things get going again after a deep recession.
Anthony, ever read about "peak spenders"? Several authors have shown a compelling correlation between the economy and the population of people in their peak spending years. Well... due to aging boomers, that age group will go into serious decline from 2010 until 2020.
TJ, Yes, I know about that theory. So what you are saying is that 2012 may only be near beginning of the pain, not the end of it. That sounds very painful...... unbearable even!