Price per Sq Ft is the right yard stick to gauage the decline.

Median does not work well because there are more deals at the upper end now.

Do you think this is real:

Working Group on Financial Markets - Wikipedia, the free encyclopedia

there are rumors they injected $57B into the market. Hard to imagine.

Stephen Roach wants you to prepare for the downside.
Morgan Stanley - Global Economic Forum 

Interesting bit this:

Seven years ago, the optimists argued that equities as a broad asset class were in reasonably good shape – that any excesses were concentrated in about 350 of the so-called Internet pure-plays that collectively accounted for only about 6% of the total capitalization of the US equity market at year-end 1999. That view turned out to be dead wrong.

Steve, Thanks for the contrarian reference (on why rumors of the consumer's demise have been greatly exaggerated). Even this report, however, sees a significant slowing ahead in that:

1. "A reduction in housing equity withdrawal will certainly be a drag on consumer spending in coming quarters."
2. Debt service ratios have increased by several percentage points in recent years.
3. "We see savings rates rising gradually over the next 5 years."

Then there are the usual canards about the subprime problems being limited to the subprime sector, and that consumers will stay solvent because stock prices have gone up so much. Finally, "we see consumer balance sheets as quite healthy" seems a bit delusional in light of all the foreclosures.

Anyway, it's good to see the other point of view...

Steve,

I have soome quibbles with the report you link to. First, it makes the idiotic, and tired, claim that only a small fraction of MEW went to consumption. How can anyone be foolish enough to belive that money used to pay down other debt, which went toward consumption, hasn't fueled consumption?

Next, they make the mistake that many others make in confusing the balance sheet of the average family with that of the median.

Financial assets make up 61% of all household assets, but are held mostlty by those near the top. Are they so clueless to believe that people refinanced taking cash out, often taking on a higher interest rate, at a time they had hundreds of thousands in financial markets. 40% of mortgages last year put no money down. Because the borrowers were too foolish to tap their huge piles of stocks?

Thanks. Seeing that makes me feel much better about my short positions.

Everyone sees slowing consumer demand ahead. Hell, the Fed is counting on it! I think the overall point is that consumption growth will slow, not fall off a cliff.

Steve,

I think the major concern is that if consumers slow down their borrowing and spending that will cause asset prices to fall, forcing the consumer to slow down their borrowing and spending even more, causing asset prices to fall, forcing the consumer to slow down their borrowing and spending even more...

That's the danger inherent in wealth that's heavy on assets and light on cash. Assets have a way of collapsing just when people need them most.

Ron,

A couple of points...

Ask yourself why Kash focuses on 2000?

The paper does mention the negative savings rate.

Defaults are up because credit was extended to people who didn't deserve the credit. Who wouldn't expect defaults to rise in such a situation?

‘If we could wave a wand and housing prices go up 10 percent, the subprime mortgage problem would disappear’

And if home prices go down, the problems gets worse.

This is what most people don’t get. Supply and demand. Home prices went up because there was a lot of demand that outstripped supply. But this demand was at least 30% speculative, or simply phantom, non-existent demand.

Now that people are realizing that the runup in prices was because of a FALSE demand, the prices will go down to whatever the market will bear.

And the idiot that bought 15 homes? He’s one that skewed that demand curve, as the REIT ‘assumed’ that he was 15 people wanting a home.

I predict that the housing supply is so large, that there are not enough people in the US to fill them up.

"Last month's sales made for the slowest February since 1997. . ." The population of California has grown by what, about 8% since 1997? If you factor-in that detail, how far back do we have to go to see such a slow February?

Pimco Says Subprime Collapse May Spread to Alt-A, Jumbo Loans

1] `subprime loans performance will carry over to Alt-A and possibly Jumbo prime markets.

2]U.S. median home prices will fall by 4 to 5 percent this year.

3]Housing and related industries account for about 23 percent of the U.S. economy.

Kiesel said, “housing is the next Nasdaq bubble.”

Pimco Says Subprime Woes May Spread to Alt-A, Jumbo (Update1) - Bloomberg.com

Steve,

After a long week filled with work-related frustrations, your link to the Societe General report was just the tonic I needed. Now, instead of feeling sorry myself, I am comforted by the reminder that there are so many "professionals" who are less fortunate than myself -- especially those employed as economists at Wall Street firms. What a misery it must be to have to willfully disregard the self-evident message of the data, and instead be obliged to construct a tortuous, tendentious argument drawing the opposite conclusion. Every week brings another sh*t twinkie, and they're required to take a big bite and smile -- while averring it's a delectable chocolate eclair.

All part of Mother Nature's cruel and inscrutable plan, I suppose. TGIF, I say, in conclusion, offer this little reminder that -- however bad it was -- it could have been worse: http://www.glass5.com/MF%20Dung%20Beetle.jpg

Anonymous | 03.16.07 - 3:41 pm = me

NOVASTAR just laid off 300 people

Mortgage Grapevine: NOVASTAR just laid off 300 people

"
So my friends at Acceleron- still bullish? At 4:30 PM, a 2 minute conference call was held to announce "that if you are on this call and received this email", you job has been eliminated.

NFI is drowning and now the morale is lower than ever. "

A good report on why the rumors of the consumer's demise have been greatly exaggerated.

I would really love to see that first chart by quintile. I am less concerned about the bottom 20% (generally in transition or afflicted in some way). I have grave concern for the middle 40%.

Kiesel said, “housing is the next Nasdaq bubble.”

If that is all it is, then it a problem, but not a catastrophe. We were personally very heavily effected by the dat.bust and 9/11 to the tune of three negative years, but we made it through those dark days (with the help of a HELOC or three). Our real estate appreciation kept us from going under.

My hope is that continuing income growth will keep this real estate bust from growing into a larget bust than the dot.com bust.

I too heard this advertisement on the radio. One poster got a chuckle from me...

Welcome to the mortgage business..making used car dealers look good since 1999. - Brian Brady

That ad reminds me of the one I used to hear from a remodeling company ...

"Don't be cheated by dishonest remodeling companies. Give us a shot at cheating you first."