patrick.net

Bellingham Bob says

The housing bubble was a period of free money that allowed this country to really screw itself up -- the trillion-dollar wars and the accumulating trillion-dollar trade deficits.
The recession we have now is just the natural state affairs, now that the trillion-dollar per year inflow from the bubble machines is gone.
http://research.stlouisfed.org/fred2/graph/?g=1U3
Not 1 person in 100 understands that graph

That was pretty much the point I was trying to make.

Btw, great way to get someone to look at the graph.
While the graph makes it look like there was a massive falloff in household debt, it's really only showing that debt is decreasing at ~1/6th the rate at which it increased during the peak of the bubble years.

BobbyS says

Real estate is an industry that's too big to fail. Too many greedy hands have too much to lose, and they won't allow their assets to dry up.

Oh I see, so they are all above the fundamental laws of economics and nature. LOL.

The Great thing about writing off losses, is you get to start fresh.
American can't get back on track and in action until it feels it has either regained the lost wealth(Aint going to happen in the twenty teens) or we write off the lost debt and start fresh. There's always more to be gained going forward than there is looking back waiting for losses to catch up.

And the next stimulus will be Cash for Klutzes.
Uncle Sam will pay you break your crap and buy new.

shrekgrinch says

Yes, he IS that stupid. Guess who was the numero dos guy that received the most in campaign contributions from Freddie and Fannie?
A junior senator from Illinois. Barack Hussein Obama
http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html
Christopher Dodd was numero uno because he did a lot with getting CRA and other crap out there while leaning on regulators to look the other way when some of them smelled a foul stench coming from CountryWide and other such institutions.

Nice try, but you lose points for forgetting to mention Barney Frank in that propaganda piece.

You guys don't get it. All guys in Washington want the same salaries,perks and pensions they currently have. What is so hard to understand when they want to restore bubble prices?

atst1138 says

Shawn, to clarify I didn't mean to imply that housing appreciation should pay the full costs of ownership. I do think people willingly pay the awful terms on a 30 year mortgage (all the interest up front) only because of the assumption of housing appreciation. I don't know that the joys of being a homeowner are worth the added costs to most people when they look at the bottom line on what the mortgage will cost them over the life of the loan.

I paid the "awful" terms on a 30 year mortgage with my first and second homes because mortgage/taxes/insurance/maintenance cost less than renting a comparable property, that wasn't going to change with interest rates which hit double digits in the 1980s, and I was saving the difference/building equity fast enough to cover the transaction costs if I moved in a few years.

A shorter loan amortization would have given the bank less but been a bigger bite out of my budget and wouldn't be cash-flow positive if I decided to rent it out.

An ARM might have saved a little but could have cost a lot. People buying homes which are affordable now won't be happy as their payments double with interest increasing from the artificial low 3% starting rate to the 7%+ historical average.

I understand he doesn't want people to lose all their monies

Apropos of nothing, this is the second time today I've heard this word used in this context. It's also the second time in my life. The word "money" is already plural. What the hell is "monies"? I can see it if you're talking about different KINDS of money, and grouping them together, but not just a quantity of money. Did they just change the rule on that? I would ask a person, "How much money do you have?". I would never ask, "How many monies do you have?" I heard someone use the word earlier today, and now am reading it here. Strange.

I like renters. Please rent. Amen.

shrekgrinch says

Yes, he IS that stupid. Guess who was the numero dos guy that received the most in campaign contributions from Freddie and Fannie?

A junior senator from Illinois. Barack Hussein Obama

http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html

Wrong.

http://politicalticker.blogs.cnn.com/2008/10/07/fact-check-did-obama-get-second-most-money-from-freddie-and-fannie/

The Facts: Federal law forbids candidates from receiving money directly from companies. The nonpartisan Center for Responsive Politics tracks donations from employees of various companies. The center's list of contributions from Fannie and Freddie employees places Obama second. Ahead of him is Sen. Chris Dodd, Democratic chairman of the Senate Banking Committee.

The total listed for Obama is $126,349 - a tiny fraction of the approximately $390 million his campaign has raised, according to the center. The list shows McCain has received a total of $21,550 from Fannie and Freddie employees. The list includes donations of at least $200 from those who receive paychecks from Fannie and Freddie. It also includes donations from political action committees - pooled contributions from employees.

The report spans from 1989-2008 - just a portion of the time since Fannie Mae went private in 1968 and Freddie Mac was created in 1970.

The New York Times has published a separate list looking at contributions from "directors, officers, and lobbyists for Fannie Mae and Freddie Mac" for the 2008 campaign cycle. That list - using figures from the Federal Election Commission - shows McCain receiving $169,000, while Obama received only $16,000.

VERDICT: Misleading. No donations actually came from the companies. One method of measuring employee contributions does put Obama second overall, but another, for the current election cycle, shows McCain receiving significantly more.

Of course he's that stupid - his advisor Tim Geitner used a toxic mortgage to buy his house. He's the last one that should be giving advice about how to fix the real esate market.

cab says

gameisrigged says

What the hell is "monies"?

@gameisrigged

Just because you don't know how to use a dictionary, it doesn't mean a term doesn't exist. Re-read the post so you understand the implied meaning of the word in context. Then go to any American dictionary and look up the word "monies."

Just because YOU don't comprehend a word doesn't mean it doesn't exist or have a bona fide use in the English language.

Whoah, dude. Calm the eff down, man.

I know it's a word, but the dictionary merely states that it is a plural of "money", which is ALREADY plural. I don't see how it is necessary to write "monies" in that context, when "money" would do quite nicely. Perhaps you would care to explain it, rather than screaming "You don't know how to use a dictionary". That's not helpful at all.

And I have no idea where you're going with "implied meaning in context". WTF? Is that supposed to mean something?

Quant HF Mgr says

Of course he's that stupid - his advisor Tim Geitner used a toxic mortgage to buy his house. He's the last one that should be giving advice about how to fix the real esate market.

Source?

There are still areas of the USA with reasonable housing costs. Yes, many of those same areas have terrible economies (i.e. Detroit). The key is to find areas with good economies AND reasonable housing costs. I'm thinking places like Dallas, Houston, Atlanta, Kansas City, Indianapolis, Minneapolis, Chicago, etc.

I was lucky enough to land a good job in a place with VERY reasonable housing costs: Corning, NY (upstate). Yes, winters are cloudy and cold. No, it isn't the most "hip" place in the country. But I'd rather not spend my life as a debt-slave in some expensive "trendy" coastal city. For the price of a run-down shack in the SF Bay Area, you can get a mansion (with a view) here.

Bellingham Bob says

"that which satisfies human needs and wants"

That would be the definition of Marginal Utility.

wthrfrk80 says

There are still areas of the USA with reasonable housing costs. Yes, many of those same areas have terrible economies (i.e. Detroit). The key is to find areas with good economies AND reasonable housing costs. I'm thinking places like Dallas, Houston, Atlanta, Kansas City, Indianapolis, Minneapolis, Chicago, etc.

Same regions where Silicon Valley companies are expanding their workforce. Recent example, Yahoo moved some of their finance functions to Omaha NE. Ebay has some ops in NE as well. One of many examples. Yes, low costing regions are attractive.

For every baby born, we borrow $64,000 that they have to pay back someday in order to raise the price of a house they will buy from $150,000 to $800,000.

Austria, Brazil, some Germany, Cuba, Nicaragua,Philippines Slovenia and Switzerland lets some 16 year olds vote. Their young can help stop this generational looting.

tatupu70 says

Quant HF Mgr says

Of course he's that stupid - his advisor Tim Geitner used a toxic mortgage to buy his house. He's the last one that should be giving advice about how to fix the real esate market.

Source?

Actually we do know it was Bernanke that used an ARM loan to buy his in NJ.

Timmy actually took a loss on his sale where he overpaid and went underwater.

Long term stable and reasonable prices are good.
We certainly havent seen that over the past 10+ years.

That's day dreaming here! It's TOO late for US to offer lower price on food, gas, and HOUSE. LOOK AT THE DOLLAR BILL WE'RE PRINTING, TOO MUCH DEPT WILL DRIVES THE higher price on food, gas, and HOUSE.

CashOffer says

LOOK AT THE DOLLAR BILL WE'RE PRINTING, TOO MUCH DEPT WILL DRIVES THE higher price on food, gas, and HOUSE.

The counterargument is that long term interest rates are very low.

Low interest rates imply that investors in long term bonds do not think there will be much inflation. And they are betting money on that.

Or maybe long term interest rates are being faked, with the only one really buying long term bonds being the Fed itself.

Shawn says

Astst, homes aren't supposed to pay for themselves, that's a myth of the bubble era, spread by late night infomercials.

Wow, that's the best thing I've read on here in a long time. Yes.

thomas.wong1986 says

Actually we do know it was Bernanke that used an ARM loan to buy his in NJ.
Timmy actually took a loss on his sale where he overpaid and went underwater.

All ARMs aren't toxic.

So, was that BS about Giethner taking out a toxic loan then?

forgot to add one:

low std of living is good.

CashOffer says

It's TOO late for US to offer lower price on food, gas, and HOUSE.

Food ? we have lots of it. Heck we were selling it to the USSR back in the 70-80s.
Gas ? we have lots of natural gas, bio, nuclear. We sold 55% of our oil international back in the 50s.

House ?

many seemed to have forgotten what prices were before the bubble compared to incomes/inflation. There was some common sense back than when most people knew what saving vs spending was.

chip_designer says

forgot to add one:

low std of living is good.

Yep, that is called some check from nature.

I'd say we want prices to go below the cost of renting the same thing. See my calculator:

http://patrick.net/housing/calculator.php

Too much easy money and tax deductions for debt just drives up the price of houses.

Agree. There's no free lunch. Subsidies just drive up costs.

The first law of economics: There's No Free Lunch
The first law of politics: To Get Votes, You Must Promise a Free Lunch

That combination is the root of most of our problems.

"Neither a borrower nor a lender be; For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry. This above all: to thine own self be true, And it must follow, as the night the day, Thou canst not then be false to any man." Wonder what the world would be like today if we'd listened to William.

My $.02 to Henry Waxman

Find your rep here - http://house.gov/htbin/findrep?ZIP5

--------

As you are aware, we are in the midst (arguably, tail end) of a housing correction (Not downturn) and it is understandable that the Obama administration and Congress is worried that lower housing prices would cause the economy to fare worse than it currently is.

BUT, housing prices have been so high as to turn normal, hard working folks into people "Priced out" of the market. Not because they could not or did not take advantage of the "Free Money" that was doled out by Countrywide and their friends in Orange County, but because they could not fathom undertaking debt that they could not possibly every fulfill.

Govt support for the housing market is only kicking the can down the road (arguably preventing an over correction of prices) and is just drawing out the inevitable, that is housing prices in line with incomes and inflation.

What are you doing to ensure that we do not support artificial housing price bubbles, and that we return housing prices to levels that people can purchase, with debt (or not) that they will actually repay?

Thanks,
Kunal

Thanks Kunal, it's a really good template.

Don't waste your effort fighting the military industrial complex. Our government is not here to serve us, but themselves. The earlier you realize that, the earlier you will spend your valuable time and effort on the items you actually can make a difference in. Trying to convince your govt anything is just a waste of time. Any reasonably smart person know that the politicians are here to serve their own interest, not ours.

Did Obmam make things right like he promised? NO
Will Ron Paul have a chance to win? NO

So, just talk in the air. Nothing is going to change. The government here is make sure you feel a sense of security. Pay your tax so they can get rich. If you get fuck or kill, they send a police to take a record. That's it. You think they are going to investigate your case and get the truth out???!! No, they are here to make money for themselves and their families. If police don't get paid, they will go home and forget about you. Just like everybody else. If government font get paid (tax), they will go home too. In short, everybody in a capitalist society is to serve their own interest and create a illusion to serve yours.

So, wake up. Vote with your consuming habit. Money is the only method. Consumers rule everything beneath the surface. Housing price will only go down when everybody really start to feel it's a piece of shit investment. 'till then, nothing gonna change. Invest in the bell curve in mind and you usually come out alright. Be an extremist, you get killed by team 6 or go bankrupt.

Absolutely right.

drew_eckhardt says

Follow the money.

The NAR PAC is the largest in the country and third largest campaign contributor.

Although the government sponsored enterprises are guaranteeing 75% of the mortgages written the banks still pick up big origination and servicing fees.

While low home prices are good for the people we're generally not the ones paying to get politicians elected.

Shorter AF: something something last realtor strangled with the entrails of the last banker...

I completely agree that artificially inflating house prices is WRONG and BAD for this country. I know that those who own houses, especially if they're upside down in their mortgage, or still in denial about their house never really being worth those inflated prices, do not want prices to correct. I get that they will potentially lose money or have a hard time letting go of the notion that they once thought they had more wealth than they really did...but it was not real, it was FAKE, it was fraudulently created by industry crooks and the politicians they OWN by way of campaign donations.

You are correct that even with attempts to keep prices at bubble levels, people still can't afford them.

Lots of things will have to be corrected for housing to be correctly priced, and that price is LOWER not higher.

For starters, we need to have industry here again, or something of value to trade on the world market. Right now we have let American co's take factories overseas and also any job that can be outsourced to a guy on a phone or computer overseas is being sent there, too. Even some medical test reading and legal work is being sent overseas. Without decent paying jobs here, people will not be able to buy any house, let alone an artificially overpriced one.

Also, incomes fell relative to the cost of living, particularly housing. Many professionals are finding that raises are a thing of the past, and taking pay cuts just to stay employed is becoming the norm. Again, people can't afford higher house prices. They also can't afford to save for a down payment and few will ever be able to pay cash.

Corporate influence over our govt has to stop or at least be greatly reduced; we got into this mess because the rule breakers were in charge, the fox guarding the henhouse. Our regulators and politicians depend too heavily on the money of corporate special interests to represent we, the people, anymore.

America's big business sold us up the river, folks. Until we stop that runaway train we're on a path to becoming a third world country. I have this to say to anyone who thinks housing needs to go up again: Get real!

2012 is shaping up to be the Center Right vs John Birch Society.

Well-played, conservatives, well-played...

Option C for me is going to be SJC to NRT . . .

tatupu70 says

"Lower house prices are GOOD!"

Actually, low house prices are good. Falling house prices, not so much.

I think the administration understands this. But I have a feeling the solution will be more low income housing.

Stop dreaming of buying a house in Beverly Hills or Lower Manhattan with cost of rental equivalent. There are millions of houses in America where is cheaper to buy then rent.

Housing prices need to be propped to keep interest/your blood flowing to banks.

REpro says

Stop dreaming of buying a house in Beverly Hills or Lower Manhattan with cost of rental equivalent. There are millions of houses in America where is cheaper to buy then rent.

And more ofen than not, those areas where buying is cheaper are places you likely don't want to live in. Either because it is a dangerous ghetto or there are absolutely no jobs.

HousingWatcher says

And more ofen than not, those areas where buying is cheaper are places you likely don't want to live in. Either because it is a dangerous ghetto or there are absolutely no jobs.

Absolutely disagree. You are looking only around your area. Try to think out of BOX.

HousingWatcher says

I think your calculator's numbers need some updating. I entered the numbers for my house in NJ and it said that the market value is $334,000 and the market rent is $2,300. A comparable house down the street just sold last week for $800,000.

Just because some fool overpaid by half a million dollars doesn't mean the calculator is wrong. The calculator uses pretty simple math, and explains exactly how it arrived at the fair value from the rent.

Of course if the rent estimate is wrong, that's another story, but just change the rent esitmate then.