Fed mistakes of the early 2000s are indeed being repeated


By Call it Crazy   Follow   Mon, 25 Mar 2013, 8:50pm   392 views   11 comments
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History seems to be repeating itself as rising home prices are not leading to a reduction in unemployment as quickly as market strength may indicate, possibly creating another housing bubble, said Bank of America Merrill Lynch in its latest report.

"In particular, by virtue of its willingness to purchase large amounts of treasury and mortgage debt at historically low yields, the Fed appears to be condoning further expansion of such debt, with the obvious irony that it was the expansion of such debt, most notably mortgage debt, that created the crisis in the first place," said strategists Chris Flanagan and Matthew Carr of BofAML

"If it is accepted that the Fed is creating asset inflation, most notably in housing, in order to lower the unemployment rate, then it appears as if the mistakes of the early 2000s are indeed being repeated," the analysts said.

http://www.housingwire.com/news/2013/03/25/continued-qe3-may-lead-another-housing-bubble-bofaml

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  1. bmwman91


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    1   10:43pm Mon 25 Mar 2013   Share   Quote   Permalink   Like (2)   Dislike  

    BofA calling a housing bubble...not THAT'S irony!

  2. Call it Crazy


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    2   1:50pm Tue 26 Mar 2013   Share   Quote   Permalink   Like (2)   Dislike  

    robertoaribas says

    Call it Crazy says

    Continued QE3 may lead to another housing bubble: BofAML

    Is this the same BofA that bought countryslide lending at the peak of the bubble????

    just sayin...

    I guess they aren't as smart as you!!! Give me your number, I'll have them call you for real estate advice, since you're such an expert!!

  3. lostand confused


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    3   1:57pm Tue 26 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    Interesting. It certainly does feel like a bubble, with the frenzy to buy or you gonna miss out mindset.

  4. RentingForHalfTheCost


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    4   2:02pm Tue 26 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    lostand confused says

    Interesting. It certainly does feel like a bubble, with the frenzy to buy or you gonna miss out mindset.

    A lot of money can be made off shorting the bubble at the perfect time. A lot!!! Bring it on baby, I'm more than ready this time.

  5. iwog


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    5   2:18pm Tue 26 Mar 2013   Share   Quote   Permalink   Like   Dislike   Protected  

    lostand confused says

    Interesting. It certainly does feel like a bubble, with the frenzy to buy or you gonna miss out mindset.

    Not to me. It feels like we overshot to the downside to the point where even 100%-financed rental properties were cash flow positive by hundreds of dollars at closing. I don't think housing has been that cheap for 50 years so it's not surprising that we got a quick spike after the lifeguard blew the all clear whistle.

    Even with these huge increases, housing now feels reasonably affordable. $500,000 will buy you a decent home on the BART tracks and the PITI will only be around $2200 a month. Most dual income families would have no problem picking up this cost if they could come up with a down payment and financing. A 10% down would bring this up to $2400.

    RentingForHalfTheCost says

    A lot of money can be made off shorting the bubble at the perfect time. A lot!!! Bring it on baby, I'm more than ready this time.

    If you short this market, you're going to be decimated and left for dead. There is absolutely no chance we see any significant decline for at least the next three years. Furthermore I'd like to know how you intend to short a housing market now that credit default swaps are gone.

  6. RentingForHalfTheCost


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    6   2:24pm Tue 26 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    iwog says

    If you short this market, you're going to be decimated and left for dead. There is absolutely no chance we see any significant decline for at least the next three years. Furthermore I'd like to know how you intend to short a housing market now that credit default swaps are gone.

    I wouldn't take a short position yet. I agree you could get decimated. For a position I would think of the housing stocks themselves for one. Also, banks will have to undergo some more pain into the future. The first mess is far from cleared. The double whammy when it comes will be a great opportunity. The problem is in finding the top as always. We all know the signs now and they are slowly creeping back.

  7. lostand confused


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    7   2:33pm Tue 26 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    iwog says

    Not to me. It feels like we overshot to the downside to the point where even
    100%-financed rental properties were cash flow positive by hundreds of dollars
    at closing. I don't think housing has been that cheap for 50 years so it's not
    surprising that we got a quick spike after the lifeguard blew the all clear
    whistle.

    In areas like Phoenix, it did overshoot. When you can pick up a condo for 22k and a house for 60k or 80k, that is low. Or like when I was living in the midwest, my colleague bought a 38k foreclosure from the bank . If I didn't move back, I was thinking of buying a house or two or three-at those prices and 30yrs-that is like a car payment. That is low for a single family home on a lot. Now in CA, the only reason current PITI is so low is due to interest rates. It is 2. something for 15 yr mortgages and 3. something for 30 year. If it is just 7% , then that doubles the interest portion of your mortgage. These are historically low interest rates.

    The good thing is if you locked in your prices-you will only pay at that rate. But otherwise in many areas the prices are reaching 2006 levels . 2000 levels was fair-because the economy was booming , but it hasn't for twelve years and now housing itself has become like the economy-well kinda.

  8. iwog


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    8   2:38pm Tue 26 Mar 2013   Share   Quote   Permalink   Like   Dislike   Protected  

    lostand confused says

    The good thing is if you locked in your prices-you will only pay at that rate. But otherwise in many areas the prices are reaching 2006 levels . 2000 levels was fair-because the economy was booming , but it hasn't for twelve years and now housing itself has become like the economy-well kinda.

    While I'm not sure about the term "fair", I will say that the amount of ready cash has exploded since 2006. There is an ocean of American money out there and most of it is in the hands of people who could pay cash for 100 homes if they wanted to.

    Prices are going to exceed 2006 levels nationwide within a few years. I wasn't sure several years ago when I was buying houses, but I'm sure now.

  9. iwog


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    9   2:39pm Tue 26 Mar 2013   Share   Quote   Permalink   Like (1)   Dislike   Protected  

    Call it Crazy says

    I guess they aren't as smart as you!!! Give me your number, I'll have them call you for real estate advice, since you're such an expert!!

    Are you serious? There's no entity on planet earth more ignorant that a bank. I'd trust the opinions of a 3rd grader over Bank of America.

  10. Call it Crazy


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    10   7:39pm Tue 26 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    iwog says

    Are you serious? There's no entity on planet earth more ignorant that a bank. I'd trust the opinions of a 3rd grader over Bank of America.

    Are you calling Roberto a 3rd grader??? Come on, you're giving him too much credit....

  11. RentingForHalfTheCost


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    11   9:21am Wed 27 Mar 2013   Share   Quote   Permalink   Like   Dislike  

    Another probable conclusion

    Premise 1. Rob is smarter than a bank
    Premise 2. A 3rd grader is smarter than a bank
    Conclusion: Without a bank we are all 3rd graders and smarter than Robert. ;)

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