patrick.net

Any overnight floating of Yuan will be disastrous.
Just imagine if all Chinese goods became 30%
expensive in the US, what will it do to the US
consumer.
At this time all the Tariff talking seems like a
pressure tactic to force China to start floating
the Yuan.
China must act to slowly increase the Yuan by
5-10% yearly, and float it completely in the
next 4-5 years.
Any overnight correction will be disastrous.

All the players in the Global Market seem to be
pretty pissed with Chinese Policies of artificial
manipulation. Alan Greenspan must be pretty
pissed to see the long term interest rates not
rising, and his efforts to slowly cool off the
housing boom just not working. Instead the
bubble just keeps growing and the eventual bust
getting out of control.
I don't believe for a second he does not think
there is a housing bubble. He just can't say it
publicly for political reasons.
Also Bush has political compulsions of helping
his successor win Ohio in 2008.
And he knows he has to deliver something to
the midwest factory workers, by acting to
protect their interests.
At this time I dont think investing in any Oil
stocks is a good idea, whether it be Chinese
or US. The Las Vegas Housing Market has
started its slide, and its all downhill from here.
Oil consumption is only gonna decrease from this
point, and there will be a glut of oil in the world
market ( just like houses in the US) and oil prices
will plunge.
Another interesting side effect of this bust will be the
airline industry. Major US airlines have been somehow
pulling thru in Chapter 11, supported by the
( idiotic ) US consumer spending. It will be interesting
to see which of them, see their demise as a result of
this spending drying out.

So does it say somewhere in the fine print that the second mortgage or home equity loan is collateralized by *all* the assets of the borrower, and not just the house?

I've also heard that the new bankruptcy laws mean that the banks can come after you when you eventually have money again, maybe even years later. Not sure if that's true.

Patrick

Thanks for the excellent comments.

Re: mortgages, here's how I see the Chinese affecting US purchase prices -
They have a low currency, so we buy their stuff, so they get lots of dollars which they invest in US Treasuries, and the Fed can keep rates low and still borrow money, and houses go up because people can borrow more at low rates.

Why they buy US Treasuries at low interest and also suffer the low dollar is still a bit mysterious to me. Seems like a lousy investment. They should be buying up oil fields or other raw materials.

Re: bankruptcy, the questions now become how many people have second mortgages (putting their non-house assets in peril) and whether a refi is really a second mortgage or not. I'm guessing that a refi is collateralized by the house only, but I don't know that for sure.

Patrick

Any chances of a soft landing for China out of this mess, are just as good ( or as bad ) as the chances of soft landing for the US Housing Market.

Also after the Tsunami of foreclosures, if the banks tighten their lending policies back to 20% downpayment. The demand for Housing will go down
further and so the prices.

In the new Federal bankruptcy law, most people may not be able to completely walk away from their debt. A judge will be able to order that consumers pay back $100 for next five years, depending on their income.
Also I think this Federal law supercedes the bankruptcy provision of several states where people were allowed to keep their houses.
Now that is capped at 125K.
What that prolly means is if your house is over 125K, you will loose your house, and may be forced to buy a house for that money. The lenders will get the rest of the money. Or at least thatz what I understand.

Matt Walsh:
That would happen if China could keep the unpegging process under its total control. The Euro has gotten stronger over a period of few years, yuan will have to follow the same slow steady course. Any quick unpegging I think will be disastrous.

All it takes is for double digit price year over year increases to stop and we will be in trouble...higher interest rates or not (and they will be higher regardless of what the 10-year yield is today).

Yep Lisa.
As Daniel Korn pointed out about San Diego, Las Vegas
is also showing the same trend.

So looks like most people here are convinced that there
is a housing bubble, which is almost about to bust.

I would like to know how many people changed their minds
about the existence of this bubble, after reading this blog.

Small single post ( anonymous is fine) from everyone would be
ideal. So just for record we know, how many here believe in the bubble
and how many do not.

And please only one post per reader, no cheating.

I came to this site believing there was a bubble and looking for data.

I also thought we were at the top of this bubble in 2003 when I sold my place in LA.

I think there are bubbles in certain areas and the amount of the bubble is proprtional to the amount of speculation. For example, all the speculators were buying in Vegas and now that prices have stalled there, the speculators are getting out with whatever profit they can get and prices wil go down. All that speculation created a false demand and now there are just too many houses (that all look exactly the same). I also think LA and SF prices will have a correction, but not as much...maybe to 2002 levels.

Yep !
Life is short. You don't want to make a blunder for which
you could end up paying for the rest of your short life.

Why pay 2K more to own a place, than if you could rent
it. I can think of so many other ways to enjoy that 2K
than just enjoying the idea of owning a house.

Here's an article about the coming Chinese Meltdown.

Economists warn of coming Chinese meltdown