patrick.net

And lets’ get that whole ‘but the Fed’s a PRIVATE company’ fallacy out of the way.

Forget the FED, I'm talking about the GSE's (fanny and freddy)....as far as I read they were created by congress as private companies......there must be a reason why they were created as private companies don't you think? I am just not so sure they will be bailed out when they fall....after all there is no explicit guarantee made by the government.

The trick will be how to get incomes to rise along with the price of all other non-housing commodities, especially in the face of global wage arbitrage and outsourcing.

Never gonna happen! Wages have been slipping, I don't see them rising as fast as would be needed.

“Hey, Bob, heard you had hamburger last night. Wow, we haven’t had that in months –what’s it going for now, $200/lb.?”Considering that RE has been the main engine of job creation over the past 5 years, that will be some trick indeed.

This is why a huge resession is inevitable.....many jobs will evaporate and consumers will seriously cut back on spending. I don't see any way out of this mess....if you ask me.

I am just not so sure they will be bailed out when they fall….after all there is no explicit guarantee made by the government.

Allah, check out "Too Big to Fail?" and "Right Said Fed" in the July archives. No matter what 'Bubbles' Greenspan says publicly (and he's leaving anyway), I doubt the Feds will allow the GSEs to fail. After all, LTCM was a completely private hedge fund, and that wasn't allowed to fail, right? Neither were the S&Ls in the late 80's.

Here we have Fannie, Freddie & Ginnie, the multi-$Trillion dollar Cerebrus with their monopoly governement charters and "implicit" guarantee of government protection and tons of angry voters with pension funds heavily vested in GSE-issued paper. Plus, the bonds traders have priced GSE paper with a very low risk premium (as in, they believe in the implicit govt' guarantee).

Not saying it can't happen, or that GSE investors aren't going to see painful times, but complete collapse seems pretty unlikely as long as there are plenty of spineless politicians around.

"When you owe $100, the bank has a problem. When you owe $100 million, the bank has a problem."
---J. Paul Getty

Jersey,

What to invest your money in to avoid having it inflated away is a big question, and there are no certainties or easy answers. You might be interested in checking out these threads:

July;
"Inflation or deflation?"
"In Debt We Trust"
“Right Said Fed”

August:
"Strategies for profiting off of a housing bust"

September:
"Fannie: what is really wrong?"

I knew prices would fall eventually, but I'm surprised it's happening so quickly:
http://tinyurl.com/88bgq

@Girgl,

$0 :lol:
Now THERE's a house even I can afford!

Neither were the S&Ls in the late 80’s.

S&Ls were explicitly protected by the FDIC....so they had to bail them out. I wish I had the capitol to buy RE back then when the RTC was auctioning off properties for pennies on the dollar...but I didn't....this time I will be ready though..

What is going to happen is anybodies guess, maybe they will get bailed out, but all I know is a bailout is not guaranteed.....and if us taxpayers are going to be stuck with the bill, who is going to be hit the hardest? Those who have no savings and are overextended right? This will worsen the problem even more by causing more foreclosures.

As far as where to put your money, the best place is different depending on who you ask. Some people say gold, but I think gold is overvalued already and if it falls, you will be one sorry fool! International investments are a good idea...warren seems to think so, but still in all, cash is king! I'm not saying keep all your money liquid, but all great investors have a good amount liquid. I feel that if you are planning on using your money as a down payment on a house, it will have more buying power when the RE prices fall so inflation isn't really a problem in this case. I believe that inflation will take off because of the FED keeping the rates too low for too long and then they will crank up the short term rates to fight it which will put a damper on the economy and plunge us into a recession.....but I believe in the long term, the dollar will come back. Paying $70 for a loaf of bread.....I don't think so, I cannot see inflation getting way out of hand without salaries going up tremendously and I seriously doubt that will happen. You can find articles that contradict what I say, but then you can find other articles that contradict that contradiction.

"Ranging in space from about 140 to 500 square feet, they may come equipped with bathrooms or even a tiny kitchen. Some cost as much as $500,000, and those with better views or more prominent locations command the highest prices."

From the article Pbass linked to above.
Unless their cash flow is endless, some people are truly stupid with money.

Answer: NOBODY. If you think otherwise, you won’t mind being caught with paper not backed unconditionally by the “full faith and credit” of the government. When the music stops, T-bills for me. Much safer than cash in the bank!

As far as the FDIC and banks are concerned, the money is explicitly backed by the “full faith and credit” of the government up to $100K per account....and it's a simple matter of running the printing press and saying "here's your money"......as far as MBS's...there is no explicit guarantee...but those who invested say "I think we're safe".

harm...did a little research on LTCM. I thought you said they were bailed out? Here is a list of losers.

http://riskinstitute.ch/146520.htm

@ flak: Holidays, coupled with the fact that there isn't a whole lot to say except to watch the coaster head down the slope now.

@ the mob:

Go Bears.

Also, the difference between 512 MB and 1 Gig of memory on a Powerbook is like night and day. Safari is usable, to pick one small difference.

Cheers,
prat

"Everything’s tapering off around here. Is it just because of the holidays, or is everyone bubbled out?"

I bubbled out about a month or so ago and have taken to obsessing over other things, like the sad state of my pedicure. Oh, and terrorism. Stuff like that.

But seriously, I think this is just one of those lulls. We will be ranting and raving again soon. Perhaps even within hours. Or minutes!

hi everyone,

i've been reading this blog for a couple of weeks, and tonight, i just feeling like joining in.....i'm noticing that santa clara county MLS inventory is going down(decreasing).....why is it slow in our area?....i was hoping to see alot of 4 sale signs this 4 day weekend....but it don't look like its going to happen.......every other county seems to be showing some kind of signs....except for santa clara county....anyone know why?....

That Cupertino Villa is a joke, it is not even in Cupertino, it is in Sunnyvale. And it doesn't even include the Monta Vista High school that every single SV Asian kid wants to go to, Cupertino High School is just a so-so school. I say this project is busted, not that such a apartment conversion would be successful in the first place.

New thread: "Doing Your Part for the Bubble Bailouts"

http://www.delawareonline.com/apps/pbcs.dll/article?AID=/20051120/NEWS/511200337/-1/NEWS01

"I think prices are pretty much what the market can bear," said Bill Palmer, of Claymont, who is selling a two-bedroom condominium in Paladin Club north of Wilmington. "Whoever buys now will get the best end of the stick."

Yeah....up their ass!

…….. how in the world does thig thing “rent to own” being peddeled in the Modesto Bee work? Please keep it simple so I can follow along. Thanks

Same thing as buying except for one major difference, when you rent with an option to buy and the bottom falls out, you can just leave....you are not forced to buy. When you buy with an IO loan(because you have to), when it falls you can walk away(like I know most will).....but your credit will be destroyed, your assets will be seized and your salary will be garnished for several years.

Sellers are so desperate now since they can't sell (no buyers), they have to rent the property instead using the (0%) chance that housing will not fall as a marketing strategy.

Bap33....I am not a realtor and If I was, I would need to know more about your area. All I can tell you is that I believe(and have read) that rent-to-own will be more popular in the near future due to the fact that many have overleveraged themselves and will soon realize that they cannot sell their way out of it. Every rent-to-own contract is different and each one may be (dis)advantageous to you in one way or another. If your looking to rent and someone is offering a rental payment comparable to any other rental of the same area (option to buy or not), I'd say go for it....but don't let the option be a reason for them to charge you more.....because house prices will drop quite a bit(along the coasts) and you will not want to buy....but if you like the monthly payment and you are not obligated to buy or there is no penalties involved on the contract, then go for it.....but then again, what is the advantage?

I am only interested in this because I find it amazing that the same home that would take a $2,500 payment can be offered at $1,000 as a rent to own.

Yes...this is quite strange, however the seller may be a speculator that may be in a serious financial bind and is desperate for someone to buy them time by getting at least part of the monthly payment from a renter. Why would they do that? Maybe (s)he realizes that we're at the top of the market and figures if (s)he could get someone in there for a while, it will help make the payments until the renter gets spooked by the drop in housing prices and bails out (and maybe excercises a stiff penalty for breaking the lease). If the house was purchased using an IO loan, his/her payments may be alot lower than you think right now, also some deals look too good to be true until you find out the details of the contract.