patrick.net

I'm still baffled by the unsold condos in San Francisco. Within blocks of me no less. No way I can walk past those places, seeing they've been empty for over a year since completion, and think this market is anywhere near normal.

The government of the United States has enough tools at its disposal to avoid housing from crashing, and they will do that not because they favor home-owners, but simply because there is no other choice to prevent the economy from descending into chaos and uncertainty.

Take a look at all the other economies around the world. The US is far, far, far better off than any of the other countries, Europe included. Quality of life here still exceeds anything China, India or any of the other so-clled booming economies offer to the average person. The amount of government corruption that exists even in a genuine democracy like India is simply too staggering and it will infuriate you. Ask the scores of Indians working in IT and listen to their stories of bureaucrats earning the equivalent of $200/month salaries ending with assets worth $4 -5 million.

The US is good. Life is good. We only need to fix our broken healthcare, weed out illegals by strengthening border patrols and enforcing constitutional laws and reduce our meddling in other countries' affairs. You will see prosperity with no limits.

Propping up home prices in the short term does not help our economy. It assures that more people will be underwater in the end. They can't hoard the inventory forever. This is price-fixing, and it's forcing Americans to overpay for houses.

Steady-
The problem with the housing market is that prices are too high. If prices came down another 50% tomorrow, the crisis would be over. Americans can not afford these homes. That is the problem. We need home prices to correct but the gov't keep interfering and delays the entire process.

If the gov't had enough tools at its disposal to avoid housing from crashing, it would have prevented it from falling in 2006. There is no way they can hold this inventory forever. Foreclosures are still stacking up at a record pace. If the economy fully recovers and all the jobs come back then we may have a chance. Another option is to demolish all the empty homes to shrink the inventory. I am sure none of those options will ever take place.

NEEDED NEW LAWS:

If one is paying cash for a house, they must live in it for six months before they can rent it out.

A lender cannot loan to where the monthly payment is more than 30% of gross monthly income. It's common sense, but it needs to be made a law.

Down payments must be at least 10% and cannot be borrowed.

If someone defaults on their mortgage and the bank elects to sell any deficient amount to a third-party junk debt buyer, the original defaulter must be given the first opportunity to buy the debt for what the third party would pay.

DickCheney says

Steady-
The problem with the housing market is that prices are too high. If prices came down another 50% tomorrow, the crisis would be over. Americans can not afford these homes. That is the problem. We need home prices to correct but the gov’t keep interfering and delays the entire process.

That's why I refer to all the government actions as Operation Enduring Bubble.

stocksjustgoup says

NEEDED NEW LAWS:
Down payments must be at least 10% and cannot be borrowed.

I'd make it a minimum of 25% down payment.

zzyzzx says

That’s why I refer to all the government actions as Operation Enduring Bubble.

That's clever, I like that.

steady market watcher says

Take a look at all the other economies around the world. The US is far, far, far better off than any of the other countries, Europe included. Quality of life here still exceeds anything China, India or any of the other so-clled booming economies offer to the average person.

Being on the crappy end of the Economic stick Sucks for any culture. Some more or less than others sure. I think you need to get out and around more. Or define "Quality of life" and "Average person".

Guess what, The whole world isn't third world. You make it sound like every one in those countries got flies buzzing around their eyes with impunity.

Where have you been, it turns out we're the ones with the crumbling out dated infrastructure.
Those Asian countries have a rising Middle class we have a diminishing Middle class.

Hop a plane it would do you good to get out more.

>> If prices came down another 50% tomorrow, the crisis would be over.

Not really. There is the small additional problem of all banks becoming insolvent (translated: unable to pay back their depositors, such as you and I) if this were to happen.

And therein lies the big dilemma of the housing bubble bursting: Who exactly is going to take the losses?

My preference was always 1. bank executives 2. bank shareholders 3. foolish homedebtors

But it is not working out that way, partly because the banks have been holding an axe over our collective heads, threatening full-blown financial chaos if and when they were to be held accountable.

as long as banks can borrow at 0 % (zero) and buy treasuries that pay 3%... they have no need to sell.

There was a story on p.net front page on, how banks are CAREFULLY WITHHOLDING higher value properties (over 500k) from the market.
They fear if they flood this segment, it will truly crush the housing market.

Once the govt takes away the free money from the banks, then people with MONEY (like renters who have been saving up) will have the upper hand.
if that will happen or not, is any body's guess.

permanent_marker says

Once the govt takes away the free money from the banks, then people with MONEY (like renters who have been saving up) will have the upper hand.
if that will happen or not, is any body’s guess.

So, what's your take? Will it happen or not?

I went to "The fashion centre at pentagon city" today. The mall is kinda pricy as you can imagine with fancy name, and man, it is filled with waves and waves of people. It made me wonder "are we really in recession or not?"

stocksjustgoup says

NEEDED NEW LAWS:
If one is paying cash for a house, they must live in it for six months before they can rent it out.
A lender cannot loan to where the monthly payment is more than 30% of gross monthly income. It’s common sense, but it needs to be made a law.

I agree with your other arguments -- particularly the one about down payments -- but these two I disagree with. The ratio of payment to gross income can differ dramatically depending on the buyer's situation. A sole breadwinner with a spouse and multiple kids probably can't afford to devote as high a percentage as a single person with no other major expenses. Also, richer people have a lot more leeway than ordinary folks do. If you take home $100k a year, but are willing to live as if you only took home one-third that amount, you can devote a lot more money to your house payment.

Also, there should be no restrictions whatsoever on what people can do with homes they've purchased for cash. I would suggest the exact opposite of your rule -- it should be the people with small down payments and very little skin in the game who should have to live in their homes for six months. Why should restrictions be placed only on the cash buyers, who represent no risk to banks, the public, or anyone but themselves?

bureaucrats earning the equivalent of $200/month salaries ending with assets worth $4 -5 million.

This happens in China too.
People really lost the meaning of life if they live in the bottom of the society.

However if you are one of the bureaucrats, you will enjoy in India than in US.

steady market watcher says

Take a look at all the other economies around the world. The US is far, far, far better off than any of the other countries, Europe included. Quality of life here still exceeds anything China, India or any of the other so-clled booming economies offer to the average person.

The only reason the US economy is "better off" is it's all financed on debt. Remove the governments ability to borrow and force it to spend less than it takes in and all those economic stimulus packages and tax cuts will go right out the window. Just look at State and local governments as an example, now just imagine the same thing happening at the federal level. Not only will millions of federal government jobs will be lost but city and state aid will be history, forcing even further cuts. You can forget about unemployment extensions, they will be lucky to fully fund Social Security and Medicare at that point. the sooner we face up to the fact we are living on borrow time, the better we can prepare for the adjustments that will come. The coming collapse of government as we know it will make the housing bubble and stock market collapse look small in comparison.

Wouldn't artificially high real estate prices affect the economy by diverting money that would have otherwise been spent on other industries? The high prices are essentially siphoning money away to the real estate industry at the expense of other industrie.

BobbyS says

Wouldn’t artificially high real estate prices affect the economy by diverting money that would have otherwise been spent on other industries? The high prices are essentially siphoning money away to the real estate industry at the expense of other industrie.

Not if HELOC is used to spent on new cars,boats and vacations :)

bubblesitter says

BobbyS says

Wouldn’t artificially high real estate prices affect the economy by diverting money that would have otherwise been spent on other industries? The high prices are essentially siphoning money away to the real estate industry at the expense of other industrie.

Not if HELOC is used to spent on new cars,boats and vacations

Getting something for nothing is a part of the "American Dream".

shrekgrinch says

The government has at its disposal enough resources to do a lot of things, but not necessarily the competence.
With regards to money, while governments have printed themselves to winning wars, they have never printed their way to prosperity EXCEPT in a few cases.

Does the national debt even matter? Can't it just perpetually increase with no consequences? What happens if we don't repay it at all?