patrick.net

It's already true. See Detroit, as example #1.

I would argue certain exurbs all over CA have the same fate.

>severe MERS issues that it would be unsellable

nah, they'll just fix what's screwed up.

>if we have a major financial melt down i think the numbers could be 50-65% of homes that would be unsellable due to lack of funding

that's not a value of $0, that's an illiquid market. Cash buyers would be king, but as long as housing can be rented out for more than the property tax it will have some value.

>financing 100% of the costs of gov with QE. when QE stops, R.E. loans stop

Nah, QE is more about interest rate control than providing liquidity. Though I do think if it is allowed to run out later this year there will be liquidity problems.

All this is not to say that the curent housing price level is safe from further drops. Anyone arguing that doesn't really see the various steamrollers coming right at us.

you get job offer in another state and no one can get a loan financed? you move and have a huse sitting in another city......whats it worth? rent it out...to who. in depressions, the number of rental properties GOES UP and the number of renters goes down because the unemployed/under-employed must move in and co-habitate. you will have 10 families living in one rental.

in an illiquid market, anything that requires credit to sell (and there isnt any credit) will be worth zero....

cash will be king...but that doesnt mean that every property can be rented out.....we have more houses than owners right now....so back to worthless.

QE is 100% about liquidity...permenant open market operations (POMO) are about pushing fake profits thru treasury buy backs to the money center banks....that is the only thing keeping them/system liquid. QE and treasury buying (buy the only buyer...the fed) keeps interest rates (of those treasuries) at zero.....

I think the Fed will be more than happy to directly fund home loans should it come to that.

They already own $760B of agency securities, adding that amount annually would cover most of the market.

Japan's home finance agency is funding 35 year loans (~1% for the first 10 years, ~2% thereafter).

We could do that : )

Then again who knows if Japan's borrowing is sustainable. They may be more f----ed than us.

everytime the fed does a QE, they have to repay/roll that QE with the next one....so double down. QE3 will have to cover the QE1 roll and the QE2 roll and provide addition funds to keep the gov going. throw in RMBS buybacks....again....? japan might have stolen its citizens savings on it way to 200% GDP but we were still buying their hondas and sonys...at least they had that income.

japan had 100 year mortgages...multi generational mortgages.....and all it got them were soshokukei danshi (Ojo-man) ; )

impotent girly-men that work part time jobs and live in the street.

you're describing a situation where there's no renter demand and no buyer demand?

And That's what you see happening when QE comes to an end?
isn't that a bit extreme?

not only ZERO but also negative in some cases. E.g. at least one bank has plowed homes under. So, that cost them money. Lots of people have homes which are worth zero or negative. Same as having an option out of the money. you might just buy that option if you think things will change. Just like an option, time will kill you. houses rot. options time out.

I agree with pkowen. In many areas homes will be worth zero. Not sure what the number is now but was like 20M vacant homes... and they are still building you know. Who wants an old shirt? Who wants an old car? Who wants an old house?