The Swiss Central Bank Openly Discourages Mortgage Lending Due to Housing Bubble Fears

Other governments around the world take steps to curb lending and warn citizens of the perils of excessive mortgage debt. Why don't we?

Someone should have warned the owner of today's featured property that smaller mortgages and lower prices were going to make resale challenging… and painful.

Irvine Home Address … 28 WILLOWHURST Irvine, CA 92602

Resale Home Price …… $825,000

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My friends feel it's their appointed duty

They keep trying to tell me all you want to do is use me

But my answer yeah to all that use me stuff

Is I wanna spread the news that if it feels this good getting used

Oh you just keep on using me until you use me up

Bill Withers — Use Me

Lenders with encouragement from the US Government want to use you to pay for their mistakes; they want to use you, and they want you to feel good about it. Buy now, it doesn't matter if you go underwater; lenders don't care as long as you make your rent payments on the money.

Recently, I wrote about Canadian finance minister Jim Flaherty preventing further inflation of Canadian housing bubble.

Allow me to recap and interpret:

(1) He is forcing qualification at a higher payment rate. If he had stated 30-year fixed rather than a 5-year fixed, It would be better, but it is a step toward stable financing. I wish the statement clarified whether or not interest-only ARMs are permitted there. I believe the qualification standard he is imposing is based on a 30-year amortizing mortgage with only a 5 year fixed rate.

(2) Twenty percent down payments? I would like to see this on all property, but common sense says investment properties and second homes should require a significant down payment — people don't hesitate to walk away from investment properties.

(3) And limiting cash-out refinancing to 90% LTV is identical to the proposal I made. I like this requirement because it provides an equity cushion that stabilizes markets and prevents walkaways.

"We do want to discourage the tendency by some to use their home as an ATM machine, the tendency by some to buy three or four condominiums by way of speculation," Flaherty said. "This will discourage the kind of mortgage refinancing that can create unsustainable debt levels as interest rates go up."

Our government actively encouraged us to borrow, spend and be happy while Canadians are being warned about excessive debt and spending their equity foolishly. The contrast is conspicuous.

It isn't just the Canadians who exercise better control over lending and warn their citizens of the perils of buying and borrowing today. The Swiss, long known for their banking prowess, do not cave in to banking interests.

The Swiss Central Bank sends warning on excessive mortgage borrowing

ZURICH, March 11 (Reuters) –

The Swiss National Bank warned banks and borrowers on Thursday about taking on too much debt while interest rates were still very low, indicating it is concerned about a possible housing bubble.

…"The SNB is warning banks and borrowers to be extremely cautious," the central bank said in its quarterly policy statement. "The fact that interest rates are exceptionally low by historical standards must be taken into account."

…"What they wanted to avoid is house prices going up too much in response to a slightly brighter economic outlook. That would mean another bubble," said Henrik Gullberg of Deutsche Bank. "One way of doing that is to keep sending these verbal warning shots while policy is still very expansive."

The Swiss government is openly concerned about its citizens financial well being, and they post warnings about mortgage borrowing to help people. Why is it only bloggers like me who issue these warnings here in the US?

The US Government wants its citizens to borrow as much as possible to help out ailing banks even if that destroys the borrower. Shameful.

Some analysts have argued that the central bank may raise borrowing costs earlier than the market currently predicts, and despite the strong Swiss franc, due to the housing concerns.

The SNB said it was conducting an in-depth investigation into banks' mortgage-granting practices and that it would work with regulators to see if any corrective steps were needed.

SNB statistics show that prices for single family homes in Switzerland rose by some 4 percent last year.

SNB vice-chairman Thomas Jordan warned as early as autumn last year of a possible bubble in the private housing market.

Why is the US Government out to screw us?

Hasn't it become obvious that our government does not care about the people? As a citizen of this country, you should be outraged by the way your government puts your interests last. Our government openly advocates destructive policies that transfer wealth from you to the lenders. The US Government as ruled today is completely captured by money interests; they feed us a steady stream of bullshit bailouts and false hopes to convince us to take on more debt and keep the Ponzi Scheme alive.

It wasn't always that way.

Andrew Jackson and the Second Bank of the United States

AIG was not the first institution that was too big to fail. Andrew Jackson waged a personal war against the banking behemoth of his era, and as a former general, he knew how to win a battle. From Wikipedia:

The Second Bank of the United States was authorized for a twenty year period during James Madison's tenure in 1816. As President, Jackson worked to rescind the bank's federal charter. In Jackson's veto message (written by George Bancroft), the bank needed to be abolished because:

  • It concentrated the nation's financial strength in a single institution.
  • It exposed the government to control by foreign interests.
  • It served mainly to make the rich richer.
  • It exercised too much control over members of Congress.
  • It favored northeastern states over southern and western states.

Following Jefferson, Jackson supported an "agricultural republic" and felt the Bank improved the fortunes of an "elite circle" of commercial and industrial entrepreneurs at the expense of farmers and laborers. After a titanic struggle, Jackson succeeded in destroying the Bank by vetoing its 1832 re-charter by Congress and by withdrawing U.S. funds in 1833.

“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.” — Andrew Jackson

Does Jackson's reasoning sound familiar to you? Isn't most of what he identified as problems exactly what we have with too-big-to-fail institutions? Who will be our modern Andrew Jackson who will crush our banking cartel? Our current crop of politicians are hopeless or worthless completely captured by banking interests and too fearful to do anything to help the people. We are lost, and we need a real leader like Andrew Jackson to help us find our way.

Irvine Home Address … 28 WILLOWHURST Irvine, CA 92602

Resale Home Price … $825,000

Home Purchase Price … $888,000

Home Purchase Date …. 7/20/2007

Net Gain (Loss) ………. $(112,500)

Percent Change ………. -7.1%

Annual Appreciation … -2.7%

Cost of Ownership

————————————————-

$825,000 ………. Asking Price

$165,000 ………. 20% Down Conventional

5.01% …………… Mortgage Interest Rate

$660,000 ………. 30-Year Mortgage

$171,019 ………. Income Requirement

$3,547 ………. Monthly Mortgage Payment

$715 ………. Property Tax

$150 ………. Special Taxes and Levies (Mello Roos)

$69 ………. Homeowners Insurance

$55 ………. Homeowners Association Fees

============================================

$4,536 ………. Monthly Cash Outlays

-$868 ………. Tax Savings (% of Interest and Property Tax)

-$792 ………. Equity Hidden in Payment

$322 ………. Lost Income to Down Payment (net of taxes)

$103 ………. Maintenance and Replacement Reserves

============================================

$3,302 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$8,250 ………. Furnishing and Move In @1%

$8,250 ………. Closing Costs @1%

$6,600 ………… Interest Points @1% of Loan

$165,000 ………. Down Payment

============================================

$188,100 ………. Total Cash Costs

$50,600 ………… Emergency Cash Reserves

============================================

$238,700 ………. Total Savings Needed

Property Details for 28 WILLOWHURST Irvine, CA 92602

——————————————————————————

5 Beds

2 full 1 part baths Baths

2,558 sq ft Home size

($323 / sq ft)

3,429 sq ft Lot Size

Year Built 2000

2 Days on Market

MLS Number P724538

Single Family, Residential Property Type

West Irvine Community

Tract Ivyw

——————————————————————————

Spectacular cul de sac 5 bedroom, 3 story dream home. Gleaming granite kitchen center island, distressed hardwood flooring, and tons of extra space. Wonderful family room with gorgeous fireplace. Breakfast area leads to large, fully-fenced rear yard and calming retreat. Open, bright floorplan with formal dining room, large secondary bedrooms and walk-in closets. Third-floor space and views are breathtaking. Don't forget the nationally recognized schools – Myford, Pioneer, and Beckman. Act now!

The slow grind of lower prices

When the current owners bought back in 2007, they probably never considered the possibility that prices might be lower when they sold. They put $200,000 of their own money into the deal, and they will be lucky to escape with any of it.

Everyone thinks they are either buying into an appreciating market, or that they are buying at the bottom. If a buyer steps up to pay this ridiculous price, they will be the ones selling for a $100K+ loss in 2013.

The scenario this owner faces is what I keep warning people about. Nobody wants to be in the same circumstances as this seller, but all who buy today risk it.

I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.

Have a great weekend,

Irvine Renter

66 thoughts on “The Swiss Central Bank Openly Discourages Mortgage Lending Due to Housing Bubble Fears

  1. Planet Reality

    “Everyone thinks they are either buying into an appreciating market, or that they are buying at the bottom. If a buyer steps up to pay this ridiculous price, they will be the ones selling for a $100K+ loss in 2013.”

    I disagree with essentially everything you said here.

    1. The premise of this blog has always been rental parity. If the monthly cost of ownership is equal to renting, there is no need to consider the idea of buying at the bottom or buying into an appreciating market.

    2. Your comment that these buyers will be selling for a $100K loss in 2013 is completely laughable. Are you really making that comment? really? Someone who buys this house will be putting 20% down and will have the income to afford the house. Why would they be selling for a $100K loss in 2013, because you said so?

    3. You have always been opposed to assuming appreciation in the housing market. That’s fine as long as you are consistent. In point 2 you are assuming the future of the market, namely decreasing prices. After you have been wrong about market dynamics, you are now adamantly predicting 2013 prices, on what basis? Hasn’t this always been about the current state versus renting, not the future state for you? Why the change? You are inconsistent in your mental framework.

    I’m sure you’ll come back with the usual, making assumptions on what I have done with my money over the past 3 years. Those assumptions could not be further from the truth.

    1. IrvineRenter

      “I disagree with essentially everything you said here.”

      I hope some day you will provide some factual backing, news story, or hard data to back your opinions. Bullishness without reason is wishful thinking.

      “Your comment that these buyers will be selling for a $100K loss in 2013 is completely laughable. Are you really making that comment? really? ”

      Yes, I am really making that comment. Are you? I cringe with embarrassment for you. The smugness of your laughable comment is truly amusing.

      “Why would they be selling for a $100K loss in 2013, because you said so?”

      They may have to or want to sell in a few years. Why are the owners of today’s featured property selling? I have no idea if the buyer of today’s property is going to sell in 2013. I merely make the statement that if they do, they may be facing a loss.

      “I’m sure you’ll come back with the usual, making assumptions on what I have done with my money over the past 3 years. Those assumptions could not be further from the truth.”

      Really? So you are engaging in wishful thinking about high-end house prices because you have objectively analyzed the data and you concluded that conditions are ripe for rampant appreciation? I think it is far more likely that you purchased a $1,000,000+ home in Irvine recently, and now you are setting out to convince everyone else — including yourself — that you made a wise decision.

      Even your moniker “Planet Reality” is loaded with the assumption that you come from a different place where people really know what is going on and you feel the need to come here and educate us lost souls. Please, share your research with us; provide some data or reasoning to back your position other than your faith. I can appreciate bullish sentiments, and I don’t typically beat down bullish posters, but you keep calling me out with nonsense.

      1. Planet Reality

        IR first off sorry for nit picking.

        This house is over priced versus rental parity, maybe 10% versus current rental parity? What does this rent for $3K?

        Anyway I think you would be more consistent if you said:

        “This house is currently not at rental parity therefore I would not buy it. I have absolutely no clue what rental parity will be in 2013. $3300 per month may or may not be rental parity in 2013.”

        I am not a bull. Peace.

        1. AZDavidPhx

          Planet Reality –

          Do you pay a mortgage in Irvine? If so then what year did you enter house debtorship?

          I noticed that you did not respond to that part of IrvineRenter’s response. How come? If someone said that to me, I would take exception with being painted a disgruntled house debtor in denial fighting buyer’s remorse.

        2. IrvineRenter

          Thank you for your measured response. I apologize if I was too harsh.

          My worry for the long term prices is not that current pricing is grossly inflated relative to rental parity. My worry is that our current cashflow values are artificial, that these artificial props will be removed, and that the result will be less affordability and lower prices.

          Rents will very likely be higher in 2013, but if interest rates have gone up even more, then prices are less affordable and likely lower.

          I am not certain my view of events is going to transpire, but the risks are high, and I want people to understand these risks if they are buying today.

          1. AZDavidPhx

            Don’t worry, there is an endless supply of artificial props that they have yet to whip out. 100 year mortgages are right around the corner. As they say, 100 is the new 30.

            We are going to be kicking back in 800K starter castles for nine dollars a month in no time. Buy now or be priced out forever – it will be different this time.

          2. Tore P.

            AzDave,
            I like your style (funny and intelligent).
            When my rent-a-mcmansion contract is up for renewal (in a few months) I need some advice on how to proceed:
            1) ask for a lower monthly lease (politely)
            2) ask for a lower lease (or I’ll move out)
            3) ask the owners to consider a short sell

            I’m afraid 2) and 3) will end as a NOD for the owners (lower lease payments, month(s) without tenant). I would buy the place, but only for 30% less than what they paid (in 2005).

            The rest of the family is not keen on moving from rental to rental. So the next move will be into a house we buy, but I don’t want to end up in something that can only be sold at a loss for the next 4 years.

          3. NOT

            I am not AzDave.

            There is no actual difference between 1 and 2, so why not just offer 1 & 3 implying 2. Just make sure your annual out of pocket is identical in both situations and you are golden right?

          4. AZDavidPhx

            Agree with NOT – no difference.

            Keep renting be happy.

            Tell the wife I mean “rest of family” that you don’t feel like losing 100K so they can pretend to have made it.

            I’m proud to rent. You should be too. It’s hilarious when you get that guy who wants to talk housedebtorship because he “Just assumes” and you go bursting his dreams by being a happy renter.

            Rent be happy annoy a house debtor.

          5. Tore P.

            Thanks NOT and AzDave.
            The wife thinks about the kids, who think it is our house we live in (and they don’t want to move again). The owner has foreclosed on at least one other property, but I believe he is current on this one (short sell not possible?).

            Yes I’m proud to rent, although I have to admit I was a homowner between 2004-2008 (not in SoCal). These days, the renters status is approaching an all-time high, so AzDave might be cooler than he thinks.

      2. witin4ever

        I agree that in 2013 this place may be 10-15% lower but I also pretty certain that in 15 years this place will probably will be atleast on par with todays pricing or even slightly higher.

        Also couple of days back you had suggested a 3 bd condo with no garage was rental parity with rents excess of 2000/- a month. If that is true this house should definitely fetch 3000-3500 rent.

        In that case if you really have a timeframe of 10+ years then it may not be a bad purchase (only because the current interest rates make it so). And if they have to sell in 3 years when prices have dropped 15% temporarily then it is what it is. If they can afford to rent it out for next 10 years since it is almost rental parity maybe they can ride it out.

        Before i get slammed for my comments, I’m just evaluating various possible scenerios with out trying to favour buying or waiting.

        1. IrvineRenter

          The scenarios you describe are true. If people know that going in, then they are prepared for what awaits. If a property is cashflow positive or even cashflow neutral, even if the resale value declines, it does not matter. Worst case, the property can be rented for breakeven and the property maintained.

    2. Sean Olender

      My concern for residential real estate prices going forward is that interest rates will have to rise eventually. If prices stabilize at 4.95% 30 year rates, it means that at 8.5% 30 year rates, prices will need to be about 42% lower. This is simple math. Based on the same incomes from people who make $30,000 a year to people who make $500,000 a year, everybody qualifies to borrow 42% less (roughly) at 8.5% rates than at 4.95% rates.

      Some think the Fed will hold rates so low that inflation will take off and this will rescue housing even at higher long term rates. I disagree. The only thing that can drive real inflation is wage inflation.

      Wage inflation, or what economists term “wage push” inflation is one of the greatest evils to investors and economists. Why? Wages are a cost of production and are subtracted from corporate profitability and investor returns. The Fed’s real mandate is to ensure that in the event of wage push inflation that monetary action is taken to stem wage inflation.

      Investors have it well. Rates are extremely low and unemployment is high causing zero or negative real wage growth at the same time that capital is almost free (if you are a large player hooked into the Fed).

      The Fed has held rates very low and will continue to until wages show even the slightest sign of rising and then it will take action. Until money gets into ordinary people’s hands, you won’t see inflation except in expensive things that well off people buy, like stocks, G5 jets, beluga caviar, etc. You won’t see home prices rise because residential real estate isn’t something well off people commonly invest in (too illiquid, maintenance costs too high, etc.). Residential real estate has been an investment choice of the middle class and the middle class would need some serious wage inflation to support prices.

      I may be wrong, but I don’t see the Fed tolerating even modest wage inflation. I don’t think we’ll see any for a while even at these rates and if we do, rates and policy will tighten. Without middle class wage inflation, home prices will probably decline slowly due to defaults, unemployment, underwater borrowers having to move for one reason or another (family, work, etc.) and thus ending their stream of payments into a black hole.

      The simple math of it is that if rates move from 4.95% to 8.5% (the historical average for the past 100 years or so), prices need to drop about 42%, or AVERAGE wages need to rise about 42%. I don’t see wages rising that much, but again, it’s hard to predict the future. If wages rose 42% and unemployment abated a bit, corporate profitability would be ruined and stock prices would have to fall dramatically. With that kind of wage inflation, if companies doubled sales, they’d still probably be less profitable than with lower sales and lower wages.

      In short, I can’t imagine what the end game is here. Rates can’t stay this low forever, but it doesn’t seem like anyone has an exit plan. Maybe the Fed and the US government saw Armageddon coming and decided the best course of action was an intermission on the way down to arrest the rapid descent into a scary and chaotic public response to the speed of deterioration. A break and a shift into a more controlled descent might avert disturbing social and political consequences that would make the economic ones seem minor in comparison.

      In short, the government is the housing market. We have an incredibly socialized housing market with 90% of all mortgages owned or guaranteed by the government. No American seems to mind this despite the deep concern many people have over “socialized medicine” or extending “socialist” unemployment benefits. The cost of continuing this support is fantastic and amazing. At some point the support will have to end because it will become mathematically impossible to continue without radically higher taxes just to pay interest on all of the debt being created.

      And we have the possibility of shocks, wars, and other problems. While the Fed appears ready to print its way out of any problem (and probably already bailed out Greece, for example), none of this can go on forever.

      I think housing has to decline further. I think rents will probably also decline further. The only thing that can stop that decline over the next five years or so is real inflation. And real inflation comes from putting a lot of money in ordinary people’s hands. That’s something the Federal Reserve will never allow.

      Look at the debt overhang? How do you push inflation out of this? Even if you give money to ordinary people, are they going to spend it, or pay down their enormous credit card debt and student loans, overdue mortgage payments, etc.? The Fed would have to flood the bottom 75% of Americans with money for a long while to be able to get real traction because the bottom 75% is probably going to use some of that money to pay down debt rather than going on a shopping spree.

      1. IrvineRenter

        Thank you for your very astute observation.

        “In short, I can’t imagine what the end game is here. Rates can’t stay this low forever, but it doesn’t seem like anyone has an exit plan. Maybe the Fed and the US government saw Armageddon coming and decided the best course of action was an intermission on the way down to arrest the rapid descent into a scary and chaotic public response to the speed of deterioration. A break and a shift into a more controlled descent might avert disturbing social and political consequences that would make the economic ones seem minor in comparison.”

        You see the situation very clearly. I don’t know what the end game is either. Inflation is almost certainly part of the puzzle, but when and how much is anyone’s guess.

        “In short, the government is the housing market. We have an incredibly socialized housing market with 90% of all mortgages owned or guaranteed by the government. No American seems to mind this despite the deep concern many people have over “socialized medicine” or extending “socialist” unemployment benefits.”

        I may steal this idea for a post. Why aren’t people who are outraged over government intrusion into our lives concerned about the government’s takeover of the housing market?

        “Look at the debt overhang? How do you push inflation out of this? Even if you give money to ordinary people, are they going to spend it, or pay down their enormous credit card debt and student loans, overdue mortgage payments, etc.? The Fed would have to flood the bottom 75% of Americans with money for a long while to be able to get real traction because the bottom 75% is probably going to use some of that money to pay down debt rather than going on a shopping spree.”

        As I said, inflation is part of the picture, but how it will manifest is unknown, and perhaps unknowable.

  2. awgee

    Maybe it would be best if the government completely uninvolved itself from the housing, mortgage, interest rate, and free markets.

    1. Geotpf

      The result would have been the same. The government didn’t make the banks offer half a million dollar, zero down, neg am, liar loans to fast food employees.

      1. awgee

        Without the government instituting the Federal Reserve, fiat currency, and fractional reserve banking, and the resultant manipulation of interest rates by the Federal Reserve, banks could not have participated in any of the behaviors you mention. The result would not have been the same. Why are you always wrong? Do you ever think or do you just spew what you hear on tv?

        1. Planet Reality

          Awgee, you may be right but a free market definitely does not guarantee positive and ethical behavior.

          In addition, what difference does it make stating the obvious? Do you honestly expect a change in our lifetime? We are fortunate that we live in one of the least corrupt global economies. All we can do is consider likely future government intervention so that we can place our bets accordingly.

          1. Food

            “We are fortunate that we live in one of the least corrupt global economies.”

            You are in your fantasy land again.

            With $2T+ bail-out money going into the rich, you tell me this is the least corrupted of all? In reality, we are living in the most corrupted land ever in the history of mankind.

            And I am fucking pissed.

          2. Gemina13

            I beg to differ.

            Go read up on Dubai, where every natural-born citizen is supported by cradle-to-grave, guaranteed benefits (healthcare, lifetime jobs, housing and cars), thanks to slave labor that has created one of the worst human rights violations situations in today’s world. The U.S. may be corrupt, but we’re not the most corrupt by a long shot.

          3. awgee

            Who said a free market guarantees positive and ethical behavior?

            From what I read, what is obvious to you and I is not even on the map for most.

            I do not have enough experience to compare least to most corrupt, but I will vote and serve jury duty and speak out against government interference.

            Agreed on placing bets.

            “All that is necessary for evil to succeed is for good men to do nothing” – can’t remember who said it

          4. matt138

            Unscrupulous businessmen get weeded out by the free market. It is never perfect but it is a hell of a lot more efficient than what we are doing now.

            Now, we incentivize them to be crap. Reverse financial darwinism.

            Geotpf: You are wrong and I sincerely hope you can put the pieces together and understand the far reaching effects of gov/t subsidized low interest rates and gov/t guaranteed mortgages.

        2. HydroCabron

          “Without the government instituting the Federal Reserve, fiat currency, and fractional reserve banking, and the resultant manipulation of interest rates by the Federal Reserve…”

          I’m with you on most of this, but fractional-reserve banking crops up in most places and times. I have no idea how one would get rid of it without driving it underground, and I don’t know enough economics to say if it would be smart to do so. Maybe this is just the sheeple in me talking.

          And though I would welcome the demise of the Federal Reserve, it’s damn near certain that interest-rate manipulation would happen if it were gone, though probably less pernicious.

          These are smaller points, however. I can’t see any way that the housing situation would have gotten half this bad without the government. Bubbles driven by private-sector insanity run out of funds a lot sooner than those driven by people with power over interest rates and the currency.

          1. david

            A little thought experiment here.

            Fractional reserve (fraudulent) banking could be phased out, if there were support for doing so, which there is not.

            How this would work: all debt-financed lending would be made with a matched book, e.g. 10-year loans would be financed with 10-year, or longer, debt. Ending fractional reserve means no borrowing short and lending long: every bank or financial company deposit or other obligation coming due would be covered by a loan or other asset that has matured. Financial institutions would have 100% liquidity to cover claims due, so there should be no possibility of bank runs except due to insolvency.

            This rule could be phased in:

            New residential and commercial mortgage loans would require full reserving, i.e. matched book, immediately. Most of this lending is already funded by portfolio investors and not by banks.

            100% backing could be phased in for other new lending categories.

            No change would be made for existing loans. As these loans mature, any re-finance, extension, or new loan would come under the 100% reserve rule.

            The Fed remains – and retains the power to create new money. So, they can offset deflationary or inflationary impacts from these changes through their open-market operations.

          2. matt138

            Money would be far more expensive to borrow as less would be available. However, many more would save with higher returns and free market interest rate equilibruim would be acheived. FDIC would be obsolete.

            Who decided it was the job of the gov/t or fed to control these things? Politicians of a consumer driven economy fiending for endless credit growth I presume.

      2. AZDavidPhx

        Geotpf –

        That’s what is so slick about how the government does things. They don’t force the banks to do anything – the just simply create the conditions that make it in the bank’s best interest to cooperate and go along with the program.

        I am not aware of any federal agency that is dedicated to helping savers grow their savings – oh but if you want a 30 year mortgage then well right this way my friend. We have a department dedicated to helping you achieve your wildest dreams.

        If you think the government is anything other than the root cause of this then you are a fool.

        The banks were simply there to enrich themselves along the way.

      3. IrvineRenter

        “The result would have been the same. The government didn’t make the banks offer half a million dollar, zero down, neg am, liar loans to fast food employees.”

        I am not so sure. I have to wonder if Glass-Steagall Act had not been rescinded, and if Alan Greenspan had stepped up to regulate derivatives if the bubble would have happened. I think not. Lenders inflated a bubble because they could. If they were not permitted to do so due to deregulation and unregulation, they would not have.

        1. Gemina13

          I agree, IR. The thieves were at the troughs with the S&L scandal (y helo thar John McCain!), but at least there were real penalties for them to pay. If we could get someone besides Dodd to create and sponsor a real financial reform bill–one with not just teeth, but retractable fangs–we might see a return to stability.

          Otherwise, the real economy is going to be nothing but the same $5 changing hands, while the banksters suck down their stolen goodies in Baccarat glasses.

    2. AZDavidPhx

      Oh but they love keeping us little piggies in perpetual servitude competing for labor. The last thing they want is a shortage of cheeseburger engineers and vehicular scrubbing technologists.

      Mortgage debt is how they keep us obedient. It’s a power that they will never give up.

      If we resurrected Andrew Jackson and put him on the campaign trail today, he would be labeled a radical by the media and cast off as an anti American UFO chasing kook. Someone might even go dig up a hooker claiming to have slept with him and offer her a book deal if she would discuss the size of his manhood.

      In his time, most of society were farming class whereas today we are just consumers – buying stuff we don’t need with money we don’t have. Our consumers need banks to keep pumping the koolaid so they aren’t bored on weekends.

      It will take a severe crisis to get a real change in this country. We may not be far away. How long are the gimmicks going to stall things? I have a feeling that people will be a lot more pissed off on the next leg down. Anyone ready to march over to D.C yet and chant slogans of “You have failed” at the white house? I wonder if the police would bring out their puppy dogs.

      Could get interesting once the recovery is revealed to be a big lie.

      1. awgee

        My part is to pay cash for everything, including our next house.

        Andrew Jackson’s present day counterpart is Ron Paul, and yes, the general consensus is to refer to him as a nutcase, or to say voting for the libertarian candidate is wasting your vote.

        Voting for anybody but the libertarian candidate is a waste of your vote.

        Chant all over the blogs. They are louder than you might think.

      2. ME

        I agree. But the govt will play it’s last card before that happens. The biggest ruse to distract us all. War or another attack on us soil. Just look throguhout history. It’s clock work. Right before people get too angy about their economic situation a war always breaks out to unite the nation.
        So not only are we pawns economically. Our children are their cannon fodder for wars.

  3. lw2000

    That is one of irvinerealtor’s listings. We went to the open house last weekend and there were a lot of people there, even in the rain. Nice place, but too much $$$ for us. Looks like it is sold already, anyway.

    1. IrvineRenter

      I didn’t notice this was one of Scott’s. That explains why the description is well-written and the photos display the home well.

      1. Sue in Irvine

        Very beautifully decorated Mr & Mrs Seller. I think their picture is on a wall. That is a huge TV downstairs.

  4. MalibuRenter

    “Hasn’t it become obvious that our government does not care about the people? As a citizen of this country, you should be outraged by the way your government puts your interests last. Our government openly advocates destructive policies that transfer wealth from you to the lenders. The US Government as ruled today is completely captured by money interests;”

    So, how do you feel about the Supreme Court decision on corporate campaign donations?

    1. AZDavidPhx

      The bank bailout should have been the first indication to the sheeple that they really do not have a choice.

      The Supreme Court finding big money corporations equal Joe Sixpack is another great example.

      And with each “F-uck You”, the folks keep rolling over not wanting to rock the boat – willing to put up with a temporary kick to the balls if it means getting to go window shopping at IKEA next weekend.

  5. MalibuRenter

    IR,

    I think you are missing the point. If you really want to change things politically, what you now need is either: 1. To get a lot of voters very upset and to ….yes, that’s the problem. Who do they vote for? There are no Federal ballot propositions. If you wanted to be horribly mischievious, you could have a CA ballot prop which puts on a tax exactly equal to the Federal mortgage interest deduction. You might actually get a CA ballot proposition removing mortgage interest as a deduction for new home purchases in the State. 2. You could form a new organization which looks carefully at housing issues, writes draft legislation and donates immense amounts of money to politicians. I hate to say it, but if you want a precise policy instrument, this is it.

    1. Planet Reality

      In the mean time the government plot with the central goal of making a Malibu beach cottage unaffordable to the upper middle class continues…

    2. IrvineRenter

      I wish I had the energy for such a fight. I am disheartened by watching other governments institute better policies than ours.

      1. tonyE

        In Europe they have wars every so often.

        The winner kills the losing government (getting rid of 50% of the laws and lawyers). Then it changes the laws, effectively getting rid of the rest of the lawyers.

        Europeans do this on a regular basis, attaching each other and in the process shaking up the politicians.

        What the US needs is a war we can lose but that won’t affect property values.

        Remember the movie “The Mouse That Roared”? We need to find such a mouse.

    3. AZDavidPhx

      All one needs to do in order to change things politically is make some noise. Stage some rallies. If one million people dressed up in rags and marched into DC and rattled tin cups along the gates outside the White House – the media would show up and your message would be heard.

      Blogging and trying to intellectually attract the voter masses is a fool’s errand. It may be fun mental masterbation for some us, but the average Joe doesn’t care. He likes putting on his favorite sports team hat and playing manly grabass in the bar over a beer.

      Just go down to your local mall and people watch for a minute or two. Ask yourself – how likely is it that each individual you see spends his free time reading blogs vs stroking himself or making babies. You quickly realize that we are hopeless.

      1. darms

        There were quite a few people in 2002 & 2003 who loudly & visibly (except on the mainstream media, of course) protested the impending Iraq invasion. Fat lot of good that did, eh?

    4. HydroCabron

      I could imagine getting involved with a movement to end the mortgage-interest tax deduction.

      The Obama Administration recently mentioned it softly, for earners above $250,000, but Lawrence Yun and the Mortgage Bankers Assn. shamed them into silence. GW Bush’s administration whispered something about it at one point.

      This would be tough to disconnect from the tax-deductibility of business-related interest expenses, which was part of the original excuse for making mortgage interest deductible.

      Houses should be cheaper, but buying one should be hard.

    5. Walter

      How about we start with resetting your prop 13 basis if you refi or pull a HELOC to the price assigned by the appraiser for the new loan.

      This will put some damper on things and has an extremely remote chance of getting passed.

      Doing away with the interest deduction–that verges on the impossible.

  6. AbroadThankGod

    Time to face the music and stop spewing the national mythology that we are the greatest nation on earth and have nothing to learn from furaners.

    We’re selfish, morally bankrupt and hopelessly myopic. We can’t change our ways. There’s just no will to do it.

    1. AZDavidPhx

      Wow look at all the hate speech IrvineRenter is bringing out today with his anti-American views. I am forwarding this to the Department of Homeland Security for immediate investigation and possible prosecution for virtual loitering.

      Cannot have this getting out of hand and turn into an online haven for terrorists like “Abroad Thank God”.

      1. AbroadThankGod

        It’s nothing I haven’t said before, David. I know you’re being sarcastic, but it’s a shame there aren’t more people capable of objectivity in the USA. It’s a twelve step program to rehabilitation. And the first step is admitting we have a problem.

        Worst part is that I’m not abroad anymore!

  7. Stock Investor

    “Everyone thinks they are either buying into an appreciating market, or that they are buying at the bottom.”

    Everyone thinks different. For example, I think that market timing is not viable investment strategy.

      1. matt138

        Ron Paul represents sobriety and sanity, yet loopy and nutcase and crackpot are the words used by most to describe him. Oh the irony.

        He is very professional in presentation and appearance. He is cool, calm, collected and makes sound, rational arguments. I wish he wasn’t from Texas though. If not him, then it’s nobody and never. That just shows how sidetracked we really are.

        I still hang on to the hope that things get bad and finally people realize the root of our problems.

  8. HydroCabron

    I particularly enjoyed the part where the U.S. Treasury puts Jackson’s image on the $20 Federal Reserve note. Heh.

    Something like Paul Kruger’s mug on the Krugerrand: Kruger thought, quite rightly, that the discovery of gold in South Africa would mean nothing but pain for its inhabitants. He also thought the world was flat, but nobody bats 1000.

  9. lurker

    I can’t believe you didn’t include the quote!

    “Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.”

  10. Eat that!

    We need to claw back some of the money that’s going into supporting high home prices. We should be lowering the amount of equity that not taxable. Do you really need to have $0.5 million dollars tax free from a home sale (per couple). Why not lower it to $300K and start paying back for the artificial price supports? BTW, I own a home now and I’m for this.

  11. Just a Lurker

    IR, Thank you for your thoughts, opinions, knowledge and intelligent discussions you provided for me over the years.

    The US has some serious challenges ahead of us. Our poors are getting poorer, our children and schools are struggling, our sicks do not have adequet healthcare or costly wars (both financial and human resources). We are spending too much buying stuffs, treating ourself to thing we cannot afford. We do not save or invest in the US enough. We do not want to work or make anything anymore. We just make our money by manipulating or speculating on imaginary or already existing products or services. God forbid, if our children are learing our unsustainable way of life.

    I have product designs that I want to get made. But I cannot find a US company to make it at a reasonable price. I cannot find anything similar to Alibaba.com in the US.

    I am waiting for the day when American wake up and start to notice that Target, Wal-Mart, Home Depot and others essential consumer retail outlets are just Chinese piggy banks. Every time you buy “made in China”, we made China richer and US poorer. I am sadden that I could not find more products made in the US.

    No. I am not a racist (I am a Chinese American). I do not hate the US, China or anyone else. I am just sadden and disappointed with the current state of affair. I am still renting in Irvine and will not likely be in the market anytime soon. Home price vs Income vs rent are still quite disconnected. When I buy, I would prefered to stay in Irvine but that is not a given anymore.

    Just M2C

    1. ME

      Exactly! IDon’t see anything changing either. The best asset we have is our food and agriculture industry.( Somthing Cina will never have enough of.) No wonder we have open boarder policies! I may be speculating but don’t be suprised if in a few years immigrants will be competeing with Americans for those bean picking jobs.

    2. Freetrader

      Just a Lurker, that is not true. American companies and products are as ubiqitous as ever. Microsoft, Google, Intel, Qualcomm, are all US companies. Just because the cheap, low-end consumer product stuff we all buy at Wal-Mart is manufactured in China, that doesn’t mean that is at all bad for the US — in fact, every time you buy from China, you’ve actually made the US a little richer. Keep it up.

  12. Planet Reality

    It’s definitely a mistake to assume that rising interest rates mean lower housing prices nominally. A 10 minute look at history would tell you otherwise.

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