Jack Guynn, Atlanta federal reserve bank President, expressed concerns about the housing bubble in 2004 and presented evidence in 2005. Alan Greenspan did nothing.
Irvine Home Address … 68 WOODLEAF Irvine, CA 92614
Resale Home Price …… $270,000
I tried to warn you somehow
You had your way
Now you must pay
I'm glad that you're sorry now
Connie Francis — Who's Sorry Now?
As Alan Greenspan guided the economy into the abyss, some voices both inside and outside the inner sanctum warned Greenspan of impending disaster. I wonder if Greenspan is sorry he didn't listen?
There were many people who saw the housing bubble for what it was. Many readers of this blog chose not to buy when others lost their senses. Though they may lack the resources of professional economists at the federal reserve, but many people inside and outside the industry pointed to problems that culminated with the housing bubble.
Few insiders with positions of power and influence saw the housing bubble. One notable exception is Jack Guynn, former president of the Atlanta federal reserve bank (not Fred Guynn the actor that played Herman Munster.)
Tyler Durden on 05/02/2010
As we were perusing the just declassified full 2004 FOMC transcripts, our attention was caught by two specific things in the December 14 uber-grouthink session. First, the original housing prophet is not Hoenig, not Lacker, and certainly no other Fed member: it is former Atlanta Fed president Jack Guynn, who prudently got out of dodge on October 1, 2006. Guynn was the first to point out, in the long ago days of 2004, that Fed policy could be leading to a massive housing bubble. Good thing the Maestro was more concerned about his misplaced dentures than to listen to voices of reason at the Eccles building. Yet speaking of the Maestro, we catch an amusing anecdote, in which it becomes obvious that none other than the Fed Chairman looks at the CFTC's Commitment of Traders reports to get an indication as to what may or may not happen to the relative strength of the dollar. When one considers this fact, and juxtaposes it with observation that the Fed runs the formerly free world, does it imminently follow that the people in charge are not brilliantly scheming and conspiratorial, but merely very, very, very dumb?
The substantial run-up in house prices, which we have followed in Florida and also see in the populous Northeast and West Coast of the United States, may be at least partially attributable to unusually low mortgage rates influenced by our very accommodative policy, which has been in place for some time. Those developments and the risks associated with the run-up in house prices probably deserve further study and thought as we decide how to posture policy.
I continue to be comfortable with the policy path we’re on. And barring some surprise, I judge that we still have a considerable way to go to get back to a more neutral stance. My concern is that, with a real fed funds rate that continues to be near zero, we could unintentionally be encouraging further imbalances in both the inflation environment and in the international sector. I hope we will not try to signal that we may soon pause in our removal of policy accommodation. Thank you, Mr. Chairman.
So much for further study and thought. While we can't fault Greenspan, the man was like 500 years old at this time, we wonder what vice-Chairman Geithner was doing when presented with these words of caution – aside from reading the tax code of the US from cover to cover of course.
The 2005 transcripts have just been released.
by CalculatedRisk on 1/14/2011 04:05:00 PM
[T]there is the housing situation, which we talked about for a long time yesterday afternoon. As I’ve been reporting for several meetings, some of our markets, especially those in coastal areas of South Florida and the Florida panhandle, are experiencing a level of building activity and price increases that are clearly, in my view, unsustainable. Nearly every major Florida city now has experienced increases in the double-digit range, and some, like Miami, Palm Beach, Sarasota, and West Palm, have been reporting increases in housing prices on a year-over-year basis of between 25 and 30 percent. While our discussion yesterday did not seem to indicate a consensus on a national housing bubble, based on past experience I’m reasonably comfortable characterizing the housing feeding frenzy in some of our markets as being a bubble or a near bubble. For example, the number of major projects planned or under construction in Miami now totals 114, most of which are high-rise developments. That includes 61,000 condo units—eight times the number that were built in the last decade—and a total of 100,000 new parking spaces. I know we don’t have any process for introducing exhibits into the record, but I’d like to pass Dave Stockton this pictorial of the new projects in Miami, so that he can continue to worry a little bit along with me. [Laughter] My supervision and regulation staff thinks this is an accident waiting to happen in our area. And while the local market excesses probably do not represent systemic national risk, the shakeouts could have serious regional consequences. My bank supervision staff points out that housing-related credit risks to our bank lenders are not so much from defaults on permanent mortgage financing that we talked about yesterday, but rather from lending for land acquisition, development, and construction. The ugly picture we have seen before—and that they think we may very likely see again before long—goes something like this: the drying up of sales of new units; the painful decision of developers to go ahead and complete the construction of additional units to make them saleable, further depressing the market; and speculators who had hoped to see big capital gains walking away or defaulting on their contracts, giving their properties back to the lender. Perhaps it’s because of where I sit, but I am less comforted than some of my colleagues about the housing situation. … CHAIRMAN GREENSPAN. Let’s take a break for coffee.
Here are the presentation materials for the June meeting with plenty of graphs on housing.
Jack Guynn strongly suspected there was a housing bubble in 2004. He sets a team of researchers on the problem, and the results showed there was clearly a problem. He correctly foresaw the collapse of the high-rise markets in Miami, Las Vegas, and Orange County. What did Greenspan do? Nothing.
For those with historic interest on the housing bubble, the complete text of the Great Housing Bubble is available on as a PDF on the right sidebar, and the online version is available by clicking on the bookshelf below or in our library.
Living as a Ponzi was common during the housing bubble. Those that flamed out are squatting in their broken ATM machines.
- The owner of today's featured property paid $207,500 on 3/15/2002. He used a $186,542 first mortgage and a $20,958 down payment.
- On 7/29/2003, he obtained a $55,400 stand-alone second.
- On 12/3/2004 he refinanced with a $290,000 Option ARM with a 1% teaser rate.
- On 9/16/2005 he obtained a $40,000 stand-alone second.
On 11/1/2007 he refinanced with a $360,000 first mortgage. It looks like he paid for about a year.
Recording Date: 02/10/2010
Document Type: Notice of Rescission
Recording Date: 07/22/2009
Document Type: Notice of Sale
Recording Date: 04/17/2009
Document Type: Notice of Default
Total mortgage equity withdrawal is $173,458. That plus two years of either squatting or rent skimming is this owners compensation for a ruined credit score. I think the borrower got the better end of the deal.
Irvine Home Address … 68 WOODLEAF Irvine, CA 92614
Resale Home Price … $270,000
Home Purchase Price … $207,500
Home Purchase Date …. 3/15/02
Net Gain (Loss) ………. $46,300
Percent Change ………. 22.3%
Annual Appreciation … 2.9%
Cost of Ownership
$270,000 ………. Asking Price
$9,450 ………. 3.5% Down FHA Financing
4.79% …………… Mortgage Interest Rate
$260,550 ………. 30-Year Mortgage
$54,577 ………. Income Requirement
$1,365 ………. Monthly Mortgage Payment
$234 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$45 ………. Homeowners Insurance
$414 ………. Homeowners Association Fees
$2,058 ………. Monthly Cash Outlays
-$127 ………. Tax Savings (% of Interest and Property Tax)
-$325 ………. Equity Hidden in Payment
$17 ………. Lost Income to Down Payment (net of taxes)
$34 ………. Maintenance and Replacement Reserves
$1,657 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$2,700 ………. Furnishing and Move In @1%
$2,700 ………. Closing Costs @1%
$2,606 ………… Interest Points @1% of Loan
$9,450 ………. Down Payment
$17,456 ………. Total Cash Costs
$25,300 ………… Emergency Cash Reserves
$42,756 ………. Total Savings Needed
Baths: 1 bath
Home size: 1,060 sq ft
($255 / sq ft)
Lot Size: n/a
Year Built: 1983
Days on Market: 7
Listing Updated: 40553
MLS Number: P765314
Property Type: Condominium, Residential
Very lovely condo in Woodbridge area. Down stairs home with enclosed patio and storage. Light and Bright end unit. Master bedromm with walk in colset. A larege community park, play ground and swimming pool with spa.
bedromm? colset? larege?
Enjoy your holiday!