Did any of you see the KCET special on Foreclosure Alley? It was well done. It humanizes the whole foreclosure mess we are all in.
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Rise so high, yet so far to fall. A plan of dignity and balance for all. Political breakthrough, euphorias high. More borrowed money, more borrowed time. Backed in a corner, caught up in the race. Means to an end ended in disgrace. Perspective is lost in the spirit of the chase.
Foreclosure of a dream, Those visions never seen, Until all is lost, Personal holocaust. Foreclosure of a dream.
Barren land that once filled a need, Are worthless now, dead without a deed. Slipping away from an iron grip, Natures scales are forced to tip, The heartland cries, loss of all pride. To leave aint believing, so try and be tried. Insufficient funds, insanity and suicide.
Are you ready for the next Great Depression? How bad with the recession get? What have you done to prepare?
What do you think of this answer:
Astute Observation by WaitingToBuyByAndBy
2008-09-28 01:45 AM
IR, just remember, you asked:
I love irony: We are currently in a recession. Everybody knows it. Yet
the official proclaimer, the National Bureau of Economic Research has
yet to call it. I find it ironic the Calculated Risk blog been calling
recession since last December and most people on the street can provide
anecdotal evidence of recession yet the official government agency has
apparently not made up its mind about the matter.
So we go about our daily lives suspecting times are not as good but not really thinking about it… or acting on it.
Many here witnessed the run up in home prices during the bubble,
knew it to be unsustainable, and realized prices had no choice but to
come back down to earth. Many have also agreed prices will over-correct
running lower than fundamentals for a brief period due to buyer
psychology (fear of being a knife-catcher).
I find it ironic, then, to hear (at least in the recent past) that
while we are in a recession, and there is a chance of severe recession,
it will not be a depression.
Psychologically, we simply do not want to consider such ideas. We
cling to the idea that the government will do its thing, and then the
economy will do its thing.
The media has widely reported over the last few years the economy
has been driven by the American consumer. How many times have you
discovered it was cheaper to buy two of the same item than one? How
many “value-paks” have you purchased. Our economy has traditionally
built upon expansion, but for the last 5-7 years our economy has
actually been depending on it.
The American consumer was able to meet this demand and fuel the
economy for the last few years using Mortgage Equity Withdrawal, Heloc
Abuse, credit cards, and savings depletion, but just as houses can’t
increase in value just because prices go up, our economy can’t continue
to expand on borrowed money. Those days are over.
You might say, sure things are bad for real estate and for Wall Street, but my company is doing business just as it always has.
Now remember, all of those housing bulls kept saying “can’t happen
here” and “all real estate is local” and “there’s no such thing as a
national housing bubble” yet here we are.
If we’re willing to open our eyes and look around: lowest personal
savings rate since the great depression; biggest decline in home prices
since the great depression; highest number of foreclosures since the
great depression; T-bills yielding zero has not occurred since the
great depression; non-banks borrowing from the Fed for the first time
since the great depression;
The currently proposed bailout will be the largest economic intervention by the government since the great depression.
The depression is not coming. Like it or not, it’s here. To coin an
ancient ad for Palmolive dish soap, we’re “actually soaking in it”.
Of course your company’s sector (unless the financial sector) is
probably unaffected by all the commotion, your company probably seems
sound, your job probably seems secure. But wasn’t there that group that
recently got laid off?
Likewise, if you own a house you are probably not bothered by the
equity-destroying comps of your neighbors, that is, until those comps
completely wipe out your equity. Even then, it’s a paper loss unless…
for some reason… you need to move.
The economic dominoes are falling. If we have learned anything in the last year, it’s that nothing is contained.
As you might guess, I’m an occasional reader of this blog and also
CR (and that Nouriel Roubini guy). I don’t mean to be un-American or
panic anybody by calling this a depression. If my claims above are not
true, please correct me.
It’s fair to say we’ll know the housing market is getting better
once the number of foreclosures subsides and starts to diminish.
Likewise, we’ll know the current economic crisis is getting better once
government bailouts start diminishing in size, but if you look at the
numbers you can see we are currently heading in the wrong direction.
I would like nothing better than for all markets to regain
confidence and work through this crisis, but again there is no
foundation for this to happen. By it’s very nature a bailout should not
inspire confidence, it should indicate system failure.
Just as the housing market can not bottom until prices reach
fundamentals, our economy can not heal until its fundamentals are
tested and found to be sound.
For those of you interested in the new book, there is now a PDF link on the main blog
I have updated the analysis page on the main blog. Much of the text of the book is located there:
The following are links to the analysis posts of Irvine Renter:
3-15-2008 — Mortgage Default Losses — Parsing the distinction between default rates and resulting default losses on residential loans.
3-13-2008 — Floplords — A discussion of the phenomenon of accidental landlords.
3-12-2008 — Mortgages as Options — A look at how borrowers and speculators gamed the system using mortgages as option contracts.
3-11-2008 — Houses and Commodities Trading — An examination of the parallels between commodities markets and the behavior of residential real estate markets.
3-10-2008 — Mortgage Equity Withdrawal — An overview of the role mortgage equity withdrawal played in the recovery following the 2001 recession.
3-8-2008 — How Big Was the Bubble? — A review of statistical measures of price to evaluate just how big the housing bubble really was.
3-4-2008 — Systemic Risk in the Housing Market — The second of a two-part series. This posts examines the failures of
structured finance and suggests methods for addressing this failure to
prevent future housing bubbles.
3-3-2008 — Structured Finance 101 — The first of a two-part series. This post provides an overview of
what structured finance is, and how it was used to during the housing
bubble.
2-28-2008 — Affordability — A review of the concept of affordability and what it means for the housing market.
2-25-2008 — The Credit Crunch — A discussion of the causes and implications of the credit crunch.
2-18-2008 — Selling for Less — A look at the changing market environment where buyers are in control of the action.
2-4-2008 — What is Equity? — Looking at the components of homeowner equity and the factors that impact it.
1-28-2008 — Speculation or Investment — Comparing the motivations and activities of two distinct classes of
purchasers of real estate. Knowing the difference between speculation
and investment can make the difference between making and losing money.
1-14-2008 —Rent Versus Own — A detailed look at the cost of ownership and the various reasons to rent or own a particular property.
1-7-2008 — The Fallacy of Financial Innovation — Shattering the myth of “financial innovation” and reinforcing the
use of 30-year, fixed-rate, conventionally amortizing mortgages.
12-3-2007 —What is a Bubble? — The concepts and beliefs that when acted upon by the general public create an asset price bubble.
10-1-2007 — What Caused the Bubble Rally? — A detailed analysis of the conditions the preceded the bubble rally and the causes of its inflation.
9-24-2007 — A Buyer’s Market — A hard-nosed look at negotiating when market conditions change.
9-13-2007 — The Market Bottom — A review of the conditions that formed the last market bottom and why it formed at the price level it did.
2007-07-16 — Land Value 101 — A detailed explanation of how raw land is valued when used for residential construction.
2007-06-25 — Houses Should Not Be a Commodity — A discussion of the psychology of commodity market trading and why this is an undesirable element in housing markets.
2007-06-18 — Telling Good Analysis from Bad — An evaluation of Gary Watts Real Estate Outlook for 2007 and a
description of the characteristics of a robust market analysis.
2007-06-11 — The Reservoir of Schadenfreude — A whimsical look at the emotional phenomenon of taking pleasure in the misfortune of others.
2007-05-21 — The Day the Market Died — A look at the conditions which led to the bursting of the bubble with analogies to Don McClean’s American Pie.
2007-05-14 — The Anatomy of a Credit Bubble — A detailed, mathematical analysis of the impact changing lending
standards had on home prices. This is fundamental to understanding of
the mechanics of the real estate bubble.
2007-05-07 — Your Buyer’s Loan Terms — The precursor to The Anatomy of a Credit Bubble. It discusses house prices from the perspective of the future buyer of
your home. It demonstrates the impact changes in loan terms will have
on future buyers and how this will impact the amount your future buyer
can bid for your home.
2007-04-30 — Appreciation is Dead — Rapid home price appreciation has become an accepted truism in
Southern California. There are many reasons to believe this is not a
basic Truth of Life. This post examines the causes of appreciation and
explores the reasons why it may all be coming to an end.
2007-04-23 — It’s not the Borrowers; It’s the Loans. — The “subprime containment” meme has been used to quell the fears of
investors since the collapse of subprime lending in early 2007. This
post examines the spurious nature of the subprime containment idea and
explores the implications of the larger problem being hidden from the
general public.
2007-04-16 — How Homedebtors Could Avoid Foreclosure — A look at a potential financing mechanism which might be used to
assist homeowners who are underwater. It also examines the potential
implications of the widespread use of such tools.
2007-04-08 — Southern California’s Cultural Pathology — An exploration of the unique cultural beliefs which made the housing
bubble take hold in Southern California. This is a critical post to
understanding why the bubble was so pronounced here while in other
areas of the country it was not as extreme.
2007-04-02 — How Bad Could Bad Get? — A look at the worst case scenario for our housing market, and why it is not unrealistic.
2007-03-24 — Who is responsible for this mess? — A rant on the difficulty of identifying the party or parties responsible for our current problems.
2007-03-14 — Why the Sub-Prime Meltdown is a Problem — Many have postulated the sub-prime collapse would not impact housing
prices in more affluent areas like Irvine. This brief post debunks this
idea.
2007-03-11 — Predictions for the Irvine Housing Market — A prediction for the future of housing prices in Irvine based on an
analysis of emerging data and trends. This is the capstone post tying
together the series of posts from 3-1 to 3-9.
2007-03-06 — What is Past is Prologue — A review of the mechanics of the collapse of the last bubble to
provide a foundation for the projections of the market action in our
current market bubble.
2007-03-05 — How Sub-Prime Lending Created the Housing Bubble — A simple thought experiment to show how a loosening of lending
standards helped create a commodities market mentality and inflated the
housing bubble.
2007-03-03 — How Inflated are House Prices? — A discussion of the fundamental valuation of housing prices. This post
is essential reading to anyone wanting to understand how residential
homes should be valued.
2007-03-01 — Financially Conservative Home Financing — A review of available financing terms and a discussion of why the
new “innovations” in home financing are disasters in the making.
2007-02-27 — I am IrvineRenter (Inventory Cholesterol) — A brief introductory post and a discussion of the different types of housing inventory and how they impact prices.
Storm clouds spreading Black horizons oil slick the southern sky What prospects should I gather here to motivate my corpse to rise? Bloodshot My eyes reject the staleness of this day And ‘reason’ gives purpose for all the pills i have to swallow Driving My heart is dead and hollow Metal boxes racing by Ringing out the death of my life Machines buzzing Towers looming the antithesis of nature Entering this asphalt tomb- self – interest my prime dictator. Now that i stand to carry the weight – try to conceive me that it’s all for something? Now that i stand to carry the weight I lie to myself…am i living-dead? Four walls surround me with wires outstretched- the triumph of time over space The modus vivendi- each man for himself Each alone And each an island Get me out of this hole somehow…get me out of this hole right now…my great depression
“[A]s the Fed chairman, Ben S. Bernanke, laid out the potentially
devastating ramifications of the financial crisis before congressional
leaders on Thursday night, there was a stunned silence at first…. Senator Christopher J. Dodd [said] the congressional leaders were told “that we’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.””
I am in the final stage of the publication process. I will be receiving my proof from the publisher this week. Once I approve it, the book will be available through the publisher’s website. Shortly thereafter, it will be available on Amazon.com.
I would give you a teaser of the content, but you have already seen most of it. It is scattered throughout this website in the various analysis posts. The readers and commenters on the IHB were instrumental in making this book possible. The daily feedback on the ideas and the presentation of opposing views has forged this work into an exhaustive review of the housing bubble. Thank you, thank you all.
If the sun refused to shine, I would still be loving you. When mountains crumble to the sea, there will still be you and me.
Kind woman, I give you my all, Kind woman, nothing more.
Little drops of rain whisper of the pain, tears of loves lost in the days gone by. My love is strong, with you there is no wrong, together we shall go until we die. My, my, my. An inspiration is what you are to me, inspiration, look… see.
And so today, my world it smiles, your hand in mine, we walk the miles, Thanks to you it will be done, for you to me are the only one. Happiness, no more be sad, happiness….I’m glad. If the sun refused to shine, I would still be loving you. When mountains crumble to the sea, there will still be you and me.
So who is going to go under first, WAMU or Lehman? Will either one of them survive the week?
What do you think is going to happen now that the government owns Freddie Mac and Fannie Mae?
You must admit, we live in interesting times. Major financial institutions are imploding or being bailed out by the government. It isn’t something you see every day…
The big story of the weekend seems to be the “conservatorship” of Freddie Mac and Fannie Mae. The American taxpayer will now be liable to pay for all the losses on the toxic mortgages these two poorly-run entities insured.
This is the bottom line: Freddie Mac and Fannie Mae and insured billions of dollars in toxic mortgages. The losses on these mortgages will end up exceeding the amount of money these companies have. If these companies were to go out of business, the entire secondary mortgage market would collapse, and our real estate markets will be in turmoil as transaction volume would plummet from its already anemic levels. The government believes it has to take over these companies in order to have a secondary mortgage market. A government takeover means the taxpayers of the United States just became liable for all the losses on the bad loans insured by these two companies. When you pay your taxes, you are now paying for a portion of all the bad mortgages given to speculators, flippers, fraudsters and the like.
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It started off so well They said we made a perfect pair I clothed myself in your glory and your love How I loved you, How I cried… The years of care and loyalty Were nothing but a sham it seems The years belie we lived a lie I love you ’til I die Save me, save me, save me I can’t face this life alone Save me, save me, save me… I’m naked and I’m far from home
The slate will soon be clean I’ll erase the memories To start again with somebody new Was it all wasted, All that love? I hang my head and I advertise A soul for sale or rent I have no heart I’m cold inside I have no real intent Save me, save me, save me I can’t face this life alone Save me, save me, ooooohhhhh… I’m naked and I’m far from home
Each night I cry I still believe the lie I’ll love you, ’till I die
Save me, save me, oh, save me Don’t let me face my life alone Save me, save me, ooh… I’m naked and I’m far from home