[hull3551]

$this->bbcode_second_pass_quote('Cynus', '.')..do you want there to be an economic collapse and massive die off,...

[JoeW]

The real estate market has been up and down for months. I think there were record new home sales in October, followed by this huge drop-off in November. It has become a volatile market, but it is not clear to me that nationwide housing price declines are in the cards.

I agree with some other posts that the fed will try to inflate us out of this mess, despite their stated mission of fighting inflation.

[cube]

$this->bbcode_second_pass_quote('JoeW', 'I') agree with some other posts that the fed will try to inflate us out of this mess, despite their stated mission of fighting inflation.

[dbarberic]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('JoeW', 'I') agree with some other posts that the fed will try to inflate us out of this mess, despite their stated mission of fighting inflation.

[mgibbons19]

I was reading the Mogambo on Bernanke and he reports that Bernanke has even suggested NEGATIVE interest rates in order to prop up 'proper' inflation.

Haven't fact checked it, but interesting. What a way to crash the economy for even those who have tried to protect themselves. Tax people for saving.

[skiwi]

The Fall of the House of Cards

$this->bbcode_second_pass_quote('', 'M')any readers will wonder why trimming the spec-market threatens the overall economy. The reason is, as The Economist points out is that "23% of all American houses bought in 2004 were for investment, not owner-occupation. Another 13% were bought as second homes. Investors are prepared to buy houses they will rent out at a loss; just because they think prices will keep rising -- the very definition of a financial bubble."

If we consider the effects of 36% of buyers moving out of the market we can grasp the magnitude of the problem.

The crisis is compounded by the enormous effect of the housing market on both growth and jobs.

"Over the past four years, consumer spending and residential construction have together accounted for 90% of the total growth in GDP. And over two-fifths of all private sector jobs created since 2001 have been in housing-related sectors, such as construction, real estate and mortgage broking." (The Economist)

"2 out of every 5" private sector jobs!?!

"90% of the total growth in GDP"!?!

[drew]

95% is a wee bit high, perhaps, Darryl..lol
maybe 90 or so..

I think most people here simply realize that Capitalism ad infinitum is not possible...

I personally dont want anything bad to happen to anyone because of PO

I think I'll be disappointed...

Drew

[Leanan]

To move homes in the slowing real estate market, sellers are resorting to more and more incentives, ranging from plasma TVs to fancy toilets:

CNN/Money

[PenultimateManStanding]

Just wait 'till it gets to plasma toilets!

[PrairieMule]

Well PMS, I supose everyone will remember the day when The Shit Hits The Plasma Fan...

[gnm]

Good grief.

Nearly everyone I know has 2nd and 3rd mortages as well. They are leveraged up to thier eyeballs on the mistaken belief that thier houses will continue to increase in value year after year. I know some who have interest only loans foir something like 125% of value! How the hell do you do that?

I have stubbornly resisted any refinancing/mortage line of credit type stuff.

-G

[emersonbiggins]

This reminds me of how GM sells cars: take a product that has outlived its usefulness, manufactured on a decrepit platform, and jazz it up with goodies like rear-seat DVD, satellite radio and Onstar, then sell to starry-eyed consumers who don't know (or care) that underneath all the jazz, it's still a Chevy. Once the new wears off, they'll find themselves holding an unsalable POS. Rinse and repeat.

[PenultimateManStanding]

$this->bbcode_second_pass_quote('gnm', '
')Nearly everyone I know has 2nd and 3rd mortages as well. They are leveraged up to thier eyeballs on the mistaken belief that thier houses will continue to increase in value year after year. I know some who have interest only loans foir something like 125% of value!

[PrairieMule]

Last summer when I worked in the sub-prime sector of the Mortgage industry we would see "habitual" refinances on hat states like California, Nevada, Florida, and New Jersey. I kid you not it is not uncommon in California to see someone refi their house and draw $30,000 in equity or as much as they they could without going over 95% equity every 6 months!! I have seen it then and I see it today on peoples credit reports.

PMS can vouch that San Diego/Long Beach area 25year old 1800sf starter house can increase it's appraisal value 20K in 6 months. I don't know where folks are going to live if it doesn't cool off soon. They sure won't be able to commute like before.

Texas has this thing about certain refi with cashouts that will keep it from going to the crapper. You cannot get cashout, pay credit cards and such if you do not have at least 85% equity. Plus it does not have crazy appraisal gains like California or the Baltimore/Boston area. Hence it's tougher to use your house as a atm if the market goes south. it also has tough anti-preditor lending laws. It was a lesson learned from the 85' Oil Bust.

[PrairieMule]

Also on the subject of California. When you refi your house you have points and closing costs. The same house I used above figure a value of $385K. To refi that house the closing costs would be around 10K, so if you did that twice a year you are adding 70-80K to the principle. They could do a HELOC or fixed 2nd with closing csts around 2-3K but the rate goes up and they choose to refi half the time. I don't know what they are doing with that money and I may not understand all the laws of the universe but you just can not "Create" 50-100K a year from a vacum on not have it come back and bite you hard. It seems this oddity of the universe exists from LA to Sacramento.

[TommyJefferson]

$this->bbcode_second_pass_quote('PrairieMule', 'T')exas has this thing about certain refi with cashouts that will keep it from going to the crapper. You cannot get cashout, pay credit cards and such if you do not have at least 85% equity. Plus it does not have crazy appraisal gains like California or the Baltimore/Boston area. Hence it's tougher to use your house as a atm if the market goes south. it also has tough anti-preditor lending laws. It was a lesson learned from the 85' Oil Bust.

[Leanan]

The Oil Drum posted this graph of new home prices today. That's a pretty sharp drop. And it's been going on for three months now.

Peak real estate?

[Zorlag]

After the drop is well underway, there are great deals to be had. But not yet. I know it sounds merciless, but that's what happens to people who get too greedy... This won't be true if who system breaks up though. But smary buyers will wait until sellers have bled dry and are desperate.

[Specop_007]

If prices continue to stagnant or slip, damn I'll be house shopping. I want a new house in a bad bad way.