[FoxV]

$this->bbcode_second_pass_quote('Tyler_JC', '"')Massachusetts Single Family Home Year-Over-Year Inflation Adjusted Price Changes, 2004–2006, from publically available U.S. government and Massachusetts Association of Realtors data.

[Tapas]

Guys,

Thanks for all the positive comments.

Here is a funny video with easy graphics that explain why Interest Only Loans are a bad idea.


I found another video that shows the close parallel between the Great Depression and the Housing Bubbleas experts continued to make false predictions even while being fully aware of the crashing stock market/housing bubble.


The value of American Homes inflated up from $10 Trillion in 2000 to over $20 Trillion in 2005. Even a conservative 50% price fall has the potential to wipe off $5 Trillion in equity. This would have a deeper impact than the Great Depression.

Consider that around $3 Trillion of this paper gain has been HELOCed out by American Families to finance their Hummers, SUVs and BMWs.

Consider that around $2.7 Trillion in ARM payments will adjust to the next higher level by 2007.

Already 10% of all home owners have zero equity.

Around 1/3rd of all home loans in 2005 were Interest Only.

Factor in the rising cost of gas for transportation and rising utility bills for heating/cooling these McMansions.

Factor in the ever increasing home insurance rates as hurricanes become more acute due to Global Warming.

Please read this Market Commentary for a nice summary.

The FEDs caused the Great Depression by shrinking the money supply. There were plenty of food. People did not have any money to buy them.

$this->bbcode_second_pass_quote('EnergyHog', 'T')he reason this matters is it helps me determine if the system will be intentionally crashed through deflation or artificially propped up through inflation.

[EnergySpin]

$this->bbcode_second_pass_quote('Tapas', '
')I found another video that shows the close parallel between the Great Depression and the Housing Bubbleas experts continued to make false predictions even while being fully aware of the crashing stock market/housing bubble.

[eric_b]

Excellent post Tapas.

I'm financially incompetent myself, but the way you explained things even I could follow it. Doesn't sound good. Next couple of years will be interesting. Perhaps this storm will blow over, but it doesn't sound like it.

[Tapas]

The bursting of the housing bubble will mark the onset of a severe US recession that will last for many years. When you compound the impact of Peak Oil and skyrocketing energy prices, we may never recover from this at all.

In a nutshell, 2005 marks the best of the Industrial Age. This is as good as it gets. Looking back to the housing peak of August 2005 several years from now, we will yearn to relive those heady days of easy HELOCs, 50% rise in home prices, easy refinancing, the fun of buying million dollar homes with zero down and enjoying shiny BMWs, SUVs and Hummers. It will all seem like a dream.

The bursting of the dot com bubble was managed by inflating the Housing Bubble. There are no more bubbles to create. We have hit a brick wall. The effects of the bursting housing bubble will be far more widespread. Let me explain:

During the Tech Bubble, the effect was limited to those wealthy enough who earned real money to buy the stocks. You had to have money to play the game. It was limited to the upper middle class and rich. Most were well educated.

There was no entry fee or qualification level to join the Real Estate Ponzi Scheme. Every janitor, valet operator, and store clerk making minimum wage could get an Interest Only/Option ARM with Zero Down simply by providing a Social Security Number on their loan application and entering an imaginary salary. The bar was set too low. Home ownership boosted to a record 70% with several speculators owning multiple properties. Soon a point had to be reached where there were no more buyers left - this was as large the Pyramid could physically grow.

As with all Ponzi Schemes, it collapses on itself when it stops growing. The housing bubble will take down the poor, clueless, uninformed and the middle class who bought into the American Dream. Their million dollar I/O loans will become their American Nightmare. The biggest hoax of the century has been carefully packaged, sold and disseminated amongst the general population who were brainwashed into believing a false mantra - Real Estate never goes down.

So take one last loving look at your SUV, RV, family photos of your Alaskan/Hawaiian Cruise, 4000 sq ft McMansion, second vacation home and 73 inch DLP HDTV with 7.1 surround sound. No other generation in the history of our nation has enjoyed so much free wealth and so much comfort by doing so little. Our forefathers could have never imagined using their home as an ATM machine.

The key to true wealth lies in Savings and having a Production Economy. Today we have negative savings, our National Debt has soared past $8.5 Trillion. Our high tech jobs have been moved offshore to India and all our production and manufacturing has been shifted to China.

Look friends - what we have left here is just a hollow shell. A shell that has been propped up by the housing and service industry. We have been increasing our paper wealth by traded housing with one another. Most of the citizens just hang on to their minimum wage service jobs. We maintain a flashy lifestyle with easy HELOC money. 70% of our economy is consumer driven.

Now that home prices are falling, the equity is vanishing. The shell is getting thinner and is about to fall like a house of cards. We have to borrow over $2 billon a day just to run the Federal Govt. Our total debt is over $44 Trillion. How long can this rigged game continue? What happens when the US dollar finally collapses? With a weak dollar the US consumer has to deal with astronomical rises in energy prices. Price of crude could easily shoot beyond $200 a barrel in a few years. Ignore the temporary drop at your gas pump. Consider this the election effect.

As the US consumers purchasing power erodes away, demand falls domestically while energy prices continue to rise in the International Market - can we say Stagflation?

$this->bbcode_second_pass_quote('EnergySpin', '
')Watch Krugman's analysis of the bubble as well.

[o2ny]

From the front lines of the housing bubble- a real estate agent insists that we won't have a hard landing... we'll have a crash landing:

$this->bbcode_second_pass_quote('', 'M')ike Morgan:

Will there be a hard landing? No!

Will there be a crash landing? Absolutely!

Despite September's short covering of home builders and value buyers trying to cash in on low P/Es and stocks selling at or below book value, a hard landing is now out of the question. We're in for a market crash. Read between the lines, or read actual comments for content.

Here's what Robert Toll, CEO of Toll Brothers said at the Credit Suisse conference. "The market got ahead of itself in recent years, citing "greed on the part of buyers and sellers, and that the current level of speculative inventory is probably the largest ever."

[Doly]

And there was a bit of news in the UK a couple of days ago that the percentage of people missing a payment in their mortgages last year was 13%.

And then my mother has trouble understanding why I want to buy a houseboat that I could pay all at once.

[ClassicSpiderman]

$this->bbcode_second_pass_quote('Fergus', 'B')est thing to do is pay off your debt and own the home out right. if you cant do that, your living at the mercy of someone else and living on borrowed time. Thats why we have pumped every available dollar into our home, paid down 14K extra so far this year. Another 3 years at this rate and we will have paid off a 15 year mortgage in about 4-5 years.

When TSHITF, I wanna be in control as much as possible. I dont want someone telling me I can no longer live where I choose to live because I cant afford it. We have taken the stance that tightening your belts now and putting up with a few 'voluntary' hardships will make life easier down the road. Though I expect no piece of cake down the road. It will be a few less headaches then the ignorant will have upon awakening and finding their life has changed and theirs nothing they can do about it.

Yeppers, we are trying to take a pro-active appraoch to PO. The things we consider are things that if something happens, we will be better for it, if nothing happens, we will be golden and flush at that time.

[Tapas]

Here is an excellent collection of graphs and charts relating to the Housing Bubble and US household debt posted at Daily Kos.

A Picture is Worth a Thousand Words

Pay attention to the last graph showing the history of Home Values from 1890 to present. Watch the spike from 2001 to 2005. Are you scared yet?



Wait, there is more. Please read these 20 points presented by Dr. Nouriel Roubini. He predicts a greater than 70% probability of a hard landing and recession.

This is a must read article on the coming recession. Each article has some thoughtful comments at the end.

Tapas

[qwerty]

$this->bbcode_second_pass_quote('Tapas', 'H')ere is an excellent collection of graphs and charts relating to the Housing Bubble and US household debt posted at Daily Kos.

A Picture is Worth a Thousand Words

Pay attention to the last graph showing the history of Home Values from 1890 to present. Watch the spike from 2001 to 2005. Are you scared yet?



Wait, there is more. Please read these 20 points presented by Dr. Nouriel Roubini. He predicts a greater than 70% probability of a hard landing and recession.

This is a must read article on the coming recession. Each article has some thoughtful comments at the end.

Tapas

[Tapas]

$this->bbcode_second_pass_quote('qwerty', '
')Why does everyone call it a 'recession' nowdays instead of the depression that is sure to come???

[o2ny]

$this->bbcode_second_pass_quote('Tapas', 'O')ur fiat currencies will also revert back to its base value - zero.

[Madpaddy]

Ye haaa,

It is finally starting here in Ireland.

From ireland biggest newspaper today 24 Sep 2006.

$this->bbcode_second_pass_quote('', '[')b]Dublin property prices falling by up to 20 per cent

NICK WEBB

THE extraordinary glut of houses coming on the market this month has led to widespread falls in the prices being demanded by estate agents.

In one case a red brick house on McMahon Street in Portobello off Dublin's South Circular Road has seen its asking price slashed by 20 per cent. The house was withdrawn from auction in June, with agent Sherry FitzGerald then quoting a price of €1.25m. Last week the property was advertised at just €1m.

Aylesbury, a luxury home on Glenageary's Adelaide Road, was withdrawn from auction before the summer. Agents Sherry FitzGerald were then quoting a price of €8.5m for the home on an acre. Last week, the property was for sale with a guide price of €7.5m. This represents a drop of 12 per cent. A detached redbrick house in Shrewsbury Park in Ballsbridge has had €450,000, or 11 per cent, shaved off its asking price, now €3.45m. Other properties from Blackrock to Ballinteer on the southside have seen thousands of euros shorn from their asking prices.

While the downward trend is most evident across more expensive houses on the prime southside suburbs of Dublin, the Sunday Independent has uncovered significant falls in asking prices in other areas of the city.

On the northside of the city a property at Brompton Grove in Castleknock is on offer at €650,000 almost 4 per cent lower than its pre-summer price. Hamilton Osborne King is selling a three bedroom home in Castilla Park, Clontarf for €795,000, having some months ago offered the property at €825,000.

Price reductions have also been widespread across the country, especially in Dublin's commuter belt counties. Both Douglas Newman Good and Hassett have chopped asking prices for certain homes in Bray and north Wicklow by between 5 per cent to 10 per cent. Auctioneer John Keane is selling a Rosslare house for €725,000, with the property having been advertised at €750,000 before the summer. Smith Harrington has sliced over 6 per cent off a Navan four bed.

Last week, two estate agents, Rathmines based Herman White and the Phibsboro branch of Mason Estates were openly advertising properties as being "reduced to sell" or "reduced price region". The homes in question were a €1.5m Victorian house on Rathgar Avenue in the heart of Dublin 6 and a €495,000 three bed on Danielli Drive in Artane, Dublin 7.

Speaking to the Sunday Independent , Douglas Newman Good economist Paul Murgatroyd said, "There is a more realistic element coming in for vendors."

However he added that DNG figures will soon reveal that average Dublin property prices actually rose 2.4 per between July and September, although the time taken to sell houses has increased.

Since the auction season began again two weeks ago, an unprecedented number of houses have been put up for sale.

[Tapas]

Hi Guys!

I came across a comment on the Housing Bubble Blog that was too funny to pass up. Here is the exact posting by Graspeer. I believe this will be the sign of times:

-----------------------------------------------------

Congress will solve this housing bubble by passing a new mortgage program.

S - Special
E - Emergency
R - Real Estate
F - Financial
S - System

SERFS shall be given loans on certain conditions.

All SERF borrowers will sign for perpetual loans that will continue onto their children, childrens children, etc until the end of days.

All SERF borrowers will be required to get permission from their mortgage holder prior to moving, changing jobs and retiring

All SERF borrowers will pay their interest only loans first prior to any other expense or debt.

All SERF borrowers mortgage terms can be readjusted at any time by the mortgage holder.

All SERF borrowers will be required to perform certain duties such as lawn care and pool cleaning on their mortgage holders property whenever required.

Anyone interested please contact their local SERFS office today

[Madpaddy]

Classic Tapas, thanks for an early morning laugh.

What about on the first night of a SERF borrowers marriage the mortgage holder shall have sexual rights over the SERF borrowers wife.

[Tapas]

Well Madpaddy, I think your clause of including a hot night of passion on the first night of marriage is being too gentle

What I fear more is when struggling families drowning under massive debt will be asked to send their precious Justin/Hailey to secure the oil fields in Iraq/Iran or face being locked behind prison camps performing manual labor for daily rations.

It's an ugly thought but a scenario that is not too improbable. It solves the Draft issue right away. Bankruptcy laws have already been tightened. The loop holes have been plugged. The debt net has been laid far and wide. With over 70% home ownership, this has to be the largest catch of the century.

The clever people on top of this real estate pyramid scam have already exited with their loot. They have cashed out at the top of the bubble and diversified their assets. The masses should have gotten a hint when the CEO of Toll Brothers sold his shares. The ones left holding the bag would be the clueless - the very last batch of speculators who entered at the bottom of the pyramid hoping to make a quick buck based on sheer greed.

Greed is the common denominator that persists across the spectrum. But there are the greedy and smart who get to be rich while there are the greedy and foolish who lose it all. After each such boom and bust cycle be it stock based or housing based, the wealth and power distribution gets more skewed.

I believe debtor prisons are coming back. Fossil fuel based machines will give way to human power based machines - just like the olden days.

Tapas

[rwwff]

$this->bbcode_second_pass_quote('qwerty', 'W')hy does everyone call it a 'recession' nowdays instead of the depression that is sure to come???

[rwwff]

$this->bbcode_second_pass_quote('Tapas', 'I')t's an ugly thought but a scenario that is not too improbable. It solves the Draft issue right away. Bankruptcy laws have already been tightened. The loop holes have been plugged. The debt net has been laid far and wide. With over 70% home ownership, this has to be the largest catch of the century.

[mgibbons19]

$this->bbcode_second_pass_quote('Madpaddy', 'C')lassic Tapas, thanks for an early morning laugh.

What about on the first night of a SERF borrowers marriage the mortgage holder shall have sexual rights over the SERF borrowers wife.

[nazman]

$this->bbcode_second_pass_quote('Tapas', '')$this->bbcode_second_pass_quote('qwerty', '
')Why does everyone call it a 'recession' nowdays instead of the depression that is sure to come???