activerain.com/blogsview/1227167/fha-market-share-increases-but-cash-reserves-shrink
I spoke about more government housing shenanigans last week.
tradersutra.blogspot.com/2009/09/mess-that-housing-is-still-in.html
This just proves my point that the housing bulls are just plain ignoring the impact of Uncle Sam's impact on the longer term fundamentals of housing. Yes, they have done a nice job of catching a falling knife. But the blood that has been shed from such an activity has yet to be seen in the broader context. You just cant have government propping up every single sector in the economy. The country is already losing hundreds of billions in lost tax receipts yet they want to stimulate artificial demand for housing with first time credits. Totally ass backwards as usual.
Whats Wrong With This Picture?
Do you notice that the states with the most FHA backed loans are also the worst real estate markets in the country? California, Florida, Georgia, and Ohio are still nuclear real estate markets, yet FHA wants to increase home ownership in these areas.
Truly nothing changes.
The FHA wouldn't be doing it job if it wasn't pimping housing in the markets that need buyers the most. Doesn't make it right, just sayin'
ReplyDeleteThe broader point being made is everything that was done to make Housing a train wreck is being done once again in the vain attempt to stabilize a busted market. Why do we have people buying homes with little or no down payment? Wasn't this the problem from the beginning? That homeowners were walking away from homes because they had no equity?
ReplyDeleteWell, that didn't help. But that was their only option playing at a table where the house wins all the time. From Carter on all you've had from D.C. is this push to get more people into homes. Push the banks to lower interest rates, authorize Fannie and Freddie to buy crappier mortgages. From there you get a slight uptick in housing, but nothing out of the ordinary. MBS's trade but its nothing out of the ordinary. Then along comes securitization and the banks suddenly can turn this steady cash flow into a murky, misunderstood, profitable asset that in AIG they can offload the risk. Banks realize that the more mortgages they can underwrite, the more they can securitize, then they can make more $$$. Suddenly banks don't care that the buyers have no money down, no credit history, no income. The faster these people can flip houses the more mortgages get underwritten so the more they can securitize. You'll get a few losers here and there but who cares, since banks are feeding the demand and supply is plentiful, they'll be able to sell any foreclosed properties at a PROFIT. Win-win, right? Except for the fact that the crackhome on the corner now costs 25x your annual income and infants, family pets, and the deceased are now qualifying for mortgages. All it takes is for a few people to realize that this is a ponzy scheme on par with what the FED is doing now and you can't sell the cardboard box in the alley for no money down and an easy 250K mortgage.
ReplyDeleteAre people right to leave their homes? No, it hurts everyone. Is it (for most of them) the only recourse in a ludicrous market? People want bigger and better and our credit based economy has been feeding that for 30, 40, 50 years. People have been saying for years that the national debt is an issue and we can't live like this and what did we all do? We laughed and went out and bought a new iPod, leased a new car (foreign, not domestic of course), and replied back to the 3 pre-approved CC offers we had in the mailbox.
Back to the point, is going down the same road the solution to the housing problem in these markets? Maybe IF we dodge the bullet that is the securitization machine that creates an insatiable demand for these products on all sides.
People buying a house to live in it = good. People buying homes simply for the sake of buying something on credit = bad.
Go back and read my post about securitization and its comeback. Its called "The Return of The King". Its happening all over again. This time with more borrowed money leveraged even more ludicrously then before. There is nothing wrong with renting. My parents did it for 8 years before they had enough money to buy a house. When they did buy one mortgage rates were 18%, which was enough for them to save not to consume. The whole thing went down the drain when Volker was put aside so that "Mr. Free Market" Greenspan can come in and say stop saving and start consuming. Credit exploded, rates fell, Michael Douglas and Wall Street was born. Home Ownership became a Mantra. Hey...I am not blameless in this. I was there in the early 90's when mortgage trading was at the infant stages, but at least they had lending standards back then, today there is no standards what so ever. How can there be when govt has no standards. Look at the way they handled AIG, FRE, FNM and the bailouts. Children cant get in line when the parents are doing cocaine off the hookers leg in the family room. Its happening. So what we have is a continious cycle of bubbles and bailouts.
ReplyDelete