Worse housing collapse in 2010 (companies, interest, tax, money)

[ufcrules1]

[quote=jimhcom;11348091We have not seen the bottom yet, and will not until the numbers begin to make sense and the economy is on a sound foundation.[/QUOTE]

This is correct. The housing bubble/greed got us into this recession and until it stabilizes, we are not getting out of it.

You can't simply keep throwing money at the housing market in an attempt to keep home values stable. They HAVE to fall to realistic affordable levels.

[brightdoglover]

Given 30 years, one should remember the bulge of baby boomers (people born 1946-1957ish). Any bulge of population creates a boom/scarcity in its purchases, and boomers are major proof.
And a lot of this group was/is clustered around the major population areas, metro areas, making more of a crush.
There are far fewer people following in the demographic wake.

[jimhcom]

Originally Posted by GregW

Our economy, due to the loss of industrial wealth creation, has been actually declining for a couple decades. What little wealth that has been created has been absorbed by the lenders leaving 3/4 of the American households with much more debt than assets. The building and housing boom was a financial trap designed to make certain everyone had a mortgage they had to pay off even after the value of the house collapsed. The people initiating the mortgages were paid on a commission basis and never actually owned the mortgage so they "encouraged" people (actually lied) to sign of on loans they could never afford.

Overall the economy of the last couple of decades has served as a means of concentrating wealth from the people that created it to the people that control it. These economies have happened before and, before governments became willing to interfere with financial markets, resulted in frequent collapses. I fear this economic decline will, due to government interference, effectively never end for the United States. We no longer have the internal wealth generation capacity to recover because of huge oil import costs, wasted expenses of continuing our Imperial Wars and the ferocious export of our industry.

We could recover if we were willing to protect our industrial base with countervailing tariffs, control the level of immigration and institute a progressive income tax with rates similar to the 1920’s. These steps, along with changing our economy away from imported energy to home grown and saving the money for domestic investment, would restore our nation to economic stability.

I doubt this will happen because most people are unaware of the income transfer to the upper 1% (The Great Rip-off) and the way this class controls our government for their own benefit. The owners of this country will continue to do extremely well as the rest of us sink into a post industrial slump at near poverty levels.

Nice summation, but beware, telling the truth in this forum can result in a flurry of personal attacks

[jimhcom]

Originally Posted by Traderx

Hmmmm

So if I were to buy a house today you think it would be worth less in say 30 years from now? How about 50 years? 1000 years?

To say things will not return to the past seems alittle over the top, doesn't it? Afterall "never" is a long time.

Perhaps housing won't recover in 5 years or even 10, but never? I doubt that.

OK, let me simplify what I said for those who may misinterpret. When I say things will not return to the past, it is in the context of the people who are participating in this forum. Will there be some point in the future where there is another out of control speculative bubble? Probably. Will the people reading this forum see it? Doubtful. Markets this far out of control only happen about every 80 to 100 years. At some point in the future there may even be another "tulip bubble" but what does it matter if none of us see it?

[user_id]

Originally Posted by jimhcom

We have not seen the bottom yet, and will not until the numbers begin to make sense and the economy is on a sound foundation.

At the end of the day whether house prices have bottomed or whether they will continue to decline a bit does not matter much as far as the economy is concerned. What matters is residential and commercial investment, the cliff diving in residential investment has stabilized but commercial is still weak.

Regardless, the recession is most likely over. Time to get on with your life.

[jimhcom]

Originally Posted by user_id

At the end of the day whether house prices have bottomed or whether they will continue to decline a bit does not matter much as far as the economy is concerned. What matters is residential and commercial investment, the cliff diving in residential investment has stabilized but commercial is still weak.

Regardless, the recession is most likely over. Time to get on with your life.

To assess if the recession is really over or if this is just in a retracement similar to the 1929-1930, it is necessary to look at the problems that caused the crash and see if they have been rectified. The first problem is the mortgage problems and the underlying derivatives. Have they been solved? Well no, not really. The government has taken over Freddie and Fannie, but neither is financially solvent. Their debts have just been acquired by the taxpayers to be dealt with at a latter time. What about the bank problems they have all been dealt with right? Well no, loan defaults are still increasing, and banks are still collapsing at the rate of 100+ a year despite massive interdiction by the government. But the government program to help sell houses is working right? Yea, people are buying houses, providing the government gives them $8000 to do it, and a 3.5% government subsidized loan. But isn't that how this problem got started, by loaning people who otherwise could not afford to buy a house money to do it? How long do you think these new homeowners will be able to hold on to their property? I guess it doesn’t matter; we can just borrow more money and sell it to someone else who can't afford it. Oh and there is that pesky problem of the $560 TRILLION in derivatives that are as Warren Buffet described a "Weapons of mass destruction" out there waiting for an incident to devastate the worlds financial institutions. Pay no attention to those; they are too complicated for us simple people to understand anyway. Then there is that little employment problem. The surplus housing inventory and the over inflated prices being propped up by the government and the banks are not really a problem are they? No, not unless you are an out of work construction worker, or work in an industry affected by construction. And the auto industry is OK now after cash for clunkers right? Well no, sales are back to pre CFC levels and the factories are continuing with cutbacks. But there is going to be some new technologies and industries coming to replace construction, and auto related industries right? Yea, we just do not know what they are yet, but I am sure when they come along, they will not be outsourced like so many of our other jobs, I mean they wouldn’t do that again right? But hey, what’s wrong with the way we are doing it now, just print the money and give it to people, that will work right? We can just have perpetual unemployment benefits. And if people can't afford their mortgage, we can just let them live in their homes anyway, and pretend like they are paying, and that way we can hide the debt and call it an asset. We can just keep saying things are getting better, even if it's not true, and everyone will believe it and we can all be happy. I mean someone will follow this post with one that relates how they saw a street bum at Starbucks the other day so things can't be that bad...right? But like you say it's all over; go on with your life. The only thing I do not understand is where and when I fell down the magic rabbit hole.

[user_id]

Originally Posted by jimhcom

To assess if the recession is really over or if this is just in a retracement similar to the 1929-1930, it is necessary to look at the problems that caused the crash and see if they have been rectified. The first problem is the mortgage problems and the underlying derivatives. Have they been solved? Well no, not really.

Yes, its been solved. What caused the crash was panic and instability in the credit markets and if you look at any indicator of the credit markets things have greatly improved, almost back to normal in fact.

The credit markets have already priced in the problems in the credit markets (in fact they likely over corrected), now the defaults will primarily weaken banking profits for the next few years. But the panic is gone, businesses/people are now getting on with things and adjusting to the new environment.

Originally Posted by jimhcom

Yea, people are buying houses, providing the government gives them $8000 to do it, and a 3.5% government subsidized loan. But isn't that how this problem got started, by loaning people who otherwise could not afford to buy a house money to do it?

FHA loans have fairly strict standards, they are not comparable to subprime nor to the sorts of exotic prime lending that occurred during the housing bubble. These people are getting standard fixed rate mortgages, the low down payments make them more risky but they are also paying a higher rate than someone would if they had a 20% down payment.

The default rates are likely to be higher than normal, but I don't think the FHA is going to lose money on this in the long term.

Anyhow, the point of my post is that you are largely looking at things that don't matter much as far as the economy is concerned. The financial system and the economy are two different things, the former is there to support the latter. Financial crises can cause problems in the economy, but at the end of the day the economy is about trading goods and services. So if you want to know what is happening in the economy, you need to look at variables that track trade not finances.

Anyhow, there are a number of structural problems in the economy that will take awhile to correct. Credit bubbles always distort things and the subsequent adjustment is always painful, especially for the rent-seeking loafers. And here I'm not just talking about "executives" and upper-management types, but teachers, lawyers, programmers and so on. The easy credit environment inflated a lot and many companies had an amazing amount of dead weight.

[floridasandy]

Originally Posted by sterlinggirl

I don't see how the housing market can keep prices stable considering the following:

* Pressure on the Fed to raise interest rates
* Pressure on the government to stop borrowing so much money for welfare programs
* Expiration of the $8000 credit
* Housing demand pulled forward artificially by the credit
* Stealth inventory of foreclosed homes which haven't been marketed
* Layoffs continuing (although at a slower pace)
* Unemployment benefits expiring
* Inability of many people to refinance upside down ARMs

The banks and government have done a great job of slowing the housing crash, but they can't keep doing it forever. When they do have to stop, the things they have done to slow the crash will add even more downward pressure to housing prices.

nice logical post! (although i disagree that the government has done a great job of anything....). the government's interest is always short-term (getting reelected) while most americans are interested in their long-term economic health. all of this artificial pulling of demand forward to benefit the short term is what is going to bite us in the backside long-term.

[jimhcom]

The financial system and the economy are two different things, the former is there to support the latter.

Support? I am not seeing much in the way of support for the economy from the financial system, what I am seeing is the financial system exploiting both the economy and people for their own gain.
The only reason there was panic in the system is that the financial system itself lacks confidence in the system they created. The recession is not over; the economy is absorbing the massive stimulus provided by the government for the benefit of the banks at the taxpayer’s expense. When the stimulus is absorbed, the crises will return.

[user_id]

Originally Posted by jimhcom

Support? I am not seeing much in the way of support for the economy from the financial system.....

Yes support, financial systems support economies. When you trade what do you trade in? Dollars. Yes there are rent seekers in the financial system, but that does not change the fact that the financial system supports and facilitates transactions in the general economy.

The US could replace its financial system while maintaining the same economy. Every financial system has different benefactors, there is no way around that. The alternative is barter.

Originally Posted by jimhcom

The recession is not over; the economy is absorbing the massive stimulus provided by the government for the benefit of the banks at the taxpayer’s expense. When the stimulus is absorbed, the crises will return.

Here you go again conflating a financial crisis with the economy. The crisis was a financial crisis that had ramifications in the economy. But these are two separate matters. The fiscal stimulus was not implemented to help the financial crisis, rather to help the economy. It is the FED who has been trying to add liquidity into the financial markets and end the financial crisis (the Treasury also helped with TARP). As a result, the end of the fiscal stimulus will not result in another panic. Furthermore, the fiscal stimulus was modest by any account and its effects will gradually decline over time.