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If America is going to step boldly into the Third World and compete with North Korea and Zimbabwe for slave wage jobs, we must understand that cardboard boxes are good enough for the workers
Here's a link to an article about people that predicted the housing bubble. 27 of them. All Austrian economists.
The same economists that are continually dismissed when they say that we can't continue the Bush/Obama economic policies and not expect to bankrupt the entire world economy.
Housing in the New Millennium: A Home Without Equity is Just a Rental with Debt
Joshua Rosner
Graham Fisher & Co.
June 29, 2000
Abstract:
This report assesses the prospects of the U.S. housing/mortgage sector over the next several years. Based on our analysis, we believe there are elements in place for the housing sector to continue to experience growth well above GDP. However, we believe there are risks that can materially distort the growth prospects of the sector. Specifically, it appears that a large portion of the housing sector's growth in the 1990's came from the easing of the credit underwriting process. Such easing includes:
* The drastic reduction of minimum down payment levels from 20% to 0%
* A focused effort to target the "low income" borrower* The reduction in private mortgage insurance requirements on high loan to value mortgages
* The increasing use of software to streamline the origination process and modify/recast delinquent loans in order to keep them classified as "current"
* Changes in the appraisal process which has led to widespread overappraisal/over-valuation problems
If these trends remain in place, it is likely that the home purchase boom of the past decade will continue unabated. Despite the increasingly more difficult economic environment, it may be possible for lenders to further ease credit standards and more fully exploit less penetrated markets. Recently targeted populations that have historically been denied homeownership opportunities have offered the mortgage industry novel hurdles to overcome. Industry participants in combination with eased regulatory standards and the support of the GSEs (Government Sponsored Enterprises) have overcome many of them.
If there is an economic disruption that causes a marked rise in unemployment, the negative impact on the housing market could be quite large. These impacts come in several forms. They include a reduction in the demand for homeownership, a decline in real estate prices and increased foreclosure expenses.
These impacts would be exacerbated by the increasing debt burden of the U.S. consumer and the reduction of home equity available in the home. Although we have yet to see any materially negative consequences of the relaxation of credit standards, we believe the risk of credit relaxation and leverage can't be ignored. Importantly, a relatively new method of loan forgiveness can temporarily alter the perception of credit health in the housing sector. In an effort to keep homeowners in the home and reduce foreclosure expenses, holders of mortgage assets are currently recasting or modifying troubled loans. Such policy initiatives may for a time distort the relevancy of delinquency and foreclosure statistics. However, a protracted housing slowdown could eventually cause modifications to become uneconomic and, thus, credit quality statistics would likely become relevant once again. The virtuous circle of increasing homeownership due to greater leverage has the potential to become a vicious cycle of lower home prices due to an accelerating rate of foreclosures.
I think those of us with consciences, who can tell right from wrong, knew deep down that something was not right when lenders were looking the other way as borrowers falsified income and lended with no money down, etc. It is easy to understand why a couple of kids buying their first house, for example, might think that if a bank would give them a mortgage that they are OK to accept it. I don't blame the borrowers as much as I blame the lenders who failed to use the most basic lending guidlines.
It was obvious in Florida, as real estate prices were rising far too fast and properties were flipping faster than pancakes at Dennys.
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