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It's all about jobs, if we stop losing jobs then the housing market has the ability to normalize. Lending will also normalize when we are able to value assets.
I'm hoping there is a sense of optimism that spreads through the US, realizing that sentiment is really the driver of our economy.
It's all about jobs, if we stop losing jobs then the housing market has the ability to normalize. Lending will also normalize when we are able to value assets.
I'm hoping there is a sense of optimism that spreads through the US, realizing that sentiment is really the driver of our economy.
There's more than sentiment working here..there an underlying mistrust of the entire banking industry even among themselves.
Shadow banking has exploded and the public needs to pick up the pieces.
The problem with shadow banking though is that it's all off the books.
Once all the problems are made public THEN we can pick up the pieces.
"Normal" is how things were donethroughout most of the 20th century. I believe that prices will correct downward whenever we return to these normal standards.
100% financing, adjustable rates, the influence of mortgage backed securities, the public/private mess of Fannie/Freddie.. none of that was normal.
For most of the 20th century, S&L's were the primary source of mortgage funding. They used customer deposits ( who remembers dime savings cards?) to fund mortgages that they kept in their portfilios. S&Ls were able to approve or deny a mortgage to anyone for any reason, including neighborhood and race. Normal?
Pre 1934, buyers typically needed a 50% downstroke to buy a house and mortgages matured in 5 years at which time a balloon payment was due or the loan was refinanced at current interest rates. Normal?
About 50 % of mortgages were forclosed during the peak of the Great Depression. Normal?
FNMA was formed in 1938 and the stub of mortgage securitization began, enabling mortages to be amortized at a fixed rate, over decades. Normal?
HUD was formed and empowered in 1965. HUD mandated the percentage of sub prime loans to borowers who would not otherwise qualify, that FNMA/FHLMC had to acquire. Normal?
ARMS were developed in the 80's to offset record high interest rates. No doc loans were created for qualified self employed folk. Normal?
Depositors seeking better ROI than that paid by the friendly neighborhood S&L moved their funds into better paying investments. That eventually led to the S&L crisis because those deposits were invested in long term fixed rate, often times, risky mortgages. This cost the Government almost $800 billion ( expressed in 2007 relative worth, based upon GDP) to fix. Normal?
The interest rates in the post 9/11 enviornment combined with easy mortgage terms, ever increasing HUD mandates for subprime lending goals, lack of regulatory oversight (which no one really cares about until it's too late) created the mania that briefly sustained the economy. Normal?
Wall Street manufactured new hybrid securities that were rated by reputable rating agencies to sustain and grow balance sheets and meet the never ending mania for greater ROI, by global investors. Normal?
Our 401Ks/investments flourished. We could pull paper equity out of our homes to acquire stuff that made us feel better, in the moment. We could sell our homes at nice profits and buy bigger and better homes with new stuff inside to make ourselves feel better. We could expand our current homes and/or buy second homes or investment properties because the party was never going to end, the finest hour of mania. Normal?
This so-called normal, ebbed and flowed for most of the past century.
Housing booms and busts have occured the world over, since private home owenership began. This too shall pass and be repeated. This is normal.
I think the real problem in this case was not the concept, but the execution. Standalone units like the Dash are quickly being outpaced by smart devices like the iPhone and Blackberry Bold, which already incorporate GPS and do not require additional fees.
For most of the 20th century, S&L's were the primary source of mortgage funding. They used customer deposits ( who remembers dime savings cards?) to fund mortgages that they kept in their portfilios. S&Ls were able to approve or deny a mortgage to anyone for any reason, including neighborhood and race. Normal?
Pre 1934, buyers typically needed a 50% downstroke to buy a house and mortgages matured in 5 years at which time a balloon payment was due or the loan was refinanced at current interest rates. Normal?
About 50 % of mortgages were forclosed during the peak of the Great Depression. Normal?
FNMA was formed in 1938 and the stub of mortgage securitization began, enabling mortages to be amortized at a fixed rate, over decades. Normal?
HUD was formed and empowered in 1965. HUD mandated the percentage of sub prime loans to borowers who would not otherwise qualify, that FNMA/FHLMC had to acquire. Normal?
ARMS were developed in the 80's to offset record high interest rates. No doc loans were created for qualified self employed folk. Normal?
Depositors seeking better ROI than that paid by the friendly neighborhood S&L moved their funds into better paying investments. That eventually led to the S&L crisis because those deposits were invested in long term fixed rate, often times, risky mortgages. This cost the Government almost $800 billion ( expressed in 2007 relative worth, based upon GDP) to fix. Normal?
The interest rates in the post 9/11 enviornment combined with easy mortgage terms, ever increasing HUD mandates for subprime lending goals, lack of regulatory oversight (which no one really cares about until it's too late) created the mania that briefly sustained the economy. Normal?
Wall Street manufactured new hybrid securities that were rated by reputable rating agencies to sustain and grow balance sheets and meet the never ending mania for greater ROI, by global investors. Normal?
Our 401Ks/investments flourished. We could pull paper equity out of our homes to acquire stuff that made us feel better, in the moment. We could sell our homes at nice profits and buy bigger and better homes with new stuff inside to make ourselves feel better. We could expand our current homes and/or buy second homes or investment properties because the party was never going to end, the finest hour of mania. Normal?
This so-called normal, ebbed and flowed for most of the past century.
Housing booms and busts have occured the world over, since private home owenership began. This too shall pass and be repeated. This is normal.
Yes, All of those are normal.
"Normal" is not a fixed point, it is a range. I'm not an expert like you, but all of those scenarios seemed within the range of "normal" to me.
I'd say that "Normal" is any standard of lending money where the lender expects the borrower to pay it back. That seems to be a reasonable definition of "normal" throughout the 20th century.
I read an analysis a couple of days ago (if I can find it I'll post it) that seemed to sum it up pretty well. It said several forces would have an impact, before the bottom. The big ones I remember:
1. The correction from the bubble prices-- which is a standalone event.
2. Tightening of lending standards/return to "normal" lending.
3. Reduction of huge overhang of inventory.
4. Impact from recession.
5. Impact from higher mortgage rates (based on belief that rates will go much higher).
This particular analysis said we were only through stage 1 at this point, and beginning stage 2. He said any of these factors ALONE would cause a housing downturn, but with all of them combined, it would be a big downturn.
sheri, where the heck are you? (forgive me if you've answered that before)
These have all been very interesting posts. I enjoy reading them. I honestly don't know what a new president will actually do for the economy or the real estate market. What I do know is that I'm still a little miffed that the *******s that caused this problem will get a "free pass" if our new pres. has anything to say about it. Re-setting mortgages and lowering pricnipal balances- rediculous! I wish someone, the Government, would re-set mine. I don't feel like paying the 55% LTV I took out on our new home. How about they lower it to 40%? This will make up for the supposed 15% price drop everyone keeps insisting our area will go through until 2010 (and in case you didn't know, I actually disagree with this). And while they're at it, can we get our 45% down payment we made at signing of contract to build, and then again, once we sold the other home and put that equity towards this one? It totals about 45% of the value so how about we get that back too, since we made such a "responsible decision" and are now being punished for it. And please don't say it was the bank/mortgage co. fault. No one had a gun to any of these people's heads and they HAD TO KNOW they could not afford what was ahead, given they didn't put any of their own hard earned money into the home in the first place!
The future president made an interesting "blip" in his speech Tues. night in the great city of Chi town (our city we live outside of) when he said "itmay not be fixed in a year, it may not be fixed in a term" What? a term? Promises already broken and he hasn't even arrived with the moving truck! A term? He better start doing something- NOW! I guess now that oil prices are down, Bush should get credit for that. But guess what, he won't, because they are just down from an all time high and one that we do blame him for. I'm sure Obama will get credit for bringing our gas prices down if they stay that way going into office. Is this a good example or what?
During the great depression, nearly 50% of mortgages were going into foreclosure. Today, it's only 4%. Why are we helping the 4%? 4% is nothing until you put #'s to it, and they use phrases like "100's of 1,000's are losing their homes". That sounds so much more dramatic now, doesn't it? Those of you that know me through my posts; now, this IS a RANT- accuse me of it, it's fine. I own up to it- feel better now, too.
During the great depression, nearly 50% of mortgages were going into foreclosure. Today, it's only 4%. Why are we helping the 4%? 4% is nothing until you put #'s to it, and they use phrases like "100's of 1,000's are losing their homes". That sounds so much more dramatic now, doesn't it? Those of you that know me through my posts; now, this IS a RANT- accuse me of it, it's fine. I own up to it- feel better now, too.
FMV..it's not really the 4% of the mortgages they are worried about. Those mortgages got chopped up and leveraged up to 65x to create those "toxic" investments. Its the investments that those mortgages generated that are at risk ..to the tune of billions to trillions of dollars.
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RE : The future of Real Estate....
