Archive for March, 2014

People who aren't paying their mortgages are portrayed as victims of evil bankers, but if people aren't paying their mortgages, can we really say they are victims? I recently wrote about a man who delivered his demolished house to repossessing bank. In that post, I recounted my belief that lenders are more culpable than borrowers in the housing debacle; however, that doesn't absolve borrowers of all responsibility for their actions. Barry Ritholtz in Bailout Nation listed those he blames for the housing bubble, and lenders are higher up the list than borrowers; however, Mr. Ritholtz goes on, “Regardless of how low rates got, the fact remains that many borrowers took out mortgages regardless of their own ability to repay the…[READ MORE]

The so-called housing recovery is really the reflation of the housing bubble built on an unstable foundation lacking fundamental support. A stable housing market requires strong job and wage growth that stimulates household formation among potential homebuyers. These first-time homebuyers drive up prices and create equity for move-up buyers, stimulating a chain of move-up sales. At least that's how it's supposed to work. Unfortunately, job and wage growth stagnates, first-time homebuyer participation languishes, and although prices are rising, much of what would be move-up equity instead restores collateral value to underwater mortgage loans or accrues to investors who crowded out first-time homebuyers when prices were lower. In short, the foundation of the housing market, as well as its upper floors,…[READ MORE]

Boomerang buyers have not materialized in 2014, and their absence contributed to a 19-year low in mortgage originations. Housing market analysts hoped boomerang buyers would return to the housing market in 2014 and take the place of departing cashflow investors. It isn't happening, and a few housing market analysts are beginning to leak out the bad news; the supposed pent-up demand from boomerang buyers may not materialize. A big part of the bullish sentiment toward real estate emanates from the belief that former owners who lost their houses in foreclosure will return in droves. A recent study from the federal reserve noted almost 75% of those who lost their homes to foreclosure may never return. Some housing market analysts, smitten…[READ MORE]

Borrowers react unpredictably when lenders initiate foreclosure proceedings. A man in Bulgaria demolished his house and delivered it to the bank working to repossess it. Lenders Are More Culpable than Borrowers in the housing debacle. Apportioning blame for the housing bubble has become a polarized political issue. The Left wants to portray the evil banks as taking advantage of hapless borrowers thus entitling these borrowers mortgage relief or absolution for strategic default. The Right points out the responsibility borrowers have for their own behavior and wants to bail out the banks for completely self-serving reasons. As with most political issues, the polarized and generally self-serving positions of each side fail to capture the truth of the matter. I maintain that…[READ MORE]

Mortgage delinquencies fall off delinquency reports when non-performing loans are sold by major banks to hedge funds. The news on delinquencies over the last several years encouraged those who want to believe the mortgage mess is past. Most reports over the last several years show a declining mortgage delinquency rate, and despite the levels of delinquency and foreclosure being highly elevated from historic norms, most comfort themselves with hopes that a disastrous situation steadily improves. A declining delinquency rate is to be expected as the economy improves, people go back to work, and borrowers catch up on their mortgage payments -- at least that is the general impression the financial media wants everyone to believe. Unfortunately, that isn't what's happening.…[READ MORE]

Mr. Burns, 3/1/2014 It's twelve hundred bucks, give or take a hundred.  That is how much it presently takes to produce one ounce of gold; of course that is just an average or a mean or a median or whatever.  It is not exact and it varies from mine to mine, but on the whole it costs about $1200 to dig and refine 1 oz. of gold.  That is also the floor for the price of gold in US dollars.  During the last couple of gold cycles, the price could and did go lower than the cost of production, but it is different this time.  Yeah, it is different this time.  Normally I laugh at anybody saying that because they are in…[READ MORE]

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