During the housing bubble, the infusion of HELOC spending money stimulated the California economy. The resulting job growth caused wages to rise as employers scrambled to find help to meet the Ponzi demand. One of the biggest hurdles potential employers faced was the enormous cost of housing. Potential employees from out-of-state were faced with selling their $300,000 homes to buy a $750,000 comparable home if they moved to California. Many decided not to make the move for this reason. A $20,000 raise sounds enticing until you consider housing will cost $40,000 a year extra to enjoy the same standard of [Read More...]

The housing bubble was inflated by private lenders giving nearly unlimited money to eager borrowers to bid up real estate prices to levels not sustainable by the real incomes of the borrowers. I have pointed out that lenders are more culpable than borrowers, but it took two to tango. Under intense political pressure to make restitution to the sheeple and to limit future lawsuits on the matter, the major banks agreed to investigate themselves and determine by their own standards if borrowers were treated unfairly. Since the review process wasn’t placating former loanowners, the politicians and the banks negotiated a [Read More...]

Economists are correct in their forecasts less often than weathermen. Some of the better ones have learned how to make their predictions vague enough so nobody notices, and the best ones revise history and make people believe they were right all along. Right now, the consensus among economists is that the housing market has bottomed. Perhaps it has, but there is also good reason to believe it has not. First, although delinquency rates are dropping, they are still almost double their historic norms. Delinquency precedes foreclosure, and foreclosure rates are still 10 times historic norms, and these rates are not [Read More...]