President Obama has lost his mind. I guess I shouldn’t be too surprised that Obama would embrace HELOC abuse as a good idea. After all, Obama HELOCed his home in Illinios before he became president. Personally, I find this outrageous. Our commander-in-chief, the leader of our nation, has embraced HELOC abuse as a noble behavior that should be encouraged by a taxpayer bailout. The dipshits who lose their home from excessive borrowing should be given a pass, and everyone who [Read More...]
As the author of The Great Housing Bubble, I am an authority on the housing bubble. As someone who has written daily about the myriad of circumstances and consequences of the bubble, I have examined this phenomenon from every conceivable perspective. One of the great features of blogging is the constant exposure to other points of view on these issues. If there is something I miss, a reader usually points it out. The astute observations have greatly increased my understanding [Read More...]
Modern American culture can trace its roots on the North American continent to pioneering English settlers. Life on the frontier is harsh, and each family unit is self-reliant. In a frontier society, if people didn’t work, and if they didn’t produce their own food and shelter, then they died. Fear of death from starvation or exposure was very real, and anyone who wasn’t motivated to produce something of value to themselves or others faced the near certainty of painful death. [Read More...]
California and Great Britain have much in common with regards to its real estate. California has witnessed three catastrophic bubbles over the last forty years as has Great Britain. Each bubble had different causes, but the timing was similar. California has strict land-use controls which creates artificial shortages of housing, and so does Great Britain. California’s economy has become dependent upon rampant HELOC abuse to fuel unsustainable booms and heart-wrenching busts. Great Britain endures the same real estate borrowing cycles [Read More...]
Part of living in California is deciding whether or not to play the California housing lottery. If you win, you could gain hundreds of thousands of dollars. If you play, you could spend hundreds of thousands of dollars and endure the consequences. If you lose, you could lose hundreds of thousands of dollars and end up homeless, destitute and bankrupt. But just like gamblers flock to the casinos, everyone believes they can be a winner, and now with our bailout [Read More...]
Last Friday, I posted an opinion piece about bailing out California debtors. The post was more about moral hazard than about the details of the bank settlement. Now that I have had time to review the bank settlement, I see the issues raised in Friday’s post were completely wrong. From what I now understand about the agreement, it only pertains to the big commercial banks, and it really doesn’t bail out anyone other than the banks. The moral hazard I [Read More...]
Despite pockets of high pricing, under the presidency of Barack Obama, house ownership affordability on a monthly payment basis has hit an all-time low relative to rents and incomes. This should be cause for celebration. People no longer have to apply an onerous portion of their monthly budget to house payments and related expenses. If this condition persists, the economy will recover quickly from the stimulus of newly freed disposable income. However, rather than celebrating this tremendous achievement, people decry [Read More...]
The loan limit on FHA loans is now $729,750. The venerable FHA which was founded to provide loans for low to middle income Americans is now being used to subsidize the mortgages and the house prices of high wage earners in places like Irvine. The government should get out of the housing market. Even the government knows this, but when removing its support causes house prices to weaken, so does the resolve of those in government to get out of [Read More...]
I don’t have any political ax to grind with the left. In fact, on many issues, I lean more left than right, but on the issue of giving away free houses, I think the extreme left has it wrong. In their interest in pandering for votes, they are calling up the troops in the Occupy wherever movement and sending them to foreclosure auctions to disrupt the activities. Perhaps we should just stop all foreclosures and let everyone who occupies a [Read More...]
When the conforming limit for GSE and FHA loans went down in October, borrower spending power went down with it. In response to the dramatic drop off in demand, Congress has voted to increase the FHA loan limit back to $729,750 through 2013. Congress votes to raise FHA loan limits By Margaret Chadbourn WASHINGTON | Fri Nov 18, 2011 2:43pm EST (Reuters) – The U.S. Congress on Thursday approved a bill to raise the maximum size of mortgages the Federal [Read More...]
The following cartoon strip and commentary is the orginal writing of Soylent Green is People. My commentary will pick up at the end. Soylent Green Is People’s take on the falling conforming limit Will the 2011 Real Estate market hit a tipping point with the reduction in loan limits, or are we seeing much made out of nothing? It’s a bit of both I’d say. Numbers don’t lie. Let’s assume that current spreads between Portfolio Jumbo financing and Standard Conforming [Read More...]
Has fairness been a casualty of the housing bubble? At times it looks that way. The government keeps implementing policies to benefit one group over another not because it is the right thing to do but because it buys them votes. Last year, I wrote about The Policy of Screwing Prudent Renters to Benefit Loan Owners. One housing bubble phenomenon was that the right ones — prudent people who knew what they could afford – were kept out, and the wrong ones — [Read More...]
Most people would agree that preventing financial bubbles is preferable to cleaning up the mess in the aftermath. The ups and downs of housing prices must end. The housing bubble shattered the dreams and aspirations of a generation. Some of the wealth lost was an illusion, but those who lost their family homes lost something tangible and real. Great Britain is trying to recover from its fourth housing bubble in the last 40 years. That rivals California’s three bubbles during [Read More...]
The agents of denial seem bent on failing to learn the lessons of the housing bubble, or worse yet, they want to learn the wrong lessons. We are setting up a system where actions have no consequences, money is for the taking, and the bills get passed on to the prudent and law-abiding. All under the watchful eye of our bought-off politicians who will tell us the plundering of our nation’s wealth was for our own good. In my opinion, [Read More...]
The housing bubble is not over yet. Though delayed for two years, the deflation of the bubble has resumed its progress toward affordability and the purging of kool aid from the beliefs and actions of buyers everywhere. Many of the buyers in the bear rally of 2009-2010 believed they were getting a good deal on the backs of the taxpayer. They believed they were buying at the bottom and getting government assistance to boot. They were wrong. Buyers during the [Read More...]
America was a frontier country. People flocked to America from Europe for the opportunity to own their land, something denied to most living in post-feudal Europe. The idea of having a piece of property with your own pink house is deeply woven into the American culture. it’s part of our history, and to this day, many identify home ownership with being American. I wrote about our modern perversion of ownership in Money Rentership: Housing and the New American Dream. Questions [Read More...]
Lenders enabled the housing bubble, but people needed a reason to provide the demand to pay stupid prices to inflate a housing bubble. As I documented, the Desire for Mortgage Equity Withdrawal Inflated the Housing Bubble. In order for home price appreciation to motivate people to pay stupid prices and inflate housing bubbles, they need a way to access this appreciation. The more immediate and plentiful this access to money, the more motivated buyers are to borrow and cash out. Mortgage equity withdrawal is [Read More...]
Should US Taxpayers responsible for every underwater homeowner? Many in government act as if they should, and many in the mainstream media report as if the status quo should be preserved. It’s common at housing blogs to find calls for the government to get out of the housing market. It’s rare when you find this sentiment coming from a local newspaper editorial in conservative South Carolina. Should we work to ‘save’ housing market? Source: Herald; Rock Hill, S.C. Publication date: [Read More...]
Over the last couple of years, a few academics have been making the case that land-use regulation is the cause of the housing bubble. Most of the post that follows summarizes their argument. I think they are only partially correct. Land use regulations do restrict supply, and therefore they do impact prices. As I noted in The Great Housing Bubble: Speculative bubbles are caused by precipitating factors.[1] Like a spark igniting a flame, a precipitating factor serves as a catalyst to [Read More...]
We are giving Congress plenty of time to think through the GSE problem. Unfortunately, as we pass through this season, the GSEs continue to cheat taxpayers out of billions of dollars. Our view on housing finance: Don’t let Fannie and Freddie return to old neighborhood As bailouts go, nothing quite matches the torrent of taxpayer money still pouring into Fannie Mae and Freddie Mac, the housing giants that now guarantee nearly half of the nation’s $11.7 trillion in mortgages. To cover [Read More...]
Rather than paraphrase, below is the full text of OC Progressive’s post: Housing Bubble Busts Every Local Budget – Get Ready for Extreme Makeovers In trying to follow local politics here in Orange County, I’ve been looking very closely at local government budgets, and there’ s one trend that seems to be emerging rapidly. We’re seeing a precipitous decline in local sales tax revenue. And this is not going to be a temporary problem, but rather one with serious long [Read More...]
Astute Observations