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Post by redwolf on Dec 5, 2008 0:57:32 GMT -6
Will the mortgage problem deepen next year?
Posted Dec 2nd 2008 4:07AM by Douglas McIntyre
The conventional wisdom is that if housing does not improve, the economy does not improve and the credit crisis does not go away. This may be a case where the consensus is right.
According to The Wall Street Journal, "TransUnion LLC, which analyzed about 27 million consumer records in its database, predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17% in the fourth quarter of 2009." That is about double the rate today.
Of all the data coming out about the current economic downturn that news could be the worst. Rising delinquencies mean rising foreclosures, which are likely the result of job losses or lack of access to credit. That, in turn, means that housing prices will continue to fall.
One of the most puzzling things about the current bailout craze which has the federal government throwing money at everything that moves is that there is not a massive, systematic program to help arrest the deepening housing crisis. If that can be done, many of the other troubles in the economy can be fixed.
Hundreds of thousands of homeowners who genuinely need relief are being thrown to the curb in the name of helping big financial services companies. A recovery only works if its goes from the bottom up. The man who owns his house and has mortgage problems is as "bottom" as it can get.
Douglas A. McIntyre is an editor at 247wallst.com.
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Post by graybeard on Dec 5, 2008 6:37:10 GMT -6
He didn't get to the bottom, just to another symptom. Housing bailouts won't keep the unemployed in houses. Housing bailouts won't help the half of people who rent.
We need to raise the minimum wage to $14, and put people to work doing 100% inspection at our ports and borders. If that won't slow our bleeding, tariffs on top of that will.
GB
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Post by waltc on Dec 5, 2008 11:08:01 GMT -6
The housing market won't come back until American companies start hiring people and pay a decent wage.
Yet these aspects are ignored by most economists. They think easing credit will fix it. It won't though, easy credit alone does nothing but create unsustainable bubbles. Even if easy credit were to appear today it wouldn't make much of a difference, given that consumers are maxed out in terms of debt they can handle and that many don't even know if they will have a job in six months.
If Congress had any sense they'd tell businesses to hold off on layoffs as long as possible because such behavior only worsens consumer confidence and making a depression that much more of a certainty.
And start sending H-2, H1-B, L-1 workers back where they came from. That alone would add about a half-million American workers to the payroll.
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Post by judes on Dec 5, 2008 17:26:35 GMT -6
Absolutely, I concur waltc and graybeard. Nothing short of job security and a living wage is going to solve this problem. But our government cares nothing of working people. They care only to keep the rich from becoming any less rich.
Another way to solve the problem, short of raising wages, is to increase taxes on the wealthiest among us. Rich and poor are relative terms, you can't have one without the other. Making the super wealthy a little less so, in turn raises the bottom in comparison, decreasing that widening income gap. But Obama has already renigged on his promise to suspend the Bush tax cuts on the wealthy, so it doesn't look like that solution will be coming any time too soon either.
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Post by unlawflcombatnt on Dec 5, 2008 18:06:40 GMT -6
And start sending H-2, H1-B, L-1 workers back where they came from. That alone would add about a half-million American workers to the payroll. Yes, that's an excellent idea.
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Post by jeffolie on Dec 5, 2008 21:39:50 GMT -6
The housing bubble was created by Greenspan and the financial community that securitized wrongly rated bad loans.
In what I consider a fair world, housing prices need to stabilize at a level where the average worker pays about 30% of their net income for the mortgage payments. Dropping wages should cause dropping housing prices with some lag.
We have never had a fair world and housing prices will never be perfectly priced. Prices will be manipulated and overshoot on the upside and on the downside. Financial education is almost completely lacking in our society and not taught in High School at all.
So where is the bottom? That depends on the manipulation. Currently there is little substantial likelihood that housing will be manipulated to the upside using the same techniques that applied to the 2003 to 2006 skyrocketing prices. Securitization of mortgages is dead. Lending with crazy practices have been drastically reduced. The housing bubble is NOT GOING TO RISE UNDULY AGAIN in my lifetime, maybe it will happen in a different, still stupid generation. Still I expect prices will stabilize AFTER the BOB expands to buy empty houses. All types of bad results happen when empty houses are allowed to fester in a prosperous neighborhood. No one wants to move in near an empty house if they can avoid it. If Obama never manipulates the buying of empty houses then housing prices are doomed to a prolonged decline as is now happening in Japan for 20 years. There now is a modest effort in the UK to buy empty houses and there is an itsy bitsy program in the US to buy empty houses. The US had a program in the Great Depression whereas empty houses were fixed up and rented out as a rent to own effort.
The bottoming out of housing prices will be a good event, but it will not turn around this economy. The US needs to stop using debt to buy consumables made overseas. Debt can be useful if properly matched for the lifetime of a productive asset. Debt for consumables is plain stupid. Debt for consumables made overseas is triple stupid.
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Post by kramer on Dec 6, 2008 0:59:12 GMT -6
In my opinion, I think home prices need to fall to what the market says. If the government steps in and helps people in trouble, I think this is going to slow down but not stop the slide in prices. This is just going to prolong this economic mess. And what happens if prices do continue to fall? Those people who were just helped will probably walk away again when they go upside down. Anybody ever see this graph of home prices from Robert Shiller? You can see that the housing bubble started under Clinton. I suspect that the tech stock market crash and 911 were the main reasons Greenspan kept rates low which I think, unfortunately added to the growth of the bubble. Bush making loans available to almost anybody (and I heard illegals as well) topped it off.
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Post by unlawflcombatnt on Dec 6, 2008 2:03:57 GMT -6
In my opinion, I think home prices need to fall to what the market says. If the government steps in and helps people in trouble, I think this is going to slow down but not stop the slide in prices. This is just going to prolong this economic mess. And what happens if prices do continue to fall? Those people who were just helped will probably walk away again when they go upside down. Right you are. Home prices cannot be maintained indefinitely above a level determined by income. Easy credit just allowed for a short-term aberration, which is now reverting to the norm. The only thing that's going to drive prices up in the long-run is increased wages and employment of American workers, thus increasing their aggregate and average wage-financed buying power. The only way to do that is to bring back American industry and the jobs that go with it. That'll only happen when we adopt the same protectionist policies that every other country on the planet employs except the United States. We need emergency tariffs right now, and before any further stimulus is doled out, to ensure that any stimulation of production demand from American consumers is filled by production by American workers, and only American workers.
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Post by kramer on Dec 6, 2008 9:23:39 GMT -6
The only thing that's going to drive prices up in the long-run is increased wages and employment of American workers, thus increasing their aggregate and average wage-financed buying power. The only way to do that is to bring back American industry and the jobs that go with it. That'll only happen when we adopt the same protectionist policies that every other country on the planet employs except the United States. We need emergency tariffs right now, and before any further stimulus is doled out, to ensure that any stimulation of production demand from American consumers is filled by production by American workers, and only American workers. I'm pretty much against the idea of tariffs. However, that is if the nations we are dealing with are not using them. You're right, we should impose tariffs on those countries. I didn't realize we were taking in the shorts so hard over tariffs... I thought only a few countries had them on us.
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Post by Grapple on Dec 6, 2008 11:08:33 GMT -6
As to housing, it was not long ago that the rule was that you should not buy a house which costs 3 or at most 4 times your yearly income. If this rule applied today, many places would still need big drops in price.
As to tariffs they are what paid for most of the Federal Government for half of our history. The idea that tariffs are bad mostly come from the international bankers and importers who make their money off of imports. Why should business in the US have to pay to play in the USA while foreign businesses and their US partners get a discount?
P.S As to international bankers or importers, I just realize that they have a personnel interest in getting rid of tariffs so their advice on this is to be taken with a big grain of salt. And since they have been funding much of the economic information we get we get a skewed view of what is best for the USA
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