August 18, 2007

People of the world it's time to listen. Housing PANIC is here. The time is nigh. The Greatest Ponzi Scheme is over.

HP has been a cute little blog these past couple of years, seeking to warn, inform and entertain. We talked in theory, we debated in potentials.

No more.

The Great Housing Crash and the Great Unwinding are now here.

If you haven't sold your home yet, and you need to, put it on the market now - as in today - and put it out at "drama price" - undercut your neighbors by at least 10% and get the hell out of dodge. Take any offer. But don't hold your breath - it's already too late.

If you're thinking of listening to a realtor on commission and buying a home (renting money from a bank), DON'T. Homes will be cheaper, SIGNIFICANTLY cheaper, months and years from now. We're in the early innings of the greatest crash of all time.

If you're invested in the stock market, GET OUT. The Fed Bump will be oh so brief. A meltdown awaits.

If you have all your assets in US dollars, SPREAD THE RISK.

If your job is tied in any way to housing, get ready to lose it.

And if you don't believe us, just go read the blog, from start to finish, all 3,300 posts. We've been mocked, we've been slandered, we've been criticized and we've been defamed.

But we were right.

And now housing PANIC is here.

And there's nothing you can do about it. This crash will be a crash of necessity. We got off the track. And after it's over, we'll be better off.

Good luck out there. You're gonna need it.


Anonymous said...

sold my home and have been sitting on the nest egg for a while. Just need the fed to lower the rate to fuel the gold market now. Next year I'll be a cash buyer!

With the latest events you have to feel that 20% was just taken off the top of already declining prices!

People can't qualify and I think its funny. Fools, fools, fools.

Anonymous said...

OK all of your Smarties!!!

Whats next ?

Anonymous said...

I am done trying to warn friends, family, co-workers, etc. about housing. Everyone looks at me like I am NUTS!!! They get all of their info from the MSM and NAR. Whatever they are hearing must be accurante, right? Funniest thing is that I am in Arizona where housing is going to crash big time. Yesterday, I tried to talk one of my co-workers out of buying a home that he fully intends to flip in a few months. He has a meeting with his realtor on Tuesday. My only hope for him is that he can't get financing.

Last night I went out with a few friends that have all purchased with in the last 3 years. They asked if I saw the news on the fed cut. They think that the housing problem is solved. No matter what I say, they never listen and they think I am an angry renter. I just wonder what they will think when I buy a house cash in a few years.....

Anonymous said...

Here in the DC metro area, all the good prices are in the outer suburbs. Well, there are a handful in the District and the inner suburbs, but they're all in lousy neighborhoods. Unless there's a firesale somewhere in 22207 or 20008 that I don't know about, it's hard for me to work up any interest. :(

Anonymous said...

Keith, longtime lurker here.

A great deal of what you have predicted has come to pass. People are being turned out of their unaffordable homes. Banks, mortgage companies, and hedgies are getting wedgies.

Realtors, "borkers", and low level wall street types are having layoffs.

Profits at the big-box stores are off and remittances to Mexico are way down.

You correctly called *all* of this, and my hat is off to you. You took a lot of abuse for it too. My hat is off to you for not backing down from the Goldilocks dumbass realtor in Boulder.

I wasn't skeptical of your claims. I can see the realities of our world as readily as you can.

How effectively can a hollowed-out service-based economy pull itself out of a recession? I don't know the answer to that, but I think it will be very very difficult.

I guess we will have the answer to that at some point...

Well done so far Keith.

Mark in San Diego said...

I am also amazed that some people are still thinking of buying real estate right now - they haven't a clue about the economy. . .I see lemmings still looking at downtown SD condos near the ballpark. . .they don't know that a lot of HOA's are in/near bankruptcy because people have defaulted and aren't paying dues. . .There is one development I looked at, and a Developer Unit is selling for 820K . . .on two floors higher, the SAME unit is on the market fo 699K from a flipper gone bad. . .people don't even bother to research this type of thing.

Dr Deflation said...

Yes Keith, but not on the foreign currency call. That's a common red herring, but do you somehow think this will be contained to the U.S?

The rest of the exporting world will hurt even more, and the buck will remain strong after everybody else gets sucked in as US consumers crater.

And gold is just a shiny speculative metal, speculation goes the way of the dodo in this environment.

Anonymous said...

One thing that has totally amazed me is this Dave Ramsey guy.

He seems to be in complete denial and totally ignorant to boot. He gets angry when people call in and indicate this crash will be anything more than a hiccup.

He gives good advice about getting out of debt but as a former realtor and a broker he prefers ignorance and denial. I'm already debt free so Dave Ramsey can ....

Anonymous said...

Thank you Keith you a modern day prophet.

formosan80 said...

Hallelujah. What a great post!!!

Anonymous said...

Why the dollar went up:

Most of the levered funds are denominated, still, in USD.

When they sold stuff, some of which was in non-US assets, they had to buy back in USD and buy treasuries.

Remember that huge growth in M3? Well, where did it go? Plenty of it was prime brokerages lending to hedge funds.

I.e. there was a 'sort of carry trade' from USD into risky assets. As this gets undone, there will be demand in dollars.

Anonymous said...

hehehe...too late for the greedy. So sad for the naive.

Anonymous said...


WSJ weekend addition had a front page article on the economist Minsky who apparently was a mentor to the guy who wrote the "Panics & Manias" book you often reccommend.


Stuck in So Pa said...

What I find amazing is the number of people who have absolutely NO IDEA what their ARM reset is based on.

"Oh yea, I was going to reset in Sept/Oct, no problem now though. Didn't you here, the fed just lowered the rates."

Lord help us!

Anonymous said...

Yeah, I've been preaching the obvious to folks for a couple of years now. And, now that a Greater Depression is getting nearer. Any ego satisfaction I might get out of seeing what folks have rolled their eyes at for years play out . . . is undercut by the fact that I'm scared as *hit!

I'm not scared by the $ issues, or even food or energy. I saw this coming, got out of ALL debt. We have a farm, we have horses to work the land, we can be completely self sufficient - it won't be easy, but we can do it. But its my fellow citizens I'm scared of. Hungry, cold and scared people are not known for being rational - and we are the most obese/spoiled, least self-reliant and most heavily armed people in history now. If Americans turn on Americans: "its the LIBERALS fault!", etc --- this will turn into a civil war bloodbath unlike anything history has ever seen.

I have two young children, as the reality of the obvious predictions resolves -- I'm scared *hitless!

Anonymous said...


It ain't over, it's just starting to unfold!

Count the dead and tally the losses!

Anonymous said...

Dr. Deflation,

I disagree with your assessment. This credit situation is born out of the USA. We have most exposure to this ponzi scheme of credit they've been giving out. Therefore, we will be the worst one when it comes to opening the spigot of dollars. You are speaking about the jump in the US dollar recently against all other currencies? Well my friend, it will be very short lived. You will here of new dollar all time lows within the next several weeks...perhaps Sept 18th?

sausage servant said...

Baloney. House prices might decline for a few quarters, but the Fed is on a reflation jihad, and that means a lower USD and much higher prices for everything, including houses. In 2-3 years the excess inventory will be washed out, the worst offenders will be in prison, and housing will, on average, cost more than it does today.

You are naive if you think the central banks will sacrifice their friends over fairness issues - get real!

Pon Raul said...

Good job on the Global Research article. Keep digging around over there - much good stuff.

My dad finally woke up to all of this... he's a landlord.

Oh this is not going to be fun, when it's all said and done...

Anonymous said...

Long time reader (sine mid 05'). I love this blog. Overall, the best. I rent and love it too. $925/mo in S. Florida while my co-workers flipped their way into credit hell and bankruptcy. "It's different this time! Real estate never goes down, never!" They were warned. I told them to go here. I told them they were going to eat it and now they are... Now the cat's out of the bag. This isn't going to end nicely. The Fed can't do shit. Adios world markets. EWP (Spain etf) is going to get smoked (90%+ adjustable rate loans) Buy EWP puts now while you can for cheap.
That's for Keith for all the money you saved me and kept my credit rating intact and perfect. I owe you.

the other trader said...

anon asked,
"what's next"?

I think i see what is coming.

This will spill into the CREDIT CARD market.
Soon, Credit card (CC) companies will be lowering limits.
If you are now over the new limit...
tooo bad.

You are now tapped out. No more credit, no more "instant financing".

The limits of creditors has been reached, there losses too large. (Thank you Mortgage Backed Securities (MBO'S))!!!

They will throw ALOT less money at the U.S. I DO MEAN ALOT!!!!

There is a credit crunch happening.
It will turn into a cash crunch.

In the next 6 to 9 months, CASH will be king.
If you have it, lucky you, bargains abound...

Anonymous said...

Keith, you and I have been on the same page for a long long time. The big difference is you have proof via this blog. I have to give you tons of credit with your forecasts. You have been more accurate than any economist out there.


cleveland steamer said...

Learn to speak Mandarin Chinese. Fluency in Mandarin will determine who gets to be a house slave and who becomes a field slave in the emerging "ownership society"

Anonymous said...

> This will spill into the CREDIT CARD market.

It has already started to spill into the credit card market. Many card companies are in the process of raising their rates.

Anonymous said...

Keith -- I've been a loyal reader and sometimes contributor to this blog for a year. Mostly I've just tried to learn by reading, rather than sounding off.

I've given up on trying to convince friends, co-workers and family about the housing bubble. Let's face it, even when I'm proven right (if I haven't been already!), they're not going to appreciate my thoughts. Nobody likes to admit financial mistakes. You never hear anyone say they made a bad deal on a car, after all, but you better believe many of us have at one time or another (myself included).

Anyone who thinks the Fed can jawbone us out of this bubble -- or inflate us out of it -- is crazy. With the rare exception of predatory lending, most anyone who could afford a 30-year fixed got one. Most of the subprimers and Alt-A's got "put" into those loans only because that's all they could qualify for, based on the size of the payment they were willing to take on.

I say, let 'em crash.

Anonymous said...

Has anyone noticed that the only central bank not to get involved in this massive world wide money pumping operation is the Bank of England?

D. said...

I've seen this coming for the last few years and recently went all cash. I'm wondering if my federally insured limits are respected and whether I can trust the Feds when all hell breaks loose! I'm very well positioned and yet STILL worried.

I can't help but think of the whackage we're going to see in the next few days/weeks as people who played it safe by investing in money market funds start losing up to 20% of their money because of CP write downs. Most investors are still oblivious and my intuition tells me that losses in money market funds will open a few eyes!

I just don't see how this won't get uglier!!!

Yesterday we had a friend over for dinner who just made an offer on a house but does not think the owner will want to sell for another 6-8 months. I told him there was no hurry since the air is slowly coming out of the sector. Basically, he told me that if I knew anything I'd be incredibly rich by now. (Even if he knows nothing of my finances... I do drive a cheap car so he probably thinks we're tight!)

I've been a portfolio manager with all the required degrees for 15 years and managed a financial services fund for some time... while this whole real estate bubble was gaining momentum and attended all these conferences where bankers were assuring us that real estate was a sure thing. I also got the calls from major US banks trying to sell me some good CDOs. But ironically, despite my experience, unlike a Doctor or scientist, I get NO respect. I don't know anything.

They only want to listen to you if you're loaded and/or well connected. What most investors fail to realize is that you don't get rich by playing the markets. All these rich financiers don't make their money by making good market calls, they make their money by winning clients, charging fees, and selling themselvbes when the timing is good to a firm who aches for assets! All they need is charisma, a few good quarters, and good timinging!

Anonymous said...

Last night I went out with a few friends that have all purchased with in the last 3 years.

They asked if I saw the news on the fed cut. They think that the housing problem is solved.

great line! lol
f'in sheeple never cease to amaze.

belchorama said...

Yeah, I think the seizing up of credit is going to be the coup de grĂ¢ce for this bubble. It'll probably take another quarter to a year until this effect shows up in the median, but I think this is it.

And let me say well done! As late in the game as a year ago there still was no straight news from the MSM about this bubble, but for over two years I've been coming here to get the information the MSM wasn't reporting. And to boot, I've learned about put options and have raked in a sick profit on the CFC and IMB tips you've pointed out. I'm still short CFC and am thinking about picking up some short term IMB puts, I think the chances of these guys going tits up in the next couple of quarters is pretty high. And it will be a real shocker for IMB investors, with that soothsaying CEO that held up so well in the last earnings call.

For the several people here who are frustrated about friends and family still not getting it and remaining smug in the face of recent events: don't hold your breath waiting for your satisfaction. I've got friends like this as well (I guess we probably all do), I think they'll finally get it within 3-12 months once the median price really starts moving down fast where they've got homes. BUT, I don't expect to hear them admitting they get it for at least another 5 years after they get it. They'll still be pretending they've made good financial moves as their net worth takes a nose dive. The only real satisfaction I expect is knowing that I stayed off the tracks while the sheep were lining up in front of the train. There's no shortage of analogies to describe the kapow these money-renters are taking right now.

Anonymous said...

"It ain't over til it's over"!

Anonymous said...


1. deflation for the next few months as dollars become scarce. asset prices dropping across the board including gold
2. printing presses and bailouts gear up and flood the market with dollars leading to a hyperinflation like Weimar or Zimbabwe
3. middle class is decimated and cries for political solution
4. in response, our "leaders" roll out the Amero, eliminate the United States sovereignty and give us a North American Union. No more Constitution.

Socialism for all. Our "leaders" consolidate power and rule.

Anonymous said...

(WSJ) Mortgage Fraud Is Prime
Prosecutors Hunt Down Scams Amid Foreclosures

Amid a jump in the number of foreclosures, federal and state prosecutors have stepped up efforts to crack down on mortgage fraud.

The scrutiny by prosecutors comes as the housing industry undergoes a shakeout, further exposing fraud schemes said to be as rampant as ever.

Federal prosecutors in a number of jurisdictions -- including Houston, Los Angeles, Phoenix and New York -- have indicted dozens of mortgage-industry professionals in recent months for their roles in a variety of alleged scams that were operating as recently as June.

Under Scrutiny: 1,200 Cases

The Federal Bureau of Investigation has stepped up probes into mortgage fraud with 1,200 cases under investigation compared with 436 in 2003 and 818 in 2006. The increased scrutiny stems in part from a flood of leads from banks: The FBI received more than 35,000 mortgage-fraud reports totaling almost $1 billion in losses last year, up from nearly 7,000 reports totaling $225 million in losses in 2003.

Federal prosecutors obtained 204 mortgage-fraud convictions last year, generating $388 million in restitutions and $231 million in fines. An FBI report in May said "mortgage fraud is pervasive and growing." Many of the schemes have been around for some time but continue to crop up, despite increased awareness and scrutiny by lenders, regulators and borrowers.

"We're getting new cases faster than we can close out old ones," FBI spokesman Stephen Kodak said.

david in norcal said...

I'm concerned that prices will fall a lot, but selling my place at any cost based on this fear wouldn't be wise either.

If the currency falters, we will have inflation and my $1900/month mortgage (equal to $1400 after tax break) is already about what it would cost to rent a similar place. I'm just outside San Fran.

So, if we have massive inflation, if I'm renting I'll be hit with massive increases in rent, but my mortgage is fixed in place.

Similarly, if we are hit with massive inflation, if I'm all cash, I'm at risk. Even if I'm stuck in house that is worth less than before, it is still a place to live --no matter how big my bank account is, I can't live in it.

This is why I'm not panicking and I took my place off the market today.

Anonymous said...

I have mutual funds and a 401K.
I don't want to lose it all.
What should I do, and where should I put my money?
I'm scared because it's all I have (I rent).

Anonymous said...

Well, I'm kinda new at this, so any advice would be great... Our family has been renting for the past 5 years since moving to Columbus, Ohio. Over that time, we saved and tried to be pretty responsible. We have no debt, payed off all credit cards, no car loans, ect. and have a decent credit score. We were pre-approved at a good rate for a 30 year fixed, and plan on putting 50k down on a house in the 170k ballpark. Should we STILL wait with all thats going on?