March 08, 2008

A HousingPANIC Message to Congress, the Fed, realtors, Bankers, the MSM, the Bush Administration and anyone concerned about the US housing market:


Want to stop the housing crash?

Get housing prices, and the home price to income and home price to rent ratios, back to their historical means, and get them there FAST.

Presto. Housing crash over.

Want to drag this problem out for years and years to come?

Keep fighting the inevitable, keep trying to prop up unjustified prices, and keep thinking of ways to bail out housing gamblers.


Glad we could help.

Peace out.

53 comments:

emmy said...

You're smart, Keith, but still, you are not taking into account what the high price of oil and the credit crunch and inflation will do to the housing market. It will not just be a matter of getting rid of the overhang with lower prices, but people will have trouble heating big homes far from work, making their money stretch from the higher cost of living, etc.

Ohio Loan Officer said...

One other time do I remember thinking, "How is anyone going to be able to afford a house". That was back in 1979 when housing prices were rising 1% per month. The solution back then--- raise rates--- keep raising rates--- keep raising rates, until at 17% mortgage rates the inflation spiral finally stopped.
But that would be unpopular now. Especially in an election year. So what are they doing= more damage by dropping rates.

Anonymous said...

Las Vegas gambling revenues are falling for the first time since 2001, adding to the evidence that the US economy is on a losing streak.

Anonymous said...

yeah but it's a new paradigm

Anonymous said...

Well, everyone had their chance months ago to bring down home prices. They all refused and so this mess dragged on.

Now, instead of a negotiating game, sellers aren't able to sell, even at lower asking prices.

Why? Because with all the other variables (oil prices, credit crunch and now unemployment), people simply can't buy.

...Unless the sellers bring this sh*t way down.

...Which they won't.

Rinse and repeat.

Man is this going to get ugly. This is heart attack serious. Thanks, you bunch of greedy "Flip This House" jackasses.

If you're going to treat buying a house as an investment, could you please take one freakin' minute to understand basic economics.

You morons!

LauraVella said...

It's going to be a rude awakning for many homedebtors - whoops, I mean homeowners...

DOPES said...

.
I'M WATCHING CNN...

THEY'RE SHOWING INFOMERCIALS CALLED NEWS ABOUT INVESTORS FLOCKING TO U.S CITIES LIKE MIAMI TO BUY DISCOUNTED HOMES...

THEY'RE SAYING THE WEAK DOLLAR MAKES THESE HOMES A BARGAIN...

THEY'RE SAYING WHAT COST $3.4 MILLION DOLLARS LAST YEAR CAN BE HAD FOR JUST $2.495 MILLION DOLLARS THIS YEAR...

BUY NOW SUCKERS!!!

THIS IS JUST LIKE WHEN WE SOLD ALL THAT WORTHLESS COMMERCIAL REAL ESTATE TO THE JAPS YEARS AGO!!!

DOPES!!! (FOREIGN TYPE)

Anonymous said...

How long before average FB is willing to sell at mean, or bank foreclosure forces sale at historic mean? A bloody long time I'm thinking.

Anonymous said...

Bernanke must have heard you, Keith - he's now calling for Congress to mandate that all rents double effective immediately.

Anonymous said...

Word... from a bitter renter. Now only if someone was listening. Bernanke's comments and the bank-supporting bailout rhetoric is making me sick.

Unfortunately, prices are still insane here in So Cal Inland Empire, and are not going down as fast as they need to, and they're still building new developments.

Just insane...

Buzz Saw said...

Now I'm pissed. I won't buy even if prices do come down.

bradinsb said...

It really is this simple.
Keith can i use this over at my blog?
http://www.icantsellmyhouse.blogspot.com/

Anonymous said...

Life I've said before, the U.S. government is doing everything in its power to keep house prices unaffordable.

Anonymous said...

'
'
'
it's a 2 sided equation of rents and house prices

given the inflationary pressures we will see in the near term, rents could easily go up 10-20% a year meaning by 2010 the ratio will have fallen back to 2000 levels without any further price drops

Anonymous said...

They (the Gov., Bush, Ben, etc.) WANT housing way over priced. Their goal is inflation. If we go along with it and start to believe a stucco box in the desert is worth $300k then they win, OUR dollars have just been drastically devalued.

Steve said...

They (the Gov., Bush, Benny, etc.) WANT housing prices too high. Their goal is to inflate, inflate, inflate. They want us to get used to things costing more and have been slowly chipping away at our money's purchasing power like some sort of Chinese water torture.

If they can convince the masses that a stucco box in the desert is worth $300k then they win and you lose because you have become a willing accomplice to devaluing your own money. Psychological game over.

oc bear said...

Are you kidding. The government solution is to tax rent so its just as expensive as housing. I hope Ben doesn't read this blog.

Anonymous said...

OH SNAP!

Anonymous said...

Maybe the government is trying to keep home prices where they are and increase rents through inflation. That would almost force people to buy, since it would be cheaper. They can pass a Home Protection Act of 2008 by levying a special 20% tax on renters. If your rent is $1000/mo then the government will tax you an extra $200/mo

better shade of orange said...

letter excerpt from CEO of ING:

While ING DIRECT avoided the sub-prime mortgage problem, we understand that this housing crisis threatens the well-being of countless families and, in the end, it will be seen as a major failing of the mortgage industry and its regulators.

The fact that ING DIRECT was not adversely affected is a testament to our operating philosophy that, as Americans, we should only buy houses we can afford. That way we can keep them for years to come. We believe a mortgage is a contract that both parties should execute in good faith and expect to see through to its conclusion.

Anonymous said...

.
.
.
.
.
.
Get housing prices, and the home price to income and home price to rent ratios, back to their historical means, and get them there FAST.

Presto. Housing crash over.
--

Umm, Keith, THAT IS the housing crash.

satan said...

This cannot be good and is probably an underestimate.

Where have I read about margin call and crashes before...

__________________


Banks face "systemic margin call," $325 billion hit: JPM
Sat Mar 8, 2008 9:23am EST

By Walden Siew

NEW YORK (Reuters) - Wall Street banks are facing a "systemic margin call" that may deplete banks of $325 billion of capital due to deteriorating subprime U.S. mortgages, JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), said in a report late on Friday.

JPMorgan, which sent a default notice to Thornburg Mortgage Inc. (TMA.N: Quote, Profile, Research) after the lender missed a $28 million margin call, said more default notices and margin calls were likely. The Carlyle Group's mortgage fund also failed to meet $37 million in margin calls this week.

"A systemic credit crunch is underway, driven primarily by bank writedowns for subprime mortgages," according to the report co-authored by analyst Christopher Flanagan. "We would characterize this situation as a systemic margin call."

The credit crisis that began about a year ago will likely intensify after Friday's weak February U.S. employment report "that most definitely signals recession," JPMorgan said.

....

belchorama said...

Keith,

If only the people you were addressing this to got this...they just don't or won't. They're all either stupid or they have a vested interest in keeping debt-ridden consumers consuming and debt-ridden.

Eff them all.

Anonymous said...

Keith,

Things are getting interesting now. Multiple banks are getting marging calls they can't cover.

It seems shit is hitting the fan right now. Things should interesting this week.

First hit:

Thornburg
Carlysle

http://www.reuters.com/article/ousiv/idUSN0832645120080308

My Real Estate Ultra short fund shot up on Thursday, and I was just pondering why? Well, now I know the answer. A couple of firms should go under, and soon.

Danny

Anonymous said...

Not likely at least not any time soon.

Something about the two rules of economic will not allow it at this time.

1) "GREED and FEAR"
2) "Path of less resistance"

http://www.contracostatimes.com/
ci_8487716

Critics: Martinez affordable housing plan ill-timed

# Council considering ordinance that would make 15 percent of new development cheaper

Proponents say the ordinance would provide affordable rentals for seniors and the disabled and make home ownership possible for teachers, police officers and other service professionals. But builders argue that the mandate is ill-timed given the turmoil in the real estate market.

"This is the worst thing you could do at the worst time," said attorney Albert Turnbaugh, who has put his plans to build condos downtown on hold until the market rebounds.

Anonymous said...

Builders to pour $2.5M into uncertain plan for Coyote Valley

When then-Mayor Ron Gonzales named a task force in August 2002 to craft a plan for 25,000 new homes in San Jose's Coyote Valley, he hoped to get the job done so he and his council allies could vote on it by the end of 2005.

With council members Pierluigi Oliverio, Sam Liccardo and Madison Nguyen all voting in June to stop planning on Coyote, the two seats to be filled this year could be critical to deciding the issue's fate.

http://www.mercurynews.com/
ci_8501445?source=most_emailed

resisting husband said...

My landlord came up with a novel way to bring the rent:price ratio more in line... he raised my rent. I told we could find something similar for much less, but were too lazy to move... it didn't click with him, he figures tthat since he bought the triplex at bubble prices, the rent should be commensurate with what he paid. Talk about tail wagging the dog!!! i cant wet til next month and my lease is up and i tell we are moving to a place that is bigger for cheaper...

Anonymous said...

S.F. housing measure qualifies for June ballot

An initiative to require that half of the new homes built as part of a major redevelopment of Bayview-Hunters Point be sold and rented at below-market rates has qualified for San Francisco's June ballot.

The developer behind the project says that the measure, if successful, would kill plans to remake the troubled neighborhood.

Supervisor Chris Daly is the major backer of the initiative that mandates half of the 10,000 new homes planned for the Hunters Point shipyard and Candlestick Point be priced at rates affordable to people earning 30 to 80 percent of the city's median income, or $64,267 for a family of four.

http://www.sfgate.com/cgi-bin/
article.cgi?f=/c/a/2008/03/07/
BA7AVF68U.DTL

Anonymous said...

In other words, "the price is wrong, Bob."

Kurt Cobain said...

This kind of shiz only happens to Courtney Love!

The rock 'n' roll widow claims that she's been DEFRAUDED out of millions….by Kurt Cobain.

That's ride, according to Courtney, someone used the dead rocker's social security number to buy a $3.2 million.

How is that even possible????

“I would like to know how," says Love. "He should probably get his ass back home if that is the case.”

Courtney also claims that thieves set up 188 credit cards in her name!

"I knew it had been going on since when I went cuckoo — bananas — in 2003," explains Love. "It was fraud after fraud. But nobody believed me until now. I did a check on my deceased husband’s social security number and he has a house in New Brunswick, New Jersey. He bought it last year."

Courtney met with police this week to investigate her claims.

Anonymous said...

You are on the 10th floor of a tall building and need to get to the 1st floor in ONE BIG HURRY... efficiency expert keefer is brought in to give advice - keefer does careful computations of the timing of all the possible routes and then advises you to jump out the window, and after you hit ground, walk up to the first floor...

this is a brilliant solution and I can't for the life of me see what is wrong with it... but I do notice Keefer ALWAYS wants his fee in advance...

Lionel said...

I just rented a house in North Seattle for 1800. Two doors down a house was listed for sale for 730K. The houses are nearly identical; in fact I would wager they were built by the same builder back in the Twenties. No doubt the sale house is tricked out, but still, it's difficult to justify that kind of disparity.

Anonymous said...

A M E N

Anonymous said...

logic that will fall on deaf ears....

Yoski said...

Assuming we're at 137 now and need to return to 100, that's a 27% drop. We'll drop at least that much. It's just not clear how long it will take. 10% price decline and 5% inflation will get us there in 2 years.

Anonymous said...

The common perception among economists is that the current housing bubble will be a relatively short-term affair.

Angelo Mozilo said...

"The problem that we face today was unanticipated" My bad

Anonymous said...

"Get housing prices, and the home price to income and home price to rent ratios, back to their historical means." Amen Brother Keith! Too bad the feds, the realtors, and all the buyers who wanted to make a killing are going to spin this simple fact until the whole thing crashes. This is what happens when people try to make a fortune off of a basis NECESSITY. Thanks for your blog.

BT

eric in vegas said...

"...Unless the sellers bring this sh*t way down.

...Which they won't."

The banks and homebuilders will be the ones that force FBs to realize their homes aren't worth what they think they are.

Anonymous said...

Anyone have a guess as to what formula they are using to calculate the P/E?

Is it Price/Annual Rent? Is the formula that simple?

Peace Brothers

Anonymous said...

Don't be naive, this housing bubble was deliberately set by our governement and the banking frims it slleps with. The purpose - devalue the dollar and keep inflation high so they can usher in the AMERO without riots in the street. The NAU is coming sooner thatn you think - it will happen in our lifetime.

Anonymous said...

The government has announced a new plan to get the home price/rent ratio back in historical norm. Today a minimum rent, 40% higher than todays average, will be established. Problem solved, case closed. :*)

Frank@Scottsdale-Sucks.com said...

"given the inflationary pressures we will see in the near term, rents could easily go up 10-20% a year meaning by 2010 the ratio will have fallen back to 2000 levels without any further price drops"

My rent dropped 28% from last year. Vacancies are increasing as rents continue to fall.

Please read an economics 101 book.

Anonymous said...

Anyone who doesn't vote for Osama is a rabid racist. So all you white folks get out there and prove that you are not a racist. Vote Osama

Anonymous said...

The banks and homebuilders will be the ones that force FBs to realize their homes aren't worth what they think they are.

You hit the nail on the head.

The catalyst for a more sweeping downturn will be the banks selling at firesale prices to get the properties off of their books.

As this becomes more prevalent, I foresee people beginning to change their focus to seriously looking at REOs. Unlike previous typical foreclosures in history, this will be one of the first times that well to do and more desirable areas will be seeing massive defaults. Once people realize they can get a deal on a nice house in a good area and a massively reduced price (and without having to pay closing costs), you will see a paradigm shift in the way they think.

That in turn will eventually lead to a panic amongst stubborn sellers. Once they realize things are spiraling down, they will start slashing as fast as they can to try to offload their properties. This will be exacerbated by the retiring baby boomers who will need money to fund their retirement and will likely need to sell property to get those funds. (I don't think you will see much of a reverse mortgage business by that time)

The above scenario will likely take quite some time to eventually play out. Like most bubbles, the largest drops are always towards the end. So despite the decreases you have seen thus far, it is nothing compared to the carnage that is coming.

Anonymous said...

given the inflationary pressures we will see in the near term, rents could easily go up 10-20% a year meaning by 2010 the ratio will have fallen back to 2000 levels without any further price drops

Only if average salary goes up 10-20% a year.

Anonymous said...

Guys,
Every day I'm driving through "Bubble-proof Seattle" and see more and more "For Sale", "Open House", etc... signs. Also I see a lot of new developments.
Seattle is NOT BUBBLE PROOF.
Can I buy now? Yes. Will I buy now? Hell no.

Anonymous said...

In Bellevue WA, I just rented a house for $1450/month, it was renovated 2 years ago. I looked it up on Redfin to see the sale price (Landlords bought it last year as an investment property)... they paid $850k for it... so tell me, how is it this is anywhere close to a rational market? My one concern is, if i'm only paying $1450 and that is not covering their mortgage payment... how long before the bank Forcloses on them and kicks me out...

Anonymous said...

"""
Once people realize they can get a deal on a nice house in a good area and a massively reduced price
"""

The problem with that is that it's no longer a good area, once half the vacant houses have been converted into meth factories, and city revenues have fallen so much that there's only one police officer who rides a push bike to crime scenes...

Paco Bell said...

Right now in the financial markets we have a multi-way Mexican standoff. In one corner is the Fed, in others there are hedge funds, lenders, FBers, pension funds, the gummint, insurers- all wondering what the next move will be, who will make it, and figuring out all the options they have available how they and how their counterparts, will react.

All in Peckinpah slow-motion. Brilliant.

We got anything besides popcorn here?

Happy Homedebtor said...

The problem many of you are missing is that, we don't produce anything in this country anymore, at all, period. As such, with a deflating currency, everything becomes more expensive - food, clothes, energy, maintenance, etc. Thus everything - including rents - will continue to skyrocket...except *your* pay.

Just because you suck and don't know how to get ahead in a Republican-administration doesn't mean the rest of us have those issues.

Thank you, come again.

-HHd

Anonymous said...

I say it's as much tied to the wages as it is to the rents. If people cannot afford the 30 year fixed mortgages without tricks and scams, then it is overpriced. The London prices can be supported because that is the only major city in the entire country. With the USA, you have dozens of metro areas. Where will all the money come from to support the bubble prices for millions of empty McMansions? The Fed can inflate all it wants, but if the inflation doesn't find its way to salaries, then prices will drop

Anonymous said...

"given the inflationary pressures we will see in the near term, rents could easily go up 10-20% a year"

---My rent dropped 28% from last year. Vacancies are increasing as rents continue to fall.---

There's a huge supply of newly formed condos which are being converted to apartments due to the lack of sales, in addition to the homes which are being subdivided into rental spaces. All and all, there'll be a huge supply deluge of places to live in, in the years ahead, to maintain a deflationary force on housing.