Too bad the MSM was (again) asleep at the wheel when they could have done some good.
A special HousingPANIC message to the reporters of America: You failed us. Again. We expect our political leaders to fail us - seeing as how they're corrupt. But when the media also fails us, well, then we're truly f*cked.
And now, as we've all come to see, we're truly f*cked.
October 27, 2008
60 Minutes, three years too late, takes on the housing crash, CDO's, derivatives and the mortgage debacle
Subscribe to:
Post Comments (Atom)
21 comments:
As an avid reader of this blog, I cant seem to get my mind around these big house prices you guys always speak of: ie::$450,000 for a house? Given where I live in the SE USA, the normal average wage of a family of four is around 42,500.00 Going to RealtyTrac and doing loan amorts, even in the 200K range, the math DOES NOT support any buying. Some of the commenters please tell me where these high figures come from? Florida? CA? WHO makes enough for this price home?
Also on the fantasy show HGTV House Hunters, how can ANY average american afford the crap they are showing? I just want to know, so if you wish to comment an enlighten me, please do.
H Spencer
Average Americans can't afford any of it. Hence our current predicament.
@anonymous - You're asking the exact right question and mrbill is absolutely right.
What very few mention or discuss, with the exception of some rare non-vested economists, is that the good old 'house price to income' ratio is STILL out of whack. I made this observation a couple of years ago and am now watching it come to fruition.
Prices can rise extremely rapidly and they can (do) drop equally as rapidly (as we are seeing). The ratio is meant to understand how people can afford properties. If the prices go up but the incomes do not, then it's called disequilibrium and it has to adjust (return to equilibrium). What did not happen during the run up in prices is incomes did not rise at the same rate as home prices were rising. So something had to give - and we're obviously seeing the result of it now.
Sometimes is sucks being right
This guy was the best; that arched eyebrow screams "Yes; we fucked you hard in the ass. What are you going to do about it, punk?"
His name? Bob Pickle
Yes the reporters of the main press failed us and they will go down as failing us again only this time a person not qualified to be President will be elected because of the corrupt media in the tank with Obama. I know I am just an unhappy Republican which I am but %100 right and will be proven right as in Jimmy Carter right.
You KNOW the train has left the station when anything is picked up on the 60 Minutes radar...
Talk about socialists. How about that czar comrade Andy Rooney.
Rooney makes McCain look like a newborn...
gwk - you cannot be right because voting for McCain requires a vote for that inarticulate, uneducated, ignorant (and proud of it), racist and hate mongering VP Palin. McCain disqualified himself by proclaiming Country First and then picking Palin which puts the Country last.
But, gwk, you have other choices, right? Vote for Nader or some of the other third party candidates and demonstrate that the stranglehold of the Repubs and Dems politicos do not serve our country and we need to open the process up.
Anonymous 6:21:
Figures like $450K for a house came from places California, Las Vegas, and the Northeast Corridor. In fact in California at the peak of the bubble, the only place you could "buy" a house for $450K was either in the middle of nowhere (Bakersfield, Palmdale/Lancaster, etc.) or in some of the least desirable neighboorhoods (the ones referred to by many as "the ghetto") of LA. In many of the more desirable parts of the LA area, "entry level" was $500K-$700K and some places in the SF Valley starting out at over $1M. And incomes weren't much higher than the $42K figure you quoted for the Southeast. I'm not familiar with northern CA, but from what I gather prices were at least as high with slightly more income to back them up. Zero-down option ARMs were used as much in California as any other part of the country, though in these other bubble areas like the Northeast they were also quite common and the only-slightly-risky zero-down interest only loan very widespread as well.
This is what happens when lenders have a policy of "No income and no assets? No problem!" All that mattered was that the "buyer" could make the first several payments (3 to 12 depending on the conditions set by the secondary buyer of the mortgages). Once the lender sold the mortgage, he was home free, and the buyers thought that if the "teaser rate" term expired or the neg-am limit reached that they could always refinance into another option ARM. I've actually talked to people out there who literally did not know the purchase price of their house, let alone the terms of the mortgage that they signed. They just wanted a nice "crib" and perhaps some cash back at close, even if it meant violating California state law (which puts limits on how much and for what reasons cash back-at-close can take place). They believed that housing has always and will always gone up (despite the bust that hit southern CA hard in the late 1980s-2000), and that even if the SHTF, they could discharge the mortgage in bankruptcy and have a free house.
Some people in California were buying houses for 20-40 times their income, when the rule of thumb for affordability is 2.5-4 times income. These people were underwater the moment they signed the papers, since nothing was put down and closing costs typically rolled into the mortgage. Angelo Mozilo and others in the industry knew that this was unsustainable, which appears to be why he accelerated sales of his CFC stock in 2006-07 to beat the clock on his company's survival. I would be very surprised if he were the only major executive in the industry to have taken this path. The buyers and even many low-level in the industry either believed it was sustainable or at least that the maxim "the market can remain irrational longer than you can remain solvent" would allow them to make some easy money.
People never could have afforded those prices, but option ARMs and HELOCs allowed people to pretend they could for a couple of years to further inflate the bubble. It's pretty easy to "buy" something if all it takes to take possession of it is to sign a piece of paper or present a plastic card and promise to pay for it later. The 30-year fixed mortgage payment on a $600K loan at 6% is $3597.30 and the IO payment $3000, but that didn't stop some people making $25K-30K from "buying" these houses with introductory payments of a few hundred dollars (with the difference being added to the principal each month).
So in short, the answer to your question "how can ANY average american afford the crap they are showing?" is "He doesn't." When this fact became clear (as evidenced by increasing defaults on debt), the rest of the world realized that anyone directly or indirectly on the receiving end of promises from such an "average American" is in deep trouble. The past six weeks or so have been about discovering how deep this trouble really is, and in all likelihood we haven't even fully mapped out all of the potential hazards yet.
As an avid reader of this blog, I cant seem to get my mind around these big house prices you guys always speak of: ie::$450,000 for a house? Given where I live in the SE USA, the normal average wage of a family of four is around 42,500.00 Going to RealtyTrac and doing loan amorts, even in the 200K range, the math DOES NOT support any buying. Some of the commenters please tell me where these high figures come from? Florida? CA? WHO makes enough for this price home?
Also on the fantasy show HGTV House Hunters, how can ANY average american afford the crap they are showing? I just want to know, so if you wish to comment an enlighten me, please do.
H Spencer
------------
Were screwed and your right, numbers just do not add up. It will be very painful!
If you drink a lot of Irish beer and say the following really really fast, that will about sum it all up:
Whale oil beef hooked
H Spencer:
I live in md outside of dc, in a 3br 2bath house that sold for 180k in 1998, and the similar house next door sold las t summer for 480k.
Yep. Consumers are screwed. Start looking at going back to the 90s or further for prices. I bet you see $7 for a barrel of oil, $2.5 for an oz of silver, $200 oz for gold, and a national median price of maybe $60,000 when this mess is done. Is it a big deal? No. Just a big bubble blowout sale.
Nananana boo boo!!!
McCain was just giving his speech. He's still talking about buying up people's bad mortgages so that the government can (in his own words) "keep the value of your home from falling."
And he calls Obama a socialist?
60 minutes still didn't get the whole story. Phil Gramm sneaked the Commodities Futures Modernization Act into an 11,000 page omnibus spending on the last day congress was in session before the Bush admin took office. There was no debate, no one even knew it was there. They had to pass that spending bill to keep the government running and congress (as usual) neglected to do their jobs and read what they were passing.
This is similar to the way they rammed the bailout through right before congress was recessed with no debate or the way the PATRIOT act was rushed through, or the way Hastert held his gavel for several hours until they could twist enough arms to get that drug company giveaway entitlement bill passed.
We need to put an end to these legislative practices.
sorry about the prices bub..but it seems you fell out of the loop
how? the manipulation of the inflation numbers so that house price inflation was not counted in the inflation calculation by the changing of the inflation calculation numbers about 15 years back as a method to not raise the return on savings at banks as interest and balance the economy and prevent house price inflation and used to allow borrowings and paid for by ouR traDE COMPETITORS TO LET THEM CONTINUE FLOODING OUR MARKETS WITH GOODS AND NON RECIPRICOL TRADE AND DEONDUSTRIALIZE OUR MILITART INDUSTRIAL/POLITICAL COMPLEX..... TREASONERS????????
CAUSE ONE IDIOT COULD AFFORD THE LOAN AND NOT THE HOUSE AND GOT SCREW..SO EVERYONE MUST GET SCREWED...........
It was insane, and still is to a great degree. A good deal of the price increases were the result of flipping. Flippers were about 30 percent of the market at least here in Arizona. Sometimes the houses were put up for sale before the deal was even closed. The internet helped too - you didn't have to be there. These were houses that the "homeowners" never lived in and never will. I imagine that contributes a bit to the excess inventory, even if they can be rented. There are a lot of "for rent" signs around here these days. And a lot of houses with grass growing high and no sign at all in the front yard.
Wow, and just last week I got into a bidding war over a house, where I even had to submit an essay on why I was the most-qualified buyer! In the letter, I had to kiss the seller's ass, saying what good taste they had and how charming the house was, how I'd take good care of it, etc, etc.
In the end though, it sold to the other guy, who offered $100k over asking, in cash! Oh, well: maybe net time!!
No shinola: that's the kind of story we were hearing in 2003-2004ish time frame, as buyers got crazy just to get in on a piece of the "action".
Anyway, "60 Minutes" is the ultimate contrarian indicator, as when it hits their airwaves, it means the common man is now hip to the scam.
The DUMBING DOWN of America has been a GREAT SUCCESS.
Have a nice day. :-)
Hey, remember who owns the media. That's right - CBS is owned by Viacom. NBC is owned by Universal. ABC is owned by Cap Cities, which is owned by Disney.
Big multinational conglomerates with a vested interest in keeping the public as anesthetized and pliable as possible. Keep the sheep dazed with images of MTV Cribs and Flip That House, while their buddies in the banking industry funnel billions into their pockets. And then, when the party's over, stick the mouth-breathing rednecks with the bill, and tell them that it's those damn feminazis' fault. Hell, those hicks are so stupid, they think Palin is a good leader.
Pay no attention to the fatcats behind the curtain, smoking cigars with the boys from Halliburton and KBR. Instead, be afraid that the Muslim Marxist is gonna steal your bass boat and give it to illegal aliens!
Post a Comment