Work with me people!

Depending on your role in this housing debacle, I think we see a bit of denial still (shockingly), a lot of fear (homebuilders, lenders, realtors), some desperation (foreclosures, bankruptcies) and the first scenes of true panic (Northern Rock savers, Fannie Mae investors)

But where would you say the majority of Americans are today?

It's been illuminating to follow this chart these past few years. It simply showed us when it came to the Housing Ponzi Scheme what was happening, and what was to come, no matter what realtors on commission wanted you to believe.

People ask me all the time "when will it be safe to buy a house again"?

The answer? When the majority are disgusted by real estate as an investment. When there's true capitulation and despondency. And of course, when you can buy a home and rent it out for positive cash flow. We're still not even close.

When it comes to the Great Housing Crash and Mortgage Meltdown, without question, the United States has now moved to HousingFEAR stage

How do we know? Because we can look back on the lazy days of Denial as if it were a million years ago.

Simpler times, yes they were. Ignorant realtors were calling HP'ers "chicken littles" and "brown shirts". Sheeple were still out buying homes thinking they were appreciating. David Lereah and the NAR were putting out numbers without anyone laughing. Crisp and Cole weren't yet under FBI investigation. 61,000 Countrywide employees thought they had stable jobs.

Ah, but those days of Denial are over. Fear is here. And there's even a sprinkling of HousingDESPERATION in the air. And then, as we all know and expect, HousingPANIC. It hath been foretold.

Vulture Financing Alert: Countrywide pays BofA 7.25% until they can pay no more. Then Bof A gets to help wind-up and dissolve Countrywide

Pretty nifty move by BofA, taking over a cash-desperate CFC for $2 Billion with zero risk if they hedged. They're probably betting that once Countrywide's assets are sold off, or this competitor goes away, they'll do OK. Or if they were even smarter, they bought a ton of CFC put options yesterday at the open. Yes, I'm short CFC.

From MarketTicker:

Under the terms of the Convertible Preferred Securities, set forth on the Certificate of Designations of 7.25% Series B Non-Voting Convertible Preferred Stock of Countrywide Financial Corporation (the “Certificate of Designations”), holders are entitled to cash dividends, payable quarterly, at the rate per annum of7.25% of the Liquidation Preference per share of $100,000.

The initial amount of dividends payable on each share of the preferred stock outstanding for each full dividend period will be $1,812.50. Dividends are cumulative and if dividends are not paid for six quarters, holders of the preferred stock are entitled to designate two directors to the Company’s Board of Directors until dividends have been paid for two consecutive quarters.

With respect to dividends and distributions upon the liquidation, winding-up or dissolution of the Company, the Convertible Preferred Securities rank in priority senior to the Company’s common stock and to each other class of capital stock or series of preferred stock (where the terms of the stock do not expressly provide that it ranks senior to or on parity with the preferred stock) and on parity with any additional Convertible Preferred Securities and any other class of capital stock or series of preferred stock.

Convertible Preferred Securities each have a Conversion Price of $18.00, which may be adjusted upon the occurrence of certain events."

Come on! Work with me people! Fear has to be here by now, eh? Let's get this crash over already and move on.

As the CEPR pointed out in their housing crash report the other day, Americans will be best off if we get this housing crash over quickly, versus the 10+ years Japan wasted.

If home prices are simply "Marked to Market", the old prices and expectations thrown away, then we could move on.

Home would start selling again. Builders could eventually start building again. Losses would be known, retirees would be able to prepare, new home buyers wouldn't go bankrupt, and existing home debtors wouldn't go out spending money they don't really have.

Or we can do this the long and painful way.

So work with me, people of America. Your home isn't worth anywhere near what it would have sold for in 2005. The funny money days are over. "Liar's Loans" are no more. Housing speculation is dead for a generation. The Ponzi Scheme is over.

And your house is worth what it was in 2000, at best.

Now deal with it.

Here's the thinking from the CEPR on this:

It is worth noting that from the standpoint of current homeowners and prospective homebuyers a quick unraveling is more desirable than a gradual one, even if the macroeconomic consequences may be more severe.

If a homeowner has a house that will lose a substantial portion of its value over the near future, then she will be better situated to deal with this loss of wealth if it happens sooner rather than if it is delayed for a substantial period of time.

For example, if the homeowner is preparing for retirement, she would benefit from knowing sooner rather than later how much equity she can actually expect to have accumulated from her house. This would allow her to plan her savings, and possibly her retirement decision based on her actual wealth rather than wealth that is only a bubble illusion.

We knew what was going to happen. And now it's here. This liquidity crush is simply "revulsion" and "discredit". Housing panic is here.

It's panic folks, and it is here. Panic. In all your lives, you'll never see such a thing again. After the biggest financial bubble in the history of humanity, the biggest crash follows. It hath been foretold.

It's time to head to the cellar. Right on schedule, housing panic is now here.

Again, from the textbook:

Ultimately, the markets stop rising and people who have borrowed heavily find themselves overstretched. This is 'distress', which generates unexpected failures, followed by 'revulsion' or 'discredit'.

The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

And just one of the headlines from reality today:

ECB injects €98bn but markets are gripped by panic

The European Central Bank released nearly €100bn (£68bn) in emergency funds into the banking system yesterday in an effort to kick-start the crippled credit markets, but its move only sparked panic selling on stock markets across the world.

The sudden cash injection was the largest since 12 September 2001, when the central bank released billions to stabilise the market after the terrorist attacks in New York.

The trigger for the €98bn package was a major overnight spike in inter-bank lending rates that if unremedied threatened to disrupt the normal functioning and stability of Europe's financial system.

As with the other market upheavals in the last month, the root cause was traced to America where the fallout from the meltdown of the market for risky, or sub-prime, loans continues to widen.

Take one part IndyMac the Liar's Loan King, one part mortgage meltdown and one part HousingPANIC, what do you get?

You get this quote from IndyMac's CEO (note I'm short IMB):

IndyMac chief calls mortgage market "panicked"

IndyMac Chief Executive Mike Perry told employees in an e-mail on Wednesday that the current turmoil in the mortgage market appears to be broader and more serious than previous disruptions.

"Unfortunately, the private secondary markets ... continue to remain very panicked and illiquid," Perry said.

What is that smell? Could it be panic?

Panic amongst the homebuilders as new permits drop to 17 year lows, confidence rating hits low

Builders' confidence falls in latest survey, view of current market at lowest level since 1991.
The survey by the National Association of Home Builders saw the confidence index sink to 30 in May from 33 in April, matching the September reading that had been a 15-year low at that time.


Panic at retailers as sales drop and drop some more

Home Depot earnings worse than expected
Wall Street was braced for bad news from Home Depot but not this bad.


Panic in Spain (and England) about the Spanish property crash underway

Spain risks crisis over vanishing reserves.
Spain's foreign reserves have plummeted to wafer-thin levels, leaving the country exposed to a possible banking crisis if the property market swings from boom to bust. "Where this gets serious is if there is a property collapse in Spain and the banks get into trouble," said Prof Tim Congdon, an expert on monetary policy.


Panic for Desperate Homedebtors who can no longer afford their debt-traps

Foreclosures rise 62 percent in April, compared with year earlier
Mortgage lenders in April foreclosed on 62 percent more U.S. homes than a year ago as borrowers failed to keep up with loan payments, an industry research firm said Tuesday. RealtyTrac Inc. said foreclosures in April spiked to 147,708, compared with 91,168 in 2006, as lenders repossessed one out of every 783 homes.


Panic at the White House, Fed, NAHB and CNBC that nobody is buying their soft-landing BS anymore

Homebuilders Rebound? April Fools!
Housing starts edged up in April, but permits, a better indicator of housing market health, plunged to the lowest pace in nearly a decade

Panic at the NAR that nobody is buying their bulls*it anymore

CBS' 60 Minutes Story Almost Appears Unbiased
It's deja vu all over again. Like the Department of Justice's leak to the Wall Street Journal that allowed reporter James Haggerty to break the news that the DOJ was filing a lawsuit against the NAR on the opening day of the NAR's annual Mid-year conference two years ago, CBS' airing of the nearly undetectably biased 60 Minutes piece "Chipping Away At Realtors' Six Percent" allowed reporter Lesley Stahl to report "How Realtors' Commission Fees Are Under Assault" just in time to embarrass the NAR once again on the eve of its Mid-year conference.

HousingPANIC Stupid Question of the Day

Does it smell like housing crash fear yet in your town?

HousingPANIC Stupid Question of the Day

Gotta be Fear by now, eh? I know people are dumb, but they can't be THAT dumb, can they?

UK Telegraph headline: US mortgage crisis goes into meltdown

Boy, reading the paper today and seeing words like "meltdown" and "panic" I thought I was reading HP, not the MSM.

Yes, folks, the Great Unwinding is here. And now it's being reported in some quarters outside the US - while most of the US MSM sleeps. Don't wan't to upset those advertisers you know...

US mortgage crisis goes into meltdown

Panic has begun to sweep the sub-prime mortgage sector in the United States after the bankruptcy of 22 lenders over the past two months, setting off mass liquidation of housing loans packaged as securities.

Analysts say the housing bust is pulling America into recession, citing a 14.4pc drop in housing starts

The rapid deterioration could not come at a worse time for British bank HSBC, which has set aside $10.5bn (£5.4bn) to cover bad loans in the US.

The cost of insuring against default on these loans has rocketed in recent weeks, from 50 basis points over Libor to 1,200, raising fears that a credit crunch could spread to the rest of the property market.

Peter Schiff, head of Euro Pacific Capital, said the sector was in an unstoppable meltdown.

"It's a self-perpetuating spiral: as sub-prime companies tighten lending they create even more defaults," he said.

Mr Roubini said: "America faces a 'reverse cycle' where a credit crunch has hit before the slowdown, a rare pattern. Normally, recession comes first, setting off credit troubles in its wake. We have a housing recession, an auto recession, a manufacturing recession, and a real investment recession already present. If all this happening in what the consensus terms as a 'Goldilocks economy', what would happen if the economy slows down?"