Housing values plummet

I did a number of radio interviews the past few days. More stations are calling me and we're talking about why the problem of housing is much worse than the media says, and what that means for the near term if you are thinking of selling.

Jim Willie has posted an excellent article:

PRIME MORTGAGE BOND LOSSES AT LEAST $2 TRILLION
SUBPRIME MORTGAGE BOND LOSSES TOTAL OVER $1 TRILLION
THE TOTAL MORTGAGE BOND LOSSES ARE OVER $3 TRILLION
THE OFFICIAL ESTIMATES ARE WRONG BY A FACTOR OF 10 !!!
GOLD WILL SKYROCKET WHEN THESE NUMBERS ARE FINALLY REPORTED

So why are all the so-called experts spouting about $200 billion in total bond losses? Why are Wall Street economists talking about $400 billion in extensive losses? A simple conclusion is that they prefer to lie and deceive, as they defend their industry. Most savvy observers are hard pressed to identify the last time Wall Street and their gaggle of advertisement vehicles actually told the truth. When people ask me why such a huge volume of lies is routinely told, my answer is always the same. Check the advertisers of CNBC, Wall Street Journal, Barrons, even Investors Business Daily. They are almost all the same: big banks, brokerage houses, mutual funds, mortgage lenders, and related firms, mostly of them headquartered in New York City. By the way, not a single felony conviction has stuck against a New York City defendant in court. All the convictions are of non-club members roaming other regions. The consequence of being beholden to such a chorus of advertisers is lost objectivity, blatant bias, active deception, and comprehensive obstruction to present the facts in a truthful light. Their message has become simple. “Do not panic, wait it out, because we are desperately trying to sell from our cratering portfolios.”

 

I'm more in Jim Willie's camp on this one. This is not a subprime issue it's a no equity issue. Anyone who purchased in the last several years probably is underwater and anyone who refinanced in that period is highly likely to be underwater. As prices decline more and more walk away.

My perception is that there are a lot of houses $600K - $1 million or so in very desirable areas that have a long way to fall…sellers are planning on selling next spring or whatever, and as times turn worse they will be forced to sell. These are the sellers in nice suburbs of Los Angeles and Virginia and Boston that have yet to have been hit really hard.

The majority of those who purchased or refi'ed sincd 2004 have negative equity and therefore only credit rating issues keeping them in their houses. A very bad picture.

Yet, the US government's proposals are to make loans easier to get. But why should anyone want to buy a house that is losing $5000 per month in equity? That makes no sense and it won't have much effect. Mortgage housing value no equity or negative equity removes any incentive for buyers to buy right now, except those that have to or those that are confident they'll be somewhere a long time.

You can buy a house even if you have terrible credit, with no money down. But I would only do so in an area that can cash flow for you. In many places it costs far less to rent than to own. The renters are the big beneficiaries. That's why I rent at this point.

I am very optimistic about real estate in the long run. But it is a creature of the credit markets and those are all messed up. I would try to do anything possible to sell now and not wait unless you can live with your current loans and in your current house for at least 5 to 7 more years.

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