1 Not unless a Democrat is in the White House. The MSM has decided collectively it's unconstitutional for there to be any good economic news when a Republican is President.

And here I thought they'd decided it was unconstitutional for there to be any Republicans at all. 

2
What the fuck just happened to the post after this one?

3 I took it down, I have a post explaining that...

Sorry.

4

There are plenty of good things going on in the economy, but the reality is that housing definitely isn't one of them.

The reason housing starts are up is because developers have been sitting on a lot of undeveloped land, and they're furiously building it out so they can unload it ASAP before prices fall any further. They're paying interest on the loans they took out to buy that property, and they need to get as much of their money back as possible before they wind up in foreclosure too.

This is something which has been coming for several years. I got out of the mortgage industry, and advised my friends to do the same, two years ago when it became apparent that housing prices had reached unsustainable levels (i.e., the people the houses were built for couldn't afford them without dipping into their savings every month).

But realtors and developers live in a world not unlike much of the nutroots - in an echo chamber where the only voices they hear are the ones who will reinforce their unrealistic beliefs. Namely: that housing prices could continue at that level when the average family had to resort to "creative financing" in order to qualify for the mortage.

I saw it when I worked in the industry, and that was the reason I got out. I just couldn't, in good conscience, advise people to buy homes and take on mortgages that I knew would bankrupt them in the long run.

A realistic look at the housing market across the country (yes, even the areas that haven't seen declines yet) reveals that housing prices still have a ways to fall and inventories will continue to increase through at least the middle of next year. It'll take a couple of years beyond that for prices and inventories to normalize, and that's the unfortunate (depending on your current situation) truth of it.

5 Jim,

I have no doubt everything you say is quite right, but they went out of their way to spin today's numbers as badly as possible.

It's like getting a good jobs report but focusing laser-like on the jobs lost in the auto industry. 

6

Jim,

I am a loan officer and I was going to write the same thing.  They want to go back in time and say that the market was out of control, but at the same time, the market cooling off and correcting is a bad thing.  They get to make 2 bad headlines out of opposite sides of a story.  It is pretty unbelievable.

7 I was a loan officer too, and if the idiot developers are adding more land, they are going to screw everyone beyond belief. There's a reason in the states with the highest default rates on mortgages (Michigan! yay!) that half the bankruptcies are in new housing.
The builder builds the home and then sells it to the prospect. "But for only 30K more, we'll give you a NEW! finished basement." Prospect says, gee, it would only cost five or ten thousand to finish it myself. "Mr. Prospect, do you have that ten thousand laying around?" Gee, no. So he buys it and overpays.

Now the next prospect comes up and they do the appraisal and low and behold, guess what? Got a comparable home sale right down the street for $230K, more than the $200K the other home SHOULD have sold for.

And rinse and repeat. Last guy on the block gets the home for a steal of $320K, creatively financed through the builder's loan officer at the low interest rate of 9% with the awesome pick-a-pay Option ARM. But guess what, honey, we have the finished basement, we need a big screen plasma.

And wouldn't a new SUV look awesome in the driveway? Then the taxes hit, then the PMI hits, and then the mortgage adjusts two years later, when the true price of home ownership hits and its game over.

Now these idiots--developers--are going to offload houses at below retail, dropping the comps across the board, trapping more people in loans over 100% of what the house is worth. I'm disgusted. The mortgage industry is partly to blame, but they are losing their shirts. The people that created this mess, the politicians that encouraged more homeownership and reduced the standards and the developers that got theirs while the getting was good, are going for broke on another man's dime.

8 But aren't more apartment houses a good thing? More communal and all that? I'm so confused.

9

I am currently trying to time the optimal interest rate and housing price to purchase myself a house. I was able to time selling my previous one at almost the top of the market and have been apartment living since.  My area hasn't been hit just yet with an attractive decrease in existing homes as other areas just yet but I don't want to wait too long and have the interest rates go up on me.

My point is that I believe there are a lot more people like me that will save the housing market from becoming a complete bust.   

10 I'm like polynikes, hoping to buy a home next year when the prices are low.

11 Yeah, I'm going to be moving (upgrading) to a new home sometime next summer or fall.  When I read about all of this, I just smile because it's going to benefit me in the end.

I couldn't in good conscience screw over some ignorant slob like these brokers did with their "creative" financing, but I have a hard time feeling sorry for people getting kicked out of homes that they realistically couldn't afford in the first place.

I've lived more than 5 years in a house located in a less than pristine neighborhood while building the equity and financial security necessary to the next step - which is getting my kid(s) into a nice upper middle class neighborhood in a great school system.  I've worked a ton of overtime and more than a few creative side-jobs to do it, but we're close. 

Unless you're in the upper echelons of income earners, this kind of stuff takes time and discipline.  I have no sympathy for people who think it's owed to them all at once.  Buying a house isn't shopping for a new pair of shoes.  Christ, get out a $5 calculator and crunch some numbers.  It isn't hard to figure out what you can afford.  It's all about cash flow.

As far as not understanding your loan terms, I have a rule when dealing with anyone trying to sell me something:  Everything put in front of me must be explained fully to my satisfaction.  If I get fast-talk, vague or overly complicated explanations, then I know someone's trying to get over on me.  I'm not stupid, so an expert in any area should be able to explain it to me in simple terms that I can understand.

Overall, though, this whole subprime mess is just human nature in action.  The wolves are always going to try to eat the sheep. I expect the wolves to act like wolves and the sheep to get slaughtered.  What pisses me off is when the politicians come riding in and try to rescue both the sheep and the wolves from the consequences of their actions, effectively penalizing the rest of us who have NOT been behaving badly or stupidly in order to bail out those who have.

12 Well said warden.

13 I'm interviewing for a better job today.  I've got both eyes on the housing market because I'd like to be a homeowner.  I'm trying to gauge when's a good time to take that big plunge.  What experts or indicators should I look to in order to know the best time?

14

bonhomme, I'm just a moron blog commenter, but the general consensus is that the housing market isn't going to bottom until at least well into 2008.  Additionally, the Fed is much more likely to execute another rate cut in the near future than to raise rates.  I'd say mid 2008 or early 2009.

 But, who knows?  What goes up must come down and the real estate market has been riding well above trend for years.  We may see prolonged pain. 

Again, keep in mind that I'm just an Ace of Spades retard.  Take it for what it's worth.

15 Oh, one more thing.  It's more important to follow regional trends than the national picture.  Not all markets participated in the bubble, and not all will experience the same amount of difficulty.

16

I've been out of the loop for a day or two, but I wanted to follow up on this.

Trying to catch the bottom of any market (real estate or otherwise) is akin to catching a falling knife: maybe you catch it cleanly, but the odds are a lot better that you're going to wind up bloody. When you're talking about the biggest investment in your life, it's best not to take that kind of chance.

If you want to play knife catch, knock yourself out. But if you'd rather be smart, wait til you see a bounce in average (not median) house prices for a period of at 3-6 months in a row. Prices are not going to skyrocket on the backside of this, so a couple months aren't going to be that much of a difference - maybe it ends up costing you an extra $1-$2K on the purchase price, but you've bought a peace of mind and financial security that's more than worth it.

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