Reversion to the Mean
A Naybob of the real estate kind, whom we believe not to be up that river, denial... forwarded me Rex Nutting's excellent coverage of the housing market situation.
The Nattering one reflects and muses...
Rex always gives good coverage of all the angles, thats what he is paid to do.
What Stephen Stanley doesn't realize is the debt markets WON'T function normally for some time to come...
as witnessed by the Superfund and FHLB efforts, which will both fail.
European and Asian banking may experience a far worse fate than the US, as they hold the bulk of the toxic paper.
As to be expected, the situation as known by the insiders, Fed and those of us "in tune or in the know"...
is far worse than the general publics dulled, sound-byte, party line controlled media influenced perception.
The ARM resets and economic slowdown over the next 3 years are going to give this market a nice shove off the 2nd and 3rd price cliffs.
Bloated inventories and price declines will accelerate as the lenders get stuck with record numbers of REO's on the books.
The 1990-1995 housing downturn will look like a cakewalk when this is all said and done, and yes it could last YEARS.
As it should. The peak prices reached in 2006, based on mental midgets and speculators buying with free money...
were NEVER justified by rents, nor incomes. Greedy lenders lent to generate fees and sell the loans to greedy debt holders (originate to sold).
The vast majority of these loans, never would have been made, if the lenders were originating to hold and wanted to mitigate the associations dowstream risk.
Reversion to the mean is the law, and that is what is happening.
We are already seeing 25% to 50% reductions in some markets. Perhaps a 2001 price level would be more apropo.
When things start to realistically pencil out again from a rent and income perspective...
and supply and demand hit their price equilibrium, the market will stabilize. That is a far cry from where we are today.
Until then all the plans of mice and men, will not stop this trainwreck in motion.
Buyers and sellers can keep wishing in one hand, and see what they get in the other.
The knives are just starting to fall, smart investors will wait and catch them on the bounce and not an initial, secondary or "dead cat" bounce either.
The Nattering one reflects and muses...
Rex always gives good coverage of all the angles, thats what he is paid to do.
What Stephen Stanley doesn't realize is the debt markets WON'T function normally for some time to come...
as witnessed by the Superfund and FHLB efforts, which will both fail.
European and Asian banking may experience a far worse fate than the US, as they hold the bulk of the toxic paper.
As to be expected, the situation as known by the insiders, Fed and those of us "in tune or in the know"...
is far worse than the general publics dulled, sound-byte, party line controlled media influenced perception.
The ARM resets and economic slowdown over the next 3 years are going to give this market a nice shove off the 2nd and 3rd price cliffs.
Bloated inventories and price declines will accelerate as the lenders get stuck with record numbers of REO's on the books.
The 1990-1995 housing downturn will look like a cakewalk when this is all said and done, and yes it could last YEARS.
As it should. The peak prices reached in 2006, based on mental midgets and speculators buying with free money...
were NEVER justified by rents, nor incomes. Greedy lenders lent to generate fees and sell the loans to greedy debt holders (originate to sold).
The vast majority of these loans, never would have been made, if the lenders were originating to hold and wanted to mitigate the associations dowstream risk.
Reversion to the mean is the law, and that is what is happening.
We are already seeing 25% to 50% reductions in some markets. Perhaps a 2001 price level would be more apropo.
When things start to realistically pencil out again from a rent and income perspective...
and supply and demand hit their price equilibrium, the market will stabilize. That is a far cry from where we are today.
Until then all the plans of mice and men, will not stop this trainwreck in motion.
Buyers and sellers can keep wishing in one hand, and see what they get in the other.
The knives are just starting to fall, smart investors will wait and catch them on the bounce and not an initial, secondary or "dead cat" bounce either.
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