Real estate crisis still alive

This is in Canada, but the picture is the same in the U.S. We suspect it’s the same in Europe, but the RE agents are more clever and don’t put up so many signs.

A couple entries from one of our favority trade publications leads us to the inescapable conclusion that the real estate crisis isn’t over, in spite of what you may be reading about increased home sales, rising home prices, etc.

Check these out: [we added underlines]

New Sandy delays Northeast foreclosure flood
Moratoriums on foreclosures in areas hard-hit by Hurricane Sandy could prolong the housing recovery and make the foreclosure problem worse in those areas, according to media reports. In the 34 counties declared disaster areas, foreclosure activity was up 54% at the end of October compared to a year ago. Last week, Fannie Mae and Freddie Mac told their loan servicers to postpone any actions against defaulting borrowers for 90 days. For more, click here…
11/16/2012
New FHA faces $16 billion shortfall, bailout may be necessary
The Federal Housing Administration is facing a $16.3 billion shortfall and may need taxpayer help to cover the losses, according to an independent audit. The agency said home prices have not risen as fast as they forecasted, and low interest rates have lowered returns. A high number of mortgage delinquencies from the real estate bubble also caused the agency to come up short. For more, click here…
11/16/2012
Housing affordability improves in third quarter
Lower interest rates helped make homes more affordable to median-income families even as house prices continued to inch up in metro areas across the country in the third quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. Nationwide, 74.1% of all homes sold in this year’s third quarter were affordable to families earning the U.S. median income of $65,000. This was up slightly from the 73.8% of homes sold that were affordable to median-income earners in the second quarter. For more, click here…

Note from IFO – lower interest rates DO NOT make housing more afforadable. They make home prices go up. If interest rates go up, prices for these “affordable” homes will crash.

For more excruciating details, please see: Dr. Housing Bubble , who continues to provide excellent, clear-eyed, factual information and analysis well beyond his traditional stomping grounds of Southern California.

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About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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2 Responses to Real estate crisis still alive

  1. savernation says:

    One has to come to the conclusion that our politicians world wide, led by ours in the US, are functionally illiterate and incapable of sound economic analysis.
    -The houseing bubble and subsequent bursting was caused by politicians who created vehicles through which to finance homes and other items with no sound lending criteria being applied.
    -Then they allowed our government owned agencies like Freddie and Fannie to aid and abet this fraud by buying up the worthless paper thus freeing the lendors to peddle more worthless loans.
    -Then, just to make sure their buddies on Wall Street were not left out in the cold, they allowed worthless derrivatives to be created whereby they could throw tons of worthlessw mortgages into pots and sell the pots as investments! All the while companies like Goldman were bundling these worthless pots of do-do, these same companies were shorting these securities for their own accounts! BRILLIANT!
    -Then, BOOM goes the bubble in 2007-08.
    —The first to go were the sub prime loans that has short term adjustments that could have never been repaid by the borrower. Foreclosures-Short Sales ensued
    —Next, was the zero down folks who saw their equity fall rapidly below their mortage amount. Foreclosures-Short Sales ensued
    —Next, those who lost their jobs in the first two years of the recessions defaulted on their loans as they were also killed by the lower debt-equity ratio they found themselves in. Foreclosures-Short Sales ensued
    —Next, Once the banks didn’t have anyone else to buy up with our Tax Money, they hit another round of foreclosures and short sales from newly acquired bad mortgages.

    The final bubble burst has yet to occur. It will take the form of a two prong catastrophe.

    1. With Obama’s re-election, the economy will continue to shed jobs regardless of what he and our incompetent Congress does regarding the “fiscal cliff”. Unemployed ranks could swell into 30M plus in the next year and to 35M plus in two years if the private sector is not givin hard tax rate reductions and regulations curtailed. The pending double dip recession will cause another round of foreclosures and short sales. The difference this time is that investors, being hit by higher capital gains taxes, may not see real estate in the US as a worthwhile investment.
    2. This is the real killer. All of this quantitative easing and mucking around in the mortage markets by the government, has flushed trillions of dollars into circulation that eventually has to come back out. As you reduce the excess dollars in circulation, interest rates, inlcuding mortgage interest rates, will start to increase. Anyone who has not been able to refinance their current adjustables, due to the squeeze lending of banks for mortages brought on a lot by Dodd-Frank or the fear of what may be in the finals regs for Dodd-Frank, will see their adjustible rates go up. This will take away from household cash flow and a very significant number of people will default oon their mortgages due to rise in interest rates. Has anyone in Washington been talking about this? NOPE!

    All you hear out of the media are phony statistics where they use meaningless numbers for comparison to say that housing is up over last year by xxxx% So what, last year SUCKED! They don’t tell you the real truth which was that the housing market sales decreased by 13% over the prior month. Unless we can start to talk about the real world, which we won’t, how on earth can we ever solve these issues? We Won’t. Our goofy fed is buying more ink and paper for continued QE practices and our Congress only worries about the 2014 election. Our President is licking his lips to continue with his fundamental transformation of this nation. God Help US!

  2. IFO says:

    Excellent analysis. As a fundamentally optimistic person, wish I could disagree. But can’t.

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