The Golden Truth: Housing Market Unequivocally Heading South Again...

Wednesday, January 27, 2010

Housing Market Unequivocally Heading South Again...

Week-to-week mortgage applications down 10.9% / New home sales fall 7.6% to 9-month low

The MBA commented that despite low fixed mortgage rates, "there appears to be a smaller pool of borrowers who are willing and able to refinance at today's rates." Article Link Although this index can be volatile from week-to-week, we would have expected that refinancings would be accelerating ahead of the big adjustable and option-ARM reset wave starting right about now (see this graph: Mortgage Reset Wave Coming). Furthermore, by all media accounts, we have been led to believe that the housing sales market is supposedly bouncing.

The problem is, and the key phrase in the above quote is "able to refinance". A large majority of homes that were purchased with ARMs and Pay-Option-ARMs are substantially underwater, meaning that the homeowner must show up with with an armload of cash in order to effect a refinancing. Otherwise he is stuck with a much higher monthly payment, and one that he did not anticipate having to ever make when he signed up for the funny money mortgage.

And the Case-Schiller Index, which has been indicating price increases in housing resales over the past couple of months is flawed as a true indicator of housing market values. I've linked a detailed explanation of why CS is bogus, but essentially the argument is that CS reflects pricing based on what is sold. It does not reflect a true statistical sampling of housing values which would include a huge pool of homes waiting to be foreclosed. Moreover, the seasonal buying mix of buyers for the past few months has skewed housing sales toward "normal organic" resales and de-emphasized foreclosure sales. Here's the link and it's well worth reading: Case-Schiller is Bogus.

The bottom line is that all of the evidence is now pointing to another big dive in the housing market, which will ultimately lead to another round of financial collapse, barring an unprecedented amount of money printing by the Fed/Treasury. In fact, I would argue that once Bernanke is safely reconfirmed, this process will begin. Make no mistake about it, we are going to find out this year why Turbo-Tax Tim Geithner clandestinely announced the removal of the Government/Taxpayer funding cap on Fannie Mae and Freddie Mac.

3 comments:

JT in MDWednesday, 27 January, 2010
A close friend runs the federal Bankruptcy court that handles 1/2 of Maryland. She recently told me that YTD bankrupcty filings are up by 1000 OVER the same period in the Federal fiscal year in her district alone. That is since Oct. Furthermore, she knows that mortgage holders are taking no action to foreclose or move families out of properties. She said the inventory of foreclosed homes, left unlisted, has never been higher.
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Dave in DenverWednesday, 27 January, 2010
Thanks for the color JT. That "shadow" inventory of homes which could be foreclosed but are not being foreclosed is enormous. I know two people who are renting out higher end homes, the owner is in default but the banks have done nothing to initiate foreclosure. The renters are not making rent payments either.
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BillWednesday, 27 January, 2010
Where can I sign up for one of these no-pay mortgages?

So what's the end-game here? Do banks just sit on the non performing assets while they have mark to market in place?

Perhaps foreclose 15 years later when a rising tide of inflation "lifts all ships."
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.