Posts Tagged ‘calamity

21
Sep
08

What I Saw At The Great Inflation

I’m on a mailing list for Guided By Voices, a 4-years-defunct band. What keeps it going, I think, are the people who make up the Postal Blowfish community – largely thoughtful, earnest folks.

I’m feeding an off-off-topic discussion (I didn’t start it, honest) about the current financial calamity, and the discussion turned to government-backed and subsidized mortgages;

David;

> But to scuttle the whole system would also keep people from buying houses
> who can repay the loans.  Put the crooks in jail, but leave the
> baby in the bathtub.

Dennis;

Yes, our first house loan was through fannie may. They put us through the credit check wringer and we had to take out mortgage insurance. We paid our way out of that and were able to refinance at a better rate and get the mortgage ins. dropped. These programs can work but people got too greedy and home buyers were fucked in those hot markets like vegas and arizona. A good friend of mine is sitting on a mortgage that is prob twice what the house will auction for in vegas.

My rejoinder;

One thought on this;

My parents, in 1964, purchased a house. A little run-down, not in the best neighborhood, but good enough. They paid $7000 for it. My dad was a pattern maker in a machine shop, my mom was, well, my mom (NOTE: No disrespect was intended to my mom, after raising 5 of us full-time she has gone on to two degrees and two entirely separate careers.)

My uncle financed the purchase, I think for 5 years at 5% simple interest. It was a duplex, and the upstairs rent paid back the mortgage in that time. I remember the day in first grade when my mom said I was getting my own room, after the renters had vacated (it was the same day I came down with the mumps, silver linings and all that.)

Fast forward 35 years to 1999. We have all moved out, except for my brother. My parents have moved, a couple of steps up the nice-neighborhood ladder (the old neighborhood, now home to numerous subsidized renters, has moved a couple steps down), and my brother, an industrial mechanic, buys the house from them at a heavily-discounted $84,000 or so, 12 times what they paid for it. Even with a healthy discount from market (this was before the boom), he had to get an FHA loan to make the deal.

What happened? There is simply no way that house in real terms was worth 12x what it sold for in 1964. The ‘magic’ of inflation, plus demand artificially stimulated by government-backed and / or subsidized mortgages, helped put a very modest home outside of the budget of a working person without help. It benefitted my parents very modestly. For the first time in 30 years, they had a mortgage. Their new crib consumed much more than the cash from the old home.

I’m not saying I have all the answers. But government interference in any market carries costs. Are they too high?

vini

Advertisements
15
Sep
08

If We Could See The Crisis Coming, Why Couldn’t Anybody Else?

We thought that the collapse of Lehman Brothers and Merrill Lynch over the weekend, the two latest “victims” in the financial calamity unfolding in our newspapers and on our TV screens, was an excellent opportunity for us to point out how right we were about the mortgage mess even before it started;

Every Homeowner…(6/9/2004);

…especially those who are mortgaged to the hilt, should read this article;

An excerpt;

Signs of a “”new era”” in housing are everywhere. Housing construction is taking place at record rates. New records for real estate prices are being set across the country, especially on the east and west coasts…As one loan officer explained to me: “”It’s almost too good to be true.””In fact, it is too good to be true. What the prophets of the new housing paradigm don’t discuss is that real estate markets have experienced similar cycles in the past and that periods described as new paradigms are often followed by periods of distress in real estate markets, including foreclosure sales, bankruptcy and bank failures.

OOOH, This Is BAD (7/2/2004);

From today’s WSJ;

The Johnsons thought they had it all figured out. After changing jobs, Paul had planned to rollover the $36,000 balance from his former employer’s 401(k) plan into an IRA. But a desire to live closer to their parents and worries that mortgage rates would head higher spurred them to cash out the 401(k) account last year and use some of the money to buy a home…”We’re making more money, but a lot of that is going into improvements on the home.””The couple also still owes state and federal taxes on the retirement-account withdrawal, and they haven’t started to rebuild their nest egg.

No real-estate bubble you say?;

A President’s Job Is Never Done (8/24/2004);

I just spotted this on the Mises Institute blog. James Bovard (always a must-read) wrote in Barron’s about George Bush’s initiative to close the gap between rich and poor. I can’t even start to comment on it. Here are some clips:

* A White House Fact Sheet issued June 17, 2002, declared that Bush’s agenda “”will help tear down the barriers to homeownership that stand in the way of our nation’s African-American, Hispanic and other minority families. … The single biggest barrier to homeownership is accumulating funds for a down payment.””

* Federal Housing Commissioner John Weicher said in January 2004 that “”the White House doesn’t think those who can afford the monthly payment but have been unable to save for a down payment should be deprived from owning a home,”” National Mortgage News reported.

* While zero-downpayment mortgages have long been considered profoundly unsafe (especially for borrowers with dubious credit history), Weicher confidently asserted: “”We do not anticipate any costs to taxpayers.””

Although Barron’s is a pay site, the full text of the article is on the blog if you scroll down a little. I just have one question that Bovard leave’s unanswered: Did we indeed elect Al Gore in 2000?

Some Eagles Fans Have Really, Really Lost Their Minds (2/3/2005);

…and could lose their houses.

From “”The Rude Awakening””, published by Bill Bonner and Addison Wiggin, authors of Financial Reckoning Day comes the following;

“”Mr. Dave Brekher, president and co-owner of North American Federal Mortgage Co. in blue-collar Northeast Philadelphia, realizes that enthusiasm is not the same as good credit.

His company has been asked to lend money to local football fans wishing to mortgage their houses so they can afford to go to the Super Bowl. “”No,”” he said.

“”If someone is that desperate, there’s always repercussions,”” he explained.

I Hope the Voters Remember This When He’s Up for Reelection (2/4/2005);

This is from the Philadelphia Daily News:

Kevin P. O’Donoghue, 36, of Glen Mills, sank $4,000 into a Super Bowl package that includes round-trip airfare, a four-night hotel stay, and one ticket.

He said that he told his wife after the Eagles defeated the Atlanta Falcons for the NFC championship: “”I don’t care if we have to mortgage our house, I’m going.””

He applied for a home-equity line of credit that required him to put up his home as collateral. He’s getting the money in a few days.

“”Sometimes the cards are maxed out, and you got to do what you got to do,”” he said.

For those of you who don’t know him, O’Donoghue is the township supervisor where I live so he wields fiduciary responsibility over my money. I will surely not forget this next time it comes time to elect a township supervisor. .

We Hate To Say We Told You So… (10/17/2005);

…but the “”crack-up boom”” is about to bite us all in the ass. Just this week;

When you get right down to it, people vote their pocketbooks.

And they are all about to be given a HARD kick.

Taking Advantage Of FHA, Buyers, Beazer Destroys Lives, Neighborhoods (3/28/2007);

When we last left this sorry tale, builder Beazer Homes had sold crappy 2-bedroom starter houses to low-income buyers in Charlotte, NC, an average of 20% of whom, it turns out, have since had those homes foreclosed.

Now the FBI, and the US Attorney in Charlotte are involved, and Beazer’s stock price is tanking, down 17% from an already low point.

As great as it is to see such a corporate pig get skewered, Beazer was only doing what the Bush Administration was urging them to do, which is to sell houses to people who have no realistic way to ever pay for them.

(link from Breitbart.com)

The Fed’s Fatal Overreach (4/1/2008);

Just when you think you have seen it all, a proposal has arisen from the Bush White House to empower the Federal Reserve to take over the entire US financial system.

Now right about now, anyone like us who has followed the Fed-inflated real-estate bubble, followed by the collapse of the housing marketthe Fed origins of the mortgage crisis, and the Fed-caused recession can be forgiven for making a gurgling noise as their head explodes from the unbelievable hubris, the BALLS behind such a move.

The prescient words of the great Ron Paul chill the spine at this moment;

We had missed the 5:30 Ferry, but the good people at Shepler’s quickly boarded us on another boat and made a special run to take us and Ron Paul over to the Island..

… I asked him how much longer he thought those guys in Washington could keep going before everything started to collapse, and he said “”Not much longer, things are starting to fall apart and this time they will not be able to stop it.””

To singlehandedly destroy an economy, quickly steal away from the scene, then return with a flourish annoncing that salvation is at hand is exactly what compulsive arsonists do.

And the people should rise up and put them in exactly the same place as arsonists – in prison, every last one of them.




More LibertyGuys Stuff

October 2018
S M T W T F S
« Apr    
 123456
78910111213
14151617181920
21222324252627
28293031  
Advertisements