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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Thu Mar 15, 2007 12:46 am Post subject: Bailout of the US Housing Market before the Bust ? |
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Mortgage Bankers Association Chief Economist, Douglas Duncan, believes that mortgage activity is set to dip and that “there's no question that the decline in [mortgage] volume will reveal excess capacity”. Although Mr. Duncan isn't painting on overly grim picture, it is worth pointing out that he offered this negative outlook more than 3-years ago …
Nearly Three Years of Insanity All But Over
As it would turn out, the so called ‘excess capacity' in the mortgage industry wasn't shed in 2004, it was simply utilized to push more ‘creative' mortgages.
“While most home buyers still opt for traditional fixed-rate loans, lenders are planning to introduce an even wider array of niche mortgages as the refinancing boom wanes and competition intensifies.”
Creative Mortgages Fuel Home Sales — Banks Push Variety of New Loans to Offset Rising Costs; the Price of a Missed Payment.” Wall Street Journal, March 16, 2004.
As the ‘creations' in question - including ‘interest only' and ‘no doc' loans – helped people who could otherwise not afford a house become homeowners, some people warned early and often that rapid home price appreciation and risky loans were a dangerous mix for the real estate market. However, these analysts, including Robert Shiller, Dean Baker, Paul Kasriel, and ‘The Economist', were largely ignored for being overly pessimistic. That is, of course, until now.
As Housing Boom Turns To Bust Policy Makers Press PANIC
As the U.S. housing market enters its bust phase policy makers have been quick to reiterate that the damage will be contained. In fact, the response to some relatively small blow-ups in the subprime market has been so quick that you have to wonder if what policy makers are really saying is they will not allow the carnage to spread.
Poole: “The possibility of a liquidity upset or crisis is a financial disturbance that may have some policy implications for the Fed to provide some liquidity” Fed's Stern says no spillover from subprime
Following Poole's suggestion of Fed help last week, Senate Banking Committee Chairman Christopher Dodd said yesterday that Congress “may need to do something much more quickly to provide some protection or you could end up with a lot of poverty and blight”. The astonishing point to be made about the bailout being talked about is that while Dodd is quoting research reports and talking about “losing 2.2 million homes”, the MBA “lists only 300,000 such [subprime] borrowers as being in foreclosure now”. Dated numbers aside, doesn't it seem odd that the bailouts and promises to defend ‘liquidity' may be set to arrive with less than 25% of the anticipated subprime bust complete? What is really going on here?
The U.S. Housing Market Is Too Important To Fail
http://www.marketoracle.co.uk/Article524.html |
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