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Author Topic: Housing Market Issues  (Read 6032 times)
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Blackadar
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« on: February 28, 2008, 09:12:25 PM »

It appears to me the continuing pattern of the Bushies bailing out big businesses, only to let the little guy suffer, has continued with the housing marking problems.

We've dropped the Fed Funds rate a great deal over the last few months, which can help the economy as a whole.  But the primary impact is for banks and investors to make more money off of their investments.  And we've done this in the face of continuing inflation - the CPI itself is on pace for a 6.8% increase this year (compounded annual rate based off the last 3 months, ending January 2008) and it grossly underreports true inflation due to a number of factors (product substitutions, etc.).  So the true number is probably closer to 10% on goods and services...and all the while we're dropping the Funds rate and letting the dollar decline, putting more price pressure on the average consumer. 

The other thing Bush wanted to do was let the FHA get into bigger mortgages to guarantee.  Again, this doesn't really help too many folks, especially those who are upside down in mortgages and CAN'T refinance due to the dropping housing prices.

Note that nothing was done to help the consumer who is stuck in these upside down mortgages with escallating interest rates.  Now good ole' tax-and-spend Henry Paulson doesn't like the plans Congress is considering: (http://www.msnbc.msn.com/id/23393034/).  Why?  Because some of them might actually help the little guy at the expense of big businesses.  They'd allow someone who is upside-down to have the right to renegotiate.  Oh, the horror!

I love it when he says only 2% of mortgages are in foreclosure.  Hey, dickhead...those 2% are hurting the value of the 93% of us who are current.  Home prices declined for the first time since the Great Depression.  And there are a lot more than 2% who can't afford to sell their homes because they're upside down now too!  Keep fiddling guys, Rome is burning!

Just goes to show that this administration has no real interest in helping anyone beyond the very rich.  If they got their heads out of their asses, they'd pass some real reform to allow people to renegotiate, which would prevent foreclosures and keep housing prices more stable.  Then they wouldn't need to drop the Funds rate as much, keeping a lid on inflation.  As it is, the middle class is taking it up the ass - their biggest source of wealth (their house) is dropping in value while they're starting to deal with rampant inflation.

Then again, I shouldn't expect much from an administration whose fiscal policies have been mediocre at best and disasterous at worst.
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brettmcd
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« Reply #1 on: February 29, 2008, 03:11:12 AM »

For the most part people should have known what they were getting into when they signed up for these insane mortgages.   I feel bad that they are having troubles, but thats just how things happen sometimes.   They were not forced to sign the mortgage they took out, its not like a gun was held to their heads or anything like that.    Every time something bad happens the first response should not be to offer a bailout.
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Blackadar
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« Reply #2 on: February 29, 2008, 04:04:06 AM »

Quote from: brettmcd on February 29, 2008, 03:11:12 AM

For the most part people should have known what they were getting into when they signed up for these insane mortgages.   I feel bad that they are having troubles, but thats just how things happen sometimes.   They were not forced to sign the mortgage they took out, its not like a gun was held to their heads or anything like that.    Every time something bad happens the first response should not be to offer a bailout.

Depending on the lending practices of the broker, actually...they may not.  My own experience suggests that if you didn't know what questions to ask, you were going to be taken advantage of by your realtor and broker.  And "insane" mortgages have very little to do with this - the bigger problem is the inability to refinance due to slumping housing prices.

Thanks again for providing only a cursory understanding of a topic here.
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brettmcd
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« Reply #3 on: February 29, 2008, 04:47:01 AM »

Quote from: Blackadar on February 29, 2008, 04:04:06 AM

Quote from: brettmcd on February 29, 2008, 03:11:12 AM

For the most part people should have known what they were getting into when they signed up for these insane mortgages.   I feel bad that they are having troubles, but thats just how things happen sometimes.   They were not forced to sign the mortgage they took out, its not like a gun was held to their heads or anything like that.    Every time something bad happens the first response should not be to offer a bailout.

Depending on the lending practices of the broker, actually...they may not.  My own experience suggests that if you didn't know what questions to ask, you were going to be taken advantage of by your realtor and broker.  And "insane" mortgages have very little to do with this - the bigger problem is the inability to refinance due to slumping housing prices.

Thanks again for providing only a cursory understanding of a topic here.

I understand the topic far far more then you might ever imagine.   

As for the inability to refinance...  well if you want to do an arm with a big interest rate hike after 3 or 5 years, you are taking a risk that housing values will increase so you can refinance.   Some people lost that bet this time, they took a calculated risk, its just that this time it didnt work out.   

As for true predatory lending, of course that needs to be dealt with, but that is NOT the major cause of the housing market problems today, its a small, small minority of the forclosures that are happening today.
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« Reply #4 on: February 29, 2008, 09:06:40 AM »

Quote from: Blackadar on February 29, 2008, 04:04:06 AM

Depending on the lending practices of the broker, actually...they may not.  My own experience suggests that if you didn't know what questions to ask, you were going to be taken advantage of by your realtor and broker. 

While I certainly agree with you about the current administration only caring about the rich -- this statement bothers me.

Ignorance isn't an excuse. If you're spending that much money then you should take a little time to learn about what you're doing. There are plenty of "buying a house for dummies" style books available to teach you. In the end - it goes back to caveat emptor ("Let the buyer beware").

Plus it's not like there isn't an abundance of advice and common sense out there that says to avoid Adjustable Rate Mortgages for exactly this reason. I personally think most of those people simply got greedy and saw a way to buy a house that they couldn't afford. Yeah sucks to be them right now, but it's a temporary pain and hopefully they'll never make that mistake again. We're all feeling the pain of the housing market - I had planned on selling my house right about now and moving up to something bigger, but it's just not worth it right now.

In the same token - this whole idea of "bailing out lenders and investors" also seems like a slap in the face. Yeah they made a bad investment, let them lose their money and learn from it. I don't see why my taxes (or worse borrowed money from China) should go to protect them.

But of course - i admit that my understanding of the issues may be only cursory.

« Last Edit: February 29, 2008, 09:39:39 AM by DarkEL » Logged
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« Reply #5 on: February 29, 2008, 02:20:58 PM »

Quote from: brettmcd on February 29, 2008, 03:11:12 AM

For the most part people should have known what they were getting into when they signed up for these insane mortgages.   I feel bad that they are having troubles, but thats just how things happen sometimes.   They were not forced to sign the mortgage they took out, its not like a gun was held to their heads or anything like that.   

Agreed. Anyone with an ounce of sense knew this was coming.  I told my wife 2 years ago when we bought our house that foreclosures were going to go through the roof because people are over extending.  It's common sense.  Even if the MortCos say you can afford a 600,000 house, you probably can't. It's simple mathematics.

Quote from: Blackadar on February 29, 2008, 04:04:06 AM

Depending on the lending practices of the broker, actually...they may not.  My own experience suggests that if you didn't know what questions to ask, you were going to be taken advantage of by your realtor and broker. 

Even if 10% of all mortgages can be attributed to shady lenders, that still leaves milllions of bad mortgages and trillions of dollars of bad money. It's not only the buyer's faults, it's the MortCos. 

Bailing people out of their own messes is no solution.  Put the money to better use (yeah right.)
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« Reply #6 on: February 29, 2008, 02:26:03 PM »

While I feel bad for those who got caught with far more mortgage than they can afford, it is not the government's job to save us from our own stupidity and lack of foresight/planning.

Yes, predatory lenders should be dealt with, but the vast majority of these mortgages gone wrong were legitimately bought by people whose eyes were bigger than their stomach (or wallet)
« Last Edit: February 29, 2008, 02:29:50 PM by Laner » Logged
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« Reply #7 on: February 29, 2008, 04:38:07 PM »

Quote from: brettmcd on February 29, 2008, 04:47:01 AM

I understand the topic far far more then you might ever imagine. 

I can imagine quite a bit...

BTW, this is just typical of Bush family policies.  Everything they do ties in with loan scams... so why does anyone think something like the mortgage market would be overlooked?

Once mortgage companies stopped carring if lenders had the ability to repay the loans, the housing meltdown was a Mission Accomplished.  As for blaming American citizens for loose fiscal policy and the government ignoring consumer protection laws... that's just more of the same "Blame America First" mentality we've heard for years already.
« Last Edit: February 29, 2008, 04:40:32 PM by unbreakable » Logged
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« Reply #8 on: February 29, 2008, 04:52:28 PM »

Quote from: unbreakable on February 29, 2008, 04:38:07 PM

As for blaming American citizens for loose fiscal policy and the government ignoring consumer protection laws... that's just more of the same "Blame America First" mentality we've heard for years already.

Typical thought patterns of one living in a society that refuses to take responsibility for its actions and is consumed by instant gratification.
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« Reply #9 on: February 29, 2008, 05:38:20 PM »

Quote from: ATB on February 29, 2008, 04:52:28 PM

Quote from: unbreakable on February 29, 2008, 04:38:07 PM

As for blaming American citizens for loose fiscal policy and the government ignoring consumer protection laws... that's just more of the same "Blame America First" mentality we've heard for years already.

Typical thought patterns of one living in a society that refuses to take responsibility for its actions and is consumed by instant gratification.

So in other words, you believe that America is an immoral nation?  Who's side are you on here, ours, or the terrorists?
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« Reply #10 on: March 01, 2008, 04:49:07 AM »

Before you point the finger at the average CEO running the a multinational company as being responsible, read a bit of history. Read up on the NAFTA, Globalization, So called "Free Trade", Wal-Mart and the marginalization of the American in the next economy. Read "Credit Card Nation", "Maxed Out", "Nickeled and Dimed", "Brand Name Bullies" and any of Noam Chomsky's work and read every economic journal out there.

Within a few weeks a very bleak picture will begin to emerge. A picture of a "Military Industural Complex" gone amok. Back in the fifties Eisenhower warned us that given enough time and lack of oversight, the "Military Industural Complex" would threaten democracy itself. It has always needed a boogeyman to justify its existance. First it was the Communists, and Russia and the Cold War, and now its the terrorists.

Since ((Reagan)) was elected in the Eighties corporations profits have rose exponentially while "real" wages, wages tied to the inflation index have fallen almost seventy percent. In 1970 the average american worker made over sixty dollars an hour ((in todays terms)) in a manufacturing job,counting benefits. Today its something like fourteen dollars an hour, and no benefits.

We are told, time and time again that globalization is a good thing, that it means more money and profits and a higher standard of living for everyone. This is wrong. Globalization is a bad thing as it is. All it really does is allows companies to move abroad, to offsource, outshore and pack up their bags and leave for some third world country with little standard of living and even less respect for human rights. Unregulated globalism is nothing more then the total antithesis of everything the United States should stand for.

We are told that affordable healthcare is untenable. It is untenable only because hospitals charge obscene amounts, and the pharma companies are making profits in the hundreds of billions of dollars. Healthcare lobbiests drive the politicians to extend patents on drugs, drive them to make laws to make DNA patentable, and the healthcare insurance industry raises the rates on healthcare as much as 20% a year... and refuses to insure everyone but the most healthy.

On the domestic front our educational system is failing. We are going from a nation of scientists and engineers to a nation that packs grocery bags, pitches cars and asks "would you like fries with that?" Educational funding is drying up at the higher levels, as the cost of higher education triples every ten years.

As a nation, we are working harder, spending less time with our families and driving GDP to an all time high, and yet the last two economic booms werent even felt by 95% of those in the workforce. The average standard of living did not rise. CNN and the Wall Street Journal and all the other news corporations declared that we had entered an "age of prosperity" and yet, we as an average american worker, didn't see a dime. Why is this?

As Americans, our whole way of life is under threat. We are under siege and we are made to believe that the problems of healthcare, social security, medicare and a slipping standard of living are "too complex" to fix. Politicans pay lip service to how they "feel our pain" to be elected but then its business as usual in capital hill. These mouthpieces dont rock the boat. Our very electorial system is nothing more then a sham. We dont see a canidate take the national stage unless he has been bought, sold and paid for by the lobbiests. These canidates know who paid for them to get into office, so they dont do anything radical, and the rot continues.

We are involved in a highly expensive, miserably planned and poorly executed war overseas. This war is funded not with our taxes but with American dollars, bought by countries that are terrified of what may happen if they stop buying our dollars. These countries already own trillions of dollars of US debt that will become worthless if they do not buy. The current administration hands out multibillion dollar no bid contracts to companies that they themselves have vested intrests in. Gasoline prices are at a record high, not entirely because of scaricity, but because the multinational monopolies that run the refineries do not increase capacity, and routinely take refineries offline to extort record profits out of a captive consumer who is forced to commute to far flung areas just to get to work.

The bottom line is that we spend more then we make. We as Americans have been supporting our standard of living on credit cards, and then paying off the credit cards with lines of credit on our very homes itself. The very system will be its undoing. What these multinational corporations dont realize is that America is still the engine that drives the world economy. You cannot ship jobs overseas, and ship goods back and expect Americans to buy what they can no longer afford on credit forever. It is untenable.

Why arent we as Americans angry yet? Perhaps it is because most Americans have been raised to accept this, and as long as we accept it, those who exploit will continue to take advantage of our political nievity. We face now a "collapse" as real as the Soviets faced in the early ninties, not because we are communist, but because we allow those who are in power to continue to take and take until there is nothing left to drive the economy at home. I have been predicting the "housing crisis" for two years now. It is there because Americans are deeply in debt, and willing to put their homes on the line to maintain their standard of living, because mortage loan companies are willing to offer exploitative ARM's with nice looking rates up front. This recession we are now in will extend into a depression when the banks collapse in a domino effect when they realize that they cant get $100,000 for the house that they financed to the tune of $450,000. It will be made worse when countries switch their standard from the dollar to the Yen, the Euro of the Chinese dong.
The pain hasent even started yet, and we, as Americans are largely to blame. ARM's are just the tip of the iceburg

Edited for: Reagan, not Nixon.
« Last Edit: March 03, 2008, 04:41:29 PM by Drazzil » Logged
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« Reply #11 on: March 02, 2008, 12:21:05 AM »

Quote from: Drazzil on March 01, 2008, 04:49:07 AM

Why arent we as Americans angry yet? Perhaps it is because most Americans have been raised to accept this, and as long as we accept it, those who exploit will continue to take advantage of our political nievity.

We take it in the face because we're either too stupid to realize it, or because we believe that we don't matter in the entire scheme of things.

It's why I get so pissed at my job whenever 90% of the people with governmental insurance walk into my pharmacy - I know they all get FAR better healthcare than I, somebody who works, get. If they walk into a hospital with the common cold, they'll get treated, and then the taxpayer will pay for it. If I try to do the same, I'll get laughed out of the hospital, and I'll get charged $1000 for my troubles.

Oh, and because of the housing market issues, my home lost $50,000 of its 'estimated value' (the value of which I pay tax on to the government) in one year. And it wasn't due to something being built nearby, either.

*goes back to lurk mode in this forum*
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« Reply #12 on: March 02, 2008, 08:32:58 AM »

Quote from: Destructor on March 02, 2008, 12:21:05 AM

Quote from: Drazzil on March 01, 2008, 04:49:07 AM

Why arent we as Americans angry yet? Perhaps it is because most Americans have been raised to accept this, and as long as we accept it, those who exploit will continue to take advantage of our political nievity.

We take it in the face because we're either too stupid to realize it, or because we believe that we don't matter in the entire scheme of things.

It's why I get so pissed at my job whenever 90% of the people with governmental insurance walk into my pharmacy - I know they all get FAR better healthcare than I, somebody who works, get. If they walk into a hospital with the common cold, they'll get treated, and then the taxpayer will pay for it. If I try to do the same, I'll get laughed out of the hospital, and I'll get charged $1000 for my troubles.

That's not entirely true.  First off, people working for the government *do* actually work (the majority of them, anyway).  Second, the taxpayer isn't paying for them to get medicine or visit the doctor- the taxpayer is paying for part of their health insurance, however (the part which the employee doesn't pay for themself).

But one thing is for sure: not only CAN the US afford universal health care, it's going to be far cheaper than not doing it.  And besides, as any fiscal conservative knows, deficits don't matter- it's all monopoly money anyway.

Quote
Oh, and because of the housing market issues, my home lost $50,000 of its 'estimated value' (the value of which I pay tax on to the government) in one year. And it wasn't due to something being built nearby, either.

*goes back to lurk mode in this forum*

In a certain respect, I think that's why local governments weren't all that eager to assist in reigning in the housing market insanity.  And part of it was likely due to the fact that most state and local governments are deep in debt- from a top-down perspective, they probably felt squeezed for money, and just bought into the "conventional wisdom" that home prices would just magically keep rising forever and ever, until a one room condo would cost the GDP of a small nation (one would imagine).

And then, of course, it's really difficult to reign something like that in anyway.  I was telling my family for the longest time that the housing market had already reached the realm of insanity, and all the signs of this were there.  However, it just ended up with them saying they wish they had taken my advice, since now they want to sell and it's difficult to do so.

When you have a scenario where a person cannot purchase a rental property and make their payments just from the rental income, that's a pretty solid indicator of market insanity.
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Blackadar
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« Reply #13 on: March 02, 2008, 03:02:21 PM »

Quote from: DarkEL on February 29, 2008, 09:06:40 AM

Quote from: Blackadar on February 29, 2008, 04:04:06 AM

Depending on the lending practices of the broker, actually...they may not.  My own experience suggests that if you didn't know what questions to ask, you were going to be taken advantage of by your realtor and broker.

While I certainly agree with you about the current administration only caring about the rich -- this statement bothers me.

Ignorance isn't an excuse. If you're spending that much money then you should take a little time to learn about what you're doing. There are plenty of "buying a house for dummies" style books available to teach you. In the end - it goes back to caveat emptor ("Let the buyer beware").

Plus it's not like there isn't an abundance of advice and common sense out there that says to avoid Adjustable Rate Mortgages for exactly this reason. I personally think most of those people simply got greedy and saw a way to buy a house that they couldn't afford. Yeah sucks to be them right now, but it's a temporary pain and hopefully they'll never make that mistake again. We're all feeling the pain of the housing market - I had planned on selling my house right about now and moving up to something bigger, but it's just not worth it right now.

In the same token - this whole idea of "bailing out lenders and investors" also seems like a slap in the face. Yeah they made a bad investment, let them lose their money and learn from it. I don't see why my taxes (or worse borrowed money from China) should go to protect them.

But of course - i admit that my understanding of the issues may be only cursory.



Fair enough, but let's face it - the way houses are sold, it may be the worst caveat emptor market around.  The buyer is entirely at a disadvantage.  First, most people don't realize that the Realtor works for the seller and themselves but not for the buyer, and they will push you higher and higher in the market.  You start out with a price range of x dollars and they'll immediately take you to the highest point on that range.  Worse, they often show you the shittiest houses available in that range.  And if that's not the MAXIMUM house you can afford, then they'll take you to a house 10-20% above that range and show you something that's so much better.  However, you don't ever see the good houses in the price range and even if you go on to the Internet and download them, they'll come up with excuses on why you can't/won't/shouldn't see those homes.  I've purchased 3 homes and the pattern has always been the same with every Realtor I've dealt with. 

Then it's time to get financing and, again, most people are way out of their league here.  Acronyms are thrown out like candy and the person you think you should trust (your Realtor) sends you to a broker without telling you they get a kickback.  It's no longer a choice between ARMs and fixed-rate.  There number of instruments and terms are staggering and the average consumer gets lost.  Of course, it doesn't help when every pundit on TV says that you need to own a home.  The American Dream can quickly get turned into a quagmire and no Buying Homes for Dummies book is going to help.  If you don't have someone guiding you or if you don't have experience, chances are you are going to get taken when buying a home.  I have little respect for Realtors after what I've seen and been through.  They're not bad people, but the way the entire industry is structured makes it painful for the consumer. 

Now I'm not claiming that the consumer has no responsibility here.  A bailout is not the right way.  But there are other methods to ease the burden on consumers without substantially lowering the value of the investment (look 'em up, they're out there).  The point is that none of them have been pushed or even floated out there by this Administration.  None.  There's been no
help forthcoming from the government regarding the consumers who are in upside-down mortgages.  And there's a lot more of those than just 2%. 

<rant on>
So while the funds rate gets cheaper - which is essentially a Government bailout of the financial sector - the consumer gets doubly screwed.  Most people don't have any clue what the real inflation rate is...the money growth rate right now is higher than any point than when Nixon took us off the gold standard.  Of course, they stopped reporting this two years ago.  But your real rate of inflation is approaching 10%, the worst since the Carter/early Reagan days.  No wonder our economy is starting to resemble the 70s stagflation era.

So the average consumer gets no direct help in the mortgage meltdown and they have to deal with higher inflationary pressures.  The value of the average consumer's biggest investment is taking a whopping hit while big business is still suckling on the tit of government money.  Is there any wonder that Bush is concerned with Telcom Immunity (yet another Big-Business Bailout), trying to finalize tax cuts for the rich and pumping money into two wars but hasn't heard of projections of $4 gas this summer (http://www.chron.com/disp/story.mpl/business/5580546.html)?  I really wonder how the hell can anyone support a Republican right now....
<end rant>
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« Reply #14 on: March 02, 2008, 10:30:53 PM »

i will make one comment here about inflation.  there are a few "upsides" to inflation

*disclaimer* i am NOT saying inflation doesnt matter, im not saying it doesnt cause incredible harm when it increases at a significant pace beyond wage growth, im not saying it should be ignored - if i were saying any of those things id be flat out lying

BUT - inflation IS good for a person with a mortgage.  in fact anyone making FIXED payments over a long period of time (note the fixed) will benefit from inflation.  the downside is, if inflation is expected to persist over a long period of time, even with a low fed rate, a person looking to get a NEW mortgage will be paying (you guessed it!) a rate reflecting an inflation premium.
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« Reply #15 on: March 02, 2008, 10:45:37 PM »

Quote from: Doopri on March 02, 2008, 10:30:53 PM

i will make one comment here about inflation.  there are a few "upsides" to inflation

*disclaimer* i am NOT saying inflation doesnt matter, im not saying it doesnt cause incredible harm when it increases at a significant pace beyond wage growth, im not saying it should be ignored - if i were saying any of those things id be flat out lying

BUT - inflation IS good for a person with a mortgage.  in fact anyone making FIXED payments over a long period of time (note the fixed) will benefit from inflation.  the downside is, if inflation is expected to persist over a long period of time, even with a low fed rate, a person looking to get a NEW mortgage will be paying (you guessed it!) a rate reflecting an inflation premium.

You need to be more specific than that.  Price inflation is not good for a person unless wage inflation accompanies it.  Unfortunately, "real" wages have not kept up with price inflation lately.  And because housing prices outpaced real wage growth in many markets over the past few years, the mortgage payments are correspondingly higher.  Now that inflation has reared its ugly head and is outpacing wage growth, the middle class is effectively squeezed from both sides - higher mortgage payments from an overheated market AND less discretionary income due to inflation.  If real wage growth gets back on track, then the inflationary pressures will make the housing payments easier.  But for right now, there's a squeeze from both sides.

And don't forget that wage growth (both real and nominal) for low income and middle income families is not as good as the national average since high wage earners' growth has far outpaced everyone else.  Nominal growth from 2000-2005 for low wage was around 2.5%, 3% for middle class and 3.8% for high wage earners.  In real terms, the lower class actually lost money in that period, the middle class was up around .3% and the upper class was up around 1.2%.
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« Reply #16 on: March 02, 2008, 10:49:50 PM »

Quote
Why arent we as Americans angry yet? Perhaps it is because most Americans have been raised to accept this, and as long as we accept it, those who exploit will continue to take advantage of our political nievity. We face now a "collapse" as real as the Soviets faced in the early ninties, not because we are communist, but because we allow those who are in power to continue to take and take until there is nothing left to drive the economy at home.

Assuming the above is true - and I'm not saying it is, because while I think there's some truth to it, it's still excessively alarmist - what's the solution?  I get tired of always hearing people rant about this and that regarding the economy but never offer a solution.  If I had to read between the lines of Drazzil's post, it seemed that the situation was described as so bleak and hopeless that a revolution was the only solution.  Somehow, I don't see that happening, nor do I see it bettering the situation, but if the author believes that, why not come out and say it?
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« Reply #17 on: March 02, 2008, 11:37:10 PM »

Quote from: ATB on February 29, 2008, 02:20:58 PM


Agreed. Anyone with an ounce of sense knew this was coming.  I told my wife 2 years ago when we bought our house that foreclosures were going to go through the roof because people are over extending.  It's common sense.  Even if the MortCos say you can afford a 600,000 house, you probably can't. It's simple mathematics.


If you're so smart then why didn't you wait two years to buy your house? smile  You coulda gotten a heck of a deal!
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« Reply #18 on: March 02, 2008, 11:58:15 PM »

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Now that inflation has reared its ugly head and is outpacing wage growth, the middle class is effectively squeezed from both sides - higher mortgage payments from an overheated market AND less discretionary income due to inflation.

yup this is very much true, and will continue to be for the near term - the "benefits" (and i use that term very narrowly) from low to moderate inflation wont be felt until what? - maybe 5 - 10 years into a mortgage (and obviously every subsequent year after that)

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In real terms, the lower class actually lost money in that period, the middle class was up around .3% and the upper class was up around 1.2%.

and also true.  ive even seen some numbers that put the growth even more anemic than that.  i think one of THE most concerning sets i saw was the one that had income growth by education.  EVERY grouping INCLUDING masters saw real declines, with the exception of professional degrees (md, jd, mba) and phds
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« Reply #19 on: March 03, 2008, 01:45:10 AM »

Quote from: Drazzil on March 01, 2008, 04:49:07 AM

Since Nixon was elected in the Eighties

wat
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« Reply #20 on: March 03, 2008, 02:29:37 AM »

Quote from: Blackadar on March 02, 2008, 03:02:21 PM

First, most people don't realize that the Realtor works for the seller and themselves but not for the buyer, and they will push you higher and higher in the market.  You start out with a price range of x dollars and they'll immediately take you to the highest point on that range. 
Well there are ways around that. You can get some realtors who will work a different type of deal where they don't make money off the deal but rather off of how much they save you off the initial price of the house. i.e. the less you pay, the more they make.

Not saying it's easy to find one willing to work that way - but they are out there.

Quote from: Blackadar on March 02, 2008, 03:02:21 PM

Then it's time to get financing and, again, most people are way out of their league here.  Acronyms are thrown out like candy and the person you think you should trust (your Realtor) sends you to a broker without telling you they get a kickback. 

I see this a being a bigger issue back in the day when your options were more limited to just the one or two finance organizations in a town, but in today's society there is no shortage of businesses willing to compete for your business. Even better, you can get financed before you shop for the house so you already know exactly what your budget is before you fall into the whole trap of trying to buy more house than you can afford.

Quote from: Blackadar on March 02, 2008, 03:02:21 PM

So the average consumer gets no direct help in the mortgage meltdown and they have to deal with higher inflationary pressures.  The value of the average consumer's biggest investment is taking a whopping hit while big business is still suckling on the tit of government money.  Is there any wonder that Bush is concerned with Telcom Immunity (yet another Big-Business Bailout), trying to finalize tax cuts for the rich and pumping money into two wars but hasn't heard of projections of $4 gas this summer (http://www.chron.com/disp/story.mpl/business/5580546.html)?  I really wonder how the hell can anyone support a Republican right now....<end rant>

Totally agree with you here.

The next president is walking into a huge mess that I doubt could be fixed with a single term in office.
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« Reply #21 on: March 03, 2008, 05:11:33 PM »

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Assuming the above is true - and I'm not saying it is, because while I think there's some truth to it, it's still excessively alarmist - what's the solution?  I get tired of always hearing people rant about this and that regarding the economy but never offer a solution.  If I had to read between the lines of Drazzil's post, it seemed that the situation was described as so bleak and hopeless that a revolution was the only solution.

I hope it doesent come down to it, but that may be what happens.
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« Reply #22 on: March 03, 2008, 11:01:51 PM »

Quote from: Drazzil on March 03, 2008, 05:11:33 PM

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Assuming the above is true - and I'm not saying it is, because while I think there's some truth to it, it's still excessively alarmist - what's the solution?  I get tired of always hearing people rant about this and that regarding the economy but never offer a solution.  If I had to read between the lines of Drazzil's post, it seemed that the situation was described as so bleak and hopeless that a revolution was the only solution.

I hope it doesent come down to it, but that may be what happens.

Communist.
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« Reply #23 on: March 03, 2008, 11:35:59 PM »

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Communist.

Canadian.
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« Reply #24 on: March 04, 2008, 02:30:03 AM »

Quote from: Drazzil on March 03, 2008, 11:35:59 PM

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Communist.

Canadian.

Catalan.
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« Reply #25 on: March 05, 2008, 07:55:21 PM »

Quote from: Blackadar on February 28, 2008, 09:12:25 PM

It appears to me the continuing pattern of the Bushies bailing out big businesses, only to let the little guy suffer, has continued with the housing marking problems.

We've dropped the Fed Funds rate a great deal over the last few months, which can help the economy as a whole.  But the primary impact is for banks and investors to make more money off of their investments.  And we've done this in the face of continuing inflation - the CPI itself is on pace for a 6.8% increase this year (compounded annual rate based off the last 3 months, ending January 2008) and it grossly underreports true inflation due to a number of factors (product substitutions, etc.).  So the true number is probably closer to 10% on goods and services...and all the while we're dropping the Funds rate and letting the dollar decline, putting more price pressure on the average consumer. 

Not to quibble, but this is factually incorrect. Lower interest rates means it is more difficult for banks to make money off of investments. In fact, there's already been a number of articles in the news the last few days about banks raising consumer fees to offset declines in investment income.

And to raise interest rates right now would hurt the little guy much more than the big corporations. Banks have already significantly tightened lending practices. Raising interest rates would basically make the credit market dry up for consumers and cost small businesses an arm and a leg. A lot of small businesses depend on short-term loans and revolving credit to make payroll when cash flow isn't steady.
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Blackadar
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« Reply #26 on: March 05, 2008, 09:41:09 PM »

Quote from: Andrew Mallon on March 05, 2008, 07:55:21 PM

Quote from: Blackadar on February 28, 2008, 09:12:25 PM

It appears to me the continuing pattern of the Bushies bailing out big businesses, only to let the little guy suffer, has continued with the housing marking problems.

We've dropped the Fed Funds rate a great deal over the last few months, which can help the economy as a whole.  But the primary impact is for banks and investors to make more money off of their investments. And we've done this in the face of continuing inflation - the CPI itself is on pace for a 6.8% increase this year (compounded annual rate based off the last 3 months, ending January 2008) and it grossly underreports true inflation due to a number of factors (product substitutions, etc.).  So the true number is probably closer to 10% on goods and services...and all the while we're dropping the Funds rate and letting the dollar decline, putting more price pressure on the average consumer. 

Not to quibble, but this is factually incorrect. Lower interest rates means it is more difficult for banks to make money off of investments. In fact, there's already been a number of articles in the news the last few days about banks raising consumer fees to offset declines in investment income.

And to raise interest rates right now would hurt the little guy much more than the big corporations. Banks have already significantly tightened lending practices. Raising interest rates would basically make the credit market dry up for consumers and cost small businesses an arm and a leg. A lot of small businesses depend on short-term loans and revolving credit to make payroll when cash flow isn't steady.

Lower interest rates allows banks to make more money from existing investments.  If I've signed up for a loan at 7% and the prevailing interest rates are lowered (and yes, the Federal Funds rate is a short-term rate, but it does have an impact on longer-term investments), then the loan is worth more.  However, if inflation is increasing at a rate above the interest rate, then we have a different scenario.

I'm not advocating raising interest rates.  There's no doubt we need a bit of stimulus.  But inflation is the variable factor here and that's what's really hurting the average consumer, but there's been no real emphasis on inflationary controls.  I'd argue that if the focus had also been Keynesian in nature - i.e, a demand side fix by giving John Q. Public a way to not have to foreclose, then the drastic cut in interest rates would not be necessary, easing inflationary pressures.  But then again, this Administration has never been about helping John Q. Public (or Mr. and Mrs. Capacity and their two Capacity children, otherwise known as a Capacity crowd).
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« Reply #27 on: March 05, 2008, 09:52:42 PM »

I did a little research into each of the 3 remaining candidates platforms on this issue:

Clinton- 1. 90 day moratorium on subprime forclosures.  2. 5 year freeze in mortgage rates on subprime adjustable rate mortgages.  3. $30 billion in aid to help states and communities fight foreclosures and offset the related costs (doesn't say where the money will come from.)  4. Backs Bush administration anti-forclosure initiatives.

Obama- 1. Improved disclosure of mortage terms to borrowers.  2. $10 billion forclosure prevention fund to help people facing foreclosure stay in their homes and renegotiate with lenders, or sell their homes.  3. Extension of the Bush administration's mortgage tax credit to lower-income home owners who do not itemize on their federal tax returns.  4. Backs Bush administration anti-forclosure initiatives.

McCain- 1. Suspension of borrowers' tax penalties if lenders forgive part of their mortgages.  2. Expansion of FHA ability to help subprime borrowers obtain conventional mortgages.  3. Backs Bush administration anti-forclosure initiatives.

Clinton's looks the best to me.
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Andrew Mallon
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« Reply #28 on: March 05, 2008, 10:19:15 PM »

Quote from: Blackadar on March 05, 2008, 09:41:09 PM

Lower interest rates allows banks to make more money from existing investments.  If I've signed up for a loan at 7% and the prevailing interest rates are lowered (and yes, the Federal Funds rate is a short-term rate, but it does have an impact on longer-term investments), then the loan is worth more.  However, if inflation is increasing at a rate above the interest rate, then we have a different scenario.

Apples and oranges. Lower interest rates may increase a bank's portfolio value, but given that rates for 15 and 30 year loans are going up even while the Fed is lowering interest rates, I don't see how that applies in our current siutation. There's a lot more that factors into setting prime interest rates than just the Fed short-term rate.

The Fed lowering interest rates now has more to do with keeping money flowing in the financial systems so banks can borrow to cover their debts and bad loans and prevent a credit crunch from grinding the economy to a halt.  
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« Reply #29 on: March 05, 2008, 10:29:49 PM »

I don't believe a higher interest rate will actually help banks, and here is why-

1. Institutional lenders can borrow from the Federal Reserve at low rates.  At times the rate is so low... they are essentially getting paid to borrow money.  Must be nice.

2. There is a minimum to what banks will charge in interest rates, as well as a maximum.  But every consumer wants a low rate... so if you can offer a loan at a low rate and make, say, 4% on the loan, both bank and customer can be happy.  However, if you have to pay more money to borrow the money you lend to the potential homeowner, you are making a smaller % in profit (since the rate can only go so high).

Thus, like any other good or service, if you can acquire your good or service for less than you sell it for... you profit.  When your costs go up, you have to charge more, but that does not necessarily (or generally) translate into more profit.

Personally, I don't think the forclosures are hurting the banks... I think the fact that nobody is buying houses is what's hurting them.  A forclosure means the bank is essentially "buying" your house at a pretty steep discount.  But where they get hurt is when they can't sell your house at all, or when the amount they lent out is more than the cost of the home. 

But that's assuming the "old" model of a bank actually lending you the money, and servicing the loan!  The real wizardry was how lenders simply became middlemen, and their loans were rated and packaged into an investment vehicle... which foreign investors, state and local governments, public institutions, etc all bought into.  Which were basically worth nothing, since the lenders didn't really care if the borrowers could make their payments or not!  Do a google search on "ninja loans"- No Income, No Job or Assets.  NINJA!  That's golden!

How that crap was deregulated into being legal is one of the many ways America got completely pwned.
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« Reply #30 on: March 11, 2008, 09:31:15 PM »

And more big-business bailouts at the expense of the little guy: http://www.msnbc.msn.com/id/3683270/

Hmmm...Fed gives banks $200 billion dollars while the taxpayers get the worst of the bad mortgages.  Brilliant!

Given the way the M3 is going through the roof (http://seekingalpha.com/article/21027-the-return-of-m3-money-supply-reporting), is it any wonder why inflation is crushing the average consumer while the financial sectors continually get bailed out? 



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« Reply #31 on: March 11, 2008, 09:39:34 PM »

It's all pretty typical of the conservative's "corporate welfare state" mentality.  For example, what was one of the first things president GWB did?  An investor bail out of United Airlines (which, of course, had zero to do with saving any jobs, worker salaries, or worker retirement plan obligations).

This financial crisis has always been predictable- rather than enforce good fiscal policies, they decided to bail out investors from the tech bubble, and create an even bigger bubble in the credit market.  But BushCo has been running loan scams for decades, so it's hardly surprising a scam engulfing the entire credit market would occur under their watch.

And yet, these are the first people to say that "America can't afford universal health care".
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« Reply #32 on: March 12, 2008, 03:25:19 AM »

Quote from: unbreakable on March 11, 2008, 09:39:34 PM

It's all pretty typical of the conservative's "corporate welfare state" mentality.  For example, what was one of the first things president GWB did?  An investor bail out of United Airlines (which, of course, had zero to do with saving any jobs, worker salaries, or worker retirement plan obligations).

This financial crisis has always been predictable- rather than enforce good fiscal policies, they decided to bail out investors from the tech bubble, and create an even bigger bubble in the credit market.  But BushCo has been running loan scams for decades, so it's hardly surprising a scam engulfing the entire credit market would occur under their watch.

And yet, these are the first people to say that "America can't afford universal health care".

I dont agree with a single one of the bailouts you mention, but they are correct in saying we cannot afford universal health care. 
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« Reply #33 on: March 12, 2008, 03:31:09 AM »

Cogent analysis, brettmcd.  You're very persuasive.
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« Reply #34 on: March 12, 2008, 04:04:24 AM »

Quote from: Brendan on March 12, 2008, 03:31:09 AM

Cogent analysis, brettmcd.  You're very persuasive.

Thank you, im glad you realize the absolute truth of my statement, its quite an improvement in your way of thinking.
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« Reply #35 on: March 12, 2008, 02:02:50 PM »

Quote from: Brendan on March 12, 2008, 03:31:09 AM

Cogent analysis, brettmcd.  You're very persuasive.

Smart man...nice way to defuse the troll.  smile 
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« Reply #36 on: March 12, 2008, 02:28:43 PM »

Not only CAN we afford universal healthcare... but we can't afford NOT to.  We are already paying far more for far less.  Not that I would expect irrelevant things like facts to be all that persuasive, of course.

With the cost of one illegal war in Iraq, we could have provided healthcare for the entire world for several years.  The cool thing about the health care alternative is it would actually produce a tangible result.  Well, a positive tangible result, I mean.

But all that is a discussion for another day.  Or another thread, anyway.
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« Reply #37 on: March 12, 2008, 02:59:11 PM »

I hate to derail the thread further.  But concerning universal healthcare, what if someone walks into the emergency room and they don't have insurance?  Do we not treat them?  Or do taxplayers end up picking up the tab anyway?  I ask because I honestly do not know.
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« Reply #38 on: March 12, 2008, 03:13:43 PM »

Quote from: denoginizer on March 12, 2008, 02:59:11 PM

I hate to derail the thread further.  But concerning universal healthcare, what if someone walks into the emergency room and they don't have insurance?  Do we not treat them?  Or do taxplayers end up picking up the tab anyway?  I ask because I honestly do not know.

They get treated and those of us who do pay the absurd amounts to insure our families have to pick up the tab.

Anyone who says we can't afford universal health care is an absolute idiot and entirely wrong.  As a country, we spend 16% of our GDP on health care.  Germany, France, Japan, UK, Canada -  countries with universal plans - spend far less as a percentage of GDP (around 10% on average).  So not only can we afford universal health care, we could (in theory) actually provide universal health care for less money than we're spending today.  The money is there - it's a matter of actually having the political will to do something.  "Affording it" has nothing to do with adopting a universal plan.

By the way, that GDP number was FIVE percent in 1960...that tells you how out-of-whack our system has become.
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« Reply #39 on: March 12, 2008, 03:14:12 PM »

Quote from: denoginizer on March 12, 2008, 02:59:11 PM

Do we not treat them?  Or do taxplayers end up picking up the tab anyway?  I ask because I honestly do not know.

Taxpayers end up picking up the tab anyway.  And if you've ever seen an emergency room bill, it's WAY more money than a scheduled doctor visit.
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