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"You Idiots All Paid Too Much For Your Houses..."

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April 29, 2009 – Comments (6)

That's essentially what Bernanke ("The Beard," as he's called on Dealbreaker) and his cadre of head-nodders are saying here. They need to keep "purchasing" government paper (really they're just moving money from one pocket to the other and pretending the result isn't just a declaration from on high, a la the Soviets...) in order to artificially lower financing costs so that all the bagholders  homeowners homedebtors out there can refinance, and to try and bring a few new buyers into the mix.

If they let the market  set rates, of course, they'd be higher, and house prices would drop even more quickly than the current, -19% clip, putting more people into negative equity situations. As studies have shown, people walk away from their homes not because they can't afford their mortgages, but when they feel like paying them is a sucker's game. Obviously, The Beard and his co-horts think lowering the rates and encouraging refinancing will counteract this on both fronts, but looking at it from a less charitable point of view, they're clearly saying, "You idiots paid too much for your houses."

As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.

Don't believe any of those pundits out there telling you the bottom is in, or near, on home prices. It's not. The only thing we're seeing is an artificial slowing of the rate of decay, brought to you courtesy some insanely expensive market manipulation.

Sj

6 Comments – Post Your Own

#1) On April 29, 2009 at 5:50 PM, awallejr (85.54) wrote:

I agree about the bottom not being in simply because the whole foreclosure process takes years to wind through.  Jim Cramer has this silly June 30th calendar for predicting a housing bottom. That's his "hedge fund" mentality at work.  It just doesn't work that way.  Hopefully this year should be the peak year, but only time will really tell.

I do challenge the statement about studies showing people walk away not because of affordability but because they feel like sucker's if they don't. People need a roof over their heads.  A house should be bought as a HOME first, investment is secondary. Most people walk away in the end because they can't afford it. I am in the business.  I see it in bankruptices and I see it in foreclosures.

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#2) On April 29, 2009 at 6:26 PM, abitare (31.77) wrote:

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#3) On April 29, 2009 at 6:36 PM, awallejr (85.54) wrote:

Yeah I can see banks actually doing that.  The violations really can pile up quick to a point where it just is cheaper to knock them down than try to finish the homes to sell.  The blog you are showing apparently involved an intended extended community development.  It would have been impossible to even sell those few homes simply because the builder couldn't come close to finishing the project.  Pointless for the bank to continue paying steep fines or finishing the few homes to get permit compliance only to be unable to even sell them.

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#4) On April 29, 2009 at 7:27 PM, QualityPicks (78.76) wrote:

What I really think the Fed is doing now is saying "You idiots Will All Overpay for Homes Yesterday, Today and Forever" Since all the measures they have taken right now have prevented home prices from deflating to a more realistic price.

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#5) On April 29, 2009 at 7:39 PM, jgseattle (34.21) wrote:

The only out for the fed is inflation.  In that case you did not pay to much.  If the fed allows deflation to take hold then everyone paid to much.

 

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#6) On April 29, 2009 at 11:28 PM, xserver (< 20) wrote:

I've been seeing articles lately in the SD Union-Trib grasping for anything that indicates a bottom in the housing market.  Then, I saw this today.  Surprised the hell out of me.

But market watchers caution against breaking out the champagne and celebrating an impending rise in prices.

“No way on God's green earth,” said Louis Galuppo, a real estate attorney and director of residential real estate at the Burnham-Moores Center for Real Estate at the University of San Diego. “There's a difference between pricing starting to go up and the market starting to find stability.”

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