Typical confused yankee . So which is it ? clean or dirty ? Actually it is not a matter of affordability. If paying 2 million for a townhouse with people stacked on top of you floats your boat then thats fine with me. Perhaps you should tell the buyers to stop so your gloom and doom scenario has better odds. Or was today's data just a conspiracy to keep the bubble going ?
You can't even comprehend English. How can anyone converse with you? When I wrote "dirty smoggy NYC" that was a quote from you shithead. Notice the question mark on the end....LMAO! You're an idiot. I wish I could stop responding to you but you continue to dig deeper and it's fairly funny when you talk bad about areas that aren't Texas. That's like Rosie O'Donnell talking bad about skinny people! And this is one of the most incomprehensible things I've ever read: "Perhaps you should tell the buyers to stop so your gloom and doom scenario has better odds. Or was today's data just a conspiracy to keep the bubble going ?"
No! Couldn't be! The housing market is doing so well according to so many here...they never back up their theories with data, but they must know what they're talking about....some of them "have a feeling" and some "worked for mortgage banks a few years ago" so they must be very informed.
i'm a middle of the roader on housing decline. gonna get worse but not the end of modern civilization. here is a link to an econ prof's blog where he ran a couple regressions on state by state foreclosures versus how much appreciation the state had recently and then versus the state's unemployment rate. prior appreciation had nothing to do with it. state unemployment rate did. caveat: state wide data. local data can be different. http://www.econbrowser.com/archives/2007/03/bubble_bubble_t.html
Interesting blog. However, I think his conclusions are seriously flawed. He observes two correlations: a negative correlation between appreciation and mortgage delinquency, and a positive correlation between unemployment and mortgage delinquency. The thing is, these correlations should typically hold regardless of market conditions. People who are sitting on large price appreciations can sell or refinance their way into solvency. Whereas, people who lose their job often have to foreclose. These aren't so much correlations as they are tautologies. There's another reason why low income areas are getting hit first. Since housing prices peaked in 2006, the only mortgages that are likely to be underwater and suffering payment shock are those with the shortest reset periods, like 2 year ARMs. These are almost all subprime. The prime and alt-A mortgages in more affluent areas are typically 5 year ARMs or IOs. Any of those mortgages that are underwater are still enjoying teaser rates. (You can find all this data and more in Ivy Zelman's report for Credit Suisse.) Finally, there is the oft-repeated truism that housing distress starts at the bottom of the food chain and spreads to the top - the plankton theory. Someone who buys a mansion has to sell their old home to a move up buyer, who sells their old home to a first time homeowner. What is happening today is that the entry level homeowners are getting clobbered, but it's only a matter of time for excess inventory and price depreciation to spread up the housing food chain. Martin
Martin, great post. I haven't read the blog yet but I wanted to comment on one thing. According to that Credit Suisse report, 46% of Alt-A loans sold last year had piggyback loans. 22% were bought on speculation. 25% of the ARM loans were 1 year ARMs...I think there are a number of factors that each adds weight. The subprime issue is an issue because they were lending to the least likely to pay back...plain and simple. But in those cases they weren't loaning as much as in the case of Alt-A loans. I think Alt-A is a much more serious problem than subprime...albeit an addition on top of subprime problems. Cheers and thanks for adding your insight.