Guest Blogger Stephen Colbert on Housing

Hi, this is Stephen Colbert of the Colbert Report. I've been bugging Tim for a while now about doing a guest post here at his blog, and he finally got me all set up with an account yesterday. It was a bit odd when we spoke on the phone - he mumbled something about oil prices and black helicopters and then the line went dead. I hope he's OK.

Anyway, he wanted me to talk about housing. I've been reading up on housing and this so-called "housing bubble" and I have a few thoughts on the subject.

First of all, housing can't be "in a bubble". Houses are much too big for that or bubbles are much too small - take your pick.

Second, those who are calling it a bubble are mostly people who don't own a house and they just want the bubble to pop so that prices will come down and they can afford to buy one.

Everyone wants to own their own home, in fact, almost everyone does now - at least one ... sometimes two, three, or four.

These people who talk about a housing bubble - people who either just sold their home and now rent, or those who never bought real estate because they thought it was crazy to spend so much of their income on housing even though prices were skyrocketing and banks were bending over backwards to lend any amount, for any house, to anybody - these people have taken a keen interest in the nation's housing market now that prices are going down.

Which brings us to today's word - Schadenfreude.

Since last week, when the year-over-year change to national home prices turned negative for the first time in many years, this word has been popping up all over the place.

[Along with for sale signs]

This is a German word, one that you don't hear that much anymore, and it means, "pleasure taken from someone else's misfortune". Now, enjoying someone else's bad luck doesn't seem like a nice thing to be doing.

[Unless they're condo flippers]

People need places to live so they buy houses. Prices have been going up for a while but that's because we have a booming economy with plenty of jobs available for everyone.

[Would you like fries with that?]

Combine a booming economy with a housing supply that can't keep up with demand and what do you get? Rising prices. Big deal. Now, in some parts of the country prices were pushed a little too high and now they're coming down a little bit.

[A little? Try selling a condo in San Diego]

A small price decline shouldn't worry anybody, it's what's called a "correction".

[Like in the stock market]

Now some people are afraid that prices went too high because of all the nontraditional mortgage products that have become so popular lately, and that people are going to have problems paying their mortgages because they don't understand the terms of their loans. They don't understand that their payments can go up.

[A lot - next year]

The mortgage industry has factored all of this into their lending standards and there's nothing to worry about.

[Until next year]

Lending standards have in fact been strengthened recently to ensure that people borrowing money really can pay it back.

[Fogging a mirror now mandatory]

Regulators have warned lenders that nontraditional mortgage products, particularly when they have "risk-layering features" - one of the greatest technological advancements of the early 21st century and the primary reason why we, as a nation, are wealthier than ever before - are untested in a stressed environment and that stronger risk management standards must be implemented.

[Like at Amaranth]

They're going to let these risky loans continue - lenders just have to be more careful.

[No more paper boys making $13,000 a month]

So, the little dip in home prices that we see right now is temporary. Nothing to worry about. Mortgage lending is sound, the real estate industry is sound, and home prices will be going back up again.

[Starting in 2011]

All the people who got into trouble by taking on too big a mortgage are going to do just fine because if they get in a tight spot, with the loss of a job or medical expenses, they can always borrow against their house.

[If they bought before 2005]

Foreclosures are up a little bit, but this is all part of the "correction" that is going on, and it won't affect the overall market or you.

[Unless you have to sell]

So all you schadenfreuders out there, you can wipe that smile off your face because the housing bubble isn't a bubble at all - and if it ain't a bubble, it ain't gonna pop. I know this because I just read Kendra Todd's article at Yahoo! Real Estate where she said that the bubble is a myth and that, "real estate markets in many areas are going through a normal correction cycle."

[It was an ad - look at the URL - it says promo]

I'm expecting a soft landing for housing and there's nothing to worry about.

[Until next year]

I'm also expecting peace to break out all over the world, energy supplies to remain plentiful and cheap forever, the trade and budget deficits to correct quickly and painlessly, Republicans and Democrats to end their bickering, real wages to rise, health care costs to fall, education to improve, and all the world's religions to merge seamlessly into a single unified understanding of God.

And that's the word.

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UPDATE - Thursday, Oct 5th - 12:15 PM PST

OK, if you were thinking that this was really Stephen Colbert, it's time to come clean - it was just me (but it felt as though I was channeling his thoughts).

I sent mail to The Colbert Report a short time ago offering to add Stephen as a team member in the hope that he might impersonate me (hey, it was worth a shot).

- Tim