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Existing home sales on a sugar high
Monday, November 23, 2009
For years, I've been saying to watch for a convergence of the blue bars and the red curve in the chart below as an indication that it might be safe to think about buying property again. Well, they've now crossed paths in the latest report on existing home sales from the National Association of Realtors.
Does that mean it's safe to buy a house at current prices?
Sure, if you think that Congress is going to continue to write $6,000 to $8,000 checks for home buyers indefinitely, that the central bank will keep mortgage rates at freakishly low levels indefinitely, that the FHA will continue to guarantee what are essentially no-money-down loans indefinitely, and that the tsunami of foreclosures that are now working their way through the system will somehow be forestalled indefinitely.
If any of these artificial supports are removed, a very different housing market will appear.
7 comments:
Tim, haven't you heard?
Congress is going to not only make the homebuyer tax credit permanent, they're going to double the mortgage interest deduction. Also, the Fed just announced an open-ended plan to buy more mortgage-backed securities that will get lending rates down from 4-to-5 percent to 3-to-4 percent and the FHA said they're going to ensure the entire mortgage market instead of just a quarter of it. Oh, and foreclosures are going to be made illegal :)
I think the pillars will fall in the following order:
*I think $8000 credit is first to go. *tsunami of fore closures
*FED stimulated interest rates
*FHA implosion.
That's funny. Fedhead Bullard was saying over the weekend that the Fed needs to keep buying MBSes - apparently Meredith Whitney has him a bit spooked.
Actually I think those things might go on indefinitely or .... until the Chinese stop lending to us.
Foreclosures don't have to be forestalled indefinitely, only for a few years until they are cleared from the system. I think the plan is to support prices until the scheduled resets are mostly gone. Banks make maximum profit this way, along with the interest rate spread subsidy.
Of course, printing reduces the standard of living of the majority to subsidize high sales prices. In effect, goods are being confiscated from the majority, and said goods are being given to the minority now selling homes.
Its all a big rip off of the majority of American people to rescue the banks that own the central bank. Stop printing. Let the banks that made stupid loans go out of business, and new banks with sensible business models can take their place. Printing is just keeping stupid business models around, which prevents new companies with sensible business models from starting.
This is much more of a "propping up" operation than a "mopping up" operation.
Tim,feel free to use that as a catchy title.......
Ah!!! I found what I was looking for. Somtimes it takes so much effort to find even tiny useful piece of information.
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