Foreclosures reached all-time record levels in 2007 and will surpass that in 2008, according to the Housing Predictor forecast. Fortunately or unfortunately Housing Predictor’s forecasts have been right on the mark. An estimated 1.8-million homes have already been foreclosed as a result of the U.S. real estate crisis.
The crisis has spread into conventional mortgages at an increasingly rapid pace. More than 50% of all residential properties in default nationwide are owned by investors, the majority of whom will allow their property to be foreclosed more easily filing bankruptcies in many cases to protect their primary residence. Those are comparatively minor consequences in this day and age. Many multi-millionaires have poor credit histories learning how to obtain financing later with little penalty. After all banks are in the business of lending money.
From an historical prospective, the real estate market has always been a gauge of the greater U.S. economy from nine months to 18 months earlier than the overall economy. The national real estate recession was forecast by Housing Predictor in early 2007.
Investors on Wall Street and in other financial markets have watched their hard-earned savings go up in smoke as trillions of dollars are wiped out from the economic turmoil. Stock values around the world are falling.
The rescue plan offered by President George W. Bush announcing a $150-billion U.S. stimulus package will do little to help the ailing U.S. real estate market and millions of American home owners at the brink of foreclosure.
An old cliche in real estate is “Lenders are liars.” The loose lending guidelines, lack of government regulation, over-whelming fraud, consumer loan fraud, misrepresentations and historically low interest rates set by the Fed led to the economic crisis. Many Americans think investors should just suffer the consequences in financial losses and credit report destruction. But the credit crisis is much larger than just investors financial losses and credit being damaged.
The entire U.S. economy is at the brink of not only a recession, but much worse teetering on the brink of a depression. Historically, it is just a balance of the economic markets. There have been six depressions since 1837 in the U.S. There is much more damage that can result to the real estate markets and the overall American economy as a result.
The cause of every major depression has been land speculation. Economist Henry George discovered this fact 120 years ago. However, never before in U.S. economic history has been there as much land speculation than in the past decade. Land from Florida up the eastern seaboard in New York across the nation to California has been purchased by speculators at the highest rate in the nation’s history, much of it with little money down to protect investors interests.
The great American green back is not a political issue, and the American economy is no longer just at risk of a recession no matter what the political pundits might have you believe. It is already in a full blown recession. Government reports are always slow. Democrats, Republicans, Independents, and even highly touted special interests need to forget their differences. America is at War in Iraq and in political chaos at home.
Political differences need to be bridged to save the national economy with emergency legislation before the epidemic of foreclosures reaches 1 in 10 American home owners, which is more than probable. One in 28 home owners have already been affected in foreclosure in Stockton, California, one in 63 across the nation in Cleveland, Ohio and an estimated one in 24 in Detroit, Michigan. Local economies are feeling the pain in major ways.
If emergency legislation is not passed to halt the foreclosure crisis the nation is certain to see another depression not only caused by the subprime meltdown, and its resulting housing crisis, but by a nation that has lost confidence in itself as a powerhouse.
http://www.housingpredictor.com
Mike Colpitts is the Editor of Housing Predictor.com, an independent web site, which forecasts more than 250 local housing markets in all 50 U.S. states and real estate news. Housing Predictor has a staff of researchers, economists and computer experts who regularly update news, including its opinion "Predictor Polls" on the real estate industry.
Bursting the housing bubble was foreseen by many. However, it took some time for most to recognize that banks, independent equity sources, and even insurers are at risk.
Question: How can one government prevent financial meltdown? Can joint action with other governments devise a plan to steady international rates of exchange?
by
Margaret Bassett (31 articles, 1967 quicklinks, 30 diaries, 1282 comments)
on Tuesday, January 22, 2008 at 10:14:10 AM
...the"financial companies?" They assembled derivitives... profitable for "investors." Why? Because they took the money and invested it in... can you guess... even more speculative derivatives!! At the core was "credit' where one could crack the fees up at will to... 18...28...38... even higher...percent. Any time. For any reason. How "profitable!"
As long as "growth" (hidden inflation... oh never mind...) was going on forever, why not? The roots in the global usery scheme are deeper and more pervasive than most people (who aren't in the "financial services" industry) can imagine. Why? Because their noses were stuck to their spreadsheets. Nobody cared what the "numbers" were supposed to represent... as long as they kept going up.
No, mum... there is no way "governments" can "unite" and "fix" it. It's Tulip Mania, written into "financial instruments" so obtuse- even the people who WROTE them can't understand them... and it worked... as long as nobody actually tried to turn their paper into real stuff. Well... now it's global. Andlight-speed fast. Sound familiar? It's how me mum and pop explained the "Great Depression" to me. Nobody could trade their paper for food.
Look out for the cheater...
by
waldopaper (11 articles, 3 quicklinks, 25 diaries, 430 comments)
on Tuesday, January 22, 2008 at 10:09:29 PM
Our financial system is built on the premise that the road to wealth creation is debt creation. On the balance sheet, holding debt is an asset, a bank deposit of your cash is a liability.
But to put things in perspective, the money that was loaned out never existed until the loan was approved. It was created out of thin air, same with your credit card debt. Easy come, easy go.
There are over 100 trillion in hedge funds in the Cayman Islands hiding all kinds of bad debt since they are not regulated. Banks and financial institutions, unlike individuals, are never audited. Their own auditors treat them as valuable customers and wink wink, look away at any problems.
The problem that arises when loans go into default, which is entirely up to them, is not because any great wealth was lost, but because under existing accounting rules, if the principal can not be recovered, it must be written off and replaced by the banks reserves, some of which may be of value, although even much of the banks reserves is the Feds liability (money created out of thin air). They could give their troubled customers a loan to cover their loan payments like we do with 3rd world countries. No problem for them . But homeowners have property that can be foreclosed on, 3rd world countries do not.
Its a house of cards, the government could simply wipe out all mortgage and credit card debt with a simple action. It could create the "money" to issue to the banks and mortgage holders who would receive it, and eliminate all the loans from their books (too bad for those with no mortgages but housing prices would drop and make them more affordable for those w/o a house or are moving after selling their old house).
The money need not be printed, 97% of what we call money is just on a spreadsheet. The money supply would actually shrink by removing debt so it would not be inflationary (each dollar of principal paid off removes 10 dollars from the banking system)
Problem solved. But they do not want to solve the problem. Depressions are a way to move money and property from the working class to the rich. The rich get richer. Profit by foreclosure.
by
pft (0 articles, 0 quicklinks, 0 diaries, 499 comments)
on Wednesday, January 23, 2008 at 3:53:05 AM
PFT, if the government erases some debt and papers over other debt, that will be the end of the dollar relative to other currencies, and it's still game over for the Federal Reserve Bank. What would foreign banks and other customers accept if the dollar collapses? (Real Assets.)
Margaret, the rate of exchange to other currencies is already being held as stable as possible. The problem is that they are all paper fiat currencies, backed only by the confidence of those willing to accept them in trade. And they are all subject to the same factors that threaten the dollar now. Government or central bank action to hold any one stable with another one would consist of them buying and selling each other's currencies, which in the end requires them to match the rate of inflation with each other. It creates a perverse incentive for the politicians on each side to steal their citizens' money with infusions of counterfeit money which lowers the value of the currency, then they can claim that they are 'helping exports'. In fact, that's the only answer Bernanke could give Ron Paul when challenged on how he was going to fix inflation with more inflation! The problems going on today are beyond repair simply by speeding up or slowing down the printing/lending machine. They have printed/borrowed/taxed beyond the tipping point. Get your money out of the stock market now, if you have any.
by
John Danforth (1 articles, 0 quicklinks, 4 diaries, 98 comments)
on Wednesday, January 23, 2008 at 6:23:29 AM
4 comments
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