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U.s. Home Prices Fell By Record In Second Quarter

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It must be very bad for an official index to actually register significant falls of 3.2%

http://www.bloomberg.com/apps/news?pid=206...&refer=home

``Given the tightening in underwriting standards and the credit freeze, it's going to be very difficult for buyers to purchase homes,'' said Mark Zandi, chief economist for Moody's Economy.com in West Chester, Pennsylvania, before the report.

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If their surveys operate in a similar way as ours this figure is likely to be underestimating the fall by around 3 fold, which would come closer to the anecdotal evidence of some regions experiencing 30% falls already.

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There is no housing crash in the US.

Oh sorry have we moved on from that now...? l have American friends you know...yes more Ameircan friends than you...etc..

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If their surveys operate in a similar way as ours this figure is likely to be underestimating the fall by around 3 fold, which would come closer to the anecdotal evidence of some regions experiencing 30% falls already.

Indeed, but a national average of 3.2% down in a single quarter before a major credit crunch is huge, huge, huge.

Add events that have already happened to events that will almost certainly happen (credit crunch extension across more dimensions: deeper into funds and lower into the real mortgage market, and across the whole range of general banking activities) and you have TARAH!

Lower house prices, then lower house prices. Then the UK stalling. Then the UK inventory reaching the sky, then lower house prices, then an almighty crash. (All of this interspersed with more credit tightening and stock market falls.)

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This should be bumped every day. The inventory numbers coupled with this is absolutely huge.

Short the US. It's all coming down.

And yet on Bloomberg, the analysts this afternoon are waiving these figures as if it's yesterday's news (which I suppose it is....). Methinks these VI's are shifting their cash , assets etc to some safe (or safer) haven because they know what's around the corner. I mean, apart from the odd murmer, not one seems to be giving a -ve view. Is the financial world made up of 98% bulls? :unsure:

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And yet on Bloomberg, the analysts this afternoon are waiving these figures as if it's yesterday's news (which I suppose it is....). Methinks these VI's are shifting their cash , assets etc to some safe (or safer) haven because they know what's around the corner. I mean, apart from the odd murmer, not one seems to be giving a -ve view. Is the financial world made up of 98% bulls? :unsure:

They simply do not see it. Crash economics are different. They will pretend that they saw it but did not want to accentuate the problems.

Of course, there are plenty of people who do see it: The people shorting and selling but all markets are inherently long. Look at Mobius; he thinks he's being clever by recommending buying. He wants to build the myth that he's a contrarian because that's the myth that covers up the fact that he's almost always wrong; but the inherent nature of capitalism means that it's hard not to make money when one has $30bn to make it with. But before he starts to make money again he will lose an awful lot of people an awful lot of money.

I don't think this is being ignored because it's yesterday's news. It's being ignored because most financial editors simply do not 'get it'. They don't get how massive this news is. They ask 'experts' and 'experts' are vested interests who crave a long market.

If this were a nationals story it would be a massive fire. It is that obvious.

Never mind. This is the time to place bets. The fact that they're not getting it makers it easier for those not off their trollies.

By Q4 they'll be getting it. The US housing market will be like a damn about to burst.

This is the biggest elephant in the corner I have ever seen. It is astonishing that the media are missing the story. But the stock markets will get it, if not entirely today then very soon indeed.

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I'm still laughing at the people who are coming out saying "the worst is over".

lcdx_graph.gif

It aint over. It looks here to stay.

Credit swaps have been re-priced, it's official, and the mark up is vast. Circa 240%. Lets see the central banks adjust that!

The current business cycle is just plain dead. And not a moment too soon. It has been dragged out far too long by politically and miltary motivated US policies.

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I don't understand why don't home owners just refuse to sell?

Answer : If you have to move from NY to LA for a new job, then you don't want to (or maybe cannot) have 2 mortgages. Hence you need to sell within a reasonable time.

This is just 1 example of 100's that means a seller cannot hold off forever........

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I'm still laughing at the people who are coming out saying "the worst is over".

lcdx_graph.gif

It aint over. It looks here to stay.

Credit swaps have been re-priced, it's official, and the mark up is vast. Circa 240%. Lets see the central banks adjust that!

The current business cycle is just plain dead. And not a moment too soon. It has been dragged out far too long by politically and miltary motivated US policies.

Hi ?...!

Could you explain what is the importance of the blue wiggle looking exactly like an inverted version of the green wiggle converging on 240?

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By Q4 they'll be getting it. The US housing market will be like a damn about to burst.

This is the biggest elephant in the corner I have ever seen. It is astonishing that the media are missing the story. But the stock markets will get it, if not entirely today then very soon indeed.

Thanks dstars. Very clear in your analysis as always.

I sold all my shares at the end of June, luckily. Will now hold off for quite a while until the elephant has had it's hissy fit ;)

btw, now that I have a pile of cash, I get a call from my bank advisor every 3-4 days asking where I'd like to invest it. I've had to tell her to lay off and leave me in peace. In early July, she was selling some product that invested 90% in shares and 10% securities. Obviously she got a big commission......Privately, I'm hoping her job will go in the crash....terrible, eh :P

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I don't understand why don't home owners just refuse to sell?

They do. That's why it takes so long for this market (housing) to unwind. That's what massive inventory numbers means. It means they refuse to sell/buyers refuse to bite)

This type of rout eats into the past. People who bought long ago are safe but the more recent the purchase the more potential pain.

In fact, it doesn't matter a hoot if your house crashes in 'value' as long as you can keep up the payments. It's all paper; it's meaningless. Houses are meant for living in; they never work well as investments; the market is too illiquid and irrational. But people don't educate themselves about such things and get caught up in the religion of expanding liquidity equalling wealth.

In the real world real people borrowed insane amounts of real money to pay looney-tune prices because that's what everyone else was doing so it seemed sane.

It still seems sane to most people. It will only become obviously mad as this rout unfolds; and in the fullness of time.

Property will fall around 50% before most people even believe it can fall at all. Most people, not versed in the vagaries of markets, have no idea what a falling market feels like to a potential buyer. (It makes them change their minds.)

This is why economists at building societies are revealed for the propogandists they are at such times. They can no longer simply spout platitudes about markets going up 3-9% and we can all be happy if it exceeds that. Suddenly, the world needs sane people who are not full of shit having a stab at feeling for the bottom (if you'll forgive the expression). Now building society economists are claiming a flat to 4% market but it's all fantasy; all just made up numbers as it always was but the smoke got in the way and they seemed like they were real.

These US numbers are very significant.

Edited by dstars

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I don't understand why don't home owners just refuse to sell?

If you have an adjustable rate mortgage with rates going up year by year, and your payment suddenly doubles, you don't have a whole lot of choice of whether to sell or not. A huge driver of the American real estate bubble was the availability of "teaser rate" mortgages that offered a lower payment during the first few years of the mortgage before going up to market rates (kind of like the fixed rate loans here in the UK).

This article appeared in the newspaper for San Francisco a couple days ago and illustrates the problem -- immigrant family buys house in ghetto (and the part of Oakland they're talking about pretty much defines the term) using variable rate loan, pulls some money out using home equity loan, then finds that their payment balloon and house is unsellable. These folks would be lucky to make 10 dollars an hour and their mortgage payment has gone from $1800 a month to $2800 with more rises coming (i.e income = $40k year with 2 people working, mortgage payments = $33.6k a year).

http://www.sfgate.com/cgi-bin/article.cgi?...7/MNGERNJ80.DTL

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Hi ?...!

Could you explain what is the importance of the blue wiggle looking exactly like an inverted version of the green wiggle converging on 240?

The "green wiggle" is on the left hand scale and is the price. The "blue wiggle" refers to the right hand scale and is the yield.

Ignore the green wiggle. It is just a nominal index price.

The blue wiggle is basically how much big reserve holders want in return for underwriting the debts of people who do not hold big reserves. They want more than they did. Reserves are now visibly tighter, money is going home.

The fact the blue wiggle hovered around the 90-100 mark for five years and is now looking to settle around the 240-250 mark is very bad. Very bad for anyone in debt that is.

So to summarise...

It is very bad, for anyone who does not hold a very large capital reserve.

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If you have an adjustable rate mortgage with rates going up year by year, and your payment suddenly doubles, you don't have a whole lot of choice of whether to sell or not. A huge driver of the American real estate bubble was the availability of "teaser rate" mortgages that offered a lower payment during the first few years of the mortgage before going up to market rates (kind of like the fixed rate loans here in the UK).

This article appeared in the newspaper for San Francisco a couple days ago and illustrates the problem -- immigrant family buys house in ghetto (and the part of Oakland they're talking about pretty much defines the term) using variable rate loan, pulls some money out using home equity loan, then finds that their payment balloon and house is unsellable. These folks would be lucky to make 10 dollars an hour and their mortgage payment has gone from $1800 a month to $2800 with more rises coming (i.e income = $40k year with 2 people working, mortgage payments = $33.6k a year).

http://www.sfgate.com/cgi-bin/article.cgi?...7/MNGERNJ80.DTL

Yeah I know tongue in cheek - but it is amazing how many bulls say that homeowners will just refuse to sell! :D

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The "green wiggle" is on the left hand scale and is the price. The "blue wiggle" refers to the right hand scale and is the yield.

Ignore the green wiggle. It is just a nominal index price.

The blue wiggle is basically how much big reserve holders want in return for underwriting the debts of people who do not hold big reserves. They want more than they did. Reserves are now visibly tighter, money is going home.

The fact the blue wiggle hovered around the 90-100 mark for five years and is now looking to settle around the 240-250 mark is very bad. Very bad for anyone in debt that is.

So to summarise...

It is very bad, for anyone who does not hold a very large capital reserve.

Gotcha! Nice clear explanation - thanks ?...!

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Note that these falls happened BEFORE the credit crunch.

Any guesses as to Q3 prices?

I'd venture that prices will be... in the toilet.

This is exactly it, and what it seems few people grasp when the bears talk about 40% plus nominal falls in the UK being possible and in a relatively short time frame. Never has so much money been leant so liberally to so many, if the plug is pulled anything is possible, although I am sure the central banks will try and come up with an inflationary exit route, although I not convinced they will be able to tame this beast.

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Gauges from the Commerce Department and the National Association of Realtors can be influenced by changes in the types of homes sold. Higher sales of cheaper homes relative to more- expensive properties will bias the figures down.

The Realtors' group has cut its forecast for new and existing-home sales every month this year.On Aug. 8, it projected demand would fall to a five-year low in 2007.

http://www.bloomberg.com/apps/news?pid=206...&refer=home

It doesn't really inspire confidence.

Edited by Ash4781

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By Q4 they'll be getting it. The US housing market will be like a damn about to burst.

This is the biggest elephant in the corner I have ever seen. It is astonishing that the media are missing the story. But the stock markets will get it, if not entirely today then very soon indeed.

Note that these falls happened BEFORE the credit crunch.

Any guesses as to Q3 prices?

I'd venture that prices will be... in the toilet.

I'm not dissing your argument - I'm bearish too, but your mixed metaphors are fantastic.

It's a massive elephant in the corner on the toilet - about to burst, apparently. Not a good place to be!

Edited by Si1

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