Wednesday, Aug 30, 2006

Great article on the increasing desperation of housing VIs

Motley Fool: No Housing Bust Here!

If it's disconcerting that the most prominent housing bulls are, when we're not looking, begging for economic policies aimed at shoring up their crumbling story, then this might be much worse. How about if the last shred of the housing bull story turned out to be untrue?

It turns out that the anecdotal evidence for falling prices may be exactly right, because a large number of housing sale prices may be based on fudged numbers.

That's right, the last leg of Greenspan's bubble may be collapsing under the weight of farcical accounting, trickery that would get you tossed in jail if you tried it at an American corporation.

Posted by little professor @ 08:24 AM (540 views)
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4 Comments

1. little professor said...

Very savage article, reads like it was written by a housepricecrash.co.uk regular!

Wednesday, August 30, 2006 08:53AM Report Comment
 

2. markd said...

In his 40 years as a home builder, Mr. Toll says, he has never seen a slump unfold like the current one. "I've never seen a downturn in housing without a downturn in employment or ... some macroeconomic nasty condition that took housing down along with other elements of the economy," he says. "This time, you've got low unemployment, you've got job creation, you've got a stable stock market and relatively low interest rates."

Hmmm-intersting comment above lifted from one of the articles linked in this article. He may be being a little optimistic about the overall state of the US economy but this perhaps demonstrates that a woefully overblown housing market can implode without the need for any particularly dire news to push it over. As he says interest rates are still "relatively low". Our turn next?

Wednesday, August 30, 2006 08:56AM Report Comment
 

3. harold said...

For those interested in the detailed stats relating to much of this article see:

http://rsch1.ml.com/9093/24013/ds/07045450.PDF

Sobering stuff.

We can expect fudged figures and trickery here too.

Wednesday, August 30, 2006 10:15AM Report Comment
 

4. uncle tom said...

Interesting how the type of mortgage we regard as normal - the variable rate - is regarded as a risky gimmick in the USA, where full term fixed rates have been the norm.

Of course it is - the last UK housing bubble would not have inflated so fast, nor fallen over so badly, if we had had full term fixes as a norm here. Whether the mortgage lenders would have survived is another matter though.

The US market is wobbling more than falling at present. What will push it over is the consequence of MEWers (refinancing as they say across the pond) maxing out and spending less as a result. That will propel unemployment and a fall in consumer confidence. The rest is easy to foresee.

Timing? - Always very difficult, and probably not as quick as we might like - but recognition of a severe economic downturn in the US, is likely by this time next year.

In the UK we also have a very large army who are dependant on spending money they don't have, and the consequences will be very similar. However we are probably the best part of a year behind the US when it comes to timescale.

Wednesday, August 30, 2006 10:37AM Report Comment
 

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