Another housing bubble already?

That’s the prediction here and the author has charts to illustrate his argument. Makes sense to me. We have politicized the mortgage market, using government money to take the place of private investors’ money as the privates fled. And, just as government guarantees enabled the private lenders to make foolish, ill-advised loans, government employees spending other people’s money are no more cautious. The idea is reinflate the bubble now and hope you’re out of office when it bursts again. What a country.

4 Comments

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4 responses to “Another housing bubble already?

  1. shoeless

    The bubble is clearly being blown at the low end, where the $8000 1st time credit and 3.5% down HFA loans are the new sub prime. As we get above the conforming limit, where banks cannot securitize the loan and have to keep it on balance sheet, lending restrictions quickly become just that – restrictions, leaving the $1-plus million dollar range in Greenwich to twist in the proverbial wind.

  2. Retired IB'er

    As I said months ago, we have clearly punted the housing market into 2010. The real question, and so a major determining factor in price direction, is whether the FED will stop its purchases of mortgages at the end of the 1st qtr as it has said it would (it will have subsidized the mortgage market to the tune of $1.25 trillion at that point).

    If they stop buying (and that is a very, very big if in my mind) mortgage rates will rise (most likely with some dislocation in the market- hence why I wonder if the FED will pull out) and that will not be good for housing and we will see a resumption of continued downward trajectory for housing.

    Put another way, when government propping of housing market goes away, the market will revert to fundamentals, which imply lower prices… full stop.

  3. Anonymous

    And now “they” are going to spend more of our $ putting low income folks in homes?…. so when the next round of business foreclosures busts out, and the newly homed loose them, we will be where?

  4. Anonymous

    Government manipulation of low-end housing mkt via subsidized mortgages: such Ponzi schemes can persist for some time (consider Social Security)

    Other unknowns: higher-end (likely better informed) buyer expectations of real estate exit values, value of renting vs buying, and liquidity…such buyers will perhaps play role of bond mkt vigilantes of ’80s in terms of willingness to pay for a fundamentally depreciating asset (esp in a country w/plentiful, cheap suburban land and low building costs); houses should depreciate like new cars in any fundamentally driven world