Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18
More on that Gold and Silver Ratio 'Deviant Conundrum' - 13th Jun 18
Silver Shares? Nobody Cares - 13th Jun 18
What Happens to Stocks, Forex, Commodities, and Bonds When the Fed Hikes Rates - 13th Jun 18
Gold and Silver Price Setting Up for A Sleeper Breakout - 13th Jun 18
Tesla Stock Analysis - 12th Jun 18
What Happens Next to Stocks when Russell Goes up 6 Weeks in a Row - 12th Jun 18
Gold vs. Stocks: Ratios Do Not Imply Correlation - 12th Jun 18
Silver’s Not-so-subtle Outperformance - 12th Jun 18
Why You Should Brace Yourself for Big Financial Changes - 11th Jun 18
Inflation to Skyrocket When Fed Reverts to New QE & Interest Rate Cuts - 11th Jun 18
Stock Market Topping Pattern or Just Consolidation? - 11th Jun 18
Study: What Happens Next to Stocks When the Put/Call Ratio is Very Low - 11th Jun 18
G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - 11th Jun 18
SPX Unshackled - 11th Jun 18
When Trump Met Fibonacci And Won - 11th Jun 18
FREE Theme Park Entry with Cadbury's Choc's! Legoland, Alton Towers, Chessington.... - 11th Jun 18
Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - 10th Jun 18
End of the World Stock Market Chart! - 10th Jun 18
All US Homes Are Overvalued - 10th Jun 18
Thorpe Theme Park London Car Park Exit Nightmare - Drivers Beware! - 10th Jun 18
Gold Price Summer Doldrums - 9th Jun 18
How to Prepare for Economic Uncertainty with Gold and Silver - 9th Jun 18
5 "Tells" that the Stock Markets Are About to Reverse - 9th Jun 18
Billionaire Schools Teacher in NAFTA Trade Talks - 9th Jun 18
Land Rover Discovery Sport ECO Mode Real World Driving MPG Fuel Economy - 9th Jun 18
Crude Oil Bullish Weekly Reversal vs. Bearish Monthly Reversal - 8th Jun 18
Fed’s Interest Rate Hike is Short term Bearish for Stocks - 8th Jun 18
The Deviant Conundrum Called Silver - 8th Jun 18
Pleasure Island Theme Park Cleethorpes, Last Day Trip Before it Closed Down - 8th Jun 18
America’s One-sided Domestic Financial War - 8th Jun 18
Debt Consolidation Advice: When and Why to Consolidate - 8th Jun 18
Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - 8th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

U.S. Housing Market Continues to Bleed

Housing-Market / US Housing Mar 31, 2011 - 03:04 AM GMT

By: Mike_Whitney

Housing-Market The collapse in housing prices is gaining pace proving that the Fed's bond purchasing program (QE2) has been an utter failure. While liquidity sloshes around in the equities markets, the distress on Main Street is more excruciating than ever. The release of the Case-Shiller index of property values on Tuesday, confirmed analysts worst fears, that the decline in prices is accelerating on the downside further weakening household balance sheets, wiping out precious home equity, and thrusting working class families back into the red.


According to Bloomberg:
"Residential real estate prices dropped in January by the most in more than a year, raising the risk that U.S. home sales will keep slowing. The S&P/Case-Shiller index of property values in 20 cities fell 3.1 percent from January 2010, the biggest year-over-year decrease since December 2009....

Rising foreclosures are swelling the number of houses on the market, which may put additional pressure on prices in coming months. At the same time, a further decline in home values may keep potential buyers on the sidelines as they foresee better deals, hurting construction and consumer spending as owners' equity evaporates." (Bloomberg)

Who will buy a house in this market knowing that the same house might be cheaper tomorrow by tens of thousands of dollars? So, why has Fed chairman Ben Bernanke focused all his energy on the financial markets? Indeed, $600 billion in monetary stimulus has sent stocks into the stratosphere rising nearly 15 percent in just 3 months, but what about the underlying economy where wages are frozen, 14 million people are out of work, food stamp usage is at record highs, and the housing market is crashing? Bernanke is like the man who tries to fix his car by digging a hole in the back yard. It can't be done, because the two things are entirely unrelated. QE2 has been a bust for everyone excluding the bank Mafia that torched the financial system with their pernicious flimflam.

So now prices will likely overshoot their historic trend due to growing pessimism and uncertainty about the overall health of the economy. Does Bernanke really believe that the financial markets can detach themselves from the real economy and float freely on a wave of overleveraged paper assets traded between charlatans?

Be serious. Housing needs a lifeline, pronto. Every downtick in prices means more lost equity, more foreclosures, more backlog, more red ink for the banks, and more years of scraping the bottom. Owning a home is no longer a vital part of the American dream; it's a sinkhole that devours everything and leaves its owner drowning in debt.

More from Bloomberg: "Foreclosure filings may climb about 20 percent in 2011, reaching a peak for the housing crisis, according to RealtyTrac Inc....

The median price of existing homes, which make up more than 95 percent of the market, slid 5.2 percent from a year earlier, erasing all gains made after February 2002, according to the National Association of Realtors."

So, we're back to 2002 and counting. How much carnage can Bernanke and Obama endure before they lend a hand?

Prices are tumbling, inventory is mushrooming, and foreclosures are off-the-chart. Yes, the market can fix this problem by adjusting prices according to supply and demand, but that wasn't the standard Bernanke used with the banks. Oh, no. Bernanke purchased $1.7 trillion in garbage mortgage backed securities (MBS) to keep his shifty buddies from taking the hit. (And that was AFTER the $700 billion TARP) It just goes to show that "free market" solutions are always jettisoned when they don't meet the needs of the rich and powerful. The free market is just a stick that's used to beat up on little guys.

According to Case-Schiller, housing prices are now off by 31.4% from their peak, a measly 2.2% above May 2009 the post-bubble bottom. So, when do we hit bottom; 35%, 40%, 50%?

Bank of America has already seen the light and started a pilot-program for making principal reductions on existing mortgages, in other words, lowering the face-value of the loan. This is a step in the right direction and could help eliminate negative equity leading to additional "walk aways" and foreclosures. According to Housingwire:

"The program will be funded from the $699.6 million the California Housing Finance Agency received from Treasury Department's Hardest Hit Fund last year. A spokesperson for the CalHFA said there is no set amount of loans BofA is targeting, but the bank will be soliciting eligible homeowners soon." (Housingwire)

The Obama administration should abandon its limp-wristed attempts at mortgage modification (HAMP) and establish Federal guidelines for "forced" cramdowns (mortgage reductions) as soon as possible. That will keep millions of people in their homes and quickly stabilize the market. There's been enough devastation and bloodletting already. Housing needs government support and a policy that's crafted in Washington not Wall Street.

By Mike Whitney

Email: fergiewhitney@msn.com

Mike is a well respected freelance writer living in Washington state, interested in politics and economics from a libertarian perspective.

© 2011 Copyright Mike Whitney - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis.
Individuals should consult with their personal financial advisors.

Mike Whitney Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules