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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: jjkirk who wrote (6928)	9/21/2002 11:32:48 AM
From: Jim Willie CB	Read Replies (3) \| Respond to of 89467

Puplava's next Storm Watch installment more great stuff, much rehashed, but well done and relevant Bubble Troubles, part II Yes, Virginia, There IS a Housing Bubble! financialsense.com conclusion excerpt: The Bust Factors In addition to rising interest rates, which could come as result of a falling dollar or a foreign exodus out of our financial markets, there are other factors that don’t bode well for the housing bubble. One is rising prices may eventually make housing unaffordable. Rising expectations of a never-ending price appreciation may fail to materialize as all bubbles eventually end with disappointment. A return of higher interest rates will also have a devastating impact on ARMs and limited-term fixed rate mortgages. The limited-term mortgages will have to be refinanced at higher rates. while monthly payments will go up on ARMs. This will severely strain the monthly budgets of plentiful and marginal borrowers. One characteristic of this housing and mortgage bubble is that credit standards have been reduced across the board. Lenders no longer bear the responsibility of their loans with so much of today’s lending whether it is mortgage debt, installment debt or credit card debt being offloaded on to the financial markets through the securitization of loans. The combination of credit-related asset deflation in the stock and real estate markets, combined with rising interest rates, will have a lethal effect on debt-strapped households. The housing bubble will deflate gradually. It will take time, maybe years, for it to unwind. Fortunately for homeowners, the price of their homes doesn’t appear as a ticker tape across a computer screen nor is it listed in the newspapers each day. The only visible sign of distress will be the increase in for sale signs in the neighborhood. Judging by what happened in the last recession, housing prices peaked several years after the recession and would take close to a decade to recover and rebuild pricing momentum. Right now homeowners, like stock investors, are in a state of denial preferring to act like ostriches rather than face reality. What could trigger the unwinding of the housing bubble? Several events could burst the bubble - a dollar crisis, the unwinding of the bond market bubble, and the second capitulation phase of a bear market in stocks. The stock market bubble, which is still with us, is the subject of Part III and the final chapter of Bubble Troubles coming soon. ~ JP