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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: UncleBigs who wrote (47771)	12/20/2005 11:57:56 AM
From: russwinter	Respond to of 110194

Tuesday, December 20, 2005 Housing 'Piggy Bank' Empty In Phoenix thehousingbubble2.blogspot.com The Arizona Republic report the housing ATM is running it's predictable course in Arizona. "The housing boom has bailed out a lot of people in metropolitan Phoenix. Homeowners caught between higher bill payments and flat incomes have been able to tap their rapidly rising home equity to stay afloat or even buy new cars and furniture. But now, Phoenix's home appreciation rates are leveling off, and it's taking longer for homes to sell." "A growing number of people are so stretched that they are spending more than they earn. Valley homeowners who have already tapped most of their equity can't count on another huge jump in values to get by. 'The Valley's housing appreciation is masking problems in the economy,' said Terry Turk, a Mesa-based (mortgage broker)." "Almost 45 percent of all homes purchased in metro Phoenix through August were financed with interest-only loans..compared with 29 percent nationally. And almost 28 percent of all Valley homeowners who refinanced this year switched to interest-only loans..The U.S. rate was 10 percent lower." "Compounding the problem for some are the rising costs on more than one home. A record number of metro Phoenix homeowners tapped equity in their primary residence to invest in houses. At least one of every four houses sold in metro Phoenix this year went to an investor. 'It's like the perfect financial storm,' said Mike Stephenson of (a) Phoenix-based credit counseling firm." "'Too many people see a home as a piggy bank to keep tapping. They don't look at it as a stable shelter for their family like they should,' said Joann Hauger of Community Housing Resources of Arizona. She said a woman working at a Wal-Mart in the East Valley recently got help to buy her first house. Instead of thinking about moving in and making a home for her family, the woman, who obtained the house without making traditional down payment, immediately thought she had a new spending account and could even rent it to make money on it." "According to an Arizona Republic analysis, at least one out of every three dollars generated in metro Phoenix comes from housing. It's the area's top industry. Analysts say markets with job growth dependent on construction will be hit harder if housing slows." "Michelle Newport, who paid $106,000 in early 2004 for her Buckeye home, was able to combine her first and second mortgages to one 30-year fixed loan and take out cash to buy a truck, furniture and pay off other debt. Her new loan is for $175,000, and her new payment is about what she was paying on both loans before. Newport doesn't plan to move or tap her equity again. 'I am set for several years,' said Newport."

To: UncleBigs who wrote (47771)	12/20/2005 1:26:48 PM
From: GST	Read Replies (1) \| Respond to of 110194

Dear Uncle: <Higher productivity is deflationary. There is no question about that.> This is one for lala land economics. Do we have good measures for productivity? Most certainly not. But does increasing productivity cause people to be unable to pay their debts due to some connection to deflation as Mish asserts? Earth to Uncle -- productivity means making better use of resources and is the only way to consistently improve living standards. That is neither deflationary nor inflationary -- it is simply a measure that allows us to begin to discuss how well we are doing at creating real wealth. Everything else is just redistribution. The economy we have now does little more than redistribute "wealth" and has the potential to destroy wealth as it corrodes the productivity of our workforce and diverts us into activities that produce no new wealth. But it is NOT because improved productivity makes it so. This is pretty basic stuff. Higher productivity is deflationary. There is no question about that. Mish made some kookoo points in his Blog on this point -- and that is where my comment is directed.