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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (8152)	8/24/2007 12:37:28 AM
From: Hawkmoon	Respond to of 33421

but eventually it is the BORROWER who DECIDES to take out the loan I hear ya.. it's why I didn't spend my substantial cash "savings" to buy a house when I returned from Iraq 2 years ago.. I just saw the prices were outrageous and unsustainable. Brand new, and very nice, 3 story townhouses, sharing a wall with a neighbor, and a noisy train coming by every other evening at 11PM were netting 800K valuations here in my part of the DC area. And now they are selling for 500-600K.. I have to feel sorry for those who purchased them at 800K with regard to their equity depreciation. But they were able to make the payments at 800K, so as long as their rates don't go up, maybe sometime in 10-20 years they'll be back to break even. That's the key to resolving this problem, IMO. Those people who thought they were going to get a interest only home and flip it in a few years are now long-term holders (or going bankrupt). It reminds me of the term "long-term investor".. It's nothing more than a short-term investor who's stock went down... (been there, done that, got the T-shirt.. ;0) What we have in our favor over the rest of the world is that our population is still increasing.. We import immigrants to boost our economy. Previously it was due to the "brain drain" where highly skilled and educated people could find a country where their financial dreams could be realized. And that maintained upward pressure on real-estate. What we have to REALLY worry about with sub-prime loans is if this craziness over illegal aliens leads to mass deportations. Many of these people were no-doc loan holders (often under assumed identities) who have no real legal rights to fight any predatory lending. But the majority are EXTREMELY diligent in making their mortgage payments. However, they stand to lose their home as those rates get adjusted to levels that they just can't sustain and there will be an exodus back to their original country, or they walk away and assume a different identity. With 10% of Mexico living in the US, there has to be a substantial number of them that have purchased homes during their stay here. money.cnn.com vdare.com A Department of Homeland Security investigator informs me that an ongoing federal probe of FHA/HUD-backed loans found that "a staggering number were approved to persons with false Social Security numbers." The Denver metro area alone accounted for 20,000 to 40,000 of the FHA-approved loans for suspected illegal aliens. "Even if a small percentage of the loans were foreclosed, HUD could be bankrupted," the homeland security official said. Pretty scary, eh? That's why I'm not in favor of mass deportations of illegals. I'm in favor of legitimizing their presence here, and placing standards of conduct and responsibility.. I basically want to know who's living in this country, even as a temporary worker. But kicking them out? That will only exacerbate the supply of houses on the market, while diminishing the demand for them. The Fed, under Greenspan, is responsible for diminishing the the borrower/lender relationship and leaving it vulnerable to the "animal spirits" of the securities marketplace. And they have the tools to demand that lenders had to maintain high standards for credit worthiness. But they failed. And thus, the Fed has a responsibility for assisting in easing the pain of the problem they've created, without pulling the rug out from under the market. This is the tune that Bernanke is going to have to dance to.. How to keep interest rates low enough for people to maintain their current mortgage payments, without resparking either a real-estate, or equity bubble. Hawk