Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: fatty who wrote (202381)	5/15/2009 11:10:36 AM
From: Jim McMannis	Read Replies (2) \| Respond to of 306849

Suburban Housing Markets Are Unsustainable (Part 2) seekingalpha.com Housing Has Bottomed At the center of the Earth In the parking lot Of the 7-11 where I was taught The motto was just a lie It says home is where your heart is But what a shame Cause everyone's heart Doesn't beat the same It's beating out of time Jesus of Suburbia – Green Day There is no need to worry. Jim “Mad Money” Cramer assures us that the bottom is in for housing. Here are his words: The bottom, well, is now. We are seeing a huge wave of buying of foreclosed homes in Northern and Southern California and in Florida. The numbers are too positive to think that these, the hardest-hit areas, aren't putting in long-term bottoms. Jim Cramer – April 19, 2009 Of course, Jimbo has called more bottoms than a proctologist. His housing market bottom call of 2006 was off slightly, by about 4 years. His latest call will be off by two years, so he is getting better. Jim Cramer is the best salesman since P.T. Barnum. He is able to hock his 4 books and website twenty times in the space of an hour every night, while helping clueless morons lose what is remaining of their retirement savings. You will learn more and lose less by watching Cash Cab every night from 6:00 pm to 7:00 pm rather than watching the shameless shill Jim Cramer. Based on past results, I think I’d rather put my faith in Professor Robert Shiller, who called the Tech bubble and the Housing bubble when others were proclaiming a new paradigm. According to the Case-Shiller Index, home prices have dropped between 25% and 30% since the mid-2006 peak. Based on the Case-Shiller Futures Index which has performed better than a Jim Cramer appearance on the Daily Show with Jon Stewart, the bottom of the housing market will occur in late 2010, with further declines of 5% to 25% in major markets. Cramer’s house in Northern New Jersey will take a 24% hit by November 2010 according to the futures market. I’m sure he sees that coming. It would be refreshing if he ever looked at facts and based his ever changing recommendations on a sound basis in reality. How can anyone in their right mind say that housing has bottomed when the months supply of new homes is at an all-time high of 13 months, the months supply of existing homes is 10 months, there will be 2.1 million foreclosures in 2009 versus 1.7 million in 2008, and 7 to 8 million more people will lose their jobs in 2009? Neither foreclosure counseling, foreclosure moratoriums or magic pixie dust will keep housing prices from completing their roundtrip back to 2000 levels. Bubbles never burst halfway. They burst completely and the mess spreads everywhere. Boulevard of Broken Dreams Now the bad news. We are in a momentary lull of mortgage resets. The subprime crisis is mostly behind us. Now the Option ARM and Alt-A crisis is coming down the track like a freight train. Even a Citicorp (C) or Bank of America (BAC) CEO could understand the following chart, given enough time and sixth grader to explain it to them. The Option ARM wins the prize for most creative financial product of mass destruction. These are ticking time bombs set to explode in 2010 and 2011. The beauty of an Option ARM is that it usually has three options. You can make a principal & interest payment, just an interest payment, or a minimum payment that increases the principal balance. Most of these loans also had introductory low teaser rates. The resets for these loans skyrocket in 2010 and 2011. Payments on these loans will go up 50% to 80%. Most of these loans are already underwater. Millions more “homeowners” will walk away and foreclosures will grow. Luckily, the Federal Reserve and Treasury cut the Stress Test off in 2010. The coming enormous bank losses in 2011 would have put a crimp in their little confidence game. The government solution to this problem has been to coerce, threaten, and provoke fear in the populace to seize their tax dollars, pile the hundreds of billions into a giant dump truck and unload the pile of tax dollars onto the front steps of Citicorp, Bank of America, Goldman Sachs (GS), Wells Fargo (WFC) and JP Morgan (JPM). Creative market based solutions that require thought, rationale, wisdom, and fortitude are dismissed. John Mauldin’s proposal to grant a green card to any immigrant who buys a home and John Hussman’s PAR proposal that would solve the foreclosure problem aren’t even considered because they wouldn’t increase the power of government over the people. morecharts