Friday, April 29, 2005

"Potential To Harm Families" Worries Writer

Danielle DiMartino writes for the Dallas Morning News and gets questions like these;
"•What's the connection between Fannie Mae and Freddie Mac and a housing bubble, if one does indeed exist?
•Assuming it does, when might this bubble pop?
•And finally, why are you so caught up in this issue?"

"Let's say for a moment that all of the credit that's being extended to purchase homes at inflated prices isn't of the highest quality. The proof here locally is that foreclosures have gone through the roof."

"Now extend that scenario to the really hot markets that have yet to suffer flat, not falling, just flat, home prices and you get to what keeps me up at night. Maybe even Alan Greenspan, too."

"How will federally established Fannie and Freddie and all the other mortgage debt holders react to the inevitable rise in delinquencies and foreclosures?"

"I worry about housing so much because of its potential to harm so many families. Stock market bubbles impact those who can afford to buy stocks. When that bubble burst in 2000, that included about 45 percent of Americans. But a record 70 percent of Americans now own a home. So housing bubbles have the ability to inflict much more pain on communities and our broader economy."


At 8:49 AM, Anonymous Anonymous said...

Funny thing is, we talked about this on this blog a few weeks back. We can see this stuff happening before officials say anything about it.

I beginning to get more and more confidence in this blog's outlook. I think we've done a good job of reading and interpretting all the info available on housing.

Hmmm.... foreclosures going through the roof, low yields on the debt... I see a problem brewing. Throw in Fannie Mae continuing to divest its holdings and a downgrade or 3 on Mortgage Backed Securities and you've got a huge financial system failure ! Mortgage rates are going to go through the roof, which will in itself make the situation worse.

Nothing new here ! We've been forecasting a problem here for the last month.

Just to refresh, I see problems arriving from the following sources:

1) Fed has to raise interest rates to curb inflation
2) Fed has to raise interest rates to float US bonds because Asia stops buying
3) Housing bubble pops and causes a liquidity crisis because homeowners are highly leveraged and broke
4) Mortgage industry collapses because of high foreclosures
5) Stock market crashes because people lose faith in US economy.

It seems as though all these factors are coming together at once.

You saw it here first !

At 8:52 AM, Blogger Ben Jones said...

Thanks. All we can do is call it like we see it.

At 9:09 AM, Blogger realist said...

the stock market crash affected any american who had a private pension plan, and every state that had a pension plan that invested in stocks. states had to raise taxes or cut benefits to make up for the pension shortfalls. in other words, the crash affected every american.

they say 7.2 trillion dollars were lost. what they should have said was that the so called "lost" money was consolidated in far fewer hands.

the housing bust will affect all of america in much of the same way. how does it not affect the state of california, when 40% of the state's economy is predicated on the real estate industry?

the "california effect" is pumping up markets in arizona and nevada. the northeastern states are pumping up markets in north and south carolina and florida. how can it not be a potential national bust, when the blue state speculators are buying up the red states' real estate? this bust could unite the red and blue states in a way bush never could.

add the international mortgage bubble, and we could have a united world. it would be a world united in depression.

At 9:25 AM, Blogger John Law said...

great article. I think doug noland lives down in dallas...maybe he's been talking with this guy. they're probably neighbors.

At 9:51 AM, Anonymous Anonymous said...

s ashame that Californians and NewYorkers etc.
are driving up prices in markets to the point that the locals cant afford housing in there own community!

At 10:04 AM, Anonymous Rob said...

Good site Ben. Hey, I didn't know you had an ocean in Arizona. That don't really look like an ocean going vessel in the back ground, but thr sun looks like it is setting on a pretty large body of water.

As for the article by Danielle DiMartino, I agree with her that mass loan defaults would be hard on families.

But she makes the statement that "Stock market bubbles impact those who can afford to buy stocks", as if they don't really count, as if they are the elite and have money to burn.

Would she agree that the housing market only effects people who can "afford" to buy a house.

I think it is simply a choice in either case.


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