The Dallas News Series Continued
The next piece on the Dallas market from Danielle DiMartino is online. "Richard Fisher, president of the Dallas Federal Reserve, noted that many areas of Texas have seen resurging economic growth. Dallas was not one of them. 'The weakest spot is North Texas,' Mr. Fisher said, 'largely because of the hit that telecom, technology and aviation took.'"
"And yet 'builders just keep building,' said David Houston. 'The risk is not so much the prices of the homes themselves, it's the loans being made on the homes. The danger I see here is that people are buying so much more home than they can afford.'"
If that is the case, it is strictly a function of the easy money. "Jim Pearson of Pearson Appraisal Co., 'This is where you're seeing a lot of the problems, where irresponsible or downright fraudulent lenders are trying to find unethical appraisers to work with them.'"
"What will happen when those loans are stress-tested, if the local economy doesn't improve, if the national economy falters, if interest rates rise?"
12 Comments:
Ben,
I am of the mind that we are headed for a fall. Lately, everywhere I turn, people are talking about real estate. The June issue of Money magazine is all about Real Estate. I know enough to know that when EVERYONE is talking about something, it is time to GET OUT!
JLP
AllThingsFinancial
JLP,
Hey, I've been to your blog before. Cool, well welcome. And you right, people know in the back of their mind, things ain't right. Thanks for commenting.
Thanks for the welcome.
Yeah, I've been blogging since October of last year. It's been a blast. I have been following your blog for some time now but just posted a link to it from my blog today.
JLP
AllThingsFinancial
do you think the bubble officially arrived
http://www.fortune.com/fortune/information/currentissue
Desi,
THAT is exactly my point. Money has done the same thing in their June issue.
JLP
Conundrum lives...rates dropped again, and more than likely they will stay low for a long time...two pieces of drywall will kepp going up.
Is it possible that we were all wrong is it possible that our mistake is that we tried to think rationally and with reason, is it possible that idiots are rewarded in todays society...
Anonymous said:
Is it possible that we were all wrong is it possible that our mistake is that we tried to think rationally and with reason, is it possible that idiots are rewarded in todays society...
That's a sure sign of a bubble if there ever was one. Think back to the late 90s and early 2000s. Your statement is what sane people were saying about the internet bubble.
JLP
AllThingsFinancial
10 yr treasury: likely will remain low for years! could drop to 3% which is great for new buyers as cost of financing would be low. Bill Gross also subscribes to this view.
housing mania would end even w/ low rates.Krugman etc believe housing is inflated in HOT areas by around 250%. Housing market slump would throw the market in recession (severe). so low rates as anticipated by the bond market ain't an anamoly.
again... who cares about the long term rates... that's not going to pop the bubble... remember, the long term rates are for normal 30 yr. fix mortgages... it's the short term rates that matter... and each time greenie raises the rates it directly hits them and their stupid ARMs and/or I/Os... as has been stated before, nearly 66% of all new mortgages this year are ARMS and/or I/Os... soooo... good luck to all!
in today's WSJ:
"The House Financial Services Committee may vote as early as Wednesday on legislation to tighten regulation of Fannie and Freddie. Mr. Greenspan has been trying to persuade Congress to include a provision that would require the companies to shed gradually the bulk of their holdings of mortgage loans and securities.
............
In a speech to a housing conference yesterday, the Fed chief reiterated that the companies eventually could set off a financial crisis if they keep expanding and taking risks on changes in interest rates. "
Re: 6:59 --
If Fannie and Freddie are ordered to reduce their portfolios, what will they shed, the least risky loans or the most risky? If the least risky, it would seem they accomplish less than nothing. If the most risky, who is going to buy that paper and why? Any thoughts?
Chip
Anon 5.46 and 6.22
We need high rates to pop it, otherwise banks will think of 40 or 50 year loans with no payment for 5-10 years and it will alow people with risky loans to switch to fixed because they will go below 4%.
I think only rates can pop it...and China, but they wont do it only because we arrogantly told them to.
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