Entry for May 30, 2005
“The chief economist for the Mortgage Bankers Assn. is worried enough about the torrid housing market to get out of it.
“I’m going to rent for a while,” said Douglas Duncan, who expects “significant reversals” in regions that have enjoyed strong home price appreciation, including Washington, D.C., Florida and California.”
That quote starts an interesting article in Sunday’s L.A. Times about whether or not there is a housing bubble: It’s Not a Bubble Until It Bursts
Personally, I think it is a bubble and that housing prices will eventually adjust to follow what people can afford on a monthly basis. So if that is $1400/month at 6%, the prices will follow and will equal out at $1400/month at 7%, 8% and 9%. Home prices will go further down if interest rates go up and force people financing with Adjustable Rate Mortgages (ARMs) to sell because they can no longer afford their homes. Right now, it sounds like many in California are stretching to buy with risky loan packages such as interest-only mortgages (1/2 of California mortgages last month and 2/3 of bay area mortgages last month) . I’m surprised banks are still funding risky mortgages.
May 31st, 2005 at 3:09 pm
Are the banks being greedy, are they being stupid, or are they being rational given the incentives put in front of them and the potential for bailouts if they get themselves into trouble?
The answer is probably, all three.
May 31st, 2005 at 7:31 pm
Bailout? Only in exchange for lengthy jail sentences. I hear the Dakotas have a very harsh winter and plenty of rocks to crush
June 1st, 2005 at 11:49 pm
Not many people went to jail when the Savings and Loans crisis led to billions of dollars of bailouts.
http://www.townhall.com/columnists/amityshlaes/as20050503.shtml
Moral hazard indeed.
June 2nd, 2005 at 1:06 pm
Ah, reality sinks in. Politicians will protect themselves and their friends first, then the rest of us.
June 2nd, 2005 at 2:04 pm
You got it.
Wow, you seem so young to be so cynical…
June 3rd, 2005 at 9:02 am
nah, not too cynical yet. I would still expect those responsible to be prosecuted.