HousingFEAR thought of the Day.

Patrick.net poses the Question: As house prices continue their inexorable decline, who loses and who wins?

1. ex-sunnyvale-renter Says:
   January 31st, 2008 at 8:50 am

   I would say that those who’ve realized we’re headed for the Mother Of All Great Depressions, and they can be miserable about it, or make the best of it like Jack London, Euell Gibbons, Harry Partch, and other luminaries who embraced the hobo life and used their experiences to inspire their art. George Orwell too, he washed dishes in the 1930s, when he was lucky. Henry Miller is another - I personally feel his books were banned not for the liberal use of (Profanity) but because they pointed out how bogus the American Nightmare is.

Helicopter Ben to the Rescue

NEW YORK (CNNMoney.com) -- Faced with growing risks of recession, the Federal Reserve made its second deep interest-rate cut in a week and slashed a key short-term rate by a half-percentage point Wednesday.

U.S. stocks, which had been slightly lower ahead of the announcement, surged on news of the rate cut but ended lower after a volatile final two hours of trading.

The federal funds rate - an overnight bank lending rate that affects how much interest consumers pay on credit cards, home equity lines of credit and auto loans - was cut to 3.0% from 3.5%. The rate had stood at 5.25% only four months ago.

The discount rate, which is what banks pay to borrow directly from the Fed, was also cut by a half-point to 3.5% on Wednesday. The cut was made at the request of nine of the nation's 12 Federal Reserve district bank presidents.

The Fed slashed both rates by three-quarters of a percentage point in an emergency move on Jan. 22.

Source


I really believe that if most Americans were just a little bit smarter there would be a revolution tomorrow. I guess the fed will just drop the rate to 0% and create more mal-investment and let the cycle continue. America is being destroyed from within just like Rome.

Real Estate Blogger sued by Developer

This story will shock and disturb you.

A Miami Realtor, and blogging friend of mine, Lucas Lechuga is being sued by Opera tower developer Tibor Hollo for 25 million dollars. He was also fired from his job as a Realtor at EWM, which is also being sued, for his blogging comments.

What is the country coming to where you lose your job, and get sued for 25 million for giving your opinion that a condo is a bad investment and a bad buying opportunity.

Are we still living in America or is this some new kind of bizzaro world?

Please visit lucas's blog Miami Condo Investments and show him your support.

What Median Home Prices would look like if the Bubble Never Happened

How much should you be paying for a home? The answer is easy to calculate if you understand the connection between median home prices and median incomes.

Historically, median home prices and median incomes have always shared a close relationship. From the mid-1970s to 2001, the historical ratio of median housing value vs. median household income was consistently between 2.6 and 3.0.

What this essentially means is that median home prices were (on average) 2.8x the median household income for the last 30 years. Using this 2.8 formula, it is very easy to estimate what median home prices would be if the most recent bubble never happened.

U.S. Median Home Prices

Current Median*	What the Median Should Be	% Difference
$208,400	$134,692	35%

Median household income information is not yet available for 2007, so we will be using median household income data for 2006 in this example and in the following examples. It should make very little difference since household incomes increased by 4 percent at the most (and that's a very generous estimate) in 2007.

The median U.S. household income is $48,201, according to the U.S. Census Bureau. When we multiply that number by 2.8, we get $134,692. That's what the U.S. median home price should be right now. The actual median home price is about 35 percent higher that that.

Median Home Prices by Region

Region	Current Median*	What the Median Should Be	% Difference
Northeast	$258,600	$145,760	44%
Midwest	$159,800	$133,941	16%
South	$173,400	$122,875	29%
West	$309,800	$146,297	53%

It is obvious to most people that we are in the midst of a national housing bubble. Nevertheless, there are still plenty of naysayers who are telling anyone who will listen that there are local bubbles only.

Using the 2.8 formula, it is clear that local bubbles aren't the problem. Median home prices are inflated in every U.S. region. In the West, where the median household income is $52,249, median home prices are more than double what they should be. The situation is similar in the Northeast, where the median household income is $52,057.

Median home prices are not quite as high in the South and the Midwest, where median household incomes are $43,884 and $47,836 respectively. Even so, prices are still 30 percent higher than what they should be in the South and 16 percent higher than what they should be in the Midwest.

California Median Home Prices

Current Median*	What the Median Should Be	% Difference
$402,000	$158,606	61%

There is no doubt about it. California was hit hardest by the housing bubble. Although prices have always been slightly elevated in the state, they grew by leaps and bounds during the housing boom.

The result is that home prices are 61 percent higher than they should be given California's media household income of $56,645. In some areas of the state, such as San Francisco and Oakland, median home prices are so inflated that they are more than 11 times the median household income.

Will Home Prices Fall?

Absolutely. Prices have already fallen by six percent nationally and by more than 11 percent in the West in a year over year comparison. Home prices must continue to fall for the average American to be able to afford a home.

The real question is: how long will it take?

The U.S. government seems to be doing everything they can to prop up prices. Before you applaud their efforts, it is worth noting that while this could work short term, all it will really do is insure we have a slow fall.

The truth is that propping up prices and prolonging the correction will not solve anything. The Japan Ministry tried to do it during the Japan correction and it was a complete disaster.

All we can really do now is prepare for the fall. It will come and it will hurt. But that's the price that must be paid for allowing the market to become artificially inflated.

---

*Current median refers to the median prices of existing homes in December 2007. All current median figures were taken from National Association of Realtors' EHS data.

Source: Homeguide123

New Ron Paul Super Tuesday ad

What will happen with Miami Condo Fiasco?

Miami Condo Fiasco Website

In 2 days Zach will have to decide if he wants to walk away from his $70,000 dollar deposit on his condo...Or close on a condo paying $375,000 dollars for a 1 bedroom unit that is now worth about $250,000 on the open market.

Its kind of like Alien vs Predator, no matter who wins, he will lose.

Zach was so stressed by the condo fiasco that he took a leave of absence from his blog in November and has not been seen since. I hope that after the closing date comes and goes 2 days from now he will update his blog and let us know what he has decided.

If you have not heard of Condo Fiasco, check out the website, linked above and read about the guy who tried to sell shares of his pre-construction condo.

Housing prices to free fall in 2008

Check out this article where Merrill Lynch predicts 15% home price drop

I read the article and If you think about it, this really makes a lot of sense.

Foreclosures are the key to driving down prices and deflating the bubble in many markets around the USA. As the number of foreclosure rises and banks begin to dump them on the market at greater and greater losses, corresponding home prices will eventually be driven back to 1999 levels as I have predicted.

A regular homeowner can only stomach a certain amount of loss, additionally, you cannot sell the house for less than you owe on the mortgage unless the mortgage holder is granted a short sale. If this was all their was to the market, prices would probably remain stagnant or fall just enough to be in the level where buyers can obtain financing.

Foreclosures and Bank owned properties change everything. Banks are not in the business of managing and maintaining properties. They will hold them for a certain time period hoping to get their money back, however, they do have the power to dump them for mark to market value and when the inventory builds, they will dump these houses at cut rate prices.

This in turn drives down comparable sales in the whole neighborhood and in turn, forces everyone to lose all their equity in their home just to compete with the REO properties for buyers interest.

House prices will continue to drop as long as foreclosures are occuring, and with the second wave of option arms resetting in the next 1-3 years it's going to get much worse than anyone can even imagine.

Free Money!

Details

Enjoy your free money friends. If we are going to go bankrupt, we mine as well have one last big party, with someone else's money of course, before we face reality.

... thats the American way.




Oh... vewy crevah! Thank you president Brush for stimrurus package. Borrow more money from China! I rove America!

Now there are five

With Ron Paul finishing second in Nevada, and a possible first in Louisiana once the provisional ballots are counted are you feeling a renewed sense of hope in the campaign?

Ron Paul is the only one out there with answers for the economy, and with his increased air time you would think the media is beginning to come around.

I know I am just dreaming, but with Rush Limbaugh saying he may not vote for any of the front runners, you have to think the door is open for Ron Paul to rise for super Tuesday if he has a good debate next week.

Fed Panics

So Bernanke Panics and drama cuts the rate today.

The main problem I have with this move is not so much the rate cut itself; the problem lies within the intention behind it. Bernanke is trying to delay or stop the impending recession, and that is simply the worst thing he can possibly do.

Why doesn’t anyone understand that we actually need a recession? A recession is healthy for the economy. Boom and bust is capitalisms summer and winter and right now we need a nice cold winter to rest and regenerate after a brutally hot summer.

We need to decrease our spending, save money, and put an end to the mal-investment that was rampant for the past decade. A recession is very welcome at this point, and the longer we attempt to delay the recession the worse it will be when it inevitably comes. And trust me it is coming...no matter how many stimulus packages, rate cuts, or free money the government throws at us, its time to stop spending and pay the bills. The only thing we have control of is how bad and how long it’s going to be. Bernanke is only making it worse with his actions.

A 0.75 point rate cut is just going to make the clueless sheeple go deeper in debt spending on their heloc's and adjustable rate credit cards, its going to cause more people to trade on margin shorting stocks, and all the other borderline retarded things that occur which are driven with this kind of irresponsible fiscal loose money policy.

Americans need to realize that they are fighting a losing battle against a government that is not looking out for their own best interest. This has all been predicted and it hath been foretold. Hell, I am a college kid majoring in Biology and even I saw this coming, how can the ad wizards in Washington DC and Wall Street with advanced doctorate degrees in economics from Harvard not understand what’s really going on here?

I think the truth is they do know, but they just don't care because they know most Americans are to busy watching American Idol or are to stupid to even understand how corrupt and incompetent they really are.

I have a dream that someday Americans will awake from their apathy and stupidity and take their country back.

Until that day comes I will be here writing and doing my part to spread the truth ;)

"We have it in our power to begin the world over again."
-- Thomas Paine

With China Revaluing its currency, Is this the beginning of the End of American Consumption?

Quick History Lesson.

China is brutal, cruel and has no consideration for the welfare and rights of its own people.

For years now China has been keeping its currency artificially low even as its economy has boomed, and it's factories produced billions of dollars of cheap goods.

Why would China do this you ask?

Simple...China did not want it's own people to buy the very products they were making in the factories. They wanted to keep the value of their currency artificially low, and pay the factory workers pennies on the dollar. The Chinese people would not be able to buy the products, which allowed them to ship their crap out to Wal-Mart stores across America so US citizens could enjoy a great bargain.

As they say on the infomercials that wake you up at 4 AM... Wait... There's more!

American consumer spending was fueled primarily by debt spending. Home equity loans on houses, massive credit card debt were all the rage for the past decade and someone had to buy that debt. Guess who? It was China who would buy the American debt allowing American consumption to continue, fueling China's manufacturing economy, fueling America's consumer spending economy, buying American debt, which would keep the Yuan artificially low vs the American dollar so that Americans could continue to afford cheap Chinese products.

The sick cycle carousel continued until 2005 when China began to revalue its currency, and as the American dollar continues to collapse the whole situation is about to spin into economic disaster.

This article I found, which I posted below, really tells the whole story, Wake up America...

The stock market is about to crash.
The Fed is destroying the dollar.
Inflation is causing people to go hungry.
And Economic disaster is looming on the horizon.

It hath been fortold.

Chinese feel pain as Beijing revalues currency

SHANGHAI (AFP) - As China gradually relaxes its controls on its currency, few stand to lose as much as Wu Xiao, a Shanghai black market money changer who may soon be out of a job.

For more than a decade, the Chinese yuan was pegged artificially low against the dollar, resulting in the kind of spread between the official and the market-driven rate that underground traders thrive on. Life was good for Wu.

But since China revalued the yuan in 2005, leading to a cumulative appreciation against the dollar of about 14 percent so far, the spread has narrowed dramatically, and Wu's margins have plunged.

Wu is in a race against time to offload his pile of tightly packed greenbacks before they lose so much of their value that his profit vanishes. Even on the best of days, he makes only two yuan (27 cents) per 100 dollars.

"If the US dollar keeps depreciating then there's nothing we can do. The only way for us to make money is to buy and sell quickly. It's now always safer to have your money in yuan," said Wu.

The change in the exchange rate in January is equivalent to about a 16-percent hike on a yearly basis, and analysts have begun to forecast that yuan could gain as much as nine percent by the end of the year.

China's booming economy has long benefited from a currency that Beijing's trade partners blame for global commercial imbalances, as cheap Chinese exports have soared while more expensive imports have failed to keep pace.

Economic growth in China in 2007 is expected to come in at about 11.5 percent. Much of that expansion is directly related to Chinese exporters which, flush with cash, have ploughed the money back into assets at home.

As inflation has picked up pace -- hitting an alarming 11-year high in November -- regulators are beginning to worry that too much money in the financial system is a main factor behind economic overheating.

"Beijing is becoming ever more concerned about domestic inflation -- and the argument that an undervalued exchange rate is at the root of excess liquidity has won increasing numbers of converts," said Stephen Green, an economist at Standard Chartered in Shanghai.

"The idea has to be that the Chinese yuan appreciation will cool some of the upstream energy and raw material inflation pressure and cool export-related investment," said Green, who estimated the yuan will rise nine percent in 2008.

The good news for the Chinese consumer is that a stronger currency means greater purchasing power to buy imports. For China's globalising firms, it means they can buy overseas assets more cheaply.

But faster currency appreciation spells trouble for China-based exporters, which have to conduct the majority of their trade in dollars.

China Machine Building International Corp in southern Hunan province said the recent adjustments to the yuan had led to a loss of business.

"Some customers refuse to accept our price hikes," said manager Flora Hu.

For Shanghai-based Korean plastics chemical trader Hanren Trading, the change in the value of the yuan have forced it to consider shifting business from exports to imports.

"It cost us much more in production and delivery costs," said manager Yatta Mao, adding that the company faced a debilitating seven percent fall in profit margins.

Source

Ron Paul finishes Second in Nevada

Of course this is going to be ignored by the biased MSM. However, they can't change the fact that Ron Paul placed second in the face of a media blackout and smear campaign against him. The voters and campaign workers in Nevada should be applauded for their hard work.

Breaking News: Growth package details

Chicken Little and the Flying Monkey were right after all!

Paulson: “After years of unsustainable price appreciation and lax lending practices, a housing correction is inevitable and necessary”.


Unconfirmed Details:

$800 dollars per individual
$1600 dollars per family

Reporter: "Can you be more specific"
Paulson: "We don't want to be specific"
Translation: "I am a moron, who is paid to spin and lie"

Bush announces stimulus package for the economy

Will the package be a Stimpack?


Or a Super Stimpack?

-For all of you Fallout fans ;)



What is comical to me is that as the package was announced the stock market began to collapse even faster. I guess the traders on wall street did not think to highly of what was proposed.

If the feds send me a check in the mail I sure as hell will not be spending it, I will be using it to pay off the credit card debt I accumulated paying for the rising cost of food and gasoline while my wages remained virtually stagnant.

Hillary Clinton is a fraud, George Bush is a joke, Ben Bernanke is a criminal, and the house of cards that is the US economy is about to come tumbling down.

HEH-LARIOUS Michigan Romney Parody

Thanks to Housing Panic, The #1 Housing Crash Blog, for finding this video!

Inflation Rate Worst in 17 years.

WASHINGTON - Higher costs for energy and food last year pushed inflation up by the largest amount in 17 years, even though prices generally remained tame outside of those two areas.

Consumer prices rose by 4.1 percent for all of 2007, up sharply from a 2.5 percent increase in 2006, with consumers especially feeling the pain when they filled up their gas tanks or shopped for groceries. Prices for both energy and food shot up by the largest amount since 1990.

Read Full Story Here

10 Billion here, 10 Billion there, sooner or later it ads up to real money.

AP
Citi Loses Almost $10B, Slashes Dividend
Tuesday January 15, 9:11 am ET
By Madlen Read, AP Business Writer

Citi Loses Almost $10B in 4Q, Slashes Dividend, Gets $12.5B Investment After Hefty Write-Downs

NEW YORK (AP) -- Citigroup Inc. lost almost $10 billion in last year's final three months, the largest quarterly deficit in the bank's 196-year history, and slashed its dividend as it recorded a mammoth write-down for bad bets on the mortgage industry.

The nation's largest bank wrote down the value of its portfolio by $18.1 billion. It also boosted loan-loss reserves by $4.1 billion, signaling further problems in its consumer businesses as deflated home prices, high energy and food costs, and rising unemployment weigh on people's ability to make their loan payments...


... Americans will continue to watch American Idol completely oblivious to the fact that the economy is headed towards a 1929 style crash and depression. Wake up America, this is a frigging disaster and it's starting to get downright scary!