Thanks for another great
Thanks for another great post, Rich. I sincerely hope you are right about the general economy turning around.

One thing your post got me thinking about was the fact that falling housing prices, in isolation, didn’t cause any problems with our economy. If people could have easily afforded their payments, the negative equity would have affected only those who wanted/needed to sell. The reason falling housing prices hurt the economy so badly was because everyone was **living off** their home price increases via HELOCs and cash-out refis, often refinancing multiple times because they were using the “extracted equity” to pay the mortgage itself.

From what I can tell, we’ve managed to make it through about 1 1/2 to 2 years without this HELOC/cash-out money, and businesses were forced to adjust to a level where people have to pay from their earned income. It would be bullish if we saw growth from here, as it would likely indicate REAL growth, not false growth that resulted from the piling on of debt that could never be repaid.

One caveat: the existence of people who have been living without any housing payments, or with artificially low payments via temporary modifications or new hybrid ARMs that will adjust again in a few years. If these squatters are going to be evicted (finally!) and forced to pay for housing, it might lead to another downturn.

Also, there’s that pesky govt debt that has replaced much of the private losses. It remains to be seen how this is managed.

Still, there is no doubt that things have visibly picked up. We’ve been seeing it around here since February of 2009, and it just keeps getting busier. There is no shortage of people who are looking to spend lots of money.