These are interesting times indeed. I am more then a little concerned about what the future will bring. We have seen the transformation that many thought would not be possible. For all those who posted the demise of investment banks and Wall St criminals going away, this is a sobering wakeup call. This is what many of us here actually predicted, that there cannot and will not be a free market response to the bubble. In a sad and predictable manner we are witnessing the true socialization of our lending industry and the housing market to follow.
What many should not do is to believe this is the last measure; conversely this is one of many MORE measures that we will see. Men like Barney Frank, Charles Schumer, Chris Dodd, who hailed the GSEs and home ownership are now the chief architects of how to deal with the problems they helped to create.
What will it mean for housing? To be more specific our region here in SD?
Not sure. One thing that is not clear to me is the future of loan servicing. This has great bearing on future foreclosures or lack thereof. Understand, there are NO MORE RULES. The feds get to make em up as they go. Foreclosure timelines, loan modifications, principal writedowns, there is NOTHING that cannot be changed. Attached to one of the many previous versions of the bailout was the ugly provision to LET JUDGES HALT FORECLOSURES.
I will say the same damn thing I have said since I joined here. Do not underestimate the lengths that this government will go to simply slow this all down. Two years ago I was 90% sure we hit bottom in 2010-2012. Last year it was 70%. Now I am about 25% confident on a bottom in the next 3 years. I am now much more inclined to see a long slow flat market that is under a monsterous manipulative influence of the government. Heavy subsidization IMO will be created to keep inventory levels more or less in line by working out deals with existing homeowners.
I am not saying there will not be drops. Perhaps even big drops. I just am not sure… I tend to think the drops will be in the more desireable areas now. I think lower end markets will soon reach investment grade levels that will lead to purchases for investments. If we do see a fast runup in treasuries and/or the yield spreads then we could see more rapid depreciation.
I do know many people that did purchase recently but every one of them that I know did so with open eyes and minds. They knew the market conditions and they were purchasing for a long horizon. Right or wrong I do not see ANY purchases made for speculative reasons anymore with the exception of cash purchases at trustee sales.
Hopefully we will get those steep declines in Carmel Valley that people are looking for. Not so sure it will happen. Those in distress may soon simply go the biggest lender in the world now to rework, delay, or write down the loans that many of us were previously counting on to default. It cannot and will not happen for everyone, but it is foolhearty to think it will not happen for some if not many of them.
