Nightmare Scenario Building??

[DoJC]

After looking at the economy and housing for a couple of months I am getting quite concerned. Are we heading into a DEPRESSION, or just a very long, protracted recession?

Here’s why I ask this:

1. BofA and other banks are seriously jacking up interest rates on credit cards. Banks need lots of incoming capitol to make up for losses they’re experiencing in housing problems, and this is an easy way to do this. But, when the average American owes $12000 of credit card debt this move is going to hurt, badly. Some folks are reporting their rates going from 9.99% to 24.99%, for no apparent reason! Makes the idea of walking away from a home even more tantalizing since this will break the back of many that are trying to stick it out and keep their home and pay their debts by temporarily living off of credit cards. Bankruptcies may spike some due to this.

2. The bond market is hitting all-time low yields. While the Fed is trying to help out the housing market by what he can do by dropping overnight rates and such the effect on mortgage rates is almost non-existent. Everyone who isn’t up to their necks in debt are losing money since savings and CD rates are going lower and lower.

3. Bond ratings issuers are going to get slapped down pretty hard. Egan-Jones is saying that MBIA should be rated BB+, not AA. There is also talk that S&P, Moody’s, Finch, etc. are going to get downgraded soon, and that the US itself will have its credit downgraded. The bonds currently issued are close to being junk bonds, and no one is going to buy them when the need to sell tons of them hits.

4. Tightening lending standards are making it difficult for anyone to get a loan right now. With no income coming in for loans, foreclosures soaring, write-downs coming in left and right, banks are in serious trouble. Short sales and foreclosures are also causing comps to drop so fast that lending institutes are doing appraisals at the beginning of escrow, and again 3-days before close of escrow. We’re starting to see escrows canceled with 3-days left due to a drop in appraised value.

5. Fannie May and Freddie Mac are reporting losses. Freddie Mac is losing money for the first time EVER, while Fannie May is reporting the first loss in 22 years. Serious problems with either of these will result in bail-outs at tax payers expense. More taxes to bail out homebuyers = less available spending money.

6. HELOCs & Refi loans are becoming almost non-existent also. Many are reporting a rejection rate of 60-75% for refi’s. Tightening standards on these loans could knock another $50 billion worth of spending out of the economy. Add the bond market woes of recording low yields and the mortgage rates are going to wreak havoc on people wanting to refi to a lower rate to keep their home. Seems like Bernanke’s efforts are in vain.

7. Jingle mail and “taking the inside out” type walk-aways are becoming increasingly common. I’m not sure how this current crisis compares to the rates of occurrence during 1990’s, but it seems to be getting worse every month.

8. Normally, when the stock market tanks people rush to buy bonds. With historic low yields they’re running to bonds alright – but not US bonds.

9. Clueless folks who need to sell are sitting on their homes with the prices so high they’ll never sell. They mistakenly think their homes somehow appreciated while everyone else’s dropped. This contributes to ever lowering appraisals as the comps end up being almost exclusively short sales and foreclosures.

It appears that we’re having a “perfect storm” of problems that could easily end up in a depression in the US, along with a global recession everywhere else. My untrained mind is telling me that all of these issues are converging into one perfect storm that is spiraling out of control.

Any thoughts or pointers to where I’m simply wrong?

– Doug

[kewp]

I think everything you posted is pretty accurate.

Hard to say whether we will have a recession or depression, though. Especially since I don’t think there is a textbook definition for depression other than ‘long recession’ (which is exactly what I think this will be, anyway).

There is likely to be unemployment on a large scale, probably not 25% like the 30’s though. Maybe more like 10-15%. I think new construction is going to stop and the economy will lose two other jobs for every one lost RE gig.

Those that still have jobs will face lower salaries, fewer raises and a reduced standard of living brought about by inflation and the destruction of consumer credit. Additionally, many that were planning an early retirement will find they will have to keep working, due to lost 401k and home equity.

The end result is everyone is going to have to learn to live within their means. I’m sure for many that is going to seem like a depression indeed!

Regardless, I saw this coming a few years ago and planned accordingly. It’s somewhat comforting that the sacrifices I’ve made over the past few years were worth it.

[kewp]

I think everything you posted is pretty accurate.

Hard to say whether we will have a recession or depression, though. Especially since I don’t think there is a textbook definition for depression other than ‘long recession’ (which is exactly what I think this will be, anyway).

There is likely to be unemployment on a large scale, probably not 25% like the 30’s though. Maybe more like 10-15%. I think new construction is going to stop and the economy will lose two other jobs for every one lost RE gig.

Those that still have jobs will face lower salaries, fewer raises and a reduced standard of living brought about by inflation and the destruction of consumer credit. Additionally, many that were planning an early retirement will find they will have to keep working, due to lost 401k and home equity.

The end result is everyone is going to have to learn to live within their means. I’m sure for many that is going to seem like a depression indeed!

Regardless, I saw this coming a few years ago and planned accordingly. It’s somewhat comforting that the sacrifices I’ve made over the past few years were worth it.

[kewp]

I think everything you posted is pretty accurate.

Hard to say whether we will have a recession or depression, though. Especially since I don’t think there is a textbook definition for depression other than ‘long recession’ (which is exactly what I think this will be, anyway).

There is likely to be unemployment on a large scale, probably not 25% like the 30’s though. Maybe more like 10-15%. I think new construction is going to stop and the economy will lose two other jobs for every one lost RE gig.

Those that still have jobs will face lower salaries, fewer raises and a reduced standard of living brought about by inflation and the destruction of consumer credit. Additionally, many that were planning an early retirement will find they will have to keep working, due to lost 401k and home equity.

The end result is everyone is going to have to learn to live within their means. I’m sure for many that is going to seem like a depression indeed!

Regardless, I saw this coming a few years ago and planned accordingly. It’s somewhat comforting that the sacrifices I’ve made over the past few years were worth it.

[kewp]

I think everything you posted is pretty accurate.

Hard to say whether we will have a recession or depression, though. Especially since I don’t think there is a textbook definition for depression other than ‘long recession’ (which is exactly what I think this will be, anyway).

There is likely to be unemployment on a large scale, probably not 25% like the 30’s though. Maybe more like 10-15%. I think new construction is going to stop and the economy will lose two other jobs for every one lost RE gig.

Those that still have jobs will face lower salaries, fewer raises and a reduced standard of living brought about by inflation and the destruction of consumer credit. Additionally, many that were planning an early retirement will find they will have to keep working, due to lost 401k and home equity.

The end result is everyone is going to have to learn to live within their means. I’m sure for many that is going to seem like a depression indeed!

Regardless, I saw this coming a few years ago and planned accordingly. It’s somewhat comforting that the sacrifices I’ve made over the past few years were worth it.

[kewp]

I think everything you posted is pretty accurate.

Hard to say whether we will have a recession or depression, though. Especially since I don’t think there is a textbook definition for depression other than ‘long recession’ (which is exactly what I think this will be, anyway).

There is likely to be unemployment on a large scale, probably not 25% like the 30’s though. Maybe more like 10-15%. I think new construction is going to stop and the economy will lose two other jobs for every one lost RE gig.

Those that still have jobs will face lower salaries, fewer raises and a reduced standard of living brought about by inflation and the destruction of consumer credit. Additionally, many that were planning an early retirement will find they will have to keep working, due to lost 401k and home equity.

The end result is everyone is going to have to learn to live within their means. I’m sure for many that is going to seem like a depression indeed!

Regardless, I saw this coming a few years ago and planned accordingly. It’s somewhat comforting that the sacrifices I’ve made over the past few years were worth it.

[gracie]

I agree with your observations….I just didn’t understand
what are : Jingle mail and “taking the inside out” type walk-aways….

[gracie]

I agree with your observations….I just didn’t understand
what are : Jingle mail and “taking the inside out” type walk-aways….

[gracie]

I agree with your observations….I just didn’t understand
what are : Jingle mail and “taking the inside out” type walk-aways….

[gracie]

I agree with your observations….I just didn’t understand
what are : Jingle mail and “taking the inside out” type walk-aways….

[gracie]

I agree with your observations….I just didn’t understand
what are : Jingle mail and “taking the inside out” type walk-aways….

[Bubblesitter]

“Jingle mail” was a term that was probably coined in the 80s or earlier. During that housing downturn, underwater homeowners (with negative equity) would just put their in the mail to the bank and move out.

We are seeing a significant rise in owners just walking away.

This has huge implications on the housing downturn.

http://money.cnn.com/2008/02/06/real_estate/walking_away/index.htm?postversion=2008020714

“taking the inside out” is former owners trashing the house on the way out of their foreclosed house

[Bubblesitter]

“Jingle mail” was a term that was probably coined in the 80s or earlier. During that housing downturn, underwater homeowners (with negative equity) would just put their in the mail to the bank and move out.

We are seeing a significant rise in owners just walking away.

This has huge implications on the housing downturn.

http://money.cnn.com/2008/02/06/real_estate/walking_away/index.htm?postversion=2008020714

“taking the inside out” is former owners trashing the house on the way out of their foreclosed house

[Bubblesitter]

“Jingle mail” was a term that was probably coined in the 80s or earlier. During that housing downturn, underwater homeowners (with negative equity) would just put their in the mail to the bank and move out.

We are seeing a significant rise in owners just walking away.

This has huge implications on the housing downturn.

http://money.cnn.com/2008/02/06/real_estate/walking_away/index.htm?postversion=2008020714

“taking the inside out” is former owners trashing the house on the way out of their foreclosed house

[Bubblesitter]

“Jingle mail” was a term that was probably coined in the 80s or earlier. During that housing downturn, underwater homeowners (with negative equity) would just put their in the mail to the bank and move out.

We are seeing a significant rise in owners just walking away.

This has huge implications on the housing downturn.

http://money.cnn.com/2008/02/06/real_estate/walking_away/index.htm?postversion=2008020714

“taking the inside out” is former owners trashing the house on the way out of their foreclosed house

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