[jrock]

>>>Huh? We’re at least halfway out of the bubble, new mortgages would be full-doc and for up to 90% of market value the moment of issuance. Why would these mortgages be worth 25 cents on the dollar.

Hmmm….so your saying 20% of these mortgages are heading to default. What do you think commercial paper with a 20% default rate is fetching on the open market today? Probably a lot less than 25 cents on the dollar. Probably more 5-10 cents on the dollar. Does anyone have the data on this? THanks

[jrock]

>>>Huh? We’re at least halfway out of the bubble, new mortgages would be full-doc and for up to 90% of market value the moment of issuance. Why would these mortgages be worth 25 cents on the dollar.

Hmmm….so your saying 20% of these mortgages are heading to default. What do you think commercial paper with a 20% default rate is fetching on the open market today? Probably a lot less than 25 cents on the dollar. Probably more 5-10 cents on the dollar. Does anyone have the data on this? THanks

[jrock]

>>>Huh? We’re at least halfway out of the bubble, new mortgages would be full-doc and for up to 90% of market value the moment of issuance. Why would these mortgages be worth 25 cents on the dollar.

Hmmm….so your saying 20% of these mortgages are heading to default. What do you think commercial paper with a 20% default rate is fetching on the open market today? Probably a lot less than 25 cents on the dollar. Probably more 5-10 cents on the dollar. Does anyone have the data on this? THanks

[jrock]

>>>Huh? We’re at least halfway out of the bubble, new mortgages would be full-doc and for up to 90% of market value the moment of issuance. Why would these mortgages be worth 25 cents on the dollar.

Hmmm….so your saying 20% of these mortgages are heading to default. What do you think commercial paper with a 20% default rate is fetching on the open market today? Probably a lot less than 25 cents on the dollar. Probably more 5-10 cents on the dollar. Does anyone have the data on this? THanks

[jrock]

>>>Huh? We’re at least halfway out of the bubble, new mortgages would be full-doc and for up to 90% of market value the moment of issuance. Why would these mortgages be worth 25 cents on the dollar.

Hmmm….so your saying 20% of these mortgages are heading to default. What do you think commercial paper with a 20% default rate is fetching on the open market today? Probably a lot less than 25 cents on the dollar. Probably more 5-10 cents on the dollar. Does anyone have the data on this? THanks

[jrock]

ps-If the Fed acts reactively to bail out a collapsing housing sector by engaging in a rate easing campaign, it could have the opposite of the desired effect. The market is unhinged from fundamentals, operating on psychology. Overt action by the Fed to counteract a housing collapse would signal to everyone that even the Fed is nervous about housing and this might serve simply to increase the sense of panic in people whose monetary well-being depends on steady or increasing housing values.

[jrock]

Lower interest rates will not necessarily have a moderating effect on the decline in housing values. During the deflation of the last SoCal housing bubble, interest rates declined significantly. However, there apparently was no significant mitigating effect on the collapse of housing values. Similarly, Fed action to bail out the collapsing economy during the great depression did little to mitigate the damage done by rampant speculation and loose credit. I think lower interest rates may result in a secondary equity bubble somewhere else in the economy, but the psychology of the real estate market has changed and I don’t think anything the Fed does can save it. It will run its course.

[jrock]

I’ve heard a lot recently about rents increasing and that this will shore up housing prices. The overlooked apsect of this is that, although housing prices do not figure into the inflation statistics used by the Fed to set interest rates, rents do. I believe that rent makes up fully one third of the CPI. If rents increase at anywhere near the rate some folks are projecting, it will send the CPI through the roof and force the Fed to continue tightening. And continued tightening in this environment would almost certainly push housing over the edge. When all those ARMs reset, an unprecedented wave of forclosures would likely result, further depressing housing prices. I think this is why the Fed is in a no win situation. The baseless increases in asset valuation, which were ignored because they weren’t statistically accounted for, are now inevitably filtering down into the core inflation statistics. People stuck with negative cash flow properties are trying to recoup their investment by increasing rents. On the other hand, if the Fed continues with easy money policies, inflation will undoubtedly become a significant issue.

[jrock]

I was looking at Mira Mesa quite a bit over the last six months. It seems quite clear that prices there have flattened and are starting to ebb. Like Clairemont, some of the neighborhoods are hit or miss; some nice little enclaves but a lot of properties that have not been kept up. In terms of price appreciation, Mira Mesa seems to lag somewhat. I was considering purchasing a home in west mira mesa for a good few months, but market conditions look to be deteriorating. I suppose in a 20 year time frame, a home purchase almost anywhere in SD would likely turn out well. But life moves too fast these days and I know very few people who can say where they will be in 3 years let alone 20. For myself, I decided to hold off on purchasing a home in SD. Right now, it just seems that the downside risk outweighs the upside potential.

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