[LA_Renter]

The dollar is critically low. If he comes across too dovish the US Dollar index may fall below 80, I think FED actually measures the dollar with another index but that one is sitting at a 30 year low. The media doesn’t talk about it much but I guarantee you the FED is taking that into consideration. Most of the economic data came in softer than expected but not enough for any FED action. The credit crunch is more of a market event than anything to do with monetary policy but he will probably incorporate some type of language they are aware of the problem and will act accordingly if it begins to harm the economy of which right now it is not (yet) in their view. Bernanke believes in market corrections, this one has only gotten started so he will stay the course. Thats my take.

[LA_Renter]

They are anticipating the FED to change its language which will open the door for a rate cut later in the year. They are also anticipating language that acknowledges the current state of the credit markets. If the Fed comments maintain a hawkish view on inflation the market will be really pissed….you saw Cramer the other day.

[LA_Renter]

They are anticipating the FED to change its language which will open the door for a rate cut later in the year. They are also anticipating language that acknowledges the current state of the credit markets. If the Fed comments maintain a hawkish view on inflation the market will be really pissed….you saw Cramer the other day.

[LA_Renter]

They are anticipating the FED to change its language which will open the door for a rate cut later in the year. They are also anticipating language that acknowledges the current state of the credit markets. If the Fed comments maintain a hawkish view on inflation the market will be really pissed….you saw Cramer the other day.

[LA_Renter]

Here is the home prices won’t actually fall that much argument by Lou Barnes at Inman.

“Housing in the Bubble Zones is still sliding, inventory accumulating,
foreclosures rising, all likely to continue for years. Those ignorant of
housing propose resolution by sellers cutting prices, but it doesn’t work
that way: overextended prices stay flat until purchasing power accumulates
to support them. The farther the boom pushed prices beyond purchasing
power, the longer it takes. This time, years and years.

Financial market commentators now speak casually of home prices falling 7
percent or 10 percent or another percentage du jour. Prices will fall that
much in some micro-markets, but most of the country did not join the
Bubble party, and will experience nothing of “falling prices.” The stock market
can fall single-piece in a heap (99 percent of the S&P 500 stocks fell in
Thursday’s wreck); homes are a neighborhood-by-neighborhood affair.”

Southern California is one of the micro-markets he is talking about. Basically he sees a 7% to 10% drop and thats it, San Diego is already 7% from the peak so I guess we won’t see much depreciation from here on out according to Lou. I personally try to keep my mind open to all possibilities, it’s not so much being proven right as it is wanting to know the truth of the situation. One thing I would say to Lou is that we (especially California) have never experienced home prices become this disconnected from incomes and rents….Never. I think the markets he is speaking of historically have maybe hit 5 to 6 times incomes at their peak and fall back to 3 to 4 times incomes. So yea, time heals all wounds in that case. By the way thats what happened to Southern California during the 90’s downturn and nominal home prices fell over 25%. We saw home prices hit 9 to 12 times incomes during this last boom. It will take a really, really , really long time for purchasing power to catch up this.

[LA_Renter]

Here is the home prices won’t actually fall that much argument by Lou Barnes at Inman.

“Housing in the Bubble Zones is still sliding, inventory accumulating,
foreclosures rising, all likely to continue for years. Those ignorant of
housing propose resolution by sellers cutting prices, but it doesn’t work
that way: overextended prices stay flat until purchasing power accumulates
to support them. The farther the boom pushed prices beyond purchasing
power, the longer it takes. This time, years and years.

Financial market commentators now speak casually of home prices falling 7
percent or 10 percent or another percentage du jour. Prices will fall that
much in some micro-markets, but most of the country did not join the
Bubble party, and will experience nothing of “falling prices.” The stock market
can fall single-piece in a heap (99 percent of the S&P 500 stocks fell in
Thursday’s wreck); homes are a neighborhood-by-neighborhood affair.”

Southern California is one of the micro-markets he is talking about. Basically he sees a 7% to 10% drop and thats it, San Diego is already 7% from the peak so I guess we won’t see much depreciation from here on out according to Lou. I personally try to keep my mind open to all possibilities, it’s not so much being proven right as it is wanting to know the truth of the situation. One thing I would say to Lou is that we (especially California) have never experienced home prices become this disconnected from incomes and rents….Never. I think the markets he is speaking of historically have maybe hit 5 to 6 times incomes at their peak and fall back to 3 to 4 times incomes. So yea, time heals all wounds in that case. By the way thats what happened to Southern California during the 90’s downturn and nominal home prices fell over 25%. We saw home prices hit 9 to 12 times incomes during this last boom. It will take a really, really , really long time for purchasing power to catch up this.

[LA_Renter]

Here is the home prices won’t actually fall that much argument by Lou Barnes at Inman.

“Housing in the Bubble Zones is still sliding, inventory accumulating,
foreclosures rising, all likely to continue for years. Those ignorant of
housing propose resolution by sellers cutting prices, but it doesn’t work
that way: overextended prices stay flat until purchasing power accumulates
to support them. The farther the boom pushed prices beyond purchasing
power, the longer it takes. This time, years and years.

Financial market commentators now speak casually of home prices falling 7
percent or 10 percent or another percentage du jour. Prices will fall that
much in some micro-markets, but most of the country did not join the
Bubble party, and will experience nothing of “falling prices.” The stock market
can fall single-piece in a heap (99 percent of the S&P 500 stocks fell in
Thursday’s wreck); homes are a neighborhood-by-neighborhood affair.”

Southern California is one of the micro-markets he is talking about. Basically he sees a 7% to 10% drop and thats it, San Diego is already 7% from the peak so I guess we won’t see much depreciation from here on out according to Lou. I personally try to keep my mind open to all possibilities, it’s not so much being proven right as it is wanting to know the truth of the situation. One thing I would say to Lou is that we (especially California) have never experienced home prices become this disconnected from incomes and rents….Never. I think the markets he is speaking of historically have maybe hit 5 to 6 times incomes at their peak and fall back to 3 to 4 times incomes. So yea, time heals all wounds in that case. By the way thats what happened to Southern California during the 90’s downturn and nominal home prices fell over 25%. We saw home prices hit 9 to 12 times incomes during this last boom. It will take a really, really , really long time for purchasing power to catch up this.

[LA_Renter]

fat_lazy_union,

There is another aspect of this to consider, in my case I know I am vulnerable to an economic downturn. That’s why I decided to sit out the current housing market. My rationale was if I make a home purchase now (2005-present) and this turns out to be a hard landing / debacle, then I or my spouse could find ourselves in a mortgage (where we have to stretch ourselves to the max) facing a layoff and not able to sell our home without a substantial loss in equity. What really puts my mind at rest from a financial perspective is the rent verses own equation favors renters, in my case at least 1500/mo after tax premium. I think the over riding motive for many people is self preservation. Am I looking forward to the increased stress and anxiety of an economic downturn…..No! Do I want this to be over with….Yes. If I or my spouse lose our job in that event then we did the right thing and preserved our capital and have the flexibility to move. If we weather the storm then we will find ourselves with a small group of people that have great credit alot of cash and many properties to chose from. I’m hoping for the latter!!

[LA_Renter]

fat_lazy_union,

There is another aspect of this to consider, in my case I know I am vulnerable to an economic downturn. That’s why I decided to sit out the current housing market. My rationale was if I make a home purchase now (2005-present) and this turns out to be a hard landing / debacle, then I or my spouse could find ourselves in a mortgage (where we have to stretch ourselves to the max) facing a layoff and not able to sell our home without a substantial loss in equity. What really puts my mind at rest from a financial perspective is the rent verses own equation favors renters, in my case at least 1500/mo after tax premium. I think the over riding motive for many people is self preservation. Am I looking forward to the increased stress and anxiety of an economic downturn…..No! Do I want this to be over with….Yes. If I or my spouse lose our job in that event then we did the right thing and preserved our capital and have the flexibility to move. If we weather the storm then we will find ourselves with a small group of people that have great credit alot of cash and many properties to chose from. I’m hoping for the latter!!

[LA_Renter]

fat_lazy_union,

There is another aspect of this to consider, in my case I know I am vulnerable to an economic downturn. That’s why I decided to sit out the current housing market. My rationale was if I make a home purchase now (2005-present) and this turns out to be a hard landing / debacle, then I or my spouse could find ourselves in a mortgage (where we have to stretch ourselves to the max) facing a layoff and not able to sell our home without a substantial loss in equity. What really puts my mind at rest from a financial perspective is the rent verses own equation favors renters, in my case at least 1500/mo after tax premium. I think the over riding motive for many people is self preservation. Am I looking forward to the increased stress and anxiety of an economic downturn…..No! Do I want this to be over with….Yes. If I or my spouse lose our job in that event then we did the right thing and preserved our capital and have the flexibility to move. If we weather the storm then we will find ourselves with a small group of people that have great credit alot of cash and many properties to chose from. I’m hoping for the latter!!

[LA_Renter]

“That commentary isn’t LA_Renter’s, it’s from Doug Noland over at Prudentbear.com”

Thanks for pointing that out Dave. I am not the author. I should have made that more obvious on the post. I posted this because Roland while being bearish never sounded like this before. And as HereWeGo pointed out Roland indicates this is hitting from the top down as much as it is the bottom up. The credit contraction as it stands now will impact the high end of the market especially California. Think about it, the loans that make California home prices possible have been pulled from the market, or will be available at much higher rates. This is Huge.

[LA_Renter]

“That commentary isn’t LA_Renter’s, it’s from Doug Noland over at Prudentbear.com”

Thanks for pointing that out Dave. I am not the author. I should have made that more obvious on the post. I posted this because Roland while being bearish never sounded like this before. And as HereWeGo pointed out Roland indicates this is hitting from the top down as much as it is the bottom up. The credit contraction as it stands now will impact the high end of the market especially California. Think about it, the loans that make California home prices possible have been pulled from the market, or will be available at much higher rates. This is Huge.

[LA_Renter]

“That commentary isn’t LA_Renter’s, it’s from Doug Noland over at Prudentbear.com”

Thanks for pointing that out Dave. I am not the author. I should have made that more obvious on the post. I posted this because Roland while being bearish never sounded like this before. And as HereWeGo pointed out Roland indicates this is hitting from the top down as much as it is the bottom up. The credit contraction as it stands now will impact the high end of the market especially California. Think about it, the loans that make California home prices possible have been pulled from the market, or will be available at much higher rates. This is Huge.

[LA_Renter]

(cont)
A focal point of my Macro Credit Analysis has for some time been the grave risks posed to markets and economies commanded by the seductive elixir of speculative liquidity. I have compared the current backdrop to that of 1929. For too long our Bubble Economy and Bubble Asset Markets have luxuriated in liquidity created in the process of leveraging speculative securities positions (especially in the Credit market). We are now witnessing how abruptly euphoric boom-time liquidity abundance can transform to a liquidity crisis.

I apologize for appearing overly dramatic. But this evening I have nagging feelings that for me recall the disturbing emotions following the terrible 9/11 tragedy. I know the world has changed and changed for the worse – yet I recognize that I don’t know how and to what extent. I fear for our markets, our economy, our currency and our system. I received an email this week on my Bloomberg that said something to the effect, “You all must be happy in Dallas.” I can tell you we’re instead sickened by what has transpired during the late-stages of this senseless Credit and specualtive orgy. The Great Credit Bubble has been pierced, and there will now be a very, very heavy price to pay. And, as always, I hope I am proved absolutely wrong.

[LA_Renter]

(cont)
A focal point of my Macro Credit Analysis has for some time been the grave risks posed to markets and economies commanded by the seductive elixir of speculative liquidity. I have compared the current backdrop to that of 1929. For too long our Bubble Economy and Bubble Asset Markets have luxuriated in liquidity created in the process of leveraging speculative securities positions (especially in the Credit market). We are now witnessing how abruptly euphoric boom-time liquidity abundance can transform to a liquidity crisis.

I apologize for appearing overly dramatic. But this evening I have nagging feelings that for me recall the disturbing emotions following the terrible 9/11 tragedy. I know the world has changed and changed for the worse – yet I recognize that I don’t know how and to what extent. I fear for our markets, our economy, our currency and our system. I received an email this week on my Bloomberg that said something to the effect, “You all must be happy in Dallas.” I can tell you we’re instead sickened by what has transpired during the late-stages of this senseless Credit and specualtive orgy. The Great Credit Bubble has been pierced, and there will now be a very, very heavy price to pay. And, as always, I hope I am proved absolutely wrong.

[Author]

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