[Lyra]

But it’s interesting that the focus seems to be on principal reduction workouts (of course we’ll have to see the final language to be sure). If that’s the case, then these workouts will should further deflate housing prices. Unlike interest rate reduction loan workouts (which are highly inflationary), principal reductions are deflationary (assuming there are no strings attached… future profit sharing, etc). They are more or less equivalent to a foreclosure where the borrower gets to buy the house back at the foreclosure price instead of getting kicked out on their a$$es. So other than being incredibly unfair, they will not prop up prices. Just imagine how equity-heavy owners are going to feel when they see their spendthrift neighbors, after leveraging themselves to the hilt buying granite countertops and Cadillac Escalades, win the big bailout lottery. And then, to add insult to injury, the neighborhood home prices are STILL going to decline over the years as the bailout recipients start unloading their homes (made possible by their new, low, post-workout cost basis). Want to see some pissed off baby boomers? This should get VERY interesting. I’m sure many were counting on Uncle Sam to inflate away the nation’s debt binge while they rode out the storm protected by their heavy asset holdings (mostly real estate).

[Lyra]

But it’s interesting that the focus seems to be on principal reduction workouts (of course we’ll have to see the final language to be sure). If that’s the case, then these workouts will should further deflate housing prices. Unlike interest rate reduction loan workouts (which are highly inflationary), principal reductions are deflationary (assuming there are no strings attached… future profit sharing, etc). They are more or less equivalent to a foreclosure where the borrower gets to buy the house back at the foreclosure price instead of getting kicked out on their a$$es. So other than being incredibly unfair, they will not prop up prices. Just imagine how equity-heavy owners are going to feel when they see their spendthrift neighbors, after leveraging themselves to the hilt buying granite countertops and Cadillac Escalades, win the big bailout lottery. And then, to add insult to injury, the neighborhood home prices are STILL going to decline over the years as the bailout recipients start unloading their homes (made possible by their new, low, post-workout cost basis). Want to see some pissed off baby boomers? This should get VERY interesting. I’m sure many were counting on Uncle Sam to inflate away the nation’s debt binge while they rode out the storm protected by their heavy asset holdings (mostly real estate).

[Lyra]

But it’s interesting that the focus seems to be on principal reduction workouts (of course we’ll have to see the final language to be sure). If that’s the case, then these workouts will should further deflate housing prices. Unlike interest rate reduction loan workouts (which are highly inflationary), principal reductions are deflationary (assuming there are no strings attached… future profit sharing, etc). They are more or less equivalent to a foreclosure where the borrower gets to buy the house back at the foreclosure price instead of getting kicked out on their a$$es. So other than being incredibly unfair, they will not prop up prices. Just imagine how equity-heavy owners are going to feel when they see their spendthrift neighbors, after leveraging themselves to the hilt buying granite countertops and Cadillac Escalades, win the big bailout lottery. And then, to add insult to injury, the neighborhood home prices are STILL going to decline over the years as the bailout recipients start unloading their homes (made possible by their new, low, post-workout cost basis). Want to see some pissed off baby boomers? This should get VERY interesting. I’m sure many were counting on Uncle Sam to inflate away the nation’s debt binge while they rode out the storm protected by their heavy asset holdings (mostly real estate).

[Lyra]

But it’s interesting that the focus seems to be on principal reduction workouts (of course we’ll have to see the final language to be sure). If that’s the case, then these workouts will should further deflate housing prices. Unlike interest rate reduction loan workouts (which are highly inflationary), principal reductions are deflationary (assuming there are no strings attached… future profit sharing, etc). They are more or less equivalent to a foreclosure where the borrower gets to buy the house back at the foreclosure price instead of getting kicked out on their a$$es. So other than being incredibly unfair, they will not prop up prices. Just imagine how equity-heavy owners are going to feel when they see their spendthrift neighbors, after leveraging themselves to the hilt buying granite countertops and Cadillac Escalades, win the big bailout lottery. And then, to add insult to injury, the neighborhood home prices are STILL going to decline over the years as the bailout recipients start unloading their homes (made possible by their new, low, post-workout cost basis). Want to see some pissed off baby boomers? This should get VERY interesting. I’m sure many were counting on Uncle Sam to inflate away the nation’s debt binge while they rode out the storm protected by their heavy asset holdings (mostly real estate).

[Lyra]

But it’s interesting that the focus seems to be on principal reduction workouts (of course we’ll have to see the final language to be sure). If that’s the case, then these workouts will should further deflate housing prices. Unlike interest rate reduction loan workouts (which are highly inflationary), principal reductions are deflationary (assuming there are no strings attached… future profit sharing, etc). They are more or less equivalent to a foreclosure where the borrower gets to buy the house back at the foreclosure price instead of getting kicked out on their a$$es. So other than being incredibly unfair, they will not prop up prices. Just imagine how equity-heavy owners are going to feel when they see their spendthrift neighbors, after leveraging themselves to the hilt buying granite countertops and Cadillac Escalades, win the big bailout lottery. And then, to add insult to injury, the neighborhood home prices are STILL going to decline over the years as the bailout recipients start unloading their homes (made possible by their new, low, post-workout cost basis). Want to see some pissed off baby boomers? This should get VERY interesting. I’m sure many were counting on Uncle Sam to inflate away the nation’s debt binge while they rode out the storm protected by their heavy asset holdings (mostly real estate).

[Lyra]

If the government limits its “quantitative easing” to purchasing agency debt (as they have suggested), wouldn’t this have the net result of creating two mortgage markets with very different interest rates?

1. Conforming mortgages @ ~ 4.5%
2. Private mortgages @ > 6.0%

Furthermore, my understanding is that the cap on government loans is 115% of MSA median. For SD County, that will be around 550K next year and even lower in 2010.

To me, all this says that overpriced coastal real estate is toast. 4.5% will stabilize the bottom end and do next to nothing for high end (excluding the the truly high-end which operates under entirely different dynamics altogether).

There will be great wailing from coasts at this but there will be almost zero political will to extend gov efforts to the high end. How could fly-over state representatives ever be convinced that bailing out rich coastal homeowners is in the best interests of their constituents?

Maybe I’m dreaming, but I think this is the end for the coast. Give it a year or two and coastal declines will match or exceed inland declines. Yay!

Lyra the optimist.

[Lyra]

If the government limits its “quantitative easing” to purchasing agency debt (as they have suggested), wouldn’t this have the net result of creating two mortgage markets with very different interest rates?

1. Conforming mortgages @ ~ 4.5%
2. Private mortgages @ > 6.0%

Furthermore, my understanding is that the cap on government loans is 115% of MSA median. For SD County, that will be around 550K next year and even lower in 2010.

To me, all this says that overpriced coastal real estate is toast. 4.5% will stabilize the bottom end and do next to nothing for high end (excluding the the truly high-end which operates under entirely different dynamics altogether).

There will be great wailing from coasts at this but there will be almost zero political will to extend gov efforts to the high end. How could fly-over state representatives ever be convinced that bailing out rich coastal homeowners is in the best interests of their constituents?

Maybe I’m dreaming, but I think this is the end for the coast. Give it a year or two and coastal declines will match or exceed inland declines. Yay!

Lyra the optimist.

[Lyra]

If the government limits its “quantitative easing” to purchasing agency debt (as they have suggested), wouldn’t this have the net result of creating two mortgage markets with very different interest rates?

1. Conforming mortgages @ ~ 4.5%
2. Private mortgages @ > 6.0%

Furthermore, my understanding is that the cap on government loans is 115% of MSA median. For SD County, that will be around 550K next year and even lower in 2010.

To me, all this says that overpriced coastal real estate is toast. 4.5% will stabilize the bottom end and do next to nothing for high end (excluding the the truly high-end which operates under entirely different dynamics altogether).

There will be great wailing from coasts at this but there will be almost zero political will to extend gov efforts to the high end. How could fly-over state representatives ever be convinced that bailing out rich coastal homeowners is in the best interests of their constituents?

Maybe I’m dreaming, but I think this is the end for the coast. Give it a year or two and coastal declines will match or exceed inland declines. Yay!

Lyra the optimist.

[Lyra]

If the government limits its “quantitative easing” to purchasing agency debt (as they have suggested), wouldn’t this have the net result of creating two mortgage markets with very different interest rates?

1. Conforming mortgages @ ~ 4.5%
2. Private mortgages @ > 6.0%

Furthermore, my understanding is that the cap on government loans is 115% of MSA median. For SD County, that will be around 550K next year and even lower in 2010.

To me, all this says that overpriced coastal real estate is toast. 4.5% will stabilize the bottom end and do next to nothing for high end (excluding the the truly high-end which operates under entirely different dynamics altogether).

There will be great wailing from coasts at this but there will be almost zero political will to extend gov efforts to the high end. How could fly-over state representatives ever be convinced that bailing out rich coastal homeowners is in the best interests of their constituents?

Maybe I’m dreaming, but I think this is the end for the coast. Give it a year or two and coastal declines will match or exceed inland declines. Yay!

Lyra the optimist.

[Lyra]

If the government limits its “quantitative easing” to purchasing agency debt (as they have suggested), wouldn’t this have the net result of creating two mortgage markets with very different interest rates?

1. Conforming mortgages @ ~ 4.5%
2. Private mortgages @ > 6.0%

Furthermore, my understanding is that the cap on government loans is 115% of MSA median. For SD County, that will be around 550K next year and even lower in 2010.

To me, all this says that overpriced coastal real estate is toast. 4.5% will stabilize the bottom end and do next to nothing for high end (excluding the the truly high-end which operates under entirely different dynamics altogether).

There will be great wailing from coasts at this but there will be almost zero political will to extend gov efforts to the high end. How could fly-over state representatives ever be convinced that bailing out rich coastal homeowners is in the best interests of their constituents?

Maybe I’m dreaming, but I think this is the end for the coast. Give it a year or two and coastal declines will match or exceed inland declines. Yay!

Lyra the optimist.

[Lyra]

“Also, didn’t FNMA and FMAC just lower the amount for loans that they are willing to buy?”

Starts Jan. 1, 2009.

Assuming they actually go through with it. I have my doubts.

But if they do, it’ll be another nail in the coffin of CV (and other similarly priced ‘hoods).

[Lyra]

“Also, didn’t FNMA and FMAC just lower the amount for loans that they are willing to buy?”

Starts Jan. 1, 2009.

Assuming they actually go through with it. I have my doubts.

But if they do, it’ll be another nail in the coffin of CV (and other similarly priced ‘hoods).

[Lyra]

“Also, didn’t FNMA and FMAC just lower the amount for loans that they are willing to buy?”

Starts Jan. 1, 2009.

Assuming they actually go through with it. I have my doubts.

But if they do, it’ll be another nail in the coffin of CV (and other similarly priced ‘hoods).

[Lyra]

“Also, didn’t FNMA and FMAC just lower the amount for loans that they are willing to buy?”

Starts Jan. 1, 2009.

Assuming they actually go through with it. I have my doubts.

But if they do, it’ll be another nail in the coffin of CV (and other similarly priced ‘hoods).

[Lyra]

“Also, didn’t FNMA and FMAC just lower the amount for loans that they are willing to buy?”

Starts Jan. 1, 2009.

Assuming they actually go through with it. I have my doubts.

But if they do, it’ll be another nail in the coffin of CV (and other similarly priced ‘hoods).

[Author]

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