[SK in CV]

[quote=CA renter]While I admire your superior knowledge about accounting and finance, I’m not sure about your claim that the Fed is buying at “real” market values.

Besides, when foreclosures are banned and/or artificially held from the market (keeping supply low), and when interest rates are “artificially” pegged to the floor (propping up the price of assets purchased with credit), can we really be sure of the market values of these securities?[/quote]

Sure we can. Market value is a price at which an asset is exchanged between willing buyer and willing seller, with neither side under any compulsion to act. There was a time when the MBS market was frozen, there were literally no buyers. That is not true today. They are actively traded, so they do have a market value. The Fed may be keeping interest rates artificially low. But within that paradigm, assets have a very real value.

And foreclosures are not banned, nor are they artificially being held from the market.

[SK in CV]

[quote=CA renter]How much of the $1.25 trillion in MBS on the Federal Reserve balance sheet is marked to market?

http://www.newyorkfed.org/markets/mbs_faq.html

edit: According to the most recent information I could find, it is just below a trillion at the moment, though recent trend changes are up.

http://research.stlouisfed.org/fred2/series/WMBSEC

http://timeline.stlouisfed.org/index.cfm?p=data&rd_id=39%5B/quote%5D

It is, in theory, marked to market, at least to the extent market is below net aggregate cost. There were proposals at one time for Treasury to buy sub-prime debt at face value. I don’t recall if any of those proposals were enacted. (Treasury acts as a matter of law. The Fed has the luxury of acting solely based on policy.) The fed has been buying debt at current market values.

[SK in CV]

[quote=harvey]BTW, Morgan Freeman tells us to blame everything but guns.

Of course we should listen to Morgan – he has that wise demeanor.

He did say that, didn’t he?[/quote]

I’m not sure if you’re kidding about that or not…but no, Morgan Freeman didn’t say that. The alleged message from him about the shooting was a hoax. He didn’t write or say it.

[SK in CV]

[quote=no_such_reality]Actually, banks currently aren’t marking to market.

Unless that’s changed, that was the dirty part of the bail-out. The banks got to pretend that their bad loans were good loans.

Efficiency in the foreclosure process, squeezing out the upside down delinquents will improve the economy, by driving the housing market to a real bottom.

Real bottom, real growth as the economy absorbs the housing then puts housing back into productive use and regains construction.

We do that at the expense of a bunch of artificial paper and people pretending that junk bond equivalent of a mortgage is AAA. And continuing to pretend that the squatter is a home owner.

No sustainable economic growth is possible to be built of the house of cards we have today.[/quote]

Nope. Banks have been required to reclassify debt as soon as it’s delinquent. Including taking reasonable impairment charges. That hasn’t changed for decades. Keep in mind that the vast majority of mortgages are not owned by banks.

You’ll have to explain in detail how driving the housing market to a real bottom (whatever that means) will help things. It’s one of those things that has been repeated by idealogues for so long that some take it as absolute fact, despite no evidence nor logic that make it so.

Builders are building. For the first time in 4 (maybe 5?), new home construction is adding to GDP growth.

That whole “house of cards” is another buzz phrase that idealogues like to throw around. The economy is made up of dozens of different segments. Some of them have been built on bubbles in the past, and are sure to be again in the future. Housing was one of them. We went through a steep correction. The aftershock of that correction is still with is. But housing is no longer a “house of cards”. Price to rent ratios and inflation adjusted values are back to within historical norms.

Assigning neither credit nor blame for how we got here, the resolution of the mortgage crisis has worked itself out, almost to perfection. The softest landing that could have occurred. It’s not over, and a lot could still go wrong. But housing prices are now back to a very delicate normal.

[SK in CV]

[quote=moneymaker][quote=SK in CV][quote=no_such_reality]Just keep it simple.

Make the banks market to market on the delinquent loans.

Force them to foreclose or forgive the loan when it’s 180 days past due.

Problem solved as we liquidate all the pretenders, including several big bank.[/quote]

What does that mean? “Market to market”?[/quote]

I think it should have been “mark to market”, my probelm with that is you are telling them what to do, with my plan people have choices. Ultimately people’s lives are affected by their choices.[/quote]

“Mark to market” makes some sense. Thank you. It’s something banks have been required to do for decades. Banks not foreclosing on homes is not a drag on the economy. Forcing them to be more efficient won’t make the economy any better.

[SK in CV]

[quote=no_such_reality]Just keep it simple.

Make the banks market to market on the delinquent loans.

Force them to foreclose or forgive the loan when it’s 180 days past due.

Problem solved as we liquidate all the pretenders, including several big bank.[/quote]

What does that mean? “Market to market”?

[SK in CV]

[quote=Allan from Fallbrook]
As far as the Sandy Hook shooter not being a bad guy: The FBI investigation is indicating that he planned the event in detail and sought to maximize the damage. So, I’m gonna go with, yeah, this motherfucker was a bad guy.

[/quote]

What FBI investigation? Why would the FBI be involved? I’ve seen lots of commentary from ex-FBI, but I can’t find anything indicating the FBI is involved in the investigation. Nor anything from anyone directly involved in the investigation to indicate that it was carefully planned. I suspect otherwise.

[SK in CV]

[quote=AN]
First, what you’re saying is, data is wrong and your memory is better?

Secondly, that chart you’re showing from Robert Schiller is inflation adjusted. That’s a HUGE difference. I was talking about nominal prices. I could have sworn we were talking about price dropping when rate rises. Which mean nominal price dropping. Not price rising slower than CPI.[/quote]

At least the first link you provided also was inflation adjusted (2000 constant dollars).

Here’s what I know. I built 75 virtually identical units in 1980-1981. The early units sold pretty quickly at $71-$72K. By the end of 1981, I barely had nibbles. It took me until the end of 1983 to sell the last units for $66K.

The same houses were selling for less, in 1984 than they did in 1980.

Here’s a chart from this blog showing median prices essentially flat during that period.

Historical Home Prices, Payments, Rents, and Rates

[SK in CV]

[quote=AN]Nationally, price went up 43% between 1960-1970: http://www.census.gov/hhes/www/housing/census/historic/values.html. Price nationally rose another 52% between 1970-1975: http://www.realestatedecline.com/homepricehistory.htm. So, I don’t see how you can say those gains = “didn’t move much at all”. They did rose sharply between 75-80, but only by 77%.

As for San Diego, accord to here: http://www.laalmanac.com/economy/ec37.htm, I don’t see any decline. At least not from 1982 forward. Maybe you’re talking about 1980-1982.[/quote]

I was there. prices were flat in the early 70’s. then they rose.

Robert Schiller remembers it too.

http://calculatedriskimages.blogspot.com/2011/05/shiller-real-house-prices-ny-times.html

[SK in CV]

[quote=AN]Are you talking about CA specific or nationally? Here’s the historical data for rates: http://www.mortgagenewsdaily.com/mortgage_rates/charts.asp and here’s the historical CA median home price: http://www.realestateabc.com/graphs/calmedian.htm

I don’t see any flattening in the mid 70s. Rates went up from 1971-1974 and price went up in 1971-1974. Rates went down between 1974-1977. Price went up between 1974-1977. Rates doubled in 1977-1981 and CA median home price went up 72%. So, between 1968-1989, there weren’t a single year where the median home price in CA declined (I didn’t count 1984, since it was basically flat). In 1980, CA median home price was $99k and by 1990, the median home price $193k. So, were did you get price fell sharply between 1980-1990?

Like FormerSanDiegan said, I don’t see any correlation or causation between rates and price. Do you have data to back up your assertion that there is one?[/quote]

Nationally. Housing prices didn’t move much at all from about 1960 to 1975. They rose sharply through the end of the decade.

Prices did go down in the early 80’s. At least they did in San Diego. Builders got killed with unsold inventory and high interest rates. I was one of them.

I mistyped or misedited, I changed that paragraph a whole bunch. Interest rates peaked in 1980 and fell through the next decade.

[SK in CV]

[quote=FormerSanDiegan]
Interest rates increased dramatically in the period form the late 1960’s to 1982. Did the rate of change of home prices increase or decrease ?[/quote]

It did both. Prices were mostly flat through the mid 70’s. As were rates. There was a bit of a real estate bubble at the end of the ’70’s, though prices did not rise as much as the CPI, as mortgage interest rates had already risen from the 4 to 7% range, to over 9% by mid ’74. RE prices peaked around 1980, then fell sharply through most of the next decade.

I think you’re asking the wrong question. The right question is what would have happened to home prices if not but for the changes in interest rates.

[SK in CV]

As Clare Boothe Luce said….no good deed goes unpunished.

[SK in CV]

[quote=Allan from Fallbrook]
Aecetia: Chicago is pretty much Ground Zero right now for out of control gun violence in the US.[/quote]

And Rahm is pretty much ground zero for shut-the-fuck-up.

[SK in CV]

[quote=Aecetia]Regarding gun control- that genie is not going back into the bottle. “The prospect of a renewed assault weapons ban in the wake of the Connecticut school massacre has set of a round of buying, as thousands of Americans head to their local gun store to secure the popular AR-15 — the model used by the school gunman — before potential government prohibitions on their purchase.”

[/quote]

Interesting, stock in both Sturm Ruger and Smith & Wesson are off 20% since Friday.

[SK in CV]

[quote=FormerSanDiegan][quote=anxvariety]

I am not in/on a lease, the question isn’t particular to Coastal CA – opinion is that both are mostly irrelevant. How can one argue that change in interest rates will not affect prices?[/quote]

If you look at the past 40+ years of data …increases in interest rates do not correlate with decreases in property values.[/quote]

Gotta be careful with the difference between correlation and causation. You’re right that higher interest rates haven’t correlated with lower property values. (As a practical matter, we haven’t seen interest rates do anything but go down for the last 30 years, save for some minor fluctuations.) Particularly in the last 30 years the Fed has been manipulating interest rates to counter inflation. So higher interest rates were used to stop prices from going up, or at least to stop them from going up as fast. So when price acceleration slows, interest rates drop.

Interest rates DO affect prices. The stronger correlation than interest rates v prices, is that between changes in interest rates and the rate of change in prices.

[Author]

Posts