The Mother of all Housing crises!

[Value Buy]

US Housing Crisis Is Now Worse Than Great Depression
HOUSING, REAL ESTATE, HOME PRICES, DEPRESSION, GREAT DEPRESSION, ECONOMY
Posted By: Jeff Cox | CNBC.com Staff Writer
CNBC.com | 14 Jun 2011 | 12:04 PM ET
It's official: The housing crisis that began in 2006 and has recently entered a double dip is now worse than the Great Depression.


Prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s, according to Case-Shiller data.

The news comes as the Federal Reserve considers whether the economy has regained enough strength to stand on its own and as unemployment remains at a still-elevated 9.1 percent, throwing into question whether the recovery is real.

"The sharp fall in house prices in the first quarter provided further confirmation that this housing crash has been larger and faster than the one during the Great Depression," Paul Dales, senior economist at Capital Economics in Toronto, wrote in research for clients.

According to Case-Shiller, which provides the most closely followed housing industry data, prices dropped 1.9 percent in the first quarter, a move that the firm interpreted as a clear double dip in prices.

Moreover, Dales said prices likely have not completed their downturn.

"The only comfort is that the latest monthly data show that towards the end of the first quarter prices started to fall at a more modest rate," he said. "Nonetheless, prices are likely to fall by a further 3 percent this year, resulting in a 5 percent drop over the year as a whole."


Prices continue to tumble despite affordability, which by most conventional metrics is near historic highs.

The rate for a 30-year conventional mortgage is around 4.5 percent, just above the historic low of 4.2 percent in October 2010. The ratio measuring mortgage costs to renting is 7 percent below its norm, while the price-to-income ratio is 23 percent below its average, Dale said.

Yet other factors are constraining the market.

After the fallout from the subprime debacle, in which millions lost their homes when they defaulted on loans they could not afford, banks changed underwriting standards.

More than four in every five mortgages now require a down payment of 20 percent, and credit history standards have tightened. At the same time, foreclosures continue at a brisk pace, pushing more supply onto the market and pressuring prices downward.


Then there is the issue of underwater homeowners—those who owe more than their house is worth—representing another 23 percent of homeowners who cannot leave or are in danger of mortgage default.

Indeed, the foreclosure problem is unlikely to get any better with 4.5 million households either three payments late or in foreclosure proceedings. The historical average is 1 million, according to Dales' research.

The only bright spot Dales found, aside from the slowing in price drop in March, was some isolated strength in states such as Nevada, Michigan, South Dakota, Alaska and Iowa.

© 2011 CNBC.com
URL: www.cnbc.com/id/43395857/

[Value Buy]

Wow. Worse than the Great Depression.........
Might be able to get that ocean front property after all, as long as I pay cash.....

[AgeOfEnlightenmentSCP]

Well, if all you're gonna do is post stuff from goofy right wing websites...

[marshabar1]

Another thing I fear is hikes in home insurance rates that will plunge a whole new group of homeowners over the cliff into mortgage failure. We're just starting to see the hikes in my area and they are big ones.

[wyouser]

Concern is also growing that the stall in housing continues BOA and othe too big to fail banks may be in line to lose billions. BoA is already off 30% from its highs this year. finance.yahoo.com/blogs/daily-ticker/housing-stalls-bank-america-other-too-big-fail-135915624

[handyman2]

True the default issue is growing in NC for out of work folks and now many underwater people are starting to walk away. My daughter in NC manages apartment complexes for a major company and she says they cannot buy complexes fast enough to meet the demand of people losing or abandoning their homes.
My daughter in Tampa says their insurance went up frm $660.00 per year to $2400.00 in just one year and they live on the highest ground in Tampa. For many that is the straw that broke the camels back.

[wyouser]

$660.00 to $2400 in one year? And Uncle Ben still talks about NO inflation?

[floridayankee]

Jun 14, 2011 12:21:14 GMT -5 handyman2 said:

My daughter in Tampa says their insurance went up frm $660.00 per year to $2400.00 in just one year and they live on the highest ground in Tampa. For many that is the straw that broke the camels back.

New hurricane model will up Florida reinsurance costs

Florida regulators have approved a new hurricane risk model which is likely to drive reinsurance costs for insurance companies higher, in contrast to previous industry expectations that it would have little impact.

www.reuters.com/article/2011/06/03/us-insurance-florida-model-idUSTRE7522WS20110603

[marshabar1]

I'm convinced the whole nation will pay for the tornados, floods and fires. Predictions are for fewer hurricanes spawned this year but more landfalls. We're hearing it's hail damage that is raising rates here. I don't know what the law regarding rate hikes is but no matter, I believe the companies are spreading the big losses regardless.

[handyman2]

My insurance agent said his companies division went broke in Fla. during the last hurricane and the other divisions and reinsurance had to bail them out

[maui1]

if your house is paid for, when, and what cost percentage would you consider being 'self insured'?

[marshabar1]

Jun 14, 2011 13:13:02 GMT -5 @maui1 said:

if your house is paid for, when, and what cost percentage would you consider being 'self insured'?

I don't understand the question, maui. We are self-insured but a certain level of insurance is required by the bank. Either way a person would have to shop for competitive rates. Would you ever leave your property without insurance?

[maui1]

if your house is paid for, who requires you to have insurance?


Would you ever leave your property without insurance?


that is my question. if i have to pay 10% of my house value in insurance yearly, should i keep that 10% in an investment vehicle that i chose and use it if i sustain damage due to a storm or other issue that might cause my house some damage.

you have to also consider deductibles into the equation.

a lot of us in florida are facing this decision, as house values have gone down so low, and insurance prices, so high, some of us are at what i would think would be right to self insure.

[Deleted]

Prices have fallen some 33 percent since the market began its collapse, greater than the 31 percent fall that began in the late 1920s and culminated in the early 1930s, according to Case-Shiller data.

My question would be (& I don't know the answer) just how much did prices increase for the 10 to 15 year periods before the bubble popped in both of these time periods? To me that would be very important & pertinent.

I thought housing just before the decline was outrageously high & unsustainable. I have my doubt that was that way before the 1920's drop (I could be wrong). Now I agree that poor laws certainty brought on a collapse of the housing market & that our lawmakers are partially responsible, but rather than cause this mess I think they just brought it to a head earlier & made it a bit more widespread.

I also think that individuals were also responsible. They bought more than they could afford, paid to much for what they got, & when gas prices went up those living on the edge just couldn't pay their mortgages. The mortgage mess was a perfect storm for a lot of people & caused by a lot of different factors adding up.

[Deleted]

I guess that I should add that I still think a lot of housing markets are still priced to high. That's not saying that I believe that they will drop a lot more (but I wouldn't be shocked). That all depends on people & as we know there are a lot of stupid people out there.

[floridayankee]

Jun 14, 2011 13:48:53 GMT -5 @maui1 said:

a lot of us in florida are facing this decision, as house values have gone down so low, and insurance prices, so high, some of us are at what i would think would be right to self insure.

The one thing to consider before self insuring....while home values have decreased, the costs to raze and rebuild a home destroyed by a hurricane has not. Especially after a hurricane (or any other natural disaster for that matter) where labor will be in high demand.

Your best option, IMHO, is to fully insure and save at the same time. Over time, this will allow you to increase your deductibles to reduce the premiums as much as possible.

[Angel!]

Oldtex

[marshabar1]

Jun 14, 2011 13:48:53 GMT -5 @maui1 said:

if your house is paid for, who requires you to have insurance?


Would you ever leave your property without insurance?


that is my question. if i have to pay 10% of my house value in insurance yearly, should i keep that 10% in an investment vehicle that i chose and use it if i sustain damage due to a storm or other issue that might cause my house some damage.

you have to also consider deductibles into the equation.

a lot of us in florida are facing this decision, as house values have gone down so low, and insurance prices, so high, some of us are at what i would think would be right to self insure.

We're paying far far less than 10% so far and that includes millions in personal liability.

At 10% you really would have to start thinking about it. For many people the house was everything. Now nothing can be financed on it and it's hardly likely to represent a decent nest egg.

I suppose a lot of people simply can't afford to think about tomorrow.

Time we got a decent captain at the helm. This one seems hypnotized by the waterfall he's heading for.

[maui1]

old- here is a question......and we almost had it answered for us.

our govt promotes 401k investing and the use of the stock market. everyone today, is willing to overlook long term for short terms gains, no matter the value or damage of that gain.

what happens, if the stock market goes back to 6000 and stays there for 20 plus years, like it has in japan? do we hold the 401k investors responsible for their losses? are they stupid for investing in the game that our govt has promoted?

tuff call.........or is it our govt for getting us involved in the stock market in the 1st place, like they did the housing market in the early 70s leading to the 2007/8 crash?

and please 'rats' don't respond with "we are not japan" , as i know that and was only using it as an example of a possibility.

[maui1]

Your best option, IMHO, is to fully insure and save at the same time. Over time, this will allow you to increase your deductibles to reduce the premiums as much as possible.

good strategy, which is my present one at the moment........but leaning ever more to f--- it, and going it alone.

fyi....mars- i am not near 10% but i can see it coming, so it has me thinking.

[marshabar1]

Whether the government is to blame or not, and I think they are, the fact is people are invested in the manipulated ponzi scheme the same way we were invested in the housing market they destroyed.

The question is not if it will be bad but how bad it will be.

Personally I think it will be very bad. And I don't think there's a darn thing we can do about it. These things have occurred in the past and they will occur in the future. If it isn't natural disasters it's wicked men and their wicked schemes. This world is not a paradise and it never will be.

[henryclay]

According to a report by CoreLogic, ~~40% of ALL homes with a second mortgage in the US are under water, and some say the bottom hasn't yet been reached.

Second mortgages are usually used for thngs other than home improvement: things like vacations and automobile purchases, (the interest is tax deductible). When the foreclosure notice comes it probably makes that vacation or automobile purchas seem a lot less important.

The projection for selling to save a bad situation fro getting worse is not promising either. The chart in the link below indicates that on Long Island New York there are enough homes on the market now that it will take 16.6 months to move them all. Other places are just as bad, and nowhere seems to be a place where buyers are standing in line.

graphicsweb.wsj.com/documents/HAGERTYQUARTERLY1104/index.html

[Savoir Faire-Demogague in NJ]

but leaning ever more to f--- it, and going it alone

What about liability insurance?

[Savoir Faire-Demogague in NJ]

what happens, if the stock market goes back to 6000 and stays there for 20 plus years, like it has in japan? do we hold the 401k investors responsible for their losses? are they stupid for investing in the game that our govt has promoted?

If defined benefit pensios were still in vogue, the identical scenario would unfold.

[fairlycrazy23]

Yes blame the government, we shouldn't be making decisions based so much on the tax code.


But I think a lot of 401k, have more options than just stock based investments.

[maui1]

What about liability insurance?

you can buy that a lot cheaper as a separate policy. i also have a notion that your liability coverage amount dictates your suit amount. insurance carriers support themselves out of court.

as a person, going to court on your own, awards, if you are found responsible, are not even close to what insurance to insurance settlements are for.

[maui1]

If defined benefit pensions were still in vogue, the identical scenario would unfold.

i am not sure that defined pension benefits, covered much of the population.

But I think a lot of 401k, have more options than just stock based investments.

most have some sort of stock risk as most don't know squat about investing and are lead into the "more risk more gain" areas that stocks are the base.

[maui1]

i just hate the fact that when govt gets involved, it involves all of us, and anything that they push, automatically extends, indirectly the taxpayers implied guaranty.

example......obamacare, which puts us on the hook for trillions if it does not work out like our gov't predicts it will work out.

[maui1]

i don't have a problem gambling........just so long that it is not someone else gambling with my money.

[Deleted]

our govt promotes 401k investing and the use of the stock market. everyone today, is willing to overlook long term for short terms gains, no matter the value or damage of that gain.

what happens, if the stock market goes back to 6000 and stays there for 20 plus years, like it has in japan?

Maui1 of course there is a big difference between stocks & houses. The most important difference is that you have to live somewhere. You would be paying rent if you weren't paying to buy that house. You don't have to own those stocks & bonds plus you don't depend of them being there as shelter at the end of each day. Take what you would be paying on rent & subtract that from what a mortgage costs you. That is (more or less plus taxes of course) what buying really costs you.

Then there's the fact (seldom brought up) that you have locked in a payment for a place to live for 30 years. Sure you could be paying less today & next year for rent rather than buying but what if the economy comes back? Do you really believe that if your landlords property will bring in more money next year or 5 years down the road, he won't raise your rent?

Then there's freedom (mostly). As a tenant you have to do what your landlord says. No dogs, no cats, etc. When you own your own property very few people can limit you in any reasonable way. That may not be a big thing to a lot of people but it is to me.

Is housing a gamble, of course it is. It would have been a gamble even if the housing bubble had never popped. The truth is that very few people look at buying a house as what it is....which is a business deal. They buy with their hearts & not their heads. Like I said before (on here maybe), I could buy a ranch house outside of town & get a good deal on it. The odds are that it would NEVER increase in value (during my lifetime). That's because this town will never spread out that far. So if I wanted to make money on a house it would be a stupid deal. To make money on a house you start of by making money the day you purchase it. The how is pretty simple but it can be hard. You look for someone that wants to unload a house at below market value. There a lot of people that do that all the time, you just have to find the right one with the right deal. I paid $115,500 for a house that appraised by the VA for $152,000 & that was a low appraisal. At the time I figured it was worth between $160,000 to $165,000. Like I say it's not really that hard to do but it can take time.

do we hold the 401k investors responsible for their losses? are they stupid for investing in the game that our govt has promoted?[/b]

Interesting point. I'll say that I have not ever lost one cent that I've invested in the stock market in the 23 years that I've been investing. That's because I never sold. Yes, I've had some big drops in worth on paper but everything that I put in & more is still there. Housing is like the stock market in that some people shouldn't be investing is something that they know nothing about & if they do, then yes they should be called stupid (or at least gamblers). Buying a house or investing in the stock market without research is very much like walking in & putting 100 thousand on black 5 & watching the wheel spin. I here about people that lost everything in the crash & need it next year to live on & I think didn't you do any research? I've never seen any book on investing that did tell you to start getting into bonds 5 years before you retired. Just bought a house, retiring & the crash came? What the hell are you thinking buying a house just before you retired? The truth is that your plan was for it to just keep going the way that it had been going & YOU blew it. You spent money BEFORE you had it which is dumb too. Just my thoughts.