Tuesday, March 31, 2009

What Does 4 in 10 Mean?

ABC News performed a poll and found that 42% of the US population believes that President Obama has the country headed in the right direction. They even made this sound like a good thing, knowing that the lemmings who read the news with a closed mind will not do the math and realize that this means 6 in 10, a majority for those of you who can't do the math, do not think we're headed in the right direction. I guess this is what you get when you call 52% of the popular vote a mandate.

You wanted it? You got it, along with Pelosi, Reid, Dodd, Waters and Frank.

Thursday, March 26, 2009

Land of the Free to Whine

And home of the over entitled. So, our President, in his entire web enabled glory, invited us, his loyal subjects to the White House website to submit questions on a variety of subjects. Obviously the one that most interests and concerns us, was his housing forum. The range of the questions was pretty narrow and most questions came in a few different forms, but the overall theme of the questions was sadly narrow.

Krysty from Corsicana, TX asks
Instead of bailing out banks, why can't we pay off the mortgages in foreclosure so banks would still get the $$ AND people can keep their homes? If we can give away $$ to huge corporations, why can't we give it to the American people who pay for it?
Well, Krysty with an extra 'y', its like this. You’re proposing a massive welfare state, which this country just isn't quite ready for, in spite of the socialist leanings of our President. Besides, how long will it be before someone like you is whining that someone down the street or around the corner got their bigger house paid for by this magical program you’re suggesting? I think it will take less than 5 minutes. Corporate welfare isn't optimal, but far more people depend on the big banks and the infrastructure they provide, than depend on the individuals staying in their over priced ill financed homes. This problem is far bigger than many people truely comprehend. Then there is this fool...

Jenn from Honolulu, Hawaii states
My husband and I work FOUR jobs to stay current on our mortgage. I was forced into an ARM and am afraid of my mortgage adjusting. No one will refinance our loan and I would need to default for loan modification. What options are available?
Well Jenn, I admire your aggressive effort and willingness to work FOUR jobs, but nobody forced anyone into an ARM, most people ran head long into an ARM, as they irrationally pursued homeownership with all the trimmings. The only option that should be available is foreclosure and a market correction to more normal pricing. The American Dream, as the cliché of homeownership has become is really a privilege, not a right. Same goes for refinancing.

Alan McVickers from Hagerstown, MD, not far from our nations capitol seems to think otherwise
We pay our house on time (bought in 2007), have great FICO but can't refinance due to housing loan to value issues (economy based). What plan is there for people like us to get a lower rate without points, more cash down and no mortgage insurance?
Sorry Alan, if you couldn't afford it, you shouldn't have bought it.

I appologise Alan, it was incorrect of me to assume you couldn't afford the home.

What I should have said is that a refi is simply not a right guaranteed to everyone. Yes, if you could refi along with millions of other home owners, you would have money to put into the economy, however, based on your comments for this posting, you haven't read any of my blog. If you had, you would understand that a correction, of epic proportions is absolutly necessary for our ecomomy to begin functioning normally again. Forestalling that correction only prevents a natural recovery, which at this point is our only option. We've over spent for 2 decades, our credit is maxed out. Furthermore, I think you over estimate the impact of the resulting spending if everyone were able to refi.

Then there are the people who will be most shafted by any bailout of our nations irresponsible borrowers.

Keesha from Valley, AL asks the real question, which I doubt our President will answer.

Is there are way to stop holding up home ownership as a banner for the American dream? Do you have a plan to give renters the same attention and opportunities for tax credits that homeowners get?
In fact, I will send an apology to the White House and post it here, if President Obama goes on national TV an answers this question or one in the same vein, in forth coming and believable manor. I'll be even more shocked if they answer my question.
Mr. President, I get the impression that your plans are essentially using my tax dollars against me, by using public funds to put a floor under troubled home owners. Whats in this for me, besides paying the freight on the death of my American dream?
The question length was limited, or I would have added that the feeble tax credits that put forward as part of this bailout, for first time buyers are a drop in the ocean, considering current price levels.

The President didn't take any tough questions. Mostly, he appeared to take questions which allowed him to further present his favorite issues and agenda. You can read the recap here. Like a good lawyer, he didn't allow any questions to be asked which he wasn't prepared to answer. Disappointing, eventually we'll see the emperor isn't wearing any clothes.

Tuesday, March 24, 2009

Stop Pouring Money Down the Drain

Look at this chart. All this money down the drain in a vain effort to stem the tide of mortgage failures. As I have said so often on this blog, you can only hold the tides back for so long. Eventually nature runs its course and frequently, its a far more angry course when we have meddled with its processes.

Sunday, March 22, 2009

Interesting Video

Politicians & AIG

Since it looks like Congress has taken square aim at a few dozen AIG employees, perhaps it time we all took the same aim at our elected officials. The Center for Responsive Politics, which tracks campaign finance reports that the donations continued after AIG received the first cash infusion of $85 million in September of 2008.

The top 10 recipients of cash contributions from AIG in 2008
1. Sen. Chris Dodd, D-Conn., $103,100
2. Sen. Barack Obama, D-Ill., $101,332
3. Sen. John McCain, R-Ariz., $59,499
4. Sen. Hillary Clinton, D-N.Y., $35,965
5. Sen. Max Baucus, D-Mont., $24,750
6. Former Gov. Mitt Romney, (R) Pres $20,850
7. Sen. Joe Biden, D-Del., $19,975
8. Rep. John Larson, D-Conn, $19,750
9. Sen. John Sununu, R-N.H., $18,500
10. Former Mayor Rudolph Giuliani (R) Pres $13,200

It’s high time our Congress stops feigning indignation and has a look in the mirror, because they are only fooling themselves, if they think that they are doing their, already low approval ratings any favors at the moment. In another move that screams quid pro quo; Chris Dodd was the biggest recipient of our tax dollars which were funneled back to him by AIG in 2008. He was also responsible for allowing the AIG bonuses to occur at all.

It’s a shame that Iowa Senator Chuck Grassley didn't include Senator Dodd, along with the AIG execs when he implored them to follow the Japanese model. After all, he was their biggest enabler in crafting the bill which allowed AIG to give these bonuses.

Monday, March 16, 2009

NAR Continues to Amaze

Or perhaps I should say, the NAR continues to deceive?

NAR stooge, Walter Molony said,
"You are looking at the best affordability conditions since we have measurement back in 1970"
Am I missing something? Did prices drop 40% last night? Last time I looked, at best prices were in the 2004 neighborhood. Is there some even more unbelievable loan type out there that makes pay option ARMs look expensive?

Oh wait, read a little further, he picks one of the most deflated and over supplied markets in the country to apply his hyperbole to. Someone once told me that there were three kind of lies ... lies, damn lies and statistics.

Once again, we see the NAR behaving in an unscrupulous manor. Basically, they will put someone out there as an expert and have them say something positive about a market that is 90% lousy. They will say anything to help one more fool buy a house at an inflated price.

Based on the Mr. Molony's comments, I have to wonder why the NAR president, Charles McMillan is upset about potential changes to the mortgage interest deduction proposed by President Obama. In fact, I have to wonder why, if these homes are sooooooo affordable, why they aren't flying off the market. Please note, my tongue is placed firmly in my cheek. Perhaps we don't need Congress and the President to be bailing out foolishly over extended homeowners.

Once again, the NAR proves itself to be less trustworthy than my dog when I leave a hamburger unattended on the table.

Thanks Investor's Business Daily

Conservative writer, Thomas Sowell, wrote this piece for the IBD. It should sound fimilar, I have been singing this tune for a year now on this blog.
Now that the federal government has decided to bail out homeowners in trouble, with mortgage loans up to $729,000, that raises some questions that ought to be asked but are seldom being asked.

Since the average American never took out a mortgage loan as big as seven hundred grand — for the very good reason that he could not afford it — why should he be forced as a taxpayer to subsidize someone else who apparently couldn't afford it either but who got in over his head anyway?

Why should taxpayers who live in apartments, perhaps because they did not feel that they could afford to buy a house, be forced to subsidize other people who could not afford to buy a house but who went ahead and bought one anyway?

We hear a lot of talk in some quarters about how any one of us could be in the same financial trouble that many homeowners are in if we lost our job or had some other misfortune. The pat phrase is that we are all just a few paydays away from being in the same predicament.

Another way of saying the same thing is that some people live high enough on the hog that any of the common misfortunes of life can ruin them.

Who hasn't been out of work at some time or other, or had an illness or accident that created unexpected expenses? The old and trite notion of "saving for a rainy day" is old and trite precisely because this has been a common experience for a very long time.

What is new is the current notion of indulging people who refused to save for a rainy day or to live within their means. In politics, it is called "compassion" — which comes in both the standard liberal version and "compassionate conservatism."

The one person toward whom there is no compassion is the taxpayer.

The current political stampede to stop mortgage foreclosures proceeds as if foreclosures are just something that strikes people like a bolt of lightning from the blue — and as if the people facing foreclosures are the only people that matter.

What if the foreclosures are not stopped?

Will millions of homes just sit empty? Or will new people move into those homes, now selling for lower prices — prices perhaps more within the means of the new occupants?

The same politicians who have been talking about a need for "affordable housing" for years are now suddenly alarmed that home prices are falling. How can housing become more affordable unless prices fall?

The political meaning of "affordable housing" is housing that is made more affordable by politicians intervening to create government subsidies, rent control or other gimmicks for which politicians can take credit.

Affordable housing produced by market forces provides no benefit to politicians and has no attraction for them.

Study after study, not only here but in other countries, shows that the most affordable housing is where there has been the least government interference with the market — contrary to rhetoric.

When new occupants of foreclosed housing find it more affordable, will the previous occupants all become homeless? Or are they more likely to move into homes or apartments that they can afford?

They will of course be sadder — but perhaps wiser as well.

The old and trite phrase "sadder but wiser" is old and trite for the same reason that "saving for a rainy day" is old and trite. It reflects an all-too-common human experience.

Even in an era of much-ballyhooed "change," the government cannot eliminate sadness. What it can do is transfer that sadness from those who made risky and unwise decisions to the taxpayers who had nothing to do with their decisions.

Worse, the subsidizing of bad decisions destroys one of the most effective sources of better decisions — namely, paying the consequences of bad decisions.

In the wake of the housing debacle in California, more people are buying less-expensive homes, making bigger down payments and staying away from "creative" and risky financing. It is amazing how fast people learn when they are not insulated from the consequences of their decisions.

Tuesday, March 10, 2009

No Sign of a Bottom

The stock market is in free fall. The housing markets are delusional. With no end in site, we are all bystanders as our government plunges head long into economic poliy which will take the US down the same route as Japan following the end of their real estate bubble. Our economic course is going to take our stock market close to if not beyond historic lows. Our housing market is stuck on emotion as a significant portion of sellers are comfortable letting the property languish well about current values and vastly above true values. Our President is comfortable submarining our markets with an indecisive set of policies and at best weak leadership. President Obama might have been the best campaigner we have ever seen, but so far, his first 50 days can only inspire the delusional and unobjective.

If you aren't worried about the markets, you don't have a dog in the fight and by dog in the fight, I mean a retirement savings.Heck, things are so bad, even Jon Stewart found a way to be relevant for once. Perhaps some day he will find humor too.

Monday, March 02, 2009

Don't Believe Me?

How about Robert Shiller. This chart clearly shows that home prices need to get back to a curve which parallels personal income growth.And then there is this chart from the US Census, which indicates just how far from the the pre-boom levels we are. A return to pre-boom, adjusted for inflation, levels would put us back on or near a point on the line which parallels personal income.