The economy is teetering on the edge of a cliff....

[Blackhatjack]

No mortgage loans available except for the most well off -- over a year's worth of 'inventory' in houses now on the market for sale -- tens of millions of loans about to reset at higher interest rates in the next 3 months -- housing starts down and construction jobs being laid off -- housing suppliers are reeling -- housing prices are plummeting as sellers become desperate and sell at firesale prices lowering the overall housing prices for everyone which reduces home equity that people were using to ride this out -- individual debt is staggering and credit card companies are raising interest rates and fees to get what they can today before people are unable to pay them -- prices of necessaries are going up --and the wealthy are taking their money out of the economy which is negatively affecting everyone.

We are in dangerous territory unless there is some government intervention, which looks like it will not happen soon enough to head of a lot of pain.

[Hubert Flottz]

1. Do you mean to tell me that you disagree with King George?

He said yesterday that we're doin' great. Do you think Saint George is a liar?

[no_hypocrisy]

7. Is he a liar? You tell me.

He says, "I'm not an economist" but he has an MBA.

You can't have it both ways babe.

[Hubert Flottz]

10. I think he'd lie to you just to avoid telling you the truth...

I can't think of but a couple of times he's told us the truth so far. Both times had to do with the word dictator.

[SpiralHawk]

2. "You can depend on me and the republicon cabal to do a heckuva job." - Commander AWOL

"Yeah, you little people can put your worries behind you. The republicon Homelander cabal will (smirk) take care (smirk) of everything. As usual. Smirk, sneer, smirk."

- Commander AWOL

[ramapo]

8. Lots of blame to go around

We have an economy with a foundation of debt on all levels from personal right up to the federal government.

We've sold our debt to anybody willing to buy it so that we're at the mercy of the Chinese among others.

We've willingly given up countless jobs to foreign countries.

We've willingly let countless foreigners fill many of the best jobs that we have to offer.

The national motto is borrow and spend. Ron Reagan started the trend. Bush II has perfected it.
Even Clinton deserves some blame, especially around NAFTA and H1Bs.

[SpiralHawk]

47. But the republicons, beyond dispute, bear RESPONSIBILITY

As much as the diaper-clad brigade of republicon Homelanders wants to shift it on to someone (anyone) else, they are RESPONSIBLE for this mess because they are not "conservative." They are radical and they have fouled the entire economic nest with their greedy, self-serving, perverted republicon radicalism.

[lonestarnot]

3. Bye bye black bird.

[seemslikeadream]

4. non intervention

That's what georgie is there for

[SpiralHawk]

54. Yep - AWOL. As ever.

At least George is dependable. Always AWOL.

[villager]

5. what will the smirkoids pay attention to -- short of mass riots?

n/t

[Nothing Without Hope]

9. They would LOVE anything they could call a "mass riot."

That would be their excuse for activating what they already have in written preparation: dissolving Congress and taking the final wraps off the totalitarian, fascist dictatorship. The government prison camps stand ready.

[villager]

12. so we do nothing, and sit here passively?

n/t

[marmar]

6. A muddy cliff in an earthquake zone.....

:scared:

[IndianaJones]

11. why so negative? jeez. nt.

[NMDemDist2]

13. Donald Trump was just on CNBC and said a recession is inevitable

and a depression is quite possible..."for quite a long time..."

the Fed just pumped more cash into the system (that's twice TODAY!)

[Eurobabe]

35. And the ECB and others overseas are doing the same

could this trigger a global meltdown? :scared:

[Yupster]

67. Recessions certainly are inevitable

They come every five years or so and we haven't had one for a while, so ones coming for sure fairly soon.

[Blackhatjack]

14. CNBC Zuckerman --" Real Estate and Financial Bubbles Are Going To Burst..."

... and people will be smarter the next time.

[TalkingDog]

72. "and people will be smarter the next time"

Really?

When has that ever happened? Trust me, it will be the same crap wrapped in a new bow next time and people will buy it just like they always have. Money is like a hard-on, all thinking above the hindbrain simply ceases.

I'm not trying to be snarky. I'm just looking back at history and, on the whole, I have to disagree with you regarding the capacity of people to be self-reflexive to any degree that is useful.

I am an Optimistic Realist: Hope for the Best, Expect the Worst. The spousal unit and I have been hunkered down for a few years, waiting for the weasel to pop. We only owe our mortgage and I have a bit of a college loan.


I HOPE it turns out okay. I have few friends who invest for a living. There is one who has most of his portolio overseas; he is not very happy right now. My only joy is knowing Darth Cheney had 90% of his investments over there too.....

[Canuckistanian]

15. Paul Krugman on government intervention

The Fed normally responds to economic problems by cutting interest rates — and as of yesterday morning the futures markets put the probability of a rate cut by the Fed before the end of next month at almost 100 percent. It can also lend money to banks that are short of cash: yesterday the European Central Bank, the Fed’s trans-Atlantic counterpart, lent banks $130 billion, saying that it would provide unlimited cash if necessary, and the Fed pumped in $24 billion.

But when liquidity dries up, the normal tools of policy lose much of their effectiveness. Reducing the cost of money doesn’t do much for borrowers if nobody is willing to make loans. Ensuring that banks have plenty of cash doesn’t do much if the cash stays in the banks’ vaults.

There are other, more exotic things the Fed and, more important, the executive branch of the U.S. government could do to contain the crisis if the standard policies don’t work. But for a variety of reasons, not least the current administration’s record of incompetence, we’d really rather not go there.

http://freedemocracy.blogspot.com/2007/08/paul-krugman-very-scary-things.html

[truedelphi]

57. Well I am not sure that the money will stay inthe bank vaults - doesn't

A good deal of it have to be lent to the Feds to pay for the two trillion dollar Iraqi war??

[Virginia Dare]

16. The power elite threw in the towel long ago..

that's why people like Dick Cheney and Bill Gates have been stocking up on inflation-protected bonds, the rich have bought up much of the Gold, and Congress was busy passing Bills on bankruptcy and other protection for the banking industry. It's obvious the Fed is just going to stand by and let it play out...:scared:

[screembloodymurder]

29. Great point!

Think they didn't see this coming? Think again.

[Sadie4629]

17. Depends on how you define 'well off'

"No mortgage loans available except for the most well off"

Part of the problem is that a lot of underemployed 24-year olds think they are entitled to home ownership. There is a benefit to delayed gratification. Paying rent sucks, but if you can do it and save the 20%--30% down payment that will make a mortgage a reality and something you can afford.

[Blackhatjack]

19. There is an education costs aspect to this problem...

Young people are graduating from college with huge debt that must be paid back. Jobs are leaving the country and prices are rising.

It is not as easy to save 20-30% as a down payment when the average home price is around $200,000 in most major markets. (REmember you have to take into account that earnings tend to be taxes higher than investment income, so you can up the amount needed to be earned to around 30-40% in pretax dollars).

And when housing starts and housing sales plummet it affects every aspect of the economy.

[Sadie4629]

34. Student loans have been a problem

for new graduates ever since I can remember. You pay them off as quickly as you can, and THEN you start thinking about a mortgage.

People have been predicting doom & gloom in the housing market forever. You should have tried thinking about a mortgage in the 70's and 80's! Our first mortgage rate was over 12% and we thought it was a good rate! You could look at your statement at the end of the year and find out you'd paid something like $97 on your principle.

[marions ghost]

30. hmmmmm

why do you think this has so much to do with '24 year olds who think they are entitled to home ownership'?

The ones I know aren't anywhere near home ownership and cannot save a 20% down payment while paying rent (and paying off school loans--I've heard of school loan debt as high as 30-40K, at 24 or so).

In many markets houses are far out of the realm of affordability for this age group.

I don't see it, but maybe you can provide details.

[Sadie4629]

32. It was on the news the other night

Can't remember which network. A young single mom couldn't find a house she could afford!

Student loans have been around for years. My husband and I had them in the '70's. His first professional job paid $11,500/year, and I had a crappy job that paid maybe around $6000.

When we started looking to buy a home, interest rates were in double digits. Lots of people were getting ARMs, or balloon mortgages, and losing their homes. A $40,000 home was more than we thought we could afford. A $50,000 home would have been completely out of our price range. Yes, we saved for a down payment, and did without a lot of the things we wanted. We are now in our 50's, and hav been homeowners for close to half of our lives.

Things are no worse now than they ever have been.

[marions ghost]

46. So then

you did get a home in your 20's? :shrug: And how was the housing market different then? Was it REALLY the same?

--------------------------
I'm no expert on housing, I'm just observing this housing bubble situation. Maybe some more knowledgeable person can compare the period you're talking about with how it is now re. attainability and price-to-income ratios more effectively. But here's some reading--

Here's an old but well-written article that talks about the housing market in the 70s-80s:
http://www.via.vt.edu/winter94/housing.html I found it enlightening.

Here's an article from 2005, more on the crisis we have now:

/snip/
"Repeating what we have heard over and over, in 17 locations nominal home prices surged by 20 to 30 percent in 2004, on top of 9 to 18 percent increases the previous year. Another 57 metropolitan areas saw increases of 20 t 20 percent.

The number of metropolitan areas where the average home costs more than four times the average income has more than tripled from 10 to 33 in the past five years and this ratio is now at a 25 year high in more than half of the metropolitan areas in the study and these metro areas, largely in Southern California, New York City and Southern Florida are home to about one quarter of the nation's households. http://www.mortgagenewsdaily.com/6302005_Housing_Market_Bubble_California.asp" /snip/

--------------------------

So WHY are you not sympathetic to a young single Mom who can't find an affordable house now, since you did find one when you were in your 20's?

[Sadie4629]

48. Not sure how the markets compare--

--but the interest rates are nowhere near as daunting as they were back then. If I recall correctly, the market was nearly dead. Homes up for sale literally for years. Truly a buyers' market, for anyone not put off by 12, 13, 14%, or higher interest rates.

"So WHY are you not sympathetic to a young single Mom who can't find an affordable house now, since you did find one when you were in your 20's?"

Although I was in my late 20's and my husband very close to 30, we had two incomes and no children. If either one of us had tried to get a mortgate on a single income, we couldn't have done it. And if either of us had tried as a single parent of two children, we would have been laughed out of a lender's office.

The following is from your first article:
"The 1950s 'starter-home' (about 1,500 square feet, slab construction, a car-port, and the option of leaving a room unfinished to save money) would find little acceptance in today's home-buying market, where consumers expect a new house to have ample size and conveniences."

The first home we purchased had two bedrooms, one bath, and an unfinished lower level. Maybe people need to lower their expectations.

Also, your article was about Virginia, and to my knowledge, that is a very expensive area to live. Maybe those people need to consider a longer commute and look for a home in a cheaper area.

[marions ghost]

49. So essentially you're saying that single parents

whether then or now, will always be "laughed out of a lender's office"? And is that a good situation?

How do you account for the unprecedented predatory lending that has gone on in the last few years--shouldn't that factor in to why optimistic young people in urban markets may be the perfect targets, rather than making judgments about their character? In markets where housing is so high, desperate renters may be any age. So they should move?

Although I understand your basic message is 'be frugal'--your teeter close to "blame the victim"--which I'm sure is EXACTLY how the predatory lenders would like us to view the housing crunch.

Taking young people alone --OK, WHO advised these young people of today? WHO ensnared them in mortgages that have a good chance of failing? WHO told them to overextend? Their parents, the lenders, the advertizers. People in their 20's are followers who want to fit in usually. In the 70's, there was still the anti-materialism of the 60's. A lot has changed since then.

This phenom is taking place all over the world BTW.

All I'm saying is--is there another way to look at it that doesn't make this so much about the charcter of these borrowers (character attack is kinda right wingish isn't it?) Isn't it a natural tendency in a consumer culture to keep up with the Jones, especially since the Reagan Revolution...in which the live frugally message of the 60's was completely lost?

[Sadie4629]

50. Of course I'm not saying that!

What I meant was that if either of us, with the incomes we had at that time, had attempted to apply for a mortgage with two kids to support, there is no way it would have happened.

And that is no judgment on anyone's character, but I do question the common sense of anyone who thinks homeownership is worth working multiple jobs, or doing without some of the extras in life!

There is no doubt that there is a problem when lenders are willing to give mortgages to people who can't afford them, or who can only afford them by being mortgage slaves. But, unless there is some legislation to rein them in (and there probably should be) then, caveat emptor. I think our public schools need to do much more to equip our students with the tools they need to make good financial choices throughout their lives.

My son and his g.f. (both 23) live in Boston. Their tiny apartment is owned by some guy who bought it for his daughter to live in while she was in college. He wants to sell it in the worst way--for somewhere in the neighborhood of $200,000. He has put pressure on these two young people to get it off his hands. They are resisting his efforts, and they know that if it means they will have to move when he sells, then so be it. No one is going to hold a gun to their heads and force them to do something they know they will regret.

[marions ghost]

53. Well our society is not particularly interested

in citizens making good financial decisions. So I doubt you'd see kids getting financial information in school. I agree that's where it should start. Parents aren't doing such a good job of guidance in this area. But there are some powerful pressures on them.

Your son is lucky in that he has good advice from his parents, but many people don't. I mean, look at the way middle class parents are suckered into these big weddings these days. I am shocked and horrified at the cost of these extravaganzas--the wedding industry plays on people's emotions. My nephew is getting married next year & nobody involved can really afford the kind of wedding the bride and her mother are already planning. (The parents are willing to go into debt for it! And so my nephew's parents feel they must also help out, never mind tradition. So they're trying to split the cost, but it's not a wise thing for either family). Yet nobody wants to say the Emperor has no clothes. Obviously it would make much more sense to put the money on her large student loan debt or to any future house purchase. Everybody knows you can have a very nice wedding day for much, much less. But the voracious industry has won... and so, after such a blow-out wedding, well you don't expect to live in a dump afterwards. The girl, after grad school, has gotten a job as a high school teacher. My nephew is in grad school and will have a low-paying TA before he goes into University teaching hopefully. Not exactly the path to riches. Neither of them can afford any more debt. So that's how they're starting out... but who's "fault" is it if they overspend at some point?

I'm not really taking issue with you personally Sadie...just trying to understand these conditions
and get some dialogue going about it. I don't have answers. But you seem to see this as an individual problem, while I'm saying it is more a societal problem.

Analyze your sentence here:

"Unless there is some legislation to reign them in (and there probably should be) then, caveat emptor."

Huh? That sounds like a contradiction--sounds like the pro-business "justifiable exploitation" position to me. You probably don't have any sympathy for those who are taken in by scams and fraud posing as legitimate business.

[mrdmk]

58. In the 70's, let me think back

In the early 70's, $50,000.00 could by you a 6 bedroom home with 4,500 sq. feet. In the late 70's $50,000.00 could by you a 4 bedroom condo with 2,500 sq feet. These prices are from Southern California. A little bit of inflation being a problem in those days. So which part of the 70's are we talking about?

Another thing, very, very few people have been able to leave college and buy a home with there first job. You are not stable enough at that time in your life. But you are correct about the high interest rates, also wage and price freezes were in place at that time. Also need to mention, in the early 70's, a women getting credit was a joke, most credit was put under the husbands name and that was that. Yes there were a lot of problems then has there are now.

[BamaGirl]

71. I have to disagree with this

Things are no worse now than they ever have been.

I've talked to my parents at length about this, belive me. They bought and sold two houses in the 80s, 1 in the 90s, and bought 1 in 2000 they're trying to sell now. The only one that sold fast was the one in the 90s of course. But my father (who just put in for his SS and is retiring--64 now. I can't believe it!) will tell you it was never the housing market/expense that drove whether he sold and moved up or not. It was the day to day expenses. The electic bill. The gas to work. The medical expenses. The grocery bill.

We bought our house 10 years ago. I was 25, the hubby was 27. We were both in the Army and it's a 1300 sqft starter house. Could we have bought the house in 1987? I don't know, but I think the answer is yes (after talking to my parents). Could I buy my own freaking house now? Hell no. In ten years, my mortgage payment has gone up about $150. And ten years ago my electric, phone, cable, etc were all less than my mortgage payment. Now, they are way more. The interesting thing is our income has doubled over the last ten years. (Getting out of the pre-9/11 Army will do that for ya.) Yet my expenses have gone way up. We are not extravagant people. I have one car payment on a Huyndai I bought used (it's cheap and good on gas!), we don't have a lot of toys, etc. We do have three kids which brings me to what is absolutely killing us now--food and medicine. Now, I've talked to my parents about this because I keep watching my grocery bill go up and up and up and it's freaking scary. Over half our take home pays go straight to Winn Dixie or the Commissary. And I'm a smart shopper. I know ppl who spend more than me with lots less ppl to feed. Still, 1k a month at the grocery store seems a little excessive to me, especially when you don't buy a lot of junk, don't buy the boxed pre made shit. And medicine? My daughter's last inhaler cost $100 AFTER the insurance paid. Yeah. That's a big improvement over two years ago when that same inhaler cost me $35. And my other daughter? Her last migraine med cost me $120. For five freaking pills. That two years ago they paid for. Now they're saying since she's under 13 they won't pay for migraine drugs. Cause that ER visit is so much cheaper, ya know? I live in fear of doctor's visits and prescriptions, I really do. Oddly, when I talk to my parents about these things they don't have the same kind of memories. Their insurance paid. Their grocery bill was never more than half their income. To be middle class in today's America is to live in fear. Fear of sickness, fear of food, fear of housing. It's crazy and it shouldn't be this way.

So, sorry, I'm sure this is a rant you didn't want to see lol. :) But I couldn't let that go. Things are different. Way, way different in the last five years much less the last ten. You should hear my Dad lol. His father was a Teamsters organizer (in the South!) and Dad is, I think, at about the end of what he can tolerate. This country is breaking his heart.

[lapislzi]

39. I alone of my colleagues live in a cheap house

I bought my house 12 years ago and have been plowing money into it ever since. I paid less than 1/3 of what it's alleged to be "worth" now. What's it worth? It's worth the amount I owe the bank. That's what it's worth, as far as I'm concerned.

Meanwhile, my colleagues, who are all roughly the same age, have dived into homebuying in a dizzying and scary way. They're all in 750k homes. I don't know how they can do it. I struggle with my small mortgage. How do they manage their whoppers? I worry about them.

I was brought up to cut my coat to suit my cloth.

[Sadie4629]

41. Good for you!

Among other benefits, you probably sleep better at night than any of your colleagues.

My son intends to save enough to purchase his first home outright. He and his fiancee are both smart about money, and they are living frugally. In the long run it will be well worth the sacrifices they are making right now.

[wiggs]

18. This is why the WH was so interested in private health care savings and

privatized social security...would have propped up Wall Street for a while longer and provided more plebian money for others to skim.

[Blackhatjack]

20. Well privatization would have got them off the hook for a huge of amount of costs...

[gratuitous]

21. The solution is obvious

Another tax cut for Paris Hilton. Sheesh, it's like you guys don't understand basic economics at all!

[JuniperLea]

22. It's not just the economy... that's just a symptom...

There is a very thin veil of propriety draped over civilization as a whole... the proverbial shit could hit the fan on the economic front and drag that veil off real quick.

[stirlingsliver]

23. Great Depression II

After this, people will refer to the Great Depression of the 1930's as "The Great Depression I".

George Bush will be known as Herbert Hoover II.

[Jim Warren]

59. and we'll be known as

the fools who sat idle watching it go down.

Puts a new spin on American Idol don't cha think?

[stirlingsliver]

62. American Idle, Actually

We will, indeed, be known as the fools who sat by.

American Idle.

[Blackhatjack]

24. OK this should tell us a lot --Fed injects 19Bil & 16Bil same day, and Down still down 124 ...

[Hydra]

25. K&R

The writing has been on the wall for a very long time. We've been floating on the exploding housing market for years now...and nothing being done to to expand other areas when that finally played out.

This is easy to see when you're poor, though. When I had a little extra, I would buy more food, buy books, go to the movies, go to the doctor, go to the dentist, buy ice cream or smoothies as snacks, travel, etc. Now I stay at home, get books and movies from the library, haven't seen the doctor in years, I go to the dentist when I can scrape enough money together, and I forgo the little extras I used to enjoy.

This is important, because this is business these people lost, and it's not because of anything they did wrong- I simply can't do it anymore. When money isn't moving around, things literally grind to a halt. This is the ultimate flaw of trickle down- the people that have it don't want to spend it. They want to invest it safely, which means that new companies and risky ventures get passed over, and the so called luxury market that is created is not as big as you'd think. When you have 20% of the people who used to have money, even though they have more of it, they'd have to buy 5 times the items to substitute for the original system. I've found that rarely happens.

It's better if more people have more money, and it stays fluid, rather than the hording mentality within the much smaller group.

This all reminds me of hardened arteries, though. We know where that leads...

[onethatcares]

26. I'm going to work on Sen Stevens house

N/t

[Blackhatjack]

27. Q just asked --"Are the Banks hiding their subprime problems?"

Demanding that hedgefunds pay up on margin calls because the banks say their subprime holdings are not worth much, but the subprime holdings of the banks are being hidden.

Not just hypocritical and inconsistent, but a key component in what could be a major collapse of that information becomes known.

[screembloodymurder]

31. Yes, and that was the SEC asking the question.

Shouldn't they know?

[KharmaTrain]

33. The Banks Saw This Problem Months Ago

I first became very aware of the sub-prime time bomb at a meeting I had with some Chase investors last April. They talked about the growing stockpile of unsold houses and defaults on loans that were stagnating the market and overall property values. This stuff isn't as much hidden as it is ignored...the mindset that there's always some sugar daddy or quick fix that will solve any credit crunch.

[KharmaTrain]

28. More Fallout...Crumbling Tax Bases

Houses that sit empty or are sold at a lower value mean lower taxes paid to the local governments...many already stressed by losses on the state and federal level. And yes, there is already a lot of pain...this will make it worse on those who can least afford it. Today, our state government is going broke...and there's no certainty we'll get a federal budget passed by years' end without asshat twisting it all around. This is a serious problem that is getting glossed over by the corporate media. While they report the market losing, they don't show what that loss means...the people who have been forced out of their homes or jobs or both due to an economy that's been imploding for the past 6 years.

Sadly, the government is intervening...the Fed is trying to pump the few dollars it has, to prop up this growing crisis, but no sooner is one creditor plugged another one starts to go under. Years of speculating in risky lending and market manipulation are no longer working and the deck of cards is crumbling. Unfortunately, with it are millions of lives, homes and jobs.

I've lived in my area for almost 20 years...it wasn't that long ago that a house wouldn't stay on the market more than a few days. Now I see For Sale signs all around...some homes have sat that way since last Fall.

This crunch could go real deep...methinks if this bleeding is to stop, it'll take a major foreign bailout...and then watch the national debt soar.

[OzarkDem]

45. Good point

I was just thinking the same thing. It filters down to local and state governments, who are more dependent than ever on property taxes for roads, schools, health care, services, etc. Combine it all with rising numbers of uninsured and you have an even bigger health care crisis on your hands, especially when local governments can't provide adequate funding to public hospitals and clinics who serve low income people.

Business tax breaks have further eroded their financial stability. Here in Ohio, tons of money has gone into offshore accounts thanks to crooked tax policies and little or no policing.

No fun waiting for all the shoes to drop. :scared:

[Blackhatjack]

36. This was expected when the Repubs pushed through the bankruptcy bill....

This is going to be particularly painful to the working class.

[ayeshahaqqiqa]

37. August should be our busiest time

In Arkansas, you need to have a termite job or transfer of existing policy if you sell your house and the buyer is getting a loan. We've done 4 termite jobs. We've had only 4 transfers of existing policies. We have one new job to do next week. When I went to the abstract office yesterday, the closers were all sitting around with nothing to do. Realtors have put off paying us for pest work we've done because they don't have the money to pay.

[Skidmore]

38. Now for the big land grab. It's coming.

The wealthy take their money out of the economy and grab real estate on the way out the door. So much for the ownership society.

[Poll_Blind]

40. Yep! Spot on! n/t

PB

[hunter]

42. They can grab it, but can they hold it?

I have my doubts. We the People won't be happy and will be in hot pursuit.

[judaspriestess]

43. Here is some good info I received in an email

To understand where we are you need to understand how we got here.

In recent years, Wall Street investors got heavily involved in the mortgage business through asset-backed securities, made up of pools of assets, that investors can invest in.

Let's say Countrywide puts together $700 million of mortgage debt from 2000 different homeowners. They then move it to Wall Street who packages that into a mortgage-backed security. So investors invest in this package and when the borrowers make their payments, the investors collect their dividends. Wall Street takes a cut for doing it and Countrywide gets a nice price for their package of loans. Not a bad deal for everyone, huh?

So keeping in mind that these investors get paid as borrowers make their payments on their mortgage, when people don't make their payments, and let their home go into foreclosure, the mortgage-backed security loses its value, investors lose money, they panic and then bail out on them.

This brings us to today where we have near record foreclosures in many areas and many more are coming due to resetting adjustable rate mortgages.

Of all of the subprime loans done last year, 75% have ARMs that will adjust next year. Talk about the tip of the iceberg. Combine this with depreciating home values and the mortgage-backed security has become a very risky investment. These securities have become impossible to sell unless they are priced in such a way to be considered worth the "risk" to investors.

So let's say you were an investor in mortgage-backed securities and you have been losing your shirt. If you were an aggressive investor, you would tell Wall Street "don't bring me anymore of that garbage unless the interest I can make is substantial. I am willing to take the risk, but I want the reward." That means high rates and bigger down payments.

If you were a conservative investor, you would simply say "no, thank you." That means less programs choices and limited credit.

The investor market for mortgage-backed securities is frightened right now. They are afraid to put their money behind it. I recently heard a story about a firm that was out shopping $90 million of seven-year interest-only ARMs all at loan-to-values of 80% or less and could not find a single investor. Not one.

When American Home Mortgage closed, their CEO said, ""Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative." This sums it all up.

The biggest banks in the world have nowhere to sell the loans they are making and they don't have the money to keep these loans themselves.

With nowhere to sell these loans huge companies, like New Century, American Home Mortgage, and Fremont, and scores of other smaller lenders have already gone out of business. Many more are going to follow.

[Blackhatjack]

44. Have you noticed rents have gone up? Rental properties low in inventory?

People are looking for rental properties, and the overall rents have risen in this area.

What option is left if a family cannot get a loan for a house, condo or townhome, AND they cannot find a rental property?

I know of several individuals who commute from rural areas quite a distance to and from work each day because they were priced out of this market.

[truedelphi]

56. If the bubble has truly burst, then that will probably

No longer be true.

Where I live - the investors built way too many houses two years ago and as of about four months ago I started noticing that rental prices were coming down.

If you live in an area where there is high immigration numbers - and people are shacking up thirteen and fourteen people in a two BDRM place - those areas might not be affected for awhile.

[Yupster]

68. With inventories of homes for sale so large

right now, rental costs will soon be going down dramatically as some of the sellers move their homes to rental properties. Has to happen because if you can't sell a house you better get something to keep your mortgage going until you can sell it.

[Divernan]

73. My friend rented out her Ft. Myers, FL condo for about $400/mo. less than her costs

and was relieved to do so. She was not one of those invest-then-flip buyers. This was her first home (at age 38) and her govt. assignment job there, which she had been told was for seven years, was abruptly terminated (the whole office was closed) once Bush got reelected and Jeb finished as governor. She can't sell it because prices have fallen so much that the latest selling price for a similar condo was $20,000 less than her mortgage balance. If it weren't for the new bankruptcy law, she could declare bankruptcy and start over. So she's found a new job in a much less expensive state, and is a renter again.

[mzmolly]

51. No worries, I'm sure the "private sector" will act soon.

:sarcasm:

[Blackhatjack]

52. I am amazed at how the pundits cannot see the people losing their homes ...

They talk about investors and banks and mortgage companies and how the Fed Reserve Bank is acting on the behalf of the Government to stabilize the markets(to lessen losses for them) and yet there is very little being said about the individuals who cannot obtain refinances of their escalating loans, and individuals who cannot sell their properties because buyers cannot obtain mortgages.

The real world effects on middle and working class families really do not figure into their plans UNLESS these families can no longer make their payments on time.

[Danascot]

76. Add to your list:

People who go to sell their houses (because of job, divorce, etc)and find it will go for significantly less than what they owe on their mortgage.

[truedelphi]

55. When are people going to learn that the old adage "What Goes Up

Must Come Down"?? is the key to everything.

We saw the dot-com-market go plummetting because everyone had been told "This is one market that is different"

Then the same people who lost their shirts on that one plus additional others went out and did Real Estate because they were told "This is one market that has nowhere to go but UP!"

I have quit feeling bad for people in the investment class who lose - they want the hype and they want the mindless promise of being in on a winner.

But ya know, if it is too good to be true - it IS indeed to good to be true.

[Yupster]

69. My favorite investment expression is

Trees don't grow to the sky.

Everything comes down just like it goes up.

[lpbk2713]

60. ----->

(No caption necessary)

[rateyes]

61. I never have figured out why anybody would

have an ARM for a mortgage. I'm sure there's a time and place for it, but I couldn't do it. No way.

[Deja Q]

63. Well, who let housing prices go up so dramatically?

That was the problem.

[Morereason]

65. Housing prices went up because Capital gains was changed and investors flooded the market.

[davsand]

75. Housing prices were increasing over the last few DECADES.

It was a fairly steady increase over time. Right about the last ten to fifteen years, however, there was a HUGE jump in values like no other in history. It was not that gradual climb we had been seeing it was a straight vertical and it is probably gonna adjust downward. I saw a graph on this subject a year or so ago, and it scared hell out of me.

Something I have been wondering about for quite a while now, is what are people gonna DO when these mortgages go sour. There are some folks who are expecting owners to just kind of skate away in the night--like they will run away from their houses. I honestly don't know if I think it will go down this way. I'm starting to wonder if maybe this is gonna turn into some kind of revolt against the money changers and if maybe people are gonna barricade themselves INTO these houses...

I honestly don't know and I can't predict it.


Laura

[sofa king]

64. Why on earth would the Bush crowd wish to intervene?

If it keeps going the way everybody knew it was going to go four years ago, the people with all the money will also wind up with all the property.

And just to be sure, take a gander at the other side of the coin: name one self-serving, small minded, greedy, hateful reason for the Republicans to avert this crisis.

Can't? Then it ain't gonna happen.

[defendandprotect]

66. Eh . . . I think Congress just closed down . . . leaving this in Bush's hands -- !!!!

[Alexander]

70. Didn't the most intelligent DUers predict an economic collapse in 2007?

Sure enough, I can count on DU to know what's going on in the world.

[Danascot]

77. I'm in ...

I've been invested in bear funds, contra-U$Dollar funds, gold and foreign markets for almost two years, obviously expecting that things will not go well for the US economy. During that period it's been party time and irrational exuberance so I haven't exactly been regarded as a genius to my family and friends.

[truedelphi]

78. It's always hard to pinpoint exactly when the

Proverbial hits the fan - but better to be cautious and not party for a year or two than lose everything you've got after two years of wild times!!

[treestar]

74. Why do you hate America?

Seriesly, Joe Average is going to "discover" the new bankruptcy laws and suddenly think they are unfair and realize that it isn't only "deadbeats" who have problems, if this is all true.

I hope it's not, though.

That's the trouble with the way * borrows and spends. The chickens don't come home to roost until the next generation pays the price, and they don't see why they should.