Can the Fed Really End QE in March, December Home Sales Down 16.7% , Worst Drop in 40 Years.

[LargoWinch]

Re: Can the Fed Really End QE in March, December Home Sales Down 16.7% , Worst Drop in 40 Years.

The Shadow Inventory in some California counties is over 200% of the number on the MLS. Just a speed bump on the road to recovery :rolleyes:

Here is a roadblock to recovery:

[cindykimlisa]

Re: Can the Fed Really End QE in March, December Home Sales Down 16.7% , Worst Drop in 40 Years.

Let's play out the logic of that sort of move.

Let's suppose you are one of the 80%+ still employed middle-aged Americans...and you are depending on your home for your future retirement [which is why you didn't go crazy withdrawing equity when you re-mortgaged it to get a lower interest rate, and you haven't ever missed a payment].

How attractive is this pitch from your Federal Government today?

1. We are allocating new funds of $xxx Billions to help homeowners who cannot make their mortgage payments stay in their homes. Anyone who didn't borrow too much, has never missed a mortgage payment, or who is still earning enough income to pay their bills doesn't qualify.
2. We are also announcing the new big MAMA program for home buyers [Mortgages Are Made Affordable] with new funding of $xxx Billions to Fannie and Freddie to increase their purchases of new mortgages and newly created MBSs from banks throughout the nation. After all we trust the loan officers, appraisers, borrowers and ratings agencies to do the right thing by the American people, so we see no reason not to keep flooding the banking system with more cash because we just know they are going to lend it to deserving borrowers.

Bingo!

You nailed it.

I have been reading the tax code for years and this is how the dems and repubs have operated for at least 20 years. Your statement is the existing and future reality for many government programs.

For example, this was and still is how financial aid for students has worked since 1990s when my kids went to college, I worked and saved all my life so that I qualified for zero financial aide with two kids in college at the same time - two kids that basically got straigt A's and no financial aide.

Check out the tax code carefully now and see at what levels your social security is and has been taxed. The more pension, 401k and savings you have the more your social security is taxed. But you can beat this system somewhat if you read the regs and play the game with them. For example I already know the four years I am going to use my roth ira and the twenty years my 401k. Will make a gigantic difference in taxes paid on Social Security, which I will take at 62 mainly so I can avoid taxes at a high rate on Social Security.


Cindy

[Quincy K]

Re: Can the Fed Really End QE in March, December Home Sales Down 16.7% , Worst Drop in 40 Years.

Here is a roadblock to recovery:

I would venture to say that over 50 percent of those that reset between 07-09 are still currently lurking in the shadow inventory yet to be disclosed.

Also, there is absolutely nothing "prime" about a loan that is upside-down 100-200k, typical of the loans in CA, FL, AZ and NV that are resetting in 2010-12.

[Camtender]

Re: Can the Fed Really End QE in March, December Home Sales Down 16.7% , Worst Drop in 40 Years.

If the big fish are doing it, why wouldn't the small fry "strategically default" in increasing numbers?

They are coming……. Four months ago I knew of no one doing a strategic default (I just created a new acronym that surely will surely stick "SD"), now I know of two families performing a “SD”.
I have talked with a half a dozen or so other people recently that are considering the same thing. It’s no longer looked down upon ("So, I screwed the bank more than you did...............")
Here is a Bloomberg article from almost two years ago talking about the trend - I think more people have caught on...........

http://www.bloomberg.com/apps/news?p...AWI&refer=home


Foreclosures Jump 57% as Homeowners Walk Away (Update2) By Dan Levy

April 15 (Bloomberg) --
More than 234,000 properties were in some stage of foreclosure, or one in every 538 RealtyTrac Inc., a seller of default data, said today in a statement. Nevada, California and NV

About $460 billion of adjustable-rate loans are scheduled to reset this year, according to New York-based analysts at Citigroup Inc. Auction notices rose 32 percent from a year ago, a sign that more defaulting homeowners are ``simply walking away and deeding their properties back to the foreclosing lender'' rather than letting the home be auctioned, RealtyTrac Chief Executive Officer James Saccacio said in the statement.

[GRG55]

Re: Can the Fed Really End QE in March, December Home Sales Down 16.7% , Worst Drop in 40 Years.

More food for thought on QE etc. from FT Alphaville:

The bank problem in a single chart

Posted by Tracy Alloway on Jan 25 08:55.
In the wake of Obama’s dramatic financial reform proposals, released last week and aimed at breaking up the biggest banks, Deutsche Bank strategist Jim Reid is reprinting an updated version of one of his most controversial charts:



...Here’s Reid’s latest commentary:

One of our most used, requested and controversial charts of the last three years neatly explains the recent furore over the regulation of the banking sector. The chart is the one we called “The Trillion Dollar Mean Reversion” and today we republish it to frame the discussion on President Obama’s aggressive plans to regulate banking activity.

Indeed when we looked at this chart in 2007/2008, the world made very little sense to us. Over a decade Financial profits had decoupled from history, the rest of the economy and reality. A combination of moral hazard issues after LTCM, the repeal of Glass-Steagall and ultra low interest rates had allowed the imbalances to get ever greater, finally leading to the collapse of many financials and what would have been the collapse of the old economic system had the authorities not been so very aggressive in their intervention.

In all honesty 12 months ago we felt that the banks would likely become more utility-like in their profitability and their earnings would oscillate around their longrun trend – a level they had reverted back to after all the write downs. So the size of the surge in profitability in 2009 perhaps surprised us more than the ’shock’ writedowns did in 2008.

With hindsight its clear that had financial profits not rebounded in the manner they have done over the last 12 months then the Global Economy would still be mired in a deep recession with the risk of Depression high. The footprints of the ever larger size of the financial sector is all over the Global economy and to leave financial earnings back down at trend levels would be to leave a trail of destruction in the real economy. So whether it was luck or judgement, allowing financial to return to super-normal profits again (see chart) allows the economy to resemble 2007 in many ways. Previously we’ve dubbed this 2007-lite.

However now the tougher battle begins. The Global economy would be better served by slowly bringing down the size of financials and weaning the global economy off its reliance on the sector slowly over time. However that would allow the sector to still be making larger than trend profits for many years to come which as Politicians are finding is very difficult to sell to an electorate baying for blood. There’s no doubt that Politicians would gain short-term popularity by increasingly regulating the industry, however they would also run the risk of cutting short the recovery. There are no easy solutions.

In reality the mistakes were made in 1998 (LTCM and moral hazard), 1999 (repeal of Glass-Steagall) and the early 2000s (rates too low for too long after the equity bubble).

It might be that the fears emanating from last week’s announcement are overblown given the difficulty that they will find enacting them or getting them through legislative procedures, however the trend is your friend and the Global re-regulation of the financial sector is likely in the early stages.

The arguments discussed above are the main ones supporting our underweight European Bank Equity call from our 2010 Outlook. If the sector could get a clear set of rules that it will operate under then its clear that there is value in certain names. However no-one knows the rules at the moment and are unlikely to do so for some time. We stay overweight sub financial debt in the credit space as we think that the authorities will ensure that these companies will be remain going concerns under their stewardship.

[LargoWinch]

Re: Can the Fed Really End QE in March, December Home Sales Down 16.7% , Worst Drop in 40 Years.

Also, there is absolutely nothing "prime" about a loan that is upside-down 100-200k, typical of the loans in CA, FL, AZ and NV that are resetting in 2010-12.

Good point Quincy.

One must assume that this chart was created in 2006 or earlier than 2010.

[GRG55]

Re: Can the Fed Really End QE in March, December Home Sales Down 16.7% , Worst Drop in 40 Years.

If this Administration is serious about setting a new course then we can forget about housing...it's over. Housing is going to get thrown under the bus as the Dems cut their losses and turn on the bankers...who have done them no favours.

As Hudson points out, the heroics over housing was all about trying to support asset valuations on behalf of the financial sector. And too many Americans have now figured that out...and of the remainder, well they just see their tax dollars being used to bail out foolish "homeowners" who acted imprudently or worse, were merely speculating.

Even if one uses the U6 number, more than 8 out of 10 Americans are still employed. And its those voters that now count most, not the soon-to-be foreclosed "homeowner" or the chronically unemployed.

Wednesday's State of the Union is going to be directed at that 80%+ working constituency who are worried about their income security [jobs], future taxation levels [the deficit & healthcare legislation], educating their kids [skyrocketing college fees], and saving for their retirement [the economy]. If housing is mentioned at all it won't feature very prominently in that speech is my guess...the last thing still-employed Americans want is to bail out underwater homeowners.

But we've heard wonderful speeches from the Orator in Chief before, so a healthy scepticism as to how committed born-again Dems are to their newfound spirituality will likely prevail [I am not yet convinced], and probably warranted...especially if one is from Missouri. ;)

Front-running the State of the Union? :rolleyes:

Senate Democrats Said to Outline $80 Billion Job Plan

Jan. 25 (Bloomberg) -- Lawmakers will consider a jobs- stimulus package worth about $80 billion that would provide tax credits to small and medium-sized businesses that hire new workers, a Democratic senator said.

The plan, to be presented tomorrow to Senate Democrats, would include aid to state governments to prevent layoffs and additional funding for infrastructure projects...

...At the same time lawmakers are trying to show voters they are serious about taming the government’s spiraling budget deficits...

[Glenn Black]

The Only Solution for Housing?

How attractive is this pitch from your Federal Government today?

1. We are allocating new funds of $xxx Billions to help homeowners who cannot make their mortgage payments stay in their homes. Anyone who didn't borrow too much, has never missed a mortgage payment, or who is still earning enough income to pay their bills doesn't qualify.
2. We are also announcing the new big MAMA program for home buyers [Mortgages Are Made Affordable] with new funding of $xxx Billions to Fannie and Freddie to increase their purchases of new mortgages and newly created MBSs from banks throughout the nation. After all we trust the loan officers, appraisers, borrowers and ratings agencies to do the right thing by the American people, so we see no reason not to keep flooding the banking system with more cash because we just know they are going to lend it to deserving borrowers.

As usual, GRG55, you are correct. However, you speak the truth. Since when do politicians speak the truth?

No politician would ever think of making those statement. They will camouflage, distract, re-direct, deny, and call it anything and everything rather than speak the truth.