Housing prices fall 6+%

[8ballrollin]

Many markets are still way out of line with the historical numbers...

[K-dog]

Theoretically, couldn't GDP be mismeasured because of economic shifts and that would cause the ratio to be out of whack more than it should be?

[8ballrollin]

Originally Posted by K-dog

Theoretically, couldn't GDP be mismeasured because of economic shifts and that would cause the ratio to be out of whack more than it should be?

Yes, but the boots-on-the-ground reality is the free money (cheapest rates since the mid-'60s) fueled the ratio change.

[venomous viper]

This chart also seems to fuel the argument that housing has more room to fall before settling in.

[8ballrollin]

Another tidbet...

"Investors own about one-fifth of Bay Area homes in foreclosure"

"Las Vegas Sun analysis found that 74 percent of single-family homes in foreclosure during a six-month period this year were owned by investors who did not live there."

http://www.sfgate.com/cgi-bin/articl...type=printable

[8ballrollin]

Originally Posted by venomous viper

This chart also seems to fuel the argument that housing has more room to fall before settling in.

Yes, like about four more years of falling....

[venomous viper]

Some have reasons to be immune to a lot of drop. Median price homes, and special tax benefits like GO Zone.

[8ballrollin]

One other item on the credit markets...

"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.

"It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.

Lenders are hoarding the cash, shunning peers as if all were sub-prime lepers. Spreads on three-month Euribor and Libor - the interbank rates used to price contracts and Club Med mortgages - are stuck at 80 basis points even after the latest blitz. The monetary screw has tightened by default.

York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.

"The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard," he says.

"They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don't think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park," he adds ...."

"The market for asset-backed commercial paper - where Europe's lenders from IKB to the German Doctors and Dentists borrowed through Irish-based "conduits" to play US housing debt - has shrunk for 18 weeks in a row. It has shed $404bn or 36pc. As lenders refuse to roll over credit, banks must take these wrecks back on their books. There lies the rub.

Professor Spencer says capital ratios have fallen far below the 8 per cent minimum under Basel rules. "If they can't raise capital, they will have to shrink balance sheets," he said.

Tim Congdon, a banking historian at the London School of Economics, said the rot had seeped through the foundations of British lending.

Average equity capital has fallen to 3.2 per cent (nearer 2.5 per cent sans "goodwill"), compared with 5 per cent seven years ago. "How on earth did the Financial Services Authority let this happen?" he asks."

http://www.telegraph.co.uk/money/mai...123.xml&page=2

[venomous viper]

Gold, cash, or ???

[8ballrollin]

Originally Posted by 8ballrollin

One other item on the credit markets...

"Liquidity doesn't do anything in this situation," says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.

"It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue," she adds.

Lenders are hoarding the cash, shunning peers as if all were sub-prime lepers. Spreads on three-month Euribor and Libor - the interbank rates used to price contracts and Club Med mortgages - are stuck at 80 basis points even after the latest blitz. The monetary screw has tightened by default.

York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.

"The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard," he says.

"They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don't think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park," he adds ...."

"The market for asset-backed commercial paper - where Europe's lenders from IKB to the German Doctors and Dentists borrowed through Irish-based "conduits" to play US housing debt - has shrunk for 18 weeks in a row. It has shed $404bn or 36pc. As lenders refuse to roll over credit, banks must take these wrecks back on their books. There lies the rub.

Professor Spencer says capital ratios have fallen far below the 8 per cent minimum under Basel rules. "If they can't raise capital, they will have to shrink balance sheets," he said.

Tim Congdon, a banking historian at the London School of Economics, said the rot had seeped through the foundations of British lending.

Average equity capital has fallen to 3.2 per cent (nearer 2.5 per cent sans "goodwill"), compared with 5 per cent seven years ago. "How on earth did the Financial Services Authority let this happen?" he asks."

http://www.telegraph.co.uk/money/mai...123.xml&page=2

In other words: financial institutions are not (yet) fully disclosing their losses and almost no one is buying new mortgage-backed securities. Financial institutions are now hording cash to cover their losses, tightening even more the credit markets.