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[nimblebear]

Just as I predicted....


Folks - its a death spiral. Lower prices, more under water homes, more diliquent loans, more defaulters, strategic or otherwise, equals lower prices, and so on. The next leg of the home price downdraft is just getting started. At least another 25% drop is in the bag.

http://www.cnbc.com/id/42904204


"While the usual subprime mortgage suspects, like California, Arizona, Florida and Nevada used to rule the foreclosure roost and still have high volumes of distressed properties, the mid-west is seeing a surge in REOs now, thanks to the plain old recession. 40 percent of the Chicago market is foreclosures, 43 percent in Cleveland and 51 percent in Minneapolis. Home prices fell 8.7 percent in the Mid-West during the past three months compared to the previous quarter.

While the foreclosure crisis is abating on the front end, with fewer loans going newly delinquent, the pipeline of seriously delinquent loans is enormous. Banks are now ramping up the foreclosure process after the "robo-signing" paperwork scandal, but at their current pace it would take about four years to process all the bad loans through foreclosure and even longer to sell those homes out on the open market."

4 more years, just at the current pace folks.

Truly, this is deflationary from a home ownership perspective, but we are getting slammed by inflation from a goods needed, and services needed perspective. This is exact recipe for hyperinflationary disaster. See the Fed cannot stop the QE, and is bound and determine to keepp printing money. Oh it (The QE) may wait a couple months or quarters, but rest assured the drops you see in silver or gold, are merely blips on their sky-rocketing path to the moon.

There are so many low comps out there from short sales and foreclosures, more than 30% of the homes for sale that is, that anyone foolish enough to even attempt to sell their abode, is going to take a major haircut. The faux equity that everyone THINKS they have in their homes, is evaporating faster than even the US dollar is debasing. Think about it for a moment. The dollar is plummeting raising the cost of the consumables they need, while people's biggest asset (denominated in dollars), is plummeting in value. Nobody born since 1940 has EVER witnessed that to any degree, except perhaps for a few folks who lived in Texas back in the 80's. (caused by oil of course.)

So people have this tent (I mean home) to live in, but they are tethered (mortgaged) to this diving albatross, while the banks keep raking in their monthly payments. Until they can't. The toxic loans that were purchased by the Fed, to the tune of at least $1.5 trillion, also are being destroyed, while the Fed traded the banks "funny money" for them to hold up their "reserves" until the next onslaught of toxic loans hits their books once again. Is the Fed going to take yet another round of $1.5 trillion of forsh*t loans off the banks again ? And oh by the way, there is all the toxic crap held by Fannie and Freddie. New loans being issued daily for even more homes that will be soon depreciating.

So when does it stop ? When it does. In otherwords, the Fed is only exacerbating the problem by printing more money, and until the Fed stops that, and actually begins to raise rates, and then house prices fall further due to higher mortgage rates ONLY THEN, can the housing market begin to see a bottom, and truly rebalance. Houses are denominated in dollars, so until the dollar stops being debased, there is no way in heck home prices are going to bottom. This cycle, a perpetual one in the negative direction, is being fed by one thing only and thats the FED. And all its QE.

Hence the prediction long ago that home prices had nowhere to go but down.

Bernanke is trapped. He's trapped by his beliefs, his trapped by his big mouth, he's trapped by his studying of the great depression, and worse he's trapped by his incredibly flawed assumptions. His problem is that he is intervening. And the intervention has completely obliterated the markets ability to correct itself, seek a balance, between suppyl and demand. He THOUGHT he could fight perceived DEFLATION. He was clearly wrong.

For you and i though, his being wrong will be very very costly. The distortions now are so great, and so embedded, that any self correcting mechanism a market might have, will cause even more major destruction of home values, than would have happened if he hadn't QE'd, printed money, and kept interest rates near zero for so long. Have no doubt. Commodity prices will continue to surge. Gas prices will continue to go up for years, and while already 44 million people on the planet have been pushed into poverty by inflating food prices, this is just the beginning.
We are witnessing history. If we survive it, we will be able to tell people, our grandchildren, what we did to make it through a hyperinflationary depression.

I'm not going to say go out and buy gold or silver now. Or guns or anything of that nature. I'd say just make darn sure you have a lot of savings, a good job in a secure industry, and a very very low cost of living. If you can live on 25% of what you make, and save the other 75% you'll likely be fine. maybe even if its 50/50. If not, then well, there's not much you can likely do, and just hope that in the next decade the government makes a major attempt to STOP spending massively, pulling out of all other countries militarily, and eliminates a ton of the entitlement spending. If you are living off entitlements, then I say too bad. You don't deserve to live off the backs of others. And if you didn't save enough, its only because you spent way too much. Just like the government has. You had a choice. You could have bought a far smaller abode, far less expensive cars, far fewer TV's and cell phones, and far fewer garbage entertainment perks. Its not an admonishment in any way. But you made your choice. You layed your bed. And you have noone to blame but yourself.

If you made the right choices over the past years, then you'll be fine. There are a number of posters here who obviously have. You know who you are, and some have been forthright in educating us.

I'm no soothsayer. Just someone with a decent amount of common sense.