Sunday, March 16, 2008

Open Thread

As we watch the Fed and Paulson desperately try to either nationalize Bear Stearns or get it merged, I am led to wonder why it is that main stream media articles keep avoiding a basic, fundamental truth about the housing bubble – they keep trying to insist that bubblicious housing prices are somehow justified, that sellers are somehow entitled to peak bubble prices and are justified in their expectation of receiving such prices, and that the only reason why housing prices are currently being threatened is because of a lack of credit. Ha! What about that 800 lb elephant sitting in the middle of the editor's office; what about income? What about the fact that the only way people could "afford" bubble pricing was with NINJA loans and the like? Why isn't income-based affordability ever given any serious consideration?

Besides, credit really isn't all that threatened especially now that the GSE conforming loan limits have been raised to absurd levels (at least here in California). Sure you can get credit; it's available to anyone who can make a hefty down payment, can prove their income, and who doesn't spend more than about a third of their gross income on the mortgage (or no more than about 40% or so on all debt combined). What's the problem? Seems perfectly reasonable to me. The "problem", of course, is that since bubble-inflated prices are based on the exact opposite of these more traditional lending criteria, bubblicious prices cannot be supported unless one of two things occurs: 1) prices come way down or 2) everyone gets a 100%+ raise. Personally, I would prefer the latter but I am not counting on it.

This was supposed to be an open thread. Sorry.

[And please be sure to check out the Marin Bubble Forum where you can create your own discussion threads.]

7 Comments:

Blogger marinite2 said...

According to Jim Rogers (care of the Mess Greenspan Made blog), the reason for the Bear Stearns bailout:

You know the reason they did it this way was because, if Bear Stearns had to declare bankruptcy, you'd realize that Bear Stearns paid out billions of dollars in bonuses in January - six weeks ago. If he let them go into bankruptcy, they all would have had to send back their bonuses.

This is what they're doing, they're doing it so they don't have to give back their bonuses. That's why they didn't put them into bankruptcy. Jamie Dimon has gotten a great deal because the Federal Reserve is paying for it. The Federal Reserve is using taxpayer money to buy a bunch of Bear Stearns traders' Mazeratis.


Americans... you let this happen.

Mar 17, 2008, 10:09:00 AM  
Blogger marinite2 said...

And now that the Fed has all of Bear's toxic mortgage assets (JP Morgan didn't want them, strange as it may seem), who is going to bail out the Fed when that day comes? Or does this mean the dream of abolishing the Fed is coming closer to reality?

Mar 17, 2008, 11:59:00 AM  
Blogger marin_explorer said...

"...who is going to bail out the Fed when that day comes?"

China? And they'll set their own price. It will be like war reparations, but without a war per se.

I'm thoroughly disgusted how govt and business have become "two hands washing each other". Both have abdicated any presumption of leadership. Time for a change.

Mar 17, 2008, 12:39:00 PM  
Blogger marinite2 said...

It seems that the Marin Market Heat Index is now a pay-for service:

http://www.marketheatindex.com/

I guess I will have to get a realtor to sign me up.

Mar 17, 2008, 4:56:00 PM  
Blogger Lisa said...

CNBC had an interesting slide on Bear Stearn's MBS holdings. Think they got gobbled by the Subprime Monster? Think again.

$15B in Prime/Alt A
$2 B in Subprime

Hmmmm......at $2/share, the company is basically being called worthless. And 88% of their paper is Prime and AltA.

Marinite, you are absolutely right about insane prices and insane lending standards. The minute you go back to traditional lending metrics, very few people can afford these prices.

Heck, Marin saw a 40% decline in sales last month.

And our beloved Marin Heat Index is no longer free to the public. You either have to have access through your realtor or pay to subscribe. I wonder if the numbers just stayed so numbingly bad that the public isn't supposed to have free & easy access to it anymore. Last I checked, Marin was in the deep freeze @ 0.42.

Mar 17, 2008, 4:58:00 PM  
Blogger marinite2 said...

And our beloved Marin Heat Index is no longer free to the public. You either have to have access through your realtor or pay to subscribe. I wonder if the numbers just stayed so numbingly bad that the public isn't supposed to have free & easy access to it anymore. Last I checked, Marin was in the deep freeze @ 0.42.

Well, if they cannot make money selling houses in Marin, they can charge nearly $800/year for access to the Heat Index while they wait for the market to recover.

Yes, 0.42 was the last number I saw late last week.

Mar 17, 2008, 5:00:00 PM  
Blogger marinite2 said...

I guess I will have to get a realtor to sign me up.

Any readers out there have access to the Index and willing to share your sign-in credentials with this blogger?

Someone want to pretend to be a buyer, get one of their agents to sign you up, and share with us?

Mar 17, 2008, 5:03:00 PM  

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