I can't believe the following quote was actually
printed in today's
SF Chronicle regarding the Bay Area housing markets. It must be a mistake as it just makes way too much sense:
‘How does demand come back? When prices come down,’ said G.U. Krueger, chief economist with IHP Capital, said the deflated new home market is simply one more indication that the market had run amok and is now returning to some equilibrium. ‘Prices went way ahead of themselves relative to the incomes of the consumer, and price increases could only be maintained with exotic financing.’
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Price increases could only be maintained with exotic financing." No. Really?
I can't believe the following quote was actually printed in today's SF Chronicle regarding the Bay Area housing markets. It must be a mistake as it just makes way too much sense:
5 comments:
The Chronicle has done a complete about face. Almost every day this past week there was another big story about the mortgage meltdown. Finally, the paper is starting to acknowledge that the boom had nothing to do with fundamentals and everything to do with exotic financing and the herd mentality. And they're no longer quoting anyone from NAR or CAR. They're quoting the bears.
Everyone on the housing blogs saw this coming 2 years ago. How the MSM is now just wrapping their heads around this mess is mindboggling. They've done their readers a huge disservice.
But who wants to admit their "golden goose" was just a figment of their imagination for the past few years?
Lisa,
True. True.
Really sad that they don't seem to have the ability to think for themselves. Jut report what is happening, don't think, and don't bite the hand(s) that feed them.
I'm still waiting for full disclosure and the complete story to be written by the major media... I still see elements of denial in all bubble articles that acknowledge bits and pieces of why housing prices got away..... fundamentals my a_ _.
Show me an editor of a major newspaper who has really told it like it is... it is still not happening.. I'd like to see a centerpiece, frontpage article that projects 40% price declines due to a falsely hyped and priced market... there is no way the Chronicle or any other newspaper would write this story line..
Matt
The other story remaining to be told is that if we're back to more traditional lending standards, then house prices will need to fall to more traditional ratios with household income.
If no doc, 100% financing, pick your payment financing really is gone, then these prices simply cannot hold. A slight nudge down in interest rates won't do much good. Not if people need to bring 20% down when they sign for a loan. Or more than that if they want a Jumbo loan.
And what's the benefit of having so many people mortgaged to the gills just to own a home? Why would parents want their children to be $1MM in debt (including interest) just to own a home in the BA?
It's sad. When I bought in '96, there were quite a few perfectly nice starter homes and townhomes for under $300K, so you could own with normal financing and not worry about some suicide loan blowing up.
Another nugget that hasn't been acknowledged is that all this exotic financing made homes LESS affordable, not the other way around.
Lisa,
Excellent point about homes now being LESS affordable due to the exotic financing that took place over the past 5-7 or so years. I never thought of it that way, but that is exactly the case... just the opposite of what was / has been being preached by Sir Allen and all the other RE machine cronies..
We'll see the tightening of the lending standards play out over the long term... days on the market will continue to grow higher and higher, inventory numbers will continue to climb higher and higher, heat indexes will drop lower and lower... all signs of house prices being much too high.. unfortunately, I don't think we'll see a major price adjustment in the short term.. just lots of pain, whining and minor reductions (over and over) over the long term as this thing plays out.... we must remember, house prices are tied to owner’s self worth, owner’s ego's, the male genitalia etc etc, so the bigger (higher priced) the better...
Yes, what parent in their right mind would like to see their kid saddled with a $1M mortgage a few years out of school.… again, it’s all BS and will all eventually unravel..
Matt
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