In many previous commentaries I have lamented the fact that the “statistics” produced by the U.S. Bureau of Labor Statistics are now so severely doctored as to have lost almost any relevance or analytical value. With mere “exaggerations” we can at least estimate points of reference and then proceed with analysis. However, the fabrications produced by the BLS have severed virtually any connection to the real world.

Where we can still find some small analytical value in these numbers is to compare the differences in the BLS’ (revised) aggregate numbers with the “headline” lies it has been dispensing each month. Unfortunately, the revised aggregate numbers only provide us with data up to the end of 2010, however we can still reach some interesting conclusions based upon the available numbers.

The U.S. propaganda-machine tells us that the “Great Recession” ended in March 2009, while the BLS has been reporting monthly “job gains” in nearly every report since that time. As a matter of simple arithmetic, if the U.S. economy began adding jobs in the Spring of 2009 (and the job losses had supposedly eased in the months immediately prior to that), then when we looked at the total number of employed workers in the U.S. (as calculated by the same BLS) we should have seen the year-over-year numbers turn positive no later than the end of 2009.

This is not what the BLS’ own data indicates. In its own “Comparison of All Employees” (seasonally adjusted) we see that December of 2009 marked the absolute bottom for total employment in the U.S. In other words, during the first eight months of “job creation” during this supposed “economic recovery” the U.S. economy lost more jobs on a net basis.

By the summer of 2010, the Obama regime was bragging that it had “created or saved” over 3 million jobs – based largely upon the fraudulent monthly “non-farm payrolls” reports of the BLS. Yet by the end of 2010 we see that total employment in the U.S. had inched upward by a mere 1 million jobs from the absolute low.

Note that this feeble level of “job creation” is less than half the amount of new jobs needed just to keep up with population growth. In other words, throughout this mythical “recovery” U.S. unemployment has worsened (proportionately) month-after-month. Keep in mind that by itself population growth will always generate more jobs. New additions to the population mean more “mouths” to feed, more people who need clothes, housing, and an endless assortment of consumer goods.

Obviously population growth alone could have accounted for that entire, paltry one million jobs. This means that despite the largest “stimulus package” in the history of the world, and more than $10 trillion in additional Fed “credit” and hand-outs to Wall Street that the U.S. economy has generated nothing in terms of jobs – and in fact has lost ground due to the population growth which has occurred over that period.

Of course the BLS isn’t the only propaganda-mouthpiece boasting about “job creation”. The Federal Reserve itself likes to make grandiose claims about fantasy-jobs which never existed. New Fed-head Janet Yellen claims that Fed money-printing (by itself) will have “created 3 million jobs” by the end of 2012. And critics of this piece will argue that (supposed) job-creation has been “even stronger” in 2011 than in 2010.

The reality here is that the “stronger growth” in jobs this year is 100% accounted for the bigger lies the BLS has been adding with its thoroughly discredited “birth/death model”. Who has “discredited” the birth/death model? The BLS itself.

Over the last few years, the BLS has added roughly 1 million “phantom jobs” per year via its birth/death calculation. And then after each of those years it “revises” its calculation (using real data) and then subtracts all of those jobs. It is the BLS itself which has calculated that none of these “birth/death” jobs ever existed.

This year, if we subtract the 600,000+ phantom-jobs added by the birth/death model since January, we see virtually all of the supposed “new jobs” vanish. And keep in mind that all of the numbers from this year will be “revised” again (lower), just as the BLS has been doing every year.

Thus, as we near the mid-point of 2011, here is the reality of the U.S. economy – minus the lies of the BLS. At best, since the U.S. “Great Recession” supposedly ended the U.S. economy has added roughly 1 million new jobs: less than one new job for every eight lost-jobs which have (officially) been recorded since the U.S. economy crashed. And those jobs were generated not by real “economic growth”, but simply due to a swelling population.

In terms of the “unemployment rate”, the numbers are unequivocal: the percentage of employable Americans who are without jobs continues to go up every month – due to the combined effect of the still extremely high weekly lay-offs, plus the fact that the number of “new jobs” doesn’t come close to even matching the growth in population.

We’ve already been through this charade in the U.S. housing market. Again we were told by countless media talking-heads and “experts” (on countless occasions) that the U.S. housing market had “bottomed” in 2009. These shills even had the audacity to claim there was a “recovery” taking place in the U.S. housing market – as opposed to merely a “dead-cat bounce” after the worst real estate crash in the history of the U.S. economy. Returning to the real world, we have now seen U.S. housing prices plunge through that supposed “bottom”, meaning that even the propagandists have been forced to abandon their lie about a “recovery” in this sector of the economy.

We are about to reach the same point with the U.S. jobs market. After two years of lying about “gains” of phantom-jobs, even the propagandists themselves are now talking about the “jobs market stalling”. The fraudulent BLS monthly report released today claimed that the U.S. economy added an anemic 54,000 jobs. Buried beneath the “headline”, the BLS quietly added over 200,000 mythical birth-death jobs. What this means is that even when we add in all of the other statistical deceptions which the BLS uses in falsifying these reports (such as bogus “seasonal adjustments”) that without the birth/death lie the U.S. economy would have lost 150,000 jobs in May.

Obviously there was never more than a tiny trickle of job-creation in the U.S. during this pretend-recovery. Obviously the U.S. economy is again losing jobs on a monthly basis. And we arrive at this conclusion just as the last of the Obama “stimulus” dollars are being spent and with the Federal Reserve again pretending that it is about to “end” its own gravy-train of $trillions in “free money” (for Wall Street).

Meanwhile, brain-dead Republicans in Washington are flexing their muscles and talking about “slashing spending”. One has to wonder whether any of these ‘Einsteins’ are familiar with the word “suicide”?

The situation is now very clear with the U.S. economy. If Washington politicians follow through on their promise/threat to subtract from current spending levels, the anemic U.S. economy will completely implode – and as revenues collapse even from today’s extremely depressed levels, the U.S. is facing a Soviet Union-style disintegration in less than two years. Given that the most extreme/reckless “stimulus” in the history of the world did nothing but allow the U.S. economy to “tread water”, removing all that stimulus from this still-crippled economy can only result in catastrophe.

The other scenario is equally bleak. With the U.S. economy even weaker than when it first crashed in 2007, and much more bloated with debt, it would require a significantly more extreme “stimulus” program just to allow the U.S. economy to avoid collapse. Actual “economic growth” is now a mathematical impossibility.

With the U.S dollar already teetering on an historic collapse when the market thought that the Fed would “end” its reckless money-printing, should it instead ramp-up this currency-dilution even faster, the only possible result is the collapse of the U.S. dollar (and the hyperinflation this directly implies).

The cheap parlor tricks of this “smoke and mirrors” economy have run their course. The 10’s of millions of Americans without jobs will soon become 10’s of millions without food, if state Republicans follow through on their plans to slash unemployment benefits, pension benefits, and health-care benefits.

If they don’t follow through on these misguided threats, and simply continue racking-up the same humungous deficits, hyperinflation looms directly ahead. The only thing we can say for sure is that regardless of which of these two economic catastrophes takes place there will be no jobs for Americans.

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PRINT Key Charts

A leading mortgage analyst predicts over 11 million homeowners will default and lose their home if the government fails to take more radical intervention.

Amherst Securities Group LP, one of the most respected names in mortgage research, has trumpeted an ambitious call-to-government arms in its October mortgage report.

“The death spiral of lower home prices, more borrowers underwater, higher transition rates (to default), more distressed sales and lower home prices must be arrested.”

The authors dismiss recent talk of mortgage performance improvement as statistical sleight-of-hand magically conjured by modifications.

“This ‘improvement’ (in mortgage performance) simply reflects large scale modification activity having served to artificially lower the delinquency rate” (Please see the chart above of mortgage balances delinquent and re-performing. All charts in this post are from “Amherst Mortgage Insight” dated October 1, 2010.).

The report offers an astounding forecast of the fate of severe negative-equity properties. Nineteen percent of properties with a loan-to-value (LTV) of 120% or greater are defaulting every year. A death-defying 75% of mortgages on 120% LTV properties will eventually go bad (19% + 19% + 19%, …).

The current crop of mortgages is already “impaired” at the one-of-five level. Nine of 100 are seriously delinquent. Six of 100 are “dirty current” (made current by modification). Five of 100 are seriously underwater (LTV greater than 120%) (Please see the chart above categorizing the forecast of 11 million defaults.).

The authors, who describe current conditions as leading to “an impossible number” of defaults and one that is “politically unfeasible”, unveil a major arms race of measures to counteract the default tide.

The solutions include mandatory principal reductions, looser underwriting of new mortgage loans, leveraged capital pools for investors, and penalties for defaulting homeowners. Amherst reports that a family who defaults can live rent-free for 20 months on average. They propose that missed mortgage payments, including property taxes and insurance, be counted as W2 income.

They make note of recent new signs of distress including two record-low readings of existing home sales in the last two reports. Another block is that underwriting standards have grown much stricter at Fannie and Freddie. Only 2% of Freddie purchases are now bad-credit borrowers where they represented about 20% of borrowers in 2006. FHA purchase mortgages, however, which have by definition much more lenient lending guidelines, have exploded upwards from roughly 10% of their lending in 2006 to more than 50% today.

The buyer pool is also compromised by the fact that 17% of borrowers now have a seriously compromised credit history. After mortgage default a typical wait-time to qualify again is anywhere from 3 to 7 years. One of the more desperate measures suggested by the authors seeks a new mortgage for those who are now behind or in danger of failing. “This (default) can be fixed by re-qualifying borrowers who are in a home they can’t afford into one they can afford.”

Risk is so high in today’s real estate market that private money has largely left the mortgage category. The retreat is most easily seen in the jumbo mortgage market. Total jumbo mortgage origination has fallen from a high of $650 billion in 2003 to $92 billion in 2009 (see the chart above). Government loans account for 90% of current originations.

“If government policy does not change, over 11.5 million borrowers are in danger of losing their homes (1 borrower out of every 5),”‘ the report said, which estimates the total of homes with a first mortgage at 55 million. “Politically, this cannot happen.”

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PRINT A MAMMOTH ONE IN FIVE BORROWERS WILL DEFAULT

Michael David White is a mortgage originator in 50 states.

]]> http://blog.ml-implode.com/2010/10/a-mammoth-one-in-five-borrowers-will-default/feed/ 0 http://blog.ml-implode.com/2010/08/the-five-stages-of-america%e2%80%99s-housing-bubble/ http://blog.ml-implode.com/2010/08/the-five-stages-of-america%e2%80%99s-housing-bubble/#comments Sat, 21 Aug 2010 01:19:51 +0000 MichaelWhite http://blog.ml-implode.com/?p=574

PRINT five stages of america’s housing bubble

Michael David White is a mortgage originator in 50 states.

PRINT Aftermath of the Global Housing Bubble

Sometimes the complexity of the world is a ruse, and seeing the overwhelming future of our fortunes is strangely simple. Our past and future credit crisis is but one case in point. Remember when fear and failure wrecked markets wising up to the fallout of debt given to anybody for anything, but especially for buying houses?

Naturally our financial leaders around the world took the radical steps required to reduce the debt created in a massive credit bubble. Oh, sorry, that was my fantasy world I was talking about. What our leaders are doing is correcting a severe cyclical recession. What our reporters are doing is covering a severe cyclical recession. What sublime kabuki theater.

Back in the real world, the destruction of debt required to cure a credit bubble hasn’t been done. That means the reason for the new credit crisis is no different than during that past time of fear and failure – except that now we have new magnificent malignant clusters of sovereign debt serving as a sort of hand-held fan covering the unclothed emperor. Does that count as cover?

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There is a prism I use to see the world. It is in houses. Look immediately above to see housing prices (the global housing bubble chart). Let me tell what I see when I look at this: We had one wicked housing bubble in the United States, but apparently we were the conservative party poopers. It looks like the funner countries are Ireland, Britain, Spain, Sweden, France, Norway, Denmark and Italy.

I know mortgages are used to buy houses. Yet they also represent not just the largest financial asset category, but the use of debt to buy anything including companies and commercial real estate and credit-card receivables. What are the futures of these debt assets? If we know the fate of mortgages do we know the fate of them all?

Oh and I also wonder about the sovereign kind? Luckily those debts are backed by the likes of honest hard-working Greeks who live to protect their impeccable reputation for being always good-and-true to their word. “Pass the Ouzo Aristotle. Do you have a cigarette? Did you have to pay any taxes this year?”

The strange case (Or is it the normal case?) is the residential mortgage market in the United States. Look immediately above. Values of the equity asset have fallen more than 30 percent, but the values of the debt asset (mortgages) used to buy the equity asset (homes) have fallen two percent. Both of these investments have a right to title to the same asset, but one has fallen FIFTEEN TIMES further than the other. Is this the real world or is it make believe?

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While it’s possible that this anomaly may hold, the 15 percent of residential mortgage borrowers who are now behind points toward the debt mortgage balances and the equity home values moving closer to each other.

That’s a complicated way of saying that mortgage balances logically should fall in value in a ratio very much like the fall in value of the house asset itself. Has not happened yet, but isn’t it true that the world is logical?

We know that the fall in property values is real and we know that the United States bubble in values was far greater than any bubble of the last 120 years (See chart above and pay close attention to the amazing “X” bubble. That’s historical.). Thus now do you see the pattern of Armageddon gathering force and deciding when and where to explode and paint a picture of gore all across the world.

The American market in housing went totally off the deep end. A flood of negative equity now invades our land. Yet look yonder to strange and distant shores. Look at Italy and Denmark and Norway and France and Sweden and Spain and Great Britain and Ireland.

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Their real estate market got bubbled worse than ours, but surely their central bank and treasury are more honest, courageous, and knowledgeable than ours?

Oh, I’m sorry. That’s another scary discovery. Admit the ruthless incompetence of the Fed and the Treasury in the management of our massive credit bubble, but give them credit for being rather like the publishers of Consumer Reports where their evasions and deceptions are surely trivial when compared to old world freaks like Italy and Spain who publish Penthouse for its unending internet offshoots. Did you read the prospectus?

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Just when you think it’s impossible for dishonesty to be taken to the next level in the American housing market, you see a factoid like this one, which, if true, means that bank-owned properties are being held like abandoned castles (See chart above showing huge numbers of banks owned properties lying hidden in your local bank’s burka.). I had always assumed that the shadow inventory was just bungling bankers failing to execute foreclosures. I didn’t see the sale of the foreclosure as boiling poison and certain death, but then I saw that chart up there and interpreted it as an executioner’s song.

One on top of the other I saw this stupendous headline in Forbes: “Six Giant Banks Made $51 Billion Last Year; The Other 980 Lost Money.” And then I said to myself: “Well, if my bank would go out of business if I sold my foreclosure collateral, would I just hold it then to live for another day?” The answer was obvious: Yes, if that was allowed, I would just hold it like an old abandoned castle.

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It takes me aback. It staggers me. Our housing market is a true obstacle course. The federal government is making every mortgage loan to forestall radical crashing, and our local banks are pretending to solvency by going into the castle and museum business (foreclosures held as investments).

My suggestion therefore is that you look in to the John Paulson trade. Read up on what that was all about (See the short simple version of it here.). See if there is some sort of echo housing-bust credit-crisis mass-multiple derivative instrument which you can use to really get the chance to do it this time. This is the best trade ever. It’s easy. It’s obvious. It’s real.

The center cannot hold. America is a bubble. The world is a bigger bubble. We and the world and the debt behind the mania will break. Hell will rule, but remember, it will only last for an extended period.

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PRINT Aftermath of the Global Housing Bubble

Michael David White is a mortgage originator in all 50 states.

The Index of pending home sales fell a record 30% in May to a record-low reading of 77.6 — two huge pessimistic indicators of future prices nationwide. Yet the combination of two record negatives went barely reported when the stats were announced last week.

So here’s the news for you now, a week late, but new to the marketplace of ideas. Pending-home sales now stand below the worst numbers we have seen since the housing crash started in 2006. The rubber bands and duct tape are breaking apart. Presume the fix of a fall is in.

Take a look at the three charts below and judge for yourself how important the facts are which the National Association of Realtors (NAR) announced last Thursday (July 1st).

The oversight by major news outlets — snubbing record negatives — is egregious by virtue of its ignorance of the expiration of the free-down-payment program. The pending-home-sales stat gave us our first view of buyer demand for housing without the hugely popular prop from the federal government.

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Speculation has run rampant as commentators have wondered about the direction of prices as government support starts to fall away.

The future direction of real estate prices is a major obsession of almost all economy watchers as the monthly bill for shelter overshadows others, as the value of homes is a predominant factor of family wealth, and because the banking sector has huge investments based upon residential property.

“If you’re looking for a silver lining in housing, you aren’t going to find it here,” Mike Larson of Weiss Research said. “Demand has fallen off a cliff in the wake of the tax credit expiration, with pending sales falling by the biggest margin ever to the lowest level ever.”

It is likely that Mr. Larson’s comment drew attention to the two new record lows. Had he remained silent, these highly relevant facts likely would have gone unreported completely. Of the 15 major outlets we reviewed, four actually did learn about the two record negatives, but they didn’t understand the meaning of it.

The statement by NAR announcing pending-home sales makes no reference to either the record fall or the record new low. If their intention was to hide bad news, they got away with murder. Let’s show you the fools who fell for it.

Among the outlets who failed to uncover either of the two record negative stats are Barrons, Dow Jones, The Financial Times, Fox Business, The Los Angeles Times, and Marketwatch.

I reviewed stories on pending-home sales by 15 leading news outlets – in addition to the flunking students mentioned immediately above, I also read Atlaticwire.com, BBC News, Bloomberg, Boston.com, CNBC, Investors’ Business Daily, New York Times, Reuters, US News — and the only difference between the outlets was the extent to which they screwed up this critical epicenter-type data set (Please see the graphic nearby depicting the various degrees of incompetence.).

The future direction of housing prices are arguably the most critical factor in the most critical nation in the most critical financial crisis since the Great Depression. The signs are not hunky-dory in this market. The May pending-sale figures may in retrospect serve as a Rosetta Stone: A perfect guide to the true fortunes of residential real estate. Just in case you have forgotten, we are in one hell of a market, and Mom did not tell us this is what would happen when we grow up.

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HousingStory.net estimates current inventory for sale of 3.9 million is 1.2 million units higher than it should be, and not too far away from the record high 4.5 million. Inventory stands at 8.3 months of sales, but it should be at 5.8 months.

Fourteen percent of mortgages are behind on payments — about 7.7 million borrowers or, more starkly, one in seven. A record 4.63 percent of borrowers are in foreclosure. Approximately 13 million homeowners have no equity or negative equity. They would make nothing from the sale of their house if they could sell it. Or they would lose a little or a lot. Thus do we have the phenomena of strategic default — now as common as no-money-down mortgages during the boom.

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We are in a pause of a tectonic shift of plates. Prices have been flat since August 2009, but are down 30% from their peak. The fall of 30% was almost completely discounted as impossible prior to its occurrence.

My speculation is that the fate of bubble-mortgage debt remains as our key obstacle blocking recovery (Unbelievers should rent the Godzilla movie “Eating the Lost Decades of Japan” for further enlightenment.). Total mortgage balances remain almost unchanged from the peak of the bubble –$11.68 trillion today versus $11.95 trillion at the peak (see chart below).

The data released last week on pending home sales and the dismal record of reporting on that data proves that breaking news business journalism fails even in surface scratching. The cows just want to feed on the grass in front of them and go on to the next field.

The smart investor is going to look at these charts on pending-home sales and have a real advantage over the common media consumer. Readers of my work know I have found pessimistic facts easy to find. The pending-sales figures are a dramatic concurrence — a record fall and a record low.

So I will give you my opinion: All hell has broken loose all over again in real estate. Don’t buy a home. Sell one.

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The press release by NAR on pending-home sales. The Fifteen Stories by Major Media Reviewed on Pending Home Sales.

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Michael David White is a mortgage originator click here for background info.

PRINT 10 Key charts delinquent for sale sold 1999 to 2010 05 by HousingStory.net

Michael David White is a mortgage originator.

A respectable 521,000 units sold in April, yet inventory for sale increased by 418,000 units. On average inventory is 2.66 million units and currently 4.04 million homes are for-sale (Please see the chart nearby of units for sale. The red line represents an average. Click image for a large view.).

Inventory increased to 8.4 months of supply versus the long-run average of 5.8 months and the recent low of 6.5 months last November. The crash high inventory was 11.3 months in April 2008.

“Although inventory levels remain above normal and much of the gain last month was seasonal, the housing price correction appears essentially over,” said Lawrence Yun, chief economist for the National Association of Realtors (NAR). “In fact, a majority of the markets have seen price gains recently. A return to old-fashioned responsible lending and buying will help the housing market avoid disruptive and painful bubble-bust cycles.”

Last week the Mortgage Bankers Association said that a record 4.63 percent of homes are in foreclosure. Foreclosures are a major contributor to falling prices.

On the positive side of the ledger, interest rates are outstanding right now and affordability has dramatically improved following a 30 percent national loss in home prices which started four years ago.

The national median existing-home price was $173,100 in April, up 4.0 percent from April 2009. Distressed sales accounted for 33 percent of the total and all-cash sales clocked in at 250 percent of their normal tally.

“Buyers are focused on finding the right house and taking advantage of favorable affordability conditions,” said Vicki Cox Golder, NAR president and owner of Vicki L. Cox & Associates. “For many buyers, owning a home is a lifestyle choice. They want a place of their own to raise a family, build memories, and be part of a larger community.”

Nearly 10 percent of current mortgage borrowers are seriously delinquent, being 90-days late or more. New Observations estimated last week that a minimum of one in ten mortgage borrowers will lose their home to the bank in a distressed sale or foreclosure in the next two years.

Our real estate market rests on a razor’s edge. On the edge lie high mortgage delinquencies, 12 million homeowners who have no equity or negative equity, high unemployment stuck at 10 percent, and an unprecedented loss in house values which followed a bubble greater by far than any in the last 120 years. Predicting that we are done with falling prices may end up landing north of reckless.

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PRINT — Realtors Forecast End of Falling Prices

Please see more on NAR at Calculated Risk for inventory and sales. Click for press release from NAR.

Please forward questions, corrections, and reactions to comments below or send me an email. mike@mynewmortgage.com

Michael David White is a mortgage originator in Chicago.

Since I began in August to forecast a continuation of falling values, frequently I met with anger, disbelief, myopia. This week I wanted to take a closer look. So I pulled out one of the best number sets, and applied my crude math in exactly the same way I always do, but I did a close up on five years of data before and after the peak. The result is the chart you see below.

Rorschach has his own interpretation, but I see a fall of either nine percent (Z) or 19 percent (Y) if you go by crude trends (see Z & Y above). Either one is plausible. Values could also take off the other way and shoot up to the moon, but the chart is more a downer than an upper. Recently the trend is again down, although it would be almost impossible to learn this from media coverage. Values have fallen in five of the last six months by this index.

If values fall, it hurts the finances of current owners, but it makes housing cheaper. This is not an afterthought. Very few would deny that a competitive economy may need cheap houses to create affordable workers who can live well on lower wages. I tell you without question: We need cheap housing to improve our competitive advantage.

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Everybody thinks rising home prices are good, but rising property prices may make many of us unnecessarily poorer by making it harder for future buyers and renters to pay the bills.

I wonder if the poor are hurt most by a policy which artificially supports housing prices? If true, then the Fed and the Treasury are taking dramatic action against the most vulnerable. The affordable housing people arguing in favor of foreclosure prevention are arguing against their own goals.

The crisis in Greece points to the problems which arise when there is too much debt. They are a country with negative equity. The back story on Greece is that national bankruptcy may be unavoidable. If they have too much national debt, they will not pay it back, even with a heroic bailout and radical cuts.

We have the same crisis here, but in housing and mortgage debt, and we have been lying about our own bankruptcy. Values bubbled irrationally in a pattern far worse than any of the last 120 years (see above). Massive unaffordable mortgage debt financed a flim-flam scheme.

A national fall in prices of 31% proves that the housing market was a lie. Yet mortgage balances are only two percent less than their peak. What makes sense: A fall in home prices of 31% or a fall in mortgage balances of 2%? (see above)? There is probably no greater lie in our economy today than the divergence in values of homes and mortgage balances. Our economy is not fixed until this is fixed, and yet nobody talks about fixing it because nobody sees it or considers it.

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The key is uniting the value of real estate and the income of property owners and renters. What we need is a rational capitalist market. We need a market price driven by private actors. The Fed, the Treasury, and Fannie & Freddie have destroyed the free market in housing and by doing so they are orchestrating poverty and misery for any person who needs a place to sleep at night.

Real estate has an established price over time. That has been proven by Case Shiller. Their study of 120 years of data offers obvious evidence. They are on record saying housing is a stable asset with no change in value from 1890 to 1990. And all the other screamers who say pricing is different now simply argue based upon imagination and prejudice.

I say go with the hard data. I say Case Shiller is right. I say return to the trend lost in 1990. Values must fall. I estimate by an additional 22 percent.

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We should all be cognizant of the positive value of falling prices. If unemployment is high, and demand for labor requires a reduction in pay, then make housing cheap and we kill three birds with one stone: We reduce the cost of labor, put labor to work, and maintain the material standing of the wage earner. Who argues against this? By their actions, all of the powers that be in Washington D.C.

As you think about this you may come to embrace a fall in prices as the right thing to do on so many levels. For 20 years the most difficult bill we pay every month has been made much more difficult. And in case you hadn’t noticed, we’re having a problem competing against cheap labor all over the world.

There’s no end in sight to the stupidity of government actions meant to stop prices from falling. Such is the folly and consequence of men and women with power playing games they do not understand. Go ahead and hang the bankers, but make sure to burn the economists at the stake. They are safe because they can calculate in their head if the heat of the fire is deadly.

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PRINT — Housing Values Are Falling Again.

Please forward questions, corrections, and reactions to comments below or send me an email. Please send an email if you would like to take out a new mortgage.

mike@mynewmortgage.com

Michael David White is a mortgage originator in Chicago.

As we approach the deadline to take advantage of the homesuckers’ tax credit on April 30, we’re seeing a minimal uptick off the February low. The index has rallied back to the 2 year downtrend line and the 52 week moving average. This includes data through April 16. So I fully expect to see these trendlines temporarily broken to the upside in the next two weeks. The NAR’s existing house sales release tomorrow, and the Bureau of BS Statistics release on new house sales on Friday are likely to look pretty darn good due to the homesuckers’ last minute rush to take advantage of the rest of US taxpayers. That should be good for a nice spike in housebuilder stocks (bears take note). It’s what comes after that is scary.

We have some experience with what to expect, and it squares with the common sense notion that the tax credit is pulling house purchase demand from the future. When the first homesucker’s credit expired last year, purchase demand collapsed. That tax credit program applied only to first time buyers. This one applies to everyone, not just first timers. The demand vacuum following the expiration of this program should be even more extreme, and last longer.

In addition to the drop in demand adding to downward pressure on prices, a little discussed effect of the tax credit is that the effective sale price to the buyer today is inflated by at least $6,500. Without the credit, buyers will be lowering their bids commensurately. Combine that with the seasonal increase in houses for sale that occurs every year from May to July, and you have the recipe for a real disaster in the housing market. That’s likely to surprise the markets and trigger yet another round of foreclosures with the attendant problems for the financial system.

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