Housing Threatened by Defaults in Sub-Prime Mortgage Market

[traderdragon2]

Records broken - home prices dive
http://money.cnn.com/2007/02/15/real_estate/home_prices/index.htm?cnn=yes

As more and more of these stories appear on the front page, the real estate market psychology will change. The slow grind down continues.

This will take years to unwind.

 

[August]

Quote from Pa(b)st Prime:

Boohooo I can't afford to live on Star Island or in the Hollywood Hills or LaJolla or the Upper East Side.

Most of ET should be shooting for a home in Gary Indiana.........

I realize Hollywood Hills has a name value - but the homes there are not that much higher priced than other Los Angeles homes which are in safe areas. Since the Hills are much less convenient, it knocks down the demand. Good for people who work form home though.

At the moment, I would not probably feel safe in an area where the homes were 400,000 or less in Los Angeles. That's twice what I would have said five years ago though. And I say that as someone who spent six years living in those areas with the mugging attempts (1 successful, 2 I ran), car thefts, and vandelisms against me and my property to prove it.

 

[Sam Mcgee]

In Canada our mortgages are not tax deductible. I always envied our American neighbors with deductible mortgages. However, now I question the value of the American policy.

What I see is that housing prices become inflated because of the mortgage deduction. In Canada there are some high housing prices, but nowhere near as high as they are in the USA. So even though Americans might get a deduction for their mortgage payments, the payments can be higher so the net cost for housing might be about the same.

Making a mortgage deductible doesn't provide a lot of value to the economy. In Canada as in the USA, investment loans are deductible. Investment in business as opposed to housing should provide for a lot more growth for the economy.

Even though it might be better for the country, any politician that ended the deduction for mortgages would be chased out of office right away.

 

[balda]

21 subprime lenders have filed for bankruptcy since December

http://www.businessweek.com/investo...p+news_top+news+index_businessweek+exclusives

 

[traderdragon2]

Homes are not inflated because of the mortgage deduction. Thats been around forever.

They are inflated because of the super cheap money that flooded the market after the stock market crash to kick start the economy.

Coupled with insane lending standards (500K loans without even verifying income), we now have real estate bubble markets in many parts of the country.

Quote from Sam Mcgee:

In Canada our mortgages are not tax deductible. I always envied our American neighbors with deductible mortgages. However, now I question the value of the American policy.

What I see is that housing prices become inflated because of the mortgage deduction. In Canada there are some high housing prices, but nowhere near as high as they are in the USA. So even though Americans might get a deduction for their mortgage payments, the payments can be higher so the net cost for housing might be about the same.

Making a mortgage deductible doesn't provide a lot of value to the economy. In Canada as in the USA, investment loans are deductible. Investment in business as opposed to housing should provide for a lot more growth for the economy.

Even though it might be better for the country, any politician that ended the deduction for mortgages would be chased out of office right away.

 

[ByLoSellHi]

It's only just beginning.

People haven't even caught a glimpse or taste of the pain to come.

Biggest asset bubble in the history of the world, including tulips and dot.com stocks.

Argue with Shiller at one's own peril.

 

[traderdragon2]

Yes, no way we are even close to over. This will take years to unwind.

 

[TheDudeofLife]

Quote from ByLoSellHi:

No prob.

According to that article, they lost 4% on their homebuilder holdings before unloading their shares.

The way I interpret that is a an extreme lack of faith in a turnaround anytime soon for the builders or new home market.

hmmm. The article is misleading. I interpret that their overall portolio dropped 4%. It seems to me that they were buying the homebuilder late last summer which was near the bottom in the Homebuilder Index, which rallied very nicely through the 4th quarter..+30% or so I think..But I could be very wrong..

 

[ByLoSellHi]

Quote from TheDudeofLife:

hmmm. The article is misleading. I interpret that their overall portolio dropped 4%. It seems to me that they were buying the homebuilder late last summer which was near the bottom in the Homebuilder Index, which rallied very nicely through the 4th quarter..+30% or so I think..But I could be very wrong..

DOL, it is ambiguous, the way it's written. I agree:

"The Bill & Melinda Gates Foundation Trust showed a strong interest in the industry, according to a filing in November. It took stakes in at least seven home builders, only to quickly divest in those companies, according to a filing on Wednesday that disclosed the foundation's holdings as of Dec. 31.

The overall value of the holdings dropped about 4 percent to $5.9 billion."


But based on the 5.9 billion figure, I think I agree with you.

 

[risktaker]

Not only the tax deductibily but especially the no capital gains tax on homes lived in for 2 years, made people use the house as an investment vehicle in many cases. The law several years back was that you "carried" the gains from 1 house to the next but that is no longer necessary. A funny thing I've noticed in the last few years has been the now more used word "home" where 10-20 years ago people would say "house".

Quote from Sam Mcgee:

In Canada our mortgages are not tax deductible. I always envied our American neighbors with deductible mortgages. However, now I question the value of the American policy.

What I see is that housing prices become inflated because of the mortgage deduction. In Canada there are some high housing prices, but nowhere near as high as they are in the USA. So even though Americans might get a deduction for their mortgage payments, the payments can be higher so the net cost for housing might be about the same.

Making a mortgage deductible doesn't provide a lot of value to the economy. In Canada as in the USA, investment loans are deductible. Investment in business as opposed to housing should provide for a lot more growth for the economy.

Even though it might be better for the country, any politician that ended the deduction for mortgages would be chased out of office right away.