Is The Government Inflating A New Housing Bubble?

They would love to start a new housing bubble but they are firing blanks as the banks are no longer going to want to make loans without generally accepted underwriting processes. That's because if they ever get out of TARP - they don't want to end up back in it + the execs would like to keep their jobs. The only way the Fed is going to reinflate a housing bubble is if they do all of the lending directly to the consumer. "Welcome to the Hotel Pennsylvania" (Avenue that is) at http://tableofwisdom.com/Daily__Quick_Thoughts.html

I saw a Ditech ad today that was close on par with Countrywide back in the day. We might be setting ourselves up again. What is bizarre this round is - houses are REAL cheap + RECORD lows on 30 year mortgage. I saw new houses being built were at record low today. People suggested bad news, I say- let it help clear out current inventory and help bring value back up. Either way - low rates + cheap housing = ? Bubble perhaps. Maybe inflation from the up coming Treasury bubble will fool people, Hey look Leeeeroy, our house is worth 30k more... Nope Franklin, that's just the dollar worth less.

Hi Brian! Right on again. Just more social engineering like the Community Reinvestment Act that is doomed to fail while being rhetorically held upright by Barney Frank and Chris Dodd. In 2004 and 2005 when inflation was like 3% per year, the homes in our neighborhood appreciated 85%. Yes, 85% in two years. We bought our home for $450k, it appraised at $485k and we now have researched and found "pre-bubble" it was only worth $250k in 2004. We are in foreclosure right now. In spite of your insinuations Brian that the foreclosures are coming from "deadbeats" who got in over their head, we had a 25 year record of work, 2 very profitable small businesses, a $60 k Fortune 500 job for the wife and real estate and stock investments. When the housing burst, the banks locked up and our customers could no longer finance our business products. Our business revenue, not income but gross sales, dropped -95% within six weeks. Our $2.2 mil in assets, $180k per year income from 9 different revenue and investment streams evaporated. We are now down to our last $3k cash, have $-40k in delinquent business loans and have attorneys for Wells Fargo coming after us. Of course, with another -20% in housing price drops coming to Seattle this year, there are no buyers (you would have to be stupid to buy a house in Seattle right now). The answer?The business owners I know are laying off their employees and taking as many products and services as possible onto the Obamaproof all cash black market.

I happen to know that the VA is now having special loans processed for non-veterans. They are being given to buyers with less than stellar credit. Is this going to be another nail in our coffin? Jeff

You got it dead on. Politicians more than the public at large doesn't want to admit that there is no silver bullet to fix this housing mess immediately. We are going to have to tough it out for a while. Not what some people want to here but it's the truth.

In addition to the FHA housing problem, how about the VA now doing special loans to non veterans? An acquaintance that works in the mortgage industry, tells me that they are being processed with less than satisfactory credit. Anything to this? Jeff

Were paying the price for forty years plus of putting issues on the back burner,and hoping thet'll just take care of themselves,or evaporate away. We have had the same politicians running this country from cradle to grave, with no term limits,and this is what we get for their superior sage leadership? The stove top is full,not a burner empty ready to explode with Social Security,Medicare Medicaid,Illegal Immigration Amnesty with all the privaledges of a US Citizen,interest payments on the Gross Nat'l Debt approaching a Trillion Dollars with a GDP of 15%-20% less to pay down the debt,Wars in every country that looks at us cross-eyed and chirps "Jihad",and the boys,and girls in "La-La D.C.Land" want to give mortgages away,..? Good Article Brian,Thanks

This could explain lots of things. Brian I can tell you here in Vicksburg Ms,houses haven't been selling,despite the fact the local talkshow host says that "vicksburg has affordable housing." It's only the low end houses that have been selling but not none of the high end homes. I've heard complaints about this housing market which is high and don't reflect the national average which irks some locals. Plus the taxes that go along with it. But no homes haven't been selling at all.

Just some quick math: That $8,000 is the required down payment on a 228K house. That's well above the estimated national average home value (according to Zillow) of about 185K. And about the same as the estimated average in my zip code. Sheesh, if I'd only have waited a few months to buy my first house....

The appraisal regulation effective May 1, 2009 favors the large Banks, BoA, Wells Fargo, Chase and Citi all have subsidiaries Appraisal Management Companies that place the Bank's appraisal request with Appraisers for a large portion of the appraisal fee. AMC have no financial or liablity risk what so ever, all the cost, expenses, liablity are borne by the appraiser. The Bank owned AMC are Bank profit centers. generating income for placement of the Bank's appraisal request. Prior to the AMC the Bank's origination department order the appraisal with no kick back or fee spliting. The AMC provide no services to the appraiser that contribute to the production of the appraisal report, just placement for 40% to 60% of the appraisal fee, which is not disclosed to the appraiser, in other words the appraiser has no knowledge of the amount the Bank is charging the customer. Up until now only substandard appraiser worked for the AMC. now many appraisal firms like mine will not work for "Sweat Shop" fees. Bank owned AMC are not benefical to the consumer, to the appraisers, to the security market they are just an additional profit center to the banks whose only asset is their control of the appraisal asignment. Great money making concept, no risk, no liabilty, no production cost and for all this get 40% to 60% of a fee you set, but is unkown to your producesor.

That is exactly what the government is attempting, however they aren't succeeding. Until the junk works it's way out of the system, which it won't until banks are fully recapitalized, the housing market is going to continue to fall in most areas. As it stands right now, the only real action is with foreclosures and distressed sales.

It sure looks like it. You know one thing that has been ignored over the past year or so, is the emotional stress that all this is putting on people. Practically everyone I know is pissed off. All the time. At the gov't, at the media, at anyone who happens to be handy. Sometimes they can't even describe what it is that is pissing them off. People have enough stress in their lives without politicians and the media adding to it every single day.

We would have a long way to go before the government could have that type of impact on this awful housing market. The issues before was not the no money down, it was no money down with no job and bad credit the created havoc. The lending guidelines have tightened up dramatically so it is a totally different type of borrower than what got us here.

Wow! Mr. Sullivan. Did you figure this out all by yourself. I love the way media people and Washington pundits spout what is obvious to everyone out here earning a living, like it is some kind of revelation. Of course, Washington is trying to keep the housing bubble from collapsing further by doing more of the same things that caused the problem. Why, because Government is dependent on overinflated housing values for revenue. Remember when Ross Perot said we have to pay our bills while the rest of the candidates promised that we could grow our way out of debt. When are the guys in Washington and the media pundits going to figure out the next big revelation. Like, economic strength depends on production and that financial manipulation is ultimately overhead. All Washington is trying to do, is give the economy enough bigger, and more frequent, herion shots for the irrational high to last their terms.