Madness – US Confidence Plunges to a Record Low. Consumers aren’t confident about the future. What, they are surprised that real estate prices can’t rise forever? They’re surprised that interest rates on their adjustable-rate mortgage went up? Where have they been? What were they thinking? Madness of the crowd convinced them that there is no history worth reading.
S&P noted one bright spot as the acceleration in decline was only moderate in August from July.
Amazing.
Regrets – I regret that I bought the home in which I currently reside, purchased before things got ridiculous, instead of one way over what I could afford, because it looks like people who signed up for liar’s loansmay well get bailed out and be allowed to stay in the homes they couldn’t afford. If that happens, how will you feel about paying part of that mortgage payment? That’s what you’ll be doing.
Interesting piece by Alex Roth of the Wall Street Journal about how half-built suburban developments strand early buyers in “post-calamity” like communities.
It’s a serious situation that will be worse before it gets better.
Article from Reuters. That this would be a surprise to anyone defies all common sense.
Entering the 20th century, the vast majority of Americans were employed in food production. Our resources were vast, and required a lot of hands to make the food we eat. Industry came, and with it, both higher paying jobs making cars (and other things). Fortunately, that same technological advance brought automation to the farm, freeing up a lot of those previously food-producing hands to go look for work in the factories in the big cities.
When foreign competition killed our steel and automotive industries, we started using the computers the industrial revolution made possible to create and sell “information.” The ridiculously cheap oil supplies we enjoyed (thanks to our “friendship” with oil sheiks in the ME) allowed us to create huge constellations of suburbs with their accompanying fast food franchises and big box stores, and sell things to each other, soaking up the enormous tidal waves of cash created by an army of manipulators of the economy.
America now has an economy that can be reduced in metaphor to a village of people who pay each other to do each others laundry. As long as some outside entity keeps sending checks to the villagers, it all works. But the many trouble-chickens coming home to roost in the U.S. right now are drying up the resources of that outside entity and the money is stopping.
What you are seeing right now in America, as we celebrate the birthday of this glorious Republic, is that we’re starting to do our own laundry. And so are our former customers, our neighbors.
This situation isn’t confined to California, however. Developers in a number of American cities are cutting prices of new construction to the bone, offering incentives (like Porches in the garage) and in all probability, begging people to take properties off their hands.
Reading this again shows not just how gullible people can be, but how many people in our society grasp on small incidents of luck and success and quickly assume they represent hard, long-term reality. I’ve been preaching Peak Oil, housing bubble and the long-term non-viability of the subprime mortgage market for quite some time. Those who I used to preach to (I save my breath these days) considered me at best, misguided and at worst, a paradoid, delusional crank.
I must admit, it’s a difficult thing to hold my tongue when I hear someone who was so quick to dismiss my ideas 18 months ago now crowing about “these problems they’re starting to read about.” It further illustrates that most of us in this society are born suckers, walking around with big signs that point to their wallet and say “pick here.” I can’t tell you how many people I’ve talked to who a year and a half ago were convinced that home prices will always rise, pausing only momentarily for thought when I asked “is everyone’s income going up to match real estate prices? And if not, how will people continue to pay ever-increasing prices for homes?”
Well, it’s all crashing down now, and sadly, many are losing those homes they mortgaged everything for, then second-mortaged again for boats, vacations, vacation homes, pools, plasma TVs and more. I can’t imagine anything sadder than loading the kids into the car as you leave your home, moving into a smaller rental house, or apartment, and then getting up in the morning to go to your job. What a heartbreak.
But it’s happening every day, in increasing numbers. If there was ever a time to get debt-free with money in the bank, and a house that could lose 25% of its market value and still show equity, now is that time. I’m happy to say your editor has been blessed enough to get there.
Madness – US Confidence Plunges to a Record Low. Consumers aren’t confident about the future. What, they are surprised that real estate prices can’t rise forever? They’re surprised that interest rates on their adjustable-rate mortgage went up? Where have they been? What were they thinking? Madness of the crowd convinced them that there is no history worth reading.
Entering the 20th century, the vast majority of Americans were employed in food production. Our resources were vast, and required a lot of hands to make the food we eat. Industry came, and with it, both higher paying jobs making cars (and other things). Fortunately, that same technological advance brought automation to the farm, freeing up a lot of those previously food-producing hands to go look for work in the factories in the big cities.