The jobs data settles that question.....
April 4 (Bloomberg) -- The U.S. lost jobs for a third consecutive month in March and the unemployment rate rose to the highest level since September 2005, pointing to an economy that may already be in a recession.
Payrolls shrank by 80,000, more than forecast, after a decrease of 76,000 in February that was more than initially reported, the Labor Department said today in Washington. The jobless rate rose to 5.1 percent from 4.8 percent.
Job losses have shaken consumer confidence, contributing to a weakening in spending that has almost stalled growth. The report reinforces forecasts that the Federal Reserve, whose Chairman Ben S. Bernanke this week acknowledged the economy may face a recession, will need to do more to prevent further deterioration.
Although, Bear Stearns is no more, the NY times has some interesting observations on the now dead bank....
WHAT are the consequences of a world in which regulators rescue even the financial institutions whose recklessness and greed helped create the titanic credit mess we are in? Will the consequences be an even weaker currency, rampant inflation, a continuation of the slow bleed that we have witnessed at banks and brokerage firms
Stick around, because we’ll soon find out. And it’s not going to be pretty.
Agreeing to guarantee a 28-day credit line to Bear Stearns, by way of JPMorgan Chase, the Federal Reserve Bank of New York conceded last Friday that no sizable firm with a book of mortgage securities or loans out to mortgage issuers could be allowed to fail right now. It was the most explicit sign yet of the Fed’s “Rescues ‘R’ Us” doctrine that already helped to force the marriage of Bank of America and Countrywide.
But why save Bear Stearns? The beneficiary of this bailout, remember, has often operated in the gray areas of Wall Street and with an aggressive, brass-knuckles approach. Until regulators came along in 1996, Bear Stearns was happy to provide its balance sheet and imprimatur to bucket-shop brokerages like Stratton Oakmont and A. R. Baron, clearing dubious stock trades.
And as one of the biggest players in the mortgage securities business on Wall Street, Bear provided munificent lines of credit to public-spirited subprime lenders like New Century (now bankrupt). It is also the owner of EMC Mortgage Servicing, one of the most aggressive subprime mortgage servicers out there.
Bear’s default rates on so-called Alt-A mortgages that it underwrote also indicates that its lending practices were especially lax during the real estate boom. As of February, according to Bloomberg data, 15 percent of these loans in its underwritten securities were delinquent by more than 60 days or in foreclosure. That compares with an industry average of 8.4 percent.
Let’s not forget that Bear Stearns lost billions for its clients last summer, when two hedge funds investing heavily in mortgage securities collapsed. And the firm tried to dump toxic mortgage securities it held in its own vaults onto the public last summer in an initial public offering of a financial company called Everquest Financial. Thankfully, that deal never got done.
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With the financial system going into meltdown, who is talking about the financial mess the US government is now facing? Good time for a fiscal stimulus, I'd say.
The U.S. government turned in a $175.56 billion budget deficit for February, a record for any month, as federal spending grew but a slowing economy caused receipts to fall 12.1 percent from a year earlier, the U.S. Treasury said on Wednesday.
The February gap marked a 46.3 percent increase over the previous all-time single-month deficit of $119.99 billion in February 2007 and soundly exceeded Wall Street economists' consensus estimate of a $160.0 billion deficit in a Reuters poll.
February receipts fell to $105.72 billion from $120.31 billion in February 2007, the Treasury said, as both corporate and individual income tax payments slowed. February outlays grew 17.1 percent to $281.29 billion, a record for February, from $240.30 billion in February 2007, the Treasury said.
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....as if we needed another one. This time it is food....
WHAT HAS the food crisis got to do with Northern Rock? Quite a lot, actually. The rocketing price of wheat, soya beans, sugar, coffee etc is all part of the credit crisis which has caused panic in financial markets and encouraged investors to take their money out of risky mortgage bonds and shaky equities and put it into commodities as "stores of value". Put another way, the Western banks are exporting their debts to the third world.
The phenomenal increases in food prices are only in part a consequence of climate change and population. Most of the recent rises have been the result of speculation and the collapse in the value of the dollar. This is being tacitly encouraged by the central banks, such as the US Federal Reserve, who are trying to ignite another asset bubble to replace the real estate and dotcom bubbles which have burst in spectacular fashion. It's the third bubble and it's hitting the third world hard.
Desperate for quick returns, trillions of dollars are being taken out of private equity and financial derivatives and ploughed into food and raw materials. The financial websites call it the "commodities super-cycle". It ranges from precious metals at one end, to corn, cocoa and cattle at the other - speculators are even placing their bets on water prices.
The collapse in the price of the dollar means that most international commodities are more expensive for poor people. The dollar's decline is a result of the low interest rate policy of the Federal Reserve. When rates are set below the rate of inflation, investors have to keep moving their massive funds from sector to sector in search of higher returns
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The lawyers are moving in. This is going to get expensive.....
WHEN BORROWERS FIGHT BACK: Banks watch closely to see if a couple's legal struggle with their lender will launch a new front in the battle over troubled mortgages.
A federal appeals court is nearing a decision on a battle between Chevy Chase Bank and a Wisconsin couple that could for the first time enable homeowners across the country to band together in class-action lawsuits against mortgage firms and get their loans canceled.
The case is alarming Wall Street's biggest banks, which could bear the hefty cost of reimbursing all mortgage interest, closing costs and broker fees to groups of homeowners who uncover even minor mistakes in their loan documents.
After a federal judge in Milwaukee ruled last year that the Wisconsin couple had been deceived and other borrowers could join their suit, Chevy Chase Bank appealed to the circuit court in Chicago. Kevin Demet, the lawyer for the plaintiffs, said a decision by the appeals court is imminent, though others involved in the case said it could be a matter of weeks.
"It's one of the most important cases for the mortgage industry right now," said Louis Pizante, chief executive of Mavent, which provides consumer protection law services to major lenders. "The case was somewhat interesting a couple years ago when it started, but its ramifications and impact have completely changed given the current environment."
I don't understand the outrage here. The over-riding of a home equity loan is that you have some equity in your home. If house prices fall, wiping out home equity,then on can hardly be surprised that banks stop lending HELOCs.
At the risk of making a tangential point, should HELOCs be used to finance pre-school feews, as the woman in this article from the WAPO seems to be doing?
Homeowners Losing Equity Lines As House Values Fall, Some Banks Withdraw Credit
Nancy Corazzi was told by her lender, USAA Federal Savings Bank, that her equity line of credit was suspended because her Howard County home had dropped in value. In one brief phone call, Nancy Corazzi's lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.
The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth. "I got off the phone and I was shaking," said Corazzi, who was using the money to pay preschool tuition for her twins ."I was near tears. We needed this credit line to get us through some tough times."
Several of the nation's largest lenders, along with smaller ones, are shutting off access to home equity lines in areas where home values are declining. It's an unusually aggressive move as the industry grapples with fallout from the mortgage crisis that began unfolding last year.
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.....it is really that bad..... oh boy.....I never realized it was that bad......
Check out the Northern Virginia bubble fallout blog.
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Credit standards tighten further, just one more reason why the housing market isn't about to recover any time soon:
(Washington Post) Call it the credit risk hangover after the housing boom binge. Home buyers and refinancers who cannot come up with sizable down payments and whose FICO credit scores are below 680 are about to get squeezed in the mortgage market.
Fannie Mae and Freddie Mac are imposing significant increases in fees for a range of borrowers with down payments of less than 30 percent who formerly were treated as "prime" credit applicants. At the same time, the two largest private mortgage insurers -- MGIC and PMI Group -- are raising premiums on consumers who have low down payments and scores in the mid- to upper 600s on the FICO scale developed by Fair Isaac Corp. The added costs for some home buyers could total thousands of dollars, either at settlement or in the form of higher interest rates.
Each company says it has experienced unexpectedly high losses on loans with these characteristics and must revise prices upward to handle the elevated risks. But some mortgage bankers and brokers say the higher costs and down payments will make homeownership impossible or very difficult for a large number of borrowers and will slow a housing market recovery.
Although Fannie Mae's and Freddie Mac's revised fees won't take effect until March 1, major lenders who sell loans to the two investors began imposing the surcharges on applicants this month. Some mortgage loan officers are upset that clients with FICO scores close to 700 -- far above the once-traditional 620 cutoff point between "prime" and "subprime" -- are being charged more.
"This is outrageous," said Steven Moore, a mortgage broker with 1st Solution Mortgage in Falls Church. "On a loan of $300,000 and with a credit score of 675 -- which is not a bad score -- and a 75 percent loan-to-value ratio (25 percent down payment), the cost is an additional $2,250 per loan." If the same borrower wants to do a cash-out refinancing to consolidate debt, the new Fannie-Freddie fee schedule will add another $1,500 to total costs on a $300,000 mortgage, Moore said. On a $400,000 loan, he estimates the extra fees would total $5,000.
Paulson thinks that the housing correction is "at or near the bottom". That is a sure sign that the housing market has still got a long way to go before things stabilise.
WASHINGTON (Thomson Financial) - The US housing market correction is 'at or near the bottom' but the fallout from problems in the subprime mortgage market will likely continue, Treasury Secretary Henry Paulson said. Paulson said losses related to foreclosures in the subprime market were to be expected in light of the 'major' housing correction the US has gone through. At the same time, he believes the risk in this area is 'largely contained,' and poses no threat to the overall economy.
This is my favorite fact about the Dot.com bubble: the average price increase on the first day of trading of an IPO dot.com money waster was more than 70 percent. That is right; in just one day, the pump-and-dump practices of Wall Street returned a cool 70 percent return. What was the comparable one day return of an IPO between 1981-1996? It was about 8 percent. That fact alone should be sufficient to convince everyone that Wall Street was up to something very unpleasant.
Today, the Supreme court dealt a serious blow to those investers who wanted to hold investment banks accountable for their anti-competitive practices. Here are the sorry details of justice denied.
A sad day.......
WASHINGTON - The Supreme Court on Monday dealt a setback to investors suing over their losses in the crash of technology stocks seven years ago. In a 7-1 decision, the court sided with Wall Street banks that allegedly conspired to drive up prices on 900 newly issued stocks.
The justices reversed a federal appeals court decision that would have enabled investors to pursue their case for anticompetitive practices. The case deals with alleged industry misconduct during the dot-com bubble of the late 1990s. The outcome of the antitrust case was vital to Wall Street because damages in antitrust cases are tripled, in contrast to penalties under the securities laws.
The question was whether conduct that is the focus of extensive federal regulation under securities laws is immune from liability under federal antitrust laws. An antitrust action raises "a substantial risk of injury to the securities market," Justice Stephen Breyer wrote. He said there is "a serious conflict" between applying antitrust law to the case and proper enforcement of the securities law.
In dissent, Justice Clarence Thomas said the securities laws contain language that preserves the right to bring the kind of lawsuit investors filed against the Wall Street investment banks. In 2005, the 2nd U.S. Circuit Court of Appeals said the conduct alleged in the case is a means of "dangerous manipulation" and that there is no indication Congress contemplated repealing the antitrust laws to protect it.
Investors allege that the investment banks, including Credit Suisse Securities (USA) LLC, agreed to impose illegal tie-ins, or "laddering" arrangements. Favored customers were able to obtain highly sought-after new stock issues in exchange for promises to make subsequent purchases at escalating prices. The investment banks allegedly conspired to levy additional charges for the stock.
As a result of the conspiracy, the investors say, the average price increase on the first day of trading was more than 70 percent in 1999-2000, 8 1/2 times the level from 1981 to 1996.
Private class-action lawsuits, say plaintiffs' attorneys, provide a significant supplement to the limited resources available to the Justice Department to enforce the antitrust laws.
Lawyers for Wall Street investment banks say it is a highly technical matter where the line is drawn between legal and illegal activity in the sale of newly issued stock. It must be left to highly trained securities regulators to decide, rather than to courtroom juries in antitrust lawsuits brought by investors, the industry says.
The Supreme Court concluded that "antitrust courts are likely to make unusually serious mistakes" that hurt defendants. As a result, investment banks must avoid "a wide range of joint conduct that the securities law permits or encourages."
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These are desperate times for condo developers in Washington DC, and desperate times require desperate measures. This article in the Washington Post highlighted one particularly sad and desperate attempt to roll in some potential buyers. However, it is doubtful if lavish parties will save the DC property market.
Condo sales numbers in the nation's capital are catastrophic. Currently, property developers are selling around 1,600 condos a quarter. During 2005, developers were shifting around 3,000 units a quarter. Think about those numbers for a moment. Imagine if the sales volumes in your business fell by almost half.
Looking forward, the DC market will be saturated with unsold condominiums. Currently, there are about 21,000 under construction, and another 20,000 are slated to construction in the next three years.
Taken together, property developers need to shift 41,000 units while current sales are standing at 1600 units. Given current sales volumes, it will take over six years for the excess inventory to clear. If parties are what it takes to shift condos, then it is party time in the nation's capital.
(Washington Post) The valet parking attendants were at the ready as the SUVs and BMWs pulled up. Men in suits and women in cocktail dresses walked through a white tent into a lobby where bartenders poured Bellinis, Kir royals and orange sorbet mimosas. Waiters passed trays of shrimp, ahi tuna on toast points and cucumber slices with crabmeat.
There was even a paparazzo in the form of Darren Santos. Posing for him in the tent was YouthAIDS founder Kate Roberts, fresh from a trip to India with a delegation that included actress Ashley Judd. "Glamorous and photogenic," Santos gushed.
It was one of the glitziest social events of the week, drawing about 200 people on a Wednesday night. But it wasn't an embassy party or a charity event or a political fundraiser. This was the preview party for the Grant, a new condominium on Massachusetts Avenue NW.
Some of the hottest D.C. parties this spring and summer have combined two of Washington's biggest obsessions: real estate and networking. With the condo market still in a slump, developers are throwing lavish affairs to create buzz for their projects, turning to a marketing technique more common in Miami and New York.
"We're in Washington. People love their events and their black tie and their kind of sassy parties," said Tracy Danneberg, special events coordinator for Metropolis Development, builder of the 90-unit Metropole near Logan Circle. "You have to keep up with it and be different."
Here's why: In the first quarter of 2007, developers sold 1,629 new condos, down from the more than 3,000 they sold each quarter of 2005, according to Gregory H. Leisch, chief executive of the Alexandria real estate research firm Delta Associates. Meanwhile, in the first quarter of 2007, there were 21,523 units under construction or being marketed, and another 20,469 units are planned over the next three years, Leisch said.
Hence the parties, some of them lavish affairs with price tags of more than $50,000, others intimate Sunday champagne brunches. There are groundbreaking parties, preview parties, grand opening parties.
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In the midst of all this terrible news about the housing market, there is the occasional happy story of bidding wars and sellers getting more than their asking price. However, such stories should be greeted with enormous skepticism. Local newspapers have strong vested interests in the real estate market. Advertising revenues has meant that many local news outlets are so deep in the Realtors pockets that they can't see daylight.
The Washington Post is a particularly bad offender. The local housing market is deeply distressed. Yet the Post produces rubbish like the article below.
(Washington Post, May 19, 2007) He and his wife, Rebecca, wanted to sell their three-bedroom townhouse in the Del Ray neighborhood of Alexandria. They paid $430,000 in 2004. They were asking $499,000. Jim and Shane Fagan of Alexandria, shown with 19-month-old daughter Tate, recently got $16,100 more than they asked for their Del Ray townhouse. (By Katherine Frey -- The Washington Post) We were pretty apprehensive," he said. "All through the fall, we had friends in Springfield who couldn't sell their house. We watched the market. We read everything. We were hoping just to break even."
However, after just three days on the market in late March, they had five offers, one for $515,000. "This completely shocked us," he said. In a soft market portrayed so often in bleak terms for home sellers, the Casons are in a minority: sellers who get the asking price or more. Some real estate agents say that, despite key statistics that show the slowest housing market in years, they are seeing cases of multiple bids and rising prices. These seem to be concentrated in close-in neighborhoods including Del Ray, Bethesda and Chevy Chase (both sides of the Maryland-District line) and American University Park in the District.
Real estate agent Jane Fairweather of Coldwell Banker in Bethesda, who said she has had some multiple-bid sales in recent months, said sellers are adjusting prices to reflect a more reasonable market rather than the upward price spiral of previous years.
"I think the market is soft if you don't price it right," she said. "You're now seeing probably 10 to 15 percent of the sellers out there who are going to see multiple contracts.”Two years ago, it was probably 40 to 50 percent of the market that got multiple contracts. And the year before that and the year before that, 60 percent of the market got multiple contracts."
Economists in the Washington area have differing views of what this could mean. Peter Morici, an economist and business professor at the University of Maryland, sees a sign of a healthier market. "It indicates while we don't have a high-volume market, we have a market that has some stability. Fundamentally, [prices] are not a lot lower than they were at the peak," he said.
It an old trick played by all dictators - demonize the foreigner. Today, Chavez - the cracker from Caracas - effectively stole a large chunk of the country's oil sector, under the pretext of protecting Venezuela's national assets.
U.S. companies ConocoPhillips, Chevron, Exxon Mobil, Britain's BP, Norway's Statoil and France's Total woke up today to find that their assets had been expropriated. After years of careful private sector development of the oil industry, which benefited both Venezuela and investors alike, Chavez comes along with that well-worn old song about "Homeland, Socialism or Death." What a sad choice to put before the nation. Would not "protection of property rights, democracy, and peace" be a better maxim?
With the benefit of high oil prices, Chavez can afford to offend foreign investors. However, once investors are expropriated, it is hard to convince them to return. Venezuela is a one industry country. It has a long and miserable history of boom following bust as oil prices rise and fall. Without foreign investment, the country's dependence on oil will increase. In the long run, Venezuela's development is jeopardized for the sake of crude quasi-racist anti-Americanism.
Foreign investors brought development, international best practice and technology transfer to Venezuela. Certainly, Venezuela has a sorry record of neglecting the poor. However, that was the responsibility of successive Venezuelan governments, who found it convenient to export responsibility for their failure overseas. Of course, it is always easier to blame Uncle Sam rather than undertake sustainable political and economic reform.
Venezuela's state oil company PDVSA has a well-earned reputation for corruption and mismanagement. Now, the PDVSA's management has even more assets to mismanage. Give PDVSA a little time and it is certain to screw things up. As the current management pulls out, these companies will run into production and safety problems.
Chavez now intends to nationalize the utilities and telecommunications. In the fullness of time, he will propose economic centralization and 5 year plans. Once oil prices fall, financial difficulties will follow. Venezuelans will see Chavez for what he is - a political fraud. One day, he will be racing to the airport, fleeing into exile. It is what usually happens to South American dictators.
It is one of the great mysteries of the modern age; why was so much of this housing bubble so obvious, so predictable, and yet so difficult to avoid. It is a comparatively simple matter to examine housing data and see prices diverging systematically from long-run trends. It is also straightforward to look at house price to income ratios and see that housing had become unaffordable for all but the most affluent. Yet despite these obvious indicators, Americans chose to ignore the obvious and instead believe the unbelievable; namely, that house prices could continue to grow in excess of 20 percent a year.
This mystery is all the more difficult to understand given the experiences of the stock market in the late 1990s. The parallels between the dot.com bubble and the recent housing fiasco are almost too obvious to highlight. However, given the widespread desire within society to believe the unbelievable, it is sadly necessary to state the obvious. In both bubbles, people were being asked to believe that economic fundamentals were no longer important; that there was something different this time, and that conventional ways of doing things were suddenly redundant.
However, ordinary homebuyers were not the only group to fail to see that the housing market was degenerating into a speculative mess. Journalists, particularly those working on local and regional newspapers, were also susceptible. No doubt, many journalists owned modest properties, and were elated when property prices started to rise. They wanted to believe, like so many property owners, that getting rich was merely a matter of holding on to an asset and waiting for it to appreciate. Given this strong desire to see prices rise, journalists often blinded themselves to obvious indicators of property overvaluation.
Wishful thinking can never overcome the realities of supply and demand. As sure as night follows day, the housing bubble popped, prices began to sink, and elation was followed with despair. Today, we are increasingly seeing newspaper headlines that should have been published five years ago.
Consider, for example, today's headline in the Washington Post "Housing boom tied to sham mortgages". The article recounts the activities of Phillip Hill, who "lured people to fancy cocktail parties in a $1.9 million mansion. He asked to use their names and credit histories in real estate deals, promising to make them rich. Most got $10,000 checks on the spot for signing up. By the time the scam unraveled, the credit of those participants had been ruined, hundreds of upscale properties had fallen into foreclosure and real estate prices had plummeted in some of this city's most exclusive neighborhoods. Hill is about to go to federal prison".
However, the article also points out that since 2000 mortgage related fraud has increased tenfold. Let us consider that statistic, it saying that mortgage fraud increased by 1000 percent in seven years. The growth in mortgage fraud makes the housing bubble look like a blip on the chart. So how is it that journalists failed to notice this explosion in housing-related crime? Why weren't they exposing the activities of people like Phillip hill back in 2002?
The answer is straightforward enough. They were too busy writing feelgood stories about the Washington real estate market. Rather than doing their jobs, they wanted to believe the unbelievable, ignore the obvious, and as a consequence failed to report the truth.
The truth is slowly coming out. When the bubble was raging across the land, everyone thought that it was speculators and flippers who were driving prices up. Now, we are learning that it was something else. True, the flippers and speculators were there, but they could only continue because there were mortgage lenders out there, ready to push the loand that financed the madness. These jokers were pushing mortgages on ill-prepared and naive borrowers like doomsday was almost upon us.
And just how mad did it get? Well, lending standards were so lax that people could get mortgages with monthly payments higher than their monthly income. Presumably, the idea was that the unfortunate borrower could eat into their savings to finance the monthly payments, then sell up and pocket the equity. There was only thing that this scheme required - eternally rising prices. In turn, that required continued lax lending standards.
The Washington Post has an interesting example how the scheme worked:
"Nahid Azimi, who immigrated to the United States from Afghanistan 22 years ago, recently stood in the upstairs hallway of her home in Loudoun County, silently sobbing as she removed the last of her personal items from the $410,000 townhouse in South Riding she bought with pride last summer. She said she was persuaded to buy the house by an Afghan real estate agent she considered a friend and by an Afghan mortgage broker who promised to get her a good loan.
Instead, Azimi, a cashier at Giant who makes $2,400 a month, found herself strapped into a no-down-payment loan with payments of $3,800 a month. She knew it would be impossible to make the payments, but the mortgage broker promised to refinance her loan to make it more affordable. Azimi couldn't qualify for the refinance, however, so she got a second job to try to cover the costs, borrowed money from her friends and tried unsuccessfully to sell the house. Then one day in November, she collapsed at work, in part because of the stress.
"I can't do it anymore," said Azimi, 44, a U.S. citizen. "I cannot afford it, and I don't want them to come one day and put my stuff on the street."
Currently, around 13 percent of sub prime mortgages are experiencing some kind of payments delay. Within a few months, those delinquencies will turn into foreclosures, which will quickly add to housing supply. Not that teh market is short of unsold houses. In most cities, housing inventory is at record highs.
This crash is slow; it is taking its time; but it is getting there. Two things will get us there. Foreclosures, and tighter lending standards.
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Today, readers were confronted with the Post's "Housing outlook: 2007". The newspaper is still at it, spinning out feel-good stories for realtors, despite the fact that the market is crashing in flames.
Take for example the article A Buyer's Market? Lenders Permitting. It is highly representative of the kind of rubbish for which the Post is famous. Rather can speak the truth and say that the market is collapsing, and that it is unlikely to recover for years, this is what the newspaper passes off as analysis:
"Once upon a time, would-be home buyers had to outbid each other and forgo inspections to get the place of their dreams. Now, sellers are the ones making concessions. "The buyers are in the driver's seat," said John Eric, a real estate agent with Long & Foster in Arlington.
But not completely. The real estate boom that ended in 2005 was driven partly by lenders' willingness to give money to people with blemished credit or with no money for down payments. Nontraditional loans, such as adjustable-rate mortgages with low introductory interest rates that increased dramatically after two or three years, became popular. With foreclosures now at a record high, banks are once again getting picky. "It's not just a buyer's market," said Leon Bailey, a real estate agent at Exit Powerhouse in Prince George's County. "It's a buyers-with-great-credit market."
Think for a moment about supply and demand. On the supply side, Washington is flooded with overpriced and largely unsellable housing inventory. Moreover, there is a glut of half constructed condos, waiting to pour onto the market. More supply means inevitably lower prices. It may take some time for sellers to understand this reality. There may be a lot of denial out there. But, more supply means lower prices.
It is true that lenders are now scared witless by sub prime defaults. It is also true that mortgage lenders will be much more reluctant to extend loans to people who don't have the capacity to repay them. However, that is a demand side issue. Less financing means less demand, which means lower prices.
So lets summarize for the benefit of all economically illiterate real estate journalists out there. Greater supply means lower prices; less financing means less demand, which in turn means lower prices.
So, if you are a buyer, in the sense that you have the financial capacity to buy a home, the collapse of the sub prime market means that it really is a buyers market. In contrast, if you are a recidivistic credit-crippled debt defaulter, yes, it will be much harder for you to buy that overpriced POS in Manassas, or the converted crack house in SE DC.
If the Post wants to regain its credibility, it has to stop quoting self-interested realtors. It needs to start telling the truth. The truth is simple enough to understand, just think about supply and demand, and it will follow like water flowing from a tap.
This cartoon more or less says it all. I nabbed it from the DC bubble blues blog, who appear to have taken it from the Washington Post.
Hey! You've won a ride back to the top
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