Kanook – Tlingit Nation

September 6th, 2010

The home sales marketplace is plunging towards the ravine in the land of “milk and honey”,
causing the sitting administration to scurry about like jack rabbits searching for cover as a pack of
grade school boys plink away at them with their 22-longs. The administration is caught between
a rock and a hard place sitting exposed to both the future homeowners and the current holders of
high-price mortgages.
Over the past few months in a vain attempt to prop up the diminishing housing market the
Obama pack has implemented tax credits, mortgage modification schemes, low interest rates,
government-back money and other lame-brain ideas to keep the sinking values above the fast
approaching line of lower home values plucking methods out of thin air to help delinquent
borrowers out of the foreclosure pit. All these screwball maneuvers put in-place with hopes that
the projected “resurgent” economy would soon pop above the horizon allowing their programs to
merge with the economy with a secure and safe value in the existing housing market.
All would have been well and good with one exception being the economy continues to sputter
and hacking like an old-man on his last legs crawling beneath a cardboard box in middle-
America. As the economy continues to teeter around zero growth in some areas and in other the
unemployment lines grow in non-linear rate – two diverse opinions are surfacing about the home
housing market – the latest one being “let the housing market crash”. Naturally the other one,
being pushed by the bankers and existing mortgage holders is to have the United States borrow
more money from the Federal Reserve and continue to provide various incentives.
The 1st proposition, “letting the market crash” is supported by a group of financial “experts”
who say if the present rate of decline (26% negative fall since June 2009), that with lower prices
buyers will soon fill the bucket of “no sales” and future homeowners will reap the benefits of the
lower prices and stimulate the economy better than any of the programs the democratic
administration and its followers could ever imagine.
There are a few republican members of the establishment, albeit they hate the Obama’s
government, screaming for more tax breaks, and truckloads of money to be poured into the
financial market that holds most of the paper on the high-interest loans of existing homeowners –
whereas the continued fall of the home values devaluates the paper they hold, and the fortunes of
the natural backers of the republican party. To a man, they dislike the party that the populace of
the United States had voted into power.
Educated citizens of the country to a person claim that to continue to stimulate the housing
market with government programs is a leap in the wrong direction, calling any further attempts an
act of supreme insanity. There is one group that moans and groans as the market slides toward
the bottom, this group contains a membership of tens of millions, positioning themselves to
retake the power ticket in an effort to reclaim the values of their property, which has fallen far
beyond the noted 30% over the past decade. They carry a double edged sword in their march, one
being they figure a war here or there will provide jobs that have went by the wayside, number two
is that because the value of their homes have crashed their across the board spending has stopped,
and with some of them looking at how easy it is to default are considering the move themselves.
And riding the middle rail is the present government, that no-matter what Joe Biden speaks the
economy is not recovering and the United States, who used to depend on the world market to pull
them back into the limelight is in as much if not worse shape than in the USA. Whereas in the
later 60s, early 70s the Arab world with their oil wealth walked across its borders an dumped
airplane loads of cash into the US real estate market, it is not happening this time around, for a
couple of reasons. One is the hatred that has sprung up after 9-11, and the other the reduced
demand for their crude from North American and the rising power of the Chinese market.
Whereas heavy rumors in the world’s financial houses are considering dropping the American
dollar as their base with some entertaining the notion that the Chinese Yuan will be its
replacement.
There are members of our financial society that are telling us that we’re on our own this time,
along with pointing to the fact that the heavy betting by this administration that their stimulus
packages has failed, and because of this the large financial houses and the members of the
administration haven’t got a clue on what to do about the ensuing crash.
Naturally as any misguided individual or government the quick solution is to poor good money
after bad in hopes that some of the good will turn around the bad, whereas the Secretary of
Housing and Urban Development is proposing another housing “tax credit” such as the one that
went by the wayside last spring – where 1st time home buyers will receive as “much” as $8,000
and buyers who were moving (upgrading) will receive $6,500. It is noted that the last “tax credit”
cost the taxpayers around $30 billion dollars, as expected the republican members in and around
Washington D.C. voiced their displeasure, albeit they do not mention the plus $356 billion bailout
of the financial houses that was signed into law by GWB on October 3rd, 2008.
 The sitting administration has backpedaled from the Secretary’s suggestion, by pushing forward
other possible stimulus measure being considered – one being the consideration of a $3 billion to
keep the unemployed from losing their homes, along with a refinancing initiative that will make a
half-hearted attempt to reduce the mortgage balances of owners who owe more than their
property is worth – a previous similar program was a resounding failure.
Through all these stimulus hi-jinks the result is that the average home now takes more than a
year to sell and when you add in the homes that have been foreclosed and not yet ready for sale
the total number is empty homes is staggering. Empty structure’s that are not paying taxes or
water and sewer bills, along not contributing a monetary value to the utilities industry.
As for the contractors, new home sales are lower than they were in the recession of the early
80s, when mortgage rates were double than what they are today, unemployment was high and the
doom and gloom similar to today.
This new environment is creating a “do nothing” attitude, whereas more and more the analyst’s
of the marketplace are saying it is much better to let the market find its own bottom, then to
extend or create new programs on borrowed money which will only temporarily stop the slide, in
other words let us stop this “delay and pray” movement and let the value of the dollar create its
own bottom line.
Slowly some of the bigger houses in the mortgage industry are coming on-board with this
attitude, some admitting albeit reluctantly that the prices for homes is artificially high and this
lending induced marketplace is killing the American dream – well, news to me, looking around I
have found that the American frenzy to purchase a home, no-matter the cost has traveled across
the Pacific and the Atlantic establishing itself in out of the way places like Turkey, Egypt,
Lebanon and even China where the government is trying to reign in the escalading cost of a
simple shelter.
The US government is hanging on the hook for a ridiculous number of mortgages, a strong
reason why policy makers have been looking under every rock for some kind of economic
stability – they are weighty the fact that another huge drop in housing prices will start a stampede
of foreclosures by the homeowners with property suddenly under evaluated. An action like this
despite any movement towards government support as last year would now cause the market to
crumble like a cookie left in the weather on the Gobi Desert. Consider the fact that the FHA has
insured millions of low-down-payment loans – loans that officials now concede was a bad move
as the credit quality of the borrowers were too low, and as unemployment reared its ugly head
with a subsequent flaky economy, the weak borrowers bailed in huge numbers, whereas there
were at least 12% of them were delinquent after a year. Linked to this, was the past decades
practice of lending outfits, in a rush to capitalize on the derivative market (created by those whiz
kids on Wall Street) refinancing property based on a future increase in its value. As failures
mounted the economy went into a tailspin and it is not news to you reading this the economic
crash in the housing market in the USA spread across the world. In 2009 the US government
back loans went to buyers with higher credit scores, a good move but to the dismay of the
financial wizards the new procedures still produced a failure rate of over 5%. This rate blamed
on the supposed “risk-takers” who had very little equity and were counting on the rebound of the
economy to sell the property they had acquired with a substantial markup.
What is happening now as the price of property continues its slide into the abyss is that
borrowers are staying away from the housing marketplace, afraid that it might never recover and
at anytime they make a purchase wake up the next day and find the value of their purchase below
market value. This fear is driving some of the houses in the financial market to demand a bigger
participation from the government, people such as William Gross of Pimco, a large manager of
bond funds to submit a proposal that the government refinance at “lower rates” millions of
mortgages it owns or insures. He maintains that such a move would create a crucial stimulus of
$55 billion in needed consumption by the owners and well as increase housing prices.
His proposal seems to have fallen by the wayside, as outfits like the National Association of
Realtors (“NAR”) in not calling for any additional stimulus programs, although some of the
members of the National Association of Home Builders (“NAHB”) are asking for a tax credit
ceiling of $25,000 – but chances of walking this through Congress are slim to none. What never
ceases to amaze me is the large financial institutions want Mr. and Mrs. Taxpayer to pony up to
the rail and dump their hard earned dollars, while outfits such as the Bank of America would
consider it a cardinal sin to wipe out a few bucks from their existing high-interest loans, never
happen.
Members of the NAHB are asking themselves, “If we can’t get a very large tax credit, one that
really brings people off the bench, why use our political capital?”
This fact is causing some of the members of Wall Street to wonder if Obama and his
administration will let the housing market find its own bottom and not step forward with
additional stimulus funds – the very same conservatives who are belly-aching about his abusive
spending in the economy are now screaming at the sky as their holy-than-thou financial
institutions once again face a monetary crisis. So-be-it!