bostonbubble.com

[BK]

SamZ,

You may also want to do research into the Community Reinvestment Act.

This a Federal Law that was passed in the Carter administration (I think) to revitalize inner City.

During the Clinton Administration - Janet Reno substantial enhanced the Community Reinvestment Act and forced Bankers to lend more Mortgage Money in Inner City neighborhoods. Prior to the Clinton Administration expansion of the Act Bankers would lend money in Inner City and charge higher fees for their increased Risk. Janet Reno made the case that this was not Financial Risk Management, but it was race based Discrimination.
The Banks fearful of being taken Court by the Federal Government drastically increased their loan activity in Poorer- Inner City Neighborhoods.

Now, the biggest areas of foreclosure are these areas where Bankers were forced to expand lending to because of the Community Reinvestment Act and we tax payers will bear the cost of fixing the mess created by Politicians and Bureaucrats.

At every turn Politicians have worked to expand Home Ownership as the ONLY way to Wealth. In the Days of Old people would live within their means, Save for a Rainy Day, and work hard.

[samz]

[BK]

Samz,

You were making the case that Government regularly intervenes with Markets and allows inflation. Why wouldn't the Government intervene and force Bankers to lend more Money to areas that need to be revitalized. The best way to get short-medium term financial expansion is by increasing lending. Its through the process of loan being made that you can increase the Money Supply - thats how our Fractional Reserve Banking System works.

I didn't say it was the CAUSE - but, it is an ingredient in the Sub Prime Story - how could it not be?

Have you looked at where the largest Numbers of Foreclosures are - predominately in Poor Neighborhoods.

Can you explain why the Highest Number of Foreclosures are in these historicallyeconomically disadvantaged cities? What explains the over investment in these Poor Towns. Bankers thought Brockton-MA, Trenton-NJ, Lawrence-MA were on the brink of a revival because of their School systems...

BTW - I think it was Fannie Mae (a Government created Enterprise) that first came up with securitizing loans - a long time ago.

I think we need to agree to Disagree.

Best of Luck.

[samz]

[john p]

There are like 3 or so topics on this thread, which I think is great because it serves as a great snapshot in time for the market thinking. Some seem to be concerned with the sustainability of the higher income strata, others on the macro economics and potential correction fallout (including policy decisions).

If you think of buyers as either carnivores or herbivores, it is interesting to follow the eating trend. For instance, when the stock market crashed and interest rates dropped, carnivores consumed housing like a dog that got into the feed bag. They are in a food coma right now. A Tex-Mex food coma is the worst b.t.w.

Anyway, the median consumption level I see based as the median priced property with the prevailing mortgage rate. Based on my calculations, it seems like this consumption level tracks on a 3 percent growth. The rate of consumption is kind of like how many people are eating at the same time (statistics on if sales are up or down).

What I'm coming around to seeing is that people are reaching to a linear 3% slope, and they are just grabbing whatever is in reach. If the inventory is down, they settle on fewer houses, and if the inventory is up, they can reach more quality. When sales are down, you get pent up demand and more hands reaching out, so the issue is as always, how many buyers and how many sellers. I believe the buyers are there, but they are now exploring options that are above what they had targeted in the past.

When I say to people buy now, what I'm saying is buy something that is a much greater quality than you think possible for the money you have. Your money is worth more now relative to housing. Further, if we get a wave of foreclosures, what quality of property will they be and where will they be located? Of course, every community will have some, but they will be concentrated in certain communities for sure. If this is these are the markets you are targeting, wait for sure.

Shiller's Index talks about sales pairs. I think you need to get your mind around what specific properties are on the market at a given time. the fundamental context might be prime to buy, but if the available properties are garbage what does it matter? The best chefs get the best ingredients. The recipe is important, but the quality of ingredients is essential. When I was in Italy, I was surprised at how simple the food was, what made it great was its freshness. I'm just saying, if you wait for a sale on tomatoes, they might not be ripe ones, so you need to align quality with your money and that means you have to always see what property your money can buy.

All in all, properties go up and down with the tide, so a good value at any time is great, unless you're a first time buyer in which case you should wait for a bottom. I'm sorry; I believe you need to buy before the bottom because when the bottom comes, buying activity increases and the quality and value in the market becomes scarce.

[john p]

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[steverino]