CHESSNOID

If you watch main street media or listen to the government and its economic cheer-leading experts, then you would think that we were past the bottom of this economic cycle and things will get better in the next quarter or two.  They like to point to certain reports that show some improvements that have Geithner calling it  “green shoots” in the economy or as Obama puts it economic “glimmers of hope”.  Maybe the White House and its economic experts are right, but I highly doubt it.

The start of this deep recession started with the housing bubble.  It took about 6 years to inflate and it eventually burst and the crisis has spilled into every part of our economy as well as beyond our borders into many other countries.  The housing area is what needs to recover before the economy starts a true recovery.  It really is that simple in my mind.

So where are we as far as the housing recovery?  I think we are still in a downtrend because the foreclosure inventory is still growing even with the moratoriums the banks and government agencies had in place.

I read an article in the NY Times and I think the author offered some good insights.  NY Times:

As is often the case at these auctions, the seller of the condo — Fannie Mae — retained the right to refuse the winning bid and keep the property. But Mr. Houtkin told me he was optimistic his bid would be accepted. An R.E.D.C. employee suggested to him that $30,000 wasn’t much below the minimum price that Fannie Mae had hoped to receive.

How could that be? Because Fannie Mae, like many banks, is inundated with foreclosed properties. In recent weeks, banks have begun accelerating foreclosures again, after having held off while waiting to find out which homeowners would be eligible for the Obama administration’s assistance program.

The glut of foreclosed homes creates a self-reinforcing cycle. Falling prices lead to more foreclosures. Foreclosures lead to an excess supply of homes for sale. The excess supply then leads to further price declines. Jan Hatzius, the chief economist at Goldman Sachs, says that the “massive amount of excess supply” means that home prices nationwide will probably fall an additional 15 percent.

This estimate hides a lot of variation, too. In Miami, Goldman forecasts, prices could drop an additional 33 percent, which is pretty amazing since they’ve already fallen 50 percent from their 2006 peak.

Nor is excess supply the only reason prices still have a way to fall. Nationwide, homes may not be overvalued by much. But in some cities, including New York, San Francisco, Los Angeles, Boston, Chicago and Miami, they remain very expensive.

So while Mr. Hatzius and his Goldman colleagues are somewhat more pessimistic than most forecasters, but the difference isn’t enormous.

These foreclosure auctions are much lower than the previous sales and after they are recorded as public records, they will become the new comps. I know some appraisers won’t use the foreclosures as comps for certain appraisals, but the truth is people who are in the market to buy will take that information into consideration in determining true market value.

I agree that the housing prices will continue to fall and that we are not near the bottom.  All the government bailouts and stimulus packages passed under both Bush and Obama have been a waste. They have put a big burden on the US taxpayer and made the recession worse.

I shake my head in disgust when I hear President Obama asking how to save $100 million dollars off the budget when not less than 100 days in office, he allowed billions of taxpayer dollars go to CEO bonuses and trillions of taxpayer dollars go to failed bankrupt companies which in turn handed it off to counter parties.  I think at some point Obama will recognize that his actions speak louder than his words.