More Media Coverage on the Sloooooow down

I can remember 6 months ago where the headlines on msnbc.com were “Housing Craze”.. The tide is now turning, and I just caught this article on their site…

How a housing downturn could roil economy

It’s about time main stream media caught on. I still think there’s a big tendency on the part of media companies to side with their advertisers and not write negative articles, but sooner or later they have to be ‘fair and balanced’ so here we go…

There is no question the housing market is slowing. Sales of existing homes fell for a fifth straight month in January, and sales of new homes unexpectedly fell 5 percent, despite unusually warm winter weather that should have spurred some house-hunting activity.

…

“There is complete harmony among the indicators as far as what’s happening here,” he said. DeKaser calls it the beginning of what he expects to be a two-year decline in housing sales and construction, although he does not expect “broad-based” price declines because labor markets are still growing.

Hmm; some labor markets are growing, but what happens to all the labor involved with real estate, construction, lending industries, and retail sectors that rely on the housing industry?

More than 40 percent of the dollar volume of new loans has been made with adjustable mortgage rates in recent years, compared with less than 20 percent in the early 1990s. As interest rates rise, many owners who stretched to buy a house will find themselves facing higher and possibly unaffordable payments. If housing prices turn down, some owners could find themselves “upside down” on their loans, owing more than the house is worth. A a true housing bust – comparable to the collapse that deflated tech-stock values in 2000 – holds the capacity to “cripple the banking system,” Kasriel said. That would make it difficult for the Federal Reserve to revive flagging growth since banks would be hard pressed to loan money even if rates were falling.

This is the paragraph that really worries me. The amount of creative financing that has been advertised, pushed, and peddled on people who don’t have a clue. It’s still happening today. Everytime I visit the fax machine at work, there’s a “spam” fax advertising a low 1.25% mortgage rate.

My feeling is that with such a sharp run-up, there’s no time for a “soft landing”. That’s what everyone wants to see, a soft landing, but how many “normal” years of appreciation would it take for us to reach the insane prices of homes today?

-Richie

PS: Grim comes home soon!