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    Expanded Ponzi Scheme Equity Vanishes

    THE PONZI SCHEME EQUITY VANISHES

    About $7 trillion
    has been taken from the wealth account of property owners.

    130
    million housing
    units in the US – owners
    have lost
    an average of
    $54,000
    .

    Homeowners were the
    victims of this PONZI SCHEME.

    NEGATIVE EQUITY – THE NEXT REALITY CHECK




    How many homeowners would be better
    off financially by walking away from their mortgage?

    THIS IS THE QUESTION MANY WILL ASK
    THEMSELVES AND THEN THEY WILL

    WALK AWAY.





    Payment
    performance on mortgages is terrible and getting worse. More than 4% of
    mortgages

    are in foreclosure. More than 13% of
    mortgages (ONE IN EIGHT) are behind.






    debt to gdp 60 year my notes jpeg

    This “Low Debt” and “High Debt” chart of approximately the
    last 60 years shows that the magnitude

    of
    debt, whether it be corporate or household, could be far beyond reasonable. If
    we are in the hang over

    of a world-record credit bubble, then the
    outlook for real estate investment is negative.



    The best research into credit bubbles says that property

    The
    best research into credit bubbles says that property’s value will fall through the summer of 2012

    until
    three years from now. The good news is that the fall in values has nearly
    equaled the average fall

    of
    35%. The bad news? What if we have a King-Kong credit bubble and it’s actually
    not stupid to say

    “It’s
    different this time.”?



    mortgage negative equity zillow % by vintage

    The
    graph shows half of all mortgages
    issued in 2006
    have a balance greater than the value of the house

    securing
    the loan. What will happen to loan performance if 50% of all mortgages are
    worth more than

    their
    collateral? Deutsche Bank issued a
    report in early August saying that 48% of all mortgages would be

    worth
    more than their collateral by 2011.



    property case crop peak to trend

    Property values could fall 60%! Prices have already fallen 30%. When values
    fall according to the

    estimates
    in this graph, it is a certainty that banks and financial companies will fail
    en masse. A bandaid

    is all we’ve done so far. These banks need a
    tourniquet, heart surgery and years of rehab.




    The
    Wall Street Journal recently reported that two-thirds of sales are a form of
    distressed sale (Improving

    Home
    Sales Belie Market Reality, 8/21/09). “‘Think about that for a minute,’
    John Mauldin of Millennium

    Wave
    Advisors wrote this week. ‘Two-thirds of home sales are either foreclosures or
    banks taking a loss

    on
    the mortgage.’ And only a third of the
    remaining one-third — roughly 10% of overall sales — comes

    from
    ‘something we could call a normal selling process.’”



    NEW
    VS USED: A wide gap has opened up between sales of new homes and existing
    homes.

    The
    trend began in 2006 and remains elevated.

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