Cure the problem
I just woke up at 3 in the morning. Cannot sleep. For some reason I am thinking of Barney Frank. I use to hate him. Now I am becoming a legit fan. But I think his plan will not help.
What cures this problem. Sales. Mark houses at the clearing rate. Why don't I own a home?
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
And I am more wealthy than many. It does not make sense at this price.
No one wants to hear this, but price would cure this right now. Could you imagine if people started prepaying their mortgages? Banks would be flush. They have these things marked so low. They have written down so much. What would cause people to prepay? An incentive to buy. Why are people not buying? Because we are not dumb. We realize that a Wicker Park condo should not be $700,000.
Long term mortgages are off the long bond. Interest rates are going up now and not down. You can take the funds rate to negative and it would not help anyone buy a home right now. But you know what helps? Tax incentives, and PRICE. Let it drop. Give people incentive to sell at a lower price. Clear it out. Give them a tax holiday until they make back their money on real estate. Give the buyers a tax holiday for buying. Move the houses. And lower the prices.
Look what happened to loans. Chrysler sells at 65. It moves. The whole market goes stratospheric. I had names trade up 16 points over night. Good houses are trading down right now because condos are priced at double the true market.
Don't buy a home at the current price. Short treasuries and Long commodities. Or short Home Prices. They are hedges to each other. And prepayments by selling houses is the only thing that will save this market. Extension risk by keeping people in their homes, combined with less prepayments while interest rates are going up is killing it.
Pre-payment would save us. And lower the real price of housing for everyone.
What cures this problem. Sales. Mark houses at the clearing rate. Why don't I own a home?
http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
And I am more wealthy than many. It does not make sense at this price.
No one wants to hear this, but price would cure this right now. Could you imagine if people started prepaying their mortgages? Banks would be flush. They have these things marked so low. They have written down so much. What would cause people to prepay? An incentive to buy. Why are people not buying? Because we are not dumb. We realize that a Wicker Park condo should not be $700,000.
Long term mortgages are off the long bond. Interest rates are going up now and not down. You can take the funds rate to negative and it would not help anyone buy a home right now. But you know what helps? Tax incentives, and PRICE. Let it drop. Give people incentive to sell at a lower price. Clear it out. Give them a tax holiday until they make back their money on real estate. Give the buyers a tax holiday for buying. Move the houses. And lower the prices.
Look what happened to loans. Chrysler sells at 65. It moves. The whole market goes stratospheric. I had names trade up 16 points over night. Good houses are trading down right now because condos are priced at double the true market.
Don't buy a home at the current price. Short treasuries and Long commodities. Or short Home Prices. They are hedges to each other. And prepayments by selling houses is the only thing that will save this market. Extension risk by keeping people in their homes, combined with less prepayments while interest rates are going up is killing it.
Pre-payment would save us. And lower the real price of housing for everyone.
posted by MattKelly54 at
3:09 AM
2 Comments:
100% agree. So how to you let prices fall without causing another round of collapses in the financial markets? Dont know if it is plausible but why not mark down the homes AND mortgages for certain properties 10% or 20%, set up a resolution trust equivalent to pick up the difference so that the banks dont go under. If we're going to drop a few hundered billion of tax payer money, do it right. That said, the devil is in the details and in the Washington pork...
Another quick update, I bought an iMac.
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