�??We are working through the toughest housing and mortgage markets in a generation,�?? said Daniel Mudd, chief executive.
Fannie Mae plunges to $3.6bn loss
By Saskia Scholtes in New York
Published: February 27 2008 14:25 | Last updated: February 27 2008 14:25
Fannie Mae, the US government-chartered mortgage lender, on Wednesday reported a $3.6bn loss for the fourth quarter of 2007, driving its shares to a 12-year low in pre-market trading.
I don’t really know much about how the whole real estate thing works but I wonder if all of those “house flippers” have anything to do with this?
[quote]Headhunter wrote:
�??We are working through the toughest housing and mortgage markets in a generation,�?? said Daniel Mudd, chief executive.
Fannie Mae plunges to $3.6bn loss
By Saskia Scholtes in New York
Published: February 27 2008 14:25 | Last updated: February 27 2008 14:25
Fannie Mae, the US government-chartered mortgage lender, on Wednesday reported a $3.6bn loss for the fourth quarter of 2007, driving its shares to a 12-year low in pre-market trading.
The never ending quest for the bliggity blang is killin us. Then people wonder why I’m so cheap.
[quote]jawara wrote:
…
The never ending quest for the bliggity blang is killin us. Then people wonder why I’m so cheap.[/quote]
Best way to live. Spend less than you earn. Let the chumps that live on credit drive the economy. They may drive nicer cars for a while but in the long run they pay more for it while you will end up with more money and less stress.
[quote]jawara wrote:
I don’t really know much about how the whole real estate thing works but I wonder if all of those “house flippers” have anything to do with this?[/quote]
Yes and no. Many people sought investment property when the rates dipped real low. This caused prices to skyrocket due to a perceived shortage – though it was artificial. The Fed tried to correct the boom by raising interest rates. Many people who took out ARMs suddenly had their payments jump a couple hundred bucks or so and then the whole market became unhinged. In an instant these same investors who were unloading homes at %40 profit had to unload a home they could no longer afford. Hello, here comes a price collapse as the market is flooded with empty homes.
This process is natural but when accompanied by artificial rate control (compared to free market interest rates) it has a tendency to be extremely volatile because the gravy train always appears to be endless. Thus investment is always greater than it normally would be because people tend to risk less of their own savings than they do when they have cheap credit. This same phenomenon happened to the stock market in 1999-2000.
Every giant bubble and collapse has been the result artificial credit expansion by the Fed. Though, ultimately, it is the investors that bear the responsibility for malinvestment.
[quote]Zap Branigan wrote:
They may drive nicer cars for a while but in the long run they pay more for it while you will end up with more money and less stress.[/quote]
Inflation tells a different story: spend now while your money is worth something.
[quote]LIFTICVSMAXIMVS wrote:
Zap Branigan wrote:
They may drive nicer cars for a while but in the long run they pay more for it while you will end up with more money and less stress.
Inflation tells a different story: spend now while your money is worth something.[/quote]
All that says is don’t put your money in the mattress. Invest in a wide variety of things and you will outpace inflation.
[quote]Zap Branigan wrote:
Invest in a wide variety of things and you will outpace inflation.[/quote]
Not necessarily. Investment is dependent on wages. Wages haven’t kept up with inflation otherwise it wouldn’t require two incomes to raise a family.
People who can afford to invest have to invest just to keep up; those that cannot afford to invest will find themselves poorer year after year.
[quote]LIFTICVSMAXIMVS wrote:
Zap Branigan wrote:
Invest in a wide variety of things and you will outpace inflation.
Not necessarily. Investment is dependent on wages.
[/quote]
No it is not.
It doesn’t. It takes fiscal responsibility and not wasting money on cable TV, cell phones and new cars if you cannot afford them.
[quote]
People who can afford to invest have to invest just to keep up; those that cannot afford to invest will find themselves poorer year after year.[/quote]
Everyone can invest a portion of their income. That portion invested will yield a higher rate of return than inflation and they will be better off.
Factor in the interest paid when borrowing and borrowing is a losing proposition (unless you borrow on a massive scale like business and government and then the economics change.)
[quote]LIFTICVSMAXIMVS wrote:
pat wrote:
No they don’t.
Oh yeah? When did it become vogue to take on debt v. saving when the mantra used to be a penny saved is a penny earned? It seems the virtues have flip-flopped almost completely – about the same time our government decided we had to consume our way to economic prosperity.
Just to show how much inflation has bit us: can you imagine bending down to pick up a penny and reciting that same mantra out loud to yourself?[/quote]
The advent of credit did that. Because America is in debt and many americans are in debt, it does not follow that the U.S. debt caused the indebtedness of Americans. You’re evidence is coincidental not causal.
More…
[quote]pat wrote:
The advent of credit did that. Because America is in debt and many americans are in debt, it does not follow that the U.S. debt caused the indebtedness of Americans. You’re evidence is coincidental not causal.[/quote]
I am not trying to pass it as evidence. It is not. Beside we cannot prove causality anyway. It is merely a point of observation that debt has become the norm – call it anecdotal. We used to be a country of savers before easy credit.
Credit has to come from somewhere…?
[quote]Zap Branigan wrote:
jawara wrote:
…
The never ending quest for the bliggity blang is killin us. Then people wonder why I’m so cheap.
Best way to live. Spend less than you earn. Let the chumps that live on credit drive the economy. They may drive nicer cars for a while but in the long run they pay more for it while you will end up with more money and less stress.[/quote]
The best kind of car…a paid for one!
[quote]LIFTICVSMAXIMVS wrote:
jawara wrote:
I don’t really know much about how the whole real estate thing works but I wonder if all of those “house flippers” have anything to do with this?
Yes and no. Many people sought investment property when the rates dipped real low. This caused prices to skyrocket due to a perceived shortage – though it was artificial. The Fed tried to correct the boom by raising interest rates. Many people who took out ARMs suddenly had their payments jump a couple hundred bucks or so and then the whole market became unhinged. In an instant these same investors who were unloading homes at %40 profit had to unload a home they could no longer afford. Hello, here comes a price collapse as the market is flooded with empty homes.
This process is natural but when accompanied by artificial rate control (compared to free market interest rates) it has a tendency to be extremely volatile because the gravy train always appears to be endless. Thus investment is always greater than it normally would be because people tend to risk less of their own savings than they do when they have cheap credit. This same phenomenon happened to the stock market in 1999-2000.
Every giant bubble and collapse has been the result artificial credit expansion by the Fed. Though, ultimately, it is the investors that bear the responsibility for malinvestment.[/quote]
thanks for the lesson
When is this expected to fix its self?
I’m 16 now, and will probably purchase a home between the ages of 23-27, will prices still be dirt cheep then?
[quote]Defekt wrote:
When is this expected to fix its self?
I’m 16 now, and will probably purchase a home between the ages of 23-27, will prices still be dirt cheep then?
[/quote]
We will probably go through one or two cycles before then. It is impossible to say what it will be like then but if population keeps growing it will be harder for you to purchase anything with land.
[quote]Defekt wrote:
When is this expected to fix its self?
I’m 16 now, and will probably purchase a home between the ages of 23-27, will prices still be dirt cheep then?
[/quote]
Just remember that when banks go broke and economists shit themselves the right time to buy has arrived.
[quote]orion wrote:
Just remember that when banks go broke and economists shit themselves the right time to buy has arrived.
[/quote]
Word!
I know it is just my opinion, but I believe the housing boom, is simple inflation. The only reason housing boom halted was because wages were not keeping pace. The cost of labor has not kept pace with anything Food, Fuel, or Housing.
Side note the economic boom that Bush takes credit for was the Real-estate boom. And in his defense Bill Clinton took credit for the Dot com boom.
[quote]pittbulll wrote:
I know it is just my opinion, but I believe the housing boom, is simple inflation. [/quote]
Yes, when money gets pumped into a particular sector disproportionately the effects are inflationary. Inflation is in terms of prices – the dollar buys less than it did before. Supply and demand for both money and housing inflates prices.
[quote]
The only reason housing boom halted was because wages were not keeping pace. The cost of labor has not kept pace with anything Food, Fuel, or Housing.[/quote]
The boom halted for many reasons and it would be hard to understand every exact reason why. The key component is that there is now an abundant supply of empty homes waiting to be bought. Somewhere before the bust rates got readjusted and this caused a problem for many sub-prime debt holders thus compounding the problem.
The bust is on two fronts: those still holding property they
can no longer afford and the financial markets who have lost their investment capital due to foreclosures, etc.