If we had had our currency anchored in this recession there's a good chance we'd have seen something a lot closer to the GD, when our currency was anchored. You think we've had a lot of problems with foreclosures now? Drop another 30-40% deflation on home values and incomes and think about what it would look like.
if housing fell another 30% as you say then first time buyers would be buying new homes like hotcakes. The reason nobody is buying is because homes are still overpriced!
Mmmm... not really. The problem is credit standards have become overly restrictive and there is that little matter of 8.3+% of people with no job. It doesn't matter if the house is 30% cheaper if you have no job and lending standards are overly tight.
at some point supply and demand shall meet, the only question is at what price.....your problem is you are afraid of falling prices perhaps you dont want to lose equity in your own house. Prices wont go to zero but they should keep falling until supply and demand meet. So standards are stricter so what? There are nations where you need to pay cash for a home. If rules are stricter then all the more reason that prices need to fall further as there is a lack of demand at these inflated prices!
just as prices rise too much when interest rates are too low and rules too lax then the opposite is true when interest rates are too high and rules too strict....the market always adjusts at some price...to interfere just distorts the market!
It doesn't matter if a house costs $200k or $140k. If you can't get a loan, you can't buy the house. Most first time buyers don't have $140k cash sitting around. Furthermore, if someone owes $210k on their mortgage and their house is worth $200k, they can't sell it when the price drops to $140k. However, you would see another avalanche of foreclosures and people losing their homes and bank failures.
read my post again....I said if interest are too high or "RULES TOO STRICT" you are saying that nobody is buying because the rules are too strict now, so what? There are nations that you need to pay cash or nearly cash for a home, all it means is that prices need to be lower so that people can afford to pay cash thats all. The less of a down payment needed the more prices tend to rise. Even things like the length of a mortgage, the longer the term the more prices rise as it takes smaller monthly payments! The market usually can handle any of these situations as at some point supply and demand meets at some price.
like I said in my other post, there are countries where people need to pay cash for a home yet still the market functions.....it just means that prices need to be lower so that people can afford to buy. Amercans have had it good for too long similar to greece.......you think that for some reason you are entitiled to cheap interest rates or easy money just like greece thought they were entitiled to all sorts of freebies. There is a price for everything!
They're going to have to get a *lot* lower before people can pay cash. But then many will not be able to sell anyway.
well fine then....and this is why in some countries you can buy a home for like 50,000 dollars as its an all cash deal....like in the philippines for example. The market always adjusts to the new normal.....still I would rather that then this nonsence of 5% down payment where when house prices fall the banks are left holding the bag.....or at least make the buyers more accountable if they decide to walk away from a bad investment decision!
I agree that no or very low down payment loans are inappropriate as an industry standard practice. But that is irrelevant to the point about the effects of deflation and housing prices falling farther.
OK let me ask you something...suppose you were a first time buyer....please tell me how keeping prices artificially high is helping you?
Home prices improving so more people can actually sell their homes might help. An improving economy probably will help me. Low interest rates helps. Lower down payment requirements help.
but dont you think that if prices fell another 100,000 on average that it would not help you as it would mean a savings of several hundred per month in interest payments on your mortgage?
Yes assuming you could get a loan and interest rates were not substantially higher it would lower your mortgage payments and down payment.
well the banks is a dirrerent problem altogether...you need to let the zombie banks fail.....and let the solvent banks buy the pieces of the bankrupt banks.....this will strengthen the banking sector as a whole...eventually in a couple of years lending would become healthy again!
I think gold will eventually be a bubble, but no where near yet. As for houses, since its being discussed in previous posts, if they aren't selling now with record low mortgage rates, then I guess the prices aren't low enough yet. You have to realize how ridiculous the housing bubble was and how ridiculous people were trying to keep up with the Jones' as the saying goes. It was very bad.
LMAO This isn't 1933. If the Government tried to outlaw gold ownership again, the US citizenry of today would absolutely scream a fit. They'd be hiding their gold under their floorboards and everywhere else to keep Government from getting their hands on it. They wouldn't turn in their gold anymore than they would their guns.
Ummm...try 1974. That is when private gold ownership became fully legal again. http://en.wikipedia.org/wiki/Executive_Order_6102#Abrogation_and_subsequent_events There are few Americans that own substantial amounts of gold...so I doubt a great public backlash would occur were it made illegal again. And the government would just agree to buy all private ownership at face value (I assume)...so it's not like the masses who don't own gold would feel so bad for those that did. The invasion of Iraq should prove once and for all that Americans can be conned into doing just about anything by the government if both parties and the bureaucracy want it badly enough. And besides, you could always store your gold offshore in Canada, Mexico, Europe, etc. if it ever came to that.
It would be a very difficult task to confiscate. They don't have to confiscate they just have to make it illegal to own. Hypothetical Scenario Golds at $2500-$3000. We have a banking crisis, martial law. Inflation at 40% after QE3 or technically QE to infinity. People are actually looking at the dollars in real terms and not nominal terms. Barter is becoming common. The president speaks we have a plan to stabilize our economy and stabilize the dollar. We will do this by backing our currency in Gold. At this point in time we will pay you $2500 an ounce for your Gold in the new US currency. You have 15 days to do this. After that you will have another 15 days to turn you Gold in for the price of $2000. We will offer a third settlement date at this time we will pay $1750 per ounce. If you do not turn in your gold you will be considered an enemy of the state and face 10 years in prison or $10,000 fine or both. Less that 6% of the population actually have physical gold. After the final settlement date the president addresses the nation and states there are belligerents in this country who continue to operate without law. These terrorists will destroy our monetary system. It is your patriotic duty to turn these belligerents in and claim a reward. So now 94 out of 100 people are against the people who actually saw this coming and planned for it and protected themselves. After the smoke is cleared about 1 year later the US reprices Gold to $10K USD and your currency was just devalued by 75%. just a thought
whats to stop an american from secretly crossing the border either into canada or mexico and selling their gold there?
That would be the thing to do. Guns, Gold and a Getaway plan But how many drones are spying on us right now? Body scanners are not going away at the airports.
