Housing market is f-ing bad

How do the Brits see what’s wrong but we don’t?

From a Feb. 2007 (yes, 2007 before the shit actually hi the fan in the U.S.) British website Market Oracle article the headline reads “US Housing Market Crash to result in second Great Depression:”

This week’s data on the sagging real estate market leaves no doubt that the housing bubble is quickly crashing to earth and that hard times are on the way.

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The US economy is in danger of a recession that will prove unusually long and severe. By any measure it is in far worse shape than in 2001-02 and the unraveling of the housing bubble is clearly at hand. It seems that the continuous buoyancy of the financial markets is again deluding many people about the gravity of the economic situation.

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The bottom line is that inventories are up, sales are down, profits are eroding, and the building industry is facing a steady downturn well into the foreseeable future. The ripple effects of the housing crash will be felt throughout the overall economy; shrinking GDP, slowing consumer spending and putting more workers in the growing unemployment lines.

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There’s no doubt now, that Fed chairman Alan Greenspan’s plan to pump zillions of dollars into the system via “low interest rates” has created the biggest monster-bubble of all time and set the stage for a deep economic retrenchment. Greenspan’s inflationary policies were designed to expand the “wealth gap” and create greater economic polarization between the classes. By the time the housing bubble deflates, millions of working class Americans will be left to pay off loans that are considerably higher than the current value of their home. This will inevitably create deeper societal divisions and, very likely, a permanent underclass of mortgage-slaves.

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… figures indicate that foreign investment is drying up and the world is no longer eager to purchase America’s lavish debt. The only thing the Federal Reserve can do is raise interest rates to attract foreign capital or let the dollar fall in value. The problem, of course, is that if the Fed raises rates, the real estate market will collapse even faster which will strangle consumer spending and shrivel GDP. In other words, we are at the brink of two separate but related crises; an economic crisis and a currency crisis. That means that the unsuspecting American people are likely to be ground between the two mill-wheels of hyperinflation and shrinking growth.

Wow, freaky.  This was posted a year and a half before the crisis actually hit in the Fall of 2008.

But have we made things any better with the actions taken?  Today’s news does not bode well in that regard. 

Yesterday, while speaking about a pipedream of retrofitting homes to make them more “energy efficient,” Housing and Urban Development Secretary Shaun Donovan noted that in the last six months 95% of all mortgages have been federally funded via the involvement of Freddie Mac and Fannie Mae, the same institutions that helped lead us to our current crisis.

Donovan spoke of this in a positive light, then reality set in:

Fannie Mae and Freddie Mac shares each fell more than 21 percent yesterday after analysts at Keefe, Bruyette & Woods said their common stock was worthless even if the troubled government-sponsored enterprises end up being recapitalized

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The freefall threatens to hamper and even cripple government efforts to stave off foreclosures, keep interest rates low, restore confidence in the mortgage backed securities markets, and finance new initiatives like the new temporary bond and refinancing program for state and local housing finance agencies announced yesterday.

KBW analysts downgraded shares of Fannie Mae and Freddie Mac to underperform from market perform and cut their price target on both stocks to zero from $1.

Crap.