Thursday, January 22, 2009

Latest Housing News

Foreclosures were up 81% in 2008 compared to 2007. There were over 3 Million foreclosures filed and over 861,000 people actually lost their homes. This number probably would have topped 1 million were it not for various foreclosure moratoria passed by several states. All they do is prolong the agony for most. Although some experts are calling for a bottom in 2010, at about a 33% drop in housing prices, there is no rational reason to believe this estimate. I think they say that because 2010 is a year away and probably no one will remember they said that at that time. To the contrary, the only bright spot in real estate has been the low interest rates and that bright spot will be extinquished by the end of this year with the bursting of the Treasury Bond Bubble.

The drying up of funds for real estate lending combined with new lending regulations that eliminate half of the people who could borrow before, in addition to the layoffs and the growing number of people "sending the keys to the bank" because they are under water, will combine to drive housing prices lower than anyone dared project, I believe.

Thinking of buying real estate? Put the money you were planning to use for the purchase (30% down required!), into silver. The overall economy is in a deflation now, with the prices of everything going down, including gold and silver. However, when the economy turns, inflation will be back with a vengeance. This situation is analagous to 1971 when the average home sold for $20,000. Let's see what would happen if Mary bought a home for $20,000 and John put $20,000 in silver. The economy was bad for several years in the 70'S but when the economy turned, prices shot up. Mary's home jumped to $40,000 in 1980, but John's $20,000 investment in silver was worth over $770,000 in 1980!

The stage is set for a repeat performance. When the economy turns, real estate appreciation will be hampered by the huge inventory of unsold homes, restrictive lending standards that will eliminate half of the usual buyers, and sky high interest rates. Silver will have no such retardants holding it back. As it is, silver is more scarce now than in 1980, since 95% of all silver mined is consumed by industrial uses. Also, Warren Buffet has recently bought 20% of All the silver in the World! Think he knows something that we don't?

Wednesday, January 21, 2009

A Quick Update on Where We Stand...

How about housing? New, luxury condos in Manhattan now loosing air too with new Battery Park condos selling for up to 56% off! Homes in Detroit and Cleveland being dumped by the banks for $1,000 each. 10% of all mortgagors late on payments, 15% of all homeowners with a mortgage owe more than the house is worth. The new restrictions banks are putting on potential home buyers, such as 30% cash for downpayment, closing costs and mandated bank reserves, has closed about 50% of willing buyers out of the market.

Mass unemployment spreading to every sector, 34,000 more from Circuit City bankruptcy alone. If you count unemployment the same way they did during the Great Depression, and there is no reason we shouldn't, our unemployment rate is really 16%

We are looking at an unstoppable avalanche of bankruptcies: US Airways, Saks, Best Buy, Kmart, BN Furniture store, Bronx, NY etc are all on the brink. Circuit City was just the first big name. Retail is moving to the Internet, just like travel. There is no need for the big overhead of a physical location in many instances. Half of all electronic purchases are now made over the Internet.

US Government will wise up later than sooner that they can not continue to save everyone. The big banks and financial institutions are already dead, the only thing keeping the lights on is tax payer money and that will soon come to a halt. Citi, Bank of America, AIG have already had several hits on the public tit and will need more. Just in: "Friedman, Billings, Ramsey analyst Paul Miller made waves Tuesday by suggesting that Bank of America Corp. (BAC: 5.78 +13.33%) needs more than $80 billion in new common equity capital. The bank begins the year with $61.7 billion of tangible common equity, supporting $2.4 trillion of tangible assets, Miller’s note said according to a MarketWatch report. That’s well below the 6 to 9 percent ratio that Miller believes is needed." Can the bank earn the Billions it needs? It just lost $1.7 Billion in the 4th qtr. Earnings are headed the other way, down, not up.

Consumer delinquencies will destroy entire industries: housing, credit card (banks), autos, etc.

Commercial real estate will soon join the party. You don't need Malls if the customers cannot afford to buy. Just in: "Suggesting that capital markets turmoil is now affecting multifamily apartment owners and developers, the National Association of Home Builders suggested Wednesday morning that apartment developers are finding it difficult to fund future projects."

Obama will have no choice but to devalue the currency to provide enough inflated dollars to pay the Trillions of debt we have and are continuing to build up. A deficit of over $2Trillion is very likely this year.

Internationally, the Chinese economy is heading for recession too. Plus, they see the growing recklessness with which the US prints money to prop up failed financial institutions. This means that they will stop, sooner than later, buying US Treasury Bonds. This will extinquish the last real estate bright spot, low interest rates which will be yet another stake in the real estate market's heart.

What about gold and silver, you ask? The current deflation has beaten down gold and silver by 30-40% in the last year. prices of gold and silver have been d
The baby has been thrown out with the water. Their prices, especially those of silver, have been hammered in the past 14 months and I expect they will continue to trend down as the deflation persists. This makes it an IDEAL time to buy gold and silver at such deflated prices. As the only real money in the world, people will stampede to these metals once the economy crashes.
Oh, yes, stocks. I predict that within the first qtr, 2009, we will see a Dow of around 5,000. The current deflation is sucking the life out of businesses. No financing for businesses, failure of more major financial institutions, bankruptcies of major retailers, no sales, dropping corp profits, possibly rising interest rates all point toward a crippled stock market in free fall.

Anyone ever hear of the Amero? Google it!