Housing prices to take another huge dive

As I wrote back in 2006, the impending collapse of the housing market was imminent. I predicted that it would brink down the entire economy, considering housings importance to the whole financial system.

Well the housing market did collapse, but the financial system did not collapse, yet.

Back then in 2006, I had no idea of the drastic, immoral and probably illegal methods the Fed would continence by the banks to avert such an event.

The Fed has printed Trillions of dollars to prop up the financial system. Wall st is inflated with government money used to purchase stocks. Bank's balance sheets are top heavy with funny money. The Fed and their cronies in the Obama administration have allowed the banks to hide the true, imploded value of their assets, especially the toxic mortgage backed securities.

I had said in my 2006 article that Joe and Mary Sixpack's ability to pay their mortgage payments were the key to the house of cards the fraudsters in Wall st and the banks had built and it still is.

However, with the drastic decline in the value of their homes, Joe and Mary have little to no incentive to pay their mortgages if the value of their homes is less than the mortgage amounts.

This is a problem I believe has been disquised and lied about. Ten years ago, the average homeowner had 50% equity in their home. At the height of the insanity, average equity had fallen to 30%.

As a result of the housing crash so far, home prices have fallen by 30% and more in certain hard hit areas. Tell me that only 25% of homeowners in Nevada, Arizona, Florida and California are underwater. Perhaps 25% at most are Above water!

The Banksters have been successful in blocking investigations into the rampant fraud that underlined so much of the housing markets, on originations and now of the foreclosure side.

But now it is all coming to light with the investigations into who owns the mortgages and therefore has the legal right to foreclose the mortgage.

Here are a look at some of the possible scenarios:
Investors in securities may demand Put Backs, refunds of the investors money paid for the security based on their fraudulent representations on the underlying securities;

Homeowners suing to get their money back who have made years of mortgage payments to an entity that had no right to those payments

Successful home owner defenses against foreclosure of their homes because of the bank's inability to prove their ownership of mortgage

Title companies refusing to guarantee title to new lenders and borrowers

A collapse of the Trillion dollar securitization game.

Short to medium term, look for housing prices to nosedive as the market grinds to a halt and deflation in the broader financial markets takes over, despite another Trillion or so of QE2, ("Qualitative easing" by the Fed in 2011.)

However, look for gold and silver to sky rocket in the face of the resulting financial chaos. In fact, I expect that you will be able to buy a home with a 1,000 OZ bar of silver, during this period, just like you could in 1982!

Long term, look for ginormous inflation when the Fed figures out how to beat deflation. Then the complete collapse of the financial economy!

20% of Homes Underwater? Think Again!

Zillow.com the real estate industry's barometer of home prices, today reported that 21.8% of all homes in the US are "Underwater." That means that the house is worth less than the mortgage. That amounts to about 20 million homes.

The facts are worse than the news. If 20 Million is 21.8% of all homes, there are approximately 100 million homes in the US. However, 1/3 of them do not have a mortgage. Therefore, 20 million means that actually 1/3 of all homes with mortgages are underwater!

Think of that. What does that mean for the housing market, the banks, the economy?

A sizable number of those homes will be lost to foreclosure. What incentive does a homeowner have to keep up with his payments if an emergency comes up? Will they pay their mortgage or their doctor bill, or their exploding credit card bills, etc.

This means a continued increase in the amount of homes foreclosed on and a continued drop in prices as those foreclosed homes are dumped on the market at fire-sale prices.

Typically, regional bank reserves are about 50% in home mortgages. If 1/3 of them are underwater, what does that do to the value of the bank reserves? For every $1 loss in reserves, the bank will have to cut $10 in lending, adding to the drying up of credit.

How about the big, money center banks sitting there with Trillions in housing derivatives? "Normally" losses of 1-3% in the value of the mortgages underlying the security is projected. What happens to the value of the security when those losses approach 30%? Again, the value of the reserves is dramatically slashed, further choking off credit.

Unfortunately, we are in worse condition than the mainstream media and the government wants you to believe.

If you want to learn more about the reality of our situation and what you can do to protect yourself and your family from economic ruin, read the other posts in this blog.
Bill Young, 646-961-3818