Some people never learn. They follow the same path that destroyed their finances in the past. Wall Street is desperately packaging the increasing amounts of subprime slime in new derivatives of mass destruction and peddling them to clients, while shorting those same derivatives. It’s called the Goldman Sachs method. When home prices begin to tumble, these derivatives will self-destruct again. What is happening today is nothing more than rearranging the deck chairs on the Titanic. The iceberg has been struck, we’re taking on water, and this sucker is going to sink. Game Over – Jim Quinn, The Burning Platform
I wanted to post this piece by Jim Quinn a) because it is incredibly well-written and b) so that everyone can see that I’m not the lone voice in the wilderness on the housing market (and the rest of the economy).
Unfortunately, a home is largely a not very liquid asset. During brief periods of mania, fueled by Fed-induced monetary promiscuity (debt and printed money), Americans begin to think that houses can be traded like stocks – i.e. there’s always a “deep” bid to the buy side. But what’s happening now is the same thing that happened in 2006-2008 in real estate. Supply is quickly outstripping demand and demand is plummeting. The housing market was very liquid when the $2 trillion of mortgage QE was going in to it. Now it’s about to become very illiquid and eventually it will become largely “offered without,” meaning a flood of listings that scare away almost all potential buyers.
I highly recommend reading Jim Quinn’s commentary: Two Outs In The Bottom Of The Ninth (and no one on base)