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United States News Title: See, I Told You So (Again: Housing) See, I Told You So (Again: Housing) Time for me to drag out the old “Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist with Morgan Stanley in San Francisco. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1 or 2 percent a year.” Yep. In 2007 I've pointed this out - 2013 was the best case for a reasonable bottom, followed by income-level growth only thereafter. For three years I have heard that "housing will be in shortage by 2010" (Cramer), "it's bottoming now" (many people, all through the last three years), and of course Benranke's famous claim that there was no bubble in the first place. “The best thing that could happen is for prices to get to a level that clears the market,” said Shapiro, who predicts prices may fall another 10 percent to 15 percent. “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.” Oh, how are we going to do that? STOP TRYING TO KEEP PRICES FROM FALLING! “The efforts to date have been worthwhile,” Blecher said in a telephone interview from Denver. “They both helped borrowers stay in their homes and kept that supply of distressed properties on the market somewhat limited.” Sorry, but wrong. Until housing bottoms the economy will not turn. It can't, because there are too many people in this country who have their entire net worth tied up in their house - or their net liability, as the case may be. Until we clear the market these people who are upside down cannot move to places where there are jobs - and opportunity - because they're trapped in an underwater house. We would be far ahead to flush the pipeline and expedite bankruptcy for those people who are deeply underwater, along with the banks that are in over the heads. Yes, it would hurt. For a short while. But if we don't do it we're going to have a lost economic decade - or more. Until we clear the market on a general basis, which means getting rid of about half of the total outstanding debt in the system, we cannot clear the economy. This is the lesson of Japan. Despite all their screwing around once they blew a bubble in real estate their economy and market was done. They have not recovered precisely because they have not forced those who are underwater to eat the losses, along with those who lent the money to the underwater people and businesses. As such the economy is stuck as people cannot move to meet and create opportunity, capital is frozen in mark-to-make-believe prices that have no economic value, it cannot trade at this inflated value (nobody's dumb enough to pay beyond true value any longer) and the entire economic engine becomes crippled and unable to accelerate. The Nikkei, despite 3% moves when the Finance Ministry comes in and plays hell with the FX markets, is trading at about 30% of where it was at the peak. Despite many monstrous rallies it has never recovered its prior values, and has no indication it ever will. The nation is literally drowning in debt. While the government and central bank continue to issue into a "favorable" environment nobody thinks the nation could pay if JGBs were to rise to, say, 4% interest. That would absorb all of their tax revenues - simply to cover the interest expense! If that happens, it's an instant "ka-boom" - and inevitably, it will happen. We have the advantage of having watched Japan screw this up. We can therefore do it differently. But instead, what Bernanke and his pals, along with Congress and the President, are doing exactly what they did - extending, pretending, allowing people to lie and refuse to take the losses they already incurred. Yeah, I know they're big losses. Yeah, I know they'd bankrupt most of the big banks. But we need a banking system, not individual banks. Where there is a vacuum in the banking system there will immediately be a new entrepreneur to enter the business, or existing smaller institutions who will step up and take over. The charades being run now do not and cannot work. I've been sounding this trumpet since 2007. Now, three years later, you have a whole host of people from the finance and housing industry saying the same thing. We could have saved the wasted three years and $4.5 trillion we've blown by listening earlier, but if we don't listen now, we will - at best - re-run the Japanese experience. And that's if we're lucky.
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#7. To: Nebuchadnezzar (#0)
In a related story...sun rises in east...sets in west,,,film at 11. Dpon't tell us what we know. Tell what you see and what it means.
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