I also know that once foreign investors decide our currency is too risky, they may flee to the gold-backed euro, and perhaps the yuan. Getting those dollars back will mean large and rapid increases in interest rates, coinciding with a weakend dollar which also is inflationary. I remember the days of “stagflation” at the end of the 70′s. I parked my car because I couldn’t afford the gas. Housing was high but no one was buying as mortgages were 16% here in Tucson.

My best, dumbfounded guess is, continued housing crisis until late this year, where the number of foreclosures will decline. Call me crazy, but I predict a “mini-bubble” after that, where median home prices increase 5-10% year over year in 2010, then interest rates increase, bringing that little gift to a ceasing halt. Obama’s free spending on infrastructure will reduce unemployment, but it is borrowed money and will further fuel this nation’s ultimate demise.

I watched Nixon devalue the dollar in the 60′s ( I remember it though I was a child) and I expect Obama – or Biden if Obama leaves due to scandal- might take that route also. But will it happen before or after the next pres. election? Depends on how bad the eschewal of our debt by foreigners becomes, and when. Clearly, the major creditors of the world have much to lose from a weak dollar – for now.

I like the posts where the writers mentioned rents were half what the mortgages are from 2007 home prices. This is critical and enables us to predict a bottom for a certain area based on current and historical rents. In Tucson, rents seldom drop very much, and this fact attracts inumerable buyers during markets like this one, as there is little risk that the buyer won’t be able to make the payments via renters. For many homes here, rental rates are far above the monthly mortgages for the corresponding home prices, yielding huge positive cash flow, and so one could safely say they have overcorrected. Other home price categories still have to fall before one can acheive breakeven by renting. Those home prices are still at risk.

In any event, this is an exciting, yet terrifying time to be alive. Let us hope, and pray, and remain diligent.

Did you read the article? Did you see see the 60 minutes program? Do you have any idea what you are suggesting? Are you being sarcastic or did the lobotomy not go well? This is going to be the mother of all financial disasters. If these resets had occurred without all the other stuff, this would be a nightmare. First 1.75% + 2.75% = 4.50% if the centrals can artificially depress libor and the other index rates, but the big problem is that the Opt arm’s were largely negative amortization and the principal is larger now than at the time of origination. In addition, the values of these homes have dropped 30-50% so they are virtually all underwater. Third, huge second mortgages have been bled from these homes. Most no equity. Fourth, Unemployment. Turn on Kudlow. Listen to what you want to hear.

(1) Major housing distress,
(2) Global stock markets crashing,
(3) Commodities collapsing,
(4) Unemployment surging.

Texas only gained jobs as oil prices surged. Where do you suppose the collapse of oil prices will take Texas now? Remember 1983?

1983 01 8.5%
1983 02 8.5%
1983 03 8.5%
1983 04 8.5%
1983 05 8.3%

Texas will be in as bad a shape as anyone soon.

I think Switzerland may have some trouble for being a safe haven for vast criminal fortunes being harbored in their banking system. Transparency is one of the demands of a population in Depression II.

Maybe Greenspan was right, that we should all be in adjustable loans. Maybe this depression will last 30 years. That would save the housing and finance industries from collapse?