I disagree with his calling what we're currently heading toward with respect to the housing market a crisis. The crisis is what has happened so far. A more or less immediate, very steep correction is what is needed to stop the crisis from continuing.
I believe a lot of the damage is already done, however. Even the people who can actually pay their mortgages are paying too much... spending too much of their incomes on debt service instead of consumption.
I think this means we'll have some pretty bad economic growth for the next few years... and all those 06 mortgages will start to default next year.
The faster the correction is, the fewer additional people there will be spending too much of their incomes on housing; and more importantly, the less time the honest and responsible people seeking home ownership will be priced out of the market. If the Feds were to lower the target rate, the correction would be slowed, which would be horrible. The Feds shouldn't lower interest rates at all until after the housing correction is complete; they should think long-term first, then worry about the short term.
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Yeah... um, if he's so smart, why didn't he say this back in 2006?
I disagree with his calling what we're currently heading toward with respect to the housing market a crisis. The crisis is what has happened so far. A more or less immediate, very steep correction is what is needed to stop the crisis from continuing.
Good point ___k.
I believe a lot of the damage is already done, however. Even the people who can actually pay their mortgages are paying too much... spending too much of their incomes on debt service instead of consumption.
I think this means we'll have some pretty bad economic growth for the next few years... and all those 06 mortgages will start to default next year.
The faster the correction is, the fewer additional people there will be spending too much of their incomes on housing; and more importantly, the less time the honest and responsible people seeking home ownership will be priced out of the market. If the Feds were to lower the target rate, the correction would be slowed, which would be horrible. The Feds shouldn't lower interest rates at all until after the housing correction is complete; they should think long-term first, then worry about the short term.
Here's an interesting read from Ben Stein regarding the recent wall street sell-off, due to the housing crisis
http://finance.yahoo.com/expert/article/yourlife/41148
____k, Agreed. Ben Stein always provides a calming voice.
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