Maybe what is happening in Phoenix gives us a clue.

I know from my friend Tom that it’s happening in Ventura, CA: He’s been putting offers on foreclosed properties the last two months but investors, cash in hand, keep snatching them.

I wander just how widespread this is.  Investors are looking for cash flow, sometimes even renting to the foreclosed homeowners.  So we probably won’t see this in communities with the highest unemployment numbers.

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Nowhere near over

January 24, 2009

Seems like every day another bank needs another fresh cash infusion or fails altogether, which invariably results in another round of articles, analyst opinions and “is it over?” type queries from every financial news anchor.

The obvious answer is, it isn’t.  And it won’t be for as long as home prices keep dropping and foreclosures stay up.

It’s not rocket science: Banks still have 40 trillion of derivatives on their books, much of it CDSs and MBSs whose value declines when the value of the underlying assets they represent or insure goes down.

We have a clear choice to make as a country, do we:

a) Let home prices fall until some sort of historic affordability level is reached, in the meantime injecting another 2-3 trillion into our banking system just to keep it from imploding.

b) Stem foreclosures and stabilize prices where they are (already 20-40% from high depending on market).

I believe the first option is dangerous and maybe even impossible to achieve: If the financial system isn’t stabilized soon, the resulting deep and protracted slowdown will result in such loss of jobs and purchasing power, historic affordability figures will be meaningless.

Home prices must be stabilized, one way or another.  I hope the rest of the TARP is used this way to a large extent.

A better fix for housing

December 3, 2008

Trillions have been spent to prop up the banks, but little has been done to address the other side of the problem: home prices keep falling and foreclosures climbing.  Obama is right to keep bringing this up.  The crisis must be attacked from both sides.

Paulson has introduced some programs, to be sure, but the money allocated is a drop in the bucket compared to bank bailouts.  Much more was spent just saving Citi in one day than on all the homeowner help programs so far.

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