Friday, October 21, 2005

Problems with CNN Article

The CNN article titled 'Housing bubble may lose some wind' is problematic for many reasons.

With the popularity of exotic mortgages, it's never been easier for homebuyers to afford their dream house even if it's out of their preferred price range.

But in many markets home prices have gone up tremendously, thus negating the 'affordability' effects of these exotic mortgages. Additionally, these exotic ( aka toxic) loans sacrifice long term affordability for short term affordability.

Walter Molony, spokesman for NAR, said the housing market's strength in the last few years has been the result of a simple supply and demand equation: with an improving job market and low interest rates, there were simply more buyers in
the market and sellers could demand higher prices.

He added while there has been "an explosion in first time homebuyers using no-down payment loans" or other exotic mortgage products, he didn't think there was necessarily a direct correlation between the availability of flexible home financing products and the housing spike.
Where is the counter agrument to Walter 'shill' Molony? They say "he didn't think there was necessarily a direct correlation?" He probably hardly ever thinks. NAR should have just hired a parrot to be spokesperson. The parrot could be placed in David Lereah's office ( chief economist of NAR).

But don't expect a free-fall in housing prices, experts said.

Ellen Bitton, president and chief executive of Park Avenue Mortgage Group, said the market is more likely to undergo stabilization rather than any major decrease in valuation.

"People who have only been looking at the real estate market in the last few years think prices have to increase by 10 to 20 percent a year," she said. "But that's a frenetic market, not a normal market."

She estimated that housing prices would return to a more stable 3 to 5 percent growth rate once it returns to a buyers market.

"But we have a way to go before we see that," she added.

CNN does not mention the possibility of significant price declines in the bubble markets. Where is a quote by an expert who recognizes the bubble? Where is Ben Jones?


  1. Now that housing is slowing and inventory is building- we hear that it will stabilize, and everything will be fine- At these prices? And what economic engine toward the end of the decade is going to allow this? Nothing. The beginning of the end is here-

  2. Ms. Britton is IMHO full of it- too bad phonies like her continue to emit noise like this to unsuspecting people. When the real and big dowmturn begins in earnest in 6 months-lets see if Ms. Britton is still showing her face.

  3. I think that the current media notion of "price rises slowing down" is a scam, and that this agrees with skytrekker's analysis.

    If price increases were just slowing down, then prices would still be increasing. In most places, they are not. So, at best, prices are "flat." In many markets, prices are, as we have long predicted, in decline. The national media hasn't acknowledged this yet, preferring as always to be Monday Morning Quarterbacks.