Friday, February 29, 2008

This is an Economic Crisis

Oli: $102+

Gold: Almost $1000

Euro: $1.51

Wheat: $15+

Case Shiller Housing Price Index: -8.9% for 2007

This is an economic crisis?


  1. David,

    All of what you mentioned is going to cut back spending. The faith in the dollar is probably the harshest impact. We're going to be forced very quickly to only spend what we can pay for today via exports. Ouch...

    Wells Fargo's decree of 25% down for all DC non-conforming loans will spread like wildfire. The banks simply do not have the funds to keep putting new loans on the books. Fannie's looming downgrade by Moodys will also have a huge impact. At that point, they'll have to cut the risk of their new portfolio. That means an accross the board down payment hike.

    I've been predicting 25% down payments will be the norm outside of FHA. It will take a while to spread through the system (9 to 15 months). But when it does, sellers will have to decide how they will deal with the small buying pool.

    Got Popcorn?

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  3. Funny thing is rents, and by extension home prices, are shock absorbers in the economy, since they are most everyone's dominant expense, yet what we get for the bulk of the land rent we pay isn't purchasing a capital good, it's just paying for the right to occupy the spatial location in which we inhabit.

    If energy costs, food, health care, taxes, interest rates etc etc all double (and wages don't), the market will simply have to bid the land rent DOWN (over time) to compensate.