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Fed study says home price drop ‘necessary’
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Large-scale government intervention in the US housing crisis would be counterproductive and prevent a “necessary” correction in home prices, according to a Federal Reserve study released Monday.
The study by economist William Emmons of the St. Louis Fed concluded that “government interventions directly in housing or mortgage markets are not necessarily the best policy responses.”
“By allowing markets to sort themselves out quickly, a foundation for sustainable homeownership and responsible mortgage lending can be re-established,” the regional branch of the central bank said.
The report said home prices in many parts of the country may fall from their peak levels in 2006 or 2007 by the largest amount in several decades, but that “from an economic standpoint this decline of overvalued properties is necessary.”
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“If house prices are allowed to remain artificially high, homebuilders will make the eventual correction even worse by supplying more unneeded houses and driving prices down even further,” the report said.
The economist noted that the phenomenon of home foreclosure is an “unpleasant, but essential aspect of the mortgage market.”
“In order to ensure the mortgage market functions effectively, the lender must have the ability to seize the borrower’s property as collateral,” the report said.
“Without the possibility of foreclosure, mortgage rates would be more on par with those of credit cards,” said Emmons.
“It is important to keep in mind that there will be those individuals who are truly harmed by the crisis,” said Emmons.
“The financial distress to borrowers and communities caused by foreclosure should be addressed directly,” he said, with a stronger “social safety net.”
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July 8th, 2008 at 1:15 pm
I guess by “stronger social safety net” they mean more homeless shelters. But then, they get to go home to their fucking McMansions in their black/white/silver Lexus SUV…why should they give a shit where you and your family sleep at night?
July 8th, 2008 at 1:29 pm
I live in the Chicago suburbs…LISLE to be exact…The people driving the LEXUS and what have you drive like they are the only ones on the road. Cutoffs, blocking traffic to make a turn that they should NEVER try to make. When you live in an apartment out here you are treated like ghetto trash, even though you are their neighbors. Hell, people act like they are ashamed. I dunno…I give up…
July 8th, 2008 at 1:46 pm
a prosperous nation which has a gold standard will have minor fluctuations in the markets and a steady increase over time. a shitty financial system, like we have currently, will have major fluctuations with a lot of booms and busts.
and to think that arrogant prick bush said the other day that the federal reserve needs more power to control our system. watch zeitgeistMovie.com if you don’t understand the monopoly the central bank has on our currency…
July 8th, 2008 at 1:57 pm
Guys, guys, they own all the land anyway… its like money, it’s a meaningless game meant to give them power…here, you all go fight over your little piece of the pie and your acre…people sure are caught up in this mire…The Lexus SUVs rule the road out here in Long Island, NY too…spitting on everyone as they pass…forgive the yuppies, they’re caught in the web.
July 8th, 2008 at 3:32 pm
I know this is off this topic but please watch this google video about scalar technology that the Russia’s have been developing since the 1960’s (Nikola Tesla creation), it will make you really think. Bill Schnoebelen is the main speaker. The world is in such deep shit.
http://video.google.com/videop.....4380471423
July 8th, 2008 at 3:49 pm
WELL… They ARE in need of a correction.
My parents bought their first house in 1989, a three family home for $87,000
That same house sold not to long ago for $190,000
Funny I do the same type of work my father did, and make the exact same number of dollars per year. I think I earn a fair wage.
So all these years of you yuppies taking advantage of these sham markets, buying and selling homes as if they were commodities, driving up the ‘value’ of them to the point where I can no longer, and heres the key word, HONESTLY afford one.
Go to hell, you and your ‘investments’. I just want a roof over my head. I yearn for a REAL correction, and you ain’t seen NOTHING yet!
July 8th, 2008 at 4:21 pm
OK, so the “market” needs to corrected by foreclosures.
However, why don’t the lenders refinance the mortgages (without preconditions) to reflect the current market value?
YOU NEVER HEAR THE FED PROTESTING THE PLIGHT OF THE HOMEOWNER PAYING FOR THE LOAN MAKING PAYMENTS AT RATES BEFORE THE SO-CALLED CORRECTION…
Because, its all for the bankers benefit. THE BANKERS WIN EITHER WAY BECAUSE THEY WILL FORECLOSE ON HOME, WRITE OFF THE LOSS, AND ANOTHER BUYER WILL BUY IT AGAIN.
AND GUESS WHAT, THAT BUYER WILL TAKE OUT ANOTHER LOAN.
CASE CLOSED. THE BANKERS ALWAYS WIN THE PROPERTY GAME JUST LIKE IN THE BOARD GAME MONOPOLY…
July 8th, 2008 at 4:32 pm
The housing market is over inflated on the east & west coast. The midwest however is stable and not overpriced. So, if the dollar is losing it’s value then shouldn’t the cost of housing be more
since it takes more dollars to buy everything else?
The real SCAM is the fucked up loans that were given out to people with not so good credit,
only to screw them even more! That is what is behind this debacle and we are all going to
wind up paying for it! You don’t think the BIG CEO’s are going to let any of their money go
do ya? We the People are going to get the shaft while they are up on the hill laughing at US,
the poor useless eaters!
I’m trying to sell my house in the Midwest and people are acting like I should give it away for
nothing, just because the news says,it’s bad out there all over!
July 8th, 2008 at 5:51 pm
The main problem is that people did not back away from home ownership when the cost of renting was significantly less than buying and were willing to finance homes that were much more expensive than what they could afford. I am amazed at how many of these “victims” did zero due diligence, like hiring a real estate attorney to explain what the paperwork they were signing meant. That is real estate 101. I do not support any bail out of any these suckers who had no business owning a home. Same goes for the mortgage companies writing crap loans. That faster everyone takes their bath, the sooner markets will recover. Home prices in most markets need to reach 1998 levels before that happens, and everybody seems to be in denial about it.
July 8th, 2008 at 7:12 pm
America is full of sheeple and are getting treated as such. Be informed always and you will weather whatever comes…….All these people buying homes they could not afford need to return to renting again and living within their means. Economies worldwide have always had up and down cycles due to manipulation……
July 9th, 2008 at 12:28 am
http://youtube.com/watch?v=LwKAY5f-WFc
July 9th, 2008 at 3:41 am
taht fucked up that niggaz be killin each other over monopoly money that ben bernake be printin up outta thin air. Why don’t the piggies lock up bernake for countafiting instead of the chinks who owned our hood laundramat for printen up notes in the middle of the nite. lucky when i was a tiny cat, i be fightin niggaz over coke and pot and booze, as you white folks call comodities
July 9th, 2008 at 6:11 am
The housing bubble was just that, a bubble, so it was bound to burst. If you spent twenty minutes over the last three years reading anything to do with finance, you would have been able to see this coming. While individuals need to take responsibility for their actions, it is a shame that once again, bankers are finding a way to screw the majority of the populace out of their hard earned fiat currency.
July 9th, 2008 at 10:15 am
What goes up…must come down. Everybody knows this. Why would we be surprised by this? I hope at least a few of you Americans out there protected yourselves using your public account over at the treasury. It would be a shame to plea ignorance while the economy flails around.
Oh, but of course, we can always blame the feds for doing this to us. Yea right.
July 9th, 2008 at 10:37 am
this so called report is like having a pedophile explain y he shouldn’t b a registered sex offender. it’s absurd to say that foreclosure is a neccessary evil. what about the millions of dollars being printed from tin air with no gold backing?
July 9th, 2008 at 10:49 am
…you mean credit bubble? Interesting, but thank goodness I’m smarter than the average mortgage broker, mortgage company and mortgage insurer. The Americans will undoubtedly figure a way out of this. Don’t underestimate the power of the people.
July 9th, 2008 at 11:24 am
Alex and Jesse U ROCK, check out the Great vid about the Fed at the bottom of the homepage
http://www.pennies-from-heaven.us
July 9th, 2008 at 12:09 pm
Once I saw Federal Reserve study, I didn’t even read rest of the article. Isn’t worth it once you already their plans.
July 9th, 2008 at 1:16 pm
After reading these responses to this article, I am wondering what our priorities are as a society ?
By society I mean: We are a society of humans and not necessarily a commodity or an inanimate object.
As much as I agree people should have seen the real estate bubble bursting ahead of time.
As humans and as social beings (not robots yet) we have families, children, college graduates, doctors, lawyers, business owners, etc, whom are buying homes whether the real estate market is up or down. My point is humans are not merely instruments of ” THE FED” or the
“REAL ESTATE” market, as much as the THE PAPER MONEY THIEVES would like to use our humanity as a tool of manipulation for their own selfish benefit.
True, from an investment point of view a large number of people did get sucked into the HYPE of the INTEREST RATE SCAM promoted by GREENSPAN and his CONUNDRUM (or code speak for his banker (wanker) proteges to get ready to put on a CONDOM and penetrate the innocent homeowners to be bent over from the great foreclosure orgy that was coming).
However, humans still need shelter as the means for basic survival. Furthermore, humans have been in need of shelter long before the THE FED and THE FAKE MONEY CREW decided to place a yoke of slavery on our basic needs of needs of survival. The “MORTGAGE” is the most devastating tool of bondage and whoever figured out how they could wrap humans into this type of slavery agreement must have seriously been into deviant SADO-MASOCHISTIC behavior as displayed by the THE FED and THE BANKER (WANKERS).
July 9th, 2008 at 2:50 pm
The correction is going to be vastly larger than that. This is just the beginning. When the smoke clears the average worker will be lucky to be able to rent 200 square feet.
July 9th, 2008 at 3:33 pm
I can see homes losing 50% of their value when the smoke clears.
Be smart and don’t forget about another HUGE impact on the horizon. Baby-boomers are approaching retirement age quickly. This will push more and more retirees away from larger homes into smaller “manageable” condos/apartments and in some cases care-facilities. So who is going to buy all of these homes? You guessed it–NO ONE.
There will be a massive GLUT in the housing market because of baby-boomers’ changing housing needs.
Apartments and condos should remain stronger but there simply is not enough money in the subsequent generations to buy-out the housing capital currently being held by Boomers.
July 9th, 2008 at 4:32 pm
All of you raised good points in this thread. Good job. Interesting read.
July 9th, 2008 at 8:42 pm
http://www.veritas144k.com
Summary Outline of Sequence of Events until the End of Time
“Now all these are the beginnings of sorrows” (Mt 24:8).
The warning foretold by Jesus started with the Tsunami in 2002.
On the Social/Geo-Political/Economic side:
The present world recession of 2008 is leading to a world depression.
The depression spreads rapidly to regions in the ‘developed nations.’
The depression will cause bank foreclosures and bank closures.
The world depression will degenerate into the dreaded ‘Great Tribulation.’
Accelerated global conflicts with ‘alliances’ of governments and alienation.
Conflicts escalating until all of the Muslim forces are in place.
On the religious side:
The disrespect for God and for His Word is universal.
Over 1,000 different Christian churches, each calling themselves ‘Christian.’
The people of Christendom are defenseless.
The churches of so-called ‘Christendom’ have all abdicated their responsibility to serve God.
The false ‘religion’ of Islam, a monotheistic cult, denies the existence of the Holy Trinity.
This Muslim militaristic religion is ready with it’s army of 200 million to invade the earth.
There is one event which is stopping the final battle, and that is Israel.
The reclaiming of the Ark is a pivotal event in the times of the end.
This event is known as the ‘third woe, and the seventh trumpet.’
This event heralds the onslaught of the Great Tribulation in global terms.
The 400 mile (700 kilometers) wall protecting Israel will be collapsed.
The Golden Dome, and the Mosque and the ‘Wailing wall,’ will also be collapsed.
The hostile nation of Islam, and the ‘Unholy Alliance’ will invade Israel.
The Lord will utterly destroy the Muslims and the Unholy Alliance.
Finally, the Kingdom of God, will be returned to Him by Christ Jesus.
“In the good day enjoy good things, and beware beforehand of the evil day, for God has made both the one and the other” (Ec 7:15).
July 10th, 2008 at 1:00 am
The Foreigners are going to buy up the suburbs… and rent them out dirt cheap in a few years. Anyone with a decent job and will have a mansion…with a big wall around it. It’s gonna be like Marty McFly’s future after Biff stole the Time Machine….
July 10th, 2008 at 9:04 am
Citizens, let’s find a way to start an Abolish The Federal Reserve movement. As they long they stay in control, we will remain enslaved.