My cynicism comment comes from Sy's original comment on the article. As for the Barney bill, I am sure it has flaws as do most bills. But it is likely to pass and be signed by the President in a form close to what will exit Congress. Its effectiveness will be judged afterwards.

Ray 

Ray,

"What has worked to date is Hope Now, a voluntary, private-sector plan that allows homeowners who have the ability to pay a lower-cost loan to refinance their mortgages. Hope Now has assisted almost 1.4 million homeowners without major government intervention. Rather than pressing for massive new programs, legislators should allow one with proven results to do its work."

The end of the linked article by Bob U. suggests this solution rather than having the public (taxpayers) bail out the suckers who can't manage an investment in their homes, and the lenders who prey on them. (I'm assuming that the program is really offered, and not full of loopholes that make it too difficult for the average person to participate.)

Sy

FL, NV, CA are experiencing severe housing price declines. In FL prices have dropped over 30% in the last 2 years. In my FL town, foreclosures are a daily event in the newspapers.  Unemployment is at all time high. 1/3 of all new condos have unit owners not  paying their monthly maintence and  the properties are being neglected. My daughter just rented a 2 bedroom condo on the water with a private dock that the landlord was asking $2,500 per month. She is paying $1,000. So if some money manager wants to claim that this crisis is over, I would tell him to visit FL, Ca and NV and see the depression that we are experiencing. 

The author of the article is well aware of the situation in the three states as is most every one else who has any knowledge of the problem. It is bad but not that bad here in AZ but local/state situations in a few states does not make a national problem. In any case the article is making projections of the future and only time will show if he is right or wrong. Certainly the problem in these three states will continue for a longer time than in the rest of the nation. No one would deny that.

Ray 

This is a very interesting discussion.

 I think, tho', we need to be careful with our metaphors. We speak of bubbles as "bursting." The air, by contrast, of this "bubble" is being slowly let out. (To be sure, some markets have had more dramatic price declines: e.g., Las Vegas, parts of California, and so on.) Many homeowners (something of a misnomer, given their indebtedness) are waiting for adjustable rate mortages to reset. Some will obviously be unable to afford their payments, once their terms change. That will lead, in some cases, again, to more foreclosures, and foreclosures depress real estate markets--period. Even when access to capital is adequate--and it isn't for many now--it can take significant amounts of time for foreclosed properties to work their way out of the system.

Sorry about another metaphor, but a) President Bush will fall on a sword--even during an election year--rather than sign Frank's legislation and b) the best we can hope for, as the "bubble" lets out air, is that doesn't depress too suddenly, too dramatically, too loudly.

 Larry T.

Larry,

Don't be too sure of what the President will or will not sign. On one of the two financial cable programs a short while ago there was mention that there might be an agreement on a compromise Barney Frank bill tonight. But of course you still may be proven right.

Ray 

Ray,

Despite my own silly metaphor, I agree with you about President Bush. This is an election year--you know, strange bedfellows and all. (Yet another dead metaphor!) Still, I think the housing declines that we're seeing are likely to continue into next year (and, perhaps, beyond). I'm not an economist and cannot speak to the question of whether it's better to have housing declines happen slowly or almost all at once (so the market can "clear itself"). What I do sense, however, is that Bernanke, the president, congress, the street seem to be resisting the "all-at-onceness," which is why I think the bubble's air is being released slowly. Add high gas prices, a battered/overextended consumer, expensive credit and you have . . . no likely recovery in the near-term.

Larry

I think there is room for legitimate debate on whether enough steps have now been taken by Federal authorities to truly stem the housing crisis.  For the record, I remain skeptical and come down on the side of those here who think the crisis is not over.

In my opinion, however, we will be able to better judge when the economic crisis is actually over by watching the price action of the TREA, which I believe is a fairly good barometer of the health of the economy.  So far this year, the account has had its worst four months performance in its history, including a rare negative month, and its performance in May continues to be very weak (up only 3 cents in value).  It seems to me that the performance of the account should be improving if the economy is really on the road to recovery.

Jared

I would beg to differ with Jared's comment that "the TREA, which I believe is a fairly good barometer of the health of the economy." Markets frequently are out of tune with the economy and the commercial Real Estate market probably is one that lags the Main Street economy; it is not a very flexible or liquid market. I expect to see the US economy to improve before the commercial real estate markets and thus I expect equity to improve before real estate does, which is why I sold out most of my REA and have been slowly and carefully buying back into equity. This is my game plan for the immediate future.

Ray 

Ray,

The commercial real estate market certainly lags the residential real estate market, and perhaps you are correct that it also lags the main street economy.  But if you look at the TREA's historical record, however, you find that after 9/11, the TREA began to noticeably improve its performance during the February/March, 2003 time period.  This is exactly the same time frame that the stock market made its double bottom after its long decline from the year 2000.  So, in this case, if there was a lag, it was a fairly brief one.

I like your plan of slowly buying back into equities.  I've thought of doing something similar, but I suspect I may be more conservative than you, so I am still waiting before I make any further moves.

Jared

If you are still interested in the Federal "bail out" for mortgages (and related topics) you can find the article with the subject title at this link.

It may or may not happen today; if not today, it may be dead.

Ray