RE: Re: Re: Re: RE: Re: How Much Housing Credit Is Too Much?
The Washington Post reported a while ago that there has been a slump in the market for $1 million plus McMansions in the DC area. On a another topic, Jim Devine turned out to be wrong about Doonesbury on Iraq. If you followed the episodes for a few more days it turns out that the Iraqi plant manager is telling the truth, that the radioactivity in the yougurt (I think that's what it was) comes from milk from cows eating grass contaminated by radioactive contamination from the Gulf war. -Original Message- From: Michael Perelman [mailto:[EMAIL PROTECTED]] Sent: Thursday, December 19, 2002 11:51 PM To: [EMAIL PROTECTED] Subject: [PEN-L:33256] Re: Re: Re: RE: Re: How Much Housing Credit Is Too Much? The WSJ has been having pieces about the incentives sellers of high end houses are having to give. One of the best indicators of an impending bubble burst would be the length of time required for sell a house. During the high bubble in San Francsico, houses would sell at a premium as soon as they were listed. I don't think anything like that is happening now. So even if prices are holding, you can have considerable weakness in the market. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: RE: Re: Re: Re: RE: Re: How Much Housing Credit Is Too Much?
Title: RE: [PEN-L:33262] RE: Re: Re: Re: RE: Re: How Much Housing Credit Is Too Much? Martin writes: On a another topic, Jim Devine turned out to be wrong about Doonesbury on Iraq. If you followed the episodes for a few more days it turns out that the Iraqi plant manager is telling the truth, that the radioactivity in the yougurt (I think that's what it was) comes from milk from cows eating grass contaminated by radioactive contamination from the Gulf war. it's the first time I've been wrong this year! Jim
Re: RE: Re: How Much Housing Credit Is Too Much?
Devine, James wrote: but how much have mortgage payments risen as a percentage of personal disposable income? after all, interest rates have fallen and refinancing is the big trend these days. The decline in the interest burden from refinanced mortgages is a surprisingly small number. Most refinancings these days involve taking cash out of appreciated equity, which adds to principal. Goldman Sachs estimates that cashouts are as high as 4% of DPI. Doug
Re: Re: RE: Re: How Much Housing Credit Is Too Much?
Michael Perelman wrote: We should ask Doug H., who is now on the radio. http://www.federalreserve.gov/releases/housedebt/default.htm Debt service % of DPI total consumer mortgage 01q1 14.05 7.91 6.14 01q2 14.16 7.96 6.20 01q3 13.94 7.79 6.16 01q4 14.39 8.05 6.35 02q1 14.09 7.88 6.22 02q2 14.03 7.82 6.20 02q3 14.00 7.76 6.24
Re: Re: Re: Re: RE: Re: How Much Housing Credit Is Too Much?
Very soothing. AG's 12/19 speech actually contains several rounds of Greenspan-D'Arista Smackdown, including his response to the idea of using regulatory tools to slow the credit expansions that breed bubbles. I can't remember any time in recent years when Father Greenspan has been quite so defensive in public (first the Jax Hole speech, now this) -- or when the Fed has seemed so Out There in its reassurances (in announcing its 50 bp cut last month, the FOMC claimed that with this action...the risks are balanced). TS In a message dated 12/20/2002 12:55:25 PM Eastern Standard Time, [EMAIL PROTECTED] writes: [EMAIL PROTECTED] wrote: Mortgage debt-service burden for Q4 2001-Q3 2002 ties the burden recorded in Q4 1990-Q3 1991 as the highest ever for four consecutive quarters This just in from St Alan - don't worry about it! http://www.federalreserve.gov/boarddocs/speeches/2002/20021219/ A full enumeration of the caveats surrounding the economic outlook would, as usual, be lengthy. But often-cited concerns about the levels of debt and debt-servicing costs of households and firms appear a bit stretched. The combination of household mortgage and consumer debt as a share of disposable income has moved up to a historically high level. But the upward trend in the series reflects, in part, financial innovations that have increased access to credit markets for many households. These innovations include the development of a deep secondary market for home mortgages, along with the advent of credit scoring and automated underwriting models that have enhanced the ability of loan officers and credit card companies to identify good credit risks. These innovations lower the risk level of any given amount of debt. To be sure, the mortgage debt of homeowners relative to their income is high by historical norms. But, as a consequence of low interest rates, the servicing requirement for that debt relative to homeowners' income is roughly in line with the historical average. Moreover, owing to continued large gains in residential real estate values, equity in homes has continued to rise despite very large debt-financed extractions. Adding in the fixed costs associated with other financial obligations, such as rental payments of tenants, consumer installment credit, and auto leases, the total servicing costs faced by households relative to their income appears somewhat elevated compared with longer-run averages. But arguably they are not a significant cause for concern. Some strain from corporate debt burdens became evident as rates of return on capital projects financed with debt fell short of expectations over the past several years. While overall debt has not been paid down, corporations have significantly increased holdings of cash and have reduced their near-term debt obligations by issuing bonds to pay down commercial paper and bank loans.
Re: RE: Re: How Much Housing Credit Is Too Much?
We should ask Doug H., who is now on the radio. Even that number is cloudy since people refinance their houses to borrow for other purposes. So, it is difficult to get a fix on mortgage debt as a separate category, except in the sense that you mentioned -- if prices fall and people walk away from their negative equity. On Thu, Dec 19, 2002 at 02:02:56PM -0800, Devine, James wrote: but how much have mortgage payments risen as a percentage of personal disposable income? after all, interest rates have fallen and refinancing is the big trend these days. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
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H'hold Mortgage Debt as Pct. of Disposable Personal Income: Q3 2002: 74.2% 2001: 72.8% 2000: 68.8% 1999: 68.4% 1998: 65.4% 1997: 64.0% SOURCE: Flow of Funds Q3 2002 Mortgage debt-service burden for Q4 2001-Q3 2002 ties the burden recorded in Q4 1990-Q3 1991 as the highest ever for four consecutive quarters, according to the Fed (http://www.federalreserve.gov/releases/housedebt/default.htm). While the burden increases, despite refis and low real rates: H'hold Net Worth as Pct. of Disposable Personal Income: Q3 2002: 486% 2001: 556% 2000: 589% 1999: 639% 1998: 588% 1997: 567% SOURCE: Flow of Funds Q3 2002 And, as Jane points out, only inflated res. r.e. prices have cushioned h'holds against deeper absolute and relative (to income) losses in net worth. Tom Schlesinger
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The WSJ has been having pieces about the incentives sellers of high end houses are having to give. One of the best indicators of an impending bubble burst would be the length of time required for sell a house. During the high bubble in San Francsico, houses would sell at a premium as soon as they were listed. I don't think anything like that is happening now. So even if prices are holding, you can have considerable weakness in the market. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
