Law of Unintended Consequences

(10 am. – promoted by ek hornbeck)

There are those that would like you to believe that the worst for housing has passed. Stories about depleted inventory, or multi-year lows.

Government programs, first-time home buyer tax credits and gifts to the builders…. heck even our propaganda machine is pushing the idea of getting people to buy a home.

(CBS)   Real estate experts in many parts of the country are saying now’s the time to buy.

[..]

Early Show money maven Ray Martin weighed in on the Saturday Edition about whether buying is indeed the way go to now,

IS THIS A GOOD TIME TO INVEST IN REAL ESTATE?

Yes, it is, and for a number of reasons. For one thing, housing prices are declining just about nationwide. Plus, mortgage rates are at a serious low. Rates on a 30-year, fixed-rate mortgage are at a level we won’t see again in our lifetime. Finally, if you buy before December 1, you’ll get an $8,000 tax credit if you’re a first-time buyer. For all those reasons, there’s really never been a better time to go shopping for real estate.

Never a better time to buy?

You know my favorite thing to do when I am told by some industry hack that “Now is a great time to buy a home” …. I ask them “When would be a bad time to buy?”

For all the government, housing industry and Wall Street efforts to keep housing a float this measly 30% decline was only the beginning. The question should be asked… Can you fit Niagra Falls through a garden hose?

The normal supply of housing on the market is approximately six months.

Eight million homes with delinquent mortgages represent a staggering 300% of the normal supply of existing homes for sale. With 3.63 million units now on the market, one million above the long-term average, an inundation of foreclosures represents a fatal death blow capable of inflicting brutal damage on the largest financial market in the world.

With the largest supply of delinquent mortgages filling the banks balance sheets the inventory levels approach over 400% of normal supply, or nearly two years of housing inventory. If you add the current level of inventory of 3.6 million units ( 1 million above normal levles) with the 8 million delinquent mortgages you have a whopping supply of 12 million units of inventory.

Very few people have a reason to continue to pay their mortgage at this stage. The banks have literally stopped foreclosing on houses for fears of adding inventory to their books. Municipalities are not going to be collecting that needed tax revenue.

Something is going to break.