I like Chris and as a consequence it pains me to see this sort of nonsense come out of him. I have to ask:“Who the hell is cutting the checks to keep food on this dude’s table, and how do you sell your soul to such a degree as to write this sort of thing?”
The difference between today’s market and those eras is that in the past borrowers would often switch to more affordable ARM products, many of which today are less available. The December drop in applications reveals that purchase market today is more sensitive to a rise in 30-year FRM rates than in prior years because borrowers are less able to switch to more affordable products.
Another explanation could be weaker labor markets. Weekly initial unemployment claims have been very volatile lately, but after claims hit a cyclical bottom of 305,000 in late September, they increased to 349,000 as of early January – a 14-percent rise. The weakness in unemployment claims was further confirmed by the very low 74,000 increase in employment.
Where do you see anything referencing Dodd-Frank?
Further, the author goes on to talk about weakening labor markets, calendar effects and weather. And yes, weather is, at least at this point, plausible. Of course if the weather improves and the activity doesn’t that would be cast aside but as a hypothesis it remains valid today.
Now look at this chart:
Reproduced with the permission of Mortgage-X.com
Here’s the fundamental problem that Chris and the rest of the housing pumpers can’t reconcile when examined in light of the facts: If a 30 year fixed-rate mortgage and a 1 year ARM in the 6s and mid 5s, respectively, were not limiting factors for the housing market in 2005 to 2007, and they clearly were not as that was the biggest part of the boom, never mind the historical rates back into the 90s that didn’t produce a “unhealthy” housing market either, how do you make the argument now that the same rate in the 4s and sub-3 is the limiting factor and, more to the point, that it’s all about Dodd-Frank?
There’s only one way — Chris and the rest of the pumpers are in effect arguing that forever higher prices are what we must have for a “healthy” market — and that those prices must accelerate at a rate exceeding that of personal income expansion.
That’s mathematically and irrefutably a Ponzi Scheme.
And that, my friends, is the bottom line.
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