Many have speculated as to when the housing market will bottom. The short answer is, nobody knows, but there are some guideposts to watch out for. First, in order for house prices to bottom, they must be affordable. Sub-4% interest rates combined with falling prices have made houses affordable on a monthly payment basis. Second, supply and demand must rebalance and demand must outstrip supply for prices to go up. That criteria is more elusive. When the housing bubble popped in 2006, people began defaulting on their mortgages. A credit crunch ensued in 2007, and foreclosures began to mount. By 2008 we reached the threshold of how many foreclosures the market could adsorb, so lenders began accumulating shadow inventory --…[READ MORE]

The federal reserve is dominated by Keynesian economists who all have one thing in common: when their policies fail, they believe doing more will somehow succeed. If the definition of insanity is repeating the same behavior expecting a different result, then all Keynesian economists and all federal reserve officials are certifiably insane. Bernanke Doubles Down on Fed Bet Defied by Recession: Mortgages January 20, 2012, 3:40 PM EST -- Bloomberg -- By Jody Shenn Jan. 11 (Bloomberg) -- Ben S. Bernanke is signaling his willingness to double down on a three-year bet that’s failed to revive housing, showing the extent of the Federal Reserve chairman’s effort to wrest a recovery from the deepest recession. The policy so far has failed…[READ MORE]

Principal forgiveness is the worst policy option. Despite this fact, it's so appealing to loan owners and politicians, reporters are keen to write about the prospect. However, the world is not comprised only of loan owners. Nearly 40% of households are renters, and of the remaining 60% who own homes, 90% of them are still paying their mortgages. Ninety-four percent of the population is asked to fix the problems of the 6% who are loan owners and the banksters who created the problem. Lenders and loan owners have problems. Lenders made loans their borrowers can't repay, and now both parties to the deal are turning to the US taxpayer for a bailout. Somehow, these two groups have convinced themselves they…[READ MORE]

Last week, I covered the high-end community of Toscana in the Village of Laguna Altura. The overview of Laguna Altura is from that post: Laguna Altura is an Irvine Company Village located at the intersection of Highway 133 (Laguna Canyon Road) and Interstate 405. The proximity to the Irvine Spectrum and nearby offices are ideal for local workers who desire a short commute. The ease of access to Interstate 405 and Interstate 5 cuts down the commute time of anyone working at a greater distance. This adjacency to the freeways does make the community a bit noisy despite efforts to buffer the sound. Further, the main entrance is on Laguna Canyon Road, a busy thoroughfare bringing traffic from Laguna Beach…[READ MORE]

It is shocking -- and a little frightening -- to see how clueless and inept the people in charge of our money supply really are. Recent releases of federal reserve open market committee transcripts clearly show the federal reserve completely missed the housing bubble, and they grossly underestimated its impact on the economy. If policy makers do not identify the problem, they can't craft policies to properly react to the problem. The people in charge at the federal reserve under Alan Greenspan -- many of whom are still there -- are embarrassingly inept. "Dear Mr. Greenspan, I think you're pretty terrific ... " Treasury Secretary Timothy Geithner (then the president of the New York Federal Reserve Bank) Alan Greenspan's ship…[READ MORE]