More on the macroeconomy and real estate

Gary Watts may look like the cat that just ate the canary, but he's got a lot of interesting things to say [pdf] about the macroeconomy and real estate in California and the US. Scary facts:

• 40 million US homeowners have no equity.
• 90% of Option ARM borrowers are paying the minimum.
• California foreclosures were 236,231 in 2008 -- up 180% on the 84,375 foreclosures in 2007!

Russ Roberts' talk with Charles Calomiris is amazing. Calomiris has an excellent grasp (as if I can judge!) of the markets and political economy. Most interesting is his recollection that "Joe Stiglitz, Jonathan Orszag, and Peter Orszag were hired by Fannie Mae to write a paper in 2002 defending the claim that the odds of Fannie Mae ever getting into financial trouble were extremely low." Good call, academics consultants. /sarc

Oh, and has anyone considered how frail the "I will buy a place and make higher monthly mortgage payments because I hate throwing my money away on rent" logic looks, now that equity has gone to zero or negative? So much for that conventional wisdom!

Bottom Line: Things are bad, and they will not be better for awhile. The "guys in charge" may have contributed to the problem, but I don't think they know how to get us out of it. (I'd stop wasting our money.)