Rising Foreclosures are actually BULLISH for the economy - let me convince you in this thread

At first glance, I am sure you are calling me crazy. Perhaps the same people that were calling me crazy when I said we would have positive GDP growth this year. But again, let me prove you wrong. It will be easier to detail this in "example" form. I basically conjugated this after visiting a friends party for their kids this weekend.

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1. Family is being f-closed on.

2. Family was still going to have a birthday party for their kids either way.

3. With the money that they are not paying the bank right now, they are spending on extra presents for their kids and extra food for adults at party (important)

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Now, #3 is quite important, and this alone should tell you what I am getting at. It is the AMERICAN CONSUMER at its finest. While it seems totally outrageous that they would be spending more, they ARE! So this gets me thinking..

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Foreclosures are GOOD FOR THE ECONOMY. We are weeding out the weak and the people that should have never have had this loan to begin with. Now I know certain circumstances apply in certain situations, but deal with me.

Now, using this same example. This Family will continue of course to spend well over their means, but they will be doing it in a RETAIL MARKETPLACE and NOT to a bank. This family will now be renting a house that is $300 cheaper a month, and YOU WANT TO GUESS WHAT THEY WILL DO WITH THE REST?.. Thats right, spend it irrationally.

In summation, NEVER DISCOUNT THE AMERICAN CONSUMER.

Multiply this by the number of homes being foreclosed on * .75 (the variable for the average american consumer) = BULL MARKET CONTINUATION TO ME

I look forward to an interesting debate if anyone would like to disprove my theory.

reply to post by GreenBicMan


S & F

This should be a good thread. I hope you have your hip-waiters Green. There will be a lot of bull being slung. I agree with your assessment.

Now...

Let the games begin.

Dont worry, I can be quite persistent as well lol (as most know)

I know of at least 5 home owners who have not paid their mortgage since Jan 09 and at least 2 renters who went to court and do not have to pay rent to their landlords who are in foreclosure and can stay until they get kicked out.None are in imminent danger of being removed.Must be nice!

reply to post by genius/idoit


EXACTLY MY FRIEND..

Now tell me...

Where are they putting their extra money?

Bank .. or TARGET/WMT/COSTCO?

I think we all know the answer here.

reply to post by GreenBicMan


True but the saying all good things must come to an end comes to mind.What then?

Then.. they...

KEEP SPENDING OVER THEIR MEANS

As I am sure they were in the first place (no offense of course)

Just have to say though, I wonder what they are going to do with those 7,500,000 homes that are empty right now.

Probably just bulldoze them to keep the prices from going where they should be.

Yes, my sister is thinking of squatting at her house until they boot her. She owes 10% more than the house is worth.

Unless they destroy these houses, I believe the tailspin will be unstoppable in the housing market.

Those latest numbers of homes sales only reflect what has happened in the south. Everywhere else the sales are still declining at 10-20%. e.g. Midwest home sales last month dropped 16%.

Not very many things are indicating any, and I do mean any real across the board recovery.

My .02

reply to post by endisnighe


Interesting view, but you are looking at it from the wrong frame of mind.

The market will take care of these houses, and the WEAK THAT BOUGHT A HOUSE THEY CANNOT AFFORD, will be forced to rent or purchase something cheaper. Which leads to.......-->

You will witness the MARKET EQUILIBRIUM THEORY at its finest, that I love for the stock market, get applied to housing here shortly.

So in essense, you are correct, but you are not seeing the "rest of the picture". These houses will come down to a EQUILIBRIUM PRICE that can be afforded once again.. BUY LOW SELL HIGH = works for the stock market and real estate.

[edit on 29-11-2009 by GreenBicMan]

Let me add -

Home sales DO NOT MATTER IN THIS INSTANCE

We are looking for families that are/been foreclosed on, and spending the rest of their usable income the "american" way.

Yes, I spent 5 of the last 6 years in California building projects for a land development company.

When I started we were building a lot of Custom homes. Than we started to build a lot of Apartment complexes. Than a lot of Commercial sites.

The pendulum was swinging back to apartments for the very thing you are talking about.

I talked to the company a few weeks back. The last 2 apartment complexes are only at 65% load.

It takes a 80% minimum load to break even. Their is just a huge glut in the market for all of the different types of buildings. The people that own them cannot afford to drop the rates on these units or they lose their shirts.

It is still in freefall. Yes, some green shoots. But money can only be wrung from destruction of a business or economy so much.

The micro outlook is great, but the macro for our economy is still a dire thing. We must be able to produce jobs to create the upward climb of the economy. If their are no consumers, you cannot produce anything.

Hence the markets overall in the Construction, Homes, Rentals, and Commercial buildings sales and such is still in freefall.

The only ones that will make it out will be the ones that owe nothing.

Jobs are lagging indicators.

I cant argue with the feeble state of the economy, but we ARE GETTING OFF TOPIC.

The topic is I believe rising foreclosures are good for the economy because of the stated reasons. Would you agree with my theory disregarding all the other things that are happening in this world? I know this will get off topic from the start, so I rather not at all.

Yes, actually your theory is quite innovative in its inception.

Think about it, instead of a bank(which right now will just sit on that money) getting the mortgage payments, the money will flow into more fluid markets.

Yes this will help. I do not know how much.

But one thing is for sure. That money not flowing into the bank's bottomless pits will help.

edit to add-sorry about wandering off grounds

[edit on 11/30/2009 by endisnighe]

reply to post by endisnighe


exactly, I can tell you are intelligent

but think about this..

highest foreclosure rate of all time prob. going on right now?

where do you think we got this positive gdp growth from?

now hopefully, most will not think I am crazy/a disinfo agent

[edit on 30-11-2009 by GreenBicMan]

Oh, not disinfo. Did you know about the 30% give away on home improvements that increase the energy efficiency of homes?

I have done 3 projects in the last 3 months.

People are replacing windows, doors, and doing insulation installation.

The markets are still being manipulated by government infusion of cash into the economy. Of course the latest one(this home efficiency rebate), the cash or loan(which 2 of the 3 people got their money from) is coming from the people and to be rebated from their income taxes. I hate to see the end result of taxes collected come April 15th next year. These purchases moved from future sales may be a bitch come next year. The Japanese economy tried all of these things a few years back. It delayed their recovery. I read a couple articles on their problems a little while ago.

Total GDP, I wish we could see the raw numbers they get their aggregate numbers from.

reply to post by endisnighe


I had a friends in South Dakota with a dome home (speaking of environ. friendly houses)

It was actually pretty cool but IMO looks odd sticking out like a sore thumb in a cow pasture lol

Positive GDP = Positive GDP if you get what I mean

It doesnt matter where the numbers came from as long as they are the same variables used over time. And these numbers can be construed as either bullish or bearish of course ( + / - )

[edit on 30-11-2009 by GreenBicMan]

reply to post by endisnighe


As a carpenter I was following your lead but you stopped short.
We need to start bulldozing all those crappy custom houses, townhouses, commercial buildings, condos you built with all that crappy composite lumber and cheep Home Depot hardware. I know because I built alot of them too. And then we can all get some good jobs back & build some good cool houses for the 21st century. And over half those old houses they are foreclosing on aren't worth keeping around either. Cheers, not to say you not a good builder.

reply to post by GreenBicMan


Just hopefully those numbers are not being manipulated like the jobs created/saved.

Hopefully, if these numbers come from the CIA like the unemployment numbers, they are career people. Not the political appointees we all love to hate.

Anyway, excellent convo. And I do hope the economy overall starts to pick up. This working 1 week out of the month is making me read way too many doom and gloom sheet on the web. Later.

reply to post by endisnighe


I agree, and it already is

P.S. - Look to LEADING INDICATORS instead of jobs (unemployment)

Regarding the GDP - I am ASSUMING (yeah I know) that these are the same variables that have been used over time

reply to post by out west


Oh, not one crappy home, not one crappy apartment, not one crappy commercial building. California was a stickler for codes and my bosses walked the sites every fracking day. God, they drove me slightly nuts.

I was one hell of a crazy-SOB-ben dejo-el patrone-diablo.

Not to mention a thousand other curse words I never heard.

I was the Site Superintendent. Everyone in construction thinks the SS job is all paperwork. Hell, I wore a pedometer for several days. My average mileage on those days was 18 miles. Include in that the 8 hours of paperwork, phone calls, inspections, etc etc. Yes, and I did swing the hammer and drive the New Holland skidsteer when necessary. Averaged about 60 hours a week. Kind of miss being busy.