Yet Another Housing Surprise?

You keep using that word. I do not think it means what you think it means.
Inigo Montoya


For the record, the definition of the word surprise is:

1: to attack unexpectedly; also : to capture by an unexpected attack
2 a: to take unawares (police surprised the burglars in the store)
b: to detect or elicit by a taking unawares (sometimes surprised a tragic shadow in her eyes — Willa Cather)
3: to strike with wonder or amazement especially because unexpected (his conduct surprised me); to cause astonishment or surprise (her success didn’t surprise)


Which leads me to these truly frightening comments:

"Boston Federal Reserve Bank President Eric Rosengren said the delay in a rebound of U.S. home sales continues to "surprise.”

"People have been expecting a recovery in housing much sooner than it has occurred and that’s continued to surprise on the downside,” Rosengren said in a telephone interview with Bloomberg News.

Rosengren said it’s "confounding” that housing shows little sign of recovery after the Fed’s six interest-rate reductions since September. Fed officials are in the eighth month of a credit crisis that began with rising delinquencies on subprime mortgages.

"The housing market is still weaker than we would like and that has contributed to some of the financial problems as well,” Rosengren said."

Surprise? Really?

I find it disturbing to see a fundamental lack of comprehension from a regional Fed President as to what the root causes of the Housing problem actually are.

Hey guys! Here’s a clue: It ain’t high interest rates . . .



Housing: US vs Japan (March 2008)

Fed’s Rosengren Calls Delay in Housing Recovery a `Surprise’
Anthony Massucci
Bloomberg, April 7 2008

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  1. Sean commented on Apr 8

    I am surprise all these FED regional Presidents ACT stupid. I really don’t think they are Truly stupid, given the fact that they hold PhD and major in economics.

    I see a pattern that they Consistently come out every month (on a rotation basis to other presidents/governors) to talk UP housing and economy.

    In order to talk up these dead economy, they must act in a STUPID way as Public is thinking, to convince these idiots to jump back into STOCK and REAL ESTATE and SPENDING.

    In other words — FEDs ARE EVIL. VERY EVIL.

  2. larster commented on Apr 8

    Perhaps one of the reasons that the bubble expanded so far was that the Fed was not looking at median household income vs median home values. I also think that they only look at the macro numbers which look better than the conditions in the bubble heartland of CA,
    AZ and FL.

  3. UrbanDigs commented on Apr 8

    I say we send the fed to the pits of despair! Where they wont even think about escape because the chains are way too thick!

  4. Asshat commented on Apr 8


  5. rw commented on Apr 8

    I wish it were intentional market-boosting, but the extent of ignorance of current conditions — measured by the amount of money being lost by the biggest players — is just extraordinary.

  6. Unsympathetic commented on Apr 8

    You foreclosed my father.

    Prepare to refinance!

  7. Unsympathetic commented on Apr 8

    You foreclosed my father.

    Prepare to refinance!

  8. Unsympathetic commented on Apr 8

    You foreclosed my father.

    Prepare to refinance!

  9. Unsympathetic commented on Apr 8

    You foreclosed my father.

    Prepare to refinance!

  10. The Politzanian Citizenry commented on Apr 8

    “No one anticipated the [insert name of problem] would [insert characterization of the impact the problem] or [insert characterization of the tenacity of problem].” – [Insert name of Bush Administration official/Appointee]


  11. bluestatedon commented on Apr 8

    This only proves for the millionth time that people at the socioeconomic level of Rosengren don’t have the slightest clue about what’s going on down on the ground where the little people like me live. Rosengren and his ilk live in the same wealthy neighborhoods and gated developments, attended the same set of ivied private colleges, go to the same exclusive restaurants and clubs, go to the same expensive resorts, have vacation homes in the same exclusive western or eastern towns, and send their children to the same small group of exclusive, cosseted day care and private schools. To them, everybody they know is doing fine, and the workers who wait on them hand and foot, mow their lawns, serve their drinks, clean their pools, and raise their children are always happy and respectful. How can there possibly be any problems with the economy that a $600 check from the federal government won’t cure?

    It’s not just the elites on the east coast with that view, either. The local paper where I live in Michigan carried an opinion piece by an investment professional in which he stated that the recession is really nothing more than the result of all the naysayers in the media talking about it, and he encouraged everyone to go out to their favorite restaurant and have a nice dinner to show that they’re not being unnecessarily burdened by all that negative psychology.

    In other words, homeowners aren’t going into foreclosure because they don’t have the money to make their monthly mortgage payments; it has nothing to do with job loss, or health care costs, or getting into an unaffordable mortgage in the first place. Nope, it’s because they’ve been scared into a state of economic panic by the likes of Barry. If they get over that fear, then the mortgage payments will easily start flowing again and there’ll be ponies for everyone.

  12. jm commented on Apr 8

    The problem is that most economists suffer from “physics envy” — they have a deep psychological need to believe that the world can be described by simple and elegant equations.

    But if they were truly pursuing economics as a science, they would have to approach it like biology, in which the usefulness of equations is, though not zero, quite limited.

  13. Kathy commented on Apr 8

    Stop Saying That!

  14. Jeff commented on Apr 8

    Funny, my real estate agent seems to know more than these idiots. She told us last week that under current projections, our house won’t be worth as much as it is today for at least the next four to five years. And it won’t be worth as much as we paid for it for at least six years.

    How is it that a real estate agent knows this, but the Fed doesn’t? Hmmmm. I think it’s probably because she has to make her living in this market and wishing for ponies isn’t going to put food on her family.

  15. Marcus Aurelius commented on Apr 8

    “…I really don’t think they are Truly stupid, given the fact that they hold PhD and major in economics…”

    And our President holds an MBA from Harvard.

    A degree from one of our “Institutions of Higher Learning” is not an indicator of smarts. It is, instead, a receipt for having traded one piece of fiat paper for another.

    There are bags of hammers smarter than most advanced degree holders I have met.

  16. Thomas Paine commented on Apr 8

    Didn’t we fight a war a few hundred years ago to rid ourselves of elitist opinions on what is best for society? And their ability to dictate to us simple folk? Is this appointed royal clown any different? Elitists created this mess over a period of decades. They wouldn’t realize what the problem was if it hit them between the eyes with a 2×4. Why does anyone care what some nattering naybob living in his castle of mess making has to say?

    It’s about time we kick all of the sunsubitches out and start over. What an epiphany. That’s exactly what society is going to do. People don’t really care what goes on in the tea & crumpets circle until they feel it in their pocket book. Then they arise to be heard. The roar of populism is deafening. And, it has the elitists scared shitless. I kinda like it.

  17. attobuoy commented on Apr 8

    Barry, I find your lack of faith . . . disturbing.

  18. SteinL commented on Apr 8

    Does the apex of the US kleptocracy at all fathom that it has fostered the conditions required to suddenly find the population in open revolt? In fact, all the ingredients are in place for a fantastic Revolution of epic impact.

    1. The polity has waged a treasury busting and unpopular war abroad, and continues to do so with no end in sight.

    2. The country’s leadership has engaged in a lengthy plundering of the national coffers; and have also redistributed national wealth in its favor, while escaping the tax burden under pretexts of wishing to stimulate the economy.

    3. The economy is entering a state of depression, with potential stagflation threatening.

    4. Wage earning power has been reduced, while the cost of living is threatening to rocket, as previously inexpensive (out)sources of manufacturing are becoming expensive – no longer providing a buffer required to help people ignore point number 3.

    5. Regions of the polity are finding themselves in conflict, with growing concerns about its ability to provide required essentials such as energy, food, water. The federal impulse is negated by localized concerns.

    6. The leadership’s ability to instill pride in the populace is at a nadir – with both the executive, legislative and judiciary being seen with great skepticism, if not outright hostility.

    7. The people is finding itself without a voice – as the media is seen to be operating on behalf of the polity’s economic and political leadership, against the interests of the people.

    8. The polity’s laws are being twisted and turned in accordance with the executive’s whims, thus removing the respect for the laws that are a prerequisite for a polity’s existence.

    9. The populace has not been as down on the polity’s raison d’etre ever before in its history.

    Enjoy the revolution – rinse, and repeat. It’s going to be gruesome, and it’s going to happen.
    There’s no difference between what happened in Russia, then again in Soviet Russia – and what could very well happen in the US.

  19. Stav commented on Apr 8

    I was at teh Boston Fed last month for a conversation on housing in Massachusetts. They aren’t surprised. They are hoping this isn’t worse than the mid-70’s

  20. michael schumacher commented on Apr 8

    Ph D. = Piled higher and Deeper..

    Exactly what we are left with from his legacy.


  21. Glenn_In_MA commented on Apr 8

    This guy heads up the Boston Fed?? How embarrassing!!

  22. jerry commented on Apr 8

    I really don’t think they are Truly stupid, given the fact that they hold PhD and major in economics.

    Both of these facts plus their combination point precisely to the conclusion they are truly stupid.

  23. bigdayj commented on Apr 8

    As I told you, it would be absolutely, totally, and in all other ways, inconceivable. No one in Guilder knows what we’ve done. And no one in Florin could have gotten here so fast. Out of curiosity, why do you ask?

    No reason. It’s only, I just happened to look behind us, and something is there.

  24. Jimmy Jazz commented on Apr 8

    Eh. The “medicine” (lower interest rates) isn’t intended to help the patient (mortgage holders), it’s intended to help the Wall Street pigmen parasites. No accident that 30-year rates and credit card rates have gone UP as the fed funds rate has gone down. But kindly old Doctor Ben and his team do need to keep the host alive just a little while longer…

  25. Ralph commented on Apr 8

    Interest rates were not responsible for the bubble and they have almost no part in the deflating of the bubble!

    Thanks for bringing the issue to light!

    As an added note, I don’t think that even 10% of the full body of wall street types, economists, journalists etc have any real understanding of what drove the bubble and certainly not what is taking place now.

  26. Darkness commented on Apr 8

    “Surprise” is the word they have to use to keep up the ruse that they weren’t lying or dissembling previously. They were just “mistaken”, but of course…

    Blame this administration for popularizing the “better to be believed an idiot than a criminal meme”. Weasels, the lot of them, not even any pride.

  27. TKL commented on Apr 8

    Did the Fed think that people would pile into ARMs all over again, only to be decimated like the last batch of suckers when rates inevitably rise (and perhaps rise fast, as some Fed officials have suggested may be necessary in the not-too-distant future)?

    Can there be any stability in house prices as long as the Fed continues its wild gyrations?

  28. surferdude commented on Apr 8

    phd.= Piled higher and Deeper.

    how about:
    phd = permanent head damage

  29. Frank commented on Apr 8

    I am a responsible family man with no debt and a small down payment for my first house, but I am not going anywhere _near_ a property. I don’t care what the interest rate is. I basically have absolutely ZERO faith in the financial community right now, and I still feel, rightly or wrongly, that cash is feeling really, really safe right now. Sure, maybe I will only earn 2% on interest, but that’s better than buying a house now and watch its value fall another 15-20% or worse.

    I am not saying I am a 100% rational actor, but who the hell is, and there are a lot of folks like me out there.

  30. Bull commented on Apr 8

    Yes, the world is going to end and the economy is going to come crashing down!! Oh no, stock up on food and weapons now!! Oh yeah, sell all your stocks while your at it!!

    This way I can buy them up cheap and reap a fortune, whether that’s 5 or 20 years. What, are you all retiring tomorrow? Now is a great time to buy investments on the cheap. If it’s not the credit crunch, it’s the savings and loan crisis, or LTCM, or it’s runaway inflation. Don’t you see? It’s always a different story with different actors.

    It’s always time to buy when people are bearish extreme and sell when people are bullish extreme! Right?? That’s what true experts know. When it rebounds, LIKE IT ALWAYS DOES, those who bought now and continue to dollar cost average will be the smart money.

    Where was everyone 2 years ago? Where was everyone in 2000? So called “experts” continually get it wrong.

    What fools you all are. Forget this one year or several years, and focus on proven, long term wealth building. For all your expertise, you have a tremendously difficult time seeing the big picture.

    The risk isn’t the downside. Downside is opportunity for long term investors. The real risk is missing the upside moves. Isn’t this basic??

    So keep selling and keep your assets in cash. Meanwhile, I’m already preparing for the next bubble, and I’ll be selling out when every average Joe Schmo is getting in!!!!

  31. AGG commented on Apr 8

    When faced with admiting criminal negligence or abysmal stupidity, this administration always picks stupidity. SteinL knows we aren’t fooled.

  32. viamede commented on Apr 8

    Professor G.H. Dorr : Well… uh… properly speaking, madam, we are surprised. You are taken aback. Though I do acknowledge that the sense that you intend is gaining increasing currency through its use, yes.

  33. Egg commented on Apr 8

    Frankly, I think the Fed people want us to believe that the economy works in some other way than it actually works, or perhaps that it works in some mysterious way that no one really understands. Just imagine if you wanted to make people think that. What would you say when confronted with unignorable evidence to the contrary? “Well that is a surprise, because we know for certain that the economy doesn’t work that way… ”

  34. ef commented on Apr 8

    This doesn’t excuse our leadership’s contrivances, but in some ways, aren’t Harry Dent’s predictions about demographics a factor in this mess. Normal tools may not work. Baby-boomers don’t want McMansions. They want value for their buck, downsizing, travel, parks, deceit healthcare, entertainment… CFP’s are advising clients to change their asset allocation. They don’t have the timeframe to recoup losses from increased risk exposure (assuming risk and return are still correlated). Good thing for a lot of early baby-boomers is their traditional pension. They have the same security in cashflow as CEO’s get in their golden parachutes/compensation package, albeit a lot smaller relatively, and have the ability to affect economic activity w/out going broke. Scott Burns at Dallas Morning news was predicting a number of years ago that this overzealous building mania in housing/McMansions wouldn’t turn out so good. When you look at some of these stepford subdivisions, all the houses built alike, at the same time, and quality?, good luck trying to differentiate your house for a sale. The cost of maintenance, insurance, taxes, plus future replacement costs for furnace, air conditioner, roof, repairs, etc., on those houses, icks! Not to mention developers didn’t consider environmental issues, which will become extremely important as we go forward. For those of us who consider a house a family home within a community, and not a thing to be flipped, or a bank, it has been brutal. The building mania and abuse of land and law was as sustainable as a bridge in MN. ;-|

    “regional Fed President as to what the root causes of the Housing problem actually are” – Looking at the last 20 or so years, it’s becoming more apparent that the “experts” are way overpaid ;-)

    “Sure, maybe I will only earn 2% on interest,” – like Will Rogers use to say, “I’m more concerned with the return of my money than the return on my money.” Unfortunately with 2% interest we are negative when inflation is put into the equation.

  35. pft commented on Apr 8

    Hitler- Demoralize the enemy from within by surprise, terror, sabotage, assassination. This is the war of the future.

    Always mystify, mislead and surprise the enemy if possible. Thomas J. Jackson

    We are an enemy being attacked in a war of surprise and terror?

    Those who pretend to be surprised by that which is not surprising are simply playing their part in the war on the people.

    Imagine, the one organization which had the ability to put a stop to the sub-prime explosion, who was surprised despite warnings for over 6 years, and continues to be surprised today as it unfolds, is to be given even more power over the entire financial system. After it is approved, we will all be “surprised” at the next “surprise”, as the Fed admits their “surprise” over the nature of the new “surprise”. Who could have known this will happen?

    Give me more power they will ask, and they will eliminate all surprises, as they extend their hands and reach for the keys to the White House. And lets get rid of that ugly French statue in the harbour, it might be the problem, all that liberty brings bad luck, lets replace it with a statue of responsibility.

  36. RNL commented on Apr 8

    Bernanke eating an apple, holding the knife to the US Dollar’s throat. She is blindfolded.

    The Market comes running around the path, sees Bernanke, slows. The two men study each other. Then..

    Bernanke: So, it is down to you. And it is down to me. If you wish her dead, by all means keep moving forward.

    Market: Let me explain..

    B: ..there’s nothing to explain. You’re trying to kidnap what I’ve rightfully inflated.

    M: Perhaps an arrangement can be reached.

    B: There will be no arrangement..and you’re killing her!

    M: But if there can be no arrangement, then we are at an impasse.

    B: I’m afraid so — I can’t compete with you physically. And you’re no match for my brains.

    M: You’re that smart?

    B: Let me put it this way: have you ever heard of Keynes, Smith, Marx?

    M: Yes.

    B: Morons.

    M: Really? In that case, I challenge you to a battle of wits.

    The Market nods.

    B: For the Princess?

    The Market nods.

    B: To the death?

    Another nod.

    B: I accept.

    M: Good. Then drop the interest rate.

    M: Inhale this, but do not touch.

    B: I smell nothing.

    M: What you do not smell are called Structured Investment Vehicles. They are odorless, tasteless, dissolve instantly in liquid, and are among the more deadly poisons known to man.

    B: Hmm.

    The Market rotates the goblets in a little shell game maneuver then puts one glass in front of Vizzini, the other in front of himself.

    M: All right, where are the assets? The battle of wits has begun. It ends when you decide and we both report, and find out who is right and who is broke.

    B: But it’s so simple. All I have to do is divine from what I know of you. Are you the sort of Market who would put the assets onto his own balance sheet, or his enemy’s?

    He studies the Market now.

    B: Now, a clever Market would put the assets onto his own sheet, because he would know that only a great fool would reach for what he was given. I’m not a great fool, so I can clearly not choose the sheet in front of you. But you must have known I was not a great fool; you would have counted on it, so I can clearly not choose the sheet in front of me.

    M: You’ve made your decision then?

    B: Not remotely. Because subprime comes from Australia, as everyone knows. And Australia is entirely peopled with criminals. And criminals are used to having people not trust them, as you are not trusted by me. So I can clearly not choose the balance sheet in front of you.

    M: Truly, you have a dizzying intellect.

    B: Wait till I get going! Where was I?

    M: Australia.

    B: Yes — Australia, and you must have suspected I would have known the assets’ origin, so I can clearly not choose the sheet in front of me.

    M: (very nervous) You’re just stalling now.

    B: (cackling) You’d like to think that, wouldn’t you?

    M: You’ve beaten my discount window, which means you’re exceptionally strong. So, you could have put the assets onto your own sheet, trusting on your strength to save you. So I can clearly not choose the sheet in front of you. But, you’ve also bested my TAF which means you must have studied. And in studying, you must have learned that the market is a man-made construct so you would have put the assets as far from yourself as possible, so I can clearly not choose the sheet in front of me.

    As Bernanke’s pleasure has been growing throughout, the Market’s has been fast disappearing.

    M: You’re trying to trick me into giving away won’t work..

    B: (triumphant) It has worked — you’ve given everything away — I know where the assets are!

    M: Then make your choice.

    B: I will. And I choose.

    And suddenly he stops, points at something behind the Market..

    B: ..what in the world can that be?

    M: (turning around, looking) What? Where? I don’t see anything.

    Bernanke busily switches the assets and lending policies around while the Market has his head turned.

    B: Oh, well, I-I could have sworn I saw something. No matter.

    The Market turns to face him again. Bernank starts to laugh.

    M: What’s so funny?

    B: I’ll tell you in a minute. First, let’s look at our balance sheets. Me from my sheet, and you from yours.

    Bernanke picks up his balance sheet. The Market picks up the one in front of him. As they both start to read, Bernanke hesitates a moment.

    Then, allowing the Market to drink first, he reads his sheet.

    M: You guessed wrong.

    Bernanke: (roaring with laughter) You only think I guessed wrong! That’s what’s so funny! I switched assets and printed money when your back was turned. You fool.

    There’s nothing he can say. He just sits there.

    Bernanke, watching him.

    Bernanke: You fell victim to one of the classic blunders. The most famous is “Never get involved in a Race to the Bottom in Asia.” But only slightly less well known is this: “Never go in against a Central Banker when DEATH is on the line!”

    He laughs and roars and cackles and whoops and is in all ways quite cheery until he falls over dead.

    The Market, stepping past the corpse, taking the blindfold and bindings off the dollar, who notices Bernanke lying dead.

    Dollar: Who are you?

    Market: I am no one to be trifled with, that is all you ever need know.

    Dollar: To think — all that time it was your was your balance sheet that was wrecked.

    Market: They were both wrecked. I spent the last few years building up an immunity to coordinated intervention – and buying gold.

  37. Winston Munn commented on Apr 8

    How To Tell If Housing Is In A Bubble.

    If you have to give away a free put contract on any possible loss, you might be in a bubble.

    If the last 10 buyers also auditioned for the remake of “Flipper”, you might be in a bubble.

    It the total fees collected are more than 100% of the contract’s value, you might be in a bubble.

    If you are stretching for yield, you might be in a bubble.

    If a gang in suits does a drive-by appraisal of your property, you might be in a bubble.

    If Alan Greenspan is the Fed Chairman, you might be in a bubble.

  38. Mich(^IXIC1881) commented on Apr 8

    If a newly built loft condo is being rented between $2000 to $3,000 where the median income is $55,252, you might be in a bubble.

Read this next.

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