In a paper recently released by the Center for Economic and Policy Research, The Impact of the Housing Crash on Family Wealth  (pdf), we find that the real danger of the drop in house prices is not simply that people's houses are worth less now.  The 'psychological factor' was that homeowners whose house prices were inflated and they felt the price could not/would not go down, tended to act as if the price of their house was money in the bank.  In short people acted as if they were wealthier than they actually were.

These bubbles made it extremely difficult for families to plan their savings, since they would have no simple way to distinguish bubble-generated wealth, which would prove ephemeral, from real wealth which could be expected to endure.  As a result, tens of millions of families likely ended up saving less than they would have considered prudent, had they recognized that their wealth was temporarily inflated by bubbles in the stock or housing market.

The Housing and Mortgage Market has taken on all the charm and character of an 1980s Horror Flick. Just when you think it is dead, and our Virginal Heroes have saved the day and the Neighborhood at Elm street, it COMES BACK and OH GOD! Stabbing in the back of the neck!

Yes, children, the mortgage crisis isn't over yet. Oh, no. Even though its been shot in the face and drowned in the river the mortgage, housing and credit crisis is still there hiding in the backseat of your car with an ice-pick.

I'm beginning to wonder if there will be an American dream left for me to have.

Hasn't America been in a perpetual state of drunkenness since Reagan was elected by virtue of the Iranian hostage crisis?

Bush says Wall Street ‘got drunk’
By Stephanie Kirchgaessner in Washington
Published: July 23 2008 01:19 | Last updated: July 23 2008 01:19
President George W. Bush said Wall Street had "got drunk" and was experiencing a hangover at a recent closed-door fundraiser in Houston in which he also made light of the US housing crisis....

http://www.ft.com/...

But... is drunkenness the real problem?

From today's Beyond Chron.

Chicago does not have rent control.  In 1997, the Illinois legislature passed – and Republican Governor Jim Edgar signed – SB 531 (the Rent Control Preemption Act), which prohibited local jurisdictions from passing it.  At the time, no city in Illinois had rent control – but the real estate lobby had a national effort to quietly stop it in places before it starts.  SB 531 passed with little fanfare: the State House voted for it 96-18, and the State Senate approved it 46-6.  One of the six senators who voted “no” was Barack Obama – although many liberal Democrats voted with landlords and the Senate’s Republican majority.  Obama’s vote – when one considers how few people stood up with him – is an example of his core progressive principles.  While it’s valid to say that he should have done more to defeat it, consider that Obama was a freshman in a very hostile climate – and as a community organizer had learned to pick his battles.

As of the time of this writing, it appears that there is no other coverage of this gaffe on the internet anywhere. I wish that I could have found video to embed here, but none was available. I transcribed it myself having recorded it using my dvr on closing bell on CNBC at 3:00 p.m. CST Tuesday, July 15. The gaffe occurs at the seventh minute.

Closing Bell on CNBC began to at least acknowledge that some feel there might possibly be a problem with the housing market and potentially the economy.  

Gretchen Morgenson, the Pulitzer Prize winning NY Times financial writer, appeared on Closing Bell today. She spoke about the President's remarks.

There has been a lot of discussion about whether or not the Federal Government should be stepping in and fashioning a bailout on Fannie Mae (FNM) and Freddie Mac (FRE) which are both publicly traded stocks.  

While I feel strongly that we spend too much money bailing out failed banks, investors and more, I have very strong feelings about this particular bail out.

There's a bigger picture here that you might not understand.  Follow me through the Fannie Mae disaster.  Tomorrow I will write a diary similar to this regarding Freddie Mac.

Ok, wait hold on a second..   Bush is proposing to have tax payers cover Fannie Mae's debt

I'm sorry but are you fucking kidding me?  Let's take a moment to break this down.

Yes folks, be prepared. BushCo is meeting with 'regulators' today to discuss the insolvency of Freddie Mac and Fannie Mae. Any idea who will be footing the bill on this?

Honor and ethics are very important to me. As I wrote on my personal blog earlier this week, the Gospel shows us that few things are more immoral than the abuse of power. When corruption scandals beset DC, I am usually very swift to condemn the accused, even if they are members of my own party - case in point, while in New Orleans, I volunteered for Karen Carter's 2006 midterm campaign to unseat Rep. William "Dollar Bill" Jefferson (D-Refrigerator).

Sometimes, however, ethics scandals are just a bunch of trumped-up hooey designed to generate headlines no matter what the personal cost, and that's exactly what we see unfolding today. The protestors, bloggers, and GOP aides trying to smear Senators Chris Dodd and Kent Conrad right now should be ashamed. Dodd and Conrad are two of the most honorable people in Washington, DC, and I do not for an instant believe either one knowingly or purposefully did anything wrong. This is especially true of Conrad, who has been a model of honesty in the way he has handled this scandal.

Hey buddy.  I got your most recently forwarded e-mail earlier.  It's a 13 minute embedded video, a screed once again attacking Barack Obama.  Telling me that Obama is not "American enough", not "like us".  Over the months there have been numerous e-mails and videos you have forwarded to me attacking Obama.  And each time you have asked me, as an Obama supporter, to respond, to debunk the lies, to educate you, if I can.  Why?  Because you, as a lifelong Republican, are sick to death of the last eight years.  You want a reason to vote Democratic this year, but the constant barrage of anti-Obama crap you are receiving makes you think you can't vote for him.  Each time I have responded: logically, calmly, rationally, pointing out lie after lie, distortion after distortion, smear after smear.  Well, no more old friend, and here's why.

Amid all the controversy over the latest pastor's remarks and who denounced or rejected them sufficiently enough, there is some very real, very serious, and very bleak news out about the housing market.

America's house prices are falling even faster than during the Great Depression.

As house prices in America continue their rapid descent, market-watchers are having to cast back ever further for gloomy comparisons. The latest S&P/Case-Shiller national house-price index, published this week, showed a slump of 14.1% in the year to the first quarter, the worst since the index began 20 years ago. Now Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back over a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, the worst point of the Depression. And things are even worse than they look. In the deflationary 1930s house prices declined less in real terms. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year.

More, below the fold.

According to Barack, Reggie Love was slipping a little today!

I was a volunteer today at his closed event in Las Vegas. After his talk on the mortgage crisis, Obama was making his rounds, shaking hands, taking pictures, etc. He came to a table of elderly Latino women who began to maul him: hugs, kiss, putting books and magazines in his hands to sign. Obama looked around and said "Where's Reggie?" Reggie came running over "My bad" and Obama said "You're not doing your job". I think Obama saw the butt-hurt look on his face, so he said, "Come on man" gave him a playful smile, and nudged him with his elbow.

Even during the Housing Boom, when almost everyone I knew was forsaking the film industry for quick money as either a realtor or mortgage broker, I had a vague sense of disgust for anyone associated with the Real Estate market. There was a 'GO-GO Get Rich Quick' Attitude and a lack of a moral compass that pervaded those trying to sell the American Dream for No Money Down.

When the market collapsed and all those just-licensed brokers and realtors came wandering back, looking for work in Hollywood I asked a couple of them if they felt anything approximating Guilt for putting money ahead of peoples' lives. None of them did. Most couldn't even accept their role as human wrecking balls that assisted in the destruction of other people's lives and dreams. The standard churlish answer I got was, Well, it isn't my fault someone can't pay for their house! And then they would fall back on the old trope of Personal Responsibility before shifting into a discussion of how hard they had it.

So, my dad keeps forwarding me the craziest stuff about Obama and Hillary, [yeah, CRAZY stuff that snopes.com refutes everyday] so I retooled the great post "You Think McCain Is Here To Help" from DNC.org with some added facts and related it to something we both shared, Family Values, and am urging him to forward it to his friends. I thought some people on here might do the same but minus the ID CD-2 stuff. Enjoy!  

   We do not have a housing crisis in America,  we have a space crisis. Up until last spring we still heard the housing industry crying out that we had a housing shortage of over 3 million units in California alone.  Their experts, including people like Edward L. Glaeser of Harvard University, predicted dire consequences of homelessness due to environmental laws and zoning limitations aimed at creating livable cities (see Glaeser and Ward, "The Causes and Consequences of Land Use Regulation: Evidence from Greater Boston," HIER Discussion Paper n. 2124, http://ssrn.com/... But housing demand and supply vary according to income and perceived need, in our culture this is especially effected by prestige – how many rooms a house has, square footage, yard, garage size, etc. This is made clear every time there is a recession, or a significant reduction in employment as after the 1987 stock market collapse or the dot.com collapse.  At these times people move in with friends or rent rooms in houses with strangers or family.  We then hear of a crisis in the housing market due to oversupply.  

Yesterday I wrote a diary talking about the stimulus checks due to arrive next week.  I asked  what people's plans were and whether or not they thought the stimulus package would have any impact.  I wanted to know what the real experts thought about our economy and how it was affecting them because, in our neck of the woods, it seemed like life was going on normally.

Well, that was then this is now.  Today, the economic chickens came to our home to roost.