Part 4: "The mother of all bubbles ... real estate bubble & tax appraisals"

Guest Financial Post
by D. Sherman Okst

Let's talk banks. First, Asset Backed Securities, Derivatives, and the toxic crud that insures them is mumbo jumbo to most. If you are unfamiliar with these "securities," I'd advocate that you take a minute or two and watch this short video.


Now, lets talk banks.

Big banks. A lot of small banks were quite prudent but, sadly, they are getting punished for investing wisely.

Look at Citi here. (1.2 trillion) $1,207,007,000,000.00 in assets and then they have $35,645,429,000,000.00 in Derivates. Think about that. If they nationalize the banks, they have to write off the toxic junk. The ramifications of that would be beyond profound. Investors purchased this trash, and I’m talking pension funds with retirees on fixed incomes and so on.

Then you have the AIGs of the world who “secured” or “insured” this trash.

I’ll leave it to your imagination here as to how this could play out.

Now lets talk microeconomics and the local real estate market.

Here are the facts.

Jobs:


Sales Figures:



The DOM is the Days on the Market. The longer period indicates a softer market.

Now take a peak at the inventory of homes. Not a good sign.

Then you have new home starts:



In Summary:

I think it is fine to agree that the average price went from $186,529.00 in 2005 to $223,566.00 in 2008. But let’s not look at that as linear, because like the chart it was anything but. Remember that in 2006 the house prices shot up to $331,323.00 before the LOCAL bubble popped in 2007. Anything but linear. In fact, other then the dates, it follows the chart perfectly.

Remember, prices are sill falling and will still fall.

Unless you are going to do an assessment yearly as prices sink like the Titanic, it is not ethical to do an assessment that doesn’t take into account the precipitous price dive that we are in now. The downside (cliff diving) part of this bubble.

Previous: Part 1, Part 2, Part 3
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D. Sherman Okst is an Augusta County resident who with his wife runs a small technology business. He reads extensively and studies the economy blogging as "Davos" at the Daily Digest, a column for Chris Martenson, which gets 1.5+ million reads a year. Sherman writes code, was a high school computer science teacher, and ex-airline captain with 15,000 hours and 18 years of service. He was a builder, managed a lumber yard and as a kid was a mate on a fishing boat. Sherman has also had work published in a few magazines.