oh...we're totally fucked. Hyperinflation is still coming. benanke's Quantatative Easing is going to ensure a harder collapse.
Home prices have to track with salary and employment growth. Some cities simply overbuilt and it's a supply and demand issue. The issue with Portland is that our economy is moribund. It's no surprise.
The campaign to do away with Freddie Mac and Fannie Mae will drive rates through the roof and eliminate the only source of financing for all but the wealthiest buyers. Housing ownership will quickly return to pre-1920 ratios, where only the rich own homes and there is no genuine middle-class. Unlike rural areas in their states, Portland and Seattle think their shit don't stink and have artificially held their listing prices at least 30% higher than they could hope to sell for, and they are likely to experience a horrendous crash in the next year or two. Meanwhile, homes here in Beautiful Central Oregon are at bargain prices and are flying out the door.
That used to be the case, but there's an established secondary mortgage market now. The GSE's are no longer needed. The securitization risk discount of roughly 37.5 basis points that the GSE's used to offer as a premium is now locked in stone. Fannie and especially Freddie have strayed so far from their original line of business that it's silly to keep them alive. Let them die and private companies will rush in to fill the void with no risk to the American taxpayer. Better yet, politicians won't have the power to force them to securitize sub-prime loans. Those instruments' prices were distorted by the implied US government backing the GSE's enjoyed.
