NOTE: The video links below are a MUST WATCH for anyone that truly wants better insight into how the housing run up got so out of control. Yesterday afternoon, CNBC aired a segment which featuring Barry Habib, President and CEO of an organization called “The Mortgage Market Guide”.
Watch the streaming video here: There Is No Bubble
Apparently, this wasn’t his first televised appearance either, as Habib has been a regular guest on CNBC as well as being frequently featured on other widely viewed cable and broadcast channels.
During the segment, Habib’s outlook, as well as his blatant and seemingly disingenuous disregard for the obvious declining state of housing, provided a stark reminder that many “analysts” have a significant interest in attempting to convince others to ignore the facts going on around them.
Like others in his camp, Habib chooses to conveniently protest the existence of a housing bubble at the national level. This is an important caveat as, even given the current, unprecedented run-up in home prices; the case for a bursting national housing bubble is not as easy to make as it is for some of the “red hot” individual markets.
The national housing market is really just a collection of hundreds of regional and local housing markets, many of which experienced only moderate appreciation over the last 10 years. So, national numbers, essentially being national averages, tend to show more moderate growth and more limited declines resulting in what would be considered non-cyclical trends... i.e. generally speaking no booms or busts.
That being said, the National Association of Realtors recently announced that 28 states and the District of Columbia are now experiencing declining home sales. It may not be long before those states register a decline in median home prices as well and then, possibly, a truly national housing bust would be more of a reality.
In any event, the numerous “metro” housing bubbles are a firm reality anecdotally and statistically and, given their sheer number and the number of people that will be affected by their decline, you can be sure the U.S. is in for some rough waters ahead.
So, should a “veteran analyst” doubt your claim of a bursting national housing bubble, instead ask him how he feels about the bursting bubbles in Boston, Washington DC, Miami, Tampa, Chicago, Phoenix, San Diego, New York, Los Angeles, Honolulu, Seattle, Sacramento, San Francisco, etc. etc… you get the picture.
P.S. For those of you interested in watching Habib’s prior appearances on CNBC I have compiled the videos below. Particularly notable is the segments in which Habib encourages others to get “Screaming Bargain” ARM loans!
- “A Call To ARMs” - August 8, 2004
Barry explains how adjustable rate mortgages are a “screaming bargain”! Additionally, Barry challenges the mindset of real estate agents, mortgage professionals and consumers who inherently assume that fixed rate loans are the way to go. - “Velocity of Money” – October 7, 2004
Barry encourages others to increase their mortgage debt burden as an arbitrage investment. Barry says “if you need a 100K mortgage… consider taking instead a 300K mortgage” then invest the excess money and after 30 years BINGO!! You have an 800K “nest egg”! - “Profiting from the Fed”– February 3, 2005
Barry explains how you can avoid PMI by either getting a “piggy back” loan or better yet get “Magic” loan insurance from MGIC. Barry suggests that ARMs are a “great alternative” to fixed rate loans. - “Four Questions for Mortgage Brokers” – April 7, 2005
Barry explains how to determine if your mortgage broker is legitimate by asking four simple questions.
Also, predicts that rates will increase only 1/2% in 2005 which is no problem as there will be no “housing bubble” and the increase only equates to $8 a month to the average home buyer.. so “give up a couple of lattes and buy the house you want”. - “Buy vs. Rent… No Housing Bubble” – June 2, 2005
Barry states that he is the “advocate” of “no housing bubble”. Again, he suggests that any up-tick in rates will only equate to an additional $8 a month for the home buyer.
Barry suggests that renting is giving up the opportunity to make $85K in appreciation.
Additionally, Barry suggests that you think twice about all the speculation of “housing bubble” since if it prevents you from buying, you might “miss out”.
Barry also suggests that “interest only loans” are “OK”. - “Realty Check” – June 21, 2005
Now suggests that you “have to be careful” with interest only loans… “they are not for everybody”.
He goes on to state that he’s not a fan of “negative amortization” loans but “however, it can be a great thing for people who are expecting their income to go up”. - “Ask Barry” – September 28, 2005
States that a quick rule of thumb is that a household should “forget what the bank says” and allocate up to 50% of “after tax” income to their mortgage debt burden.
Goes on to state that a Florida real estate speculator feel secure that Florida is #1 in the country in job growth an should expect merely a slowdown in appreciation if rates increase.
Additionally, suggests that an “Option ARM” could be a “great tool” as long as the borrower is disciplined.
