Thursday, August 12, 2010

No Mortgage Revival, No Property Recovery

Even with the Fed's announced intention to increase its purchases of mortgage-backed securities, purveyors of said securities cannot see a bright future:

Investors doubt the market for home- loan securities without government backing will revive until 2012, according to Moody’s Investors Service.

Thanks for the heads-up, Moody's.  Too bad you couldn't have given us comparably prescient views when the market for the MBS securities you rated as AAA was about to go down hard in 2008.  The home loan market can't survive at its present size anyway because zero net employment growth for a decade has capped the number of homes that can be sold to working Americans.  Those homes that have been sold are permanently underwater and will never regain their lost value:

During the great housing boom, homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their houses as security. Now the money has been spent and struggling borrowers are unable or unwilling to pay it back.

Despondent consumers continue to spend their mortgage money on imported goods in a sign that we're developing a cargo cult mentality as a society.  That can't be good.