Global Warming? are humans to blame?

Well, housing prices have increased faster than interest rates. So the people who have borrowed cheap money are profiting off their mortgage- the interest they are paying over the term of the loan is less than their home's appreciation. Even if the housing boom ends (and many real estate people will say the bubble has burst, or is about to), homes still appreciate. Rarely, if ever, do homes/land lose value- afterall, that's partly tied to inflation (which is a constant in even a marginally-functioning economy) and it's partly tied to the population (which, of course, is constantly expanding). So, if/when the bubble bursts, what you are going to see is home appreciation going from 10+% a year, down to maybe 2 or 3% at the worst. Most of the cheap loans were around 4%, IIRC, though some were even less. So, really, even worst-case scenario, they will lose about 1% which is really not all that significant on a purchase of $80,000 to $1,000,000 or so, given the use of the home for 30 years- it works out to an $800 (on an $80K home) to $10,000 (on a $1mil home) loss per year. And that is really the WORST case scenario. I don't think it's likely at all. So, realistically, it will have no effect on people with existing mortgages and, most likely, unless the bursting bubble is dramatic, they will still gain a net benefit from their mortgage. And, if the economy gets REALLY bad and we find ourselves in a depression, the home-owners can have reasonable confidence that their Government will lower interest rates ("Greenspan", again) in order to spur the economy. That will make refinancing a viable option for them and, again, limit the potential loss on their investment. So really, there's hardly any downside at all. Even people who buy a home when interest rates are 10% or more, can take advantage of refinancing should the economy go down the tubes... so you really don't have very much risk there at all, regardless of when you buy. I'm hazy on this detail, but I think I was told by a lender that mortgage refinancing makes sense when the interest rate you can get is 1.5% less than your present interest rate. So that's the absolute worst case scenario. There's no other investment in the known universe with so little downside risk that you can still sleep in and raise a family in.


I would say that a strong economy has the following characteristics- Low Unemployment and high GDP. High GDP, of course is variable based upon the respective economy, but can generally be characterized as low savings with a high reinvestment (or spending) of income.

 

http://seattlepi.nwsource.com/opinion/285275_trahant17.html

"What stands out in this housing boom is that average U.S. housing prices grew three times faster than disposable incomes.

How could that be? It became easier to tap into loans with adjustable rate mortgages or ARMS.

"Over 30 percent of all conventional mortgages closed in 2004 and 2005 were ARMs. The ARM share moderated to 25 percent by the second quarter of 2006," Brown said.

But among poorer-credit borrowing, or subprime loans, Brown said, "the share of ARMs was far higher, closer to 80 percent."

In other words: Eighty percent of the loans of the people who can least afford a house are facing enormous risk, escalating payments and possible defaults.

On top of that, a lot of loans were interest-only or worse, fixed payment plans that increased the principal owed on a house.

Brown said it's difficult to measure how many of these loans are out there -- but they "appear to have made as much as 40 to 50 percent of all loans securitized by private issuers of mortgage-backed securities during 2004 and 2005."

The FDIC economist says there are only two possible outcomes: A period of stagnation and weak housing prices or a sharp decline in housing prices "with severe adverse consequences for homeowners, lenders and the real estate sector as a whole."

 

Yes. The poor were often set up with ARMs that may royally screw them. However, note that the stat is "80% of poorer-credit borrowers", not "80% of loans". So that stat is very hard to quantify, but I will do so using very generous estimates.

What effect will the collapse of poor peoples' ARM-mortgages have? Well, really it depends on when the home was bought. For early loans, it's going to be just fine because, as you noted, housing prices were skyrocketing. So even if one day they turn around and can't make the payments, the appreciation ought to more than take care of them. Even if we see a few percent decline in value, the enormous previous increases will ensure that the early adopters come out of this just fine.

The later adopters- the people jumping to ARMs in the past 12 months or so- may be in some trouble. But remember. Most mortgages are 30 years. So the past 12 months of mortgages account for about 3.3% of the mortgages out there. Ok, let's say 6% of mortgages out there, since obviously we were still in a bit of a bubble/boom.

So the "at risk" group is about 6% of mortgages. But not 6% of ALL mortgages, just those people with poor credit. Let's say half of the total have poor credit (and I think that's a generous estimate since some people in the lower half ought to be classified as "average", don't you think?). So that's 3% of mortgages that are at risk of collapsing at some point in the future, but only 80% of them have ARMs, so that's 2.4% at risk. That's not 2.4% that will collapse, they are only the additional number, on top of whatever the traditional historical number is, that might collapse. So based on this, it's reasonable to assume the default rate will not increase by more an additional 2.4%. HOWEVER, there's more mitigating factors....

What group of people, traditionally, are the least likely to own homes? Young people who haven't bought one yet. So who ought to have the majority of the ARM's out there? Young People. And who is more likely to have significant increases in their earnings over the next few years? Young people. I'm not going to add this to my analysis because I don't have the figures to quantify it, but I'll leave it out there as another reason that the ARM-collapse isn't going to be as drastic as many people think.

So my ballpark estimate is that 2.4% of the market are "at risk". Even without the mitigating effects of salary increases for young people, given that increase in GDP and population increase are both above this number, I don't think the ARM problem is enough of an impetus to cause a longterm downtrend in the market.

 

http://en.wikipedia.org/wiki/Image:Holocene_Temperature_Variations.png

http://en.wikipedia.org/wiki/Image:2000_Year_Temperature_Comparison.png

http://www.grida.no/climate/ipcc_tar/wg1/268.htm
http://www.grida.no/climate/ipcc_tar/wg1/269.htm
http://www.grida.no/climate/ipcc_tar/wg1/079.htm
http://www.grida.no/climate/ipcc_tar/wg1/266.htm#721
http://www.realclimate.org/index.php/archives/2005/04/water-vapour-feedback-or-forcing/

 

Ok Toot, I follow you. Now excusing my ignorance if you would;
Are the balance of the mortgages fixed at rates for long terms?Like decades?
Or are they fixed for terms like one to five years.? I vaguely remember the real estate bubble that burst in about 1990 resulting in property values dropping as much as 25 percent almost overnight and taking years to rebound. Even more vaguely I remember interest rates in the double digits about 10 or fifteen years before that. Is that simply not possible anymore?

 

Omno,

The last graph you posted to refute me actually shows a greater deviation from 0 in the negative direction during the little ice age than the current hot trend; and the Holocene graph shows historic short term fluctuations 3 times greater than the last 150 years. So the current climate warming is still within natural variations. Because of these historic records, scientists will have to prove an actual link between CO2 emissions and the current warming trend, not just point to circumstancial evidence.

 

Was that meant to refute you? I looked at that and thought he was trying to show how the data simply can't conclusively show anything regarding global warming. Well ok, it does show that it has gotten warmer since the environmental movement was spurred into existance by concerns over global cooling

 

We have gotten gleefully of-topic now, but I feel that may be my true calling in life.

ARMs usually have a period during which they are fixed. That period is maybe 1-10 years. It could be shorter, could be longer, of course. After that, they will fluctuate based upon LIBOR, the London Interbank Offered Rate. Don't ask me what London has to do with it, I don't know much about it, but basically, it's the "market rate" for interbank lending. Obviously, the more your bank has to pay to borrow money, the more they are going to charge you (the consumer/borrower) to get it. So you'll typically be charged LIBOR plus some additional percentage after your fixed term has ended.

If the going rate has dropped since then, it's no big deal at all, you simply refinance at the new lower rate and move happily along with a lower premium.

There is nothing preventing interest rates from climbing to 10+% in the future (except for a war and various other "issues" that are depressing the economy). That's why an ARM may screw you if the economy gets good (and interest rates rise). However, if you have a fixed mortgage, you are locked in and that variation in interest rates will not really affect you one bit.

As for property values dropping over night, you do see that in some areas. The one that springs to my mind is Flint, Michigan. When a major provider of jobs picks up and leaves, the local market gets depressed and nobody wants to buy a house there, so the market tumbles. And yes, I do think there are some markets with quite a bit of excess fat in them right now- Much of the California coast springs immediately to mind. Could they lose value quickly? Or overnight? I suppose it is possible. HOWEVER, a mortgage term is typically 30 years. A lot of things can happen in 30 years.

But if you comparing the situation surrounding Flint, MI to that in Los Angeles, CA, you will see something very clearly. Los Angeles isn't depending on one corporation to provide jobs to the community. In fact, LA is just like any other large city. In the long term, the only real worry would be something like nuclear fallout which could make their property uninhabitable or undesirable for an extended period of time. But eventually, the market WILL have to rebound because we have population growth. People will eventually need a place to live. More crowding means more demand for homes, means an increase in prices. Again, this is the long term view. But break it down into thirds, and break it down by the type of mortgage.

You've got new buyers in ARMS who would be hurt by a real estate crash. You've got new buyers with fixed mortgages who have determined that they can make the payments and nothing should change for them because their payments are fixed and predictable for them over the next 30 years.

You've got people who've owned their homes for 5-15 years or so and, even if the real estate market is cut in half, their property may still be worth more than they are paying for it, thanks to the previous bubble. And, if they are in ARMS and if the fixed-period is ending, they are still paying their mortgage based on 50% of the home's current value, so unless they bought a house twice as big as they could afford, they should do just fine. And, if they can't afford it, they can cash out- sell it- and at LEAST break even.

Then you've got the people who've owned their homes for 16+ years. These people are paying ridiculously low mortgages. My parents paid off their mortgage about 5 years ago. Their mortgage, IIRC, on a 3 bedroom brick home in Chicago was about $300 a month. The value of the home is presently about $150,000. Now, Chicago real estate hasn't gone nearly as crazy as much of the rest of the United States, but it should be pretty obvious that you can't rent ANYTHING for $300 a month. And if they were in a "hotter" real estate market, they'd only be better off. So the long-term mortgage holders won't be affected one bit. They've gotten enough appreciation over the past 15-30 years to more than weather a 50% drop in home values.

 

Remember their budget is lower than ours, because health care and other insurencies like pensions, sick leave etc, etc are mostly private
US spends more money on health care per capita than we (Norway) do, but we have it in our budget and pay for it with taxes, while they pay the insurance company, that is the 2/3 of the population that have the money...

 

Scientists shocked as Arctic polar route emerges


Good news! We can skip those Panama Canal fees! (This has nothing to do with that Liberal Global Warming Cr*p . . . of course!)

http://news.yahoo.com/s/afp/climatewarmingarctic

PARIS (AFP) - European scientists voiced shock as they showed pictures which showed Arctic ice cover had disappeared so much last month that a ship could sail unhindered from Europe's most northerly outpost to the North Pole itself. The satellite images were acquired from August 23 to 25 by instruments aboard Envisat and EOS Aqua, two satellites operated by the European Space Agency (ESA).

Perennial sea ice -- thick ice that is normally present year-round and is not affected by the Arctic summer -- had disappeared over an area bigger than the British Isles, ESA said. Vast patches of ice-free sea stretched north of Svalbard, an archipelago lying midway between Norway and the North Ple, and extended deep into the Russian Arctic, all the way to the North Pole, the agency said in a press release. "This situation is unlike anything observed in previous record low-ice seasons," said Mark Drinkwater of ESA's Oceans/Ice Unit.

"It is highly imaginable that a ship could have passed from Spitzbergen or Northern Siberia through what is normally pack ice to reach the North Pole without difficulty."

...

http://news.yahoo.com/s/afp/climatewarmingarctic

 

Uh, well, if that's the case, then we're in total agreement.

 

It does refute you. You specifically claimed that "from the 1000's to the 1300's the earth was actually warmer than it is now". The placement of zero is arbitary. In this case they have used the mean of recorded records.

This graph refuted your implication that the recent global temperature rise is part of a millenias-long rise in temperatures. Over the past 6 millenia there has actually been a long term cooling trend if anything. So the recent warming is not part of some long term warming trend. Indeed if recent warming of ~0.8C a century was just part of a 6 millenia trend we would be 48C warmer than 6000 years ago which is absurd.

The different reconstructions to not agree closely enough to provide any knowledge about short term fluctuations. But the case for much of recent warming being anthropogenic is not based on temperature being outside the range nature could push it, but that it is not explainable given recently recorded natural variation, such as solar variation.

For example if solar variation in the past had pushed temprature up and down 2C that only makes solar variation a plausible candidate for recent warming. But if recent records show solar variation has not increased enough to explain the recent rise then solar variation can be written off or made a lower priority as an explaination.

There is a proven physical link - co2 being a greenhouse gas causes an increased warming effect as it's concentration in the atmosphere increases.

co2 has increased by over 35% over the past 150 years. Therefore there will be a warming effect associated with that. How much is a good question, but it's hardly "circumstancial evidence" as if the whole notion of it is ridiculous.

It's not like say number of pirates vs temperature for example in which there is no physical link between number of pirates and temperature, only a correlation.

 

Depends on who you believe. Dr. Zbigniew Jaworowski, in a hearing before the US Senate Committee on Commerce, Science, and Transportation, I.E. in a place he could be charged with purgery if he lied, reported that climatologists cherrypicked data points and adjusted the Siple Curve timeline vs. the Mauna Loa CO2 record in order to make the "facts" fit their pet theories. Simply by showing where the climatologists cooked the data, he effectively disproved the notion that preindustrial CO2 levels were at the claimed 290 ppm, and were in fact at 328 ppm in 1890, and as it turns out the same 328 ppm were measured at Mauna Loa as late as 1973.

Here's where he pointed out that one Dr. Callendar cherrypicked data points to make the outcome match his preconcieved theory, and was later disproved by someone OTHER than Dr. Jaworowski:




And here is the graph depicting the ice core CO2 concentrations timeline BEFORE the data was cooked, showing the CO2 levels rising to present levels about 1850 to 1890, which coincides with coming out of the Little Ice Age:



ANNNNND...
The same data after the facts were "adjusted" by the IPCC, among others, to fit the theory:




Here's where you can get the entire report: http://www.warwickhughes.com/icecore/

Whether or not the global temperature is rising, the fact that the eco nuts are having to LIE to support their claims that humans are responsible, makes me suspicious of the whole concept. Since I've started researching this, I've gone from having no opinion to the belief that this is simply an attempt by ecologists to bypass the legitimate democratic process in order to dictate economic policy.

 

It sure looks like a millenia-long rise to me... occuring over about 20 millenia, it seems.



What is interesting in that graph though is that usually in the warm periods, the increase in temperature outpaces the increase in CO2. For the first time ever, this appears not to be the case.

Now, since the first 7,000 years of an ice core (called the "firn") tends to be somewhat open to the atmosphere allowing gassing and degassing through the not-yet-solid core, this could simply be a result of the method used to acquire the data- surely, where gassing/degassing occurs, your results will be different than when it "settles out" and becomes a solid core.

Here's something else that just caught my eye. It appears to my eye that temperatures lag CO2 on the upswing, and lead CO2 on the downswing. Does anybody else see that? If that's the case, it appears that the Earth has a self-regulating function built in.

Anyway, you will notice that the peak temperatures of *this* "heatwave" (the last 20k years) is lower than previous peaks. But the CO2 is higher. This suggests to me that the CO2 is having a regulating effect. By not declining, it is preventing the temperatures from going down into another ice age (10,000+ years from now). Further supporting this is the fact that our current "heatwave peak" has lasted about 10,000 years whereas historically they seem to have lasted about half that long. This suggests that the CO2 is actually staving off an inevitable decline in temperatures.

Seems to me that CO2 production is having a stabilizing effect on temperature swings.

 

Good one bntii!