..REPORTS COMING IN FROM ALL OVER THE COUNTRY OF WOULD-BE HOMEBUYERS, HAVING SPENT MONTHS STUDYING THE AVAILABLE HOMES AND PRICES IN THEIR AREA WHILE THEY PAY DOWN THEIR CREDIT CARDS AND PILE UP CASH, AND ARE THEN TURNED DOWN FLAT BY BANKS WHO WANT EVEN BIGGER DEPOSITS AND EVEN HIGHER CREDIT SCORE RATINGS – ALL THE WHILE JACKING MORTGAGE RATES UP TO SILLY LEVELS, AFTER ABSORBING AND DIGESTING TENS OF BILLIONS OF DOLLARS FROM THE FEDERAL RESERVE SYSTEM.

 
DESPITE THIS UNFRIENDLY ATMOSPHERE AT BANKS, WHO ARE TRYING TO MAKE THE BIGGEST PROFITS THEY CAN IN THE SHORTEST TIME WITH THE SMALLEST RISK TO OFFSET THE VERY MANY BLIND, STUPID LOANS AND ALSO SPECULATIVE PURCHASES MADE ON THEIR OWN ACCOUNT IN 2005-2006, BUYERS ARE STILL GOBBLING UP HOMES MUCH FASTER THAN NEW ONES ARE BEING BUILT.  THAT IS BY FAR THE MOST BULLISH FACT IN THIS SITUATION.
 
IT IS IMPORTANT THAT YOU REALIZE SOME OF THE CRISIS ATMOSPHERE IS BEING CAUSED BY THE FAILURE OF INVESTORS TO PROVIDE CAPITAL FOR FANNIE MAE AND FHA SO THEY CAN LIBERALIZE THEIR MORTGAGE RULES, INCLUDING HIGHER LOAN LEVELS, AS MUCH AS THEY CLEARLY WANT.  THE 1913 FEDERAL RESERVE ACT GAVE THE FED EMERGENCY POWERS TO BECOME LENDER OF LAST RESORT IN A CRISIS.  THEY COULD AND WOULD PROVIDE CAPITAL TO INVESTMENT BANKS AND THEY HAVE DONE SO.
 
IF MANY BANKS CONTINUE TO FAIL IN THEIR OBLIGATION TO FUND THE MORTGAGE MARKET, THE FED ITSELF WILL START POURING BILLIONS OF DOLLARS INTO DIRECT PURCHASES OF FANNIE MAE AND FHA PAPER - JUST AS THEY MAY HAVE TO DO WITH STUDENT LOAN DEBT, IF BANKS CONTINUE TO OPT OUT OF THE SALLIE MAE PROGRAMS BECAUSE THEY WANT BIGGER PROFIT MARGINS ON GUARANTEED LOANS.  
MY LAST ITEM IS THE ONE I HAVE BEEN SAVING:  THE PHOENIX HOUSING MARKET LETTER RELEASED MONDAY SUGGESTS THAT THE WORST MIGHT BE OVER FOR BUILDERS IN THAT (HARD-HIT) AREA.  THE LETTER SAID: “WE THINK EVIDENCE IS BUILDING THAT WE ARE SEEING THE BOTTOM OF THE (NEW) HOUSING MARKET RIGHT HERE IN THE METRO-PHOENIX AREA.”
 
TO SUPPORT THAT PREMISE THEY NOTE A HEALTHY UPTICK IN NEW HOME CLOSINGS IN MARCH, TO 1900.  THAT IS WELL BELOW THE PEAK, TO BE SURE, YET REFLECTS A MAJOR IMPROVEMENT.  THE LETTER ADDED A COMMENT THAT I THINK DESERVES TO BE SHARED WITH YOU.  THEY SAID LOCAL BUILDERS ARE DOING FAR BETTER IN PHOENIX THAN ARE BIG NATIONAL BUILDERS, AND THEY CREDIT THIS TO LOCAL BUILDERS KEEPING THEIR EAR TO THE GROUND, FINDING OUT WHAT BUYERS WANT AND THEN PRODUCING IT FOR THEM.  THAT SOUNDS LIKE PURE ENTREPRENEURSHIP TO ME.

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