1. Due to the overwhelming evidence of a long-term bubble in the housing market due to unprecedented lax lending standards, we have called for a significant drop in real estate prices since the March 2005 introduction of the Ponder This… newsletter. Although housing continued to hold on for about another year, with some markets starting down earlier than others, it is now safe to say we are in one of the largest housing market downturns in U.S. history. The Economist reports that house prices are falling even faster than what took place during the Great Depression. Our published calls for housing gloom, as early as March 2005, were based on long term historical value, sentiment, and credit analysis. If this sort of insight interests you, please continue patronizing the pages of this online knowledge source. Feel free to spread the word as well. Housing will hopefully (and likely) not be our last proper call.

2. One after another, major banking institutions, fearful for the lives of their balance sheets, are tightening mortgage lending standards. HSBC provides the latest example. Coming out of an era of broad NO MONEY DOWN real estate speculation, these changes are providing significant tinder to the ravaging inferno that is real estate assets. All I can say is, the problem in the first place was insane, wholly economically unsound lending practices during the bubble.

3. “We’ve accepted the fact that it’s going to have to take place,” Gary, 48, said of their impending departure. “For a long time we felt, ‘Why did this have to happen to us?’ ” he said. “Now we know a lot of other people are going through the same thing. It seems to make it a little easier to accept.” This is the sort of sentiment you will begin to see spreading like brushfire throughout the country. The more people who begin to see that it is socially normal to foreclose and/or default on other debts, the more it will take place. This sentiment is further punishing a number of over-priced markets.

4. Reggie Middleton has been on fire analyzing banks, property builders and other organizations who are imperiled due to the housing bust. His latest analysis drills down into the balance sheet of major banking institution Wells Fargo. It is a worthy read.

5. Wall Street banking institution Lehman Brothers Holdings appears to potentially be on the ropes. The company was already forced to raise $4 billion in extra capital in the first quarter in order to stay above water. Now, only a few months later, the company appears set to go out, hat-in-hand, yet again, this time they appear set to raise common equity capital. Given that Bear Stearns went downhill to a bust so rapidly, do not be surprised to see Lehman fall victim to the same fate. These guys have played leveraged to the hilt with lots of fuzzy assets. I do not see Lehman surviving the bust.

6. Finally, Mish reports on the flashy rich being less rich. Note some of the rather comical steps being taken by individuals in the article to maintain appearances through “tough” times.

Filed under: Social Mood, Economics, Six Packs, Current Events