‘Lack Of Buyer Urgency’: CEO
Some housing bubble news from Wall Street. “Technical Olympic USA, Inc…reported combined net sales orders of 2,117 for the second quarter of 2006, a 34% decrease from the 3,185 reported in the second quarter of 2005. During the quarter, the Company began implementing efforts to reduce its staffing levels to better align its cost structure with anticipated reduced levels of activities and softening market conditions.”
“‘Currently, conditions in most of our markets are different than those experienced during 2005; a year we believe represented unsustainable levels of activity. Current business conditions are characterized by increased inventories of new and existing homes, higher incentives, increased cancellation rates, lower traffic levels, increased competition among builders and a lack of buyer urgency,’ said Antonio B. Mon, CEO.”
“For the quarter ended June 30, 2006, Anworth Mortgage Asset Corp. announced today an unaudited net loss to common stockholders of $12.9 million. This net loss included the loss of approximately $10 million from the sale of approximately $400 million in agency mortgage-backed securities.”
“Lloyd McAdams, Anworth’s CEO, stated, ‘The interest expense on our repurchase agreement financing has continued to increase almost in step with increases in the Federal Funds rate.’”
From Countrywide Financial. “The second quarter of 2006 was characterized by both rising interest rates and a relatively flat yield curve. The amount of total U.S. mortgage originations nationally declined 9% when compared to the second quarter of 2005.”
“Our adjustable rate loan production has decreased in the quarter ended June 30, 2005 to 47% in the current quarter, reflecting the decreased relative attractiveness of these loans compared to fixed-rate loans as the yield curve flattens. The trend is also reflected in our pay-option loan production. Approximately 72% of the pay-option arms originated in the quarter ended June 30, 2006 were retained in our Bank’s investment loan portfolio.”
“Pay-option..borrowers may be less able to pay the increased amounts and, therefore, more likely to default on the loan, than a borrower using a more traditional monthly-amortizing loan. Substantially all of the pay-option loans we originate are underwritten based on ‘reduced documentation’ standards whereby the loan applicant’s income is not fully documented.”
From Broker Universe. “During the height of the stock market boom, now-retired Federal Reserve Board chairman Alan Greenspan said investors were acting with ‘irrational exuberance.’ The results of a recent survey of approximately 500 mortgage brokers might have some industry observers accusing participants of having irrational exuberance.”
“The survey found that over 63% of the respondents said they were optimistic about their business prospects for 2006, while just 13% claimed to be pessimistic. But being that mortgage brokers are salespeople, it would be natural for them to have a positive outlook, especially as many of them have never faced a down market before.”
“Almost 70% of the brokers said they believe their clients understand the mortgage product they are receiving, but a significant minority, 30%, said the consumer did not. When broken down by region, respondents from the West Coast have a more pessimistic response.”
“In what might be the most telling sign of irrational exuberance in the mortgage broker business can be seen in the number of participants. In 1998, Wholesale Access estimated there were 36,000 mortgage brokerages. Based on the responses to the survey, Wholesale Access estimates there were still 53,000 mortgage brokers in the country for 2005.”
“Soon there will be a decline in the number of brokers. A good, well-thought-out business plan may be the difference in being a successful mortgage brokerage and being a statistic.”
Another HB with earnings today included in this article… Down 25% today…
http://www.marketwatch.com/news/story/story.aspx?guid=%7B0B6AE8EA-29FE-49A1-8E49-3B461FA5166C%7D
Check out the chart on Comstock Homebuilding (CHCI)
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=CHCI&siteid=mktw&time=9&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
OUCH!!!
Good find!
‘Comstock Homebuilding Cos. reported a second-quarter net loss of $7.1 million, or 47 cents a share, mainly due to a $12.9 million noncash charge resulting from impairments and write-offs.’
‘ The $12.9 million charge was related to impairments to its real-estate inventory and write-offs for options on land it decided not to purchase. Comstock operates mainly in the Georgia, North Carolina and Washington, D.C., markets.’
‘Analyst Daniel Oppenheim said that he expects additional write-offs as a result of the company’s concentration in the nation’s capital, further write-downs of condo conversions and recent acquisitions.’
Ben,
When they say write-offs… is that referring to HB’s selling off their land or land options?
It looks like they use ‘write offs’ for money lost via cancelling options, and ‘impairments’ for reducing the book value of property they own.
It’s sorta like an early sale. It’s easier to imagine with the stock market. Let’s say you represent a company that files according to GAAP and in this example you will be buying Microsoft in march of 1999 (paying a split adjusted $38/share). We’ll say you bought what is now 6,000 shares (1,000 shares then), for a total of 228,000. According to accounting rules if you buy a stock that you plan to hold on to it sits on your balance sheet at the price you paid $228,000. As the price rose through the remainder of 1999 you would recieve no income or change in your balance sheet even though the stock got all the way to $50. The same is true as the stock price comes down for the next for years.
As they began to pay dividends you would recieve income on your dividends. Finally with the stock having traded for about $25/share for the last couple of years you might decide that it is never going to be worth what you paid (more likely your auditor comes to that conclusion for you) and you would “write off the value of that asset.”
When this happens your income would show an expense for $78,000 ($38-$25=$13*6000 shares)and your Microsoft asset would be writen down to $150,000.
In the case of stocks most of the time stocks are not held according to those rules because it’s easy to buy and sell them and very easy to price them (a computer or WSJ is all you need). It’s much harder to accurately value say an option to purchase a piece of land, but if you decide not to exercise the option you would have to write off the cost of the option.
“It’s sorta like an early sale.”
It’s kind of like an early sale, but not nearly as good. What was written down once is bound to be written down again–I find it highly unlikely that the HB’s will be able to pick the terminal value of their land immediately at the time of the first write-down.
fed pause rally is awsome !
http://www.rallymonkey.com/oldvideo.php
What rally? 10yr is flat, the rest of the market tanked.
http://financialsense.com/fsu/editorials/schiff/2006/0804.html
Now the pundits are starting to use the “R” word…
http://tinyurl.com/pm5ho
“As of Tuesday night, the 90-day T-Bill rate stood at 5.10%, while the 10-year Treasury note yield stood at 4.93%, which means that the yield curve is now inverted to the tune of 17 basis points.
It surprises me that the editors have remained so sanguine in the face of the inverted yield curve. They paid the yield curve a lot more attention in the first couple of months of this year when it was inverted to a smaller extent than it is today.
How likely is it for a recession to follow a yield curve inversion of this magnitude?
One answer is provided by a paper written a decade ago by Arturo Estrella, an economist at the Federal Reserve Bank of New York, and Frederic Mishkin, a professor of banking and financial institutions at Columbia University. They constructed an econometric model that, for various levels of the yield curve, calculates the probability of a recession occurring within 12 months. Given a 17-basis-point yield curve inversion, that probability is 30%. This may provide insight into why the Fed chose not to raise rates at its Tuesday meeting.”
It also provides insight to why I suspect the Fed may be “managing” the yield curve to hide the recession risk we currently face.
What happened at 2:30? Foreign markets open?
Cool — the first to capitulate. How long till KBH, TOL, CTX, etc join the party?
“During the quarter, the Company began implementing efforts to reduce its staffing levels to better align its cost structure with anticipated reduced levels of activities and softening market conditions.”
This is how the recession in early 2000’s came to be. High Tech CEO’s saw a down turn and started to lay off workers. Several months later we were in a recession. This was all after the Tech bubble.
So here we go again… Next they will say… ‘we have no visability to future numbers’… Mark my words this will be said.
Ladies and Gents
Thanks for the feedback re: Tennessee.
Has the following been addressed?
Prior to Hurricane Andrew my State Farm home insurance deductible was $500. After Andrew it changed to 5%. I mention this since a house now “valued” at $500,000 will have a $25,000 deductible after the next storm while under the old policy(prior to 1992) it would still be $500. This might lead one to conclude that:
(1) it no longer pays the rich to carry home insurance if you have available cash and one’s mortgage is paid off……AND
(2) a severe storm will leave a large number of middle-class homeowners in the lurch when they realize the amount that they are being held responsible for.
(3) if (1) becomes the new reality the insurance industry will hike rates even further to make up for their “expected” rate of return on the premiums that were anticipated but lost.
I still believe that the new wind insurance rates for South Florida, coming in the mail this Fall, will be the final wrecking ball to the housing markets there.
my dad is moving from fl to tn
mansion w 2k in taxes= sweet
In California the deductible for earthquake insurance is 10%, the insurance itself is unaffordable so very few people even have it.
Don’t forget that the companies will simply declare bankruptcy if a large enough disaster comes through.
We had a flooding disaster in a housing development in NH this past spring. They didn’t have insurance coverage for flooding and the water came up pretty high with the expected water damage problems. Fortunately there were no deaths (or injuries) and the damage was limited to one development so that the town could help out.
These folks lived in the middle of a pond with an access road. The 100 year storm arrived and caused these folks a lot of problems.
Berkshire Hathaway reported great earnings the past quarter. They attributed much of it to much higher reinsurance premiums and more people taking out reinsurance now that they are aware of the risks in certain parts of the country.
The one thing about owning a relatively inexpensive home is that it makes it easier to start over if your house gets wiped out.
I lately wonder if actuaries figure arcane stuff like potential equity loss into their risk assessments. A lot of bubbleland just happens to be in earthquake or hurricane country. Fraud is one thing, but stuff can also happen because an owner is too financially stressed to maintain the house, fix that wiring, etc, or because the house is sitting unoccupied (neutron house, as referred to by some contributor here), or…?
“Approximately 72% of the pay-option arms originated in the quarter ended June 30, 2006 were retained in our Bank’s investment loan portfolio.”
Well I still don’t know who WAS buying this paper, but I know who is buying it now: no one.
“Pay-option..borrowers may be less able to pay the increased amounts and, therefore, more likely to default on the loan, than a borrower using a more traditional monthly-amortizing loan. Substantially all of the pay-option loans we originate are underwritten based on ‘reduced documentation’ standards whereby the loan applicant’s income is not fully documented.”
OK, so those loans in your portfolio, how does their value compare with your company’s capital?
No doubt about it, if people start turning in the keys Countrywide will have to sell, and quick.
Pay-option..borrowers may be less able to pay the increased amounts and, therefore, more likely to default on the loan, than a borrower using a more traditional monthly-amortizing loan. Substantially all of the pay-option loans we originate are underwritten based on ‘reduced documentation’ standards whereby the loan applicant’s income is not fully documented.
=These loans are worthless crap.
Approximately 72% of the pay-option arms originated in the quarter ended June 30, 2006 were retained in our Bank’s investment loan portfolio.
=that we can’t sell.
So what happens Countrywide they go into receivership? I guess that their remaining loans are assets, but who would buy them and at what discount? That is some ugly, stinking poo.
I certainly would not put my money in the Countrywide bank .I agree , Countrywide couldn’t sell the loans in the secondary market .Now I know why they had a big campaign to get funds about 6 months ago by offering a higher interest rate ,(especially jumbo CD’s)
Which begs the question, is the FDIC ready? I think alot of these lenders are going to get stuck with bad loan portfolios that couldn’t be sold, but like lemmings they’re so afraid of falling behind their peers they keep writing crazy loans. How much will the FDIC have to come up with to bail out depositors? A paranoid person (and there are plenty around here) would wonder if the fed stopped reporting the M3 in anticipation of bank defaults and the subsequent deflation caused by the disappearance of deposite in excess of the FDIC guarantee. After BB seems more afraid of deflation than inflation and in the perception IS reality world, not reporting it means it didn’t happen.
yet Countrywide’s stock just won’t go down. Instead of $37 it seems to me it should be trading for a maximum of $10. Look at this chart…$2 higher than a year ago.
http://finance.yahoo.com/q/bc?s=CFC&t=1y
I’ve had several very frustrating months of holding Jan07 puts on it..but I’m not giving up yet!
I’m just about to dive into CFC puts.
Don’t. I’m in the same position as Denver Ken. CFC should have tanked already, IMHO. Something might be going on (I’m still waiting for buyout announcements or ???). FNM, as you know, is basically doing the same thing. I don’t get it…
The subprime lender LEND is starting to tank today.
Earning call tomorrow.
WCI reports before the bell as well. Holding puts in WCI, JOE, and LEND. Tomorrow should be interesting.
“Well I still don’t know who WAS buying this paper, but I know who is buying it now: no one.”
It’s the first step. If Countrywide can’t sell the Option ARMs to someone else, then I’m going to bet that they stop making the loans (or tighten underwriting so that the loans are more sellable). As I recall, they were among the more careful about keeping loans off their books–I doubt that they are going to want to change that strategy at this point in the cycle.
When I talked to CFC some time ago (probably 6-12 months ago), they said they were starting to keep their own loans. They were doing this intentionally to keep up the volume. They also claimed that was why their rates were a bit higher than other lenders.
Just a thought about sales figures. We are seeing some huge drops, of 30-50% YOY. This is a good thing. However, these figures still stand in contrast to claims made here sometimes that “nothing is selling” or that there’s a standoff. If nothing truly was selling, wouldn’t we be seeing catastrophic 85-95% declines? 50% of last year’s sales means that there are still a *lot* of people buying. I don’t know who or why or what they’re thinking, but the fact is that people are still buying as if real estate were a good deal.
Are you claiming there are lots of stupid people in this world?
No, no; All I’m saying is that It’s Different This Time
No, wrong answer. The answer to “dwr’s” question is “Yes, there are a lot of stupid people in the world.” It wasn’t a trick question. I’ve recently skipped around on some of the housing bulls sites, and I have to say the level of stupidity is astounding.
By the way, what’s different about 50% YOY declines. Everything that marks a RE decline is in perfect order. If anything, what’s different is how bad this one is in comparison to others.
Sometimes reading this board is like the old Monty Python mattress sketch (”don’t say mattress to Mr. Lambert”) “Ah, well, you have to multiply everything he tells you by three, so when he says it’s two feet long, it’s really sixty feet long.”
Yes, houses and condos are still selling, because no matter what the market is like, some people will still be looking to buy or sell for all the reasons that people have always wanted to buy or sell, though for many right now it might not be the smartest financial decision to do so.
“Nothing” can also be seen as relative to the big inventory numbers, which the sales are not reducing. And also relative to the inflated number of realtors, so that some are seeing greatly reduced business even while others are still making sales.
Not so stupid people are buying and selling houses because jobs are still available in growth cities. Look, we can beat up Las Vegas all we want, and there is real estate pain there, but the fact is there is 4.2% unemployment, and 7 billion dollars in just 1 project on the strip (city center) with 12,000 construction jobs thru 2010. Service workers are still in high demand, and the American dream of owning for 1st time buyers is still strong. I remember sales happened a few years ago even at 12% interest rates, so keep your eye on the jobs market before you anticipate 50% decline.
25% in the next 6 months seems a safe bet.
(Prior to Hurricane Andrew my State Farm home insurance deductible was $500. After Andrew it changed to 5%. I mention this since a house now “valued” at $500,000 will have a $25,000 deductible after the next storm…it no longer pays the rich to carry home insurance if you have available cash and one’s mortgage is paid off)
I agree, and not just about the rich, except for insurance against a catastrophic loss. I could afford to take $25,000 loss and do not want to insure against it. But I cannot find the option of a $25,000 deductable in the market.
In fact, since I live in a “coastal county” Allstate forced me to take a $10,000 deductable in the event of a hurricane, but would not permit a similar deductable with a lower premium otherwise.
The FED didn’t raise the rate this morning; a balancing act between oil prices and housing’s FBs?
So now there is LESS urgency for buyers to buy.
He didn’t raise but he didn’t give Wall St or homesellers reason for massive hope as the language was still mildly hawkish. It sounds like there is another hike or two coming. But not right now. Wall St spiked on the rate news but then came to their senses.
Of course what usually happens is the Fed does a big liquidity pump the next day to show the world that all is right with the world.
Sell in May and go away.
Check out itulip’s comment on the statements from Countrywide’s CEO (Mozilo) - it’s great:
http://www.itulip.com/forums/showthread.php?p=1876
Good stuff. This about sums it up….
During the terminal stages of every asset bubble, those profiting from it always haul out the old “soft-landing” chestnut to placate the soon to be despondent market participants, if only to draw out the period of their dreamy state, during which a few more bucks can be extracted from them.
Some other notes on builders:
“The luxury-home builder Hovnanian Enterprises said yesterday that its third-quarter and full-year earnings would fall short of its previous forecasts as a result of slower sales, high cancellation rates and the cost of sales incentives.”
-The New York Times, August 5, 2006
“Pulte Homes Inc., the No. 2 U.S. home builder, said Wednesday that its quarterly profit fell 20% and that new orders dropped 29%, underscoring the slowdown in the U.S. housing market and prompting the company to cut its earnings forecast a second time since June.”
-Los Angeles Times, July 27, 2006
Bonds of U.S. home builders, profitable through April, have turned into the biggest losers this year in the market for debt with ratings below investment grade. Debt sold by D.R. Horton, KB Home and other construction companies has fallen an average 3 percent since May 1, saddling investors with losses of about 1.1 percent for this year, including reinvested interest, according to indexes compiled by Merrill Lynch. That is the worst performance of 37 industries tracked by the investment bank.”
-The International Herald Tribune, July 24, 2006
“The monthly index of builder confidence compiled by Wells Fargo Bank and the National Association of Home Builders slipped three more notches in June to a current reading of 39. The barometer of builder sentiment has now fallen by 46% from a reading of 72 in June of last year. The year-long slide “reflects growing builder uncertainty on the heels of reduced sales and increased cancellations related to eroding affordability, as well as an ongoing withdrawal of investors and speculators from the marketplace,” said David Seiders, chief economist of the National Association of Home Builders.”
-Home Textiles Today, July 31, 2006
“Weyerhaeuser Co., the world’s biggest lumber company, said second-quarter profit fell 25 per cent as wood-product sales declined. Net income dropped to $314 million US, or $1.26 a share, from $420 million, or $1.71, a year earlier, Federal Way, Wash.-based Weyerhaeuser said Tuesday. Revenue fell 0.5 per cent to $5.69 billion. Wood-product sales declined 11 per cent to $2.3 billion. Profit at the unit dropped 36 per cent to $131 million. Weyerhaeuser is among resource companies exposed to slowing U.S. new-home construction and the ripple effect on the price of lumber and other building materials.”
-The Star Phoenix (Saskatoon, Saskatchewan), July 26, 2006
“Top housing-industry economists warned home builders meeting in Orlando on Wednesday that the industry will remain weak the rest of this year and next before possibly rebounding in 2008. Higher interest rates and declining affordability are taking a toll, said David Seiders, chief economist for the National Association of Home Builders, and David Berson, chief economist for the Federal National Mortgage Association, known as Fannie Mae.”
“Seiders said cancellations of new-home sales contracts are up sharply, builder confidence has plummeted, investor-owned homes are boosting inventory to record levels and home prices are starting to slip.”
“Something is seriously going on here,” said Seiders, who repeated a previous warning that “it’s more than an orderly downturn.”
-Orlando Sentinel (Florida), August 3, 2006
I pulled all of these from LexisNexis, so was unable to link the stories. It is obvious things are looking grim.
Saskatoon Star Phoenix LOL.
$10 says they’re just running with someone else’s story. That land of socialists hasn’t had an original thought since I left!
(and very few while I was there I will admit - I drank the kool-aid/water too)
Oh yeah, Saskatchewan, with a population of 1million since the 1930s, and declining or stagnant wages, is having huge home price appreciation too. Not too much value though I think. I just feel sorry for all my friends and family still stuck there. Even the socialist ones.
at least BB knows it’s tanking hard and NOT a soft landing
I understand the WSJ has a report with the CFC CEO saying:
‘Countrywide says it has been careful to give these loans only to borrowers with relatively strong finances. Stil, the test of these loans will come when borrowers face ‘resets’ to higher monthly payments. Mr. Mozilo said. ‘I’m not sure exactly what will happen then,’ he said.’
From the same story in the WSJ:
“I’ve never seen a soft landing in 53 years,” Mr. Mozilo told analysts in a conference call last month.
Just got finished with my monthly visit to the Bay area. A lot of homes for sale. Lake Tahoe had for sales signs all over the place (and that is actually a nice place to be). Traffic still sucks. Parking very difficult in San Francisco. And best of all, they are having another Learning Annex “Get Rich in Real Estate” seminar. Ad said that everyone should come so they can learn how to profit big in the coming RE shakeup. Noted spearkers, Ozone “I Invented the Internet” AL, Big George Foreman, and a crew of other RE clowns.
Did you get the 800# for the Learning Annex “Get Rich in Real Estate” seminar….. I have my CC ready to reserve tickets.
Zig Ziggler
Dirk Diggler
that name’s so sharp, it cuts glass!
Question: With the fed pausing the interest rate hike, would that spell the end of the housing bubble, as the last remaining argument for the “buy it now or forever be priced out” camp, i.e. rising interest rates is done? What about inflation?
last week; buy now b/c rising interest rates will price you out of the market forever.
this week; buy now b/c rising inflation will price you out of the market forever.
Realtors confuse Mongo..
where does one get the smiley faces?
from the candygrams! mongo straight!
That argument was false to begin with because the higher rates go the lower the principle (house price) goes (or rather affordability). You’re better off getting the higher fixed rate with a much lower prinicple because the odds of being able refi at lower rate later are much higher and you won’t the massive principal to pay off.
Sorry…mixed up principal (correct) and principle (wrong).
a lack of urgency? I thought they were making any more land? what happened to buy now or be priced out forever?
Alas, they just started making land again…
Keep in mind that the Fed controls short terms rates only, which impacts credit cards, HELOCs, auto loans, etc. Mortgages are mostly set by 10-year bond. My guess is bond market will go nuts as Fed goes a little soft on inflation. Mortgage rates could still head higher even with the Fed pausing today.
ARMs and hybrid ARM - a big part today’s mortgages, are exposed to the Fed rate.
Yes, because they are short term teaser rates.
ARMs [...] are short term teaser rates?
Not necessarily. Lots of ARMs are short term teaser rates, but so are some “fixed” 30-year ones as well. (One of the builders in the DC area is offering 5.99% fixed but with 1.99% first year and 3.99% second year to tease you into buying an overpriced McMansion with their subsidized loan).
Many ARMS until recently offered a starting rate that was actually right about where it would be set if floating against the benchmark. Real example in 2003: 2.5% above 1-year CMT rate of 1.25% = 3.75%. (The 5/1 fixed period on that ARM was 3.99%)
In the last year, however, lenders have apparently found that borrowers will balk at that up-front rate, since adding the margin to benchmark is… well, kinda high! Real example today: 1.50% above LIBOR = 7.09%. Ouch!
So the only thing to do to get people in the door is to offer a teaser, even if it’s just a percent or two for a few years; that’s what can lead a borrower into even more trouble than a simple increase/float in rate.
I’m not saying that teaser rate are always bad. If you get a 5/1 adjustable at a good rate, for example, then you have 5 years of savings before possible pain starts. But a one-year (or shorter) teaser that you use just to qualify for the loan, well that’s a disaster in the making.
ot but worth a reading about the “wall street talk” from cramer, kudlow, cohen, battapaglia etc in the bubble days. unbelievable.
http://immobilienblasen.blogspot.com/2006/08/wall-street-talk.html
from germany
That was priceless. I can’t wait to see the Real Estate version. David Lereah will be quoted a lot.
hello from germany,
i can´t wait for the collection. we will definitly have a best of ben´s blog.
http://www.immobilienblasen.blogspot.com/
OT… Dont understand the link they are trying to make here between a pause and HB’s going down as a result… I would think the pause would be good news for the HB’s… Any inputs???
——
Home builders move lower after Fed rate decision
By John Spence
Last Update: 2:56 PM ET Aug 8, 2006
BOSTON (MarketWatch) — Residential home builders traded lower Tuesday afternoon after the Federal Reserve Open Market Committee decided not to raise interest rates. Builders are rate-sensitive because mortgage rates are linked to Treasury yields. However, there was one dissenter in the ten-member Fed committee, Jeffrey Lacker in Richmond, who wanted another rate hike, and the Fed signaled more increases may be necessary to contain inflation. In afternoon dealings, shares of Toll Brothers Inc. (TOL : Toll Brothers TOL 26.74, -1.18, -4.2%) shed 4.1% to $26.79, KB Home (KBH 44.72, -1.81, -3.9%) lost 3.7% at $44.80, D.R. Horton Inc. (DHI : D.R. Horton, Inc. DHI21.73, -1.04, -4.6%) was off 3.7% to $21.93 and Ryland Group Inc. (RYL42.92, -1.42, -3.2%) was down 3.3% to $42.90.
Looks like the whole market is down. Someone else mentioned a reason why. The pause was already priced in, and now the market fears another hike already because of semi-hawkish Fed statements.
“I would think the pause would be good news for the HB’s… Any inputs???”
even less rush to buy w/o fear of further rate increases (even though that was a specious logic to begin with).
Here’s a bit of humor for all of you. I was chatting with my sister over the weekend, and the topic moved to real estate, housing costs, etc….you know the drill. Well, I started talking about “flippers”, and “flipping”, yada yada…and you won’t believe what she asked me.
She asked, “What’s a flipper?” !?!?!?! Now, my sister is a very intelligent woman, is current on most world topics, etc, etc….BUT, I was floored when this came out of her mouth. Oh! Btw, she lives in Vegas.
(Now why didn’t she know about flippers???) Last year when she was considering putting her house on the market and was talking about all of this STUFF she was going to do to prepare it for the sale, I balked at her wanting to change her tile counter tops to granite, replace the garage door, and on and on. Her reasoning was to be on par with other houses similar to hers but to price hers lower and more competitively. Well, she eventually decided to keep her house but she told me that a guy “in the business” who she also asked about the GCT said the same thing that I said…so now I’m right. Oh, yeah, and the garage door only needed a window pane replaced and a little dent popped back out (I did that for her…I’m so good. :-D) Saved her a few dollars.
The point of my anecdote is just to concur that it is TRULY amazing that intelligent people do NOT know the whole of what is going on, and don’t readily listen to people who have done their homework. They listen to people “in the business”. Lucky for her, this guy that my sister consulted was not trying to take her money. For future reference, I explained to her that there really is a market of people who would rather make their own improvements in the home that they intend to live in instead of buying someone elses idea of what makes it the “perfect house”. Personally, I don’t think many people realize that granite counter tops come with their own issues …. avoiding spillage of mustard, wine, oils, acidic chemicals. It’s just the “in” thing right now.
BayQT~
Right on with the “in the business” business. It’s amazing and scary how much people trust “experts” and don’t think for themselves. My anecdote: I’ve been gently touching on the housing bubble issue with my 20-something friends here and there in the last year. All based on my own research and looking into the history and figures. And of course reinforcement from this blog. I never got much response, but then in the last few months I’ve heard things from them like, “Oh, I saw on TV that maybe there might be a housing slowdown.” Not that I ever had irrefutable evidence, but it is frustrating to have people who only believe something when a talking head says it on the local news. Doing your own homework is *so* out of fashion!
Then there’s the multitude of housing sales figures, new, existing, median prices, mom, yoy, dod, etc. So many ways to fudge the numbers and make them look positive, it’s amazing that the bubble/bust news makes the MSM. But it finally is.
A lot of people I talk to are still in denial mode. A girl I work with just bought a 130k house (in a marginal area) with an I/O loan and was bragging about this being the time to buy. She then went on to discuss how she was barely making it each month and proceeded to complain about how dumpy her neighbors’ houses were. I countered that I’m not comfortable with the market and will stay a renter for a while. She dismissed my comment like I was some lunatic living in a bomb shelter waiting for the end of the world.
I’m sorry, completely OT.. this reminds me so much of 24, first season I believe. Cute chick Kim has to take refuge at night with a survivalist guy who has a bomb shelter, just as LA is facing terrorist nukes. He’s pretty creepy, so she wants to leave. As my roommate said MST3K-style when we were watching it, “You don’t like my bomb shelter?”
Creepy renters with bomb shelters we are… I guess in 10 years we’ll have houses and be cash-laden but lonely.
Doing your own homework is *so* out of fashion!
That is SO cool with me ’cause I NEVER followed the crowd…neither in school nor as an adult. Actually, my Dad (may he rest in peace) always taught my sister and I to do our research. “Look it up!” he always said. Very frustrating for a kid and even as a teen, but very rewarding and empowering when you have discovered things on your own, or have your own style rather than doing what’s “in”. (Thanks Daddy!)
BayQT~
Apparently now the “in” thing per txchick 57 is pewter countertops.
LOL! Now that is funny!
Pewter? If that is true I would not be surprised in the least.
BayQT~
I too have been amazed at the number of people who ask “What’s a flipper?”, the first time I mention it .
I would have thought that word’s been in the freaking dictionary now for at least few years with it’s current meaning.
Flipper = John Kerry?
Make a decision, and if the facts later support a different conclusion, change your mind?
No no! Stay the course!!
That makes W a flopper….stick with those specatular failures—ride them all the way down.
“Personally, I don’t think many people realize that granite counter tops come with their own issues …. avoiding spillage of mustard, wine, oils, acidic chemicals. It’s just the “in” thing right now.”
Just put a layer of formica over it!
I accompanied an aquaintance to a house she was considering renting.
$1600/mo for 2400 square feet (if it were me I’d have offered $1200 absolute MAX for this house & neighborhood). 25 year old neighborhood near nicer houses but slowly sliding down the evolutionary scale for a house.
Met at the door by the “owner” (who, I kid you not, was a 19 year old girl and her “mommy” who was - this will not shock most of you - a realtor). Kid owner was jabbering on cell phone with teenage friends. Obviously, “mom” is getting kid into the flipping business early!
This place was so blatantly overpriced we just walked out after about 30 seconds. But the incongruity of paying rent to a 19 year old kid just skeeved me out. I think this kid will have problems with this place.
Landlord discrimination!
Compliments of Merriam-Webster:
Brainwashing -
1 : a forcible indoctrination to induce someone to give up basic political, social, or religious beliefs and attitudes and to accept contrasting regimented ideas
2 : persuasion by propaganda or salesmanship
Hmmm…
BayQT~
I have some acquaintances who call this blog my propaganda.
Pause in interest rates and the stock market did.. very little. I still think a slow down is on the way caused by “The Housing Market ” cooling off. Maybe the stock market does too? at least today.
if even the Fed considered housing in their statements about economic ‘risks’, then why did the jerks on Neil Cavuto’s show a couple minutes ago go on and on about how the *only* inflation in the air comes from stuff the Fed can’t control, i.e. energy and commodities?! And the only counters to the groupclaim about how it’s ridiculous for the Fed to consider any continued tightening came in the form of arguing that oh, if the Fed continues to tighten it can’t stop the pipelines shutting down or the bombs from falling in the mideast but it can dampen demand…
why does nobody talk creditbubble?
In explaining its decision, the Fed noted the slowing economy, saying, “Economic growth has moderated from its quite strong pace earlier this year.”
The Fed said this moderation in part reflected a gradual cooling of the housing market, the economic drag caused by rising energy prices and the lagged effects of previous Fed rate hikes.
——————————————————————————
I don’t know much about Neil Cavuto’s show but wouldn’t pay too much attention to the guests unless you happen to know they are informed and know what they are talking about.
I am having a hard time imagining what it is like to rent or buy during a non-urgent market. I had to participate in a frenzied search for a room to rent in the Boston in the mid 90s, the blood sport of apartment hunting in the Bay Area in the late 90s, bidding war home purchase insanity in SD just after the turn of the century, then a couple years later the same thing, with the added pressure of buy-it-now before interest rates go up panic in LA. I am so conditioned. Luckily a company is paying for my current rental.
You’re in for a treat then. It is a lovely, relaxing thing to look for a home (rental or purchase) during a “slow” market.
Before the 90’s, a relaxed market was all I knew about!
So relax and take it easy when the markets slow. Shake off the old habits! you’ll be glad you did!
I agree. When I bought my first house in ‘79, it was *totally* not like this insanity. A senior-aged gentleman (RE agent) showed us an old house (Berkeley, built in 1907) that needed some tlc. There was no ‘for sale’ sign posted. We liked it and wanted it. My FIL helped us with the down because we didn’t have the full 10% required (Sale price, $39,000; $3,900 down).
Can you believe those numbers?? 
The sellers also set up a 2nd and we paid directly to them something like $60/month for a year or 2…and then they just forgave the rest. They liked us, what can I say. 
We wound up remodeling the house over the next 3 years into a beauty with the help of a city redevelopment loan. Long time neighbors would stop by and compliment us on the work we were doing. Those were the days….
BayQT~
I’m sorry, I was just chain-yanking. Throwing around some very expensive words. The people we speak of are going to find out just how expensive.
I just received this notification by email.
August 8, 2006
As of July 12, 2006 Centex Home Equity, LLC has been acquired by an affiliate of Fortress Investments Group, LLC. We are no longer a subsidiary/part of Centex Corporation. We have changed our name to Nationstar Mortgage, LLC.
Me thinks builders are distancing themselves from the monster they created. Who the hell would buy a mortgage operation at this point? A strawman perhaps!
Mortgage brokerage is one thing; actual lending is another. My loan portfolio consisting of about 25 loans made since 1993 is performing perfectly well. Of course I never made an interest-only loan, never made a negative-amortization loan, never made a no-down-payment loan. I never even made an adjustable-rate loan, but my rates are high enough (8.5-10.0%) to shield me from upticks. Why did people use my services? Many reasons. (a) Borrowers know that banks and mortgage brokers charge a lot of fees, hidden or not-so-hidden. (b) Some of my clientele have cash businesses that make their notes unmarketable to Fannie Mae or whatever. (c) Banks cannot afford to pay a loan officer to understand my niche - won’t say what niche because I’m not anxious to invite competition. (d) Being a retired individual, I don’t mind taking the time to recalculate someone’s amortization table if the borrower has a temporary problem that causes him/her to miss a couple of payments.
I have received many mail solicitations from mortgage brokers. Don’t I want to sell my notes blah blah blah. Once or twice I checked what they were offering. Basically they wanted to buy my 9% or 10% notes on some basis that would yield them 14%. Guess they thought I am really stupid. If that’s the only way they can make money, I would say THEY are really stupid. Anyway, I’ve never sold any of my notes. They do turn over faster than I expected, because people find some way to pay off the high-interest lender before they pay off the low-interest lenders.
Mortgage brokerage is a perfectly useless scam. If I can’t make a loan and offer the opportunity to someone else, I charge a fee of zero dollars and zero cents.
Mortgage brokerage is one thing; actual lending is another. My loan portfolio consisting of about 25 loans made since 1993 is performing perfectly well. Of course I never made an interest-only loan, never made a negative-amortization loan, never made a no-down-payment loan. I never even made an adjustable-rate loan, but my rates are high enough (8.5-10.0%) to shield me from upticks. Why did people use my services? Many reasons. (a) Borrowers know that banks and mortgage brokers charge a lot of fees, hidden or not-so-hidden. (b) Some of my clientele have cash businesses that make their notes unmarketable to Fannie Mae or whatever. (c) Banks cannot afford to pay a loan officer to understand my niche - won’t say what niche because I’m not anxious to invite competition. (d) Being a retired individual, I don’t mind taking the time to recalculate someone’s amortization table if the borrower has a temporary problem that causes him/her to miss a couple of payments.
I have received many mail solicitations from mortgage brokers. Don’t I want to sell my notes blah blah blah. Once or twice I checked what they were offering. Basically they wanted to buy my 9% or 10% notes on some basis that would yield them 14%. Guess they thought I am really stupid. If that’s the only way they can make money, I would say THEY are really stupid. Anyway, I’ve never sold any of my notes. They do turn over faster than I expected, because people find some way to pay off the high-interest lender before they pay off the low-interest lenders.
Mortgage brokerage is a perfectly useless scam. If I can’t make a loan and offer the opportunity to someone else, I charge a fee of zero dollars and zero cents.