Bits Bucket And Craigslist Finds For October 2, 2006
Please post off-topic ideas, links and Craigslist finds here!
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Beware of the ‘Bubbleonians’ / fleckenstein
http://tinyurl.com/oxmv2
good morning jmf! Every morningI get on this site to see what you have to say. Just wanted to thank you for your informative comments. =)Danni
I second the sentiment: Vielen dank, jmf!
thanks for the kind words.
i ,john flemming, nhz etc have the advantage of 7 hours (german time to east coast time us) to “screen” some other blogs etc.
I, on the other hand, find myself skipping the first 5-7 posts in the bits bucket every day. I dislike being directed to someone else’s blog to read commentary that is not theirs. It’s a matter of principle to me.
As some posters recently pointed out to Price_Doubt, one of the nice things about blogs is the option to skip over what your don’t want to read.
I agreed with you last time chick but, I think I was wrong….I think jmf brings some good info to the blog…
find myself skipping the first 5-7 posts in the bits bucket every day.
Except today of course.
FWIW (=0) I’ve grown to like the eurosummary in the morning. My blog reading time keeps getting shorter, and HBB keeps getting longer. (Damn you posters! You’re taking too much of my time!)
I would love a 10-best-posts-of-the-day summary, cuz I can’t keep up. Hell, I’d settle for a exec summary of GetStucco. (Where do you find the time GS?)
Oh if we could all only be as rightous as txchick…..what a wonderful world it would be.
When is your blog coming txchick…looking forward to all that original content!!! Should be a real hoot.
Yeeehaw
This is a non-issue for me. If I like the link I keep reading. If I do not like it I hit the “backwards” button on the keyboard. Either way, I appreciate having the opportunity to quickly link somewhere else that may be of interest to me.
“In ‘73, when stocks seemed worry free
That September/October rally was the last one before the market got annihilated. In fact, after the rally ended in late October 1973, the market dropped close to 20% in a month’s time. A year later, it was down almost 40% from those October highs. Fast-forward to the present, where the macro backdrop is worse, and the contrast may prove telling.
Obviously, with animal spirits running high and folks thinking they have a free pass because it’s the “fundamentally correct” time of the quarter to buy stocks, any bit of craziness is possible in the short run. However, it will be temporary. There will be no bailing out the housing bubble that bailed out the equity bubble. There’s no way that the flagrant disregard for risk on the part of folks chasing stocks can end in anything other than tears for this temporary rebirth of Bubbleonian mentality.”
I wonder how Fleck “knows” there will no bailing out the housing bubble?
yeah, I wonder too. I’m 99% sure there will be a bailout in Europe; politicians from all directions are very busy here making a safety net for homeowners where all downside risk is covered by the taxpayer (which of course includes most homeowners, but don’t tell them …).
Well that’s how the politicos get their votes from the gullible public. They are experts in the art of pick pocketing. They convince voters that they are getting something from their neighbor as he’s taxed quite a bit. Then the politipickpocketers raise some other tax that will make the recipient pay more. In the end, what happens is there is a middleman, a troll, who charges someone tribute just to live. It’s called the Republicrat troll, also known as Demopublican troll. The troll acts as if he’s doing you a favor, when you would really have a much higher standard of living if he just got out of the way. The best art of the troll is to make Democrats and Republican voters go at each other’s throats and argue about semantics. It’s just a big guise to extract more wealth from the productive members of our society and buy votes from the non-productive. It’s all for big power grabbing and making a career out of being a politician. Hookers have more honesty than any politician. So yes, the homeowners in Europe will be ecstatic to get a taxpayer bailout and their politipickpocket masters will skillfully extract more wealth in other forms (value added tax, gas tax, whatever). Slick, as in “Slick Willie.”
“Hookers have more honesty than any politician.”
I think I agree, but I get a little confused, as most politicians …act like hookers.
Hookers have to be good at what they do!
Note that he is refering to how the housing bubble bailed out the stock bubble. I don’t think he is talking about government bailouts of banks, etc. I think what he means is the government will not be able to stop housing from crashing.
And that is right, they won’t be able to stop it. They will probably do something like make capital loss on your own home a possible tax deduction. Make everyone feel much better, ha ha. Grow our deficit a little faster. Make us bubble-sitter-outers expand foreign currency positions.
“In ‘73, when stocks seemed worry free…”
Nixon was faced with the Israel’s Yom Kippur war, and the U.S. decision to supply arms resulted in our oil supply embargo.
Today, the U.S. has a huge battle tested military force in the region that may have difficulties fighting an insurgency, but it is the worlds most powerful force when a clear objective exists. Next embargo, they’d lose their oil fields until a suitable puppet could be installed.
yeah, keep dreaming.
His point is that the Fed has no recourse this time. Any huge drop in interest rates will skyrocket inflation so they are painted into a corner.
Any ‘bailout’ will be of the banks, not the individual homeowners. The banks contribute “campaign” funds and voters do what the $$ tells them to do. The few of us that actually vote, that is.
the Fed has no more bubbles to create to help the US. the next time the Fed lowers rates it will just provide the ammo for the next leg in the commodities boom. everyone gets so worked up about commodities dropping now. in the early 70s gold dropped 50% in price, down to around $100. the rest is goldbug history. this time around the next bubble will help commodity areas of the US, but harm the general economy, most likely. it will probably be a boom again to Russia, Brazil and etc.
I REALLY like Fleckenstein’s articles. He’s always there to remind the public that things are out of whack.
Gotta love him!
New video. I look at two housing developments in the far western Houston exurbs. One is quite nice. One is a housing project where you carry a mortgage. Any downturn in Houston and the place will crash hard.
http://housingcrashvideos.blogspot.com/
I should have cleaned my windshield first. Sorry. BTW, please send in your videos!
new site?
bookmarked it.
good video.
the bridgeland looked good, but as you said on the blog
Then I realized that living in Bridgeland would force me to commute on the worst highway in the Houston area.
can´t wait for the next video.
Houses in Houston are less expensive than here in SW MO. That doesn’t make any sense, does it? There are hardly any jobs here. I suppose the country is nicer (rolling hills, happy cows).
You guys have Branson, the Osmonds, and bass fishing, right? Doesn’t that make everyone want to live in the Shepherd of the Hills country?
That’s because there is an endless supply of land and cheap labor in Houston. Like everything else, far too many competing in the market. Sickening.
I noticed that Houston was cheaper than Billings, MT. I think the reason that houses are so cheap is that the property tax is so high (3%?).
There is SO much land here. Greater Houston is huge. It doesn’t have zoning laws. Everywhere freeway you drive (I10, I45, 59, 288, Beltway 8 and Hardy tollroad) has similar McBoxes. Existing homes don’t appreciate that much on the x-burbs as builders keep on building in new plots.
One thing Houston doesn’t have is a background of high paying jobs. Median salary is poor. Even energy, is in a catch up where they have not paid well due to previous depressed commodity prices.
What happens in Inner Loop Houston will be interesting. There is a glut of townhouses when I drive around. More going up and I am starting to see my first “Price reduced” in midtown area.
On the otherhand, rent vs buying is not as out of whack as it is in Cali or other places. You will NOT get a $1m place for $1200 as I often read here.
if we don’t buy now the only thing we’ll be able to afford is that portapotty.
Lou — thanks. What I really liked is the Bridgeville reality-check on the cost of construction. Even if the lots were free, those new houses appear to be much lower priced than anywhere I’ve driven in Alabama, Georgia and Florida. I couldn’t handle the high property taxes there, but property taxes don’t affect the building costs.
this is from the washington post from a chat
must be a real professional…
Q: DEAR BOB: I have been selling homes successfully for about three years. In 2005, I earned more than $100,000 in sales commissions. But my earnings in 2006 will be much less due to the slowdown in the home sales market. I’m not making as many sales as last year. As I read the newspapers and real estate trade journals, I’m wondering why the national home sales prices keep going up but the number of home sales is dropping. What is your view on today’s home sales market?
– Susan R.
rest is boring
http://tinyurl.com/q3y98
Q. I’m wondering why the national home sales prices keep going up but the number of home sales is dropping.
A. The Law of Demand says that when the price of a good rises (including the price of homes), a smaller quantity is demanded — hence higher prices is entirely consistent with a dropping number of home sales.
The scarcity in home sales, makes every sale soooo special that
in the near future the Dow will hit new records on the days in which their will be a home sold.
IMHO the only houses I have seen sell have been really nicely appointed with beautiful landscaping and these houses are selling ~10% less than last year. The majority of the houses are not selling, thus the houses that do sell are keeping the average up.
Exactly what is happening in my neighborhood near downtown Phoenix. Sales are happening, but not nearly keeping up with new listings. Most sales are 10-30% below what the same house could have sold for at the peak. Nicely redone flipper house across the street from me sat for months, then suddenly sold for close to the bubblemax price to a young doctor who just moved to town. Houses that aren’t as nice just sit.
There are four flipper specials, oops, make that five, within a half mile of my house. (And I’m probably under-counting.) None is attracting much buyer interest.
“The majority of the houses are not selling, thus the houses that do sell are keeping the average up.”
And as a poster observed here some time ago, most buyers have a pretty-much fixed budget in mind for the house they want to buy. When prices decline, rather than paying less for a house, they buy more/better house for the same money, thus the tendency for median prices to stay up. Admittedly, I am reflecting my own plan here — I’ve allocated $X (all-cash, in my case) for a post-crash house and, though I’ll consider a nice house that sells for noticeably less, in all likelihood I’ll spend that X amount for the best house I can find at the price.
very good piece again from hussman
http://www.hussmanfunds.com/wmc/wmc061002.htm
GetStucco, you might find Hussman’s HSTRX fund of interest for your folks.
Thanks for the suggestion.
bulletin
EXPANSION IN U.S. MANUFACTURING SLOWS IN SEPTEMBER
ECONOMIC PREVIEW
Soft landing in sight
ISM, jobs report expected to show a weakening economy
By Rex Nutting, MarketWatch
Last Update: 10:52 AM ET Oct 1, 2006
WASHINGTON (MarketWatch) — The U.S. economy has geared down after three years of supercharged growth. While inflation remains a concern, it’s the prospect of stagnant growth that’s the real worry for many economists.
So far, the economic data support the notion that the economy will glide into a rare but truly appreciated soft landing, with growth slow enough to reduce inflationary pressures, but not so weak as to threaten a recession.
The data to be released in the coming week are expected to keep that story alive. The big numbers will be the Institute for Supply Management index for September on Monday and the September jobs report on Friday.
“We expect the employment and ISM reports to show a still-gradual slowing in overall growth — enough slowing to keep the Fed on hold but not enough yet to trigger easing,” said Maury Harris, U.S. economist for UBS.
http://tinyurl.com/qv868
How can you have a soft landing when everyone’s definition of a soft landing is different. Do we actually have fundamental data supporting the soft landing scenario? I know how I answer these questions, but my point is to make anyone reading think for themselves and understand when there being spoon-fed total crap!
“ How can you have a soft landing when everyone’s definition of a soft landing is different.”
Soft landing = Somebody I don’t know looses their job
Hard Landing = Somebody I know looses their job
Crash = I lose my job.
> looses their job
loose |loōs| adjective 1 not firmly or tightly fixed in place
loses
lose |loōz| verb ( past and past part. lost |lôst; läst|) [ trans. ] 1 be deprived of or cease to have or retain
Glorgau! I’ve been dying to do that for months.
I can’t stand it when I’m reading a sentence and I come across “looses his whatever” as opposed to “loses his whatever”. It makes this annoying hiccup in the reading part of my brain.
Loose as in noose. Lose as in fuse.
English is a difficult language, but it’s the only one I gots.
MjM
These are the talking points for:
Economists: soft landing, soft landing, soft landing
Real Estate Agents: buyer’s market, buyer’s market, buyer’s market
These clowns with their superior wisdom think if they repeat these lies often enough that they can fool enough stupid people into believing them. It’s an old trick they copied from politicians.
Nice article by Ben Stein in Yahoo Finance.
What to Do When a Boom Goes Bust
…A Long Way Down
There’s a bit of a moral here. When real estate crashes happen, they rarely involve that elusive creature called “the soft landing.” Yes, friends, when real estate starts to fall after a meteoric rise, it tends to fall hard.
There will be exceptions, and you’ll hear of people who sell their homes for vast sums overnight, but that’s not the general nature of a real estate correction….”
http://tinyurl.com/gttfm
Soft Landing, Not!
tx, even scarier than Fleckenstien
but a good read
plus very good charts.
from charles hugh smith
Here is the Dow Industrials with all three groups of traders as classified by the CFTC. What is important to note here is the level of net percent holdings by group. Commercials: 38.2% net short, Non-Commercial (Large Traders): 8% net long, Non-reportable (Small Traders) 30.2 % net long.
What does this mean? It means the least knowledgeable, least capitalized group of traders is holding the greatest OI (open interest, in this case long positions) against (betting against that is) the most knowledgeable, most heavily capitalized traders. Normally Large traders (hedge funds and the like) offset Commercials but their net long position is anemic. It might be time to pop the popcorn, pull up a chair and watch how this turns out or position oneself to take advantage of the rout should it occur.
http://www.oftwominds.com/blog.html
Sounds as though the Big Boyz are going to have a royal feast, with lamb (aka sheep) as the main dish…
Funds of funds who owned Amaranth getting redemptions? What do they own that you can lean on? We’re set up now for a nice down move. As usual, I got in too early but I always do that.
Most proper fund of funds will not be materially hurt or worried by even the melting of Amaranth, at least from my own internal observations. Their returns, if properly diversified, will be impacted and they won’t collect their 10 or so, but they probably won’t be impacted in that manner.
“The amount investors eventually get back from Amaranth will depend on how effectively it and Fortress unload the funds’ holdings. Amaranth recently gave up its natural gas trades to the Citadel Investment Group and J. P.Morgan Chase, and sold other investments to avoid being shut down by creditors.”
http://tinyurl.com/zo3bn
IMHO having tried to get out of illiquid positions in the past, this is not easy. It may take months and could easily cost the rest of the Amaranth funds. The questions are the exposure that Amaranth has in Derivatives that are not backed by anything other than good faith. This could be the straw that broke the Hedge Funds back. As an aside today is The Day of Atonement or a most excellent day to short.
Hedge funds are not classed as commercial or noncommercial on the commitment reports by registration status. Does the hedge fund usually hold a stock portfolio that can reasonably be hedged by the contract they are using? If yes, they will be classed as commercial.
from mish
a major disconnect (about the news and the marketreaction)
http://globaleconomicanalysis.blogspot.com/2006/10/major-disconnect.html
Mish has carefully analyzed what I am too lazy to look at this carefully.
But we seem to agree that homebuilder stock prices always go up.
—————————————————————————————
Homebuilders
Remarkable complacency is being shown in warning after warning after warning from homebuilders. At least with homebuilders one might have expected a snapback rally based on sentiment. Indeed bears had a warning when the builders stopped falling on bad news. But homebuilders rising for months on repeatedly bad news sure seems like another disconnect.
Check out Lennar’s Third Quarter Lennar Reports Third Quarter EPS of $1.30
Financial Highlights
* Revenues of $4.2 billion - up 20%
* EPS of $1.30 - down 37%
* Gross margin on home sales of 18.7% - down 760 basis points
* Gross profit on land sales of ($0.3) million - down $46.7 million
* Financial Services operating earnings of $61.7 million - up $26.8 million
* Homebuilding debt to total capital of 31.9% - 520 basis point improvement
* Return on equity of 25.2%
* Deliveries of 13,038 homes - up 19%
* New orders of 11,056 homes - down 5%
Here are the three things that most stand out.
1. Gross margins are down 760 basis points to 18.7%. That is a staggering decline.
2. Gross profit on land sales is now negative. Lennar is unloading land and/or options which shows lack of confidence going forward.
3. Financial Services Operating Earnings had a 77% increase (from 34.9 to 61.7). To what extent is Lennar taking on risk (keeping the loans) just to unload houses?
How long will it be before Lennar’s gross margins go negative?
As long as the homebuilders have Krammer and Kudlow as their spokepersons, and CNBC and their delivery mechanism, don’t let the facts confuse me. Buying stocks today is playing craps in Las Vegas, without the free drinks. In Vegas you might have some fun along the way, with the Wall Street gang, they will squeeze every nickle out of you, and then step over your dead carcass.
FRANK NOTHAFT, CHIEF ECONOMIST, FREDDIE MAC vs. DEAN BAKER, CENTER FOR POLICY & RESEARCH on the housing bubble (from CNN’s ‘Open House’):
http://transcripts.cnn.com/TRANSCRIPTS/0609/30/oh.01.html
Q: How low can this go?
NOTHAFT: Well, I think we’re going to see the market kind of bottom out in the first half of 2007 and then we’ll see some pickup in housing activity. And a very bright sign over the last two months is the fact that mortgage rates have come down about a half a percentage point.
BAKER: Well, the answer is terms of how low it can go is how high did it get? And historically — Bob Shiller (ph), you interviewed earlier, has looked back as far as the 19th century and has found that house prices pretty much track the overall rate of inflation.
We had this extraordinary run-up which he and I have called a bubble over the last nine years, where house prices increased by 50 percent above the rate of inflation. If you just look at the trend path, the answer at how low can it go, well, the trend is a 30 percent drop in prices.
WILLIS: Oh, my goodness. Are you saying that prices are going to drop 30 percent?
BAKER: I think that’s a ballpark number. And in some places, the places where we have had the biggest run-up, the Gulf Coast of Florida, parts of California, you might see drops as much as 40, 50 percent. Those are, in effect, the dot-coms of the real estate bubble.
WILLIS: And how long does this go on for, Dean?
BAKER: Well, a lot will depend on the path of interest rates. You know, in the case of the stock market, it took over two years to fully deflate. It could take even longer with the housing market.
On the other hand, if mortgage rates continue to rise — they’ve fallen recently — but if they go back up again, then we’ll see prices adjust much more quickly.
“Well, I think we’re going to see the market kind of bottom out in the first half of 2007 and then we’ll see some pickup in housing activity.”
Does Nothaft have some Florida condo investments that he is trying to protect from price declines like fellow-REIC-expert Lereah has?
when freddie mac follows the advice from nothaft we will have both freddie and fannie in trouble…..
At this point both Freddie and Fannie are likely in trouble. The rate at which they have been buying funny paper for places like Countrywide has been staggering. While they still hold a huge amount of 30 year fixed paper written during sensible times, even they are starting to fret about all the gabage they have processed in the last 5 years.
At present their loan acquisition arms are still competing against each other to buy in as much as they can. Remember this: while they are govenment sponsored enterprises, they are still trying to work as companies. They make money by sourcing loans and selling the bonds. With the downturn in the market they are getting fewer and fewer loans in the front door, and what they do get is becoming more dubious in quality on average.
So even though there are fewer loans, they still have to create MBS notes, so its a struggle to get volume. As such they are becoming more agressive about bringing in paper.
It’s somewhat of an ugly cycle on the back end now. What is worse for the forces of nature cleaning this up on their own, many of the folks who write the really scarey paper care side chaining Fannie and Freddie and going straight at the MBS market themselves. I have heard that to some extent hedge funds are buying up this stuff. Talk about a house of cards…
Good thing FNM’s stock price has permanent plunge protection, so shareholders will see their investment in FNM retain its value no matter how badly eroded the underlying fundamentals become.
i had a temp job at FDIC fourteen years ago ( wow, do i feel old all of a sudden!) during the savings -and-loan mess. i have read on this blog several opinions that the federal gov’t is going to bail out the FB’S. nothing of the kind happened then and i don’t think anything of the kind will happen in this coming meltdown. only the big people and big institutions got bailed out. i used to field calls from people all day who were underwater in their homes and desperate. there was no government help for them and they lost everything. this time will be even worse. welcome to the wonderful world of debt peonage.
Susan — thanks — that outlook is refreshing.
thanks/danke
Good advice from the Sunday SD Union Tribune on hedge fund investing (”don’t”):
http://www.signonsandiego.com/news/business/shaughnessy/20061001-9999-1b1lynn.html
How will pension fund managers and trustees keep from getting lynched when these things take a dive? And what really baffles me is why the pension funds’ auditors do not include significant management notes about the fees and costs charged by the hedge funds, relative to the index funds.
FIRST REPUBLIC BANK BLAMES INTEREST RATES, EXPANSION COSTS
FIRST REPUBLIC BANK ESTIMATES Q3 EARNINGS AT 56C-58C
FIRST REPUBLIC BANK Q3 FIRST CALL ESTIMATE 62C
FIRST REPUBLIC BANK CUTS Q3 EARNINGS ESTIMATE BELOW 57C
Total third quarter earnings per diluted share are presently expected to be approximately $0.56 to $0.58; however, this will include federal and state tax benefits of $0.07 per share
Asset quality and loan volume remain strong
http://biz.yahoo.com/prnews/061002/sfm066.html?.v=64
when i read this correctly. they would have earned only 50 cents. thats 20% below prior estimates.
comic relief
http://dnn.tv/ top left
Hmmm…some realistic predictions: DC growth of 3% over ten years (similar for NYC). However, the predictions for Phoenix and SD are way off.
http://www.youtube.com/watch?v=TxylHPnoloI&eurl=
Great video, still laughing, thanks.
Awesome. Everyone should watch that.
In today’s Washington Post front section, quarter page ad
“Waterfront Liquidation” (wonder if they knew they were punning) 3+ acres James river, was $325,000, now $149,900
The Deutsche Bank as ‘the US Dollar Rescue Team’
http://www.bloomberg.com/apps/news?pid=20601087&sid=anGc_nNEuiG4&refer=home
interesting story, all the usual pundits are showing their vested interests. Pimco getting a bit anxious about EU rates going higher (that might not work well for their position that is geared towards ever lower rates). Deutsche Bank calling for a decline in the euro (of course, that would be good for big business in Europe, at least for the short term). And Goldman Sachs calling for a rise in the euro (of course, they want a falling dollar so the foreigners pay the US debt).
All in all, a lot of noise - and not just from the ECB.
PIMCO is short the dollar which should drop when euro rates go up - and PIMCO’s stated hedge is long US T Bonds. They are positioned short dollars 2 - 5 years out. Not looking for over night fortune.
thanks for the correction; apparently I have misunderstood Pimco’s position (I keep reading how bullish they are on bonds …).
I haven’t bothered to look up the financials on MortgageIT Holdings Inc., a publicly traded subprime New York mortgage banker that is currently being acquired by DB in a deal worth $429 million:
http://tinyurl.com/jvb2g
But judging from the stench of some of the loans I’ve seen through MortgageIT, something doesn’t make sense here. Could this be part a back door bailout strategy by the London bankers?
Check this out: http://tinyurl.com/f3hqz
“…Wall Street firms are now major (very major) players in the non-conforming market, operating through conduits and mortgage banking affiliates. According to interviews conducted by NMN for this book, several investment banking firms - and large correspondent buyers that are not Street firms — are starting to aggressively enforce buy-back agreements. These requests, we’re told, are hurting small to mid-sized non-conforming originators that do not have the financial wherewithal to take back product.
In particular, Bear Stearns and its mortgage affiliate EMC Mortgage of Irving, Texas, have been singled out by funders, warehouse executives, and due diligence executives as being particularly aggressive. Bear officials would not comment directly to us regarding this matter, citing a pending lawsuit. EMC Mortgage is currently involved in litigation against MortgageIT, New York, over $70.5 million in subprime buy-backs. A public filing by MortgageIT notes that the dispute is over “early payment default repurchase obligations. (The publicly traded lender says it will “vigorously defend” itself.)”
So, we have a London money center bank, buying a puking NY subprime mortgage lender for a paltry $429 million, with a pending legal action by EMC for $70 million, and this is just the beginning of the cycle slowdown.
I’ll bet you a happy meal that this is just the tip of the iceburg for the repo exposure on MortgageIT, and DB is sopping it up.
Oh, I forgot to mention one minor detail:
“Today, MortgageIT is a growing Top 25 lender that originated approximately $29 billion in wholesale, retail and correspondent loans in 2005″
Bear Stearns is a huge NY money center bank, owns EMC. EMC is suing MortgageIT, soon to be owned by Deutsche Bank, a huge UK money center bank.
I’ll ask Russ Winter how he interprets this, but I bet it has something to do with Pig Men playing with Old Maid Cards under the umbrella Godfather Protection Racket.
Russ Winterisms:
http://tinyurl.com/pcexo
EU-German, not UK. Silly me.
I comment on the rancid smell of this one, in the last paragraph of my blog today:
http://www.xanga.com/home.aspx?user=russwinter&nextdate=10%2f2%2f2006+23%3a59%3a59.999
Ahead of the Tape (on p C3 of today’s WSJ):
– Today’s Market Forecast –
By Henny Sender*
Where It Is Hard to Be a Bear
Playing the housing slowdown in financial markets is proving tougher than anyone expected.
Some obvious bets against housing haven’t been working out. Even though housing statistics are sinking, home-builder stocks have risen since July and demand for mortgage-backed securities has held up.
Just last week, the National Association of Realtors made the case for housing bears stronger by reporting that prices of existing homes had fallen for the first time in 11 years.
The Federal Reserve is working against the bears by pausing its campaign of short-term interest-rate rises.
If the Fed were to allow interest rates to get too high, that would raise mortgage costs and could tip the economy into a serious slowdown. That is why some investors believe the Fed might cut rates next time it meets. Long-term interest rates already are falling, which is holding down mortgage costs at a critical time.
“Just when a lot of players were thinking that the sky would fall and delinquencies on mortgage payments would rise, the Fed paused,” says Boaz Weinstein, Deutsche Bank’s head of credit trading in the U.S. and Europe.”
etc.
*No relation to Henny-penny.
GS,
“Playing the housing slowdown in financial markets is proving tougher than anyone expected.”
Well, when I was younger and surfing @ Beacon’s in SD county, My best buddy Rick and I drove the hell out of a ‘71 VW Bus…in fact, we drove that putt-putt engine on 3 cylinders for over a year…until finally, one day….
I can hear Click & Clack laughing their heads off right now!
Timothy
If the only reason they’re not raising interest rates is that they don’t want residential housing to collapse, then the BAILOUT has BEGUN.
Why don’t careful savers like many of us (with fixed, or no mortgages) deserve the benefits of a higher return on our savings?
not much reaction so far regarding the lending “guidelines”
cfc, wm, wfc etc are all unchanged.
seems like they don´t fear the guidelines very much…..
Could anyone versed in technical analysis tell me what this twin peaks pattern in Apple’s stock price chart portends, especially given that sizes of the runups in the Nasdaq and in Apples’ stock price have traded places? (I am thinking it might be deja vu all over again, but I don’t claim any expertise at reading the tea leaves…)
http://tinyurl.com/qpec2
I don’t have a clue. Sorry.
I can say that I held AAPL long for 6 years and sold in july. It was just getting too risky for me and I didn’t want to witness a deja’vu all over again.
It means that the “fad” of the iPod has run its course. SELL!
AUGUST PRIVATE RESIDENTIAL CONSTRUCTION SPENDING DOWN 1.5%
U.S. PENDING HOME SALES DOWN 14.1% YEAR-ON-YEAR
U.S. AUGUST FEDERAL CONSTRUCTION SPENDING DOWN 4.3%
U.S. AUG. PENDING HOME SALES RISE 4.3%
U.S. AUGUST CONSTRUCTION SPENDING RISES 0.3%
Pending sales of U.S. existing homes rose by 4.3% in August, indicating the housing market may be stabilizing, the National Association of Realtors said Monday. Pending-home sales are down 14.1% in the past year, the real estate industry group said. Sales are recorded as “pending” when a sales contract is signed; they are recorded as “sold” when the sale closes, usually one or two months later. “Our sense is that home sales may have reached a low in August,” said David Lereah, chief economist for the NAR in a statement. The pending-sales index rose 9.2% in the West, 4% in the South and 3.6% in the Northeast. The index was flat in the Midwest
Our sense is that home sales may have reached a low in August,” said David Lereah……….
Yes they did Davey, how observant of him. To be followed by an even lower low in Sep, Oct, Nov, Dec, Jan, Feb, etc.
With the housing market cooling, is anyone else who is looking starting to see more “tricks of the trade” showing up? I’m sure realtors have numerous unethical ploys to try to get potential buyers all worked up…such as inventing fake offers. Now, more than ever, I bet they’re really digging into their bag of tricks…
U.S. pending home sales down 14.1% YOY (8/05 - 8/06). But that is not what the marketwatch.com headline says.
————————————————————————————————
U.S. pending home sales up 4.3% in August
By Rex Nutting
Last Update: 10:00 AM ET Oct 2, 2006
WASHINGTON (MarketWatch) — Pending sales of U.S. existing homes rose by 4.3% in August, indicating the housing market may be stabilizing, the National Association of Realtors said Monday. Pending-home sales are down 14.1% in the past year, the real estate industry group said. Sales are recorded as “pending” when a sales contract is signed; they are recorded as “sold” when the sale closes, usually one or two months later. “Our sense is that home sales may have reached a low in August,” said David Lereah, chief economist for the NAR in a statement. The pending-sales index rose 9.2% in the West, 4% in the South and 3.6% in the Northeast. The index was flat in the Midwest.
“Our sense is that home sales may have reached a low in August…”
Someone ought to market barf bags with DLs photo on them, to help get your heaves over with faster.
Factory activity in the United States decelerated in September, the Institute for Supply Management reported Friday. The ISM index fell to 52.9% in September from 54.5% in August. This is the lowest level since May 2005. The decline was sharper than expected. The consensus forecast of estimates collected by Marketwatch was for the index to fall to 53.7. Readings above 50 indicate expansion. New orders fell to 52.9% in September from 54.5% in August. The employment index dropped to 49.4% from 54.0%. The price index dropped sharply to 61.0% from 73.0%. This is the lowest level since July 2005
http://tinyurl.com/klqnl
“The median home price in South Lake Tahoe as of June 1 was $499,000. It was $189,000 in 2000. The median price in 2005 in Truckee was $685,000.
However, both areas are struggling to maintain a middle-class workforce. Firefighters, teachers and nurses are among those who can’t afford to live where they work.
Adding to the dilemma is the influx of second-home owners whose Bay Area money is driving up the cost of housing.
In the Lake Tahoe region, 4 out of 10 units are classified as vacation homes, according to Dean Runyan Associates and the U.S. Census Bureau. This is nearly four times greater than the national average, according to the National Association of Realtors.
“The National Association of Realtors discovered that second-home ownership-investment property is likely to double within the next 10 to 20 years as the crush of Baby Boomers passes through their peak earning years,” said Deb Howard, who owns a real estate company in South Lake Tahoe and is on the Resort Committee for the association.
In 1979, when Ron Treabess moved into his North Shore subdivision, 75 percent of the residents lived there full time and 25 percent were second-home owners. Now more than 80 percent are second-home owners.”
““The median home price in South Lake Tahoe as of June 1 was $499,000. It was $189,000 in 2000. The median price in 2005 in Truckee was $685,000. However, both areas are struggling to maintain a middle-class workforce. Firefighters, teachers and nurses are among those who can’t afford to live where they work.”
On the brighter side, if these people can hang in there another 2-3 years by renting, prices may well tumble back toward that $189K point.
Just spoke to a friend whose husband’s family has a small construction business in Moreno Valley (Inland Empire, CA), building mostly high-end custom residences. They have always been swamped with work. She just told me they have absolutely no work for the next two months and they are now considering moving out of CA.
We’re trying to find a builder for a retirement home we want to build in florida (a small, sensible, “green” house, with solar electric, etc. outside of a development.)
Every builder we’re speaking to can start “now.”
When we started poking around two years ago, there was a 2-year waiting list…
For those of you who believe in a better tomorrow:
Open a new browser tab or window with this link: (for background music)
http://www.scoutsongs.com/lyrics/americathebeautiful.html
Then go here and read this article:
http://today.reuters.com/news/articlebusiness.aspx?type=ousiv&storyID=2006-10-02T103127Z_01_N02328249_RTRIDST_0_BUSINESSPRO-RETAIL-WALMART-DC.XML&WTmodLoc=Home-C4-Business-ousiv-6&from=business
I wonder what Susan Clark’s thoughts are on the subject of employee morale?
“Wal-Mart spokeswoman Sarah Clark told Reuters the company had no specific target for part-timers as a percentage of its work force.
Clark added that it is important that Wal-Mart staff are working at times when customers want to shop.”
Corporate America wake-up! Follow Wal-Mart’s lead. It shows that it’s not feasible to have employees work 8 hours a day if your business is open for 12 hours a day, 7 days a week.
What does this have to do with the housing bubble? Do you really buy that load of crap? What Wal-Mart really wants is to shift even more of their health care costs for employees over to the taxpayer.
the builderstocks got a boost from the “bullish” barrons article regarding the “off balance sheet”………
this market seems really to be bullet proofed (until it insn´t…)
http://www.bloomberg.com/apps/news?pid=20601103&sid=ahY7_Y5RkMVk&refer=us
Growth in U.S. Slows to `Stall Speed,’ Raising Recession Risk
By Rich Miller
Oct. 2 (Bloomberg) — The U.S. economy has slowed more dramatically than most economists expected just a few weeks ago, leaving it more vulnerable to a recession
A brief concise snapshot of the US Enonomy and projected growth?/Stall for 4th quarter.
Maybe the bad guy was a real estate agent or a homeowner with a reset?
Client rails against friendly bank
A California man is suing his bank — Washington Mutual — and saying its new, open interior got him mugged. Jaime Quiroz Sanchez tried to deposit $20,805 in cash at one of the bank’s circular teller kiosks, which were designed to be “friendly” and “welcoming”. He said a dozen people watched as the teller counted the bills, and refused to accept them because his driver’s license had expired. “Everyone was looking at me,” Sanchez said. “And I could tell the people weren’t having good thoughts.” He left with the money, and a man robbed him at knifepoint outside. The bank said its newfangled branch wasn’t to blame.
http://reno.craigslist.org/rfs/214864004.html
“The solid brass hardware and totally silent Casablanca ceiling fans reinforce your feeling of quality”
“5 minutes to the newest hospital complex in northern Nevada”
“sinks(2)”
“true convection oven and microwave oven”
“DSL High Speed Internet”
“All three car doors are operated with remote controls”
Of course with all this the number of bedrooms, bathrooms and square footage isn’t important enough to list.
Who needs bedrooms when your garage opens with a remote control?
This girl has come to a surprisingly accurate conclusion about her intelligence:
“I live in Brooklyn NY. Like an idiot, I regretfully bought a home as an investment to flip in Florida. I tried everything to sell this home. I listed with a reputable real estate company. I was told no buyers. I tried selling at lower than what I owe the bank as for sale by owner. I read blogs about another person in same situation about a Florida home. In the replies it implies that if I do a DIL or foreclosure, that I’ll have to pay the IRS capitol gains taxes on the $305,000 I owe the bank if I do the DIL or a foreclosure. Is that true? I can’t afford paying taxes on $305,000. I’m ashamed and scared. I can’t afford this home anymore. I borrowed money from my parents to make the last 5 months payments to the bank because I didn’t flip it like planned. They can’t give me any more money or a loan because they are retired on a fixed income. Right now, I have way more bills than earnings. Making matters worse, I had to take a pay cut due to a major reorganization at my job. Is that true about having to pay capitol gains taxes to the IRS if the bank OKs a DIL or foreclosure? I may have to move in with my parents which is totally embarrassing. Please share your thoughts. Madonna”
http://www.foreclosureforum.com/mb/messages/19050.html
Ha, ha — funny spelling error, but it feels correct anyway:
“I’ll have to pay the IRS capitol gains taxes…”
and not only will she lose her house, she’ll probably lose the relationship with her parents!
(BTW, my druken M-I-L called once to “borrow” some money to cover the loss from the sale of her home. She decided to move to Idaho for some get-rich-quick scheme that never worked out and sold her CA home at a loss. I laughed at her and hung up! She only stayed mad for a week or so…she ended up BKing for the third time in her life.)
Like a virgin…
Been lurking for a few months and now I’m finally flabbergasted enough to post.
1) On Saturday afternoon I saw my first sign twirler ever! This was in Germantown, a Maryland suburb of Washington, D.C. (which used to be farm country but has grown outrageously in the past 10 years). I travel regularly all over the east coast and I’ve never seen a sign twirler before.
2) I’ve been watching the listings of a real estate agent who specializes in historic homes. I was particularly in love with one of them, but after going to the open house I told her that the price ($679,000 for 1000 square feet — $679 a square foot!) was unreasonable. Last week it was listed as “CNTG/NO KO”, which means someone made an offer contingent on their being able to sell their own house, with no kickout clause — meaning the house sits indefinitely until the buyers’ house is sold. Unbelievably, I checked today and it says it’s under contract and the closing date is 10/20. Something seems fishy to me; four of her listings went from active to contingent on Sept. 21 and 22. Anyway, if this closing really happens I will consider it the last decadent explosion of ridiculousness before the total decay of the “Roaring Aughts.”
here’s the listing.
That’s a beautiful house.
LA Times has: Private-Sector Anger Builds as Public Pension Costs Rise: Lawmakers feel the heat from taxpayers who see their own benefits wither, and traditional payouts give way to 401(k)-style plans.
State and local taxes (including property taxes) will be used to raise the money needed to conver underfunded pensions (84% for states, who knows how many for county and city retirees). Tax revolt anyone?
Once the market tanks, they’ll be forced to reassess their rosy assumptions for returns on their existing investments. That whole they’ve been steadily digging will suddenly turn into a canyon.
Maryann Haggarty of the WashPost is having a live, online chat about real estate now (2PM Eastern)
http://www.washingtonpost.com/wp-dyn/content/discussion/2006/09/25/DI2006092500684.html
I found this comment most interesting:
****
Haymarket, Va.: We contracted to build new construction but our current home has not sold after multiple price reductions. In the event we default and don’t settle on the new construction, the builder will not only keep our deposit, but sue us for the difference between our sales price and the discounted sales price they end up selling it for to someone else. Have you heard of anyone successfully beating this in court? They have offered us creative, but extremely expensive financing to settle now but we still risk our house not selling and going bankrupt anyway. Any advice would be appreciated. By the way, our local market seems to be soo much worse than what is being reported. Our home value has decreased by almost $100,000 in the past year.
Maryann Haggerty: I know there are some lawyers experimenting with similar cases. I haven’t heard that they’ve established new case law or anything, tho. And sorry, I can’t recommend anyone.
****
Well, a contract is a contract.
Well, a contract is a contract.
Of course, if too many people have such contracts, and the current regime needs their votes, they’ll simply make a law to make those contracts invalid!
Old article, but a good one.
http://www.washingtonmonthly.com/features/2004/0404.wallace-wells.html
i agree. thanks/danke
A homeowner is beggin’ for advice on how to keep from losing her house to foreclosure. Come to find out, she’s a flipper and is not happy with how her investment is going. LOL
The condensed version of the conversation is here:
http://www.runutz.net/index.php/?p=43
and to read the full story, check out Clark Howard’s Message Board here:
http://clarkhoward.com/p/boards/ch/postlist.pl?Cat=&Board=clarkhowardrealestate
funny!
Foreclosure prevention specialists…..they have got to be kidding!
http://www.runutz.net/worst.htm
LOL!
You borrowed $350,000 neg amort, HELOCed $75,000 (had a nice party), ARM reset payment increase 90%, refi penalty $15,000, comps are $300,000, must bring $185,000 to table; who you gonna call?
FORECLOSURE PREVENTION SPECIALISTS!!!!
They perform miracles!
LOL!
OMG! That really was the Worst. Ad. Ever!
Yeah, I’ll start a business - Crisis real estate consultants
We will review your situation and tell you your options:
1)Take out a big life insurance policy then kill yourself.
2)Lottsa Lotto!
3)Whack your RE Agent (your housing, meals, healthcare, and clothing will be taken care of for the rest of your life.)
4) “Jewish Lightning”
5) Change your name to Juan - “No speaka ingles!”
Of course, my fee will be paid in hummers and wide screen plasma tv’s.
Here’s a rediculous article by a RE Agent. She states, “…there is no real estate bubble. Bubbles are for bathtubs.” Here third paragraph contradicts her first statement with, “A bubble is a market in which the value of the key asset is inflated based on speculation and psychology.” What does she think this market has been driven by?? True Demand?? Ha! http://promo.realestate.yahoo.com/
This is from today’s Richard Russell. I guess Barron’s did a number on miami Condos this week.
(snip)
This is the situation — The central banks have flooded the world with too much liquidity. That has caused almost all financial assets to “float” higher, meaning that they are overpriced. That in turn is why there are such unattractive returns (dividends) on stocks and on bonds (interest). I know Bill Gross and many bears on the US economy are bullish on bonds, but my objection to bonds is that they are an “over-loved” asset class. Everybody in town is convinced that bonds are the place to be. I’m uncomfortable when everybody agrees that one sector is where it’s at. Too many cats on one side of the ledger.
How about the following? Let’s say that the widely-anticipated soft landing for real estate fails to arrive. Instead, real estate goes down and goes down hard. For this scenario you might read the article in the current Barron’s entitled “Florida Housing Hurricane.” Also, I’m receiving e-mails from all over the nation, and what they say is that the housing situation in their sector of the nation is bad, very bad. All in all, it makes me think that a hard landing in housing is very possible.
If a truly hard landing materializes, we could have a deflationary situation, and this is the last thing in the world that the Fed Chairman Bernanke wants. What would the Fed do in a deflationary situation? They could monetize Treasuries, and this could send the dollar heading south in a hurry. A declining dollar would hit bonds in the gut. Conclusion — I’m not lusting for bonds here. Frankly, I feel safer in 91-day T bills.
No bubble in Fort Smith, Arkansas.
Isn’t this the former home of the Beverley Hillbillies?
http://www.swtimes.com/articles/2006/10/02/business/e-business01.txt