Bits Bucket And Craigslist Finds For October 10, 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
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D.R. Horton 4Q sales down 34%
passend dazu ein call von jpm
J.P. Morgan upgrades homebuilders
J.P. Morgan said it was taking a more positive stance on homebuilders, upgrading D.R. Horton Inc and Standard Pacific Corp to overweight from neutral Toll Brothers Inc to neutral from underweight
We believe key leading fundamentals are either beginning to stabilize or are on the cusp of recovering over the next few quarters, and historical performance trends point to a longer-term positive move,” the broker said. In particular, J.P. Morgan said inventories — which it believes were the leading driver of the market’s recent downturn — are beginning to stabilize and should drive a market recovery. (reminds me of the calls concerning jdsu with inventory issue…../erinnert mich stark an die calls von jdsu ……..)
D.R. Horton, Inc. , America’s Builder, the largest homebuilder in the United States, Tuesday (October 10, 2006), reported net sales orders for the fourth quarter ended September 30, 2006 of 10,430 homes ($2.5 billion), compared to 13,950 homes ($3.8 billion) for the same quarter of fiscal year 2005. Net sales orders for fiscal year 2006 totaled 51,980 homes ($13.9 billion), compared to 53,232 homes ($14.6 billion) for fiscal year 2005. The Company’s cancellation rate (homes cancelled divided by gross homes sold) for the fourth quarter of fiscal year 2006 was 40%, compared to 29% in the third quarter of fiscal year 2006.
plus kb homes
KB Home estimates 32% drop in third-quarter profit
KB HOME: EXPECTS BANK WAIVERS IN ‘NEAR TERM’
KB HOME: MAY NEED TO MAKE NON-CASH CHARGES FOR COMPENSATION
KB HOME: STOCK OPTION REVIEW NOT COMPLETE
KB HOME REVENUE IN QUARTER $2.67 BLN, UP 6%
KB HOME Q3 EPS TO FALL TO $1.93 FROM $2.55
KB HOME DELAYS Q3 FOR STOCK OPTION GRANT REVIEW
KBH for the first time estimated earnings results for the third quarter, saying net income likely dropped 32% to $155 million, or $1.93 a share. The company had previously reported a 6% rise in third-quarter revenue to $2.67 billion. The home builder hasn’t filed its third-quarter results with the Securities and Exchange Commission as it’s still reviewing accounting for stock-option grants. Additional non-cash charges for stock based compensation relating to these grants may need to be recorded, the company said in an SEC filing. It expects to receive extensions from banks in the “near term” to file third-quarter results.
all this should be good enough for a big bounce……
by the way here is nive chart from the performance ytd
phm,dhi vs. willshare home contrction index and dow
http://immobilienblasen.blogspot.com/2006/10/homebuilder-ytd-vs-dow.html
more “good news” can´t wait for the upgrade….
M/I HOMES Q3 NEW CONTRACTS 571 TO 1,163
M/I HOMES CUTS ‘06 EARNS EST. TO $5.25 TO $5.75
M/I HOMES Q3 HOMES DELIVERED 927 VS. 1,047
Homes delivered for the 2006 third quarter decreased 11% to 927 from 2005’s 1,047. For the nine month period ended September 30, 2006, homes delivered were 2,746, up 3% from 2,675 in the same period of 2005. New contracts for 2006’s third quarter were 571 compared to 2005’s third quarter of 1,163. For the nine months, 2006’s new contracts declined to 2,472 from 3,413 in 2005.
The sales value of backlog of homes at September 30, 2006 was $923 million with backlog units of 2,533 and an average sales price of $364,000. The backlog of homes at September 30, 2005 had a sales value of $1.139 billion with backlog units of 3,522 and an average sales price of $323,000. M/I Homes had 170 active communities at September 30, 2006 compared to 140 at September 30, 2005.
Florida 138 481 (71)
on top of that is the fact that this numbers are despite 21% more communies.
wow!
even mho went into the green.
this market is really all about programm trading.
the whole sector moves in tandem. as seen the last week from wci after the ratingsdowngrade
The genius of Wall Street:
HOUSING-SECTOR SPOTLIGHT
• D.R. Horton’s sales fall 34%
• KB Home sees 32% profit drop
• M/I Homes lowers forecast
• Homebuilders upgraded
I know a fellow who took a PR job at KB Homes during the summer. Although I wondered why, in times like these, he was taking a job with a homebuilder, he went to work for KB. I just heard that he’s been laid off.
Last year homebuilders were hiring tons of people in Sacramento. I know some guys who left decent jobs for a 10K raise with a homebuilder. I thought they were crazy. I bet homebuilders are cutting staff in Sacramento faster than Paul Bunyan can cut trees. I heard Centex in Sacramento opened a sales office for some condo development that they just begun to build in Sacramento. After one week they closed it due to not having a model to show. My understanding nobody should up to inquire. What this!!! My God people should be lined up and have to camp out the night before to just get the opportunity to be on a waiting list.
How long the builder sector keep rallying on bad news? Have they reached a permanently high rate of share price appreciation, even while the underlying (home sale prices) steadily erodes?
i have found “flipper hell”. a must see video.
http://immobilienblasen.blogspot.com/2006/10/downtown-miami-condos-under.html
haha..
My fav quote “This is the prime RE in Miami”.
Its interesting there are 4 building all under construction at the same time on the “prime” Miami RE.
Let me give you a little clue, Mr. Flipper. If you have to be told, “this the the prime RE”, its not. You will know it by looking at it. Also, if you see the entire area torn up with brand new buildings going up, its not the prime RE! If it was that prime, it would already have high end homes/condos on it.
Prime RE, they’re not making anymore of that. Until the next idiot decides that on the shores of Lake Okee are prime, or next to the Solid Waste authority (what used to be called, a dump) is prime.
I travel to Miami quite a bit for work, and always drive in (from WPB). Its nuts, you can see cranes everywhere! I read on another blog, from the right spot, you can see 3 dozen of those huge high rise cranes at one time.
No bubble here, move along. Plenty of rich baby boomers coming to live in Miami, right on Brickell Ave.
Actually, just a FYI, Miami has another dream. All the South Americans are going to swoop in and buy all these 500+/sq/ft homes. Same dream, different people, rich S. Americans instead of boomers.
What a joke. That is so NOT prime Miami RE. Anything on the far north side of downtown is no-man’s land - the only chance it had was a new baseball stadium and that ain’t gonna happen. I had a friend with a rug shop on NE 19th St. - You’re hemmed in on all sides by urban connectors or dangerous mini-neighborhoods. (you do have easier access to Miami Beach and the airport, though!).
These condos have Mortgage Prison written all over them.
from s%p
creditquality from companies deterioate (translation from me/for sure not perfect)
the creditquality from companies has deterioate during q3 2006. in q3 were more down than upgrades from standart&poors.
203 changes were made by s&p. in 121 cases was downgraded and in 82 cases the rating was improved.
it was the first time that the amount of debt that was downgraded (377 b$) exceeds the volume of debt that was upgraded (208 b$).
on the other hand the quality from emerging marktes has improved with 8 upgrades and only 2 downgrades
That is one interesting piece of info.
I was wondering when these emerging economies would disconnect from the US. Perhaps this will give them a bit more confidence.
and something to laugh from the today show / yotube
watch the crystall ball….. very funny
Greenspan’s inheritance
http://immobilienblasen.blogspot.com/2006/10/greenspans-inheritance-erbe-watch.html
refi wave if…./study from ubs
dank geht an herb greenberg http://tinyurl.com/qquwd
Mortgage melee from Annaly (nly), citing information from UBS:
“Market participants are beginning to ask: ‘How far do mortgage rates have to fall to generate a significant refi wave?’
The academic answer is based on the likelihood of a borrower with a specific mortgage rate to refinance at a given interest rate… [I]f the mortgage market rates decline approximately 40 bps to 5.93% (roughly corresponding to a 4.13% 10-year Treasury yield), then 34% of the mortgage market would be marginally refinanceable.
If mortgage rates fell to a 5.69% (or about a 3.89% 10-year Treasury), then 58% of the mortgage market would be marginally refinanceable.
For the mortgage market to get to the levels of 2003 when virtually 100% of the market was fully refinanceable, mortgage rates would have to rally to 4.73%, (or about a 2.93% 10-year).” Not holding my breath…yet. Onward…
you wonder were the $ in this szenario would be. this rates could only be reached when the us in a deep recession with lots of job cuts. i think these jobcuts will counter the low rates. it is also not clear that when the $ tanks and maybe the mbs is more risk sensitive that the mortagerate will fall in tandem with the treasuries.
10Y yield at 4.73% (=up) at this moment
The 10-year Treasury note fell 10/32, or $3.12 on a $1,000 note, to yield 4.73 percent, up from 4.70 percent late Friday.
The 30-year bond tumbled 16/32, or $5.00 on a $1,000 bond, to yield 4.87 percent, up from 4.83 percent the previous session. Bond prices and yields move in opposite directions.
http://money.cnn.com/2006/10/10/markets/bondcenter/bonds/index.htm?postversion=2006101009
Now that concerns about the housing slow down are past, it makes sense for the 10 year to go back up some. With housing concerns in the past, perhaps the Fed will raise rates one more time for good measure. After all, the economy is booming, with the stock market shooting up, the dollar strong and housing recovering–the risk of inflation must be rising.
Ha-ha, good one Bill. But that’s a good point. Since so many fake economists are looking at the fake data and claiming all is well then it would be a good argument to start raising interest rates again. Since the housing market and economy are doing so well. Plus I hear the war in Iraq is doing just peachy too.
Ben’s place has become a bit of an echo chamber as of late. I enjoy reading people who don’t believe as we do. Some of them have made reasonable arguments. I don’t agree with them, but it’s a shame that certain people here attack the bubble doubters and call them trolls.
People here in real bubble areas like CA and WA are just dying to see those areas come down. I don’t blame them, it’s ludicrous out there. But it was ludicrous out there in 1987 too so it’s just a matter of degrees. Now I see a bear market rally setting up in the HB stocks as mentioned at least 6-7 weeks ago but nobody wants that either.
People here in real bubble areas like CA and WA are just dying to see those areas come down. I don’t blame them, it’s ludicrous out there. But it was ludicrous out there in 1987 too so it’s just a matter of degrees. Now I see a bear market rally setting up in the HB stocks as mentioned at least 6-7 weeks ago but nobody wants that either.
‘Some of them have made reasonable arguments.’
That’s just the problem, some don’t make make reasoned arguments and may be 14 year olds at the library computer. Trolls waste peoples time. It is difficult to juggle this amount of traffic and the troll issue.
“That’s just the problem, some don’t make make reasoned arguments and may be 14 year olds at the library computer. Trolls waste peoples time. It is difficult to juggle this amount of traffic and the troll issue.”
Don’t assume that it’s only bulls who are trolls. This blog is also plagued with people advocating Lyndon LaRouche’s analysis, conspiracy nonsense about the Plunge Protection Team manipulating homebuilder stocks (see comments below), and stock analysis methods which are as empirically well-supported as tea-leaf reading. Your anti-troll policy should be consistent.
We aren’t talking about my troll policy, but rather the boards.
Anything is possible, “…conspiracy nonsense about the Plunge Protection Team manipulating…” what nonsense? I have seen conclusions based on intuition and facts supporting the very argument, what leads you to believe otherwise? As far as stock analysis methods, I read an article showing the percentages over time with the correct choices of the so called experts being very low. Tea reading may be preferrable if there are any facts and observable trends to support the conclusion. When I meet a Bubbleonian I tend to advise them to come here, so if they post opposing arguments, I expect them to be taught, not ridiculed. BTW, saying we were in a housing bubble in 2003 earned one the lable of crazy tea leaf reader. Jmho. Please keep on, “examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.”
“what leads you to believe otherwise? ”
Jim Lippard is clearly a troll
“Your anti-troll policy should be consistent.”
It’s funny how hypocrite left-wing libs always want to play thought-police, make rules, and ban people that don’t serve their agenda. Lippard has been trolling his blog for how long?
BTW, I like trolls, diverse opinions and especially enjoy “poking them with a stick” as Cote would say.
Whenever I read Jim Lippard’s posts, I picture him as one of those Easter Island sculptures, but with even less humor or intellectual spark. He seems grimly determined to stamp out any and all challenges to political orthodoxy as defined by circumscribed little anal apertures incapable of independent thought, who cravenly kiss the backsides of whatever Establishment hack is peddling them the latest snake-oil.
Note to Jim: Those who flout conventional wisdom or present contrary points of view are not “trolls.” The information they present may or may not be valid, but let the readers in here, not would-be censors like you, be the judge of that.
If you enjoyed the trolls and the challenges of them, go to your local newspapers website, or other, and try to educate a few, there you will find ignorance that needs to be eliminated and a few that will appreciate your efforts. Report back any major finds of contradiction.
this place has been like therapy for me for over a year. i made a bold move by selling my house in july ‘05 and moved my family into a rental. the people that used to call me crazy, now call me lucky. it’s irritating. there are a gazillion “bull boards” out there. i, for one, wish the trolls would stay out of this one. i’d much rather read the well researched data that many bloggers come on here and share generously.
cool name
i made a bold move by selling my house in july ‘05 and moved my family into a rental
Agent- read my post over at Piggington (worth it but, an update), your story and mine.
“Ben’s place has become a bit of an echo chamber as of late.”
Lou, I’d have to agree, but I’d argue that that is the nature of the beast; even on the more “bullish” blogs (SDCIA, Seattle Eric, Long Beach Clifford), the regulars are talking bear talk (at least a little).
“but it’s a shame that certain people here attack the bubble doubters and call them trolls.”
Sorry, if I see certain keywords or phrases at this point in the game (”real estate always goes up”, “this place is different”, “we’ve hit a permanently high price plateau”, etc.) all in one post, I take it as a sign that the poster is a troll, and is just trying to stir things up. However, if I see a really well reasoned argument, or links to supporting data, I’ll treat it as “real”.
(Just another data point, there have been some posts on one of the bull boards about people coming to this blog and posting obviously controversial or “trolly” stuff, just to watch the bears trip over themselves to post contrary views…so there *are* people out there claiming to troll here for fun).
Don’t feed the troll.
Didn’t I just read yesterday on the SDCIA board that Dallas was still a good place to “invest?”
Dallas-area housing slips in September
National struggles cited as sales of preowned homes fall in N. Texas
10:46 PM CDT on Monday, October 9, 2006
By STEVE BROWN / The Dallas Morning News
The North Texas housing market took a hit in September.
Sales dropped, the number of homes for sale jumped, and prices declined slightly as homebuyers pulled back to see what will happen to the national housing market.
Price cuts by builders also took buyers away from the preowned home market.
It seems flippers and speculators more closely emulate the equity nomad behavior. Dallas, Austin, Nashville, Buffalo NY (yuk) seem to exhibit a large amount of RE activity. A rolling bubble, a rolling crash?
Texas is also one of only a few states that together make up 66 percent of the last month’s foreclosure filings. The other states are Florida, California, and Colorado, if memory serves.
Florida and California make sense, especially CA’s scenario of only 10% of the population able to afford a single family home. Seeing Texas in that list surprised me for a moment, but then I realized that “affordability” is a relative thing from region to region, and the designer loans that have abounded in this period are getting people in trouble at all loan levels
Here’s a great thread (on an RE agent forum) concerning the MLS and the woes of relisting… We all know how the MLS has been distorted like this in many markets and this thread has several agents agreeing. Link Here. Here is a choice quote:
“Being fairly new, I just had my first experience with how much the ability to relist distorts matters! A little while back, I had a long-shot of an opportunity to possibly list a house worth about $6 million. The family was buying new construction and was just going into contract on a house that was 8 to 9 months away from completion. I asked my broker for some help in obtaining the listing and he just said “Why are you bothering now? The house they will move into is more than 8 months from completion. It would be silly for you to try and get a listing now.” But I had seen houses in that price range hanging on the market forever. I didn’t think it was too soon.
So I looked at average DOM - and it was about 120 days. It also looked as if the asking/selling price weren’t that far apart. But that didn’t square with what I was seeing, so I went through the histories. Oh brother. If you accounted for multiple relistings, the average DOM were well over 300. Also, if you looked at the difference between initial asking and selling price, you found that agents were allowing almost ANY asking price to start - just to secure the listing. Relistings occurred when prices were dropped significantly. Most had been relisted at least twice.
This practice gives a distorted version of the average DOM, and the performance of the individual agent. I think this practice should be checked because it truly distorts what a reasonable asking price is and gives sellers an unrealistic time frame for selling their home.”
very good find!
You would have to be foolish to let DOM or ask #’s enter your equation for producing a bid. The only thing MLS is good for is the address and the picture. Sometimes, not even that.
Over the weekend, I took a 16-mile bike ride. Since my ride covered some of the most scenic parts of central Tucson, I thought that a fun-filled game of Count the “For Sale” Signs would be in order. I counted a total of 28 properties for sale, including three that have been on the market for more than a year.
Two of these one-plus year specials have been re-listed with different agencies, so the official DOM is probably less than what I’m reporting. If you’re curious, these two houses are located at the intersection of Third Street and Country Club Road in Tucson’s oh-so-desirable Sam Hughes neighborhood. Both are listed with Long Realty.
How are Buyers Financing in Today’s Market?
The market slowdown has probably caused buyers to be more conservative in how they finance their purchase, right?
mhhhh……
http://www.bubbleinfo.com/journal/2006/10/8/how-are-buyers-financing-in-todays-market.html
If the borrow lies on a stated-income loan, how do the buyback
provisions work? If it’s a 2-year reset term before the first
reset, there is little chance that the investment banks, et al,
will determine the fraud until the adjustment kicks in. At that
point it is after the typical 6 month - 12 month buyback period.
Can the lender be forced to buyback the loan in this case, or
can they say, “Sorry, you should have caught that sooner”?
What an interesting time to upgrade the homebuilders. On the day that DR Horton reports weak numbers, JPMorgan says buy. Is this the ultimate in contrarian thinking or what?
http://tinyurl.com/n2gac
J.P. Morgan upgrades homebuilders
By Simon Kennedy
Last Update: 5:27 AM ET Oct 10, 2006
LONDON (MarketWatch) — J.P. Morgan said it was taking a more positive stance on homebuilders, upgrading D.R. Horton Inc. and Standard Pacific Corp. to overweight from neutral and Toll Brothers Inc. to neutral from underweight.”We believe key leading fundamentals are either beginning to stabilize or are on the cusp of recovering over the next few quarters, and historical performance trends point to a longer-term positive move,” the broker said. In particular, J.P. Morgan said inventories — which it believes were the leading driver of the market’s recent downturn — are beginning to stabilize and should drive a market recovery
“J.P. Morgan said it was taking a more positive stance on ”
Did I waste 4 years in collage studying economics and investing to believe my lying eyes? Nothing in my intelligence and 35 years of investing tells me thast the Home Builders are losing their shirt, and there is no numbers out there that lead me other than to conclude these guys are in big troube, …BUT JP Morgan says buy!! Give me the researcher at JP that produced this dribble. I WANT HIS NAME!!
I wonder if David Learah of NAR has a brother working on Wall Street. This is worst than the end of the dot.com boom, and it will end with CNBC spinning this crap just like they did before.
it was this Asian dude who was interviewed on CNBC.
Yeah I saw that he looked like he was about 23 years old. He said they have a report that homebuilders will not have big write downs like they did in the 90’s. Where is this report? Did he write it? Did he have nice illustrations where he was able to stay within the lines? I just cannot believe in a report that has crayon drawings outside the lines.
he was about 23 years old
Perfect sacrificial lamb age.
Did I waste 4 years in collage studying economics and investing
Yeah, probably, like the rest of us, but you sound like you’ve done fine in spite of it.
Here you go…………..
JP Morgan analyst Michael Rehaut
The government is spending big bucks to support the HBs. I suspect that will continue until the election. What then? Will the PPT take a few days off or will they find other reasons to manipulate the HBs upward? I guess we will have to wait and see. But in the meantime, what an incredible opportunity to build short positions! Keep a high level of liquidity so you can ride out the efforts to squeeze the shorts but if you can ride it out, the profits will be sizable. We are already beginning to see some of the smaller HBs go into bankruptcy. It won’t be long until we see major HBs join them.
Gotta wonder who is buying condos from WCI and McMansions from TOL in today’s market.
I’m not sure government intervention is required. The HBs are quite open about buying back their own stock (which will of course bite them in the rear when they realize they’re hurting for cash in ‘07). The fact that they’re also apparently calling in favors from the likes of JPM suggests they’re getting desperate. These things are the short of a lifetime here IMO.
the latest info from all the calls i´ve heard that almost every homebuilder will freeze their bb activity
NEWS FLASH:
JP Morgan (along with GS) is the PPT 9a big part anyways)
Why risk your own money, when you can just issue an upgrade.
“The government is spending big bucks to support the HBs.”
On what evidence do you say this?
BTW, this morning I heard an NPR discussion on libel suit risk for blogs. It was definitely food for thought, given the number of unsubstantiated assertions we tend to throw around here.
How could it be worse than the “facts” we hear in the MSM?
Posted at indexcalls.com:
“Upgrading the home bubblers at this time is a bit like a doctor “upgrading” a patient from coma to dead. “
good one!
Stock Talk Blog
Homebuilders Back in Play
By Frank Curzio
RealMoney.com Contributor
10/10/2006 10:22 AM EDT
URL: http://www.thestreet.com/p/rmoney/stocktalkblog/10314024.html
This morning, J.P. Morgan upgraded Toll Brothers (TOL) , D.R. Horton (DHI) and Standard Pacific (SPF) based on an improving inventory outlook. Last week, I met with John Buckingham, editor of the value-oriented newsletter The Prudent Speculator, and he was also high on the homebuilders.
After being a bear on this sector for almost two years, since back when I was editor of the FXC Newsletter and here and here, I now believe homebuilders represent a great long-term investment.
Back then, I found it troubling that housing prices continued to rise while the Fed continued to tighten interest rates. While rates rose, so did home prices, property taxes and energy prices. The fact that most CEOs in the industry made it a point to say that everything was fine and dandy led to further speculation that homebuilders were ready to fall.
Today, after 30% to 50% declines in homebuilding stocks, these same CEOs have finally acknowledged the challenging environment. Past optimism has led to huge inventories that are just beginning to be worked off, according to recent data on housing starts.
Revisiting my initial thesis and looking longer term, I now believe the homebuilders should be bought. First, interest rates are very likely to come down. I won’t speculate on a time frame, but it’s highly probable that interest rates will be lower 18 months from now, which will likely lead to lower mortgage rates. This was the original catalyst that fueled the recent housing boom.
Next, energy prices have retreated. This could arguably be a short-term catalyst, but a substantial decline in oil, natural gas and gasoline prices could be compared to getting a free check from the government. I’m sure any homeowner understands the positive effects of lower energy prices.
Lastly, the financials of these homebuilders are in good shape, which should limit downside pricing pressure at current levels. I wouldn’t go as far as to say they are trading near book value, because further downward revisions could be in the making. However, the valuations limit the downside risk. Patient investors — or those with an outlook past 12 months — could be rewarded.
i like the phrase that “the financial are in good shape”
with almost every builder at junk or at lowest investmentgrade rating possible. add to this the coming write down on land and some jv plus massive debt.
when he would have called the latest 10-15% bounce a trading buy i could have agreed with him.
but the reason he mentioned for this longer term call are not plausibel to me.
“…the financials of these homebuilders are in good shape…”
Absolutely. They are in fine shape. M/I Homes is an example of how fine:
”
Homes delivered for the 2006 third quarter decreased 11% to 927 from 2005’s 1,047. For the nine month period ended September 30, 2006, homes delivered were 2,746, up 3% from 2,675 in the same period of 2005. New contracts for 2006’s third quarter were 571 compared to 2005’s third quarter of 1,163. For the nine months, 2006’s new contracts declined to 2,472 from 3,413 in 2005.”
http://biz.yahoo.com/prnews/061010/cltu031.html?.v=64
And then there is Kara Homes:
“From Bloomberg. “Kara Homes Inc., the New Jersey builder known for so-called McMansions, filed for bankruptcy after $250,000 discounts failed to lure buyers. The closely held East Brunswick, New Jersey-based company sought Chapter 11 protection in U.S. Bankruptcy Court, saying it owes $296.84 million to lumber, concrete, electrical, plumbing and woodwork companies while holding $350.18 million in assets, primarily unsold houses and land.”
So buy, buy, buy the HBs. They are so cheap now.
it probably helps that cancellations only show up as sales and never show up as inventory afterwards.
M.
Could someone please explain to me exactly who is going to clean up this mess:
I. E. who is actaully going to reposses the house? The bank doesnt hold the paper anymore, it was packaged into a loan pool. And now some Hedge fund/foreign government/retirement fund now holds 100 bad mortgages out of 1000.
How exaclty is this going to work? I cant see the Dutch/Chinese/Japanese government, the retirement fund taking ownership of the homes (maybe the hedge funds will) The banks dont own them anymore…..who and how will this get worked out?
Will the banks/lending companies that originated the toxic stew now charge the Effed lenders to squeeze whatever nickels they can?
Will the houses be squated in while massive lawsuits are instituted between CountryWide and TIAA/CREFF?
I just dont see who is going to phyisically do the REO? Help a brother out here.
In the early 90s, there were liquidation contractors for the FDIC/RTC such as Amresco and Bonnet Resources. They were my firm’s clients. They set up offices and systematically liquidated the properties, sued whoever was sue-able, etc. They had in-house lawyers and the work could be very interesting and fun at times.
Thank you.
So there will be something akin to collection agenices that the bad paper will either be sold to, or they will be contracted to try to collect on?
Sueing anybody and everybody to try to re-coup. The originator, including the apraiser and the loan officer, the Effed borrower, the title company, the builder etc etc etc.
That wsa all done. The contractors would appear in consumer bankruptcy cases and break it off on chapter 13 plans, file objections to discharge and dischargeability, etc. in 7s. They were very aggressive. I can’t see why that would be any different this time. If it happens.
excellent point txchick, although i think that countrywide and some bigger servicers will establish themselves as the all-inclusive servicer/forecloser/reo disposition teams when this hits the fan. i do remember deficiency judgment paper being traded like bad credit card debt in the early 90’s. that stuff doesn’t go away, it just waits for an opportunity to pounce.
That is exactly what happened. The down side was that Prosecutors found moneyed potential witness clammed up for fear they would also be sued by the RTC.
I meant this to nest under Txchicks comment above.
So, can you invest in any of these liquidation companies?
Comments? In my personal interactions, I see the pancake effect in both bubble areas and non-bubble areas (that were flat/no increase, but I believe should’ve taken RE dives over the last four years). My definition of pancake effect is median price constant, growing inventory middle and upper quad, entry buyers squeezed out.
How long does the pancake effect, if it is truly an observable phenomenon, support the market? Not to bring up a sore subject here, but homeowning boomers could theoretically flip these pancakes for years. If this has been thrashed out already, please give me a hint on the approximate month/thread. Thanks.
Uh, no it won’t. Several trillion $ in loan resets between now and the end of 2008 will see to that.
Median price will often stay constant in a falling market - there is no such thing as a “median house,” just the median transaction. The median, then, does not account for what is being bought and sold. Buyers are getting more house, in a better location, at median price - that is what you are seeing. “Growing inventory” is what you should look out for - don’t stand underneath a house (price)!
posted“Growing inventory” is what you should look out for…
So simple, so obvious.
But not to the “players”…AKA Atlanta Realtor in next thread who laments that her “crystal ball is shattered”
take a look at the growing inventory in your town, Sis.
that should give you a clue.
(shakes head in disbelief)
I don’t know if anyone mentioned this previously, but CNN is carrying a Moody’s prediction of timeframes and percentages of the impending crashes here: http://money.cnn.com/2006/10/05/real_estate/moodys/index.htm
Looks like it was dated October 6, so someone probably already mentioned it.
Tipping Point for the Ministry of Truth:
http://www.xanga.com/home.aspx?user=russwinter&nextdate=10%2f10%2f2006+23%3a59%3a59.999
Imagine that!!! A Jew blaming the Germans!
Housing boom due to global intergration says Greenspan
By Krishna Guha in Washington
The great boom in US house prices that abruptly petered out in recent months was caused by increased global integration, not loose monetary policy, Alan Greenspan, the former chairman of the Federal Reserve, has claimed.
“I don’t think that the boom came from a 1 per cent Fed funds rate or from the Fed’s easing. It came from the collapse of the Berlin Wall,” Mr Greenspan told a private audience in Canada on Friday.
http://www.ft.com/cms/s/8e5e3ad6-57b9-11db-be9f-0000779e2340.html
the fact that you chalk this up to their ethnicities reveals more about you than it does about them.
Are you kidding?
I am a card carrying member of AAACBP
American Association Against Central Banker Profiling
Can we capture those illegal enemy combatants that broke down the Berlin wall and bring them to justice? Ruining the US economy, now that’s terrorism!
as a german i raelly feel guilty…..
sorry for the bubble
Trump’s new Baja project:
http://www.latimes.com/classified/realestate/news/la-fi-trump4oct04,0,5997555.story
With all the new conservative loan product out there like the brand new 30 year fixed rate loan the housing market may have a slow down. Before these new conservative products people only option was an adjustable rate mortgage with a low introductory rate. LOOK AT ME I AM SPINNING LOAN PRODUCTS IN THE OPPOSITE DIRECTION OF THE REALTORS.
Seen as I worked out this morning, a condo ad here in San Diego that said:
No free boats, no free cars, no free vacations, just discounted prices.
For someplace in “LaJolla Colony” but I forget which development.
In the words of Arte Johnson: velly interesting!
Here is my report from the Pro Real Estate Blog “keepin It Real In Sacramento” This is what the realtor said today.
“The lazy days of summer are a distant memory. Around here, every day seems to busier than the last. We ended last week with some very good activity on my listings. I did an Open House at my Greywood property and had the best turnout I have had in some time. The shoppers were serious and I think one couple may be back. In the same neighborhood, my Barnwood listing has had several showings in the past few days and it is only a matter of time before someone falls in love with this beauty. Back in Rocklin, we have finally had some serious lookers at my Fairway listing and for the price this may be one of the best deals around. As you may have noticed from my website, I have a new listing in a very nice neighborhood in North Highlands. This is a unique home, being sold by the original buyer who has lived in the home since 1953. For its age this home is in amazing condition and is immaculate. There is a lot of house for only $279,000 and is worth a closer look.
This week we have hired an assistant for me. I have finally come to the conclusion that to continue to provide the kind of service my clients deserve I need more help. Kelly Baker has three years of experience working in busy real estate offices and brings a wealth of skill and knowledge to our office. So I will be spending some time in the office bringing Kelly up to speed and then there is tomorrow.
Fall is always an exciting time but I’d like one more of the lazy days of summer!”
She mentions the neighborhood of North Highlands here in Sacramento. That Neighborhood is crack addicts dream. Drug deals go down everywhere, School system is in collapse, Sex offenders are dumped there when released from Prison. Norht Highlands boosts Sacramento’s only XXX rated movie theater. Yeah great neighborhood. That neighborhood is a dump. Plenty of people pushng shopping carts in North Highlands Sacramento.
Yeah, but you got to give the girl credit…She is WORKING IT…!
I think I would like to sign up for her Creative Writing/Lowkey Salesmanship Class.
Here is my attempt at creative writing for Real Estate.
Edgy neighborhood with 24 hour action for those who like that hip Big City feel with close by access to local pharmaceutical suppliers for all your self medicating needs. Seller will throw in upgrade to power panel to supply grow lights for those who enjoy indoor horticulture.
I was thinking the other day. if the 1980s had played out like every other decade after massive inflation, we would have had outright deflation of the currency and etc. we did have nasty recession, but from there is was disinflation(falling inflation rate) instead of outright deflation. the fact that there is no metal standard makes me question my deflation outlook a bit.
Japan had deflation, but their cycle matched up with falling commodity prices. I’m not sure ours will. if it does, it will either be a huge disaster or it will be very short and very deep.
Since the state of the economy is heavily dependent upon psychology, perhaps there was something to the so-called “peace dividend”?
NoVA median price plunges 7% in September
September numbers are out. NoVA’s median and average price were down 7% and 6% on a year over year basis, respectively. NoVA’s average price is down almost 9% from the peak last summer.
Here are other figures (all medians, YOY):
Alexandria -6.4%
Arlington -5.0%
Fairfax Co. -8.2%
Falls Church -4.9%
Loudoun - 9.3%
Prince William -3.7%
Also of note, the average sales price as a percentage of list price was 93%. So if you are planning to buy something and you offer more than 93% of list, you are probably paying too much.
See http://www.mris.com/reports/stats/ for details.
Hmmm - somethings rotten in the state of Denmark.
Per MRIS Loundon median Sep 05 -> Sep 06 (all homes) was 485->440 (the 9.3% drop shown), however per NVAR the median for SFH was 515->512 (0.6% drop) and the median for condo & co-op was 310->310 (no change). This despite the fact that NVAR claims that MRIS is their data source.
I’ve been tracking these pretty closely recently since I live in Loudoun county, and it’s becoming apparent to me that the Northern Virginia Association of Realtors is fudging their numbers, apparently in an attempt to make it appear that prices haven’t been declining. The MRIS and NVAR numbers used to track very closely, but they’ve diverged markedly since about August ‘05, with the MRIS numbers tracking slowly downward, and the NVAR numbers tracking slowly upward.
Not sure about other counties. Perhaps a research project for someone?
NVAR puts out two sets of numbers, the overall market ’stats’ for NoVA and greater NoVA and the market ‘reports’ by county (pdf files). The price data in the market stats is for that month, while the data in the market reports is year to date (which is essentially useless in my opinion). I’ve pretty much stopped using the NVAR reports, since the same data, in more detailed form (attached/detached/condos/by zip code), is available at MRIS.com. Hope this helps.
Problem is the MRIS doesn’t break down the median sold price by attached/detached/condos, it only breaks down the number of listings that way - the median price is only for the combined housing, unless I’m not querying the right way.
Still though, even though NVAR shows YTD numbers, if the monthly numbers are going down, then the YTD numbers should also be going down, just not at as fast a rate. They’re not though.
For each of the first seven months of 2006, the average price in northern Virginia was higher than in the comparable month in 2005. Beginning in August, however, the average price has been lower than the comparable month in 2005. This why YTD prices are still up, even though YoY prices are now down.
Longtime lurker here with a suggestion for a Real Estate Drinking Game: Have one drink for each time the words ’stark’ and ’sharp’ appear in a R.E. related story describing the nature of the decline in market activity. What other words or phrases could be used as well?
If you had to drink everytime a realtor was quoted as saying its “just temporary” you’d really be wasted.
Hey, Ill drink to that!
We’ve all seen these numbers here and there, but here’s a good summary:
http://www.financialsense.com/editorials/rubino/2006/1009.html
• 32.6% of new mortgages and home-equity loans in 2005 were interest only, up from 0.6% in 2000.
• 43% of first-time home buyers in 2005 put no money down.
• 15.2% of 2005 buyers owe at least 10% more than their home is worth.
• 10% of all home owners with mortgages have no equity in their homes.
• $2.7 trillion dollars in loans will adjust to higher rates in 2006 and 2007.
• Housing related industries — for example, builders, mortgage lenders and real estate agencies — have generated 44% of the jobs created since 2000 and today employ 1 in 10 workers.
Already, these industries have stopped adding to payrolls. Actually, in some regions builders are already reporting lay-offs. Assuredly, these problems have been building for some time. For example consider the trend reported by Washington Mutual (WaMu) in its annual report. At the end of 2003, 1% of WaMu’s option ARMS were in negative amortization (payments were not covering interest charges, so the shortfall was added to the principal). At the end of 2004, the percentage jumped to 21%. At the end of 2005, the percentage jumped again to 47%. By value of the loans, the percentage was 55%.
I’m in Florida this week on business and I just had a chat with a co-worker who told me he made a pile of $$$ on the home he purchased less than a year ago.
“Great! You were lucky to pull out in time.” I said.
“Oh, I haven’t sold it yet…that’s just what it’s worth today.”
I didn’t bother to challenge this–I didn’t want to burst his bubble. How can anyone count his unhatched chickens like this?
Newsweek article on potential 2007 recession with real estate tumble:
http://www.msnbc.msn.com/id/15173465/site/newsweek/
anyone have good luck renting a house for cheap lately? rents going down? up? i lowballed a rental and i think they are going to nix it, which i’m actually kind of sad about b/c i really liked the house.
For geeks, only:
What To Do about Fannie and Freddie?
Edward L. Glaeser, Harvard University
Dwight M. Jaffee, University of California, Berkeley
Abstract
Edward Glaeser and Dwight Jaffee argue that Freddie Mac and Fannie Mae are actively pursuing great risk at taxpayer expense and private profit: the cure is a tax on their $1.5 trillion in borrowing that could yield as much as $6 billion a year.
Suggested Citation
Edward L. Glaeser and Dwight M. Jaffee (2006) “What To Do about Fannie and Freddie?,” The Economists’ Voice: Vol. 3: No. 7,
http://www.bepress.com/ev/vol3/iss7/art5/
A couple of years ago I was going through a “career crisis.” I wasn’t happy where I was but I wasn’t sure how to get where I wanted to go. I had made a list of employment and moneymaking possibilities. I found that list the other day. At the bottom I’d written, “Real estate flips.”
Hmm.
New builder desperation here in New Mexico
http://www.longfordhomes.com/
-no downpayment
-no closing costs
-no payments for a year
It’s like buying a sofa
Hey folks,
Found this article in the L.A. Times, check it out..
“Big Condo Complex Planned for Alhambra”
http://www.latimes.com/classified/realestate/news/la-fi-alhambra10oct10,0,7508216.story?coll=la-home-realestate
Little snippets..
Price appreciation for existing homes and condos in Alhambra surpassed Los Angeles County at large in four out of the last five years, yet the median Alhambra home price in August of $499,000 was still $18,000 cheaper than that of the county overall, according to DataQuick.
The valley’s attractiveness to people of Asian heritage, including many with roots in China or Taiwan, “just evolved over several decades,” he said. “You have a high Asian comfort factor.”
The Chinese government has been easing controls on its citizens’ overseas spending, “so we should expect more of their investments here,” said Gardena real estate broker Randal Lee of Lilly Enterprises, who represents Asian investors in the United States. “Their first buy will be residential, 9 times out of 10.”
Target buyers are young professionals, “empty nesters” and the approximately 3,000 employees of businesses already located at the 1-million-square-foot office campus, said Milan Ratkovich, the development manager.
Construction is expected to begin next year on a $189-million, 351-unit condominium complex in Alhambra. The units are to be priced from about $400,000 to $900,000.
*****
I have been to Alhambra and there are also alot of Latino’s. I suppose they are targeting the Asians because they have the $$$. Still, with prices from 351k - 900k , and 351 condo’s, I doubt they will sell all of them in a reasonable timeframe without slashing prices. Not the best time to build this massive eyesore! eh
It’s going down…lol
Yep - it has hit the mainstream press - look at this from the Washington Post - 10-11-06
http://www.washingtonpost.com/wp-dyn/content/article/2006/10/10/AR2006101001284_pf.html