Bits Bucket And Craigslist Finds For October 11, 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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bear stearns goes subprime.
ECC Capital Corporation a mortgage finance real estate investment trust (REIT) that originates and invests in residential mortgage loans, today announced that it has entered into an agreement to sell certain operating assets used in its subprime wholesale mortgage banking division to Bear Stearns Residential Mortgage Corporation, an affiliate of Bear Stearns & Co., for approximately $26 million in cash and Bear Stearns’ assumption of certain lease liabilities.
ECC Capital will retain other obligations arising from its subprime wholesale mortgage banking division, including but not limited to, loan repurchase obligations, remaining leases and personnel related liabilities. ECC Capital will also retain the majority of its core assets, including its residual interests in mortgage-backed securities and associated servicing rights
http://immobilienblasen.blogspot.com/2006/10/firesale-notverkauf-subprime-ecr-bear.html
Applications for both mortage refi’s and new purchases were down about 5% last week. This is the first week after the new tighter lending guidlines were released, so maybe they are having an effect. The stabilzing and slight increase in these data during September is part of what got Greenspan and Wall Street so excited about the supposed “stabilizing” in the housing market. We need a few weeks or months of new data to see what is really happening.
what. exactly did bear stearns get from this “wunderdeal”, origination capacity is currently a liability, not an asset as far as i know. does bear stearns get the liability of the loan portfolio after the payments dry up?
test
It sounds like they DON’T get the main liability — buy backs due to fraud, ECC keeps that obligation.
According to FinancialNews.com, “Jeff Verschleiser, a senior managing director in the mortgage department at Bear Stearns, said: “The acquisition of ECC Capital’s origination unit will give Bear Stearns a substantial stake in the subprime lending business. Bear Stearns has been buying loans from ECC Capital for over three years and the performance of its loans has been favorable compared with other originators in the marketplace.”
What’s more from previous media reports, other MBS packagers are taking similar actions trying to get closer to end-users, subprime borrowers. So, it appears Bear Stearns’ move is tactical and in response to its competitors. Here is the FinancialNews link: http://tinyurl.com/k3ogw
I wonder if this is going to develop into an industry wide disintermediary trend leading to the removal of the middle-man or is something more sinister afoot like a$$-covering.
The MBA reported this morning, “the Market Composite Index, a measure of mortgage loan application volume, was 599.1, a decrease of 5.5 percent on a seasonally adjusted basis from 633.9 one week earlier….and “the seasonally-adjusted Refinance Index decreased by 5.8 percent to 1857 from 1970.8 the previous week and the Purchase Index decreased by 5.3 percent to 383.3 from 404.6 one week earlier.
The entire report can be found here: http://tinyurl.com/hznhk
add this from cfc
Countrywide Sept. loan volume falls 22 pct
Countrywide Financial Corp., the largest U.S. mortgage lender, said on Wednesday it funded $38 billion of mortgage loans in September, a decrease of 22 percent from the same month last year.
The lender whose name will not be revealed here, but a/k/a
az_lender, one of the tiniest US mortgage lenders, will fund zero dollars of new mortgages in 4Q06, a drop of 100% from any quarter in the past five years. Glad I can afford to take a safe return on Australian national debt instead.
az lender,
Know it’s late, but do tell. What is the main reason for zero new mortgages??? Closing up shop or can’t find qualified borrowers or someone not willing to take risks?
Thank you!!!
Abitibi-Consolidated cutting 700 jobs in Quebec and closing four mills
18:21:55 EDT Oct 10, 2006
Canadian Press: LUANN LASALLE
‘”We all recognize that there’s consolidation that needs to be done in the industry,” Abitibi spokesman Denis Leclerc said Tuesday.
Leclerc said costs at sawmills need to be reduced in the short term. He noted there are too many mills and they need to be consolidated in the wake of changes in the market.
He also said the U.S. housing market has also slowed down, which isn’t helping the industry. ‘
‘Almost 3,000 permanent jobs and about 4,100 temporary jobs have been lost in the province’s forestry industry since April 2005, according to the Quebec Forestry Council Industry. The Quebec government already announced a multimillion dollar aid package last spring to help the industry.
Other forestry companies including Domtar (TSX:DTC) and Cascades (TSX:CAS), Weyerhaeuser (TSX:WEF) and privately held Kruger have announced similar closures in Quebec and in other parts of Canada this year as the industry restructures to meet rising energy costs and lower demand for lumber and other wood products.’
http://www.cbc.ca/cp/business/061010/b101096.html
…I’m a lumberjack and I’m alright, I work all day and I sleep all night…(Monty Python song)
Actually, it’s
I’m a lumberjack and I’m okay
I sleep all night and I work all day
Thanks!
Do you remember the rest of the song too?
“I cut down trees, I skip and jump, I like to press wild flowers… I like to put on women’s clothes and hang around in bars”
Just like my dear mama . . .
Thanks a lot. Now that song will be running thru my head all day.
I’m a lumberjack and I’m OK
I sleep all night and I work all day.
Chorus:
He’s a lumberjack and he’s OK
He sleeps all night and he works all day.
I cut down trees, I eat my lunch
I go to the lavatory.
On Wednesdays I go shopping and have buttered scones for tea
Mounties:
He cut down trees, he eat his lunch
He goes to the lavatory.
On Wednesdays he go shopping and has buttered scones for tea.
Chorus:
He’s a lumberjack and he’s OK
He sleeps all night and he works all day.
I cut down trees, I skip and jump
I like to press wild flowers.
I put on women’s clothing and hang around in bars.
Mounties:
He cuts down trees, he skips and jumps
He likes to press wild flowers.
He puts on women’s clothing and hangs around in bars?!
Chorus:
He’s a lumberjack and he’s OK
He sleeps all night and he works all day.
I cut down trees, I wear high heels
Suspenders and a bra.
I wish I’d been a girlie, just like my dear papa!!
Mounties:
He cuts down trees, he wears high heels?!
Suspenders…and a bra?!…
Just the Lumberjack:
I wish I’d been a girlie, just like my dear ma’ma!!
Actually, it’s “just like my dear pa-pa” although with his accent it comes out “par-par”. Makes it even funnier.
This is a pretty big hit for BC’s economy. We have some discussion going on this topic over at my place.
New September Numbers for metro Washington, DC:
http://tinyurl.com/ppshw
David
Bubble Meter Blog
One limitation of the MRIS numbers is that they have a large amount of variability, since they are per-month numbers, particularly since sales have been so slow lately thus there’s less of a data sampling. So what I do is put these into a spreadsheet and average out about a 4-6 month period to find the real trends. Loudoun county for instance had a huge drop on a single-month basis (over 9% - not only YoY but also since last month!), but in reality I think the size of that drop is an anomaly - the trend over the last few months is about 4% drop since last year. Likewise I think other counties that actually show a YoY increase are really in a decreasing trend overall, the one-month anomaly is misleading.
I would like to see another topic summarizing the rediculous offers that home builders are offering to move their inventory. Longford Homes in Albuquerque is running a radio add that you can get a new home with zero down, zero closing costs and zero payments for one year….while supplies last!!!!
It sounds like they are selling furniture in a close out sell.
How about just cutting the damn price.
Makes me so mad, all those incentives add up to is many, many years of paying tax/insurance/interest on a home you overpaid for. Lower the price, and all the other carrying costs are lower as well. Also, the comps will be set lower, and start the housing market into a faster freefall. Oops.. I didn’t mean to say that.
How about just cutting the damn price
It won’t work. You’re underappreciating the problem.
Today’s home “buyers” cannot afford to put anything down. They are razor thin on their finances. Dropping the price will help long term, but these people don’t have the finances NOW to get into the house.
0 down, 0 payments, 0 carrying costs removes a barrier to entry.
It also helps with the people that already own a home. this way those folk would say “Hey, we can get into our dream home now, and then we have a whole year to sell our house”. It’ll help to get rid of some of those NASTY order cancellations and pre-sale contingencies.
Clouseau,
You just made me realize how scary the market really is. Home buyers purchasing these 2nd homes with no payments for a year could be sitting on their previous residence as they have no cash flow problem if they don’t sell.
So there will be two types of people who get these mortgages:
1. People who hold off selling their previous home until “the market recovers in a few months.”
2. Fraudsters who will never make a payment.
Both have created artificial demand. Thus, greater inventory in 2007/2008. Oh, this is going to get very interesting…
Neil
It’s a very strange problem.
Because Harry Howmuchamonth only cares about his initial monthly payment, he dosn’t care about the true cost of the item. This drives housing prices way up, because (initially) cheap money is available. Harry doesn’t care he’s paying $400,000 for a $250,000 house. All he cares about is that he can move in with no money out of pocket, and a low monthly initial payment.
Fannie Frugal, on the other hand, makes twice as much as Harry Howmuchamonth. She does the math and realizes that, over 30 years, she’d be paying much more for the house with the adjustable i/o neg-am mortgage than she would if she got a 30 year fixed mortgage, and put 20% down (so she wouldn’t have to pay PMI.)
I hate regulation, but there’s something wrong when the smarter consumer (Fannie) has to pay the cost of an artifically inflated asset.
And, there’s a good chance that Harry Howmuchamonth will NEVER really be able to afford the house, once principal payments kick in, etc. He’s planing on selling the house and coming out ahead (risky!) or “pulling money out” if it appreciates and taking on even more debt (riskier). While there may be periods of time here and there where this can work, it’s not a good strategy for a house you may be living in for 30 years or more.
At the very least the GOVERNMENT needs to stop subsidizing Harry Howmuchamonth by eliminating the mortgage interest deduction, and making any governement backed mortgage program require 20% down, fixed mortgages, and income requirements.
I should add one thing: Often Harry Howmuchamonth lies about his income on a “stated income loan”. Fannie Frugal won’t do that because:
1. She’s honest
2. You have to pay even higher interest on a stated-income loan. Why would anyone do that if they really had the income and could back it up, except in some very unsual circumstances? Wouldn’t you want the cheaper option.
One more thing:
Harry Howmuchamonth often lies on his “stated income mortgage” because it lets him qualify for a larger amount. Even though state-income loans have higher interest rates, Harry doesn’t care because there’s a payment he can afford for the first two years. He’ll worry about the rest of the mortgage when the time comes.
Fanny Frugal won’t do this.
1. She’s honest
2. Why would she want a higher-interest loan? She can prove she makes the income, so there’s no need to do a “stated income”.
another issue not explicitly mentioned it that even if Fanny Frugal would choose a 0% down mortgage, if values decline she is on the hook for the full loss because she has savings. Because she knows that homes are extremely overpriced, she does not want to buy in the current environment.
Harry doesn’t care about the value or value going down, because there is no money to be found with him and in the worst case he will walk or choose some kind of bankruptcy (in my country bankruptcy is very convenient; after 3 years of ’social security’ wage level you can try again for that 1 million euro home).
> in my country bankruptcy is very convenient
Wouldn’t you have to sell your residence in the Netherlands and rent, if you go bankrupt, to pay your creditors? (If the house is foreclosed upon, that doesn’t matter anymore, of course.)
well, it’s convenient when judged from the financial side. Yes, you probably have to move to another home but you can keep your car and other expensive stuff. People simply can’t loose money in the game, worst case you loose a couple of years mortgage payments which (because of HMD) of often cheaper than a few years rent.
We have to bring back financial risk into the equation. People who don’t have money simply should not be buying homes, and certainly not very, luxury expensive homes.
> We have to bring back financial risk into the equation.
Agreed.
> People who don’t have money simply should not be buying homes
What about the lenders who lend those people the money? Why don’t they do a better risk analysis? THEY should know better. In a market economy, I would first look in that direction.
Peter T: agreed about the lenders, but I don’t think there is a ‘free market’ in the housing sector as long as there are tons of subsidies, incentives and free put options - both for buyers and lenders.
The risk is simply transferred to society (savers, taxpayers, pensioners etc.) and that is why the parties involved in the transaction are speculating with such high leverage. Yes, I would like to see some kind of personal sanction on all those mortgage deals that go sour, so that the lenders and mortgage agents/brokers can loose (at least) their fat commissions when they don’t take their responsibility.
You forgot 0 moral standards. On the flipper blogs they have the acronym OPM = Other Peoples Money, i.e. it doesn’t really matter if you end up loosing it all, it’s not your money….
…sounds like GM’s offers when the sh$t hit the fan.
On some of these offers, does the builder absorb the interest for the first year? Or is it more like a payment option loan? Anyone know how these offers work?
I’ve never done any 0 down purchases before.
Good point. If one reads the fine print, you will probably learn that the principle is increasing during that year when you are not paying anything. Perhaps the builder is paying interest only.
If they pay a typical interest-only, then the principle will remain the same, no increase and no decrease. Are they trying instead to get people hooked into a negative-amortization mortgage?
From the deals I’ve seen (which is admittedly only a handful and only in the DC area) all of them are paying down the mortgage, albeit slowly as per a typical 30-year scenario. That doesn’t mean California builders aren’t “ahead of the curve” on this type of offer, though.
They could structure it as points that buy the interest down to 0% for the first year, plus an amount equal to your first year’s principal.
Of course, most people will just end up pissing it all away on upgrades anyways, so this is another great ploy by the builder.
“…you can get a new home with zero down, zero closing costs and zero payments for one year….while supplies last!!!!”
They forgot one zero!
…any ‘zero’ can get a new home with zero down, zero …etc….
They forgot zero income.
I’m sure (lack of) income won’t be a problem. In Europe you can even buy homes with zero identity. Just sign please, nobody gives a damn.
At the end of the day, however, the unsuspecting home buyer is going to pick up the tab. The cost is either hidden in the builder’s gross margin or the lending firm’s mortgage structure; from the outside it’s hard to determine, however.
Albuquerque, do you know if the builder has its own financing unit like DHI Mortgage of Pulte Mortgage or a really *tight* relationship with its referred lender?
I’d like to hear more news from Albuquerque. That has really been a speculator-infested area.
As would I. A friend invested heavily there…within the last few months…and I’m sure curious.
Oh god. I’ll bet it’s all on the west side too, right? Rio Rancho, Ventana Ranch, etc.? Those are the Queen Creek of Albuquerque.
Supplies are going to last for a real lo-o-o-o-ong time.
The L.A. Times ran a story on Sunday that quoted some professor at USC who remarked that home prices in L.A. County fell 17% in the 1990s decline. I emailed the reporter, questioning that figure. She replied that the 17% figure was the median, meaning that half of the homes experienced price declines of less than 17%. She replied several experts do not dispute this figure.
Now, I know there are lies, there are damned lies, and there are statistics, but I simply cannot wrap my head around this figure. Could it possibly be the homes SOLD during the decline? (suggesting that someone who bought in 1947 and sold in 1994 did not see a 17% price decline)
E-mail her this file it chronicles the boom and bust by zip code in So Cal:
http://www.firstamres.com/pdf/Cagan_FireBurn_1104.pdf
warning PDF.
Sounds like the same reporter that got defensive when Poway Seller asked a few questions.
She couldn’t/wouldn’t name her other experts that time either.
Quoting the “fact” that other “experts” believe a particular set of numbers is an idiotic method of presenting evidence. It’s usually bodes poorly for any future attempt of rational discussion.
Either give me the damn evidence, or get out of the way.
I was there, West Los Angeles near Pico and Sepulveda. My parents house was getting offers of 750,000 at one point and this went down to 450,000 in the mid 90’s.
Now it’s 1.3 million.
Ridiculous.
“She replied that the 17% figure was the median, meaning that half of the homes experienced price declines of less than 17%.”
This is not what the median means. It only means that the selling price between the upper and lower half the homes was higher was 17% lower than at the peak. It does not mean that the individual houses were selling for 17% less. When the prices are dropping the median often shows less of a drop because people are paying the same or nearly the same as they would have but they are getting more house for their money. The opposite must be true for rising prices when people are getting less house for the money than the median suggests.
Excellent point.
As my father is fond of saying “figures don’t lie but liers figure”
How about this for a possibility of 17%: for measurement take the last year before declining sales volume (1990, I believe, as I recall prices kept rising in 1991 on lower volume, just like 2006) and use the last year after sales volume increases (1996 or 1997) voila! 1990 prices compared to 1997 (as opposed to 1991 vs 1995.)
Thus the decline is based on sales volume, not price.
Or how about this: base your measurements on the NATIONAL sales decline, which I think started on the East Coast in 1989, and ended in California well before 1995…
should be “use the FIRST year of rising sales volume (1996 or 1997)”
this is really misleading, for some reason. was the 17% median based on percentages drop or based on median price drop? these 2 are not the same. the former is the median of the percentage drops of house prices. the latter is be calculated from the price drop of the median. i think the figure is based on the latter, but she explained it *not very* accurately.
More media sunshine for the homebuilders from Morningstar, fyi. Dated October 9th.
“So while the industry is in for some rough sledding over the next several quarters, and will likely remain a tough business for a long time thereafter, we think most of the public builders will survive the current slump in much better shape than the market thinks. Once on the other side, the higher-quality builders will resume generating economic profits. And for that reason, we think the group is worth more than liquidation value, which is where some names are currently priced.”
http://news.morningstar.com/article/article.asp?id=175149&pgid=wwhome1a
“Once on the other side, the higher-quality builders will resume generating economic profits….”
I don’t entirely disagree with these statements, some builders will emerge stronger than others when the market gets to the other side of the trough. The problem, however, is the time it takes to get to the other side. You holdings will probably be under water the entire period, opportunity costs. Moreover, how can you determine the builders that will emerge stronger from the ones that will emerge weaker or not make it to the other side of the trough?
When the dot coms went bust, all the analysts and “experts” had wet dreams for the “picks and shovels” (ie fiber optics, networking, servers). They went bust too despite “having business models” and “cash flow”. No one wants the party to end. They’ll just keep trying until the forces overwhelm them.
Do builders refuse to lower the actual price because they use that number somewhere in their calculation of inventory on their balance sheet? I don’t know how HB inventory is valued so anybody with insight here please let us know. It would make sense that they are trying to prop up their book value to preserve their credit rating and share price.
No. Inventory is carried at cost and is only impacted by sales prices to the extent they cannot recover their costs through the expected sales proceeds. In that case, they would have to write down their inventory to its ‘net realizable value.’
Most large homebuilders have gross profit margins in the 25 to 30% range. I don’t think the combination of incentives and price reductions has been significant enough that they’ve had to write down their inventory (yet).
I believe the refusal to lower actual prices is fostered by their hope that the market will soon recover and they’ll be able to resume selling homes at these hyper-inflated prices and by their reluctance to hurt the customers who just purchased at higher prices (badwill avoidance). It’s only a matter of time until top line price reductions are the norm, however.
I would only add one small tidbit to that discussion. Land (and all assets under GAAP for that matter) is carried at the lower of acquisition costs or market value. Land write-downs are the talk du jour for “book value” of these companies. In the 90’s, the HB stocks looked great until they started with the land writedowns. The auditors are under such scrutiny now that I wouldnt’ be surprised if they are all over this every quarter… getting reappraisals, and so on.
JD you make a good point about land write-downs; when the land write downs are booked, asset value, book value, and share value will all plummet.
However, you underestimate some of the builders’ abilities to *manage* asset values in a depreciating asset market, particularly those with off balance sheet JVs and in-house lending units. Who determines the market value of land? GAAP? Or, the builder’s sales and accounting dept together with its incestuous audit firm. Everyone is working feverishly to renegotiate options plus creatively postpone far off into the future any land write-downs.
You raise several good points. Builders can maintain constant sales revenue and slow net profit decline by cutting costs in operational areas outside of sales and marketing such as staff, travel, birthday cakes, paper clips and so on. Moreover, the inflation of cost of sales you refer to by way of not marking down inventoried land value allows them to maintain an apperance of solid book value. Add to the mix their ability to manipulate cost of sales and inventory values through off balance sheet JVs and you got the making of an impending scandal and a how did they do it bestseller.
Like I just mentioned above, land values must be written down according to GAAP. I covered that in my most recent article.
John Doe
OT.
been wondering lately:
People keep bringing up “desirable” areas again and again. And they speak like these deserve some sort of price premium.
However, it seems to me that there are simply too many desirable areas for that to mean too much.
Again and again we hear it. “blah blah is so desirable”. Even places most used to consider a wasteland are now “desirable”.
I think that a lot of places aren’t really desirable at all. They just had cheap land and no/little snow, and then rapid price appreciation. People then used the price appreciation to think it was “desirable”
No offense (I live in Mpls, hardly thought of as desirable but I love it here), but are Las Vegas and Phoenix really that desirable? Is South Florida really that desirable? They definitely have their plusses…. but I just don’t get it.
Then, when I add up all the “desirable” places, it basically is most of the country.
I’m just wondering if “desirable” has been watered down.
” … but are Las Vegas and Phoenix really that desirable?”
They were, say 10 or 20 years ago. At that time, housing prices were inexpensive compared to the rest of the country, taxes were low, the climate appealed to some (a bit too warm for me).
Unfortunately, the secret got out, the masses decided to move there, and the Southwest went downhill. It’s a shame - I like that region of the country, but wouldn’t think of relocating there now.
I agree, desirable is one of those mushy terms that don’t really mean anything for the REIC.
Weren’t you the one who went on and on about 4 or 5 houses selling in your neighborhood in Minneapolis earlier this year and how that meant it was “different here”?
Weren’t you the one who went on and on about 4 or 5 houses selling in your neighborhood in Minneapolis earlier this year and how that meant it was “different here”?
No. I did go on and on about many houses selling in my neighborhood, and I couldn’t understand why. And this was back in May or June I believe.
A little angry?
I’m as big a bear as anybody. But I won’t lie or make up stories to win favor with the bear crowd either. I’m not a sheep, in either direction.
I had fully expected the Mpls market to be DEAD ON ARRIVAL this summer. I was reading stories, allegorical and otherwise, of people who saw nothing selling.
But my own experience from this summer showed that my particular neighborhood was selling very quickly.
that said, if you recall (selective memory?) I’ve also spoken of the divorcee across from MY VERY house who had to sell for $100k under what people thought the “market” was, and then the flipper who had bought that house (but actually renovated the whole thing and did a good job) but couldn’t sell it so now it’s a RENTAL (the only one in my neighborhood).
I’ve also talked about “the Russian” in the alley behind my house who bought and tore down a house and sold it in days, and then bought and tore down a SECOND house behind my house and that one sat.
The market in my particular neighborhood was VERY strong until about end-July 2006. August was slow, Sept very slow. (I don’t know the numbers). And now, there is very little for sale around my house. (In Mpls, winter actually means something, so few people try to sell here)
clouseau
It’s not the fact you mentioned the homes selling, it’s what I remember you concluding from that tiny number of sales. I’m not angry, it just seems like you’re now attacking the “it’s different here” argument when you seemed to make a very similar one just a few months ago about your neighborhood.
I never made an “its different here” argument.
I was honestly surprised at the level of sales in my ‘hood in the early summer. I posted here more as a way of trying to digest what I was seeing, and to ask if any other Minneapolitans/Twin Citians were noting similar findings, not to lend credence to the “its different here” argument.
I posted on the “many houses selling” over several different threads (one of the disadvantages to blogging). You most likely missed the whole gist of what I was saying.
I started with simple observation: “I see lots of houses selling”.
then I asked “why”. I pondered if it could be a flight to “quality” (different here argument). I also pondered if it were due to other factors.
By the end of my discussion here, I had talked to my good friend who is an honest realtor. ANd he said things were selling like hotcakes because the houses were reducing price very quickly. (what would have sold for $750k sold for $599k instead as example). He also said that the homes that were selling were much higher quality than in the past. And he also said that those sales signs were being put up and left up longer than normal, to make it seem like everything was selling. (usually, sign stays up as “sold” for maybe 2 weeks, but realtors were leaving “sold” signs up an entire month).
Then, finally in end July, I reposted here that the “dead” market had hit my specific neighborhood. In fact, it is as close as 20 ft. from my house. (the divorcee/flipper house that isn’t selling anywhere near old ‘comps’)
peace?
Hey Clouseau, I’ll stand up for you. Deer Isle Maine was kind of the same way. I thought it would be a dead summer, but some number of buyers showed up who thought It’s Different Here, even if I never thought so. However the realtor who sold my own house expressed such complete exasperation with me over my allowing the buyer to make a very small earnest-money deposit, that it became obvious HE knew it was not Different Here, and not at all healthy. Lots of people here still think It’s Different Here…just wait till they need or want to sell. They will find it’s Same Here
If we all just RAH RAH about the crash, and make up lies/allegories to “fit in” then this board is useless.
I prefer that we bring to the table HONEST discussion about what is actually occuring out there.
This is how we kicked the crap out of the MSM. we had ACCURATE and TIMELY information. And we tried to use it in a rational manner. They relied on the lies and cheers of the NAR>
the tide has definitely swung in our favor over the last 10 months or so.
But make no mistake. there is little blood in the streets THUS FAR (on a macro level, of course there are some bleeders out there). YOY declines are in the single digits in most areas, or even slightly positive, with a few exceptions. Overall declines from “peak” are also in the single digits in most areas.
Sales are way down. Affordability is way down. Many “sales” were stole from the future with the NAR fear campaign. And so on. Lots to be bearish about. But that is fundamental analysis for the FUTURE.
Let’s take off our bear colored glasses once in a while and try to objectively make our arguments. Those are the STRONGEST ones.
The last 2 months, I have spoken VOCIFEROUSLY about how the stock market very well may rally. Then the name calling began. I was told how dumb I was, that there was no way it could happen. That I could “go to the bank” with the FACT that the equities market ALWAYS falls between Labor day and end October. Yet I was correct in my analysis.
Less Rah Rah. More HONEST analysis, more HONEST allegorical stories. More HONEST data please.
just my opinion.
I wasn’t too popular myself saying the homebuilders were buyable back in July and August. Que sera.
ROFL! yeah.
I made up a “fake” portfolio late spring/early summer and bought a lot of puts on the HBs. I would’ve been slaughtered. Glad it was just practice.
Out of curiosity: what’s your thought on the S&P outlook for the rest of Oct and to year’s end?
I felt pretty confident that the S&P would do well Sept into early Oct, but now my crystal ball is foggy
how long CAN the equities market defy what seems to be considerable headwinds? (obviously this is pure speculation, just interested in hearing your or others’ thoughts)
My thought (please feel free to decimate it):
equities will be very strong through October into early Nov. This is because the big boys MUST invest in something. They will of course do a lot of selling to offset gains and losses for Oct 31 tax purposes, but I think they’ll also start feeling a lot of pressure to buy, so that they’re not “left behind”.
If they all underperform and also the S&P sucks, they’re fine. But if they underperform and the S&P surges, they’re screwed.
then the xmas shoppers will try for one last hurrah before reality hits in Jan. I’m thinking S&P (generic for market) starts tanking then.
It seems there is an agenda and they tend to defy logic. We had a four year cycle low due in September. Didn’t happen.
Justice delayed is justice denied (for the bears?) I doubt it. Just put off until after Jan. 1 and bonuses are safely banked.
“But make no mistake. there is little blood in the streets THUS FAR “. You’re right, no blood in Phoenix yet. It seems like there’s been of a shift of sentiment regarding housing and stocks, that the markets have had their corrections, and a soft landing has been achieved. Bears are dropping like flies, but have no fear my friends, as I’ve found a little gem that will reinforce your gloom and doom:
“Weapons of mass financial destruction”
http://mondediplo.com/2006/10/02finance
The S&P will depend on how Q3 (fiscal year-end for many compnaies) earnings look. The Q3 results are just starting this week and will roll out over the next 3 weeks, or so. Alcoa is singlehandedly providing a pretty big hit today. If you start seeing a handful of blue-chips per day reporting short, it will spark the traditional Oct. slide, otherwise, as long as Joe Blow consumers kept spending like there was plenty of money to be made, the market should keep doing it’s short term news reactions until Jan. Of course, election years are always anomalies. Wall Street analysts just do not deal with unknowns of any kind very well. They either acknowledge and ignore, or over-react, and which one actually happens is totally illogical.
Right on, HIC. Can’t get too much into confirmation bias. Yes, we all know what’s happening — housing is going down — but the devil is in the details.
Personally, I’m always looking for a good argument as to why things may take unexpected turns. The problem is that those of us who’ve been here a while have already beaten the MSM/REIC bullsh!t to death, and yet the newbies just keep bringing them back up. Very few original ideas, unfortunately.
Still, the anecdotes alone are enough to feed the addiction.
“big boys MUST invest in something” — but it could be entirely Unamerican something.
Updates on the North Jersey real estate market for September:
Northern New Jersey September Residential Sales
January
Average Sales (2003-2005): 2000
2005 Sales: 2013
2006 Sales: 1705
(Down 15.3% Year Over Year)
February
Average Sales (2003-2005): 1583
2005 Sales: 1578
2006 Sales: 1395
(Down 11.6% Year Over Year)
March
Average Sales (2003-2005): 2193
2005 Sales: 2256
2006 Sales: 2033
(Down 9.9% Year Over Year)
April
Average Sales (2003-2005): 2322
2005 Sales: 2383
2006 Sales: 1817
(Down 23.8% Year Over Year)
May
Average Sales (2003-2005): 2615
2005 Sales: 2725
2006 Sales: 2298
(Down 15.7% Year Over Year)
June
Average Sales (2003-2005): 3486
2005 Sales: 3682
2006 Sales: 2911
(Down 20.9% Year Over Year)
July
Average Sales (2003-2005): 3495
2005 Sales: 3338
2006 Sales: 2428
(Down 27.3% Year Over Year)
August
Average Sales (2003-2005): 3661
2005 Sales: 3668
2006 Sales: 2599
(Down 29.1% Year Over Year)
September
Average Sales (2003-2005): 2854
2005 Sales: 2655
2006 Sales: 1968
(Down 25.9% Year Over Year)
Some more graphs and data available at the link above.
Caveat Emptor!
jb
New Jersey Real Estate Report
As I went down the list, I kept feeling the need to say *KABOOM*.
Explains Kara’s BK.
Interesting Article in the Orlando Sentinel about Bankruptcy. Local lawyers are anticipating in increase in filings related to people making bad real estate deals.
http://www.orlandosentinel.com/business/orl-mbankruptcy1106oct11,0,7124032.story?coll=orl-home-headlines
Reading that story about the Kara Homes Chapter 11 really got my interest going again. It’s been so long since we’ve had a good recession and all the bankruptcies that go with it. I can’t stay away from that stuff. It’s like candy trying to figure out what happened, who stole what from who, etc. I love it. And then the bondholder vs. everyone else fighting. Damn, I may have to get a job
Hey Tx:
recently, you posted a very cool site that’s cofounded by that Mavericks owner where they give you “the scoop” on various comanies.
Do you have the link? I found it very intriguing. I wish I could analyse stocks in such a manner. (which is why I usually invest in indexes like the rest of the sheeple!)
thanks in advance
http://www.sharesleuth.com
Also, you had posted a stock picker out of Cambridge Mass. You indicated that it was expensive to subscribe. Do you recall the fee?
10K a year, I believe.
“It’s like candy trying to figure out what happened”
Forensic Accounting? That would make a pretty cool TV show…
OT for sure and I’ll try to keep my comments to a minimum but I feel compelled to at least mention this topic.
Did anyone catch the MSNBC commentary last night on the bill awaiting the presidents signature that allegedly negates the constitutional writ of Habeas Corpus? I was pleasantly surprised to see the MSM covering this at all. If you are unfamiliar with Habeas Corpus then please google it. It is the underpinning of our Bill of Rights and as such you need to be alarmed.
I won’t go off on the ramifications of this bill as it would take up too much space but if you have a senator or congressman who supported this bill then you may want to inquire how this squares with the oath to defend the constitution (while you still have the opportunity to do so without being labeled a terrorist and thrown in jail without a hearing)? Note: this is a non-partisan comment
thank you! I admittedly had to google the term and glad for it……what is this country coming to?
You’ll get booted for saying anything critical of you know who. I was, albeit temporarily. Proceed at your own risk.
I’ll make a partisan comment. I’m by no means a Democrat, but I’m fed up with both the top two parties. Neither is better than the other. Except for the 1980s, America has creeped toward more socialism and authoritarianism despite who is in control of the Oval office or Congress. It’s a big fraud on the American public. One party honestly promotes socialism and delivers it. The other party speaks fondly of Capitalism and delivers socialism. And that other party promotes bible thumping religion and delivers perverted internet lurkers. You vote for either party because you are disgusted with the last party in power? You get worse people in power as the result. They get worse every election. And yes, I guess Chip will “chip in” (grin). I did vote Libertarian for many years and even held a minor Libertarian office. I was the campaign manager for a Libertarian Party candidate for a California state Assembly seat in the early 80s while in college. But the Libertarian Party keeps conjuring up wacky marijuana users, so people don’t vote for them. The Reform party is just another brand of socialism. The best way to protest this socialism is to not vote, IMO. Okay, politics off, I’m done.
Contrasting socialism with capitalism as a means to reflect the current state of affairs in the USA is a cheesy polarizing ploy that no longer works for the group of thieving liars currently grasping power. You might as well have used the homeless drug addict and Carl Icahn dichotomy.
It won’t work here either.
The problem is that if you don’t vote then you are by default voting for the winner.
There needs to be an “Against All” candidate on the ballot. If “Against All” gets a majority then the election should be repeated with entirely new candidates. Repeat until a real candidate gets a majority. Only in this way can the voters regain power from the two party system which is in place.
Well said. Debating stupidity and wedge issues like burning flags, gays and capitalism vs. socialism has done a fine job of keeping the creeps in power. Meanwhile, 40-Hour Joe continues to get hammered, year after year. Yet, we see self-appointed “church leaders” like Falwell, Dobson, Tony Perkins and Jay Sekulow leading their flock of sheep to the slaughterhouse election after election to keep these creeps in power.
Voting with your wallet is catching on though. Quickly I might add.
Don’t forget Louis Farrakhan, Jacka$$ Jesse Jackson, and the equally fanatical, self-appointed “leaders” on the left doing the same thing. They are all useless, regarless of which side they are on.
Haven’t heard much from those guys in a while.
How about this creep?
http://www.breitbart.com/news/2006/10/11/D8KMJ8I00.html
I can’t view external links. Who is it? Falwell? Abramoff? Delay?
Ask your mommy to turn off your filter. Hehehehehe.
Go away troll.
What everybody seems to be saying is that they are fed up with either party. The first attainable order of business is to split power by having DEMS take back either the Senate or House. Perhaps this will stop the insane laws I’ve been seeing passed, perhaps not. Then, ANY program or system or party that will allow for enforcement of the constitution AS WRITTEN will get my vote. Clearly either party with control of both house, senate and the presidency doesn’t cut it. I didn’t intend to jack this thread with such a divisive topic, sorry.
I don’t think you have to worry about that. The split is coming. Guns and babies don’t work when everyone’s worried about whether they can make their Hummer payment and still have money for Starbucks.
“The first attainable order of business is to split power by having DEMS take back either the Senate or House”
In my younger years, I was against gridlock, because with gridlock, nothing gets done (for us).
Now that I’m older, I am in favor of gridlock, because with gridlock, nothing gets done (too us).
Except for a few cases, voting is choosing between the lesser of two weasels.
the first order of business should be to not waste time voting or even paying attention to national politics - they need your money, don’t give it to them.
and don’t keep your money in USD in the long-run - then they can’t inflate it away
the only solution to the bad economics is the effentual default of a major socialist government in Europe - that might drive the message home
believe it or not, we are more capitalist now than in the 80s - more free trade, more deregulated industries, unions are no longer lionized, a 40% tax rate would be a tough sell, people whine about spending instead of seeing it as an “investment”
yeah, we’re still hampered by all those 1930s programs but, in the long run, I think they’ll destroy themselves just as the union heavy industries have
Exactly! I have always thought that elections aren’t democratic unless there is a “None of the Above” option. Even many Marxist countries have “elections”, but if the only choices are “there” choices then it’s not really democratic.
“The problem is that if you don’t vote then you are by default voting for the winner.” I’m not sure about that. Someone correct me if I’m wrong but I never heard Bill Clinton claim he had a mandate. If I’m right, I have to give the guy credit. He never one a majority of votes in his two elections. I think one of them, he got 43% of the votes.
Vote for NONE OF THE ABOVE…. mighta been Brewster’s millions, or something… Richard Pryor.
Sounds good to me.
What really cracks me up is when I hear the term “Islamic Fascism” to describe our enimies. Look up Fascism on Wikipedia and you’ll see it’s defined as “a radical political ideology that combines elements of corporatism, authoritarianism, nationalism, militarism, anti-anarchism, anti-communism and anti-liberalism”
Corporatism meaning a secret alliance between big corporations and government. Hmm, sounds familiar?
Wiki needs to clean up the definition. Corporatism is just a form of communism. It may be anti-Marxist, but all fascist gov’ts have been communist in existance (i.e. the gov’t controls the means of production).
Then how do you explain Hitlers Nazi’s?
You might want to read “The Rise and Fall of the Third Reich” or “Mein Kampf.” My details may not be perfect, but Hitler joined and took over a small communist party called the German Workers Party. He then transformed this into the Nationalist Socialist Party and incorporated the elements of the German Communist Party he wanted and eliminated the rest. Hitler was radically anti-capitalist and made no secret about it. What is it that need explaining?
Read about the Krupp family in Germany. Daimler-Benz, Volkswagen and Messerschmitt all supported the Nazis. Basically the same setup we have now in the USA. Concentration of wealth, means of production and a hold on political power. Can you think of anything that America can produce better than weapons systems?
Ike warned us about the “Military Industrial Complex.” Apparently our leadership didn’t give a rip - too much money to be made (and we all know who runs (owns) the government). History does not repeat itself - but it rhymes (Samuel Clemens?)
“You might want to read “The Rise and Fall of the Third Reich” or “Mein Kampf.” My details may not be perfect, but Hitler joined and took over a small communist party called the German Workers Party. He then transformed this into the Nationalist Socialist Party and incorporated the elements of the German Communist Party he wanted and eliminated the rest. Hitler was radically anti-capitalist and made no secret about it. What is it that need explaining?”
Hmmm… Then why did he jail all communists inside German borders and then ultimately turned his guns east toward the birthplace of radical marxism?
Me thinks you need a history lesson young man.
Hitler was a megalomaniacal killer. He went after Russia because he wanted to control the world. The fact remains that Hitler was a fascist who came from the anti-capitalist left. Hitler was a bum on the dole in Vienna for two years before he started his political career - like most anti-capitalists he was either unwilling or unable to provide goods and services to the economy but wanted those productive assets for himself. Don’t tell me about getting history lessons, punk.
Repeating revisionist history interspersed with rabid attacks will never make it reality. Irrespective of that, Hitler was anti-communist, rather a nationalist free market loonytune revered by european corporations and bankers of that day.
Hitler was a megalomaniacal killer I agree and think that it is the major difference with our current leadership. IMO, the brand of fascism that the USA is more of a corporate fascism that strives to maintain the status quo through military dominance. Kind of a Roman/British Imperialist model. Roman for the blatant credit inflation and corruption and British for the ruthless military actions to dominate the weak with superior military technology. It’s tough to draw an exact analogy, but the parallels that come to mind are not all that pleasant.
Wikipedia is not an authority on such issues. Quouting Wikipedia on subjective issues such as these is loopy. Wikipedia is for junior high school students trying to impress their teachers. The idea of Wikipedia being some type of mainstream authority makes me sigh and curse the Internet.
In this case Wikipedia is 100% accurate. Fascism derives it’s name from fasces, an old roman sybol that Mossulini made his. It’s true that fascism and nazism (nazi = National Socialismus) claimed to be socialist (not communist!), but if you knew your history, the basis for nazism and fascism was to make the general population believe you were on their side. Hitler descibed this illusion in his book Mein Kampf. He called it “die grosse Luege”,”the big lie”. If you want to make the general public believe a lie, make sure it’s a big lie and repeat it over and over again.
If you are concerned about this, you should read Glenn Greenwald, a former litigator that is on top of this. Right now, there is some debate as to whether this law applies to US citizens. The right-leaning blogs (and much of the MSM) claim (illegal or legal) aliens only. However, many constitutional scholars, including right-leaning ones, who have read the law claim that this law applies to U.S. citizens as well. This means the law has a chance of becoming unconstitutional if reviewed by the court. However, there are provisions in the law to try to keep it from court review (because we can’t have “activist judges” doing something like calling it unconstitutional).
Right now, I am not sure which side I believe, because no one has posted an analysis on-line (it is just “I have read it”) However, given the Jose Padilla case, we do know that this administration wants to deny habeus corpus to citizens, provided they are considered “enemy combatants”.
Why the NRA isn’t shaking in their boots over this, I have no idea.
Those damned “activist” judges. The NRA whines like a baby only when a threat to manufacturer sales is percieved. History proves this but nope…… Pay no attention to the corporate gangsters. They really are our friends. Really…..
thx, saw this on google videos. blew me away, cause he speaks with the righteous indignation of the hard right wingers, but…
http://video.google.com/videoplay?docid=-434166324141091880&hl=en
More on market manipulation by Harry Schultz, a widely followed newsletter writer for over 40 years:
International Harry Schultz Letter
HSL has just been named the “Newsletter of the Year” by Peter Brimelow of Market Watch. A few days earlier HSL was ranked #2 among the Top 10 most profitable newsletters (for subscribers :-)) in 2005 by Hulbert Financial Digest.
HSL (International Harry Schultz Letter) is the world’s premier international investment, financial, economic, geopolitical, privacy, sociological and philosophical newsletter. HSL is now in its 41st year with subscribers in 71 nations. In addition to decades of money-making investment advice in all major world stock, bond, commodities, and currencies markets. Based in Switzerland, HSL is one of the few truly international investment newsletters.
+++
We know the US govt interferes with this mkt, as it does in other mkts, eg, currency & some commodities,
Gold
HSL 656 - 01 OCT 06 7
Price-fixing is illegal in most nations, & is prosecuted daily. But gold price fixing hasn’t been successfully prosecuted in court yet, though GATA tried. Current mkt intervention is admitted. Recently–as I spelled out in great detail in GoldChartsR Us on 9/13, headed: Nov elections smashed gold mkt last Thursday.
US govt couldn’t afford to let gold rise pre-election. Gold had just had a 1-day breakout, at which govt fired major bullets to reverse–& succeeded. The US Treasury/Fed sold euros (to boost the US$) & shorted gold futures, pressured the Euro Central Bank to sell gold & coerced their lapdog NY banks (eg, GoldmanSachs) to short gold in both NY & Japan. I concluded: “It was pure unadulterated manipulation of all mkts.”
But such govt efforts are relatively trivial compared to the worldwide gold mkt’s faith/size. So, such attacks run out of steam when global buying overwhelms them. Charts reveal it on a gradual day-to-day basis. Also, as US debt, & the cost of servicing it, has assumed such monstrous size, those efforts to support the $ & depress gold become ever shorter & weaker. Other nations become increasingly reluctant to feed a debt machine which undermines their own best interests in the longer run. Politics plays a role in forcing them to shoot themselves in their feet. Financial self-mutilation is becoming less appealing to Japan, China & Europe.
Why would anyone get involved with a market that people think can be manipulated? Run away screaming from such a market.
Because manipulation can’t work forever if there is a finite supply of the item being manipulated. Like gold, for instance.
Well now you have to chose your conspiracies. Is GoldmanSachs a lap dog, or the lap upon which the dog sits?
And further, SO WHAT? If you know it’s there, you can see it happening . . . . ride along! Make a few bucks on it!
Read something the other day that said 97% of the silver shorts are held by four parties. Damn, if I was Buffet, Gates or Soros, I’d add to my billions by squeezing them until they screamed.
[NOTE: Yes, there's a cap on individual silver holdings, but there's no limit on the number of silver ETF shares an individual can buy!]
October 11, 2006
“Housing boom due to global integration says Greenspan”
No, you “political hack,” it was due to your policy of “emergency rates” when there was no emergency other than Bush re-election and your re-appointment that was contingent of Bush re-election.
These frickin manipulators of the US economy always try to blame something, or someone, else.
American dupes have no idea how corrupt their beloved econo-political system has become over the decades. Yeah, yeah, “it is better than the rest.” The Greater Depression, to begin within this decade, should settle the debate as to how good the system has been, especially, over the past 2-3 decades.
Jas
———————————————————————-
Housing boom due to global integration says Greenspan
By Krishna Guha in Washington; FT.com
Published: October 9 2006 20:18 | Last updated: October 9 2006 20:18
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.
The former Fed chairman said the collapse of Communism in eastern Europe and the shift towards more market-based economies in China and other parts of the developing world brought “billions of cheap labourers onto the scene”.
This, he said, “brought disinflation and lowered inflation risk premiums and long-term interest rates, creating a decline in real interest rates and equity-risk premiums.”
In consequence, “the real market value of assets increased faster than GDP”.
Mr Greenspan said the system “ran out of steam as no one could afford houses any more.” But he said the worst of the housing correction may already be over.
Asked why he had not tried to raise interest rates to dampen down the technology bubble in the stock market in the late 1990s, the former Fed chairman said “we tried that in 1994/1995 and failed.”
Mr Greenspan said the tightening cycle from 1994 to 1995 was “highly disruptive” but failed to rein in stock prices.
“We didn’t diffuse the bubble, we made it worse,” he said. “The stock market was flat during the tightening period and when the tightening ended in 1995 the stock market took off.”
“We learned that the Fed could not incrementally diffuse a bubble,” he said.
Mr Greenspan said he realised that “unless we tightened aggressively enough to hurt the economy and profitability the market bubble wouldn’t diffuse. Rates would have had to go up 10 to 12 percentage points to break the back of the stock market, which would destroy the economy.”
The former Fed chairman also talked about developments in the energy market, highlighting the absence of spare capacity as a major source of volatility in prices.
“Excess capacity is not there any more,” he said. “Therefore if anything goes wrong on the supply side, prices can jump.”
He added “there is also a significant terrorist premium, and prices were also bid up by financial speculation.”
Mr Greenspan defended the role of hedge funds, which he said “did us a great favour in buying oil contracts.”
He said “hedge funds now have the inventory they need, so the bids are disappearing, and prices are now falling,” even though “global demand for oil has not slowed much.”
But he was critical of the oil industry, remarking “another problem is that the huge amounts of cash flowing into national oil companies are not being used for exploration.”
Mr Greenspan said there is not enough refining capacity, and cast doubt over whether ethanol derived from corn could ever adequately substitute for US consumption of petroleum products.
The former Fed chief said global warming was “real, evident and a given.” He described the Kyoto accord as “naïve” but praised the European Union carbon trading system.
He said he was unconcerned about consolidation in the banking industry, arguing that “new institutions will spring up to meet local and community needs.”
Jas, now you’re into one of my favorite under-appreciated facets of this current bubble. The role of non-Americans, especially in the shady and criminal side of things. It’s only now starting to be reported, I expect it to be a much bigger story before it’s all over.
“The role of non-Americans, especially in the shady and criminal side of things.”
You mean Greenscam, the “non-American?” True, he is a part of the criminal gang that rules over Americans and the world — Bankrupters and Fraudsters of New York City (BFNYC). The Executive branch is infested with Fraudsters from Goldchain Silverknife.
Jas Jain
Jas - Your paranoia is not pretty to behold.
“Mr Greenspan said the system “ran out of steam as no one could afford houses any more.” But he said the worst of the housing correction may already be over.”
So, affordability must be on the rise? Well, I don’t see prices dropping so I guess I’ll just sit back and wait for that big 180% increase on my next paycheck!
Heckuva job, Greenie.
I don’t usually think Mr. Greenspan sounds ridiculous, but I must admit…that’s pretty damned ridiculous.
Sorry Al, we’re just gettin’ started here…you know it…we know it…
…but thanks for attempting to make everyone feel a bit better about what’s to come.
as mentioned before, this ‘Berlin Wall’ stuuf is a ridiculous argument. Can Easy Al please explain why the country of the Berlin Wall is about the only one in the civilized world that has NO severe housing bubble?
please, can we stop listening to this idiot …
nhz: is that an entirely true statement? I know prices in Germany haven’t been rising recently, but aren’t there places in Germany where it’s almost been impossible to buy a house, say Taunus mountains, unless you inherit one from you parents? The bubble just inflated many many years ago….
> aren’t there places in Germany where it’s almost been impossible to buy a house, say Taunus mountains
The Taunus hills are the favorite area for the bankers of Frankfurt to reside. Further development is prohibited by environmental protection. Which price development do you expect?
> The bubble just inflated many many years ago.
After two hyperinflations, real estate had special status among German investments until 1982, when it lost its status. But nhz wrote that the global price rise is spilling also into Germany.
relatively it certainly is true. There is some froth spilling over into Germany, mostly from the Netherlands and also locally in the bankster towns. But over the last 25 years or so, home prices in Germany have generally been declining, not rising. And in the area closest to the Wall, home prices have declined strongly.
Some time ago it was mentioned that you can buy a nice home in some areas in ‘East Germany’ for 3000 euro. That’s at least 100 times cheaper than a comparable home in the Netherlands, a few hundred km to the West.
“please, can we stop listening to this idiot … ”
No, we can’t. His comments are in demand to help his real masters — BFNYC. But, we ain’t seen nothin yet, in terms of idiots heading the Fed. Bernanke, the academic, is going to be lot worse. He will keep explaining every problem that the Fed help create.
What a system!
Jas Jain
yes, I agree that Bernanke is more dangerous … Easy Al is the man behind the green curtain (no wonder that ‘the Wizard of Oz’ is his favorite).
Ben Bernanke looks more like the Sorcerer’s Apprentice; he thinks he can do magic with some black helicopters, but in reality all hell will break loose once he starts doing his little magic act.
Mortgage Reality Check:
http://www.xanga.com/home.aspx?user=russwinter&nextdate=10%2f11%2f2006+23%3a59%3a59.999
House Inspector Clouseau
This helps explain why there’s no blood in the streets, yet… Maybe The Boyz haven’t got their REO departments up and running yet.
Wow! Staggering numbers!
According RW, “we have the late 2005 and 2006 cohorts who arrived at this circus as the tents were being taken down.”
It is so agonizing watching these clowns.
A few interesting observations when looking at the NAHB-Wells Fargo Housing opportunity Index data:
http://www.nahb.org/page.aspx/category/sectionID=135
I graphed the data for six areas - Los Angeles, Las Vegas, San Francisco, San Diego, the Inland Empire, and San Luis Obispo (Cali central coast). The data went as far back as Q1 1994. What I found (at least from 1994 to the present):
1. From 1994 until about 1999, there seemed to be 3 affordability “bands”. Las Vegas and the Inland Empire were priced in a “very affordable” band (HOI of 60-80). Los Angeles, San Luis Obispo, and San Diego were priced in an “almost affordable” band (HOI of 35-50). However, San Francisco was priced in what seemed to be a perpetual “unaffordable” band (HOI of 15-25). From my untrained eye, the distinction of these “bands” is remarkable (i.e. the are very well defined and differentiated).
2. Maybe San Francisco won’t fall as much as some of us expect (assuming stable wages)? San Francisco’s HAI has “only” fallen from 20% affordability down to about 8% affordability.
3. All but Las Vegas are now below 10% affordable. Las Vegas went from 60%-80% affordable to about 16% affordable.
Very interesting!
I have only 2 caveats for your thesis…
1) wage and population changes in SF.
2) the neglect of the “bust” years of 89-94 in your data
I’m a born and raised San Franciscan. It’s always been expensive. But things REALLY started changing in the mid 1990’s with the tech boom. Prior to that, the affordability wasn’t quite so severe.
now, tech is not doing so well. Sure there are a few new megamillionaries around (google, youtube), but not like there once was. SFs wages are simply falling.
thus, altough I could imagine SF bay area not falling as much percentage wise as perhaps NV, it also has a few things that NV doesn’t need to contend with, mainly falling wages AND falling population.
Also, SF and LA saw major price problems from around 1989 to 1994 or so. the data you’re using neglects this. How would that change the long term affordability trend?
I’d like to see your graphs go back at least until the early 1980’s, I feel they’d be more representative.
For those to whom historical rhymes matter:
California of Today = Michigan of 70-80 years ago.
Silly.con Valley and SFBA = Detroit & Flint.
Michigan has been done in by East Asian competition. CA would be done in by East and South Asian competition.
Let us see how it all plays out this time around.
Jas Jain
Unfortunately, I agree. SF was once the most innovative city in the most profitable sector. Those days are gone. And I hate to say it, likely never will return.
Theoretically, the US is so “innovative” that we can just leave manufacturing forever, leave agriculture forever, leave the tech sector, and simply invent a new sector. we still have financials for now.
we’d better get innovating.
I saw that China has developed a newer better internet. (IPv6, much superior to IPv4 created here) I’m not tech savvy, but it sounds like a big deal. In the past, they mass marketed what we invented. now the big dragon is hungry, and learning innovation.
http://www.mybroadband.co.za/nephp/?m=show&id=4346
We’d better get innovating FAST.
I was just thinking the same thing reading all the spin about SF and the OC.
Portsmouth, Ohio ever heard of it? Picture early 1900’s Shoe Capitol of the world, major fuel (coal/coke) companies, steel mills. Home of one of the teams to play in the first NFL playoffs (Spartans). Home of Branch Rickey coach who signed Jackie Robinson and Roy Rogers. Bigger then Cleveland and Detroit turn of the century. The Major railroad hub of the west.
California of Today = Michigan of 70-80 years ago = Portsmouth Ohio 110-130 years ago
“the neglect of the “bust” years of 89-94 in your data”
You are correct…unfortunately, the NAHB didn’t have data for all areas going back that far.
OT - which brokerages do you use for options trading? input from experienced folks would be helpful. thx!
http://www.thinkorswim.com
the best by a long shot
optionsexpress isn’t bad either
Tschick57,
Do you have a view on Interactive Brokers? Just curious and I value any insight you may have.
I know some retail traders who use them. Consensus among them is IAB sucks.
Someone asked yesterday about the Wells Fargo affordability index - I believe it’s located here : Last update - Q2 : 8/22/2006
Report From “Keep It real In Sacramento” website address http://www.jalone.com/id59.html
Late last year I wrote the above titled article and had it published on several websites. At the time I felt pretty good about it but when I saw it the other day I realized what I was writing about may have more relevance today than it did then. Although the inventory of available home appears to have peaked and is slowing declining we are now seeing large numbers of price reductions every day. Sellers cannot afford to go on the market with a price tag larger than they are willing to take and then chase the competition with small price decreases. I firmly believe you have to lead the competition to get attention from the buyers.
I republished “Pricing for Results” in my weekly column over at Rocklin & Roseville Today or you can see it on my website here.
I’d love some feedback on this so please send me an email and let me know if you agree to think I am “all wet.”
Today she speaks a lot of truth. I hope she tells her clients this.
Anecdote: I was talking to a Realtor friend the other day, and she was telling me that she’s starting to see some appraisals for mortgages getting kicked back for review, *after* the mortgages have funded. She says that some are even six months after being funded. She was asked by an appraiser to help him back up his previous numbers, but when she looked at them, she said that there was no way she could back them up. The appraiser said that he really needed help, because if he couldn’t justify the appraisal numbers, he would probably get black listed. We both laughed at the thought that just a year ago, the appraiser would have probably been blacklisted if he *didn’t* hit the ‘required’ numbers, no matter the true value. How times have changed.
Appraisers will ALWAYS be blacklisted for not hitting the numbers their paymasters want. That’s why “independent appraiser” is an oxymoron.
I noticed this blog from Sacramento Landing Housing Bubble. I knew things were bad, but not this bad.
Anon 7:47,
I am in the same position at the JTS Estates at Lincoln Crossing, except 90% of the homes are still vacant 9 months after completion. 140 homes and 90 are sold to bay area flippers, with 50 still owned by the builder (about 50 flippers cancelled their contracts and ran home). 4 or 5 homes are owner occupants, 15 are renters and the rest are vacant, awaiting greater fools with a bucket of money and a box of stupid. A lot of flippers are trying to dump their homes, but the builder is undercutting them by $200,000 and he isn’t selling much at the new prices either. The flippers will have to rent or go to foreclosure or short sales. The monthly carry for the flippers is brutal with tax, ins, bonds and HOA costs totalling $1,000 to $1200/month. The homes are renting for $1500 to $2,200. The debt service on the $700,000 purchase prices is deadly.
So maybe you should count your blessings, in that you have some occupants providing cash flow to the neighborhood. I believe many of the homes here are headed to foreclosure. That could bring months of no upkeep, dead lawns, HOA shortfalls, etc. These are big houses, some at 4500 sf plus, so just wait until 6 college kids go in on a house for $400 each and then the fun will begin.
This just may be the start of a long road to deterioration in this neighborhood. I feel your pain.
Tuesday, October 10, 2006 9:25:00 PM
“A lot of flippers are trying to dump their homes, but the builder is undercutting them by $200,000…”
Ooooooouuuuuuuuuuuucccccccchhhhhhhhhh! *That’s* gonna leave a mark!
well when are we going to start seeing these numbers show up in the price drop statistics?
Lennar homes are dropping prices and posting on Craigslist.
http://orlando.craigslist.org/rfs/219051718.html
They can make these financial incentive offers b/c of their incestuous in-house financial unit; Here is a quote from their website, “UAMC is a part of the Lennar Family of Builders and Lennar Financial Services. Lennar is one of the nation’s largest homebuilders and is listed on the New York Stock Exchange…. The Lennar family of companies provides one stop shopping to make your home purchase your easiest purchase.”
Here is the link: http://tinyurl.com/edbh8
So, if they don’t get you with the price, they get you with the financing and in some instances they get you with both.
actually, there could be a bit of sweet justice in that….FB folds in the first year or two, MBS holder takes back house, MBS pushes loss/note back to originator (as some seem to be doing). Lennar ends up eating it in their sub. And with the direction of the market, they’ll certainly take a far bigger hit on it down stream than they would right now.
Aint’ karma a bitch!
Here’s a discussion at Foreclosure Forum:
http://www.foreclosureforum.com/mb/messages/19204.html
“Re: for any who thinks SD hasn’t fallen yet…
…
Here’s a story about a property scheduled for auction 10/11/2006.
3/2 Bath Home ~1700 sf in desireable part of Poway. Sold in 17 days during the peak of the market for $976,000 and closed in August 2004.
These buyers got 100% financing in 8/2004.
~$685K First
~$295K Second
Tomorrow (10/11) the 1st is foreclosing with $708K estimated default.
Now there are only 2 comps for homes that size within 1 mile per Realist.
1 sold for $936K and 1 for $740K.
A property on the same street that is 2.5 times larger with an extra 2 acres of land and 5bd/5ba, recently sold for only $950K after 150 days on the market. They originally asked for $1.2M.
So - I wonder - if the auction takes place - if this one will get bid up above the $708K estimated default amount.
I think I’ll go to this auction. I want to see for myself how it plays out.
….
We tried to do a hard money loan on a house in Azusa (at the base of the San Gabriel Mountains) which sold for $1.1 million in July 2005. Deal blew up when the appraisal came in at $750K and flushed the LTV. Appraiser told us McMansion prices in parts of the San Gabriel Valley are 30% off their highs; and the blood is not in the water yet. “
News of deep price cuts this early in the game really make my heart sing. Here’s two more:
Upper East side, Manhattan (York and 86th). One bd. in great bldg. Went on market 5 months ago for 750K. They chased the market down til last week when it finally sold for 515K. Realtor friend sold this one and had a heck of a time with the seller start to finish trying to get him to lower the price every step of the way.
Sisters’ friends in Providence RI just bought a great home on the East side (the *good* neighborhood) for 260K. Comparable homes have been sitting at 480K all summer. The seller was an elderly man who bought it for 21K decades ago and just wanted to get out and go live with his kids in FLA.
With comps dropping like that, it won’t be long before sellers start getting a clue.
The days of 20-50K price cuts on 500K homes and 100-300K cuts on million dollar plus homes may be winding to a close soon.
Heh, just watched Arizona Midday on Channel 12 where they interviewed a Real Estate investor. According to this gentleman prices are going up in Arizona and you had better buy now or be priced out for good. The last 3-5 months were an opportunity to buy and soon that will be lost. You had also better pull any equity you have in your home right now and buy some investment properties. If you do buy, better use Interest Only loans too. And don’t just look at 100k-150k homes, you can make a lot of money buying 300k to 400k homes. Blech. I feel dirty just having watched that interview.
You can see some interviews with this gentleman here: http://www.azcentral.com/12news/arizonamidday/articles/0320silverstar-CR.html
It’s realtors a, brokers and investors like these with their self-serving BAD/lethal advice that are going to bring down the whole industry. Any trust they had with the public before, which has been quite a bit, will be broken.
Love it. It’ll be great when these charlatans are exposed for what they really are.
Sept. 20, 2006 fed minutes are out. According to the minutes, “…considerable uncertainty was expressed regarding the ultimate extent of the downturn in the housing sector and the degree to which the slowing in housing activity and the deceleration in home prices would affect consumption and other expenditures going forward.”
Link to the minutes: http://tinyurl.com/jse9p
“Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.”
same link
How about this? The article also mentions that Reid profited from federal land swaps through Del Webb…
AP Exclusive: Reid Got $1M in Land Sale
Senate Democratic Leader Harry Reid collected a $1.1 million windfall on a Las Vegas land sale even though he hadn’t personally owned the property for three years, property deeds show.
In the process, Reid did not disclose to Congress an earlier sale in which he transferred his land to a company created by a friend and took a financial stake in that company, according to records and interviews.
The Nevada Democrat’s deal was engineered by Jay Brown, a longtime friend and former casino lawyer whose name surfaced in a major political bribery trial this summer and in other prior organized crime investigations. He’s never been charged with wrongdoing _ except for a 1981 federal securities complaint that was settled out of court.
Land deeds obtained by The Associated Press during a review of Reid’s business dealings show:
_The deal began in 1998 when Reid bought undeveloped residential property on Las Vegas’ booming outskirts for about $400,000. Reid bought one lot outright, and a second parcel jointly with Brown. One of the sellers was a developer who was benefiting from a government land swap that Reid supported. The seller never talked to Reid.
_In 2001, Reid sold the land for the same price to a limited liability corporation created by Brown. The senator didn’t disclose the sale on his annual public ethics report or tell Congress he had any stake in Brown’s company. He continued to report to Congress that he personally owned the land.
_After getting local officials to rezone the property for a shopping center, Brown’s company sold the land in 2004 to other developers and Reid took $1.1 million of the proceeds, nearly tripling the senator’s investment. Reid reported it to Congress as a personal land sale.
Oh shit. LOL.
Well, I’ve been reading that the DNC wanted Hillary to take his position anyway. Here’s the opportunity.
Is the Fed with Wall Street, or against it? “Don’t fight the Fed.”
http://www.marketwatch.com/tools/marketsummary/default.asp
GS, last Friday (?) you asked why I did not believe in the PPT. I did not see your request until yesterday - so I am answering here. I have been trading for 35 years - always for myself- 20 of those years on the floor. I have seen collusion. When an entity (individual, government, corporation) tries to move the market, there is inevitably tremendous profit potentials - to be made on the opposite side. The last time I am aware of a government trying to manipulate the markets with direct intervention was the British government trying to support the Pound Sterling. George Soros was blamed for driving the pound into the sewer, but if the government had not tried direct intervention the decline would have occurred over a longer period of time with less disruption to the world market and George Soros et al would have had no economic incentive to sell Pounds. The market is to efficient to leave enormous profit potential unchallenged - George Soros did it with the British Pound, some hedge fund(s) would do it with the stock market.
The other reason is that while conspiracies have been kept throughout the 20th century, those conspiracies involved national security - Manhattan Project etc.
Any trading program that the government might use would have been disclosed by a clerk, government staffer etc. To this date there have been a lot of allegations, but not evidence, no clerks, staff or turncoat traders. The Washington Post article that started this rumor and kept alive by conspiracy theorists had no substantiated evidence of market manipulation. The idea of a PPT would be very comforting to most American investors “it can only go up!” I truly believe that computerized trading and the programs used to buy dips, breakdowns and out of favor stocks is keeping the markets unbelievably high. At the same time because of the nature of rotation in the stock market, the volatility is the highest I have ever seen for a resting market and long interest has never been higher than right now. Rotation in the stock market is buying eg. GM monday;, F, tuesday etc. The flavor of the day. Pretty soon the flavors all get boring.
“To this date there have been a lot of allegations, but not evidence, no clerks, staff or turncoat traders.”
The absence of evidence is not evidence of absence. Imagine if anyone had conjectured circa 1999 that Wall Street darling Enron had set up offshore accounts to hide its losses? It also bears considering that the Fed has a very strict code of secrecy which I suspect pervades other top government economic institutions as well.
The absence of looked-for evidence that should be there as a logical consequence of what is being described is evidence of absence.
Enron’s 1999 filings led to questioning (and shorting) by people like James Chanos, and there were clearly both insiders and outsiders. JEDI and Chewco were disclosed in public filings and reports. If you read _The Smartest Guys in the Room_, it wasn’t so much that what Enron was doing was *secret* as it was that those who knew had an interest in keeping it going because they were all making money off of it. It’s a lot like the mortgage fraud business while the housing market was moving upward…
Uh-Oh… the career path for Realtors.
“A California real estate salesman faces life in prison after he pleaded guilty Monday to drug trafficking in the largest cocaine seizure in Carson Valley history.”
http://tinyurl.com/p4n83
In the 70’s a middle aged acquaintence of mine who had lost his business approached me to help him set up a drug deal. Of course I dissuaded him. As I was only a casual user back then.
This may be a route some finding themselves in a pinch choose to persue because it is seen as easy money and a way to make lots of it with minimal effort. What they have not grasped is that the risk is far higher with a seriously nasty downside and the competition is, shall we say, less than civil.
September data for San Diego:
http://www.voiceofsandiego.org/articles/2006/10/11/survival/933homedexsept.txt
Home Sales, Prices Down Again
Sales in September for detached resale homes were down 16.2 percent from August and 33 percent from last September throughout the county, according to the HomeDex report released today by Robert Brown, an economist at the University of California, San Marcos.
For attached homes, such as condos and townhomes, sales rates were down about 23 percent from August.
Price declines hit both markets. Detached homes dropped 3.06 percent from September 2005 to a median price of $571,000. That’s a decrease of 0.75 percent from August.
Attached homes also dropped slightly from the previous month — an 0.8 percent decline brought the median price down a few thousand dollars to $360,000.
Brown’s report draws data from Sandicor, the San Diego Multiple Listing Service, and is released by the Realtor’s association in North County. It differs from the monthly data from DataQuick Information Systems (due for release this week). DataQuick includes in its reports new home sales and sales completed without the use of a Realtor.
In HomeDex, Brown examines the trends by zip code and region within the county. He noted the median price per square foot for North County, East County, South County and the San Diego metro area. (Again, check out Rich Toscano’s discussion of the value of looking at prices this way.)
Those trends are:
Detached homes:
# North County: median $316 per square foot in September, $315 per square foot in August.
# East County: median $300 per square foot in September, $317 per square foot in August.
# South County: median $319 per square foot in September, $315 per square foot in August.
# San Diego metro: median $397 per square foot in September, $390 per square foot in August.
Attached homes:
# North County: median $325 per square foot in September, $326 per square foot in August.
# East County: median $274 per square foot in September, $296 per square foot in August.
# South County: median $315 per square foot in September, $308 per square foot in August.
# San Diego metro: median $384 per square foot in September, $373 per square foot in August.
Some wishful thinking from Freddie Mac:
http://www.mortgagenewsdaily.com/10112006_October_Housing.asp
“October Forecast Sees Housing Finding Solid Ground”
“Homes are projected to appreciate at an average of 5.7 percent for the second half of 2006 and 6.2 percent during the first two quarters of next year.”
Yeah, right.
Real estate investing is so lucrative in Las Vegas, you can make a profit on property you don’t even own!
http://www.washingtontimes.com/national/20061011-040427-8960r.htm
Sorry, didn’t see that Max had already beat me to this story…
Incidentally, the folks at the National Association of Realtors just released their latest forecast for home sales, prices, and all that. Here’s a Bloomberg story on the details:
http://tinyurl.com/gryjx
The details in a nutshell: They forecast a 0.2% drop in new home median prices, which would be the first in 15 years. Also, they say existing home prices will end up rising 1.6% for full-year 2006. Bloomberg calls this the smallest gain on record.
About time……………….
http://biz.yahoo.com/ap/061012/stock_options_executives.html?.v=1