Fed Prompted Housing Speculation: Fisher
Some housing bubble news from Wall Street and Washington. “Third-quarter profit at New Century Financial got cut in half, as the mortgage lender to people with poor credit histories saw a decline in loan production.”
“A top executive at Caterpillar Inc. said late Thursday he believes 2007 will be a year of ’significant slowdown’ in the U.S. housing market.
“Washington Mutual, the nation’s largest savings and loan, is laying off 255 workers as part of its efforts to trim costs amid a downturn in the national housing market. Sixty-five layoffs in Sacramento, Calif., and 190 in Austin, Texas, will take effect by the end of December, spokeswoman Darcy Donahoe-Wilmot said Wednesday.”
“Many of the jobs being cut are in the company’s mortgage-related business, Donahoe-Wilmot said.”
“Friedman, Billings, Ramsey Group Inc., the investment bank and brokerage, on Thursday reported a third-quarter loss. Separately, the company wrote down the value of a mortgage loan portfolio by $146.8 million. In addition, it wrote down equity positions in its merchant banking portfolio by $20 million, saying a majority of this sum relates to companies doing business in the subprime mortgage sector.”
“Home prices fell from July to August in seven of the 10 major housing markets covered by the S&P Case Shiller indexes. But prices are heading down a lot more, if the investment pros who trade in housing futures can be believed.”
“The latest report by the Labor Department showed construction companies got rid of 26,000 jobs.”
“Earlier this year, S.A. Ibrahim’s pitch that mortgage investors would benefit from insuring portfolios against a spike in borrower defaults fell on deaf ears. Now his phone is ringing. There is a heightened sensitivity to credit risk among investors, said Ibrahim, a 20-year veteran of the mortgage industry and former GreenPoint Mortgage CEO. ‘A big disconnect between that and the behavior of credit spreads,’ which have been tight, may soon reverse, he said.”
“It may go down as the ‘Got milk?’ moment for the housing sector. Just as dairy associations, with their widespread ads, have tried to convince Americans of the many benefits of milk, the National Association of Realtors will begin promoting the notion that buying a home is an unalloyed good in a $40 million campaign that boldly declares: ‘It’s a great time to buy or sell a home.’”
“‘In visiting our local associations and state associations, we were hearing our members saying, ‘God, we are getting beat up out there,’ said Thomas M. Stevens, president of the trade group. Stevens dismissed the idea that the campaign, the first of its kind undertaken by the association, could be viewed as a sign of desperation.”
“As the credit market has grown and become more sophisticated, lenders have been able to extend credit to households and businesses that might previously have been considered uncreditworthy, Federal Reserve Chairman Ben Bernanke said.”
“‘Some evidence, including recent Federal Reserve research on consumers holding adjustable-rate mortgages, suggests that awareness could be improved, particularly among borrowers with lower incomes and education levels,’ Bernanke said.”
“Dallas Fed President Richard Fisher said the Fed held its target rate at 1 percent ‘longer than it should have been’ and unintentionally prompted speculation in the housing market. The Fed was influenced by inflation figures, which have been revised upward, he said.”
“In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets,’ Fisher said. ‘Today, as anybody not from the former planet of Pluto knows, the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country. It is complicating the task of achieving our monetary objective of creating the conditions for sustainable non-inflationary growth.’”
“Fed Governor Susan Bies told reporters that the economy is ’still running at a solid pace outside of housing.’ While the housing slump may see even ‘further softening,’ that may be limited by ‘relatively low’ mortgage costs, income growth and recent stock-market increases, she said in her speech.”
“‘I am still more worried about inflation than a slowdown in economic growth,’ Bies said to reporters.”
Sounds like it is Pontus Pilot time:
I am washing my hand of this matter.
(Sorry for the incorrect spelling.)
When your spelling is close to the original like in this case (Pontius), you can just type it into Google. Google will ask “Do you mean…” and more often than not give you the correct spelling.
Heck, I find Google to be better than most spelling checkers.
I hate spelling nazi’s
Can’t resist. Spelled ‘Nazi’, a proper name.
Lower case N was intentional
And the unnecessary apostrophe?
I think Skitt’s Law applies.
Do you also hate grammar nazis? Because it’s “nazis” not “nazi’s”. Or was that intentional as well?
Hate them even more
notzees
shadash, i spelt better than you
If you type in “pontus pilot” Google doesn’t catch the fact his last name is spelled Pilate. (Also, the native pronunciation of his last name isn’t “pilot”, but I digress.)
dose enay one no houw toos spel anill reetientive?
“Dallas Fed President Richard Fisher said the Fed held its target rate at 1 percent ‘longer than it should have been’ and unintentionally prompted speculation in the housing market. The Fed was influenced by inflation figures, which have been revised upward, he said.”
So much for Alan Greensapn being a genius. Even the Fed is in CYA mode now.
Oops. Meant “Greenspan”.
I think a typo epidemic has hit this blog .
As long as the message is clear, I see no reason for corrections, qualifications and the like. We’re all pretty smart people or else we’d have bought a house in 2005.
No, it is not a typo, because no one is setting moveable type here. Rather, it is only a mispellng (did I spell that correctly?)
Yes, miss!
I question the word “unintentionally”. Greenspan knew what he was doing.
You are right. He clearly said that towards the end of his terms. The good and bad, both he knew.
nnvmrtbrker,
Amen. If he wasn’t in a position “to know” who the hell would be? It’s kind of in keeping w/your Bend, OR comment about the “gamblers” and it being like a drug. Easy money is hard to get out of your mind! Trust me, I fight it everyday. But that’s the key, (you have to fight it!)
I had no problem with the Fed keeping the fed funds target at 1 for so long, but it should have been doing 50s at every meeting instead of 25s, with a few intermeeting hikes thrown in when it was clear the economy was doing just fine.
Can We Bank on the Federal Reserve?
Was Greenspan a bubble blower? Should Bernanke stay the course? Five experts judge the powers and perils of the world’s mightiest central bank.
“Greenspan left a pile of shit in Bernanke’s lap. I think he has inherited a very difficult environment to navigate. The government keeps two sets of books: the one we hear the most about that says there was only a $318 billion deficit in 2005, then the one that comes out from Treasury [following standard accounting rules, not special government ones] that no one talks about, which shows a deficit of $760 billion. And if you include Social Security and Medicare liabilities… ”
Jeff Saut ( Raymond James Investments)
Reason Magazine Nov, 2006
http://tinyurl.com/y94grn
This article is also worth reading for comments from M. Friedman on inflation, the Fed and gold. I am not a fan of congressperson R. Paul - but he lets loose with his normal tirade.
“Greenspan left a pile of shit in Bernanke’s lap.”
My, my…have we been going to creative writing classes?
LOL
We need more Ron Paul’s in government.
“We need more Ron Paul’s in government.”
I’d be grateful for just one more. That would double the true shrink-government contingent.
Personally - I see another politician in Congressperson Paul. With the modern technology available to each and every American, I frankly do not see why we cannot have a democracy instead of a truncated republic. It certainly cannot make any worse mistakes and may in fact be better.
It’s always amazing to go back and read early Greenspan. He was a huge goldbug back in the day. Its interesting now as gold starts to look better and better every day in the wake of Greenspan’s inflation legacy…
Maybe Greenspan was running a proof by contradiction on the whole fiat currency versus gold thing.
Ron Paul’s revelation about Greenspan’s standing on his gold article is very interesting. 1999 and in private, Greenspan says he still believes in the substance of his article. Recently and in front of Congress, Greenspan claims he no longer subscribes to those views.
Friedman is a bit too optimistic.
“If you have a foreign owner of a bond or stock who loses confidence in the American economy and sells, whom do they sell it to? If you have a foreign owner of a bond or stock who loses confidence in the American economy and sells, whom do they sell it to? They have to sell it to people with a stronger confidence in the U.S. economy who are willing to hold on to it. If the foreigners dump bonds or stock and use dollars to buy other U.S. assets, there’s no net effect. If they use them to buy consumer goods, then that means an increase in balance of payments, a plus on income accounts.”
If they lose confidence I’m sure that it is still possible to unload the American assets at a discount. And what if they use their newly liquidated money to purchase natural resources? Sure, at some point, some of the money comes back (maybe Chinese tourists) but I doubt they need our manufacturing base. Maybe a Boeing in every Chinese garage?
Abolish the Fed
Abolish the Fed
Abolish the Fed
Free Banking
Free Banking
Free Banking
Even the Fed chairmen, Greenspan and Bernanke and Volcker, never deny that they look at the price of gold. I was in Congress when Volcker was chairman, and I had a breakfast meeting with him. I had gotten there early, and when Volcker came in, he didn’t say good morning, he went right to his staffer and said, “What is the price of gold?” That was the most important thing on his mind because people buying gold were voting no confidence in the dollar, and his job was to protect the dollar.
There’s still a lot of confidence now. But when gold hits $2,000, people will become more alert to what is happening.
Woops..I forgot the quotation marks on the above… I was, uh, never in Congress myself : )
Thanks for the clarification, sohonyc- lol. you had me there for a brief moment.
The real problem is housing prices should be used directly for inflation data not rents. That would have sent inflation numbers soaring in 2001 and the FED could have prevented the whole housing bubble. However, one has to wonder what would have happend to the economy subsequently.
I’ve wondered about that as well. Signals given by the data would depend on how much it was weighted in the index, but the source wasn’t even there. Too late now for what has occurred.
Fisher comments-
As I mentioned before, what was once said in private (at a meeting I attended) is now mentioned in public. Unfortunately, its too late. Time get out a mop and pail and clean up this mess.
Also, this is pure CYA - blame the data.
What about the bubble in hedgefunds and private equity and commercial real estate. Will this be blamed on “bad data” or BAD POLICY?
The poor data thing just irks me to no end. Complete and utter BS as they have been manipulating the data to fit their idea of reality for years. Now it comes back to bite them in the ass and they call it bad data. Jerks.
Any regulation of anything is typically bad policy. Why should a market need “policy makers”, anyway? Let it be a free market, it will work itself out.
Plank #5 of the communist manifesto is a central bank that regulates credit. Communism self-destructed, why should we expect the Federal Reserve to have a different fate?
Yes, the policy of making us all drive on the right side of the road is especially terrible. Who is the government to tell me what side of the road to drive on? Commie pigs!
I’m sorry, did you just mean fiscal policy?
Exactly, this is the Fed trying to get out in front and say, don’t blame Greenspan or us, it’s that lousy data’s fault. It doesn’t wash. Anybody with a brain could see that even if a bubble didn’t exist in 2002, the lengthy 1% FF rate was like rocket fuel for a bubble to get started. And then Greenspan with his shockingly bad advice to people to switch their fixed rate mortgages to arms to “save money.” Possibly the worst timed and most costly bad advice ever given.
“As the credit market has grown and become more sophisticated, lenders have been able to extend credit to households and businesses that might previously have been considered uncreditworthy, Federal Reserve Chairman Ben Bernanke said.”
As the credit markets have become more sophisticated, opportunities for fraudulent lending have mushrooomed, including the opportunity to make loans to uncreditworthy borrowers which prudent underwriting standards suggest are unlikely to ever be repaid.
If this is his idea of “sophisticated” then I’m sure that Bernanke has a whole liquor cabinet full of Ripple and Mad Dog 20/20. What a jerk.
I think sophisticated takes the meaning of “complex” rather than “savvy” in this instance.
I tend to agree more with Bernanke than Fisher, although there is merit to both POV’s. The low funds rate definitely played a part in this (not only dropping mortgage rates but also making it so unattractive to save,) but the willingness of the newly sophisticated credit market to buy subprime mortgages is the real culprit. If Countrywide, HR Block, WaMu, and the countless other lenders were unable to package and sell high risk mortgages, the bubble would have deflated long ago.
Well I was attempting to be amusing and obviously failing.
I’m still not convinced that a glorified version of “hot potato” qualifies as being a sophisticated system.
Maybe, but the potato is cut into multiple wedges. Some wedges are radioactive, some scalding, some room temperature, and some ice cold.
So who has the ice cold wedges, and who has the radioactive ones? That’s an interesting question, IMO.
I think the answer to that question is that it matters not which wedge you hold, as long as the music never stops and the wedges keep moving. Perhaps there is a gigantic hole somewhere along the line in the game where the toxic pieces can just “disappear”?
“sophisticated” is not the word I would have used.
Competetive, desperate, loose, creative…all would have been more accurate.
And they will be considered uncreditworthy again. As it was, so it shall be again.
“Stevens dismissed the idea that the campaign, the first of its kind undertaken by the association, could be viewed as a sign of desperation.”
Alert. Alert. Emergency News Flash from your local real estate emergency management unit — The residential RE market is at an inflection point. Stop! Do not enter the market now. If you’ve already entered, quickly exit the market now or forever be f’d.
Now we will return to our regularly scheduled programming.
I am in Washington DC public policy PR, and I know a b.s. “save the association” media campaign. This isn’t simple NAR promotion, or a promotion of product; this is a plea for survival.
Let’s see how many suckers they scrape out of the woodwork with this campaign before the whole thing falls apart next year when $1T in ARM resets hit on a declining market.
And they are doing this so soon, too! You’d think NAR would wait till next spring when the refi market starts to shake out and the spring buying season starts. I guess given the abysmal track record they have had in ‘06, they need to justify their paychecks this quarter.
They can always get a job at Burger Barn.
More like the “Got arsenic?” moment for Realtors…
I can’t wait to see what the actual slogan is going to be…?
Got equity?
Got toxic loan?
Got F***ed?
Got brain?
Got a pulse? (We can qualify you for a $500k mortgage)
Got two mortgages? Get a third!
Photo of a Mirror.
Caption reads: “Got Breath?”
Imploder!!!
I was thinking, “Got Debt?”
‘It’s a great time to buy or sell a home.’
Can anyone name an instance where it’s simultaneously a great time to buy or sell anything?
It’s a seller’s market and a buyer’s market!
It’s a house pickers market.
No one is buying. This is known as a “nosepickers market”.
Always and everywhere, if you’re a Realtor™ and the subject is houses.
Everyone should read this essay by George Orwell on the human propensity to hold two contradictory beliefs at the same time:
http://orwell.ru/library/articles/nose/english/e_nose
I’m part of that same DC PR/public affairs universe — I don’t see it as a “save the association” ad so much as a “what is national doing about this?” response. In either event - it’s pretty uninspired stuff — I would love to see how they’re focus groups went to come up with this Orwellian “it’s a great time to buy or sell a house” line.
I think a good tagline for these efforts would be “Get Milked” (as in “buyers will …..”)
That’s funny! Brilliant!
Got Milked?
Should be an ad for BK atty. Gotta use that one!
“I am in Washington DC public policy PR, and I know a b.s. “save the association” media campaign. This isn’t simple NAR promotion, or a promotion of product; this is a plea for survival.”
Agreed. It’s seems like NAR members are doing a lot of hand wringing. Moreover, it’s odd like you say, NAR leadership would feel pressured to roll out this campaign in the Fall. Early Spring would be more impactful, IMO.
Question: What do you think of their message distribution choices? The NY Times, USA Today, and WSJ are all national media channels yet DL publicly argues ‘all real estate is local.’ Moreover, who are they targeting with said message? I suspect the readership for these publications are very aware of the bursting bubble and have above average IQs. They are certainly not the GF types the NAR has been targeting all along.
It’s a horrible waste of advertising dollars, IMO. Every professional marketer will tell you that direct personal selling is the best communication channel available to stimulate sales particularly for high ticket or complex products. That’s why the NAR exists — buying or selling a home is a complex transaction for a high ticket product. If they can’t generate sales through one on one contact with buyers and sellers, they are simply doomed.
Lastly, what is the respondent suppose to do after reading the ad? Buy? Sell? Call the NAR? Feel good? There is no call for action in the ad. I suspect more Realtors™ will be exposed to this message than potential buyers or sellers. Maybe NAR leadership will have something to defend itself with now and can say to membership — we tried.
Maybe members don’t realize it but David ‘double Speaking’ Lereah did a lot of damage to the NAR brand and its credibility. His incredibly unvelievable happy talk during the bubble’s expansion and run up to the peak sucked a lot of future buyers into the market. Now, with falling prices they are all stuck and upside down with their mortgages. As a result, they can’t sell even if they wanted to (no equity to cover realtor comission or to pay off mortgage) and if they can’t sell they certainly can’t buy either. Ironically, some sellers are locked into their homes like serfs and as a result Realtors™ are locked out of any future potential sales.
stevens was the one that got “surprised” by the downturn while trying to sell his house- see, they are dopes
“stevens was the one that got ’surprised’”
I think that one was disinformation.
Matrix has got a copy of the ad up for those interested…
“…the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country.”
Oh boo-hoo, now they are going to have to take out real car loans again instead of HELOC’s, where you and I got to subsidize the interest on their Hummer. Define what these real costs are, anyway? Just because their values drop doesn’t mean that they have to shell out more money each month - actually it would be quite the contrary because their property taxes and home improvement projects will drop.
It seems highly unlikely that property taxes will drop in most markets. Even if local assessments go down, I think reality-based thinking would lead one to speculate that local property tax rates will go up as fed monies dry up further and local bodies are forced to take on increasing fiscal responsibilities. I am in my 60s and I have never seen property taxes in my neck of the woods go down. Ever.
Wish that you were right, jjinla, but I fear not.
Well, I’m not in my 60’s, but while I was “sitting in front of the fire, sipping champagne” in a house that was 35% underwater, in 1992, I successfully petitioned the assessors office for a dramatic reduction.
This was in Los Angeles. It was a very common practice. So common that mass mailing scams arose offering to do it for all the property holders for a fee, when it was a simple thing to do on ones own. Of course, many used the fee services, cause the couldn’t break away from the fireside and champagne. They were having too much fun.
I did that property tax reaprasial also, and I remember the mailing scams as well. HoHo they think of everything out there don’t they.
I did get a substantial reduction on a condo I bought in LA. Bought it from a bank for $95K when it had previously sold for $260K and then $160K. I showed I had paid only $95K, which I thought under Prop 13 would reduce my property tax to $1200/yr. They did reduce my tax a lot, but not all the way down. Maybe they were using some BS argument like my price was far below fair market. Pooh, i WAS the fair market. Anyway my point is, under Cal and maybe Fla law, it should be possible to get individual reductions based on lower purchase prices. At the same time, I agree w/ you that the spending by municipalities is not going to decrease, so they will get the tax by hook or by crook.
Typical two-faced govt bull. As prices go up, all high sales prices are fair market value and the new assessment is based on the sale price. On the way down, however, the old assessment sticks. The screw you on the way up, and they screw you on the way down.
they screw you at the drive thru also.
This could be the nail in the coffin for San Diego. Just as the city economy starts improving (slightly) from increasing property taxes (or at least the scraps from the table after Sacramento has taken their share) then every FB gets the value reassessed.
Gee maybe it’ll be time to start eliminating the pork.
Real costs? What if you bought something you could afford with a 30-year fix and don’t sell, ie, used your head?
“What if you bought something you could afford with a 30-year fix and don’t sell, ie, used your head?”
I’ve met both these guys in California and they are gonna be just fine:)
I too met one of these guys….but I wasn’t aware that there was another.
What is Susan Bies smoking? The stock market has begun its freefall! You would think that on a day when employment figures were substantially revised upwards and the unemployment rate sank to its lowest in 5 yrs, the market would be up. It has begun.
Don’t know what Susan Bies was thinking, but the market was thinking that maybe the Philips curve was not really dead, but rather just dormant for a while.
“Bies told reporters that the economy is ’still running at a solid pace outside of housing.’ While the housing slump may see even ‘further softening,’ that may be limited by ‘relatively low’ mortgage costs, income growth and recent stock-market increases…”
Bies would like to buy some FL swamp land? Oops! So sorry; we’re sold out.
Buy Fla swamp land now or be priced out forever.
All they had to do was log onto John Williams’ website: http://www.shadowstats.com to see the truth about what’s really going on with economic data. But in reality the people at the top have long known the truth and they have long known that what they were doing was wrong…just like Ken Lay long knew the truth and that what he was doing was wrong. Now the people at the top are getting into CYA mode in the main stream press so something that smells very bad must be around the corner.
“…so something that smells very bad must be around the corner.”
Agreed, it’s going to get worse than we think and much faster than we think. Also, makes me wonder what’s really happening at FNM.
My Dad is big time short on FMN. My concern is that stock, like GM and a few others, is the type of stock that the people at the top are inclined to keep propped up. All they have to do is print phunny money and buy that POS. I know it sounds conspiratorial, but clearly we have a cadre of bankers exerting far too much influence without any sort of checks and balances. If there were a proper sort of oversight, then rational minds would not have gotten us into this horrible mess in the first place. Some very very bad stuff must be around the corner and they, the Greenspan Gang, can’t keep a lid on it any longer. Like the gig eventually expired on Ken Lay, the same goes for this cadre of bankers.
What time is it? It’s time for the little guys who were foolish to get screwed. Time for everybody’s money to go to “Money Heaven”. Time for the FB to walk the plank, or twist in the wind.
They are not going to lower rates and it’s pretty obvious what the net result on the housing is gonna be. Fait accompli.
“I know it sounds conspiratorial,”
sometimes a conspiracy exists. I’ve spoken of my tinfoil hat conspiracy several times here, but will restrict it to this:
If there is no conspiracy to let FNM unwind slowly and quietly, then WHY are they not delisted? No financials x 3 years, and no even attempt to garner them, and yet not delisted?
Bailout.
When FNM is unwound, then PERHAPS the housing market will be allowed to implode. not before. remember: FNM= implicit guarantee, regardless of the US govt trying to explicitly deny it. Also remember: FNM investors are CALPERS and every other large govt pension fund in America. It was the “safest” place to put your money (that darn implicit guarantee again)
when FNM is unwound from its positions, and those that be feel it’s safe again, then we’ll see financials, then FNM will be done, it will likely bring down Freddie too, and the housing market will implode.
20th century bailout (e.g. Chrysler) = tell the world all about it.
21st century bailout (e.g. FNM) = don’t tell a soul.
BTW the Chrysler “bailout” was actually a loan guarantee which didn’t cost the taxpayers anything (but of course would have if Chrysler hadn’t pulled through).
Loan guarantee which didn’t cost anything? Since when is insurance available for free (unless the government is giving it away)?
Chrysler paid for the loan guarantee. It was not interest free and as I recall the governments juice included 500 million shares of Chrysler at $3.00 per share that the government sold at $15.00 per share back to the company. Iacocca’s legacy was his ability to foster the ‘K’ car on an unsuspecting public along with the “bimbo box”.
Dont worry about FNM…As long as they dont report their
numbers, everything must be fine!!
As long as FNM’s stock price never goes down and they are not delisted from the NYSE, everything must be fine as well.
Can’t someone sue the NYSE for selective enforcement? If not that, what about shareholder lawsuits against the NYSE when FNM does finally fail (since not delisting constitutes unwarranted support misleading investors as to the safety of the security)?
O.C. mid-October home sales down 33%
DataQuick’s latest O.C. home sales data, for the 22 business days ended Oct. 17, strongly hints that October was the eighth straight month where the sales pace was 20 percent or greater below the year-ago pace. The last time we saw as deep a drop running for as long a time was in 1991. The most recent median price was a slim 1% above a year ago. If that trend was to hold for the entire month, it would be the smallest apreciation since May 1997. Here’s how it looks by the slice:
Median price Change vs. ‘05 Volume Change vs. ‘05
Resale houses $665,000 -0.7% 1,739 -28.6%
Resale condos $440,000 -3.3% 702 -39.4%
New residences* $717,500 +9.8% 293 -37.3%
All homes $613,000 +1.0% 2,734 -32.7%
* Includes single-family homes, condos and converted apartments
its in the bag!!!
Heaven in 2007!
Ha ha ha
Great in ‘08!
Fine in ‘09!
(sorry)
In the pen in ‘10….
still working at 7-11… in 11.
Hey everyone - check it out. Today’s San Fran Chronicle has an article about the growing number & following of bubble blogs. Ben is mentioned by name:
http://sfgate.com/columnists/lloyd/
Wonder if these kinds of spot-on articles in the MSM press, which get more readership than our humble blogs, will start to make the sheeple think twice about buying right now. MSM articles/opinion pieces like these help slow a slowing market even further. And this one was brutally honest in its writing, too.
This article really deserves its own thread. Not just because we are fans of Ben’s site — but because of the influence sites like this have on real estate markets the country over, by educating people and allowing us to exchange the truth as we actually see it on the ground (and not as filtered through the Real Estate Industrial Complex).
Also, as a longtime Lloyd basher, I was surprised by the fairness of her article. I guess she’s decided if she can’t beat the bears, might as well join the bears (at least for this week’s column).
I just emailed her to thank her for her good reporting and encouraged her to keep up the good work! Reporters like Carol who tell the truth about housing should be inundated with accolades from us bloggers!
Lloyd hasn’t always told the truth about housing (many a wild-eyed fluff piece using realtor-speak as gospel have flown from her pen). Hopefully her newfound enlightenment will develop into a trend, and not just prove a one-off.
The MSM is developing an interesting symbiosis with blogs like this one. After all, lots of eyeballs go to any dead tree paper’s website every time one of us links in an article.
O.C. builder’s orders off 62%
California Coastal Communities from Irvine, builder of Brightwater at Bolsa Chica, says ….
During the first nine months of 2006, net new orders decreased 62% to 62 homes compared with 164 orders during the first nine months of 2005. Our cancellations increased to 10 and 27, respectively, in the three and nine months ended September 30, 2006, compared with 9 and 18 in the comparable periods of 2005. At the same time, backlog as of September 30, 2006 decreased 72% to 31 homes compared with 112 homes as of September 30, 2005, while the value of homes in backlog decreased 58% to $22.0 million from $51.8 million. The Company’s inventory of unsold homes increased to 17 as of September 30, 2006.
This slowdown reflects an overall softening of current demand for new homes, as well as an oversupply of homes available for sale. The Company attributes the reduction in demand to reduced affordability of new homes due to rapid price increases over the last six years and declines in consumer confidence related to concerns on the part of prospective home buyers about the future direction of home prices and their inability to sell existing homes. In addition, many of the large national homebuilders operating in the Company’s markets are attempting to reduce their inventories by offering incentives and / or lowering prices.
This is worth repeating…
“The Company attributes the reduction in demand to reduced affordability of new homes due to rapid price increases over the last six years and declines in consumer confidence related to concerns on the part of prospective home buyers about the future direction of home prices and their inability to sell existing homes.”
How do Mr. Fishers comments reconcile with the Chicago FEDS report issued which stated this whole housing deal was based on FUNDAMENTALS??
Or these comments from the NY FED:
“My view is that the run-up of home prices has been driven by the fundamentals,” says Dick Peach, an economist with the Federal Reserve Bank of New York. He figures we’ll have a soft landing.”
One of Peach’s “fundamentals” is interest rates. Too bad rates have increased since he wrote his research paper on this subject a couple of years ago to a level which implies that home prices have to fall by a considerable amount for prices to realign with his “fundamentals.” Too bad the Fed will not be able to lower Fed Funds rates without a risk of spooking the bond market, which would send long-term mortgage rates higher and fundamental values of homes still lower.
The thing that kills me about the “Fed Model” for stock valuation is that lower rates automatically mean higher stock values, right? Hmmm. Didn’t seem to work too well in the 30’s.
“The War of the Roses” had an easier reconciliation.
It just occurred to me Fisher was the one who made the “eighth inning” comment a couple years back. That is, he said the Fed was in the “eighth inning” of its rate hike cycle when it turned out there were six or seven more hikes to go!
IOW, back then his opinion was a few, moderate hikes were enough. Now he’s saying the Fed shoulda acted more drastically! Same guy!
I’ll try to dig up where and when he said this, but it was a VERY big deal in the markets when he said it.
Found it, first thing on google.
http://www.msnbc.msn.com/id/8060354/
June 1, 2005. Fed funds was 3%. Now it’s 5.25%, so there were NINE hikes after he said it. Only the Chicago Cubs in the Steve Bartman game had a longer “eighth inning” in history.
Having re-read Fisher’s comments about doing our ‘duty’ by running a massive current accounts deficit, this guy (and his big, toothy, used-car smile) comes off more and more out to lunch. He has been way off the mark for a very long time, and I do not believe his comments today. Zero credibility. And pass, great link. Thanks
Which just goes to prove that if you prognosticate, do it often and be all over the place. Then you’re bound to be right once in a while and can trumpet yourself as a genius. Elaine Garzarelli anyone?
This $40 mill lying campaign by NAR is disturbing. Clearly it is an act of desperation as a means to the raping, robbing and pillaging. But how effective will it be? Enough to merely delay the inevitable or worse yet, a tool among many to right the market? We want to believe that it isn’t possible but is it?
Maybe we ought to start our own newsprint campaign to counter the BS.
“Maybe we ought to start our own newsprint campaign to counter the BS. ”
I would donate to that.
Ditto.
I’ll pass. People who are stupid with money deserve their fate.
Besides, Suzanne researched this.
wow, 40 mill
lawyers take note - go get em
how can it be good to be on both sides of a trade?
it’s either good to seel or buy
can’t be both
LIErah
When you’re a broker and you make money off of commission on the trade.
That’s right. Lereah doesn’t have crossed fingers behind his back, he’s telling the truth. It’s always a good time to buy and sell…. for the broker. Who else is there to care about?
Might I humbly recommend a “guerrilla” media campaign as an alternative…I have procured a couple dozen of the stickers here:
http://www.nbdinz.com/sites/pufftags/store/condo_arrow1.html
The “Overpriced Shit*y Condos” one…and will be making good use of them in NoVa’s Condo Canyon…
Might I humbly recommend a guerrilla viral marketing campaign…
http://www.nbdinz.com/sites/pufftags/store/condo_arrow1.html
I have purchased several dozen and will be making good use in NoVa’s condo canyons…
Migh I humbly suggest a guerrilla marketing campaign using these:
http://www.nbdinz.com/sites/pufftags/store/condo_arrow1.html
“Washington Mutual, the nation’s largest savings and loan, is laying off 255 workers as part of its efforts to trim costs amid a downturn in the national housing market. Sixty-five layoffs in Sacramento, Calif., and 190 in Austin, Texas, will take effect by the end of December, spokeswoman Darcy Donahoe-Wilmot said Wednesday.”
What kind of scrooge lays people off during the
ChristmasHoliday season?So, let’s see, no layoffs during November or December. January - that’s holiday, too, I guess, or too cold - can’t layoff people then.
Gee, what months DO you suggest we permit employers to make staffing decisions? Or have shareholders and management lost all their decision-making rights, and should be forced to carry unneeded workers indefinitely?
Imploder feels June is good month for personal “rightsizings”. Imploder live near good surfing beaches. Gee, thank you for asking Paul in Jax. Most Big Boss don’t ask.
But my birthday is in June….can we take June out of the mix also?
Oh relax. No one is abrogating any shareholder or management rights. I’m just saying that’s especially heartless. But that shouldn’t surprise us… the REIC has been heartless all along.
I worked in an engineering office in Houston in the 80s where they laid off folks on Christmas Eve. You couldnt even find a box to pack up your personal stuff.
Pardon, but these kinds of issues actually interest me. Once you make a management decision to trim staff you really need to eliminate the affected employees as quickly as possible or it leads to rumor, undermines morale, and interferes with the strategic direction of the firm. In this respect, letting workers go when there are lulls in activity, such as around holidays, probably on balance makes more sense than at other times. Whether there are or aren’t severance packages or other considerations for laid-off/fired workers is of course a separate issue.
Having had to manage layoffs, the best time for the employees was the Christmas holiday season. January is a good month for new employment and gives the laid off workers the best chance of getting quickly hired. It seems cruel, but try finding a job in August.
“letting workers go when there are lulls in activity, such as around holidays, probably on balance makes more sense than at other times.”
Yes, and it makes the Christmas party “a real GAS!”
Better yet, wait UNTILL the Christmas Party! Hand out pink slips in envelopes that usually contain christmas bonuses! You might wanna write that one down!
Am I the only one that feels like that NAR is basically spending $44M to try to send a message to the major media outlets to get them to stop writing bad articles on the real-estate market? Payola?
Good point. I bet this will basically be a PRINT campaign. Cause TV producers just read the papers (and the net) to get their story ideas. An attempt to throttle the baby in the bassinet?
“In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets,’ Fisher said. ‘Today, as anybody not from the former planet of Pluto knows, the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country. It is complicating the task of achieving our monetary objective of creating the conditions for sustainable non-inflationary growth.’”
I don’t see the problem. The fed looked at a low “core” inflation rate as it lowered rates, and now that core has greatly increased. It’s time to raise rates again.
HAHAHAHAHAHAHHA.
The fed will keep short term rates as low as possible so that those with resetting ARMS can jump into a new ARM, resetting the ARM ticking time bomb by 2-5 more years. I’m sure there will be a solution to this problem by then.
We’ll se an adjustment in what consists of the “core CPI” before we see a raise in the Fed Funds Rate.
Core CPI at 6%?…. well not if we switch to this new hedonic adjustment! voila, 1.6%… Perfect!
I love Susan Bies’ comment: Sure, the Titanic is running smoothly and performing well, except for that gaping hole below the waterline. Everything looks great topside, as long as you ignore belowdecks. To further the analogy, she’s more worried about the engine’s running temperature than she is about a couple of tons of cold seawater hitting the boiler.
I tried to nest this under the comment regarding an ad campaign, but couldn’t do it.
So…might I humbly suggest a guerrilla viral marketing campaign?
These stickers say “Overpriced Shi**y Condos” and those in the DC area will likely start seeing them pop up. I encourage you to join in the fun!
http://www.nbdinz.com/sites/pufftags/store/condo_arrow1.html
Saw those at the beginning of the week at David’s Bubble Meter blog. They look like fun but are a bit pricey, at least the use-once ones.
are you guys asleep at the keyboard? did you guys notice the bad news for FBR and NEW? I also see that both are off almost 30% from their highs. I haven’t been following them closely and didn’t realize they’d tanked. the only thing after the homebuilders and the lenders is the banks. are they holding up?