“This Is Not The Bottom”: Greenspan
Some housing bubble news from Wall Street and Washington. “On Monday, Comstock Homebuilding Cos. said it swung to a quarterly loss of $5.8 million, from profit of $11.5 million in the year-ago quarter. The company said in the third quarter ended Sept. 30 it recorded a non-cash pre-tax charge of $1.8 million as a result of impairments to its real-estate inventory.”
“Total quarterly revenue fell to $35.3 million from $78.4 million a year earlier, as net new orders dropped 21%. The company said home-building gross margin for the quarter decreased to 6.8% from 30%.”
“Investors are looking to home builder Toll Brothers Inc. to provide an update on the health of the luxury housing market later this week when it reports preliminary quarterly results before the market opens on Tuesday, with a conference call later in the day to discuss its outlook.”
“‘We expect orders to fall 34% year-over-year in the fourth quarter despite slightly easier comparisons, an anticipated 30% increase in communities and more attractive incentives,’ wrote Banc of America Securities analyst Daniel Oppenheim in a research note.”
“Real estate investment trust Saxon Capital Inc. said it swung to a third-quarter loss on a higher short-term interest rates, continued price competition and an increase in delinquencies. The company said net interest income, or earnings from interest on deposits and loans, fell to $18 million from $47.3 million in the year-ago period.”
“The net mortgage loan portfolio grew to $6.8 billion at September 30, 2006, an increase of 9% from September 30, 2005.”
“The factors contributing to the net loss in the third quarter of 2006 were increased short-term interest rates, continued price competition, an increase in delinquencies, as well as a decrease in the 2/3 year part of the forward LIBOR curve, which negatively impacted the Company’s derivative valuations.”
“Accredited Home Lenders Holding Co., a nonprime residential mortgage lender, said Monday third-quarter earnings plunged 55 percent as the company booked a lower premium on loans sold and higher provisions for repurchases.”
“‘Our recent performance has been negatively impacted by fierce pricing competition, ongoing product contraction, anticipated higher delinquencies and losses, and activities associated with the acquisition of Aames Investment Corp.,’ the company said.”
“Lime Financial Services will hire most of Meritage Mortgage Corp.’s sales staff and some employees in operations as Meritage’s parent company, NetBank Inc., exits the nonconforming mortgage business.”
“NetBank CEO Steven F. Herbert said the company is ‘working aggressively’ to refocus on core banking and conforming mortgage competencies. NetBank’s nonconforming mortgage operations are expected to cease by year-end.”
“Irwin Financial Corporation IFC, a bank holding company focusing on small business and consumer mortgage lending, today announced the Corporation sold substantially all of its conforming, conventional mortgage segment operations, including the majority of the associated mortgage loans and mortgage servicing rights.”
“This discontinued segment reported a loss, including disposal costs, during the third quarter of $13.4 million. ‘In the home equity segment,’ CEO Will Miller said, ‘our results were well below our expectations earlier in the quarter, largely due to the effects of clean up calls on the last of the pre-2003 securitizations and the accounting for certain economic hedges.’”
“Senior mortgage banking executives recently delivered dour forecasts for the next year, according to coverage from MortgageDaily.com. The chairmen and CEOs of Freddie Mac, Fannie Mae and IndyMac predicted rising delinquency and a cooling mortgage market as rates reset.”
“‘Obviously we’re going to have a period where delinquencies and foreclosures are going to exponentially grow,’ one of the executives said. ‘It’s going to be a fairly tough correction,’ another added.”
“A UBS analyst downgraded Home Depot Inc. and Lowe’s Cos. amid expectations that the sluggish U.S. housing market will ‘weigh significantly’ on both companies. Noting that both stocks’ prices and earnings expectations have been bucking the broader trends of soft housing data and prospects for ‘continued weakness,’ UBS analyst Brian Nagel lowered his ratings.”
“By Nagel’s reckoning, as much as half of the same-store sales at home centers is linked to changes in the macroeconomic environment for housing. ‘The housing market in the United States continues to slow more than initially expected,’ Nagel said.”
“The U.S. housing market will weaken further, but the sharpest decline is over as inventories of unsold homes thin, Former Federal Reserve Chairman Alan Greenspan said on Monday.”
“‘This is not the bottom, but the worst is behind us,’ Greenspan said.”
“Greenspan also touched on the potential adjustment in loan costs for home buyers with nontraditional mortgage products. While some individual buyers may feel the pinch as their payments rise, Greenspan said those changes were ‘very unlikely to have a macroeconomic effect.’”
‘The former central banker said he is “reasonably confident” the United States will not slide into recession because businesses appear to be strong, as evinced by strong corporate profit margins and healthy levels of capital investment.’
‘On interest rates, the former Fed chair cautioned that global factors that helped push down long-term interest rates, helping fuel the U.S. housing boom of the early part of the decade, are not permanent features of the economic landscape. On Monday, he said that forces such as a flood of new workers into the world economy after the collapse of communism and the global integration of China were one-time events that will eventually stop playing a role in keeping long-term interest rates as persistently low. ‘There is a turning point but I don’t know where it is,’ he said.’
So in other words, after a nice period of deflation caused by globalism, cheap labor, and our productivity miracle we are going to see the mother of all inflations? Are you the chicken or the egg Mr. Greenspan?
I personally think that GS, JPM and C should not count as corporations in the industrial sense especially with the record bonuses being paid to their employees this year. The average payout to a GS worker this year will be $400,000. Printing money, nice work if you can get it.
Right, and businesses will continue to expand despite the consumer being unable to further lever their assets to feed consumption. The resulting increased inventory will turn into magic pixie dust which will magically fall into consumers’ ears.
The dust will wake the consumers who aren’t suffering the effects of higher rates which have caused their mortgage expenses to rise by thousands of dollars/month. They aren’t suffering because greenspan says so. Foreclosures, reduced consumer spending, cancellations in the housing industry, bankruptcy in the building suppy industries. These are inconvenient details which should be moved to the footnotes because greenspan says so.
Therefore, awakened by greespan’s magic pixie dust, consumers will arise from their 6mo stuper and buy, buy, buy houses, cars, jewelery, etc…etc…
And once again no harm will come to the American economy. Because, well, nothing really matters. Either consumers will keep on spending or if they falter business spending will remain strong. Or, consumers will keep on spending or if they falter business spending will remain strong. Or ….
Because greenspan is just that good.
Dipster:
Great fairy tale! I have become convinced that Greenspan is suffering from dementia and is delusional. The present over-confidence that seems to prevail in D.C. and Wall Street is stunning. We are not immune to another 1929, despite all the hand holding from above mentioned parties.
Greenspan’s view is based on the asumption that the house inventory is going down. However, another possibility is that the number of homes for sale is leveling off during the weaks sales period of fall and winter and will pick up again in spring. Is the number of homes for sales stabilizing because the inventory is starting to be cleared by sales, or is it just that people are waiting to sell their homes. If they wait too long, they will find that prices are already well below what they expected. Does anyone know what typically happens to inventory during fall and winter. I expect that inventory might decline even if sales are weak. I for one, would get tired of keeping my house read to show when hardly anyone is visiting the hopes for a sale are very low.
It is normal for inventory to drop down to a low in December and start building up again in January.
I don’t know about the rest of the country but here in Ohio the inventory has declined due to expired and withdrawn listings. Sales have dropped from last years numbers and the sales which have occurred have not had any impact on the available housing units.
What I am seeing from our local MLS figures is that the number of available units has dropped to similar figures from a year ago. However when I view expired and withdrawn listings from this same period I see a 300% increase from last years numbers. In short, large numbers of people have given up trying to sell their homes.
“Reasonably confident” is not the same as “confident.” Not by a long shot, especially when uttered by a former Fed official notorious for weasel-wording.
“‘This is not the bottom, but the worst is behind us,’ Greenspan said.”
Greenspan once said something like ” it wasn’t the FED’s job to tell people the truth”
Perhaps someone here has the exact qoute.
“The U.S. housing market will weaken further, but the sharpest decline is over as inventories of unsold homes thin, Former Federal Reserve Chairman Alan Greenspan said on Monday.”
“‘This is not the bottom, but the worst is behind us,’ Greenspan said.”
“Greenspan also touched on the potential adjustment in loan costs for home buyers with nontraditional mortgage products. While some individual buyers may feel the pinch as their payments rise, Greenspan said those changes were ‘very unlikely to have a macroeconomic effect.’”
I respect Greenspan and the fact he tried to make the fed more data driven and more proactive rather than reactive.
However, I must respectfully disagree with him here. Builders continue to build at faster than the absorption rate right before a time when I believe (strongly) that credit is about to tighten. Not to mention all of those condos/homes in Florida, Sacramento, San Diego, Pheonix, Las Vegas, DC, Palmdale/Lancaster, Ventura county, the inland empire, …
Oh, and do I need to mention the issues with selling a home around Detroit?
Not to mention my LA is now the most overpriced real estate market in the world!
link, WARNING PDF!:
http://www.demographia.com/dhi-ix2005q3.pdf
And when I discuss it on my blog of zero readers.
http://recomments.blogspot.com/2006/10/housing-affordability.html
Neil
Greenspan is fearful of being the fall guy during the aftermath of the bubble. He knows he’s entirely responsible and the blame game is only now getting started. He will be remembered as the guy that sunk the economy.
I’m sure he’s quite aware of the scale of the bubble and has some appreciation for the lunacy of the affordbility disconnect. What he isn’t recognizing, in public at least, is the unprecendented freight train of defaults that will overwhelm the marketplace.
It’s his Polyanna way of continuing to push out the inevitable. The further out it goes, the more likely BB gets stuck with the blame…
I think this pretty much hits the nail on the head.
For Greenspan to admit the obvious would be tantamount to yelling fire in a movie theater. You cannot keep the real estate ship afloat by telling the truth. Truth has been and will continue to be their enemy. The truth is the one thing that brings this house of cards down. All it takes is one prominent government official speaking the truth, to send homeowners rushing to the exits to sell. This real estate crash will truly be one for the ages. The Japansese real estate crash is a good example for America. Newsflash to American homeowners-Cut the price to WHATEVER it takes to SELL, SELL, SELL. A bird in the hand is worth two in the bush.
Japan could be a model for what happens next, as you say. Then again, Argentina could be a model instead. And won’t that be fun?
There’s no way Greenspan gets out of this mess scot-free. The American people are more than willing to go along with happy-talk as long as things are going their way. But when there’s a crisis people will look for a scapegoat and Greenspan has a big, ol’ bullseye right on his wrinkly body. He will go down as the “maestro” of the biggest financial meltdown in history.
Santa Barbara,Pebble Beach and the San Francisco Bay area are the most expesnive markets in California with the high desert,Riverside,etc. and Sacramento being more affordable.It is Placer County and Elk Grove,Galt area that are building still so many houses but you have to remember this is the end several years of land acquisition,planning and finally the execution phase,building. This process was begun years ago and funded more recently and is simply being fulfilled. Inventory has to also account for new homes but forgets to incorporate the four fold increase over last year of older homes.
The company said home-building gross margin for the quarter decreased to 6.8% from 30%.”
______________________________________________
So much for that supposed ability to DROP prices and still make money.
???
Crispy, I really respect your analysis, but 6.8% is still making money. Patience. Its going to be a long cold winter.
Neil
Yes,
And the inputs are getting cheaper:
1. Land prices are falling
2. Lumber prices are falling
3. Labor prices are falling
4. Other materials inputs prices are falling (granite, pergo, stainless steel appliances)
Most importantly, to stay in business, they need to build. Even at a loss to generate cash flow. If they don’t they might as well declar bankruptcy and lay off everyone. That would be calamitous to shareholders.
John Doe,
Thanks for bringing that to light! We don’t give this all important factor near the “press” it merits. All during the upswing we were told that everything from concrete to copper was going up b/c of the demand! Well now what’s their excuse? I feel for builders that overpaid for everything from joist hangers to plumbing fittings right up to the half a$$ed lot this whole house of cards sits on but it’s hardly my problem!
I think that you might be overstating the adjustments to non-lumber construction materials. Stainless steel is definitely not dropping anytime soon: nickel hit an all-time high (nominal prices) a week or so ago. Zinc is also still up in the stratosphere (major component of die cast). Copper is also proving to be difficult to keep below $3.30/lb.
There have been reports in Bloomberg’s commodity coverage about the Chinese using previously undisclosed stockpiles to help cushion the rises in prices of these metals earlier this year. If true, demand (and hence prices) has been artificially kept low for most of the year despite record-setting prices. Most experts believe that despite a slowdown in US residential building, global consumption still exceeds global supply capacity for copper, zinc, and nickel (aluminum still has excess capacity, but as the price of copper soars so will demand for aluminum, particularly where engineering standards are more lax). Unless the Chinese have another 6 months supply of metals hanging around, first half of 2007 is going to be much tighter than previously expected.
For example, last week Credit Suisse published a report forecasting the price of copper to rise by as much as 66% in Q2 2007.
John Doe,
Can you explain what you mean by still operate at a loss to stay in business? I thought that if you operated at a loss for long enough, that the IRS would just tell you to close up shop (assuming the market didn’t crush your stock price and drag you down first).
Walt 526,
And don’t forget the implications on price that the LME delivery default had on Nickel.
Yup, that one caught my eye too. Kind of like the old saw, “while we lose money on every transaction, we’ll make up for it in volume”.
I don’t think all the inputs are getting cheaper fast enough.
1. Land–while prices are falling, homebuilders have a fair amount of expensive land in inventory already–lower prices aren’t going to help for near term earnings.
2. True.
3. To my understanding, labor prices haven’t really fallen yet–subcontractors may need to sharpen their pencils a bit more when bidding jobs, but I think that the first thing to impact pricing from subs will be the subcontractors cutting their margins.
4. The bulk of the cost for a house is in lumber and concrete. Lumber has come down, concrete has not.
I think cheaper inputs will help somewhat, but not enough to keep many publics from announcing losses in the coming quarters.
“1. Land prices are falling”
I thought they had optioned themselves to the hilt. So this means the value of those call options to buy land has dropped to $0 — 100% loss in many cases. Are you saying this has already washed through their balance sheets? News to me…
That is gross margins. Before the real expenses.
I remember doing some work for some mid-large size builders in the early 90’s. The game was to show strong gross margins - as they claimed the bankers looked at this for strength. They would put as many expenses as they could BELOW the COGS section of the income statement.
Meanwhile they were losing their a$$, but they still had stron gross margins. I see this crap returing again.
Crispy (TM)
Crispy … your right about that…
Aaagh…
Good point.
Its like the airlines. Often their operating margin is in the black yet they suffer a loss…
So I sit corrected.
I wonder how many will file BK? I’d bet most of the big ones will still be around in 10 years. They just will have reduced the cost of purchased land via debt forgiveness.
Neil
NO! They lost money this quarter. Gross is not the same as net. Gross does not include all of a firm’s costs.
Also -
This company lost money. Looks like they moved some expenses “below the line” to show they still have some gross margins:
On Monday, Comstock Homebuilding Cos. said it swung to a quarterly loss of $5.8 million
Right, and if they are selectively building on their cheaper inventory of land, that would hold down operating costs. Accountants can do all kind of things to distort if that is their intent.
These subprime guys are quietly walking away.
Crispy,
I know little about accounting, but I have suspected accounting sleight of hand from the builders. Based on your experience from the early 90s, how much longer do you think they can keep this shell game going?
This accountant says the soonest anything will happen in terms of inquiry (waaay before prosecution) will be most likely March ‘07, after the ‘06 financials have been reported. Later, though, if they can get an extension.
I wish Mr. Greenspan lives a long, life without any of his mental facilities impaired in any way. Hopefully our economy is as healthy as he says it is - but if not - let him see the pain he has sowed.
Contrast what he says to the two previous housing market threads, Florida and the Mid-West, and you can easily conclude he is not entirely plugged in to the day to day conditions of these markets.
P.S.,
In addition, contrast his statements to some of the downgrades (Homedepot and Lowes) and pessimistic outlook for anything housing related within this thread such as, “‘Obviously we’re going to have a period where delinquencies and foreclosures are going to exponentially grow,’ one of the executives said. ‘It’s going to be a fairly tough correction,’ another added.”
I’m not sure why he bothers to chime in like he does. He must be quite wealthy at this point and could spend his time not focusing on the economy. I guess to build a reputation like he has/had, you must have a pretty big ego and I agree with the comments that he is working very hard to preserve his reputation.
Preserving reputation would be correct, methinks. Since he knows what he has done, he will play this out as long as he can - because he knows full well that numbers are not the only thing that drives markets. Say it with me. . . PSYCHOLOGY.
…and in this case “Psychology” is just an elegant synonym for MINDF**K
He makes more $$$$ now than he ever did at speaking engagements. We haven’t heard the last of AG… until the bubble bursts wide open and all the fingers are pointing squarely back at him. Then he’ll be washed up into obscurity - where he belongs.
a decrease in the 2/3 year part of the forward LIBOR curve
Can anyone explain that one? Specifically 2/3 year part of the LIBOR
Lemmy try. First, I assume LIBOR is quoted as the actual interest rate, not discounted from 100 as Eurodollars and Treasuries are. Thus a “decrease” is a decrease in yields/rates.
That part of the yield curve has been going down throughout the back half of 2006 because people are pricing in rate cuts and/or a US recession. Also there’s been somewhat of a flight to quality as people shy away from MBSs and lower-grade stuff.
This REIT prolly had derivatives in place to protect them from RISING rates, tho. They were following the traditional thinking that rising rates, for whatever reason, would harm their business.
So when intermediate rates fell, the value of these derivatives fell. Even though such lower rates should, in theory, stimulate the overall economy and allow more people to afford/buy/rent their properties.
Need to add: If a recession starts in 2007 the end of the rate cut cycle would likely be a year or two out from that, or two to three years out from today. Hence THAT specific part of the curve versus some other.
LIBOR, like Eurodollars, are pretty much a bet on the future of Fed rate decisions, more so than Treasuries are.
LIBOR = London interbank (overnight) rate.
It is considered the true borrowing rate since there is no govt guarantee in the price. As opposed to 2-3 yr US govt bills which carry a guarantee of payment and therefore are assumed to be the risk free rate of return.
Basically 2-3 yr rate is where most bank/insurance/hedge funds go to finance large purchases of securities. So he is trying to say that the decrease in these rates will allow financials to lever up and continue to support financing activities for consumers & businesses.
LIBOR = London Interbank OFFERED Rate.
Doesn’t this blow a hole in the NAR’s big ad campaign? It would be pretty hard to sell someone a new house when all the newspapers are quoting real experts that say we’re nowhere near the bottom. I guess they’ll have to switch to TV ads to target those that don’t read newspapers.
They plan to roll TV commercials out in January. Will be curious to see what the market is like then……will they still be quoting August ‘06 stats to make things look good?
“Doesn’t this blow a hole in the NAR’s big ad campaign?”
As most people argue on this blog, people decide the price of a home.
In general, it could be argued that the economy is good because even in “the slums around here,” the homes are selling for quite a bit more than they were in 2000– so at least some of the “price increase” stuck– so more taxes are collected and more income is captured.
Like “stocks,” house prices are based on a market cap– the expectation that all similar houses will sell for the same price.
While the 2005 prices are sticking, the inflationary economy is still being driven by price increases prior to 2005.
I’d love to see some research on this.
Isn’t a bubble a great way to redistribute wealth? Most of the time, people just associate wealth with one particular individual rather than the redistribution of it– multiplier effect.
Great spoof of the NAR ad!!
http://njrereport.com/images/nar-big.jpg
Thanks! (I did that spoof)
you = awesome
LOL. Great stuff, you should work for the onion.com
This may not be the best thread to post in, but I wanted to share some stats and thoughts on conditions in the RENTAL market. There’s been a lot of talk about how the housing bust is a boon for rental companies and landlords, since people who can’t buy have to live somewhere. But I’m skeptical. I think the rental “boom” may have run its course due to the increased amount of “reconversions” of failed condo conversions. We’re also seeing many more stuck flippers become reluctant landlords. In fact, a few different measures of rental market tightness/looseness are now starting to shift. More analysis here if you’re interested …
http://interestrateroundup.blogspot.com/
I agree with your analysis Mike. The wild card for Florida apartment complexes, however, will be insurance and tax costs. As both increase, apartment complex owners will be forced to increase rents. Some SFH rental owners, however, may have some pricing wriggle room.
Anecdotally, however, I received some promotional mail to visit an apt complex that was planning to go condo but the market shifted so now they are back into rental market as a luxury brand. Another observations is that their 3 bdrm 2 story townhome apts are roughly the same price and in some instances $100 above comparable 3 or 4 bdrm SFHs.
“As both increase, apartment complex owners will be forced to increase rents.”
But will renters be forced to remain in them? For one thing, SFR and townhouse rents are incredibly cheap in many parts of Florida, as FBs try to keep their gator fed.
You are right. Landlords can raise rents all they want, but they may experience vacancies, which would motivate them to keep their rents competitive.
“Greenspan said that a group of nonpartisan policy makers could broker an effective solution for the Social Security shortfall in a mere “15 minutes.” In fact, it would take that long only because the first 10 minutes would be devoted to pleasantries, Greenspan added.”
Behind door number 1 we have tax increases, behind door number 2 we have cuts in benefits, and behind door number 3 we have the elections, no changes. So Mr. SSDI-5150, section-8, obese, tattooed slob and father of three special education losers with free lunches — what will it be?
1. Index benefits to CPI rather than standard-of-living or whatever it’s called
2. Raise retirement age to 70
3. Collect SS tax on unearned income (interest/cap gains etc)
Done and done. I’m fully in favor of #1 and #2, and you can prolly sell a lot of people on #3.
Number 3 is the key to making it work but to further the point, remove the cap on earned income. And there is the added benefit of reducing the 15.3% to less than 5% and never have to worry about SS insolvency again. I doubt it will happen as there is a shrieking minority loonies who want SS to “wither on the vine”. In that case, let it wither as those who advocate the destruction of SS will pay the ultimate price.
Number 3 is the key to making it work but to further the point, remove the cap on earned income. And there is the added benefit of reducing the 15.3% to less than 5% and never have to worry about SS insolvency again. I doubt it will happen as there is a shrieking minority loonies who want SS to “wither on the vine”. In that case, let it wither as those who advocate the destruction of SS will pay the ultimate price.
clarification reducing the 15.3% SS tax.
One more time: “reducing the 15.3% SS tax”.
duh.
Well, yes, I’d love to see SS just go away. I’d love to see a ton of other gvt programs just go away. But barring that…
One problem with removing the cap on earned income is you’ll have more people doing what John Edwards does — creating investment vehicles that shift earned income to investment income, thus dodging the SS tax.
The super-rich ALWAYS have ways of dodging taxes. As super-rich friend told me one, the smart people aren’t the ones writing the lax laws, the smart people are the ones making all the money and getting around the tax laws in the first place. At some point they can just move out of the country to a tax haven and pay no SS tax at all.
Also, that’s pretty much making it a means test.
I’d rather see SS tax on ALL income (including gains from housing!) but only up to a certain level.
“I’d rather see SS tax on ALL income (including gains from housing!) but only up to a certain level.”
I think that is reasonable, say, a certain level that maintains SS solvency.
Before doing anything to “maintain SS solvency”, they need to make tighter rules about where money paid into SS can go (I’m thinking some sort of “lockbox”)–I’m tired of the SS program being used as a slush fund for the rest of the gov.
Remove the cap? Hmmm, the rich pay and the rest collect… that’s called welfare, not Social Security.
Please stop with the political class warfare crap.
OT:
This Isn’t Their Moment
For the first time in years, it’s possible to lose money on a New York apartment.
Note in the NY mag article, on one FB is stuck with two mortgages and does not even have the option to rent the old place due to co-op rules.
Co-ops really limit your ability to cover a problem by renting. I know someone trying to unload a fantastic UWS 1 bedroom apartment with penthouses overlooking the river. He already bought a much larger condo and has been trying to unload the co-op for 6 months now. The price has dropped from around $1.5M to $1.35. He bought it for $1.16M in 2003. I hear he is getting offers at 1.25. Did I mention he has an ARM about to reset on the smaller pad. Did I mention he sank 70K into repairs. He has deep pockets, but watching as a spectator has opened my eyes
Here’s the solution from MSNBC — mortgages designed for off-the-books workers without social security numbers. “The slumping housing market could get a $200 billion boost from new immigrant home buyers if mainstream lenders start using alternative methods to score credit, a national group of Hispanic real estate agents said Friday.”
http://www.msnbc.msn.com/id/15551056/
I have a personal anecdote in this same vain. I’ve been studying for a certification exam for the past month. I go study at Borders or Starbucks around the San Diego area. On several occasions, I’ve been witness to closings happening in the Cafe! Now that may not sound that radical to you…but I haven’t mentioned how it was conducted. It was conducted with a translator…for english to spanish. Don’t misunderstand me here, I couldn’t help but overhear what was going on as they were no more than three feet away from me. The dollar values of these transactions?? Well over $500K. Now what am I supposed to infer from these observations?? You tell me…
Mortages? Sheesh. Around here they just pay cash. Seriously. In the heavily Hispanic areas of Waco you can easily pick up a 3 br bungalo for around $20 grand or about the price of a new Ford F150 truck. Here are a couple of typical examples
http://www.realtor.com/Prop/1064645430
http://www.realtor.com/Prop/1064295889
http://www.realtor.com/Prop/1070514886
those homes would fetch 500k here in the ghetto areas of los angeles.
Wow, I can’t imagine what it would be like to have a $124. a month mortgage payment. Does anyone know what taxes and insurance are like in Waco?
Here’s the solution from MSNBC — mortgages designed for off-the-books workers without social security numbers. “The slumping housing market could get a $200 billion boost from new immigrant home buyers if mainstream lenders start using alternative methods to score credit, a national group of Hispanic real estate agents said Friday.”
Mortages? Sheesh. Around here they just pay cash. Seriously. In the heavily Hispanic areas of Waco you can easily pick up a 3 br bungalo for around $20 grand or about the price of a new Ford F150 truck. Here are a couple of typical examples
http://www.realtor.com/Prop/1064645430
http://www.realtor.com/Prop/1064295889
http://www.realtor.com/Prop/1070514886
Oh, great. Lender-sponsored affinity fraud. Just what we need.
I’ve stated this before here, this group is already tapped. They’ve been giving suicide loans to illegals for a few years now. They use a TIN number instead of an SS number to get credit. My former landlady was one of these. The people who bought my house were of this set. I think the great majority of purchases that are happening these days are from this group of barrell bottom types.
Once these elections are over, i think the MSM will really get a hold of the bubble issue. Even the reports i have seen havent really addressed the root causes of the problem. They like to refer to it as a “slump”. A slump is gonig 4-50 in baseball. This is a slaughter. It’s just that the masses are not willing to admit it yet. When the lead story on all three networks is the bubble and when the reports actually explain that it is not a slump but, a huge ponzi scheme played out on the public by multiple enablers……this is when we will know that our message has arrived.
I think I know the answer to this question but I’d like to do some perception checking: What is this huge ponzi scheme?
from wikipedia
A Ponzi scheme is a fraudulent investment operation that involves paying abnormally high returns (”profits”) to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business.
i think that about sums it up unless you were looking for something more quantitave with its relation to the current housing market
You know, of course, whatever party “wins” in this election will get blamed for the housing damage/fall-out coming. People will forget who set it up and blame whichever party is in power at the time.
Blowing up the two-party system is long overdue
Who cares… Their will be enough blame to go around for the next decade.
“People will forget who set it up and blame whichever party is in power at the time.”
People will blame whichever party the mainstream media (NY Times, LA Times, etc) tells them is to blame. I wonder which one that’ll be?
The problem in 3 easy sentences that cannot be argued with: 1) Lenders disconnected income from loan qualifications. 2) Greenspan sunk teaser rates to a minimum. 3) Prices disconnected from underlying community income when EVERYONE thought they could afford a $500,000 house/condo. Now come the resets. Lordy, this is going to be bad.
“‘This is not the bottom, but the worst is behind us,’ Greenspan said.”
Don’t be surprised if you see Greenspan on some NAR commercial in the near future touting the benefits of homeownership!
How can anyone possibly argue that the bottom has been reached when so many of the relevant players are still in a state of denial over the matter? To listen to these people there’s been some magical time warp this past quarter - from no bubble - to bubble’s behind us. There are people out there buying into this logic aren’t there?
Yuck.
Sorry for being a bit off topic, this is too great not to share:
http://www.signonsandiego.com/uniontrib/20061105/news_1h05mailbag.html
“QUESTION:My house has been for sale more than 18 months. Despite scores of open houses and showings by agents, no offers. We can’t figure out any ideas to sell it without a dramatic drop in price.
ANSWER: The primary reason a home doesn’t sell is it is overpriced. Or, maybe you have an agent who isn’t effectively marketing your home in the local MLS (multiple listing service), newspaper ads, Internet Web sites such as http://www.Realtor.com, and networking among local agents.
Here’s another example of a delusional seller, agent, or both:
A 3,500 sf home in Rancho Cucamonga, CA recently sold for 769k. A slightly smaller home on the same street was just listed for 949k and the agent says “seller very motivtaed”, and “will accept offers up to $1M.” Zillow estimate is down 16k in one week to 726k. Should be a long cold winter….
Maybe if the seller is really smoking hot, there might be some kind of sexual incentive for a buyer to really gert Fd by the seller.
Well, my answer would look something like this:
ANSWER: First off I’m not sure what your question is. I don’t see anything you wrote that is phrased in an interrogatory manner, or that ends in a question mark.
Barring that crucial omission, if your intended question is, “What can I do to get my house sold?” it appears you already know the only possible answer.
“It is very difficult to definitively identify a bubble until after the fact — that is, when its bursting confirmed its existence,” Greenspan said.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2002/08/31/BU229125.DTL
H&R Block delivering another nasty earnings bombshell tonight, FYI. Co. warns profit per share will miss forecasts in the fiscal year ending 4/2007 due to bigger problems at its Option One mortgage arm. Co. alsoconsidering the old “strategic alternatives” there — meaning it’s looking to dump the subprime ops on someone else.
Link to the release:
http://biz.yahoo.com/bw/061106/20061106006324.html?.v=1
http://interestrateroundup.blogspot.com/
I knew it would end this way; they got sucked into a high margin growth sector and now they got their asses handed to them. LOL! What were they thinking? They’re a tax preparation company. I guess I answered my own question.
‘This is not the bottom, but the worst is behind us,’ Greenspan said.”
Classic Greenspeak. If it’s not the bottom, then how could the worst be behind us? Even if he is alluding to percentage differences or to the rate of change, the bottom that lies ahead is still worse.
They should give him the Pulitzer prize for fiction. Then hang him.
Thanks for the laugh.
When is Greenspan going to give up the ghost?
Greenspan’s comments only further attest to his early onset Alzheimer’s
We are still doing very well here in Borrego, partly because we are about a year behind most other markets in the market cycle, and partly because local civic leaders are very careful about which projects are approved, with the result that little or no mass building is going on here. There is a lot of project finishing-up going on as individual builders and remodelers work off the last of their financing. Lumber has indeed gone down about 10% at Home Dump and Lowe’s, but nothing else has. Home Dump parking lot and store in La Quinta are noticeably more empty these days and some things are not being restocked. The general attitude here in Borrego is that it is nearing time to settle in for a few quieter years and make payments/collect rent etc until the market heats up again. It is my opinion that most of the housing bubble naysaying is coming from people who were expecting easy money, (i.e. ‘investors’, ’speculators’, and ‘house flippers’), but for those of us who get down and do the loving work on our properties with realistic expectations, there is no problem, because we aren’t out for the fast buck. Those out for the fast buck are now starting to get burned, and I saw a couple of annoying house flippers here barely get out with their hides. I expect 4-5 more quiet years before things heat up again, and when it happens it will largely be a result of overall population and economic growth rather than any tricks the Fed may appear to apply. How I know that is that there is a world with 6 billion who nearly all want to own a home and there will be a few hundred million more of those around five years from now. If one looks at Planet Earth as a real estate market, it is obviously only going to get more expensive over time–and increasingly so as more warm bodies appear. For now, however, I am really looking forward to a few years without the easy money people interfering with a good, solid, long-term thing. If your bubble has popped, I am sorry for you. Mine is not a bubble: it is a rock. And it is very hard work, but well worth it.