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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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One sad aspect of this downturn is going to be the long-term societal impact, with regards simply to neighborliness. I think there will be two big phenomena (sp?) that we’ll see that will last a really long time:
1. Neighbors will be angry at neighbors for years, because for many, similar houses in their neighborhood will be selling for far less than their own, continually pointing out how foolish they were for paying such a high price at the peak. Some will still not get it that their house is worth less than when they bought it, and will continue to be angry at sellers for ruining their comps. This will be happening for a very long time.
2. All the empty houses on the market in certain areas are going to get trashed by vandals, especially houses that were owned by developers that went bankrupt, and repo’s that couldn’t sell. This will also cause a lot of neighborhood angst, and calls for greater police services and such.
It will be sad in some areas, and for a long time.
There will be a sad, sad time. But remember that during the Great Depression, people weren’t driven by the almighty dollar. They cared for others and helped where they could. I remember poor people coming to our door and my mother always gave them a sandwich.
I was about to mention that, ironically, people are typically at their best when times are bad, and their worst when times are good.
There were entire neighborhoods in suburban Houston, Dallas and Austin that went from middle class to basically ghetto complete with abandoned houses and graffiti in the last bust.
I’m sorry I covered my TOL short yesterday although it was just a short term trade. May put it back on today along w/a few others.
Here’s an idea for a TV show” “Eat This House”
“house haters” for HIVtv 07 season
they haven’t developed an episode in over a year
-good short ?
I remeber talking to an X houston resident that said he lived in a new hood that turned into a ghetto in late 80’s
Pls elaborate with numbers, you need not reveal how much you had invested. I am just curious about your entry and exit points.
5K short at 33.30, cover 31.96
I did it because I was bored and noticed the 50% retracement on the HGX
And short again. This time will hold.
This is my exact fear about buying a new house. Where we are looking, there are many new subdivisions with small or zero lot lines built between 2000 and present. The divisions built around 2000-01 are already looking like section 8 housing, I could definately see people not being able (equity not there) or not wanting to keep up their property when it is depreciating or flat since these are already lower end houses. My brother in-law bought a house in a new subdivision outside Oakland from a lottery type sale about 2 years ago. The neighborhood is already gone to shit multiple familys, empty houses, nothing selling and very few english speaking residents, one family was even keeping chickens and roosters in their yard.
Interesting and related is the topic of personal relationship breakdown as fallout induced stress drives married coulples to the brink over ‘investment’ decisions made during the bubble. Sadly, a spike in the already sky high divorce rate could occur as “I told you so” type arguments abound among married FBs. Divorce attorneys could see a real windfall from a bubble rupture such as the one we are currently watching unfold.
Hey PBB,
I agree. The tide is going down around here and a few couples I know don’t seem too happy with seeing their partners naked.
A couple I know who are getting divorced. Last night I found out that the Mrs., who was counting on half the house, probably isn’t going to get anything as her husband had been refinancing all along to supplement their life style.
I wonder how Mr. and Mrs. “Suzanne” are doing.
(from the commercial, not you, Suzanne_I_researched_this.
)
Oh man there’s a funny spoof commercial waiting to happen.
I picture them inside a bancruptcy lawyer’s office - papers in front of them -with the wife saying “Come on. We can do this.”
“Did you see the size of that garage (at your parent’s house)”
“(that we’ll be living in)”
How about the strain on relationships with friends who have gotten themselves into financial trouble. It’s going to be kind of hard to go out and have dinner when all they can afford are two for one hotdogs and splitting a fountain drink at the nearest 7-11. Of course they probably still won’ t give up cable tv and suvs, but I digress.
I don’t watch TV so I’m slightly biased but that is one thing that truly amazes me. People spending $100 a month and more for cable TV and then more for Tivo too?
Maybe they have to make sure they get as much media coverage as possible that backs up their delusional view of the housing market and more generally, how wealth is generated. $100 bucks a month is worth it for the sage advice they get from the media on investing in real estate. Not to mention they get Cramer!!
> one thing that truly amazes me. People spending $100 a month and more for cable TV and then more for Tivo too?
I think 100 USD is too high. We spend about half for basic cable plus internet (we have no landline phone).
Basic cable for us includes a TiVo like service, which is VERY helpful for watching movies without advertising.
I too do not pay for cable. When I bought my current house it had a tv antenna on the roof that brings in a perfectly clear network picture. I had to chuckle because the first time one of my friends came to the house the first comment he made when coming in the door was “when are you going to have that antenna taken down?” It’s still there after three years and I’m counting the money I save every month by not have cable and all the bells and whistles!
Sometimes I wonder what would happen if everyone on this blog wrote an email or two to the MSM. Shows are always requesting topics and you could mention that they could be the first media outlet to expose the bubble, expose the loan scams, toxic mortages and unethical apprasials. Email shows from 20/20, 60 minues, Oprah to the Today show. Feed the producers egos and maybe this will get out there and we could see prices fall faster.
I’m already avoiding people who’ve made dumb financial decisions during the late-great housing “boom.” It’s the easiest way I know to keep The Troublemaker (my mouth) from saying something unkind.
Actually, I know several people (myself included) who don’t go out for big events much just because we’re saving like gang-busters for the coming bust. Time with friends is fabulous regardless of what we’re eating or doing. But then again, most of us went to Art school together and we never seemed to have moved out of the starving artist mindset despite our now steady, bigger incomes.
I’m also one of those “sad” people who pay for cable TV because I’m addicted to old B&W movies and HGTV.
BTW - more and more shows on HGTV with the do it yourself format instead of the “spend eighty bagillion on contractors” type shows. They are also running commericals which feature ideas on how to still sell your house during the housing slump - note they call it a slump and not a bubble - which I love. The more the sense that housing is taking it in the shorts is distributed among the masses, the happier I am.
I tried to watch HGTV and I swear it’s all product placement for overpriced ugly furniture and lamps and fabric. I never did see a bona fide garden show. Well of course not — what company is going to product place a $2.99 bag of dirt and a $3.99 flat of tomato plants?
Divorce attorney bubble coming?
On the other hand, couples in financial distress may come to figure its easier to try and work things out than add the additional burden of carrying two households.
Not to worry, once President Rodham assumes the postion the new, new deal will be implemented all the spare homes/condos will be given to the homeless. Also there will be world peace, see how easy it is, problem solved without any pain.
forgot free-er healthcare- most on this board like to forget the community banking bill’s source
Forget about Hillary, that’s just a possibility…
More importantly, if you owned a home before Bush got into power, you made out like gangbusters, but now comes the hangover, with 25 long months to go in his term, before he can creep back into the woods in Crawford and clear brush, til the cows come home.
A lot of what his administration has done borders on criminal, but we were all making money, so it was easy to overlook a lot.
The worm has turned~
Amen on all counts.
“once President Rodham assumes” At least I detect some sort of a brain that actually functions. I understand from some inside source that Hillary actually can read a book.
In some places there are too many houses, no doubt, but in others it is only an institutional problem that will keep houses vacant. Perhaps there will be a push to get the large houses back in circulation, as group homes for seniors with self care limitations or to house the homeless, for example.
Can’t we just put the jobless to work building homes for the homeless?
Problem solved..
jb
Sadly, someday we will feed the homeless to the hungry.
Soilent Green?
Sure, as soon as the shameless get done selling houses to the brainless.
Trashed houses? Already happened to one in my neighborhood. The “For Sale” sign out front was like a magnet for vandals.
Even if the homes aren’t vacant, a number of people in newer housing developments might find themselves living with less than desirable neighbors.
As people get shaken out of their homes, there will be a number who will try to maximize their cash flow and keep the house. Whether this means renting the house out to a ton of people by room or pushing for more Section 8 housing for the higher rent, those who can afford to keep their home will watch their home properties drop even further when their neighbors, now first-time and desperate landlords, will rent out the place to anybody who has a pulse. Never mind that it is likely that this will depress the value of the home even faster.
Isolated incidents like this are tolerable, but once you get a critical mass of undesirables, the path back up can be tough.
“All the empty houses on the market in certain areas are going to get trashed by vandals, …”
All of them? I would guess that some will serve as meth labs, and that whoever works there will guard the property with firearms…
Was in Austin recently and things seem very bubbly there right now (lots of condos). Wondering what folks think of the possibility of a retrenchment there this time around?
Hide the women and children.
Which of the new real estate related web sites (i.e. zillow, zip realty etc) will survive this real estate bubble? This is almost like a echo dot com bubble with all the new sites popping up.
He he - yeah I notice there’s actually quite a few new “housing bubble” websites even, that are very shall we say tabloidish. Eventually when the bubble ceases to be (when we hit bottom and eventually “normalize”) these will also go away.
Eventually It’ll actually be kind of a sad day for this blog even. Ben what do you think will happen then? Got any plans for it? Maybe we should all have a big get-together. Kind of like that funny Jack Handey “Deep Thoughts” -
“When the age of the Vikings came to a close, they must have sensed it. Probably, they gathered together one evening, slapped each other on the back and said, ‘Hey, good job’”
That is why Ben has the Money & Metals blog and the Foreclosure Blog.
Check the link’s on the right.
I’m refering more to sites related to RE sales as opposed to housing bubble sites.
I think it would be fun one weekend night if we all agreed to have a blog party. With the intelligence level on this board (myself not included I’m learning from all of you) that should be very interesting!!
are you the poster who was having a foreclosure situation with your apartment?
If you are, what is happenning with that?
Phillygal:
Yes!! Sorry to be so long on the update.
I had to move last weekend.
Soooooo…. She said she had someone ready to move in at 2000 per month (I was paying 1750) that fell through.
But with regard to my ex-landlord, she’s in another country….. Thus her reason for not answering. Now a RE agent is handling the lease and me.
Apparently he has the deposit checks ready for me as of today. I’ll feel comfortable when they clear.
I had to do a bit of threatening but it seemed to work. Part of it involved me threatening to take down the front fence I put up which cost me 400 bucks and effectively fenced in the entire yard where it wasn’t completely fenced in before. I also brought up the fact that the sewer backed up into the house and that I was exposed to e-coli according to my doc (I got mildly sick, fluish for three days) and that I’d sue her butt if she tried to mess with my deposit.
She gave in but I’ll feel comfortable when those checks clear. Now she has an empty house on her hands that is NEVER going to rent for 2k. There is a house down the road for 1950 with a garage.
She made a big mistake.
I’d put retirement money on the table that she lets the house go into foreclosure.
Will let you all know what happens.
On the blog party front, I’m up for an on-line (I know it’s not as much fun) party sometime and for any DC metro area people I’d be game for a HB pub crawl or something.
Novasold
I’d be willing to get together with the Central Cali Coasters bubblistas when we start getting spring inventory numbers. THAT should be worth celebrating.
Hell, I’d drive down for that.
You could have it in a Starbucks in a rapidly depreciating area. It would be fun to watch the eavesdroppers’ heads explode.
Zip is already bleeding and Zillow just made an announcement yesterday that I think is the kiss of death. I’d be surprised if they make it.
On the other hand, I see a large need for internet based house selling, buying and renting. The current model with 6% for the real estate agents is certainly outmoded. Maybe Zillow or Google can expand into that market. With easy access to the websites, one site need not to become a monopoly.
“”The current model with 6% for the real estate agents is certainly outmoded”"
I disagree, but then I’m broker. So even if I tried to explain why it would be met with disdain. So I won’t even bother as to the why.
In order for a site to be successful you would have to have a wholesale change in how the buying and selling process was structured. You would have to virtually eliminate the ability to sue for lack of disclosure. IMO it would be insanity for a site like google to undertake housing and assume that liability. They don’t need to go that route even if they had the ability.
The only way I see a website overtaking the business is if the whole process is federalized. Or if a zillow or a zip has a monopoly. The real estate industry is too fractionalized.
Even if zillow starts showing some success how long do you think it will be before Century 21, RE/MAX, Caldwell Banker et al puts up the same kind of website. They have the ability. Hell if I wanted to shell out the dollars I could have the ability. Then all your’re left with from zillow is a pretty FSBO site. There are tons of them already. No easy solution.
One of the things I get a chuckle from the posters on this blog. is when they parrot statements like agents are going the way of travel agents. You can tell they have zero business acumen and just parroting something that sounds good. Sort of like RE Agents parroting real estate always goes up and they are not making any more land. Statements that have no bearing on reality.
Zillow has a nice foundation I’ll give them that. But I look for their technology to be bought by the major real estate houses and turned over to the agents for their use. Here’s why if they continue on their current course the ad dollars are going to dry up if they start trying to charge the consumer to list their house their fee’s are going to be exorbitant which is going to loose luster ie: might as well list with an agent for free and pay for performance. Especially in a down market where folks are going to be counting ashtray change for gas money.
Federalization is the only way I see happening what some are wishing for and at the end of the day you have to ask yourself how you feel about that.
“…agents are going the way of travel agents.”
Yeah, I don’t think that’ll happen. There’s a HUGE differnce between booking a trip to Vegas on Expedia and buying a $300,000 home on Zip.
http://yochicago.com/today/web-sites/what-price-will-make-you-move_3326/#comments
“Don’t under-zesstimate Zillow. The real estate industry is poised for change, and Zillow’s positioned to take advantage of those changes.
Travel agents pooh-poohed the Zillow team when they founded Expedia. Remember travel agents?”
Couldn’t Zillow position itself as a free-market MLS-alternative, offering equal-quality listings to full-service RE offices, discount RE offices and FSBOs. They could trump everyone that way, probably getting a lot of Craigslist’s action, and their zestimates would become much less important.
Since they are a real-estate-only site, they won’t suffer the ignominious fate Yahoo did with its poorly-run real estate section.
Thanks for the link the following comment sums it up.
Zillow is part of this housing bubble. Many similiar real estate related web sites will fall by the wayside once housing corrects.
“”The CEO was on CNBC last night talking about this new feature. He readily admitted that they have yet to turn a profit and that they’re losing money but they’re confident they have a good business model. That’s the same kind of talk that you heard from execs at every dot com that went up in smoke six year.”"
If it’s true he changed his business model he’s realized he’s walking a fine line. Someone else made a very sharp observation on that link. In a down market no one is going to be offering you a make me move price when banks are tossing inventory for 50 cents on the dollar. Especially when you have moron setting prices on 8 unit apt complexes for 2 million located 10 feet from the train tracks. Zillow is a pipe dream of someone who had more ego then sense. His only option is to get it done with and turn it over to the agents and get licensing or royalty revenue.
“”Couldn’t Zillow position itself as a free-market MLS-alternative, offering equal-quality listings to full-service RE offices, discount RE offices and FSBOs. They could trump everyone that way, probably getting a lot of Craigslist’s action, and their zestimates would become much less important.”"
If you take away the marketing and the zestimates you have just another FSBO site. Why would discount brokers and full service brokers need zillow?
Since they are a real-estate-only site, they won’t suffer the ignominious fate Yahoo did with its poorly-run real estate section.
IMHO, after the subsequent government hearings concerning this RE collapse, it would be surprising to imagine the NAR existing as it does today. When there appears to be conflict of interest, collusion and anti trust violations, rightly or wrongly, laws will be enacted and fines levied. 6% is a commission fee of the past.
“”IMHO, after the subsequent government hearings concerning this RE collapse, it would be surprising to imagine the NAR existing as it does today. When there appears to be conflict of interest, collusion and anti trust violations, rightly or wrongly, laws will be enacted and fines levied. 6% is a commission fee of the past.”"
We’ve been here before, i say you’re wrong but time will tell. NAR pumps way too much money to the hill to get anything more than a slap on the wrist. Like or not that’s the America we know today.
”The current model with 6% for the real estate agents is certainly outmoded.”
> I disagree, but then I’m broker. So even if I tried to explain why it would be met with disdain. So I won’t even bother as to the why.
It seems that you’ve tried anyhow, and I thank you for that. I like to hear different well-thought viewpoints. My problem with the current system is twofold - 6% percent is too much (I compare with other countries), and the buyers’ agent has a conflict of interest between getting a high comission and getting the buyers a low price. (On the other hand, the interests of sellers and sellers’ agents are pretty well aligned.)
> Then all your’re left with from zillow is a pretty FSBO site. There are tons of them already.
Last year, I was on many FSBO sites, and I was not impressed by their search engines and the presented information or better lack thereof. Two or three FSBO sites that present more information better could attract many buyers who today still would use a buyer’s agent who gets more if they pay more. Additionally, the sites could offer standard forms (disclosure of defects), links to title insurance, home repair companies etc.
One difficulty for a trade without agent is the buyers’ visit of the actual property - home sellers might come across as unprofessional and too much involved with their property, which would make some buyers uncomfortable. Here specialised agents could offer their limited services for a fixed price. Another time, the buyers could bring a licensed house inspector with them into an empty house who points out the substance of the house but also prevents vandalism of pseudo-buyers. I don’t expect real estate agents and other services to go the way of the dudu.
Like or not that’s the America we know today.
The America we know today isn’t going to be the same tomorrow.
Realtors aren’t the best negotiators, certainly not the best legal advisors, and are totally unnecessary when it comes to finding and getting a loan. In the past they have been useful for finding homes, but the web does that better, too.
Oh, and the coming depression will financially devastate the NAR and kill their influence in DC.
IMHO, I don’t see them going away, but I do see their business model changing dramatically.
Well, I’d say the tone is definitely morose so far today!
Ben how about covering the switch from the housing market bubble to the commercial market bubble. It is certianly happening here in NYC. There is much talk by developers of building more speculative office towers. Coupled with a doozy of a housing bubble……..
Let’s talk about what some FB can do to enhance their life before their house goes into foreclosure. My suggestion is that they refi or take out a maximum HELOC and run to the nearest plastic surgeon for that total body reconstruction. The elderly can get rid of all those wrinkles, the younger set can lipo, inplant, and tummy tuck (after all, why should they have to put themselves out with excerise). And the best part of this is that the banks and courts can take their house, take their car, but they can’t take their body, and image is everything with this crowd.
too funny…
or maybe sad, I don’t know, it’s kind of terrible to contemplate a McMansionville depopulated of Stepford Wife Barbie-dolls.
Where would all the Barbies go?
my house?
do you have a plastic fetish?
That reminds me, I have to go grocery shopping. I love the grocery store in the late mornings.
If I were in the FB position - and before going BK, I would sue the realtor that showed me the property, the NAR, the builder if new, the mortgage broker(s), the end lender, (if over 80% loan - the mortgage insurance company) - I would scream theft by realtor deception with such famous quotes as “RE only goes up”, “10% is in the bag this year” etc. I would attempt to show theft from the MB and lender. I would sue under RICO and try to get triple damages.
No lawyer would take that on contingency. You’d be better off scraping up money for first last and a UHaul rental.
I agree that most lawyers would not take such a case on contingency, but there are a lot of idle lawyers out there and I would offer to pay hard costs - then with an idle lawyer, at worst, only out his time. I know plenty of lawyers that would do this lawsuit. And I believe these suits are being prepared as I write.
Do you think of FBs as victims? I don’t.
No - I have no thought that most FB’s are victims, but the question asked was “what some FB can do to enhance their life before their house goes into foreclosure…”. If I were in the FB position that is what I would do. The reasons are that it takes years for a lawsuit to wind its way thru the court system and I can still live in the house without making any payments pending outcome of the multiple lawsuits. In the words of Bobby Kennnedy, “Don’t get mad, get even”
What’s the status of your investor buddies? Are they up, down, breaking even, or just don’t have a clue?
Might talk about what’s going to be eliminated from the budget next year. Let’s see, we have landline telephone, cell phone, cable or sat TV, sat radio, internet connections, movie rentals, etc. How much do these hidden costs add to the consumer budget?
Anyone up for haikus? Here’s one posted last night:
one by one they fall
soldiers of liquidity
the sword cuts both ways
Winter of our discontent
a lot of time to lament
game over now
I’ve been interested in any stories people have about living through the “urban decay” period most of our larger cities underwent in the 1970s and early 1980s. What was it like trying to sell/rent/live in a typical place in the Upper West Side, or Kenmore, or Philly etc.? I’m not thinking of the completely blighted places such as Detroit or the South Bronx but the average neighborhoods where nobody wanted to buy and property tax revenue couldn’t keep up with infrastructure needs.
Everyone wants to live in the city now, or so the RE people say, but it sure wasn’t that way 30 years ago.
We’ve accepted a “throwaway city” mentality, which isn’t all that surprising…
I remember growing up in the mid 60’s and there was always a mr fixit in the neighborhood that could repair damnear anything.
When a new Bissell vacuum cleaner costs $39.99 @ wally world, why would you ever get your 10 year old vacuum fixed?
We have to get over this mentality.
Philly always seems to rebound in spite of itself.
We’ve had planned urban renaissance that worked out well: Society Hill
“organic” urban renewal, meaning it grew out of artists moving into deteriorating neighborhoods which then attracted restaurants, boutiques, etc: South Street , Manayunk, Northern Liberties
But the day of the neighborhood stronghold, (AKA South Philly, where folks who moved out to the burbs moved back into their former ‘hood cause they couldn’t take suburban life) are over. A lot of city folk cashed out during this last boom, and never looked back.
It remains to be seen if the fliphouses in marginal neighborhoods will eventually go to yuppies who get great bargains, or if the properties get boarded up as crackhouses of the future.
My parents bought an 8-room co-op in what was then a somewhat dicey part of Manhattan in the early 1970s. New York in the 70s and early 80s was a much grittier place than it is today, but I loved growing up there.
Minyanville
Speaking of Complacency
Let’s talk about complacency for a moment.
Ownit Mortgage Solutions, a California-based home lender, closed this week and told more than 800 workers not to bother coming back to work.
The Los Angeles Times reported that Ownit simply ran out of cash needed to meet obligations.
According to Bloomberg, Nonprime News, an industry newsletter, ranked Ownit as the 11th-largest U.S. issuer of subprime mortgages.
A reasonable question to ask, is didn’t anyone at Ownit see the problems with subprime lending coming?
Apparently not. Bloomberg says Ownit issued $5.46 billion of loans during the first half of the year, 44% more than a year earlier.
Of course, Ownit’s lack of vision isn’t isolated… either to the subprime industry itself or to Wall Street’s white shoe firms.
Merrill Lynch bought a minority stake in Ownit last year.
Meanwhile, Merrill this year has sold at least $4 billion in bonds packaged from Ownit home loans, according to Bloomberg.
Ownit joins Ameriquest Mortgage Co., Countrywide Financial Corp., H&R Block Inc.’s Option One, BNC Mortgage Inc. and other lenders in shutting operations or laying off employees.
Meanwhile, Sebring Capital Partners, a specialist in subprime loans, ceased operations on Friday, according to the company’s Web site.
Here’s where the complacency enters the picture. The closure of lenders such as Ownit isn’t where the story ends.
Consider Merit Financial, one of Washington state’s largest mortgage brokerages which laid off 300 employees and shut its doors this past spring.
According to the Seattle Times, the closure of Merit has left a trail of angry ex-employees, expensive lawsuits, unpaid taxes and government investigations.
Angry ex-employees?
Expensive lawsuits?
Unpaid taxes?
Government investigations?
That rings a bell.
4. Speaking of Subprime Loans
So what is the real source of the problems in subprime lending? Is it weak underwriting? Rising interest rates? And why, specifically, are loans which originated in 2005 experiencing higher default rates that other years?
According to the mortgage industry news source, Mortgage Daily, Michael Youngblood, a research managing director for Friedman, Billings, Ramsey Group, believes local economic conditions and natural disasters are the reasons subprime lenders are facing hard times.
A white paper by Youngblood examined the reasons why subprime loans originated in 2005 are experiencing higher default rates than loans of the same age originating in the two previous years.
According to Mortgage Daily, in the year ending July 2006 the weighted-average of mortgage rates of all subprime ARMs in each of the nation’s 361 metropolitan statistical areas actually fell by 35 basis points over the year to 7.12%.
Youngblood also dismissed deteriorating underwriting as the reason for higher defaults.
He noted that key aspects of subprime loans, combined loan-to-value ratio, debt-to-income ratio, and credit score, did not diverge from long-run averages.
So why the problems? Youngblood concluded that weak economic conditions in 95 of the 361 metro areas and the ongoing aftermath of Hurricanes Katrina and Rita in Louisiana and Mississippi are to blame for the increase in default rates in the more-recently originated subprime loans, Mortgage Daily said.
This is all a fancy way of saying “there is no national housing market, so there can’t be a national house-price bubble,” which is precisely what Youngblood said in a May 2006 interview in BusinessWeek.
Tell it to UK-based HSBC, the world’s third-largest bank, which on Wednesday said it had underestimated borrowers’ ability to repay mortgage loans in the U.S.
Much of HSBC’s woes stem from its 2003 purchase of Household International (now called HSBC Finance Corp.) a lender for high-risk borrowers.
HSBC Finance generated 31% of HSBC’s North American profit… but 65% of its non-performing loans, according to the National Post of Canada.
“Tell it to UK-based HSBC, the world’s third-largest bank, which on Wednesday said it had underestimated borrowers’ ability to repay mortgage loans in the U.S.”
Think you meant, “…inability to repay…”
or …ability to NOT repay…
Didn’t Crammer issue a “strong buy” on Ownit as it closed down for business. Really good turn around situation, according to the Pump and Dump CNBC talking head.
“He noted that key aspects of subprime loans, combined loan-to-value ratio, debt-to-income ratio, and credit score, did not diverge from long-run averages.”
Wait a minute…so they have ALWAYS been doing 100%, no doc, no closing cost, stated income/NINA loans to sub-prime borrowers in the percentage and volume that they have been recently? I fond that highly unlikely. Anyone in the sub-prime biz care to comment?
The reason it’s changed is that prices stopped going up.
When you can simply refinance into an I/O loan you don’t foreclose - rates now are higher than when most of these toxic loans where written.
Add in the fact that houses bought last year won’t appraise for what they have outstanding on the loan (since everyone went I/O they haven’t paid down a dime of the loan balance) - and even if they can appraise they can’t afford to refi as rates will be higher.
The endgame is here.
What is shaking up the yield curve today? Did someone set off an inflation bomb that I did not hear about?
http://www.bloomberg.com/markets/rates/index.html
I guess some folks are concerned the Phillips curve may have recently been merely dormant, not extinct.
—————————————————————————–
BOND REPORT
Treasury bonds dented by November jobs gain
Benchmark yield falls to its lowest level in more than two weeks
By Leslie Wines, MarketWatch
Last Update: 3:36 PM ET Dec 8, 2006
NEW YORK (MarketWatch) — Treasury prices sold off Friday, sending the benchmark yield to its highest closing level in two and a half weeks, after news of brisker-than-anticipated jobs growth last month put concerns about the Federal Reserve continuing to raise rates back in the forefront.
During a television interview, Treasury Secretary Henry Paulson described the November payrolls report as “very, very good news for the economy.” Paulson also welcomed wage growth that has supplemented job gains.
http://tinyurl.com/yjzdbq
I suspect that there are a number of financial players that are discovering a sudden need for cash and that this is the beginning of a selloff in everything. Gold, commodities, bonds, stocks.
Once the fly-by-night subprimes start going belly up it can’t be long until those Credit Default Swaps start being called in and certain people discover a pressing need to sell anything they have to generate cash to cover them.
I hope the printing presses and helicopters can handle the extra workload…
I’ve raised this question before, but never yet seen a satisfactory answer, so here it goes again:
Flippers, move-up and subprime buyers would appear to all have been recently knocked out of the demand queue by flat or falling prices. And anyone who was ridiculed for sitting on their hands while all the financial geniuses were cashing in on an ever-rising market certainly has little reason to change his mind at the moment.
So who is left to buy now?
In L.A.,
There are reams of afluent Asian buyers, especially in the San Gabriel Valley. Whether they realize the pot has gone off the boil, is another question, altogether~
If that’s the case, what have they been waiting for???
Who knows?
I’ve always given the Asian Culture kudos for in general, being smarter than other folks and maybe they caught on?
Many folks were making similar remarks about the Japanese culture back around 1989. “Financial genius is a rising market.”
I was thinking more in an education vein…
You’ve got me there; likewise if you are thinking in a household savings vein.
I thought there was a post a couple of days ago that Alhambra was down 10% from last year.
> So who is left to buy now?
People who change jobs or extend their families and haven’t educated themselves about the housing bubble. They think the market is what it is and it is now necessary to put 50% of their income into housing, because renting is not an approved way of life.
These people still fall into the move-up category. Re-read GS’ question.
If you count them in the move-up category, many of them have not yet been knocked out of the demand queue by flat or falling prices. I have one extended family relation in DC and one coworker here in MN who belong in this category - sad, but it’s their money they throw away by buying. The appearance that GS is talking about is still different where I live, but, and there I concur with GS, it appears the appearance is changing slowly towards less demand.
Let’s at least agree there is less move-up demand when prices are flat or falling than when they are going up 23% per year, OK? Especially when cashout home equity ATM loans were such a big source of consumption spending money in the past three years. How much less is for someone with access to the data to figure out…
How about a discussion about all the crazy things that have come about as a result of the housing boom, like all the silly home designs, building in locations like remote areas next to the power plant or out on the open prairie, all the crazy mixed-developments, the haphazard subdivision designs, and my favorite rant, HOA’s, deed restricted property and covenants.
My favorite would be the houses in el lay crammed into tight spots, a full sized home, with a backyard about 10 feet deep and the neighbors are so close you can hear when they change tv stations, around 20 houses in an area that would have held 5 houses in the 1960’s~
Yeah, that’s the ticket. $700k for all of that~
One of the things I get a chuckle from the posters on this blog. is when they parrot statements like agents are going the way of travel agents. You can tell they have zero business acumen and just parroting something that sounds good. Sort of like RE Agents parroting real estate always goes up and they are not making any more land. Statements that have no bearing on reality.
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I’m not so sure about that. Most RE agents I’ve known in my career are basically “average” meaning they have access to the MLS and can drive you around to show you houses. I don’t believe an “average Realtor” deserves a 6% commission!!… especially now days when you can do a lot of the pre-searching yourself via an internet service.
Also, If this RE implosion plays out over the next few years and there is major PAIN experienced by multitudes of FB’s / citizens, you could very well see some type of governmental agency come into existence (kind of like the SEC) to regulate an industry that absolutely needs regulating. If that happens (big IF I know) say goodbye to the NAR as we know it today!
And what the hell is the deal with “6 percent”? If you’re an outsider with no knowledge of a large city, wouldn’t you be willing to pay 7%? If you’re a resident in a small town like Omaha, wouldn’t you pay 5%? Surely the internet knocks at least 1 point off, right? It’s amazing how much more information we have at our fingertips 24 hours a day, than we had 10 years ago.
Does anyone think certain policies to help make homes more affordable may have inadvertently led many households down the dusty road to bankruptcy (I am thinking in particular about vanishingly-small-downpayment requirement programs)?
And if this is the case, was this due to an intentional plan to set off a massive wave of foreclosures, or was it simply due to a basic failure to understand the relationship between downpayment requirements and prudent purchase decisions?
I believe this issue is of paramount importance, as the NAR and HUD are in bed together to push for further relaxation of downpayment requirements.
http://biz.yahoo.com/prnews/061110/dcf040.html?.v=54
Off topic for sure, but looking up above, there’s a Nostradamus link.
Did he mention real estate, in his predictions?
I think we need to clear up some terminology. Many people object to the word “victim” being used to describe various and sundry players in this drama. From Webster’s on-line:
one that is acted on and usually adversely affected by a force or agent : as a (1) : one that is injured, destroyed, or sacrificed under any of various conditions (2) : one that is subjected to oppression, hardship, or mistreatment b : one that is tricked or duped
So what is the appropriate word to describe someone who suffers injury due to their own actions or their lack of forethought?
“one that is acted on and usually adversely affected by a force or agent…”
Including real estate agents?
> one that is tricked or duped
I think that is a category, into which a few FBs could fall.
> So what is the appropriate word to describe someone who suffers injury due to their own actions or their lack of forethought?
A fool?
Is it fraudulent when a home valued at $650K sells for $700K thanks to $50K worth of incentives and an appraisor willing to overstate the home’s market value by $50K?
How about a thread where everyone tells us where they’re located?
What will the falling greenback mean for the bursting bubble?
http://economist.com/finance/displaystory.cfm?story_id=8361260
“America After the Bust”
What will life be like 3 to 5 years from now?