Seller Flexibility A “Window Of Opportunity”: NAR
Some housing bubble reports from Wall Street and Washington. “Existing-home sales are expected to rise gradually in 2007 from current levels, with annual totals comparable to 2006, while new-home sales will continue to slide, according to the latest forecast by the National Association of Realtors.”
“‘Buyers, especially first-time buyers, with the combined benefits of seller flexibility and an unexpected drop in mortgage interest rates, have a window of opportunity. These conditions will persist in many areas until early spring when inventory supplies are likely to become more balanced,’ said David Lereah, NAR’s chief economist.”
“‘Prices in this buyer’s market are temporarily a little below a year ago when we were in a strong seller’s market,’ Lereah said.”
The New York Sun. “The economic ride in 2007 could be a lot bumpier than we’ve been led to believe. More and more potholes are starting to pop up, suggesting that talk of a next year’s widely expected soft landing is becoming increasingly suspect.”
“Merrill Lynch’s North American economist, David Rosenberg, has just dispatched a disturbing commentary to clients in which he notes: ‘It’s getting harder to call it a soft landing.’”
“A Morgan Stanley economist, Richard Berner, also raises the danger that the soft landing scenario may be at risk. Income data, he says, depict a rapid deterioration in fourth-quarter economic growth, one that will likely extend into the first quarter. ‘We need no convincing,’ he adds, ‘that the housing downturn still has a long way to go.’”
The Dallas Morning News. “A sharp downturn for the subprime mortgage business represents the latest sign of trouble in the teetering housing industry. ‘The housing market is going down,’ said David Liu, a mortgage analyst at UBS AG in New York. ‘In a slower market, it’s the weakest borrower and the weakest lender that are the first to go.’”
“The subprime skid claimed a local victim this month, when Carrollton-based Sebring Capital Partners LP said it was shuttering its operations. The failure eliminated 325 jobs, including 140 in North Texas.”
“Some 5.7 million subprime mortgages were outstanding as of June, or 13 percent of the total tracked by the Mortgage Bankers Association. Subprime mortgages accounted for more than 2 percent of the total in 2000.”
“Today, the U.S. homeownership rate stands at 69 percent. That compares with 65.1 percent at the end of 1995, according to the Census Bureau. The growth of subprime lending, fueled by new technologies and new mortgage products could have accounted for as much as half of the increase, according to two economists at the Federal Reserve Bank of Chicago, Jonas Fisher and Saad Quayyum.”
“‘Subprime lending appears to be a very significant factor,’ Mr. Fisher said.”
“Many subprime mortgage lenders borrow money at short-term interest rates, lend it at long-term interest rates. Lately, however, that profit spread has been erased, as interest rates on benchmark 10-year U.S. Treasury notes have dipped below the rates for two-year Treasuries.”
“‘That has just killed subprime companies,’ said Sam Garcia, publisher of MortgageDaily.com.”
“Industry analysts said loan buybacks could have presented the Sebring with liabilities that outstripped its assets. Sebring Capital issued mortgages totaling $930 million last year, according to National Mortgage News. Sebring Capital issued mortgages worth $921 million in 2004, and $966 million in 2003.”
From Paul Muolo at National Mortgage News. “The biggest story this past week, hands down, had to be the failure of OwnIt Mortgage, a subprime lender 20% owned by Merrill Lynch. Sources tell us that 60 days ago OwnIt auctioned off $20 million in defaulted paper (buybacks) at a price of 70. (Par is 100.) Recently, it tried to sell $70 million in bad paper.”
“The bids, we’re told, were under whelming. Merrill owns somewhere between 20% and 25% of OwnIt. One mortgage executive told us that some Merrill officials are calling its $100 million investment in OwnIt one of the worst investments the mortgage group has ever made.”
From Reuters. “During the recent U.S. housing boom, mortgage lenders touted so-called exotic mortgages that allowed people to buy houses they could not otherwise afford. Now those lenders are bracing for the not-so-happy story of borrowers like Jesline Jean-Simon.”
“The Miami woman bought her two-bedroom condo a year ago on a 3 percent adjustable rate mortgage with flexible payments. When home prices in the city were blasting off two years ago, Jean-Simon was sitting pretty.”
“But now prices have eased and she works three jobs just to manage a mortgage that has ballooned into interest rates of around 10 percent. ‘I don’t sleep much,’ the 35-year-old says about her round-the-clock work schedule. ‘But the first thing that I pay is my mortgage because I don’t want my credit to go bad.’”
“‘One way or another, the industry is going to get a black eye,’ said John Taylor, president of the National Community Reinvestment Coalition. ‘There will be questions about tricks, fraud and whether these loans should have been made in the first place.’”
“But there is still a chance for lenders to take control of the issue, said Kurt Photenhauer, a top lobbyist for the Mortgage Bankers Association. ‘I think that we can make a pretty convincing argument that we want people to stay in homes,’ he said. ‘We get no benefit from people defaulting.’”
“A mortgage survey (is) due on Wednesday. In a hint at Wednesday’s data, October saw more foreclosure actions than any other month this year according to RealtyTrac.”
“Still, he said, lawmakers might get pushed along by the coming headlines about defaults and people losing their homes. If Wednesday’s data shows a serious uptick in delinquencies, he said, ‘our arguments get harder.’”
‘While the closure of Ownit Mortgage Solutions last Tuesday afternoon caught most of the market – including the lender’s own employees – off-guard, senior management at the firm spent their last few hours furiously trying to find a new partner, BankNet360.com has learned.’
‘Frank Raines says he should be accountable for the billions in overstated earnings and shareholder losses at Fannie Mae when he was running the joint. He just doesn’t act like it. Raines’ lawyer issued a statement that said, in part: ‘Mr. Raines strongly believes that, as the leader of Fannie Mae, he should be accountable for what happened within the organization, regardless of his personal involvement or fault. He does not disagree with the … statement [in an internal report] that ‘he was ultimately responsible for the failures that occurred on his watch.’
‘A growing number of analysts, including (consultant) Thomas Lawler are becoming disenchanted with the OFHEO index. The low estimation in which OFHEO is beginning to be held can be attributed to what the index excludes as well as what it includes. ‘Clearly, the OFHEO indexes are producing some pretty meaningless, and in some cases scarily misleading, indications of what home prices are doing in many regions,’ he says.’
Have no fear, Fitch Ratings is on it:
‘The U.S. housing market and the financial health of the consumer continue to be primary focuses in U.S. structured finance going into 2007, according to Fitch Ratings. In U.S. RMBS, delinquencies have been rising, which will likely continue over the next year. Fitch’s declining asset Outlook for the Prime and Alt-A sectors is attributable to the trend toward more risky collateral attributes.’
‘The Subprime sector’s declining asset performance and ratings outlook is due to increased borrower leverage and upcoming rate adjustments. The sharp decline in excess spread will put negative pressure on subprime RMBS ratings.’
“‘In a slower market, it’s the weakest borrower and the weakest lender that are the first to go.’”
Contrast this statement to DL’s target buyer — first timers. Is there a limit to this maniac’s foolhardiness?
“Existing-home sales are expected to rise gradually in 2007 from current levels, with annual totals comparable to 2006, while new-home sales will continue to slide, according to the latest forecast by the National Association of Realtors.”
if you make financial planning based on NAR predictions, you’re so screwed. it’s not even funny, but i laugh any way. hahahaha.
“Existing-home sales are expected to rise gradually in 2007 from current levels, with annual totals comparable to 2006, while new-home sales will continue to slide, according to the latest forecast by the National Association of Realtors.”
Of course existing home sales will rise in your mind David, because that is where your cult makes its money! Just throw the new homes and builders under the bus, because they don’t keep your gravy train stocked. Talk about trying to speak something into existence. If this guy were Pinocchio, there wouldn’t be enough Kleenex in the world to service that snout. He is pathological.
that’s a sharp observation banteringbear.
That is a blatant lie, isn’t it? Since when do people prefer owning an old house versus a new one? Don’t new houses basically set the market trend?
The Ownit Story reminds we of how quickly the sub prime spigot can be turned off. Overnight these guys are gone. I also love the denial letter released by MLN.
They are very disposeable folks I guess. Send them a pink slip through email and shut the doors and shred all the cooked books. Just shows you can’t trust your employer to really care about your job too much.
“Just shows you can’t trust your employer to really care about your job too much.”
Also, you need to be careful where you chose to work. If you’re working for a flybynighter w/out scruples, don’t be surprised by Ownit like outcomes.
We will see homebuilders also close up overnite leaving vendors subcontractors employees having to see the bk judge to get paid.It will be like dominoes no way to stop it.
after reading what the OFHEO index excludes and includes, Lawler is spot on. what purpose are they possibly hoping to fulfill?? tax dollars, WASTED.
OT-in today’s ny daily news there is an article saying how great the nyc market is going to do because of all the wall street bonus money
i’l try and get a link
here is the link
http://www.nydailynews.com/business/story/479007p-402972c.html
The Onyx condo mentioned in the article is on a pretty cruddy corner. across the street from the FIT building, diagonal from a housing project, and next to some lowrise buildings with dive bars. Pretty much no neighborhood.
Bonuses at the top 5 firms, plus compensation, this year will be larger than the income of the country of Vietnam.
that’s the sucking sound of the 401k money going into NYC and being distributed around here
But the outlook is not so great. The Economist had a cover story about how fast Wall Street is losing its lead in the world’s capital markets on their Nov 25 - Dec 1 issue. WS had over 55% of the world’s IPO proceeds just 6 years ago and now it’s less than 20%, behind London’s and about the same as Hong Kong’s.
Why would European or Asian companies come here for capital when most of the money come from Asian or European savers?
also IPOs are going out of the country because of Sabanes-Oxley. NYSE and NASDAQ losing out.
Sarbanes (!)
No way. (With some excpetions) anyone who works on Wall Street and is smart enough to have earned a big bonus is savvy enough to know that buying an illiquid asset at its historical peak is NOT a good idea!
Many though may not be experienced enough to recall that residential does indeed go down, even in highly supply constrained markets.
Housing is going down like a cheap hooker. It’s no surprise since the industry is led by RealtWhores.
“Seller flexibility?” Yes, I guess many sellers are bending over pretty far these days. LOL.
“The Miami woman bought her two-bedroom condo a year ago on a 3 percent adjustable rate mortgage with flexible payments. When home prices in the city were blasting off two years ago, Jean-Simon was sitting pretty.”
Why was she sitting pretty two years ago when she bought her condo last year? Maybe because she didn’t own a home then and she only needed two jobs to pay rent rather than three to pay the mortgage?
“‘Prices in this buyer’s market are temporarily a little below a year ago when we were in a strong seller’s market,’ Lereah said.”
Well David, in my area, prices are 13% off the peak (median price) and are closer to 20-25% if you HAD to sell seeing we have a mere 48 month supply. Maybe a 20% haircut is “a little below” by your definition but certainly not all the FBs. I hope “temporarily” means spring 2011, because that might be how long we have to wait this disater out.
I’ll never understnad why this guy is even quoted. Journalism in this country has gone to hell.
Actually, the quote is from a press release. But Bloomberg did pick it up.
DL needs to be buried alive in a granite casket.
Here’s an actual house that may work….ROFL
Looks like a tomb to me!
http://tinyurl.com/yfpjp3
That’s a scary looking house. Where are those windows that they are showing? On the side, or the back? Absolutely, no curb appeal.
BayQT~
Ummm… that seriously does look like a Mausoleum….
It’s the Frankenberry estate.
Did the previous owner experience storm flashbacks and decide he couldn’t live with windows anymore?
There are plenty of windows, click through the slide show.
My guess is that the person who built this house was very concerned about roadside car bombings and drive by shootings. Therefore the house is optimised against streetside threats.
Picture 11 gives a sense of a what a weird house this is. It’s like an empty stage complete with stagelighting on a track. I might add, that the front columns should be doubled as they are way too thin relative to the mass of the front wall.
Keith obermans worst person in the world goes to: David lereah, that would be real funny
Hilarious! That’s the “redneck taj mahal,” I guess.
Embalm, cremate, and bury. Take no chances.
Crap, I thought we were going to hit 60 months in Palm Beach, it looks like we may have to wait to 1Q next year to hit that milestone.
I am sitting in the middle of an accident just watching the action; its like being in the Matrix. The cars are crumpling around me, but ever so slowly. Oh well, I have time, I can get a view from all the angles because its taking so long to unwind!
I think we can hit 60 months. Obviously, people will be taking homes off the market for the holidays. I suspect after the Super Bowl the inventory will start to rise. More stuff from the builders coming online, $1.2 trillion in ARMs resetting, and a probable 56% increase by Citizens for insurance on March 1st will get us to 60 months and possibly beyond. It will get much worse before it gets better. FL really needs a bust as big as the boom to level things out.
LOL — what happened to pent up demand?
Looks like a lot of Floridians aren’t waiting for the next insurance hike. Latest UHaul index, actually from Budget as the UHaul site wasn’t responding. Prices are for a December 18 pick-up.
24 foot truck Raleigh to Sarasota- $432.
24 foot truck Sarasota to Raleigh- $1,906!
Hmmm, I wonder if I can get a gig “deadheading” these trucks back to Florida.
Oh god, if insurance taps up 50%…. It’s going to be like armageddeon down here!
God help all of us, honestly, this is really painful to watch, just wait as the intrest resets start, and god forbid, insurance goes higher.
That will truly be the endgame for S. FL, prices will start a freefall until we reach what will be, imho, far below the actual value of the home (just because of the mass herd mentality). Unfortunately, it could be so bad that it may have a really negative effect on the whole area (unemployment, empty subdivisons w/undesierables inhabiting, etc).
Some people question whether coastal insurance will be written at all:
‘Between hurricanes along the East and Gulf coasts and earthquakes along the West Coast, it is an open question whether the private insurance industry will continue to insure the coastline at all,’ said University of Pennsylvania economist Howard Kunreuther, an authority on disasters.’
I believe here in cali the ins companies are required to write quake insurance if they do business here.By the way i am getting a ‘feeling” we are due for another BIG ONE.
If the insurance industry acts on the premise that disaster prone areas are not places for habitation, then the insurers of last resort (the Federal taxpayers) will start getting lots more business.
Just as a reference point for you Floridians: Our insurance company claims the “full replacement value” of our house is $300K, even though we didn’t pay that much (including the land of course) to the bank that had foreclosed on it last year. But that’s the coverage we now have and of course it includes windstorm coverage. The cost is $750 per year. What would we be paying in Florida, five miles from the Gulf- $2,000? $3,000? More?
That might be OK, since the value of the land should not be counted in replacement value, unless you live on a sandbar or something.
I’m waiting for fire insurance to start going up around the country in the exurbs. This year has seen a lot of fire activity in CA and it’s a good excuse to kick in higher premiums.
One problem the insurance industry might face is a rash of “friction” fires. They occur when the mortgage rubs against the policy until they burst into flames causing a catastrophic fire. A real tragedy for the homeowner…….
Insurance companies have been through this before. Think Brooklyn NY, in the late 1970s.
Anyone stupid enough to try arson will get caught, and agressively f*cked.
disater = disaster. Sorry.
Was anyone quoted as often as Lereah in previous market crashes? I’m tired of seeing his name show up in the MSM as the “all-knowing” housing market economist even though his forecasts are consistently incorrect. At this point, shouldn’t the MSM be interviewing Robert Shiller for a better prediction of what the market will be like in 2007?
“Many subprime mortgage lenders borrow money at short-term interest rates, lend it at long-term interest rates. Lately, however, that profit spread has been erased, as interest rates on benchmark 10-year U.S. Treasury notes have dipped below the rates for two-year Treasuries.”
“‘That has just killed subprime companies,’ said Sam Garcia, publisher of MortgageDaily.com.”
I think Garcia’s conclusion is inaccurate for two reasons. One, subprimers pay a premium above going rates. Two, other reports on this blog indicate early defaults led to credit tightening.
mrkt Maven FL,
Good points. It sounded kind of fishy to begin with. This can be only a minor factor if at all. Ownit when under for a lot of reasons, like lending to anybody with a pulse.
What makes this even MORE fun is that we are now basically BACK to OCT 2005 levels on the 30 yr. FRM so all those clowns that ran out and paid peak of market prices b/c “rates may never be this low again” are taking it right where they deserve it! Secondly, now that we’re back flirting with previous lows, that hasn’t helped a lick making Lereah and NAR look even dumber for their jaw-boning the FED to stop w/ rate hikes! If cheap money were the answer we wouldn’t have all this inventory now would we!
What has killed subprime companies is buybacks from pooly performing loans. Their business was to have enough cash to loan, and to sell the notes quickly to replenish their coffers. After the buybacks, they have no money to lend, and no one to buy their loans, so no ability to get more money to loan.
Their business dried up, plain and simple.
“‘Buyers, especially first-time buyers, with the combined benefits of seller flexibility and an unexpected drop in mortgage interest rates, have a window of opportunity. These conditions will persist in many areas until early spring when inventory supplies are likely to become more balanced,’ said David Lereah, NAR’s chief economist.”
Notice how he targets the only class of consumer that doesn’t yet have a house - the first time buyer. And vaguely threatens them with the “window of opportunity”. The ole “Buy before its too late !” spiel.
And then he proceeds to do what nobody else can do. Forecast the 2007 housing season, including what the home builders are going to do !
Don’t economists have some sort of code of ethics ? Oh, I forgot, he is a real estate man first, then an economist. I guess not.
seeing how the market has been a on major downward trend for quite some time now, i am willing to miss this so-called window of opportunity and wait as long qas it takes for homes to become more “balanced with incomes of the non wall street king of the universe salary”
“Notice how he targets the only class of consumer that doesn’t yet have a house - the first time buyer…”
They are also the least experienced and informed buyer; as a result, they make good marks. However, as I alluded above, unlike some and by all means not all current owners, first timers have no equity to roll over and with current prices minimal downpayments. Therefore, relying exclusively on first time buyers to jump start the real estate transaction engine is extremely foolhardy.
“Therefore, relying exclusively on first time buyers to jump start the real estate transaction engine is extremely foolhardy.”
But vital. Without first-timers, there is no move-up market because second-timers have no one to sell to.
“The biggest story this past week, hands down, had to be the failure of OwnIt Mortgage, a subprime lender 20% owned by Merrill Lynch. Sources tell us that 60 days ago OwnIt auctioned off $20 million in defaulted paper (buybacks) at a price of 70. (Par is 100.) Recently, it tried to sell $70 million in bad paper.”
Anyone know more details on this stuff ? What is “defaulted paper” ? A bunch of houses where the owner has defaulted on the mortgage ? What about “bad” paper ?
Most mortgage companies sell off all of the loans they originate. Whomever the mortgage company sells to always have it in writing that they can reject a loan. This is what a buyback is, when a loan that is originated and sold to an investor has to be repurchased by the loan originator. Buybacks are horrible for an originator. It means the loan did not meet investor guidelines or was a first payment default. Usually when a loan is sold, the price is usually anywhere from 100-104 (assuming a loan for $100,000 is sold at 103, means the originator will receive $103,000 for the loan or a $3,000 profit for the sale). Because the loans are already bad and cannot be fobbed on anywhere esle, they are losing 30% on the sale of the loans. Meaning if they originated $100,000,000 worth of bad loans and they get 70 pricing, then they lost $30,000,000 on the sale. The $100,000,000 is a real number because that money had to be lent out to make the loan happen. Originate too many loans that have to be bought back, and you go out of business overnight like OwnIt. OwnIt might be a good name for this company because if you can’t sell the loans you originate, you do own it.
Does buyback=”bad paper” ????
Yes
“OwnIt might be a good name for this company because if you can’t sell the loans you originate, you do own it.”
LOL. In addition, that’s why Garcia’s inverted yield curve argument and conclusion was misplaced (see above quote). Like you described, the ‘marketability’ of Ownit’s paper was the leading cause of its demise.
The old borrow short/lend long thing was dead about 12 months ago when the yeild curve started to seriously invert. No one has been seriously doing that.
What ownit would have had used “warehouse lines” or repurchase agreements, which are basicly very big margin accounts. These are used to hold loans untill they can be sold. Typicaly the warehouse line is 90% LTV, and runs a few basis points over libor.
You do not make serious money from holding loans, but from selling them at a slight premium to the MBS market. So loan that ownit would originate would sell for 103, while ownit’s cost to originate was 101.5.
The buybacks kill you because either the warehouse lender insists that you take back the loan, or the final buyer does. If you calculate the ratio of Sales to working capital, it is very very high, and investors like that.
Ownit simply does not have the capital nor the structure to deal with non-performing paper. Taking back and disposing of one loan at 70 eats up the profit on 30 sucessful loan loans. One hiccup, and *POOF*.
But no one complains when the business model works.
Subsonic-
Who are the middle men that actually create the MBS? I take it the subprime lenders simply originate the loans, then package the loans to the financial institutions that then offer MBS.
Fannie Mae and Freddie Mac would be an example of an MBS middleman. Mortgate companies/banks sell them loans, they package them and sell them off to bond investors (countries, pension funds, Wall St., etc). The loan servicer accepts the mortgage payments, remit the full payment less a servicing fee to Fannie/Freddie, who in turn remit them to the bond investors.
Fannie and Freddie have products that compete with subprime companies, but the paper that an OwnIt would originate would not be something Freddie/Fannie would buy. The companies the Subprime boys sell to are more like Shearson Lehman, Bear Stearns, Merrill Lynch, Goldman Sachs, but as the case of OwnIt goes, even they have their limits of crap they will purchase.
Aren’t those the same companies that issue CDS to insure the MBS against defaults?
Fannie and Freddie originate mortgages and sell them as stright pass thrus to investors through dealers like bear, lehman, et al. Those same dealers also take many of those mortgages and put them into trusts that issue various securities with varying claims on the collateral (the mortgages) in the trusts. These securities are a type of MBS known as a CMO (collateralized mortgage obligation). CMOs come in a wide range of flavors based on investors risk tolerance and objectives…it’s a huge market unto itself.
OwnIt typically originated “non-conforming” or “private label” mortgages which did not conform to Fannie and Freddie’s underwriting guidelines. These mortgages are also packaged and sold to investors (with much lower ratings and higher yields, of course).
CDS (credit default swaps) aren’t really insurance. They are derivatives based on a bond or underlying index of bonds. Someone “buying protection” through CDS will make money if the underlying bond or index falls in price, and that money will be paid buy the counterparty. But no insuracnce is paid directly to an underlying bond issuer to support payments on the bond. Both counterparties to the CDS could be speculating on the performance of the underlying security, so it’s not really insurance in that sense.
Thanks for the clarificaton, garcap. Still, if the issuer fails to make bond payments, wouldn’t that severly impact the price of the bond? Would the CDS allow the holder of the MBS to Dutch-auction the MBS, with the CDS issuer covering the difference after the sale?
if the reference security/index goes down in price due to default by the issuer or some lesser negative credit event, then the investor who is long credit protection will make money in proportion to the decline of the reference security. That money will be paid out by the investor who is short protection to the investor who is long protection, but the underlying bond will still have its credit problems.
if the reference security/index goes down in price due to default by the issuer or some lesser negative credit event, then the investor who is long credit protection will make money in proportion to the decline of the reference security. That money will be paid out by the investor who is short protection to the investor who is long protection, but the underlying bond will still have its credit problems.
if the reference security/index goes down in price due to default by the issuer or some lesser negative credit event, then the investor who is long credit protection will make money in proportion to the decline of the reference security. That money will be paid out by the investor who is short protection to the investor who is long protection, but the underlying bond will still have its credit problems.
That depends on if the CDX is cash settled or physically settled by tendering the defaulted bonds. Unless someone resells the CDX contract, no cash changes hands untill a credit event occurs.
A CDX is basicly a big fancy put option that you can only excercise upon a credit event happening.
“A Morgan Stanley economist, Richard Berner, also raises the danger that the soft landing scenario may be at risk.”
Uh, Rick, you know that nice, soft, smooth, grassy field you were aiming (hoping) for? Rocks…pointy rocks…Lots of them.
Rocks? That a range of cactus covered granite hills.
The NAR spin is such total BS it is painful to respond to. There is a serious need for an organization with credibility to counter NAR press releases. Thank god for blogs like this. At least there is a place to go for those with the sense to look. For the rest, once again, those with money and incentive flood the market of ideas with misleading info to sucker in the idiots of the world.
Amen. Now let’s see how many in the media pick up this pr newswire “story” without questioning its contents. Full report tomorrow!
Snake oil => FDA.
Stock frauds => SEC.
This RE episode might lead to some “teeth” for OFHEO, but I’m not counting on it.
“There is a serious need for an organization with credibility to counter NAR press releases”
Why does Bill Oreilly on FOX do his “we are looking out for you”
hit peice on the NAR? Anybody out there who is on his premium member list might drop him a heads up on the spin coming from David Learah and the gang at NAR.
I’d do it like this. print the NAR spin. then the next day just print an article debunking the spin. two articles for one!
Because Bill O’Really is looking out for the NAR.
Bill O’reilly makes Dave Lereah look like Abe Lincoln.
Or George Washington.
Seriously, I trust Dave Lereah more than I trust anything said on a fox news show.
“These conditions will persist in many areas until early spring when inventory supplies are likely to become more balanced,’ said David Lereah, NAR’s chief economist.”
Lets see, inventory is still very high, spring will bring another big round of new inventory onto the market. Higher inventory + more inventory = balance in supply? I think we will be hearing David Lereah jokes on the late night comedy shows with the next year or two. His comments are just to good to be overlooked by the comedians and the rest of the public in the future.
Seriously, this guy should never work again…
How many people on this board know others, personally, who are ready to sell now but holding their listings for the Spring (on the advice of a Realtor, after reading too much NAR spin, or otherwise)? I know at least two.
last year was the “silent spring.” I’d like to coin this year the “screaming spring.”
as in people scream when they put their house back on the market and see the prices, the inventory and the days on market.
Have seen a bunch of listings pulled after Thanksgiving, and I know the houses are vacant. These will add to the spring inventory glut.
Conversely, I’ve seen two homes put back on the market this week, which were pulled off the market around September. These sellers know what is up, and are hoping to get first in line since inventory is lower now. Futile attempts to avoid the Spring bloodbath.
Interesting. Will inventory rise precipitously before the sping, as the herd attempts to “beat the crowd”?
Yes! Spring has already sprung!
I can’t see why everyone doesn’t see this coming. you couldn’t possibly be more right. The spring is going to be really ugly! Wall St should be able to make this connection any day now - they are a little slow like a really big, dumb, fat kid.
“…Now those lenders are bracing for the not-so-happy story of borrowers like Jesline Jean-Simon.”
Take a moment Ben and fellow bloggers to bask in the glory of accurate predictions. We’ve been saying the outcome of these loose lending practices will lead to an individual, industry, and economy wide house of pain. These killer ARMs have a solid grip on the REIC b@lls and are begining to squeeze.
And futher proof the housing bubble has burst…
You can buy a copy of David Lereah’s book “Are you missing the real estate boom?” used on Amazon for only $1.15 http://www.amazon.com/gp/offer-listing/0385514344/sr=8-2/qid=1165773647/ref=pd_bbs_2/105-1111436-3258844?ie=UTF8&s=books
ARM holders in the Northeast will need to buy some of these to use as kindling to keep warm this winter as they won’t be able to afford oil or gas heat.
Northern VA,
You know, that is so funny! Anytime my wife and I visit a thrift store you see all kinds of dated and very obviously incorrect books at bargain prices! Like; “Y2K and the coming technology meltdown” type stuff. This is exactly where DL belongs! (In the bargain bin). LOL!
Is it cheaper than TP yet? Like DL’s public statements, it probably chafs however.
Ownit = Eat it
San Diego housing bubble burst Part 2.
Remember the 90’s burst due to defense contractors laying off tons of people in So Cal?
Did you know San Diego’s biggest private employer is SAIC, a HUGE defense contractor (you’ve never heard of)?
If SAIC pulls out of San Diego can you imagine how many houses would be put on the market or foreclosed on?
http://tinyurl.com/y47mmx
If you haven’t gotten out of the San Diego real estate market by now, you are going to be in a world of hurt after 2008 with ARM resets and job losses accelerating.
after gop blows the pres 08 - you can bet dod will get trimmed
Let’s leave the Clenis out of this
I’m in contracting myself. I hate to see more people moving to the Northern VA area to contribute to traffic and high housing prices. SAIC is fairly big but 5k jobs isn’t much in a major metro area. We had Worldcom and AOL shedding folks out here 5 to 10k at a time and it didn’t hurt RE values at all back in 2001-02.
If gov spending really dries up it would be tough times here in the DC area as well. I don’t think that is very likely though. We’ll have less spending in 2009 when our overseas troop presence is much smaller but most of that money never makes it back into the states. Intel spending and the standing size of the army will likely be increased. Some major cuts may include missle defense, shipbuilding, and there will be less replacement military equipment required. In general I would expect stagnant growth in the military industrial complex but outright cuts are politically very difficult for either party.
Oh my.
How many jobs will move? What will be the average compensation associated with those jobs?
These aren’t the only defense jobs looking to move…
Lockheed had to promise thousands of jobs to Texas and Florida to get support on “Orion.” (Shuttle replacement.) I know for a fact, retention is So-cal in aerospace/defense is a problem due to home prices anyway. Not to mention California isn’t exactly a friendly state to do defense work in anyway…
We’re talking a bit of an exodus. The thing never mentioned is that with defense jobs, for every “official” job that moves, there is another one or two “vendor” job that goes along. If this causes SoCal to drop below a critical threshold of support vendors, the companies left will have no choice but to follow…
Oh, we’re not even close right now… (We have about 100k more jobs than required to keep the vendors here.)
But it could…
Neil
From Reuters - Greenspan is talking the dollar down in Tel Aviv. Can you recommend how to invest in other currencies? Thanks!
“But there is still a chance for lenders to take control of the issue, said Kurt Photenhauer, a top lobbyist for the Mortgage Bankers Association. ‘I think that we can make a pretty convincing argument that we want people to stay in homes,’ he said. ‘We get no benefit from people defaulting.’”
Who is the “WE” in each of these statements? I was kind of counting on the defaults yielding a benefit for me Kurt, and I don’t need the government to help me either.
DL can say what he wants, but I think the part of the Reuters article that was quite interesting tells a bigger tale:
“One way or another, the industry is going to get a black eye,” said John Taylor, president of the National Community Reinvestment Coalition, which promotes equal access to credit. “There will be questions about tricks, fraud and whether these loans should have been made in the first place.”
Many of those questions will come from the media, Taylor said, but the lending industry could face more than bad headlines as regulators and lawmakers weigh in.
In October, federal bank regulators tightened underwriting rules on “exotic” mortgages. In their sights were payment-option and interest-only mortgages that let borrowers lower their interest payments for a time but can deliver a kick later in the life of the loan.
And the industry could be in for worse than regulatory scrutiny next year when a new team of Democratic lawmakers like Barney Frank, the incoming chairman of the House Financial Services Committee, begin to consider predatory mortgage lending legislation.
We all know that the FBI already has mortgage fraud activities in their crosshairs, and articles are surfacing. Somewhere along the line the media will (albeit to their own advantage) eventually report what’s not reaching the mainstream now. My fingers have been crossed for the longest hoping that day will be sooner rather than later.
Here is an article that’s a bit dated, but definitely relevant to the housing situation:
http://www.nmhc.org/Content/ServeContent.cfm?IssueID=60&ContentItemID=3130&siteArea=Topics
BayQT~
“early signs of credit distress” in financial institutions’ holdings of so-called “subprime” mortgages.
2 or 3 weeks ago you didn’t hear anything about MBS holders in the news. Now it is a daily occurrence.
http://biz.yahoo.com/ap/061211/home_mortgages.html?.v=2
Mortgage credit is going to/ HAS TO tighten significantly now. This will be the start of the real bubble bursting. What we have had thus far is just a precursor to what is to come.